Commitments and Contingencies

12 Months Ended

Jun. 30, 2018

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

7. COMMITMENTS AND CONTINGENCIES

On January 31, 2017, the Company and a stockholder filed a complaint (the “Complaint”) in the United States District Court for the Eastern District of Louisiana (RedHawk Holdings Corp. and Beechwood Properties, LLC Case No. 2:17-cv-819). The Complaint names Daniel J. Schreiber (“Schreiber”) and the Schreiber Living Trust – DTD 2/08/96 (the “Schreiber Trust”) as defendants. Schreiber is the former Chief Executive Officer and director of RedHawk. The Schreiber Trust, of which Schreiber is the Trustee, is a shareholder of the Company. The Complaint lodged claims on behalf of RedHawk for securities fraud, fraud, and Schreiber’s breach of fiduciary duties.

On April 24, 2017, RedHawk and its shareholder filed an amended complaint (“Amended Complaint”) naming Schreiber as the only proper defendant in the suit, individually and as Trustee of the Schreiber Trust.

On May 22, 2017, Schreiber filed a motion to dismiss, or in the alternative to transfer, the suit on the grounds of lack of personal jurisdiction and improper venue. After the parties filed an opposition and reply, on August 16, 2017 the court denied Schreiber’s motion to dismiss.

On September 13, 2017, Schreiber filed an answer to the Amended Complaint, as well as counterclaims against RedHawk, Beechwood, and a director of RedHawk for actions allegedly taken in the course of his duty as a director. The counterclaims against RedHawk and its director are for alleged violation of UCC § 8-401, breach of fiduciary duty, negligence, and unfair trade practices.

The legal remedies sought in these counterclaims were the subject of a lawsuit filed previously by Schreiber in the United States District Court for the Sothern District of California on April 24, 2017 (Case No. 3:17-cv-8824). At the time of the answer of the Louisiana lawsuit, the California action was still pending, and the answer asked that the counterclaim filed in Louisiana be stayed until the California case was adjudicated. On September 26, 2017, the court in the California action granted RedHawk’s motion to dismiss that suit.

On October 24, 2017, a scheduling conference was held. The parties agreed to, among other matters, to exchange documents and conduct other discovery, and, at this time, to schedule a bench trial starting November 5, 2018.

RedHawk plans to vigorously contest the claims against it in this matter and to pursue the claims against Schreiber, individually and as Trustee of the Schreiber Trust.

While we are insured for our legal defense costs in this matter, we have a $250,000 self-insured retention. During the year ended June 30, 2018, we recorded a charge of $250,000 for uinsured costs incurred in connection with this matter. We believe the ultimate resolution of this matter will not significantly adversely affect our financial position, operations or cash flows, other than the uninsured costs referred to above.