Commitments and Contingencies

12 Months Ended

Jun. 30, 2016

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

10. Commitments and Contingencies

Leases

We lease our office, production and warehouse facilities in Irvine, California and Beaverton, Oregon under agreements that expire in April 2018 and July 2017, respectively. Both leases require us to pay insurance, taxes, and other expenses related to the leased space.

Additionally, during the fiscal year ended June 30, 2015 we entered leases in conjunction with the acquisitions of Huber and Fineline, located in San Carlos, California and San Dimas, California respectively. The Huber lease expired on November 30, 2015 and all orders shipped since that date are manufactured at the Irvine facility. The Fineline lease expires on February 28, 2017. Finally, during fiscal 2015 we opened a sales office in Troy, Michigan to support our engineering services division. The lease expired on December 31, 2015 and as a result of closing down the office during fiscal 2015, we accrued for the remaining rent expense as of June 30, 2015. Rent expense in fiscal 2016 and 2015 was $561,000 and $550,000, respectively. Minimum lease payments for future fiscal years ending June 30 are as follows (in thousands):

	Operating Leases
Fiscal Year:
2017	$	549
2018		361
Total minimum lease payments	$	910

Compensation Arrangements

Retirement Savings 401(k) Plan

The Pro-Dex, Inc. Retirement Savings 401(k) Plan (the “401(k) Plan”) is a defined contribution plan we administer that covers substantially all our employees and is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended. Employees are eligible to participate in the 401(k) Plan when they have attained 19 years of age and then can enter into the 401(k) Plan on the first day of each calendar quarter. Participants are eligible to receive non-discretionary Pro-Dex matching contributions of 25% of their contributions up to 5% of eligible compensation. For the fiscal years ended June 30, 2016 and 2015, we recognized compensation expense amounting to $68,000 and $33,000, respectively, in connection with the 401(k) Plan.

Annual Incentive Plan (“AIP”)

In September 2013, our Board approved an AIP that provides sets of incentives to achieve performance goals on an annual and a multi-year basis. Previously accrued AIP awards of $15,000 were paid to the participants during fiscal 2016. No compensation expense was accrued under the terms of the AIP in either fiscal year 2016 or 2015.

Legal Matters

On August 1, 2016, we received correspondence from an attorney representing Scott Robertson, the former president of Riverside Manufacturing, Inc., claiming damages owed under claims of breach of contract, fraudulent inducement, wrongful self-help eviction among others. The letter requested a payment of $250,000 within 10 days of the date of the letter to fully settle the matter. We have made no such payment nor have we accrued any amounts owed related to this matter. On August 12, 2016, we responded to the letter indicating that we believe each and every claim has no legal merit. Additionally, on September 8, 2016, we sent a follow up correspondence asserting claims against Mr. Robertson including slander of title, fraudulent misrepresentation, conversion and theft. We have proposed a mutual release of all claims to settle this dispute and avoid potentially costly legal fees. As of the date of this filing, no litigation has commenced nor, to our knowledge, is pending. While we believe that we would prevail should this matter escalate, there can be no assurances that we will be successful should this matter be litigated.

In addition to the matter described above we are from time to time a party to various legal proceedings incidental to our business. There can be no certainty, however, that we may not ultimately incur liability or that such liability will not be material and adverse.