COMMITMENTS AND CONTINGENCIES

12 Months Ended

Jun. 30, 2015

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

16. COMMITMENTS AND CONTINGENCIES

SALE AND LEASEBACK TRANSACTIONS

In June 2014, the Company and a third party finance company, entered into six Sale Leaseback Agreements (the “Sale Leaseback Agreements” or a “Sale Leaseback Agreement”) pursuant to which a third-party finance company purchased ePort equipment owned by the Company and used by the Company in its JumpStart Program. As of June 30, 2014, a third-party finance company completed the purchase from the Company, the ePort equipment under the first two of the Sale Leaseback Agreements.

In the quarter ended September 2014, a third-party finance company completed the purchase from the Company of the ePort equipment described in the last four of the Sale Leaseback Agreements. Upon the completion of the sale under these agreements, the Company computed a gain on the sale of its ePort equipment, which is deferred and will be amortized in proportion to the related gross rental charged to expense over the lease terms in accordance with the FASB topic ASC 840-40, “Sale Leaseback Transactions”. The computed gain on the sale will be recognized ratably over the 36-month term and charged as a reduction to the Company’s JumpStart rent expense included in costs of services in the Company’s Consolidated Statement of Operations. The Company is accounting for the Sale Leaseback as an operating lease and is obligated to pay to Varilease a base monthly rental for this equipment during the 36-month lease term. The future lease payment obligations under these agreements are included in the table at the bottom of this note.

Upon the completion of the sales, the Company computed gains on the sale of its ePort equipment as follows:

	Year ended June 30, 2015			Year ended June 30, 2014
Rental equipment sold, cost	$	3,873,275		$	1,918,920
Rental equipment sold, accumulated depreciation upon sale		(331,069	)		(76,032	)
Rental equipment sold, net book value		3,542,206			1,842,888
Proceeds from sale		4,993,879			2,995,095
Gain on sale of rental equipment	$	1,451,673		$	1,152,207

In accordance with the FASB topic ASC 840-40, “Sale Leaseback Transactions”, any gain shall be deferred and shall be amortized in proportion to the related gross rental charged to expense over the lease term. The computed gain on the sale will be recognized ratably over the 36 month term and charged as a reduction to the Company’s JumpStart rent expense included in costs of services in the Company’s Consolidated Statement of Operations. For the years ended June 30, 2015 and 2014 the Company recognized gains as follows:

	Year ended June 30, 2015			Year ended June 30, 2014
Beginning balance	$	1,142,685		$	-
Gain on sale of rental equipment		1,451,673			1,152,207
Recognition of deferred gain		(833,619	)		(9,522	)
Ending balance		1,760,739			1,142,685
Less current portion		860,391			380,895
Non-current portion of deferred gain	$	900,348		$	761,790

OTHER LEASES

Other lease commitments include leases for its operations from various facilities. The Company leases space located in Malvern, Pennsylvania for its principal executive office and used for general administrative functions, sales activities, product development, and customer support. In November 2010, the Company entered into an amended lease of its principal executive office in Malvern, Pennsylvania, which extended the lease term from December 31, 2010 to April 2016. The amendment includes rental payments of approximately $29,000 to $32,000 as well as a four month period of no rent payments and leasehold improvements of approximately $195,000. The straight-lined rent expense for this office is approximately $25,000 per month for the duration of the lease.

The Company leases space in Malvern, Pennsylvania for its product warehousing and shipping support. In November 2012, the Company entered into a lease as of January 1, 2013 through February 29, 2016. The lease includes monthly rental payments from $4,406 to $4,678 as well as a two month period of no rent payments. Beginning in January 2013 the straight-lined rent expense for this operations site is approximately $4,300 per month for the duration of the lease period.

Rent expense under operating leases was approximately $354,000, $372,000 and $432,000 during the years ended June 30, 2015, 2014, and 2013, respectively.  

SUMMARY OF LEASE OBLIGATIONS

Future minimum lease payments for fiscal years subsequent to June 30, 2015 under non-cancellable operating leases and capital leases are as follows:

	Operating Leases		Other Operating		Total Operating		Capital
	from Sale Leaseback		Leases		Leases		Leases
2016	$	2,641,155	$	361,927	$	3,003,082	$	157,304
2017		2,641,155		810		2,641,965		131,585
2018		137,731		-		137,731		70,416
2019		-		-		-		23,361
Total minimum lease payments	$	5,420,041	$	362,737	$	5,782,778	$	382,666
Less amount representing interest								45,069
Present value of net minimum lease payments								337,597
Less current obligations under capital leases								131,583
Obligations under capital leases, less current portion							$	206,014

LITIGATION

From time to time, the Company is involved in various legal proceedings arising during the normal course of business which, in the opinion of the management of the Company, will not have a material adverse effect on the Company’s financial position and results of operations or cash flows.

On December 30, 2014, the Company settled a legal action brought in connection with a customer billing dispute. Under the settlement, the Company agreed to pay approximately $690,000. Approximately $280,000 of this amount was recorded in fiscal 2014 and $410,000 of this amount was recorded in fiscal 2015 and was reflected in Cost of Services in the Consolidated Statements of Operations.

During 2015, the Company became involved in a legal proceeding with a former non- vending customer and entities affiliated with the former customer.  The Company is seeking to recoup approximately $680,000 relating to certain credit card chargebacks due under the customer agreement, while the former customer is seeking to recover damages alleged to have been incurred as a result of the breach by the Company of the agreement. The Company does not believe any of the claims asserted against it have  merit and intends to vigorously defend this matter. Additionally, the Company intends to pursue its  claims in order  to recoup the chargebacks.