Commitments and Contingencies

6 Months Ended

Jul. 02, 2016

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

The Company is not subject to any material litigation as of July 2, 2016. However, the Company may become involved in various legal and administrative actions arising in the normal course of business. These could include actions brought by taxing authorities challenging the employment status of consultants utilized by the Company. In addition, future customer bankruptcies could result in additional claims on collected balances for professional services near the bankruptcy filing date. When management has determined that it is probable that an asset has been impaired or a liability had been incurred related to an action, claim or assessment and the amount of loss can be reasonably estimated, the Company will record a liability for such estimated loss in the appropriate accounting period. The resolution of any of such actions, claims, or the matters described above may have an impact on the financial results for the period in which they occur. 

During fiscal years 2013 and 2014, the Company recorded liabilities relating to a series of awards made by the arbitrator in a claim by a former executive officer of the Company for severance, attorneys’ fees and costs and pre-judgment interest. The final award amount was $1.7 million which was paid in the first quarter of fiscal 2015. All amounts awarded under the action have been paid by the Company and the matter is fully resolved. See Note 13, Commitments and Contingencies in the Notes to the Consolidated Financial Statements included in Item 8, Consolidated Financial Statements, of the 2015 Form 10-K.

During the first quarter of fiscal 2015, the Company renewed an agreement under which it had a commitment to purchase a minimum of $412,000 in computer software over a three-year period. During the first quarter of fiscal 2016, the Company amended the agreement to include an additional commitment of $95,000 over a two-year period. As of July 2, 2016, the Company had an obligation of $181,000 remaining under this commitment.

In conjunction with the acquisition of the Farncombe Entities on July 22, 2015, the Company has recognized a liability of $1,875,000 related to potential Earn-Out consideration payable to the former shareholders of the Farncombe Entities. See Note 2, Acquisition for a discussion of the Earn-Out consideration.