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Contingencies | 12 Months Ended
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Jun. 30, 2024
Commitments and Contingencies |
Contingencies | 15. Contingencies Legal The Company from time to time is involved in various legal actions arising in the normal course of business. Management, after reviewing with legal counsel all of these actions and proceedings, believes that the aggregate losses, if any, will not have a material adverse effect on the Company’s financial position or results of operations. In April 2021, the Company terminated several employees of its China subsidiaries, LPOIZ and LPOI, including the General Manager, the Sales Manager, and the Engineering Manager, after determining that they had engaged in malfeasance and conduct adverse to our interests, including efforts to misappropriate certain of our proprietary technology, diverting sales to entities owned or controlled by these former employees and other suspected acts of fraud, theft and embezzlement. In connection with such terminations, the Company’s China subsidiaries engaged in certain legal proceedings with the terminated employees. The Company incurred various expenses associated with its investigation into these matters prior and subsequent to the termination of the employees and the associated legal proceedings. These expenses, which included legal, consulting and other transitional management fees, totaled $718,000 and $400,000 during the years ended June 30, 2021 and 2022, respectively. During the years ended June 30, 2024 and 2023, expenses incurred related to the legal proceedings were immaterial. In December 2023, the Company recovered approximately $190,000 in funds that had been recovered by the Chinese authorities, which is included in other income, net in the accompanying consolidated statements of comprehensive income (loss) for the year ended June 30, 2024. We do not expect to incur additional legal fees or consulting expenses in future periods as we have exhausted nearly all of our legal options and remedies. Knowing that employee transitions in international subsidiaries can lead to lengthy legal proceedings that can interrupt the subsidiary’s ability to operate, the Company chose to enter into severance agreements with certain of the employees at the time of termination. Pursuant to the severance agreements, LPOIZ and LPOI agreed to pay such employees severance of approximately $485,000 in the aggregate, to be paid over a six-month period. After the execution of the severance agreements, we discovered additional wrongdoing by the terminated employees. As a result, LPOIZ and LPOI did not immediately pay the severance payments and disputed the employees’ rights to such payments. However, based on the likelihood that the courts in China would determine that the Company’s subsidiaries would ultimately be obligated to pay these amounts, we accrued for these payments as of June 30, 2021. Such expenses were recorded as “Selling, general and administrative” expenses in the Consolidated Statement of Comprehensive Income (Loss) for the year ended June 30, 2021. As of June 30, 2022, approximately $430,000 remained accrued. The Chinese Labor Court subsequently ruled in favor of the former employees, as expected, and these severance payments were paid out during the first half of fiscal year 2023. The Company has transitioned the management of LPOI and LPOIZ to a new management team without any significant detrimental effects on the ability of those subsidiaries to operate. Management has not experienced any material adverse impact to the business operations of LPOI or LPOIZ as a result of the transition. Potential Impact of Economic Conditions in China Due to our operations in China, our business, results of operations, financial condition and prospects may be influenced to a significant degree by economic, political, legal and social conditions in China. China’s economy differs from the economies of other countries in many respects, including with respect to the level of development, growth rate, amount of government involvement, control of foreign exchange and allocation of resources. While China’s economy has experienced significant growth over the past several decades, its growth rate has declined in recent years and may continue to decline. Deteriorating economic conditions in China generally have led to lower demand for our products in China and thus lower revenues and net income for our subsidiaries in China and the Company overall. A continuation of China’s current economic conditions or a further slowdown in the economic growth, an economic downturn, a recession, or other adverse economic conditions in China is likely to have a material adverse effect on our business and results of operations in future quarters. Impact of Ongoing Wars In February 2022, Russian military forces invaded Ukraine. This war has led to sanctions on Russia, which have had some impacts, though temporary, on our supply chain of raw materials. Separately, Israel declared war on Hamas in October 2023. Initially, this resulted in a temporary increase in our sales, as Israel worked to replace electro-optical systems that in some cases use our materials. However, it is possible that this war will also have a negative impact on our business at some point as a result of the economic impact in Israel. In addition to the significant defense related market in Israel, we also serve many commercial related applications and work with commercial companies in Israel, and the business of those customers may be negatively impacted by the war over time. Given the dynamic nature of this situation, we cannot reasonably estimate the impact of either the Russian-Ukraine conflict or the Israel-Hamas war on our financial condition, results of operations or cash flows into the foreseeable future.

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