NOTE 13 LEGAL PROCEEDINGS

From time to time, the Company may become a party to other legal actions or proceedings in the ordinary course of its business. As of September 30, 2014, there were no such actions or proceedings, either individually or in the aggregate, that, if decided adversely to the Company’s interests, the Company believes would be material to its business.

On July 15, 2014, Terence Bernard Wise, a director of the Company, filed a derivative complaint in the Supreme Court of the State of New York, New York County, against directors Frank LaGrange Johnson, Robert Garrett, and John F. Chiste and then-directors (now former directors) Timothy Gordon and Owen P.J. King, also naming the Company as a nominal defendant, alleging breaches of fiduciary duty and seeking declaratory and injunctive relief (both preliminary and final), including a temporary restraining order (“TRO”), that would have prevented the Board of the Company from voting on proposals to raise capital or engage in any extraordinary transactions. The court rejected Mr. Wise’s request for a TRO and Mr. Wise then withdrew his request for preliminary injunctive relief. Mr. Wise then amended his complaint to add allegations of breach of fiduciary duties under various provisions of New York’s Business Corporation Law. On December 4, 2014, Mr. Wise brought a new application to the court, once again seeking a TRO and a preliminary injunction that would enjoin his fellow Company directors from causing the Company to issue any Series B Senior Convertible Preferred Stock (the “Preferred Stock”), or take any antecedent or preparatory steps to effectuate such issuance, prior to the Company’s 2014 annual meeting of shareholders (the “2014 Annual Meeting”). The court granted the TRO, in part, by prohibiting the Company from issuing—but not from taking antecedent or preparatory steps to issue—such Preferred Stock prior to December 8, 2014. At a hearing on December 8, 2014, the court then granted Mr. Wise’s motion for a preliminary injunction, enjoining the Company’s issuance of the Preferred Stock prior to the Company’s 2014 Annual Meeting. On December 8, 2014, the Company filed a notice of appeal of the court’s order to the Supreme Court of the State of New York, Appellate Division, First Department. On December 9, 2014, the Company moved, before such appellate court, to vacate the lower court’s injunction, which motion has not yet been decided.. The case otherwise remains pending before the lower court.

On July 16, 2014, the Company filed a lawsuit in the U.S. District Court for the Southern District of New York against Mr. Wise and his long-time business partner, Jenny P. Yu, alleging multiple violations of federal securities laws, including the filing with the Commission of deceptive and misleading Schedules 13D and proxy solicitation materials. Specifically, the Company alleged that Mr. Wise and Ms. Yu have been acting as an improperly undisclosed “group” engaged in an effort to replace the entire Board with Mr. Wise’s hand-picked candidates. The Company’s lawsuit seeks expedited injunctive and declaratory relief that would require Mr. Wise and Ms. Yu to comply with the federal securities laws and submit corrected, accurate disclosures in advance of any vote by the Company’s shareholders. On September 20, 2014, the Court granted Wise’s and Yu’s respective motions to dismiss the case, after which the Company filed an appeal to the United States Court of Appeals for the Second Circuit. The Company’s appeal currently is pending before the Court of Appeals.

On August 26, 2014, James McKenna, the Company’s former Chief Financial Officer, filed a lawsuit in the U.S. District Court for the Southern District of New York against the Company and directors Frank LaGrange Johnson, Robert Garrett and John F. Chiste and then-directors (now former directors) Timothy Gordon and Owen P.J. King, alleging purported claims of retaliation for whistleblowing under the Dodd-Frank Act, breach of contract and breach of the covenant of good faith and fair dealing all as against the Company, and a single claim for tortious interference with contract as against the individual defendants. The complaint seeks an unspecified amount of monetary consequential damages and punitive damages. The case currently is pending before the court.