Note 9: Commitments and Contingencies

 

Operating Leases and Service Contracts

 

As of March 31, 2012, future minimum annual payments under operating lease agreements and non-cancelable service contracts for fiscal years ending September 30 are as follows:

 

		Payments Due by Fiscal Year
		Total				2012				2013				2014				2015				2016				Thereafter
Operating lease commitments		$	342,154			$	199,164			$	115,996			$	25,190			$	1,031			$	773			$	-
Noncanceleable service contracts			-				-				-				-				-				-				-
		$	342,154			$	199,164			$	115,996			$	25,190			$	1,031			$	773			$	-

 

This table excludes minimum payment obligations under capital leases, which are set forth below.

 

Capital leases

 

As of March 31, 2012, future obligations under non-cancelable capital leases are as follows for the fiscal years ended September 30:

 

2012		$	5,345
2013			-
2014			-
2015			-
2016			-
Thereafter			-
Total minimum lease payments			5,345
Less imputed interest			(15	)
Present value of minimum lease payments			5,330
Less: current maturities of capital lease obligations			5,330
Noncurrent maturities of capital lease obligations		$	-

 

 

Litigation

 

The Company is party to certain legal proceedings from time to time incidental to the conduct of its business. These proceedings could result in fines, penalties, compensatory or treble damages or non-monetary relief. The nature of legal proceedings is such that we cannot assure the outcome of any particular matter, and an unfavorable ruling or development could have a materially adverse effect on our consolidated financial position, results of operations and cash flows in the period in which a ruling or settlement occurs. However, based on information available to the Company’s management to date and other than as noted below, the Company’s management does not expect that the outcome of any matter pending against us is likely to have a materially adverse effect on our consolidated financial position as of March 31, 2012, our annual results of operations or cash flows, or our liquidity.

 

The Company has not recorded any accruals pertaining to any legal proceedings as of March 31, 2012, as they did not meet the criteria for accrual under FASB ASC 450.

 

Global Education Services, Inc. v. LiveDeal, Inc.

 

On June 6, 2008, Global Education Services, Inc. (“GES“) filed a consumer fraud class action lawsuit against the Company in King County (Washington) Superior Court alleging that the Company’s use of activator checks violated the Washington Consumer Protection Act.  GES sought injunctive relief against the Company’s use of activator checks, as well as damages in an amount equal to three times the damages allegedly sustained by the putative members of the class. LiveDeal denied the allegations and defended the litigation.  The Company is currently negotiating a settlement and expects to file motions with the court jointly with the class representative and class counsel for preliminary and final approval once the settlement documents have been finalized.