Note 9 - Commitments and Contingencies

6 Months Ended

Dec. 31, 2017

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

9

.     

Commitments and Contingencies

Operating Leases

The Company leases the Rancho Cordova and Gurgaon, India facilities pursuant to operating leases. The Rancho Cordova lease expires in

May 2019.

  The Gurgaon lease expires in

September 2023,

however, either party can terminate after

September 2019

with

three

months notice. As part of our agreement with Fortis Healthcare, we occupy and manage a

2,800

square foot cord blood banking cellular therapy processing facility in the Fortis Memorial Research Institute.  The agreement with Fortis expires in

July 2020

and the rent payments have been included in the table below.  The Company recognizes rent expense on a straight-line basis over the term of the facility lease. The annual future minimum lease payments for the Company’s non-cancelable operating leases are as follows:

201 8		521,000
2019		359,000
2020		123,000
Total	$	1,003,000

Rent expense

was

$241,000

for the

six

months ended

December 31, 2017

and

$291,000

and

$657,000

for the years ended

June 30, 2017

and

2016,

respectively.

Financial Covenants

Effective

May 15, 2017,

the Company entered into a Sixth Amended and Restated Technology License and Escrow Agreement with CBR Systems, Inc. which modified the financial covenant that the Company must meet in order to avoid an event of default. The Company must maintain a cash balance and short-term investments net of debt or borrowed funds that are payable within

one

year of

not

less than

$2,000,000.

The Company was in compliance with this financial covenant as of

December 31, 2017.

Potential Severance Payments

T

he Company’s Chief Executive Officer (CEO) and Chief Operating Officer (COO) have rights upon termination under their employment agreements. With respect to these agreements at

December 31, 2017,

potential severance amounted to

$2.6

million.

Contingencies

and Restricted Cash

In fiscal

2016,

the Company signed an engagement letter with a strategic consulting firm. Included in the engagement letter was a success fee due upon the successful conclusion of certain strategic

transactions. On

May 4, 2017,

a lawsuit was filed against the Company and its CEO by the consulting firm as the consulting firm argues that it is owed a transaction fee of

$1,000,000

under the terms of the engagement letter due to the conversion of the Boyalife debentures in

August 2016.

In

October 2017,

to streamline the case and without acknowledging any liability, the Company deposited

$1,000,000

with the Court. The consulting firm has also dismissed the Company’s CEO from the case, without liability. The parties are engaged in discovery, and

no

trial date has been set. The Company intends to defend the lawsuit vigorously and

no

accrual has been recorded for this contingent liability as of

December 31, 2017.

In the normal course of operations,

the Company

may

have disagreements or disputes with customers, employees or vendors. Such potential disputes are seen by management as a normal part of business. As of

December 31, 2017,

management believes any liability that

may

ultimately result from the resolution of these matters will

not

have a material adverse effect on the Company’s consolidated financial position, operating results or cash flows.

Warranty

The Company offers a warranty on all of the Company

’s non-disposable products of

one

to

two

years. The Company warrants disposable products through their expiration date. The Company periodically assesses the adequacy of the Company’s recorded warranty liabilities and adjusts the amounts as necessary.

Changes in the Company

’s product liability which is included in other current liabilities during the period are as follows:

	Six Months Ended December 31,			Years E nded June 30,
	2017			2017			2016
Beginning balance	$	588,000		$	566,000		$	627,000
Warranties issued during the period		95,000			120,000			97,000
Settlements made during the period		(359,000	)		(93,000	)		(287,000	)
Changes in liability for p re-existing warranties during the period		(33,000	)		(5,000	)		129,000
Ending balance	$	291,000		$	588,000		$	566,000