Risks and uncertainties

12 Months Ended

Jul. 31, 2012

Risks and uncertainties

7. Risks and uncertainties:

The Company is subject to risks common to companies in the medical and security technology industries. These risks, which could have a material and negative impact on the Company’s business, financial condition, and results of operations, include, but are not limited to, loss of any significant customer, dependence on key suppliers, and United States and foreign regulatory clearances and approvals.

Customers

The Company had three customers, as set forth in the table below, who accounted for 10% or more of the net revenue during fiscal years 2012, 2011, and 2010.

	Year Ended July 31,
	2012			2011			2010
Koninklijke Philips Electronics N.V. (“Philips”)		14	%		13	%		15	%
L-3 Communications Corporation (“L-3”)		12	%		*			*
Toshiba Corporation (“Toshiba”)		10	%		11	%		12	%

Note (*): Total net revenue was less than 10% in this fiscal year.

Philips’s and Toshiba’s revenue was in the Medical Imaging segment and L-3’s revenue was in the Security Technology segment.

Our ten largest customers as a group accounted for 68%, 64%, and 66% of our net product and engineering revenue for fiscal years 2012, 2011, and 2010, respectively. The loss of any one of these customers could have a material adverse effect on our business. Philips accounted for 13% and 17% of net accounts receivable at July 31, 2012 and 2011, respectively. GE accounted for 10% and 12% of net accounts receivable at July 31, 2012 and 2011, respectively. At July 31, 2012, L-3 accounted for 18% of net accounts receivable.

Although the Company is seeking to broaden its customer base, the Company will continue to depend on sales to a relatively small number of major customers. Because it often takes significant time to replace lost business, it is likely that operating results would be adversely affected if one or more major customers were to cancel, delay, or reduce significant orders in the future. Customer agreements typically permit the customer to discontinue future purchases after timely notice. In addition, the Company generates significant accounts receivable in connection with the products it sells and the services it provides to its major customers. Although its major customers are large well established corporations, if one or more of its customers were to become insolvent or otherwise be unable to pay for the Company’s products and services, the Company’s operating results and financial condition could be adversely affected.