Commitments and Contingencies

9 Months Ended

Mar. 31, 2015

Commitments And Contingencies [Abstract]

Commitments and Contingencies

13.Commitments and Contingencies

The Company may, from time to time, be subject to litigation and other claims in the ordinary course of its business.  The Company accrues for estimated losses arising from such litigation or claims if it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated. To estimate whether a loss contingency should be accrued by a charge to income, the Company evaluates, among other factors, the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of the loss. Since the outcome of litigation and claims is subject to significant uncertainty, changes in the factors used in the Company’s evaluation could materially impact the Company’s financial position or results of operations.

Management is currently unaware of any significant pending litigation affecting the Company other than the matter set forth below. 

The Company is a party to a civil suit filed by 3CEMS, a Cayman Islands and People’s Republic of China corporation, in the U.S. District Court for the Eastern District of Michigan and served on the Company on or about January 7, 2015.  The suit alleges that the Company breached its contractual obligations by failing to pay for component parts to be used to manufacture optical video scopes for the Company’s discontinued Commercial Products Business Unit.  3CEMS alleged that it purchased the component parts in advance of the receipt of orders from the Company based upon instructions they claimed to have received from the Company.  The suit alleged damages of not less than $4.0 million. See also Note 5 of the Notes to the Consolidated Financial Statements, “Contingencies”, of the Company’s Annual Report on Form 10-K for fiscal year 2014, for a discussion regarding a previous civil suit filed against the Company by 3CEMS, on July 19, 2013, which was dismissed effective December 6, 2013 and a Tolling Agreement entered into between the Company and 3CEMS that terminated on December 31, 2014.  The Company intends to vigorously defend against 3CEMS’ claims.

Because of the inherent uncertainty of litigation and claims such as the 3CEMS Matter, the Company is unable to reasonably estimate a possible loss or range of loss relating to the 3CEMS Matter.

As part of routine evaluation procedures, the Company identified a potential concern regarding the employment status and withholding for several individuals in one of the Company’s foreign jurisdictions.  During the third quarter of fiscal 2015, the Company estimated a range of the potential financial liability related to this matter of 486,000 euros to 1 million euros.  The Company is not able to reasonably estimate the amount within this range that it will be required to pay for this matter.  As a result, the Company recorded a reserve of 486,000 euros (equivalent to approximately $536,000) representing the minimum amount the Company estimates will be paid.  The Company expects final resolution of this matter in the next few months. The Company does not expect that the resolution of this matter will have a detrimental effect on the conduct of the Company’s business in this foreign jurisdiction.