Commitments and Contingencies

9 Months Ended

Mar. 31, 2015

Commitments and Contingencies [Abstract]

Commitments and Contingencies

NOTE 5 – Commitments and Contingencies

The Company was sued by a former employee on June 23, 2008, alleging breach of a consulting agreement and an employment agreement entered into in May and June 2007, respectively. In addition, the plaintiff seeks to recover certain of his personal property, which was used or stored in the Company's offices and alleges the Company invaded his privacy by looking at his personal computer (which was used in the Company's business) in the Company's offices. A jury trial was held for the lawsuit in July 2012. At the conclusion of the trial, the plaintiff was awarded $200,000 under his invasion of privacy and fraudulent misrepresentation claim, $5,000 on the trespass claim, $841,000 on the breach of consulting agreement claim and $200,000 against the Company's CEO on a claim of civil theft, which by law results in an award of $600,000 for the plaintiff. The Company's board of directors approved the indemnification of the Company's CEO for the $600,000. The Company filed a post-trial motion for Judgment Notwithstanding Verdict, New Trial and Remittitur, requesting that the judge set aside or reduce the amounts of the jury verdict.

Based upon the verdicts, the Company recorded a litigation accrual of $1,646,000 as of June 30, 2012. In November 2012, the insurance carrier paid the plaintiff $200,000 in settlement of the invasion of privacy and fraudulent misrepresentation awards. As a result, the Company reduced the amounts accrued for these awards resulting in other income of $200,000 for the period ended December 31, 2012.

In January 2013, the court ruled on the Company's post-trial motions in this litigation dismissing the $200,000 civil theft verdict (which was subject to triple damages) against the CEO and reducing the $841,000 breach of the consulting agreement award to $500,000. The Company then filed a motion seeking a new trial on damages. The Company received a favorable ruling on this motion and received a new trial on the damages. As a result of the reduction in the award for breach of the consulting agreement from $841,000 to $500,000 and the vacating of the award for civil theft which the Company had previously accrued $600,000, the Company recorded other income of $941,000 for the year ended June 30, 2013.

On October 28, 2014 the Court issued a Final Judgment in this case. The Court awarded Mr. Hopkins $51,956 for the breach of consulting agreement. As such the total liability related to this matter is $56,956. In accordance with ASC 855-10-55-1, the Company recorded other income of $448,044 in the unaudited condensed consolidated statement of operations for the nine months ended March 31, 2015 resulting from the reduction of the accrual for litigation. Mr. Hopkins has filed an appeal.

On January 23, 2015, the Court approved the Company's motion seeking reimbursement of attorneys' fees and costs from Mr. Hopkins. An evidentiary hearing is scheduled for June 2015 to determine the amount of fees and costs to which the Company is entitled and a judgment will be entered for that amount.