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COMMITMENTS AND CONTINGENCIES | 6 Months Ended
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Dec. 31, 2014
Commitments and Contingencies Disclosure [Abstract] |
COMMITMENTS AND CONTINGENCIES | 9. COMMITMENTS AND CONTINGENCIES LEASE COMMITMENTS In June 2014, the Company and Varilease Finance, Inc. (“Varilease”), entered into six Sale Leaseback Agreements (the “Sale Leaseback Agreements” or a “Sale Leaseback Agreement”) pursuant to which Varilease purchased ePort equipment owned by the Company and used by the Company in its JumpStart Program. As of June 30, 2014, Varilease completed the purchase from the Company, the ePort equipment under the first two of the Sale Leaseback Agreements as described in our Annual Report on Form 10-K for the year ended June 30, 2014. In September 2014, Varilease 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. Upon the completion of the sale, the Company computed a gain on the sale of its ePort equipment as follows:
|  | Year ended |  |  | Six months ended |  |  |  |
|  | June 30, 2014 |  |  | December 31, 2014 |  |  | Total |
|  |  |  |  | (unaudited) |  |  |  |
Rental equipment sold, cost |  | $ | 1,918,920 |  |  | $ | 3,873,275 |  |  | $ | 5,792,195 |
Rental equipment sold, accumulated depreciation upon sale |  |  | (76,032 | ) |  |  | (331,069 | ) |  |  | (407,101 | )
Rental equipment sold, net book value |  |  | 1,842,888 |  |  |  | 3,542,206 |  |  |  | 5,385,094 |
Proceeds from sale |  |  | 2,995,095 |  |  |  | 4,993,879 |  |  |  | 7,988,974 |
Gain on sale of rental equipment |  | $ | 1,152,207 |  |  | $ | 1,451,673 |  |  | $ | 2,603,880 |
The following table summarizes the changes in deferred gain for the six months ended December 31, 2014 from the sale leaseback transactions:
|  | Six months ended |
|  | December 31, 2014 |
|  | (unaudited) |
Beginning balance, June 30, 2014 |  | $ | 1,142,685 |
Gain on sale of rental equipment |  |  | 1,451,673 |
Recognition of deferred gain |  |  | (403,424 | )
Ending balance, December 31, 2014 |  |  | 2,190,934 |
Less current portion |  |  | 860,390 |
Non-current portion of deferred gain |  | $ | 1,330,544 |
The Company is obligated to pay Varilease a base monthly rental of approximately $220,000 for this equipment during the 36-month lease term. Future minimum lease payments subsequent to December 31, 2014 are as follows:
|  | Operating Leases |
|  | from Sale Leaseback |
|  | (unaudited) |
2015 (remaining six months) |  | $ | 1,320,578 |
2016 |  |  | 2,641,155 |
2017 |  |  | 2,641,155 |
2018 |  |  | 137,731 |
Total minimum lease payments |  | $ | 6,740,619 |
2015 STI PLAN On August 28, 2014, the Board of Directors approved the Fiscal Year 2015 Short-Term Incentive Plan (the “2015 STI Plan”) covering Stephen P. Herbert, Chairman and Chief Executive Officer, and David M. DeMedio, Chief Financial Officer. The 2015 STI Plan provides that each executive officer would earn a cash bonus in the event that the Company achieved during the 2015 fiscal year certain annual financial goals and certain annual specific performance goals relating to the executive officer which are to be established by the Compensation Committee. If none of the minimum threshold target goals are achieved, the executive officers would not earn a cash bonus. If all of the target goals are achieved, the executive officers would earn a cash bonus as follows: Mr. Herbert – $136,500 (40% of base salary); and Mr. DeMedio – $59,469 (25% of base salary). If all of the maximum distinguished target goals are achieved, the executive officers would earn a cash bonus as follows: Mr. Herbert – $273,000 (80% of base salary); and Mr. DeMedio – $118,938 (50% of base salary). Assuming the minimum threshold target goal would be achieved for a particular metric, the amount of the cash bonus to be earned would be determined on a pro rata basis, provided that the bonus would not exceed the maximum distinguished award for that metric. During the three and six months ended December 31, 2014, the Company recorded expense of $19,737 and $46,198 and a corresponding liability, respectively, for the 2015 STI Plan. 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 the three months ended September 30, 2014 and was reflected in Cost of Services in the Consolidated Statements of Operations.

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