Note 10 - Commitments and Contingencies

6 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

10.

     COMMITMENTS AND CONTINGENCIES:

Employment and consulting agreements:

Smith has held the positions of Director, President and General Counsel of Company and its subsidiaries under various agreements (and extensions) and terms since

March 2003.

On

October 10, 2016,

the Company approved a month to month contract extension with Smith which includes provisions for i) a monthly deferred salary of

$18,000

effective

October 1, 2016

until the Board of Directors re-instates cash payments to all employees and consultants who are deferring compensation, ii) the right to convert up to

$125,000

of his deferred compensation, at his sole election, at

$0.75

per share, until

March 15, 2018 (

which was expanded on

April 27, 2017

to the right to convert up to

$300,000

of his deferred compensation, at his sole election, at

$0.75

per share, and subsequently extended until

December 31, 2019),

and iii) the right to convert his deferred compensation in whole or in part, at his sole election, at any time in any amount at “market” or into securities sold in the Company’s current/most recent private offering at the price of such offering to

third

parties. Smith agreed effective

July 29, 2018

to continue to serve the Company under these terms.

Since

March 31, 2005,

the Company has had various agreements with Brightcap and/or Bassani, through which the services of Bassani are provided (any reference to Brightcap or Bassani for all purposes are the same individual). The Board appointed Bassani as the Company's CEO effective

May 13, 2011.

On

February 10, 2015,

the Company executed an Extension Agreement with Bassani pursuant to which Bassani extended the term of his service to the Company to

December 31, 2017, (

with the Company having an option to extend the term an additional

six

months.) Pursuant to the Extension Agreement, Bassani continued to defer his cash compensation (

$31,000

per month) until the Board of Directors re-instates cash payments to all employees and consultants who are deferring their compensation. During

October 2016

Bassani was granted the right to convert up to

$125,000

of his deferred compensation, at his sole election, at

$0.75

per share, until

March 15, 2018 (

which was expanded on

April 27, 2017

to the right to convert up to

$300,000

of his deferred compensation, at his sole election, at

$0.75

per share, and subsequently extended until

December 31, 2019).

During

February 2018,

the Company agreed to the material terms for a binding

two

-year extension agreement for Bassani’s services as CEO, while a detailed, fully executed agreement is still being negotiated and will be finalized in the future. Bassani’s salary will remain

$372,000

per year, which will continue to be accrued until there is adequate cash available while negotiations proceed toward the re-instatement of a least a partial cash payment. Additionally, the Company has agreed to pay him

$2,000

per month to be applied to life insurance premiums. On

August 1, 2018,

in the context of extending his agreement to provide services to the Company on a full time basis through

December 31, 2022)

plus

2

years after that on a part-time basis, the Company received an interest bearing secured promissory note for

$300,000

from Bassani as consideration to purchase warrants to purchase

3,000,000

shares of the Company’s restricted common stock, which warrants are exercisable at

$0.60

and have expiry dates of

June 30, 2025.

The promissory note is secured by Bassani’s

$300,000

of

January 2015

Convertible Note (Note

7

) and as of

December 31, 2019,

the accrued interest was

$16,964.

Execution/exercise bonuses:

As part of agreements the Company entered into with Bassani and Smith effective

May 15, 2013,

they were each granted the following: a) a

50%

execution/exercise bonus which shall be applied upon the effective date of the notice of intent to exercise (for options and warrants) or issuance event, as applicable, of any currently outstanding and/or subsequently acquired options, warrants and/or contingent stock bonuses owned by each (and/or their donees) as follows: i) in the case of exercise by payment of cash, the bonus shall take the form of reduction of the exercise price; ii) in the case of cashless exercise, the bonus shall be applied to reduce the exercise price prior to the cashless exercise calculations; and iii) with regard to contingent stock bonuses, issuance shall be triggered upon the Company’s common stock reaching a closing price equal to

50%

of currently specified price; and b) the right to extend the exercise period of all or part of the applicable options and warrants for up to

five

years (

one

year at a time) by annual payments of

$.05

per option or warrant to the Company on or before a date during the

three

months prior to expiration of the exercise period at least

three

business days before the end of the expiration period. Effective

January 1, 2016

such annual payments to extend warrant exercise periods have been reduced to

$.01

per option or warrant.

During the year ended

June 30, 2014,

the Company extended

50%

execution/exercise bonuses with the same terms as described above to Schafer and to Jon Northrop (“Northrop”), the Company’s other board member.

During the year ended

June 30, 2018,

the Company extended

50%

execution/exercise bonuses with the same terms as described above to all options and warrants issued prior to

November 7, 2017,

to an employee and

two

former employees who are now consultants.

During the year ended

June 30, 2018,

the Company increased the above

50%

execution/exercise bonus on all outstanding options and warrants owned or acquired in the future by Bassani, Smith and Schafer to

75%

(to the extent such existing exercise bonus is less than

75%

).

During the year ended

June 30, 2019,

the Company approved the right to extend the exercise period of all or part of any options or warrants granted in the past or in the future, for up to

five

years (

one

year at a time) by annual payments of

$0.01

per option/warrant for

one

of its employees. The extension payment

may

be made in i) cash; ii) by reduction of sums owed by the Company, and iii) by reduction of applicable exercise bonuses.

As of

December 31, 2019,

the execution/exercise bonuses ranging from

50

-

90%

were applicable to

7,604,600

of the Company’s outstanding options and

12,175,411

of the Company’s outstanding warrants.

Litigation:

On

September 25, 2014,

Pennvest exercised its right to declare the Pennvest Loan in default and has accelerated the Pennvest Loan and has demanded that

PA1

pay

$8,137,117

(principal, interest plus late charges) on or before

October 24, 2014.

PA1

did

not

make the payment and did

not

then and does

not

now have the resources to make the payment demanded by Pennvest. During

August 2012,

the Company provided Pennvest (and the PADEP) with data demonstrating that the Kreider

1

system met the ‘technology guaranty’ standards which were incorporated in the Pennvest financing documents and, as a result, the Pennvest Loan is now solely an obligation of

PA1.

No

litigation has commenced related to this matter but such litigation is likely if negotiations do

not

produce a resolution (Note

1

and Note

6

).

The Company currently is

not

involved in any other material litigation.