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Liquidity
12 Months Ended
Jun. 30, 2012
Liquidity [Abstract]  
Liquidity

 

3.         Liquidity

 

                The Company incurred net losses of $4,695,000 in fiscal year 2012 and $3,733,000 and $2,169,000 in the fiscal years ended 2011 and 2010, respectively.  In addition, the Company has accumulated aggregate net losses from the inception of business through June 30, 2012 of $114,726,000.  At June 30, 2012, the Company had cash and cash equivalents of $1,899,000 and no debt outstanding. 

 

During the first quarter of fiscal 2012, the Company entered into a license agreement with Medtronic for the Prostiva RF Therapy System. The Company paid Medtronic $500,000 on September 6, 2011 for half of the $1,000,000 initial license fee, with the remaining $500,000 payable on the one-year anniversary of this date, September 6, 2012.  As part of the licensing agreement, royalty payments for Prostiva products are paid one year in arrears based on the contract year, with the first payment of royalties due October 6, 2012. In addition, inventory payments were deferred on both inventory transferred following the close of the agreement and on shipments of products purchased. Deferred payments to be made on inventory received through June 30, 2012, which are due in fiscal year 2013, approximate $3.8 million.

 

The Company completed a secondary offering in the first quarter of fiscal year 2013 which contributed approximately $3.8 million of net proceeds.  However, as a result of the Company’s history of operating losses and negative cash flows from operations, and the licensing fee, royalties and inventory payments related to the Prostiva acquisition, there is substantial doubt about our ability to continue as a going concern.  The Company’s cash and cash equivalents may not be sufficient to sustain day-to-day operations for the next 12 months and the Company’s ability to continue as a going concern is dependent upon our ability to generate positive cash flows from our business, as well as available borrowing under our line of credit with Silicon Valley Bank entered into on January 11, 2012. The line of credit allows borrowing by the Company of up to the lesser of $2.0 million or the defined borrowing base consisting of 80% of eligible accounts receivable. As of June 30, 2012 the Company has not borrowed against this facility. There is no assurance that our cash, cash generated from operations, if any, and available borrowing under our agreement with Silicon Valley Bank will be sufficient to fund our anticipated capital needs and operating expenses, particularly if product sales do not generate revenues in the amounts currently anticipated or if our operating costs are greater than anticipated. 

 

The Company’s current plan to improve its cash and liquidity position is to generate expected revenues both from sales of our Cooled ThermoTherapy and Prostiva products which will help generate positive cash flow from our business.   

 

If the Company is unable to generate sufficient liquidity to meet its needs and in a timely manner, the Company may be required to further reduce expenses and curtail capital expenditures, sell assets, or suspend or discontinue operations. If the Company is unable  to make the required payments to Medtronic with respect to the Prostiva acquisition, it would give Medtronic the right to terminate the Company’s rights to sell the Prostiva product.

 

The financial statements as of and for the year ended June 30, 2012 do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.