12. COMMITMENTS AND CONTINGENCIES |
12 Months Ended | ||||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||
| Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||
| COMMITMENTS AND CONTINGENCIES | Employment agreements - On June 30, 2014, the Company entered into employment agreements, effective July 1, 2014 with the Company’s Chief Executive and Chief Financial Officers. The employment agreements provide for levels of compensation and continuation of benefit under Company benefit plans. The agreements have severance provisions and are effective until 18 months after notice of termination is given by either party. Copies of the employment agreements were attached as exhibits to the Form 8-K filed on July 1, 2014.
Leases – The Company’s corporate office is located at 7950 E. Acoma Drive, Suite 111, Scottsdale, Arizona 85260, in an approximately 1,500 square foot facility. At June 30, 2016 the facility was occupied on a month to month basis with monthly payments of $1,800 (including rental tax). Effective August 1, 2016, the month to month payment increased to $1,900 (including rental tax).
The ten year land lease related to Deer Creek, was effective May 1, 2012 and has two additional ten year option periods that may be activated by AES. The initial terms of the lease requires minimum monthly lease payments of $100 per acre (increasing to $150 and $200 per acre for the second and third ten year option periods, respectively) plus additional royalty payments based upon quantities of produced water received (approximately $0.25 per barrel) at the site. The design and construction of the Deer Creek water disposal facility required certain changes to the Goodwin Solid Waste facility resulting in extra costs to the landlord (owner of Goodwin Solid Waste). As incentive for the landlord to approve the facility design, AES agreed to limit landlord construction improvement costs related to the leased land to $200,000. Included in the $200,000 limited amount was $100,000 of landlord improvement costs to be paid by AES and reimbursed through a 50% credit against the $0.25 per barrel royalty payments due to the landlord. The prepaid royalty expired on August 31, 2015 under terms of the agreement and therefore had a zero balance at June 30, 2016. Under certain circumstances, the acreage covered by the lease may be expanded by up to 50 acres to allow for additional expansion at the site.
Rent expense for the fiscal years ended June 30, 2016 and 2015 were $60,500 and $53,300, respectively. Future minimum non-contingent payments as of June 30, 2016 are as follows:
Legal Proceedings – The Company is a defendant and counterclaimant in litigation involving its subsidiary, TSI Dissolution Corp. (formerly known as Alanco/TSI Prism, Inc.) (“TSI”) and the purchaser of TSI’s assets, Black Creek Integrated Systems Corp. (“Black Creek”). Black Creek filed a complaint in the Maricopa County Superior Court against TSI and the Company, being Civil Case No. CV2011-014175, claiming various offsets from the purchase price, primarily concerning inventory adjustments, and TSI counterclaimed for monies due from Black Creek under the purchase agreement. Following a trial during fiscal 2014, the court awarded a net judgment in favor of Black Creek in the amount of $16,800, plus attorney’s fees and accrued interest, resulting in a total judgment in the amount of $128,300. At June 30, 2014, the Company recorded an accrued liability of $128,300 for the judgment and had posted a bond with the court in conjunction with the Company’s appeal of the judgment. In May 2015, the State of Arizona Division One Court of Appeals vacated the trial court’s damages award and remanded to the trial court to direct the parties to follow dispute guidelines defined in the asset purchase agreement. In addition, the appellate court’s decision vacated the trial court’s attorney’s fees award and awarded TSI approximately $21,900 of its fees on appeal. At June 30, 2015, the Company reversed the accrual of $128,300 for the prior judgment. Under the court’s direction, the Company followed the dispute guidelines defined in the asset purchase agreement which resulted in an award to Black Creek of approximately $13,000. The Company has previously stipulated that it owed Black Creek approximately $9,600 for shared expenses incurred from 2010 - 2011. The court is currently reviewing Black Creek’s recent attorney’s fees application and the Company’s answer to said application. If the court were to grant a fee award to Black Creek, the range could be any amount from zero to the amount applied for, approximately $160,000. The Company vehemently disagrees with Black Creek’s attorney’s fees claim and believes that its legal defenses in its answer to Black Creek’s attorney’s fees application will preclude any award and accordingly the Company has not recorded a liability.
The Company may from time to time be involved in litigation arising from the normal course of business. As of June 30, 2016, other than the litigation discussed above, there was no such litigation pending deemed material by the Company. |
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