15. COMMITMENTS

9 Months Ended

Mar. 31, 2016

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS

Asset Retirement Obligations

FASB ASC Topic 410, "Asset Retirement and Environmental Obligations," requires the fair value of a liability for an asset retirement obligation be recorded in the period in which it is incurred if a reasonable estimate of fair value can be made and that the associated asset retirement costs be capitalized as part of the carrying amount of the long-lived asset.  The retirement obligation relates to estimated costs for the removal and shipment of a solar power system under an equipment lease.  Accrued asset retirement obligations are recorded at net present value and discounted over the life of the lease.  The Company had an asset retirement obligation of $18,527 as of March 31, 2016 and none as of June 30, 2015.  This retirement obligation is classified as "Other long-term liabilities" in the condensed consolidated balance sheets.  The table below summarizes the asset retirement obligation balances and activity as of:

	March 31, 2016		June 30, 2015
Balance at beginning of period		—		—
Liabilities incurred		18,527		—
Balance at end of period	$	18,527	$	—

Leasing Activities

Sale-leaseback Transactions

During the three months ended March 31, 2016, the Company entered into a sale-leaseback transaction with a non-related party.  The Company evaluated the transaction under FASB ASC Subtopic 842-40, "Sale and Leaseback Transactions" and concluded that the transfer of the asset did not qualify as a sale and is accounted for in accordance with other Topics.  The liability is presented in the debt table in Note 10 as an equipment financing obligation.

Finance Leases

The Company executed a lease-to-own agreement for certain office equipment from a non-related company that includes a bargain purchase of $1 at the end of the lease term.  The Company is required to pay monthly installments of $1,158 for twelve months beginning in July 2015.  Amortization of the right of use asset recognized during the nine months ended March 31, 2016 was $3,380 and no amortization expense was recognized during the nine months ended March 31, 2015.  Amortization expense related to finance lease obligations is included in the "Depreciation and amortization" in the condensed consolidated statements of operations.  The associated interest expense on the lease liability recognized during the nine months ended March 31, 2016 was $340 and no interest expense was recognized during the nine months ended March 31, 2015.  Interest expense related to finance lease obligations is included in the "Interest expense" in the condensed consolidated statements of operations.  As of March 31, 2016, the net carrying value of the asset was $10,141 and is included in "Property, plant, and equipment, net" and the related liability of $3,444 is included in "Accrued expenses" in the condensed consolidated balance sheets.

Operating Leases

The Company leases office space in Madison, Wisconsin from a non-related company under the terms of a lease that expires October 31, 2017.  Monthly rent for the first twelve months of the lease is $1,580 and increases by 3% for each succeeding 12 month period. 

The Company leased an Australian research and development facility from a non-related Australian company under the terms of a lease that was due to expire on October 31, 2016.  Subsequently, the Company entered into a lease termination agreement that was effective January 1, 2016.  The Company was required to pay a rent shortfall of $36,521 and a leasing fee of $7,313.  Lease expense recognized during the nine months ended March 31, 2016 was $95,422 and is included in operating expenses in the condensed consolidated statements of operations.  The carrying value of the right of use asset was $32,136 and is separately stated on the condensed consolidated balance sheets.  The related short-term and long-term liabilities of $19,964 and $12,172 are included in "Accrued expenses" and "Other long-term liabilities," respectively, in the condensed consolidated balance sheets.

Operating lease expense recognized during the nine months ended March 31, 2016 and March 31, 2015 was $95,422 and $66,961, respectively.   Operating lease expense is included in operating expenses in the condensed consolidated statements of operations.  As of March 31, 2016 and June 30, 2015, the carrying value of the right of use asset was $32,136 and $85,656, respectively, and is separately stated on the condensed consolidated balance sheets.  The related short-term and long-term liabilities as of March 31, 2016 were $19,964 and $12,172 and as of June 30, 2015 were $85,656 and $0, respectively.  The short-term and long-term liabilities are included in "Accrued expenses" and "Other long-term liabilities," respectively, in the condensed consolidated balance sheets.

Information regarding the weighted-average remaining lease term and the weighted-average discount rate for finance and operating leases as of March 31, 2016 and June 30, 2015 are summarized below:

	March 31, 2016		June 30, 2015
Weighted-average remaining lease term (in years)
Finance leases		0.25		-
Operating leases		1.58		0.50
Weighted-average discount rate
Finance leases		5.0 %		-
Operating leases		5.0 %		5.0 %

The table below reconciles the undiscounted cash flows for the first five years and total of the remaining years to the finance lease liabilities and operating lease liabilities recorded in the condensed consolidated balance sheets:

	Finance Leases			Operating Leases
2016	$	3,474		$	5,260
2017		-			21,440
2018		-			7,180
Total undiscounted lease payments		3,474			33,880
Present value adjustment		(30	)		(1,744	)
Net finance lease and operating lease liabilities	$	3,444		$	32,136

Short-term Leases

The Company leases office space in Honolulu, Hawaii from a non-related party under the terms of a lease that expires September 15, 2016.  Monthly rent for the twelve month rental period is $4,250.  Rent expense of $34,000 was recognized during the nine months ended March 31, 2016 and no short-term rent expense was recognized during the nine months ended March 31, 2015.  Short-term rent expense is included in operating expenses in the condensed consolidated statement of operations.

Employment Contracts

The Company has entered into employment contracts with executives and management personnel.  The contracts provide for salaries, bonuses and stock option grants, along with other employee benefits.  The employment contracts generally have no set term and can be terminated by either party.  There is a provision for payments of up to six months of annual salary as severance if the Company terminates a contract without cause, along with the acceleration of certain unvested stock option grants.  During the nine months ended March 31, 2016, the Company recorded $125,000 of severance for the former CEO.