Net Income. We realized income of
Liquidity and Capital Resources
Our principal sources of liquidity are cash on hand and cash generated from operations. To date, most of our profits have been generated in
Europe, but with the introduction of new products and our successful efforts to streamline our U.S. operations, all U.S. operating entities experienced increased revenues and profits in fiscal 2013. We expect this revenue trend to continue and look forward to an increase in overall revenues from our U.S. operations in fiscal 2014. We expect to invest in additional sales and marketing staff and to increase our professional services and support staff. These expenditures will have a negative impact on profits for fiscal 2014. During the year ended June 30, 2013, we repaid approximately $725,000on our HSBC Loan and on our secured notes. During the year ended June 30, 2012, we repaid approximately $770,000on our HSBC Loan and on our secured notes. These payments were made from cash flow generated from operations. We purchased 622,815 shares of our Common Stock at a cost of $1,631,000and were able to increase our cash position by $433,000. As of June 30, 2013, we owe HSBC $292,000and are repaying approximately $59,000per month for the term of the loan. As of June 30, 2012, we owed HSBC $945,000. We believe our existing cash balance, and the cash expected to be generated from operations, will be sufficient to meet our anticipated cash needs for at least the next 12 months. Our future capital requirements will depend on many factors, including our level of net sales, the timing and extent of expenditures to support our development activities and the continued market acceptance of our products. For the year ending June 30, 2014, we anticipate increasing our marketing department and increasing overall marketing expenditures by approximately $600,000, increasing our sales department by $300,000and increasing our professional services and support staff by $550,000. We believe these expenditures may result in increased revenue in 2014, but will have a negative impact on profits and cash flow. The investments we will make in 2014 should contribute to the increased growth in 2015. We could be required, or we may choose, to seek additional funding through public or private equity or debt financing. In addition, in connection with any future acquisitions, we may require additional funding which may be provided in the form of additional debt or equity financing or a combination of both. These additional funds may not be available on terms acceptable to us, or at all. 22 Working Capital Working capital at June 30, 2013was $3,502,000compared to $1,674,000at June 30, 2012. The working capital increase resulted primarily from a $433,000increase in cash, a $4,000increase in net accounts receivable, a decrease of $159,000in inventories, a $1,018,000increase in prepaid expenses and other assets, a $72,000increase in accounts payable, a $59,000decrease in accrued expenses, a $138,000increase in accrued payroll and other taxes, a $442,000decrease in derivative liabilities, a $447,000decrease in the current portion of long-term debt, an increase of $361,000in the current portion of deferred revenue, an increase of $60,000in sales tax payable, and a decrease of $215,000in income tax payable.