Commitments and Contingencies
|12 Months Ended|
Jun. 30, 2020
|Commitments and Contingencies Disclosure [Abstract]|
|Commitments and Contingencies||
Note 12. Commitments and contingencies
The Company leases office space and office equipment in Huntersville, NC as well as equipment in Canandaigua, NY. On January 7, 2020, the Company entered into an amended lease agreement with the current lessor in order to extend the lease term and increase office space at our Huntersville, NC corporate office. The amended lease expands our space to 22,000 square feet and extends the term to February 2023. This resulted in a remeasurement of the previous right of use asset and liability, which resulted in an increase of approximately $0.2 million.
Following adoption of ASC 842, lease expense excludes capital area maintenance and property taxes.
The components of lease expense were as follows (in thousands):
Supplemental balance sheet information related to leases was as follows (in thousands):
The following table outlines the minimum future lease payments for the next five years and thereafter, (in thousands):
Ontario County Industrial Development Authority Agreement
On February 27, 2018, the Company entered into a Lease and Project Agreement (the “Lease and Project Agreement”) and a Company Lease Agreement (the “Company Lease Agreement” and together with the Lease and Project Agreement, the “Agreements”), each dated as of February 1, 2018, with the Ontario County Industrial Development Agency, a public benefit corporation of the State of New York (the “OCIDA”). Pursuant to the Agreements, the Company will lease for $1.00 annually to the OCIDA an approximately 9.995 acre parcel of land in Canandaigua, New York, together with the improvements thereon (including the Company’s New York fabrication facility), and transfer title to certain related equipment and personal property to the OCIDA (collectively, the “Facility”). The OCIDA will lease the Facility back to the Company for annual rent payments specified in the Lease and Project Agreement for the Company’s primary use as research and development, manufacturing, warehouse and professional office space in its business, and to be subleased, in part, by the Company to various existing tenants. The Company estimates substantial tax savings during the term of the Agreements, which expire on December 31, 2028. In addition, subject to the terms of the Lease and Project Agreement, certain purchases and leases of eligible items will be exempt from the imposition of sales and use taxes. Subject to the terms of the Lease and Project Agreement, the OCIDA has also granted to the Company an exemption from certain mortgage recording taxes for one or more mortgages securing an aggregate principal amount not to exceed $12.0 million, or such greater amount as approved by the OCIDA in its sole and absolute discretion. The benefits provided to the Company pursuant to the terms of the Lease and Project Agreement are subject to claw back over the life of the Agreements upon certain recapture events, including certain events of default.
Real Estate Contingent Liability
On March 23, 2017, the Company entered into an Asset Purchase Agreement and a Real Property Purchase Agreement with The Research Foundation for the State University of New York (“RF-SUNY”) and Fuller Road Management Corporation (“FRMC”), an affiliate of RF-SUNY (collectively, “Sellers”), respectively, to acquire certain specified assets, including STC-MEMS, a semiconductor wafer-manufacturing and MEMS operation with associated wafer-manufacturing tools, and the associated real estate and improvements located in Canandaigua, NY used in the operation of STC-MEMS (the assets and real estate and improvements referred to together herein as the “STC-MEMS Business”).
In connection with the acquisition of the STC-MEMS Business, the Company agreed to pay to FRMC a penalty, if the Company sold the property subject to the related Definitive Real Property Purchase Agreement within three (3) years after the date of such agreement for an amount in excess of $1.75 million, subject to certain enumerated exceptions. The penalty imposed would have been equivalent to the amount that the sales price of the property exceeded $1.75 million up to a maximum penalty. Due to the lapse of the three-year penalty period, the maximum penalty as of June 30, 2020 was $0.
The fair value of the contingent liability was reduced to zero due to the lapse of the sale restriction period. As of June 30, 2020 and June 30, 2019, the fair value of the contingent liability was $0.0 million and $0.4 million, respectively. During the year ended June 30, 2020 and 2019, the Company marked the contingent liability to fair value and recorded a gain of $0.4 million and $0.8 million, respectively, relating to the change in fair value.
Litigation, Claims and Assessments
From time to time, the Company may become involved in lawsuits, investigations and claims that arise in the ordinary course of business. The Company believes it has meritorious defenses against all pending claims and intends to vigorously pursue them. While it is not possible to predict or determine the outcomes of any pending actions, the Company believes the amount of liability, if any, with respect to such actions, would not materially affect its financial position, results of operations or cash flows.
Effective November 5, 2018, the employment by the Company of its former principal financial officer, John T. Kurtzweil (the “Former CFO”), ended, after which the Former CFO filed for an arbitration hearing pursuant to the terms of his employment agreement and filed a complaint under the whistleblower provisions of the Sarbanes-Oxley Act of 2002 with the Occupational Safety and Health Administration (“OSHA”) of the U.S. Department of Labor. On October 28, 2019, the Company and the Former CFO entered into a Settlement Agreement that resolved all pending disputes between the parties with no admission of liability by either party. OSHA approved the Settlement Agreement and closed its investigation of the Former CEO’s whistleblower complaint on November 26, 2019. Pursuant to the Settlement Agreement, the Company paid the Former CFO an all-inclusive settlement amount of $375 thousand in cash. As part of the Settlement Agreement, all unvested restricted stock units and stock options were acknowledged as forfeited as of such date. The arbitration was closed on December 30, 2019.
Tax Credit Contingency
The Company accrues a liability for indirect tax contingencies when it believes that it is both probable that a liability has been incurred and that it can reasonably estimate the amount of the loss. The Company reviews these accruals and adjusts them to reflect ongoing negotiations, settlements, rulings, advice of legal counsel and other relevant information. To the extent new information is obtained and the Company’s views on the probable outcomes of claims, suits, assessments, investigations or legal proceedings change, changes in the Company’s accrued liabilities would be recorded in the period in which such determination is made.
The Company’s gross unrecognized indirect tax credits totaled $0.1 million as of June 30, 2020 and $0.1 million as of June 30, 2019 and are recorded on the Consolidated Balance Sheet as a long-term liability.
The entire disclosure for commitments and contingencies.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef