NOTE 15 - 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 $19,697 as of June 30, 2017 and $18,759 as of June 30, 2016. The asset retirement obligation is classified as “Other long-term liabilities” in the consolidated balance sheets. The table below summarizes the asset retirement obligation balances and activity:

	Year ended June 30,
	2017		2016
Balance at beginning of year	$	18,759	$	-
Liabilities incurred		-		18,527
Accretion expense		938		232
Balance at end of year	$	19,697	$	18,759

Leasing Activities

Sale-leaseback Transactions

During the year ended June 30, 2016, the Company entered into a sale-leaseback transaction with an unrelated 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.

Operating Leases

Operating lease expense recognized during the year ended June 30, 2017 and June 30, 2016 was $68,460 and $100,715 , respectively. Operating lease expense is included in operating expenses in the consolidated statements of operations. As of June 30, 2017 and June 30, 2016, the carrying value of the right of use asset was $150,214 and $27,264, respectively, and is separately stated on the consolidated balance sheets. The related short-term and long-term liabilities as of June 30, 2017 were $65,004 and $85,210 and as of June 30, 2016 were $20,234 and $7,030 , respectively. The short-term and long-term liabilities are included in “Accrued expenses” and “Other long-term liabilities,” respectively, in the consolidated balance sheets.

Information regarding the weighted-average remaining lease term and the weighted-average discount rate for operating leases as of June 30, 2017 and June 30, 2016 are summarized below:

	As of June 30,
	2017			2016
Weighted-average remaining lease term (in years)
Operating leases		2.37			1.33
Weighted-average discount rate
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 operating lease liabilities recorded in the consolidated balance sheets as of June 30, 2017:

2018	$	69,805
2019		64,297
2020		24,954
2021		-
2022		-
Thereafter		-
Total undiscounted lease payments		159,056
Present value adjustment		(8,842)
Net operating lease liabilities	$	150,214

Short-term Leases

The Company leases facilities in Honolulu, Hawaii, Milwaukee, Wisconsin and Shanghai, China from unrelated parties under lease terms that has either expired during the year ended June 30, 2017 or will expire during the year ended June 30, 2018. Monthly rent for the twelve-month rental periods is between $400 and $2,010 per month. Rent expense of $50,552 and $84,670 was recognized during the years ended June 30, 2017 and June 30, 2016. Short-term rent expense is included in operating expenses in the consolidated statements 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 year ended June 30, 2017 and June 30, 2016, the Company recorded $35,615 and $125,000 of severance for former Vice President and CEO, respectively.