Commitments and Contingencies

3 Months Ended

Apr. 27, 2012

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

Litigation

From time to time, the Company may be involved in certain claims and legal actions arising in the ordinary course of business. As of April 27, 2012, there were no claims or legal actions that management believes will have a material adverse effect on the Company’s financial position, results of operations, or liquidity.

Environmental

In preparation for the sale of the Earlysville, Virginia facility, the Company engaged an environmental consulting firm to survey the property for possible soil or groundwater contamination. This survey revealed impacts to both shallow soils and groundwater that may have resulted from the accidental loss of solvents. As a result of the initial and subsequent surveys, contamination treatment was determined to be necessary at an estimated total cost of $788,000 as of April 27, 2012, as determined by an environmental compliance specialist, and which is included in the environmental liability. Thus, in accordance with U.S. GAAP, the Company capitalized these contamination treatment costs in its financial statements as an increase to property held for sale, net, since such costs will be incurred in preparation for the sale of the Earlysville, Virginia facility.

The Company has had discussions with the former owner of the property concerning responsibility for contamination treatment. The former owner of the property and the Company solicited proposals in 2009 from environmental consulting firms and received a proposal from which management estimates the cost of contamination treatment to be approximately $615,000. Depending on the findings of additional studies, the scope and cost of the contamination treatment may change. Current estimates of future monitoring, oversight and other related costs are estimated between approximately $175,000 and $225,000.  As of April 27, 2012, the Company and the former owner of the property were negotiating the terms of administrative consent orders with the U.S. Environmental Protection Agency for completion of the contamination characterization and treatment plans. The Company continues to be in communication with the former owner of the property concerning its responsibility to cover the costs of the contamination characterization and treatment. The Company will reassess the accrued liability and record any appropriate adjustments in its financial statements following completion of the characterization process as required by these orders. Costs incurred during the three months ended April 27, 2012 and April 29, 2011 to pay an environmental consulting firm to characterize contamination that may be present in the ground between the Company’s property and nearby homes amounted to $0 and $7,000, respectively.

Commitments

There have been no material changes to our purchase and lease commitments from those disclosed in our Annual Report on Form 10-K for the year ended January 31, 2012. Total rent expense under the facility lease in Charlottesville, Virginia for the three months ended April 27, 2012 and April 29, 2011 was $43,000 and $44,000, respectively. A majority of those costs are included in cost of sales while the balance is included in selling, general and administrative expenses.

Contract Loss Provisions

The Company has a longstanding customer-funded development contract relating to a product for a UAV application. As a result of numerous technical difficulties encountered on the contract over the period of performance, total estimated costs increased significantly and a contract loss provision was established. As of April 27, 2012, the contract loss provision for this contract is $1,136,000, an increase from the prior period of $50,000. Until recently, the Company understood and estimated the remaining effort required to satisfy the contract requirements based, in part, on an understanding that the customer intended to grant certain waivers relating to the technical specifications. In the last few weeks, the customer has reversed its position on the waivers, purportedly due to pressure from its customer. During the coming weeks, the Company expects to meet with the customer to review this situation and to seek to negotiate a resolution, which may include modifying requirements, reducing contract scope, and/or increasing contract value. The outcome of these discussions with the customer is uncertain at this time and the financial impact cannot be reasonably estimated. However, it is reasonably possible that the outcome may result in additional contract loss provisions in a future period.