7. Commitments And Contingencies
|12 Months Ended|
Sep. 30, 2012
|Commitments and Contingencies Disclosure [Abstract]|
|Note 7 - Commitments And Contingencies||
The Company has two non-cancelable operating leases, which include a lease for MST's facility in Dallas, Texas, which expires in August 31, 2016, for $3,375 per month, and a lease for the Company's corporate office and manufacturing facility in Lake Forest, California, which was subsequently amended and became effective October 1, 2012, and expires in May 2013. Our present lease in Lake Forest, California contains two sixty-month options to extend the lease at the then prevailing market rent. The rent is at $24,395 per month.
Future annual minimum lease payments under the above lease agreements at September 30, 2012, are as follows:
Rent expense for the years ended September 30, 2012 and 2011 was approximately $332,000 and $332,000, respectively.
Rent expense is recognized on a straight-line basis over the term of the lease. Therefore, rent expense on the leases does not correspond with the actual rent payments due. Additionally, as part of the Company's lease agreement of its facility in Lake Forest, California, the Company received $100,000 from the lessor as an allowance for leasehold improvements contributed by the Company. The unamortized portion of the $100,000 payment received is being recognized on a straight-line basis over the term of the lease, including the amended lease entered into in June 2010 as reduction to rent expense and the unamortized portion is included in deferred rent. The difference between the cumulative rent payments, net of the allowance on leasehold improvements versus the cumulative rent expense on a straight-line basis is recorded as a deferred rent liability. As of September 30, 2012 and 2011, this liability was $43,000 and $100,000, respectively.
See Note 4 regarding capital leases.
Settlement and OEM Agreement
On August 24, 2005, we entered into a five year OEM agreement with Lumenis. Under the OEM agreement, Lumenis agreed to pay us a royalty of 7.5% of its worldwide sales of side firing and angled firing laser fibers, and Lumenis also agreed to purchase 100% of its needs for side firing laser fibers and 75% of its needs for angled firing laser fibers from us, subject to our laser fibers meeting certain performance standards and satisfactory completion of an audit of our manufacturing process and quality system. This Agreement expired on August 23, 2010.
Under the license agreement dated as of August 23, 2010, Lumenis extended the 7.5% royalty payment period to July 21, 2014.
During the fiscal year ended September 30, 2012 and 2011, the Company received $116,000 and $96,000, respectively, under the license agreement, which was included in other income.
Sale of Patents
In January 2012, the Company entered into an agreement for the sale of certain patents held by the Company to a third party. Under the terms of the agreement the Company received a non-refundable payment of $200,000, and we received a non-exclusive, royalty free license to the patents. The third party filed a lawsuit against a large foreign company that the third party believes is infringing some of the patents sold to the third party by Trimedyne. The Company will receive 35% of all net (after legal fees) proceeds received by the third party, up to $6 million, less the initial $200,000 payment and 50% of net proceeds over $6 million, if any.
The Company is subject to various claims and actions which arise in the ordinary course of business. The litigation process is inherently uncertain, and it is possible that the resolution of any of the Company's existing and future litigation may adversely affect the Company. Management is unaware of any matters which are not reflected in the consolidated financial statements that may have material impact on the Company's financial position, results of operations or cash flows.
Guarantees and Indemnities
The Company has made certain indemnities and guarantees, under which it may be required to make payments to a guaranteed or indemnified party. The Company indemnifies its directors, officers, employees and agents to the maximum extent permitted under the laws of the State of California. In connection with its facility leases, the Company has indemnified its lessors for certain claims arising from the use of the facilities. The duration of the guarantees and indemnities varies, and in many cases is indefinite. These guarantees and indemnities do not provide for any limitation of the maximum potential future payments the Company could be obligated to make. Historically, the Company has not been obligated to make any payments for these obligations and no liabilities have been recorded for these indemnities and guarantees in the accompanying consolidated balance sheet.
Risks and Uncertainties
The Centers for Medicare and Medicaid Services (CMS), the agency of the U.S. Government that administers the Medicare Program, does not reimburse for thermal intradiscal procedures to treat spinal discs including the use of the Company's pulsed Holmium Lasers. Since most people suffering from a herniated or ruptured spinal disc are below Medicare age, we do not believe CMS's decision will have an adverse impact on our business.
The entire disclosure for commitments and contingencies.
Reference 1: http://www.xbrl.org/2003/role/presentationRef