5. Liabilities

License and Option Agreements

In June 2010, the Company and Asahi entered into an amendment (the "Amendment") of their Distribution and License Agreement, originally effective March 28, 2005. Under the terms of the Amendment, Asahi obtained exclusive rights to distribute the CryoSeal System in South Korea, North Korea, Taiwan, the People's Republic of China, the Philippines, Thailand, Singapore, India and Malaysia. These rights included the exclusive right to market, distribute and sell the processing disposables and Thrombin Reagent for production of thrombin in a stand-alone product.

In connection with the above-described Amendment, the Company and Asahi also entered into an Option Agreement ("Option Agreement") and on June 30, 2012, Asahi exercised the option to purchase certain intangible assets related to this product line, including all associated patents and engineering files for $2,000,000. In connection with the notice of exercise, the Amendment automatically terminated. Payment of the $2,000,000 was based upon completion of certain provisions of the Option Agreement. As such, the Company recognized the gain on sale upon completion of those provisions which occurred in July 2012. The $2,000,000 payment was received in August 2012.

As part of the Amendment, we provided support to Asahi in the form of maintaining manufacturing capabilities of the CryoSeal System until termination of the Amendment. Asahi paid $1,000,000, of which $400,000 was refundable if we failed to provide technical support or maintain manufacturing capabilities as specified.

We allocated $250,000 of the $1,000,000 to the additional license rights granted under the Amendment based on the fair value of those rights. The $250,000 was amortized on the straight line basis over the term of the Amendment, or eight years. At June 30, 2012, upon termination of the Amendment, the $188,000 included in long-term deferred revenue at June 30, 2011 was recognized.

The remaining $750,000 was allocated to offset further expenses we expected to incur in fulfilling our obligations under the Amendment, of which $350,000 was released as the expenses were incurred and the remainder was released upon completion of the refundable activities. At June 30, 2011, $234,000 had been released and the remainder, $516,000, was released during the year ended June 30, 2012. We recognized $189,000 as contra research and development expense based upon expenses incurred and $327,000 as other income as there were no further anticipated expenses due to the shortened contract term.

Other current liabilities consisted of the following at June 30:

	2012		2011
Accrued warranty reserves	$	547,000	$	608,000
Asahi prepayment		--		516,000
Accrued professional fees		159,000		257,000
Other accrued liabilities		522,000		273,000
	$	1,228,000	$	1,654,000