NOTE 14 - COMMITMENTS

Leasing Activities

Operating Leases

Operating lease expense recognized during the three and six months ended December 31, 2017 was $20,356 and $41,620, respectively. Operating lease expense recognized during the three and six months ended December 31, 2016 was $14,539 and $29,077, respectively. Operating lease expense is included in operating expenses in the condensed consolidated statements of operations.

In December 2017, the Company entered into a seven-year office lease agreement to replace the Company’s former headquarters, which was sold in the third quarter of fiscal 2018. Monthly rent for the first twelve months of the lease is $13,845 and increases by approximately 1.5% for each succeeding 12 month period. Refer to Note 1 of the Notes to Condensed Consolidated Financial Statements for further detail related to the sale of the Company’s headquarters.

As of December 31, 2017, and June 30, 2017, the carrying value of the right of use asset was $1,170,793 and $150,214, respectively, and is separately stated on the condensed consolidated balance sheets. The related short-term and long-term liabilities as of December 31, 2017 were $179,865 and $990,928 and as of June 30, 2017 were $65,004 and $85,210, 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 operating leases are summarized below:

	December 31, 2017			June 30, 2017
Weighted-average remaining lease term (in years)
Operating leases		6.42			2.37
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 condensed consolidated balance sheet as of December 31, 2017:

2018	$	109,405
2019		248,148
2020		210,260
2021		172,317
2022		174,873
Thereafter		463,275
Total undiscounted lease payments		1,378,278
Present value adjustment		(207,485)
Net operating lease liabilities	$	1,170,793

Short-term Leases

The Company leases facilities in Honolulu, Hawaii, Milwaukee and Madison, Wisconsin and Shanghai, China from unrelated parties under lease terms that will expire over the next twelve months. Monthly rent for the twelve-month rental periods is between $400 and $2,010 per month. Rent expense of $12,213 and $21,135 was recognized during the three and six months ended December 31, 2017, respectively. Rent expense of $22,529 and $46,290 was recognized during the three and six months ended December 31, 2016, respectively. Short-term rent expense is included in operating expenses in the condensed consolidated statement of operations.