Commitments and Contingencies

12 Months Ended

Jun. 30, 2012

Commitments and Contingencies [Abstract]

Commitments and Contingencies

6.       Commitments and Contingencies

Operating Leases

We lease our facility pursuant to an operating lease, which contains scheduled rent increases.  The lease expires in 2016, has a cancellation option beginning November 1, 2014 and has a renewal option of five years.  We recognize rent expense on a straight-line basis over the term of the facility lease.  The annual future minimum lease payments for the non-cancelable operating lease are as follows:

2013		373,000
2014		387,000
2015		397,000
2016		410,000
2017		140,000
Total	$	1,707,000

Rent expense was $470,000, $691,000 and $760,000 for the years ended June 30, 2012, 2011 and 2010, respectively.

Contingencies

Subsequent to year-end, we were notified by a third party who believes that the Res-Q system infringes upon certain of its US and European patents.  The Company is in process of gathering information; however, it has not yet collected enough information to assess the validity of the alleged infringement or estimate any potential financial impact; therefore, it has not made an accrual as of June 30, 2012.

In the normal course of operations, we may have disagreements or disputes with customers, employees or vendors.  Further, in the growing medical device industry disputes may arise with competitors or other third parties in regards to patent infringement claims associated with their products or our products which may require expenditures of attorney fees to defend or prosecute such disputes or licensing fees associated with the resolution of such claims.  These disputes are seen by the Company's management as a normal part of business, and there are no pending legal proceedings currently that management believes would have a significant material impact on the Company's financial position, results of operations or cash flow.

Warranty

We offer a one year warranty on all of our non-disposable products.  We warrant disposable products through their expiration date.  We periodically assess the adequacy of our recorded warranty liabilities and adjust the amounts as necessary.

Changes in the Company's product liability which is included in accrued liabilities during the period are as follows:

	For years ended June 30,
	2012			2011
Beginning balance	$	608,000		$	1,113,000
Warranties issued during the period		282,000			261,000
Settlements made during the period		(471,000	)		(815,000	)
Changes in liability for pre-existing warranties during the period, including expirations		128,000			49,000
Ending balance	$	547,000		$	608,000