Commitments and Contingencies

3 Months Ended

Sep. 30, 2018

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTIGENCIES

(15) COMMITMENTS AND CONTINGENCIES

The Company previously carried $3,000,000 in product liability insurance to cover both clinical sites and sales. As part of its cost savings initiatives, the Company cancelled the policy as it had not had any adverse experiences after conducting more than 25,000 patient scans worldwide. The Company is now self-insuring the risk of product liability. The Company is about to begin a new series of clinical trials in the U.S. and also to engage the services of a medical device contract manufacturer. Each hospital will have their own requirements regarding product liability insurance and the Company will obtain such insurance when requested. The medical device manufacturer has stated in their contract that they will require $2,000,000 product liability insurance before commencing the manufacture of CTLM® systems.

From May 2010 to June 2012, claims were made by the IRS for payment of the Company’s accrued payroll taxes, interest and penalties, which as of June 30, 2012 was $1,489,640. The Company engaged tax counsel to handle this matter and intends to fully satisfy its payroll tax obligations. On August 4, 2014, Viable purchased 250 shares of convertible preferred stock for $2,500,000, which gave them a 78.9% voting and economic interest in the Company’s capital stock representing a change in control of the Company. New management’s tax counsel negotiated a new Installment Agreement which stipulated a lump sum payment of $250,000, which was paid on September 4, 2014 and monthly installment payments of $20,000 beginning in September 2014 due on the 18^th of each month until the balance of payroll taxes, interest and penalties are paid in full.

During fiscal 2018, as part of new management’s restructuring plan, the Company received funds from an accredited investor to pay off the payroll tax portion of the amount owed to the IRS. The Company engaged tax counsel to manage the settlement and payment. On June 27, 2018, the IRS provided counsel with a payoff calculation table indicating that the balance of taxes due was $381,224. On June 29, 2018, Viable International Investments LLC provided a bank check in that amount to counsel and they sent the check to the IRS with a letter requesting abatement of penalties and interest totaling $314,019. The IRS is considering the request.

The Company leases a commercial building from Isco Properties, LLC for its offices and warehouse in Fort Lauderdale, FL. The term of the lease is five years beginning February 2014 with a monthly base rent beginning at $6,360 and increasing at a rate of 3% per year. The total rent commitment for the five years is $405,031 of which $376,398 has been paid through September 30, 2018, leaving a balance due of $28,633. Total rent expense for operating leases for offices and manufacturing facilities amounted to $21,434 and $20,849 for the three months ended September 30, 2018 and 2017, respectively. On October 31, 2018, the Company extended the lease for two years from February 1, 2019 to January 31, 2021 (see footnote 15). The monthly base rent is $7,150 for the 1^st year and $7,350 for the 2^nd year. The rent commitment including sales tax for the two years is $184,092.

On September 30, 2013, the Company’s lease with Fort Lauderdale Business Plaza Associates (the “Landlord”) for the premises located at 5307 NW 35th Terrace, Fort Lauderdale, FL 33309 expired and we did not exercise our option to renew for three more years. We continued to occupy the premises on a month to month basis giving us time to find a less expensive facility.

The landlord refused to repair or replace two roof top air conditioning units so we engaged counsel who advised that the Landlord had violated Florida Statute 83.201 by failing to provide air conditioning which is deemed a utility in the State of Florida. In 2013, we calculated the amount of rent due of $41,262 when we had no air conditioning for our offices and recorded that amount as other income for the debt cancellation. Although the Company does not anticipate any further litigation we accrued $27,607 for rent, which our attorney determined is our maximum liability for rent when the air conditioning was functioning.