Quarterly report pursuant to Section 13 or 15(d)

Commitments and Contingencies

Commitments and Contingencies
6 Months Ended
Sep. 30, 2012
Commitments and Contingencies [Abstract]  
Commitments and Contingencies

Note 10. Commitments and Contingencies


Future obligations and commitments, which are comprised of future minimum lease payments and inventory purchase obligations, increased $1.2 million in the six months ended September 30, 2012 to $17.9 million, which was up from $16.7 million at March 31, 2012.


The Company and its subsidiaries are involved in various assertions, claims, proceedings and requests for indemnification concerning intellectual property, including patent infringement suits involving technologies that are incorporated in the Company’s products, which are being handled and defended in the ordinary course of business. These matters are in various stages of investigation and litigation, and they are being vigorously defended. Although the Company does not expect that the outcome in any of these matters, individually or collectively, will have a material adverse effect on its financial condition or results of operations, litigation is inherently unpredictable. Therefore, judgments could be rendered, or settlements entered, that could adversely affect the Company’s operating results or cash flows in a particular period. The Company routinely assesses all of its litigation and threatened litigation as to the probability of ultimately incurring a liability, and it records its best estimate of the ultimate loss in situations where it assesses the likelihood of loss as probable. The Company has not recorded any contingent liability attributable to existing litigation.

Contingency Reserves

As of September 30, 2012 and March 31, 2012, the Company had total contingent reserves of $397,000 and $810,000, respectively, related to certain intellectual property and indemnification claims. The contingency reserves are classified as Accrued expenses on the Condensed Consolidated Balance Sheets.

As of September 30, 2012 and March 31, 2012, $397,000 and $410,000, respectively, of the contingent reserves related to the discontinued operations of ConferencePlus. The decrease related to the discontinued operations contingent liability resulted from the payment of a claim.

Subsequent to September 30, 2012, but prior to the release of the financial statements, the Company resolved, through arbitration, a dispute with NETGEAR regarding an interpretation of the Asset Purchase Agreement covering the CNS asset sale. As a result, the Company must pay NETGEAR an estimated $0.9 million which it expects to satisfy through release of the escrow balance to NETGEAR and an additional payment. As of March 31, 2012, the Company had a $0.4 million contingency reserve for this claim and recorded an additional expense of $0.5 million during the three months ended September 30, 2012. As of September 30, 2012, the $0.9 million reserve is classified as Accrued expenses on the Condensed Consolidated Balance Sheet.

Additionally, as of September 30, 2012, the Company had a contingent cash consideration payable related to the acquisition of ANTONE. The ANTONE contingent consideration becomes payable based upon the profitability of the acquired products for post-closing periods through June 30, 2016 and may be offset by working capital adjustments and other indemnification claims. The maximum earn-out that could be paid before offsets is $3.5 million. As of September 30, 2012, the fair value of the contingent consideration liability after offsetting a working capital adjustment and an indemnification claim for warranty obligations is $2.4 million (see Notes 1, 7 and 12).