COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jul. 04, 2015

COMMITMENTS AND CONTINGENCIES.

COMMITMENTS AND CONTINGENCIES

4.COMMITMENTS AND CONTINGENCIES

Litigation

The Company is a party to routine litigation and administrative complaints incidental to its business. The Company does not believe that the resolution of any or all of such routine litigation and administrative complaints is likely to have a material adverse effect on the Company’s financial condition or results of operations, except as noted below.

On May 27, 2015, the Company filed a complaint against Carol E. Bramson, Annamaria Dooley, Kenneth N. Price, Carson J. Darling, Dulcie M. Madden, and Bruce Work in the United States District Court for the District of Rhode Island (Civil Action No. 1:15-CV-00218-5-LDA).  The Complaint alleges theft and misappropriation of the Company’s confidential and proprietary trade secrets, intellectual property, and business, branding and marketing strategies.  Ms. Bramson is a former member of the Company’s Board of Directors and the Company’s former Chief Executive Officer, Ms. Dooley is the Company’s former Senior Vice President of Product Development, and Mr. Price is the former President of Global Sales & Marketing of the Company.  Mr. Darling and Ms. Madden are employees of Rest Devices, Inc., a consultant to the Company (the “Rest Defendants”).  The Complaint alleges violation of trade secrets, misappropriation of confidential information, breaches of fiduciary duties by Mmes. Bramson and Dooley and Mr. Price, conversion, breaches of contract by Mmes. Bramson and Dooley and Mr. Price, tortious interference with employment agreements, consulting agreements, and prospective business relations, unjust enrichment and other related claims, and seeks injunctive relief, return of the Company’s confidential and proprietary information, as well as other relief including compensatory damages. 

On June 23, 2015, the Rest Defendants filed a motion to dismiss the claims against them set forth in the complaint, and the Company filed its opposition to the motion on July 3, 2015.  The Court has not yet ruled on the Rest Defendants motion to dismiss.  On July 3, 2015, Mr. Price filed a motion to dismiss the claims against him set forth in the complaint, and the Company filed its opposition to the motion on July 20, 2015.  The Court has not yet ruled on Mr. Price’s motion to dismiss.  On July 3, 2015, Ms. Bramson and Ms. Dooley filed an answer to the complaint, and asserted counterclaims against the Company, including (i) a claim by Ms. Bramson for contractual indemnification and (ii) claims by Ms. Bramson and Ms. Dooley for indemnification under the Company’s bylaws, tortious interference with prospective business relations, unfair and deceptive trade practices and abuse of process.  The Company filed a motion to dismiss the counterclaims made by Ms. Bramson and Ms. Dooley on July 27, 2015, and the Court has not yet ruled on the Company’s motion to dismiss.  The parties are engaging in discovery, and a hearing on the preliminary injunction is currently scheduled for August 31, 2015.  The Company intends to vigorously pursue this matter and to protect its confidential and proprietary information.  The Company has incurred significant expenses related to this lawsuit to date and may continue to incur expenses related to this lawsuit.  The Company cannot predict the outcome of this lawsuit or for how long it will remain active.