Major Customers

3 Months Ended

Sep. 30, 2011

Major Customers [Abstract]

Major Customers

NOTE 8. MAJOR CUSTOMERS

Information with respect to two customers, both accounting for sales in excess of 10% of our total sales in each of the three-month periods ended September 30, 2011 and 2010, is as follows:

	2011				2010
	Sales		Accounts Receivable		Sales		Accounts Receivable
Customer 1	$	1,661,000	$	545,000	$	750,000	$	406,000
Customer 2	$	2,388,000	$	632,000	$	2,783,000	$	843,000

In December 2009, our largest customer informed us that it was in the process of developing, and planned to eventually manufacture, its own surgical devices which are functionally comparable to the products we currently provide to the customer. We have been the exclusive manufacturer of these products since they were developed.

We currently provide this Customer with two products ("Product A" and "Product B") and repair services for such products. Sales for each of these categories for the three months ended September 30, 2011 and 2010 were as follows:

	2011		2010		Average % of Total
Product A	$	793,000	$	1,642,000		56	%
Product B		1,191,000		894,000		34	%
Repairs		404,000		247,000		10	%
	$	2,388,000	$	2,783,000		100	%

On June 21, 2011, the Customer indicated that it planned to purchase all of the products it currently had on order with us for Products A and B but did not plan to place any new orders with us for these products. During the period from July 1 through October 31, 2011, the Customer amended its purchase orders to adjust the mix of product and the timing of delivery. As a result, during this period we sold to the Customer $793,000 and $1,638,000 of Product A and Product B, respectively. As of October 31, 2011, the Customer has remaining orders of (i) $940,000 for Product A scheduled for delivery through April 2012 and (ii) $1,638,000 for Product B scheduled for delivery through February 2012.

The Customer has indicated that its plan is contingent on several factors, including the registration of the Customer's product in a foreign jurisdiction and the successful completion of its field testing for the product that will replace Product B. The Customer indicated that the results to date from the field testing have been positive but that the number of units and length of service in the field are still insufficient to draw conclusions.

In addition, the Customer indicated that it plans to limit repair requests from us to those Products A and B that are covered by our product warranty, thus most likely nearly eliminating repair revenue for out-of-warranty products.

Resulting from the foregoing, revenue attributable to the Customer could decline to zero or a negligible amount by the end of fiscal year 2012.

However, the Customer is not obligated either to abide by the timetables it has communicated to us or to update us as to the status of its current plan. Accordingly, we are unable to know or predict the status of the Customer's plan or initiatives on an ongoing basis. The Customer could accelerate, delay or terminate its transition to its own products at any time and without notice to us, which could have a material impact on our revenues. The identity of the Customer is protected by a confidentiality agreement.

We are continuing to implement steps to identify and capture additional revenue opportunities. There can be no assurance, however, as to either the timing or success of achieving this objective, and it would be our intent to reduce operating costs, if and as necessary, to minimize the impact of a revenue reduction, should it occur. In the event that the Customer's future purchases are reduced beyond the realization of such opportunities or cost reductions, we are likely to experience a material and adverse impact on our business.