On July 10, 2012, the Compensation Committee of the Board of Directors granted a cash bonus of $166,000 to Hojabr Alimi, Chairman of the Board of Directors and Chief Executive Officer. The bonus was granted pursuant to the FY 2012 Bonus Plan to Mr. Alimi for meeting his target milestones.

On July 25, 2012, the Company was notified that one of its strategic partners received a warning letter from the FDA regarding their manufacturing and marketing of certain Microcyn® Technology-based products. While the Company is still assessing the letter, it currently believes it does not have an obligation to respond to the FDA, although it may choose to assist its partner in the partner’s response. It is possible such letter will have a material impact on the Company’s business. However, the Company cannot predict when or how its partner will respond to the FDA or if its partner will adequately address all of the FDA’s concerns. If the partner does not meet all of the FDA’s concerns, the partner may cease selling some or all of the Company’s products. It is also possible that the FDA may require the partner to take other actions regarding the Company’s products including a recall. If the partner ceases to sell the Company’s products on a temporary or permanent basis, the Company’s revenues will be adversely affected.