10. Commitments and Contingencies

3 Months Ended

Sep. 30, 2014

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Employment Agreements

On June 30, 2014, the Company entered into employment agreements, effective July 1, 2014 with the Company’s newly elected Chief Executive and Chief Financial Officers. The elections resulted due to the March 2014 death of Robert Kauffman, past President and CEO of the Company. The employment agreements provide for levels of compensation and continuation of benefit under Company benefit plans. The agreements have severance provisions and are effective until 18 months after notice of termination is given by either party. Copies of the employment agreements were attached as exhibits to the Form 8-K filed on July 1, 2014.

Legal Proceedings

The Company is a defendant and counter claimant in litigation involving its subsidiary, TSI Dissolution Corp. (formerly known as Alanco/TSI Prism Inc. (“TSI”)) and the purchaser of TSI’s assets, Black Creek Integrated Systems Corp. Black Creek filed a complaint in the Maricopa County Superior Court against TSI and the Company, being Civil Case NO. CV2011-014175, claiming various offsets from the purchase price, primarily concerning inventory adjustments, and TSI counterclaimed for monies due from Black Creek under the purchase agreement. Following a trial during fiscal 2014, the court awarded a net judgment in favor of Black Creek in the amount of $16,800, plus attorney’s fees and accrued interest, resulting in a total judgment in the amount of $128,300. At September 30, 2014 and June 30, 2014, the Company recorded an accrued liability of $128,300 for the judgment. The Company believes the net judgment amount fails to address, among other matters, inventory reserves established for the specific items of inventory which were the subject of Black Creek’s concerns, which if properly addressed would result in a net judgment in favor of the Company, with an attendant award of attorney’s fees in favor of the Company. The Company has filed its Appeal and intends to vigorously pursue the appeal of the judgment. As required under the appeal process, the Company posted a bond with the court for $128,300, which is included in prepaid expenses and other current assets at September 30, 2014 and June 30, 2014.

The Company may from time to time be involved in litigation arising from the normal course of business.  As of September 30, 2014, there was no such litigation pending deemed material by the Company.