3. Liquidity and Capital Resources

At June 30, 2014, we had $6.3 million in cash and cash equivalents and short-term investments and $7.9 million of working capital.

The Company believes that our existing cash, cash equivalents and short-term investment balances will be sufficient to fund the Company’s operations through at least the next twelve months. In May 2014, the Board approved a restructuring plan (see Note 15) that was implemented during the fiscal quarter ending June 30, 2014 which lowered our overall cost structure by approximately $2.0 million per quarter. We are hopeful that our new product strategies and their associated products will start to gain market acceptance and that we will be able to return to profitability. If market acceptance of our strategy and products is slower than anticipated, then we will need to:

•

undertake additional restructuring to lower costs to bring those more in line with actual revenues;

•

raise additional funds to support the Company’s operations beyond the second quarter of 2015. There is no assurance that the Company will be able to raise such additional funds on acceptable terms, if at all. If the Company raises additional funds by issuing securities, existing stockholders may be diluted; and

•

review strategic alternatives for one or more of our product lines.

If adequate funds are not available, we may be required to curtail our operations or other business activities significantly or to obtain funds through arrangements with strategic partners or others that may require us to relinquish rights to certain technologies or potential markets.