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NOTE 13 - COMMITMENTS AND CONTINGENCIES | 12 Months Ended
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Jun. 30, 2015
Commitments and Contingencies Disclosure [Abstract] |
NOTE 13 - COMMITMENTS AND CONTINGENCIES | NOTE 13 - COMMITMENTS AND CONTINGENCIES Leases The Company rents its operating facilities and certain equipment, pursuant to operating lease agreements expiring at various dates through November 2026. The leases for certain facilities contain escalation clauses relating to increases in real property taxes as well as certain maintenance costs. Future minimum operating lease commitments consisted of the following at June 30, 2015:
Year Ending June 30, |  | Facilities And Equipment (Operating Lease)*
| 2016 |  |  | $ | 3,717,939 |
| 2017 |  |  |  | 3,191,082 |
| 2018 |  |  |  | 2,722,882 |
| 2019 |  |  |  | 2,129,428 |
| 2020 |  |  |  | 1,866,277 |
| Thereafter |  |  |  | 8,094,188 |
| Total minimum obligations |  |  | $ | 21,721,796 |
*Includes new lease for the Company’s principal office in Melville, see subsequent events Note 20. Rent expense for operating leases approximated $4,266,000, $4,571,000 and $4,035,000, for the years ended June 30, 2015, 2014 and 2013, respectively. The expense for the year ended June 30, 2013 included an expense for early termination of a lease of approximately $690,000. The Company has received preliminary approval from the Suffolk County IDA on August 27, 2015 of a 50% property tax abatement, valued at $440,000, over a 10 year period commencing January 2017. Final approval from the IDA may come as soon as their next meeting on September 22, 2015. Employee Benefit Plans The Company has a non-contributory 401(k) Plan (the “401(k) Plan”). The 401(k) Plan covers all non-union employees who are at least 21 years of age with no minimum service requirements. There were no employer contributions to the Plan for the years ended June 30, 2015, 2014 and 2013. The stockholders of the Company approved the 2000 Employee Stock Purchase Plan (“ESPP”) at the Company’s annual stockholders’ meeting in April 2000. The ESPP provides for eligible employees to acquire common stock of the Company at a discount, not to exceed 15%. This plan has not been put into effect as of June 30, 2015. Stipulation Agreements The Company has entered into stipulation agreements with a number of its creditors that in the aggregate total $83,966, which is included in other current liabilities on the Company’s balance sheet as of June 30, 2015. The monthly payments total $19,552. Litigation The Company is subject to legal proceedings and claims arising from the ordinary course of its business, including personal injury, customer contract and employment claims. In the opinion of management, the aggregate liability, if any, with respect to such actions, will not have a material adverse effect on the consolidated financial position or results of operations of the Company. Golden Triangle Company v. Fonar Corporation et al, CV10-2933. The Plaintiff contracted with the Company to purchase a scanner, and paid $1,455,500 in advance. The scanner was never delivered, but Plaintiff never designed a site for delivery either. Alleging other damages, fraud and deceptive trade practices, Plaintiff sought up to $5,000,000. The Company made a motion to dismiss the complaint, the outcome of which left Plaintiff with only a cause of action for breach of contract. The claims against the individual officers and employees of the Company were dismissed. The Company filed its answer, together with a counterclaim alleging that the Plaintiff, by attempting to overcharge the end-customer, had damaged the Company’s reputation and ability to sell in Kuwait. The case was settled in June 2013 for $480,000 in cash and 30,000 shares of the Company’s common stock payable in installments. The Company recorded a gain of $755,500 on the statements of income for the year ended June 30, 2013. Matt Malek Madison v. Fonar Corporation, United States District Court, Northern District of California, was commenced by plaintiff on August 27, 2007 to recover a down payment for a scanner in the amount of $300,000, with interest. The plaintiff sought costs of suit and attorney’s fees as well. The Company answered the complaint and sued the plaintiff for breach of contract in the amount of $450,000. Although down payments are usually expressly non-refundable in the Company’s quotations and agreements, in this case, the quotation contemplated the sale of four scanners, and provided that the deposit would be refundable with interest, if the customer were unable to find suitable locations in the San Francisco Bay area. The issue was whether the customer made a good faith effort to find locations; the Company’s position was that the customer did not. The case went to trial before a judge; the parties submitted post-trial briefs, and judgment was awarded to the plaintiff. The Company appealed the trial court’s decision, but on January 31, 2012, the U.S. Court of Appeals for the 9th Circuit affirmed the lower court’s decision awarding the plaintiff the $300,000 deposit with prejudgment interest from July 1, 2006. The Company sought to have the Court of Appeals reconsider the decision en banc, (by all or a larger number of the judges on the Circuit Court of Appeals), but this was not granted. Although the case has been concluded, the plaintiff has not taken any steps to collect the judgment. As of June 30, 2015 and 2014, $300,000 was included in the Company’s accrued expenses. Bonutti Research v. Fonar Corporation, Health Management Corporation of America, Health Diagnostics, LLC et al, was commenced on December 2, 2011. Bonutti Research filed a patent infringement action in the U.S. District Court for the Eastern District Court of New York, alleging that Fonar’s Upright® MRI scanners infringe plaintiff’s patent which relates to the moving of a patient into the scanner. Fonar believes plaintiff’s claims are without merit and further, that the patent is invalid. The parties have settled the case for $150,000 payable by Fonar in twelve installments and certain licenses and covenants not to sue. The $150,000 has been recorded in the Company’s consolidated statements of income for the year ended June 30, 2014. As of June 30, 2015, the Company has paid the $150,000. Bolt MRI Technologies v. Fonar Corporation, Health Management Corporation of America & Health Diagnostics, LLC, was commenced on July 22, 2013, when Bolt MRI Technologies filed an action against Fonar Corporation, Health Management Corporation of America and Health Diagnostics, LLC alleging infringement of the same patent which is the subject of the Bonutti case. Bolt alleged that the patent was assigned to Bolt. The settlement of the Bonutti case covers this case as well. Other Matters The Company is also delinquent in filing sales tax returns for certain states, for which the Company has transacted business. The Company has recorded tax obligations of approximately $2,538,000 plus interest and penalties of approximately $2,509,000. The Company is in the process of determining its regulatory requirements in order to become compliant. The Company maintains a self-funded health insurance program with a stop-loss umbrella policy with a third party insurer to limit the maximum potential liability for individual claims to $100,000 per person and for a maximum potential claim liability based on member enrollment. With respect to this program, the Company considers historical and projected medical utilization data when estimating its health insurance program liability and related expense. As of June 30, 2015 and 2014, the Company had approximately $510,000 and $298,000, respectively, in reserve for its self-funded health insurance programs. The reserves are included in “Other current liabilities” in the consolidated balance sheets. The Company regularly analyzes its reserves for incurred but not reported claims, and for reported but not paid claims related to its reinsurance and self-funded insurance programs. The Company believes its reserves are adequate. However, significant judgment is involved in assessing these reserves such as assessing historical paid claims, average lags between the claims’ incurred date, reported dates and paid dates, and the frequency and severity of claims. There may be differences between actual settlement amounts and recorded reserves and any resulting adjustments are included in expense once a probable amount is known. There were no significant adjustments recorded in the years covered by this report.

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