ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.

On September 30, 2008, American TonerServ Corp. (the "Company") entered into modifications of certain convertible promissory notes with BDS Transitions, LLC (f/k/a Tonertype of Florida, LLC) ("BDS") and Azaria Management Group, LLC ("Azaria") which accelerated the automatic conversion dates of the notes to September 30, 2008. As a result, the notes were converted into shares of the Company's common stock effective September 30, 2008.

The contingent convertible promissory note held by BDS in the face amount of $500,000 was converted into 2,145,923 shares of common stock at a conversion price of $0.233 per share. The contingent convertible promissory note was originally issued to BDS as part of the purchase price paid by the Company in connection with the acquisition of certain assets of BDS in December 2007. The shares will be placed into escrow until December 28, 2009 pursuant to the terms of the Asset Purchase Agreement between the Company and BDS dated December 19, 2007.

The convertible promissory note held by Azaria in the face amount of $300,000 was converted into 1,500,000 shares of the Company's common stock at a conversion price of $0.20 per share. The convertible promissory note was originally issued to Azaria as part of the purchase price paid by the Company in connection with the acquisition of certain assets of Optima Technologies in April 2007. The shares issued to Azaria are not subject to any escrow provisions. Steven R. Jensen, the CEO of Azaria, currently serves as a Director of the Company.