10. Subsequent events

On July 1, 2013, the Company entered into an employment agreement with Jonathan P. Foster, pursuant to which Mr. Foster would continue, on a permanent basis, his service as the Company’s Chief Financial Officer effective September 1, 2013. As previously disclosed, Mr. Foster has been serving as Chief Financial Officer since March 16, 2012 under a Consulting Agreement, as amended. For additional information, refer to the Company’s Current Report on Form 8-K filed with the SEC on July 8, 2013.

On July 17, 2013, Ryan Morris, a member the Company’s Board of Directors (the “Board”) delivered a letter to the Special Committee of the Board (the “Special Committee”) regarding a good faith indication of interest by Meson Capital Partners LP and Mr. Morris to acquire the Company for between $1.85 and $2.00 per share in cash (the “Morris Letter”). On July 18, 2013, the Special Committee considered the Morris Letter and issued a written response (the “Special Committee Response”). The Special Committee is comprised of the three independent members of the Board, Messrs. David Dreyer, Joseph Whitters and Wayne Yetter, and was formed on May 14, 2013 to review and be responsible for such matters. For additional information, refer to the Company’s Current Report on Form 8-K filed with the SEC on July 19, 2013.

On July 31, 2013, the Board issued an Open Letter to Shareholders. In this letter, the Board announced the following: 1) The Special Committee, after long and careful deliberation and in the best interest of all shareholders, terminated the consideration of a potential sale of the Company; 2) Following thorough discussions with the Special Committee through the Company’s investment banking firm, Houlihan Lokey, Mr. Morris and his potential financing partners did not accept the offer made by the Special Committee in its Special Committee Response; 3) As such, the Board unanimously consented to disband the Special Committee; 4) Effective immediately, Wayne Yetter, while remaining an independent Board member, stepped down as Chairman of the Board and Ryan Morris resumed his position as Executive Chairman. For additional information, refer to the Company’s Current Report on Form 8-K filed with the SEC on July 31, 2013.