Royalties

The Company is subject to a royalty agreement based upon sales of certain skin care products. The agreement requires the Company to pay a royalty based upon 8% of such sales, up to $227,175. Royalty expense approximated $21,000 and $19,000 for the three month periods ended June 30, 2013 and 2012, respectively. Royalty expense approximated $35,000 and $25,000 for the six month periods ended June 30, 2013 and 2012, respectively. The remaining commitment at June 30, 2013, is approximately $80,000. The Company’s President has a 60% interest in the royalties.

At June 30, 2013 and December 31, 2012, included in accounts payable and accrued expenses was $131,000 and $96,000, respectively, in regards to this agreement.

In addition, in June 2013 the Company entered into a royalty agreement with a consultant which provides for a fee of 2% of sales as defined. At June 30, 2013 no amounts have been earned under this agreement.