Note 8. Supplemental Balance Sheet Information

Inventories: Inventories as of January 31, 2012 and July 31, 2011 were as follows (dollars in thousands):

	January 31,2012		July 31, 2011
Raw material and component parts	$	6,360	$	6,205
Work in progress		1,820		1,185
Finished goods		5,213		4,692
	$	13,393	$	12,082

Property and Equipment: Property and equipment as of January 31, 2012 and July 31, 2011 were as follows (dollars in thousands):

	January 31, 2012		July 31, 2011
Land	$	730	$	730
Building and improvements		5,885		5,965
Machinery and equipment		7,133		6,861
Furniture and fixtures		1,173		730
Software		996		363
Construction in progress		363		685
		16,280		15,334
Less accumulated depreciation		7,319		6,773
	$	8,961	$	8,561

Other Intangible Assets: Information regarding the Company's other intangible assets as of January 31, 2012 and July 31, 2011 were as follows (dollars in thousands):

	Gross Carrying Value		Accumulated Amortization		Net
	January 31, 2012
Proprietary know-how	$	4,057	$	1,915	$	2,142
Trademark		5,923		--		5,923
Licensing agreement		5,834		2,364		3,470
Patents		1,822		676		1,146
	$	17,636	$	4,955	$	12,681

	July 31, 2011
Proprietary know-how	$	4,057	$	1,792	$	2,265
Trademark		5,923		--		5,923
Licensing agreement		5,834		2,230		3,604
Patents		1,659		609		1,050
	$	17,473	$	4,631	$	12,842

Goodwill of $10,661,000 and proprietary know-how of $4,057,000 are a result of the reverse merger transaction completed on September 21, 2005.

The Company did not incur costs to renew or extend the term of acquired intangible assets during the period ended January 31, 2012. Estimated amortization expense on other intangibles for the remaining six months of the fiscal year ending July 31, 2012, and the next four years thereafter is as follows (dollars in thousands):

	Amount
Fiscal Year 2012 (remaining 6 months)	$	318
Fiscal Year 2013		636
Fiscal Year 2014		636
Fiscal Year 2015		636
Fiscal Year 2016		636

Amortization expense for the three and six months ended January 31, 2012 was $162,000 and $324,000, respectively.

Pledged assets; short and long-term debt (excluding revenue bonds payable): Short-term debt as of January 31, 2012 and July 31, 2011, consisted of the following:

Revolving Credit Facility: The Company has a credit facility with a bank which allows for borrowings of up to $9.5 million (collateral available on January 31, 2012 permits borrowings up to $8.9 million) with an interest rate based on either the one-, two- or three-month LIBOR plus 2.0 percent and adjusting each quarter based upon our leverage ratio. As of January 31, 2012, interest under the facility is charged at 2.25 percent. The unused portion of the facility is charged at a rate of 0.20 percent. There were no borrowings under this facility at January 31, 2012. Outstanding amounts are collateralized by the Company's domestic receivables and inventory. This credit facility was amended on November 30, 2011, to extend the termination date through November 30, 2013.

The facility has two financial covenants: a maximum leverage ratio of 3.75 times and a minimum fixed charge coverage ratio of 1.1 times. As of January 31, 2012, the leverage ratio was 0.78 times and the minimum fixed charge coverage ratio was 1.82 times. Collateral availability under the line as of January 31, 2012, was approximately $8.9 million. The facility restricts the payment of dividends if, following the distribution, the fixed charge coverage ratio would fall below the required minimum.

Equipment Line of Credit: Under this credit facility, the Company may borrow up to $1.0 million, with interest at one-month LIBOR plus 3.0 percent. Pursuant to the terms of the equipment line of credit, under no circumstances shall the rate be less than 3.5 percent per annum. The unused portion of the facility is not charged a fee. There were no borrowings under this facility at January 31, 2012. The equipment line of credit was amended on November 30, 2011, to extend the maturity date to November 30, 2013.

Long-term debt as of January 31, 2012 and July 31, 2011 consisted of the following (dollars in thousands):

	January 31, 2012		July 31, 2011
Note payable to the estate of the late Dr. Leonard I. Malis, due in quarterly installments of $159,904 which includes interest at an imputed rate of 6.0 percent; remaining balance of $0 including the effects of imputing interest, paid December 15, 2011, collateralized by the Malis® trademark	$	--	$	313
Settlement obligation to Iridex Corporation, due in annual installments of $800,000 which includes interest at an imputed rate of 8.0 percent; remaining balance of $800,000 including the effects of imputing interest, due April 15, 2012		741		740
Total	$	741	$	1,053
Less current maturities		741		1,053
Long-term portion	$	---	$	--

Deferred revenue: Deferred revenue as of January 31, 2012 and July 31, 2011, consisted of the following (dollars in thousands):

	January 31, 2012		July 31, 2011
Deferred revenue – Alcon settlement	$	17,749	$	18,334
Deferred revenue – Codman exclusivity		--		266
Total	$	17,749	$	18,600
Less: Short-term		1,288		540
Long-term portion	$	16,461	$	18,060