Sony Mobile says it is aware of the issue that some people are having and recently released this statement over on the SM Product Blog:
After receiving feedback on our SmartWatch software update 1.2, it has come to our knowledge that a few of you are experiencing some functionality problems after installation.
If this is the case, please visit www.sonymobile.com/support and http://talk.sonymobile.com/community/support, for support, relevant contact details and help with individual and specific issues.