Leases

The Company maintains a production facility located at Applied Process Engineering Laboratory (APEL) in Richland, Washington. The APEL facility became operational in

September 2007.

The production facility has over

15,000

square feet and includes space for isotope separation, seed production, order dispensing, a clean room for assembly of our product offerings, and a dedicated shipping area. In

2015,

the Company entered into a modification to the production facility lease that modified the requirement to return the facility to ground at the time of exit at Company discretion, exercised an extension in

2017

to increase the lease term to

April 30, 2021,

and reduced the required notice to terminate the lease early from

twelve

months to

six

months. In

July 2019,

the Company entered into another modification of the production facility lease that extends the term to

April 20, 2026

and provides for an

eighteen

month termination notice with an early termination penalty of up to

$40,000

which decreases in the future beginning

May 1, 2022.

Upon the adoption of Topic

842

July 1, 2019,

the Company recognized a right-of-use asset and lease liability of approximately

$1.2

million. In determining the amount of the right-of-use asset and lease liability, we assumed the termination of the lease in

April 2024

and incurring a termination penalty of

$20,000.

As of the date of adoption, a right of use asset and a corresponding lease liability of approximately

$1.2

million were recognized on the balance sheet based upon the present value of the future base payments discounted at a

discount rate using the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term and amount equal to the lease payments in a similar economic environment as the lease does

not

provide an implicit discount rate. The weighted average remaining term and discount rate as of

June

30,

2020

was

3.85

years.

For the fiscal year ended

June

30,

2020,

2019,

and

2018

our operating lease expense was approximately

$294,000,

$285,000,

and

$285,000

respectively, and is recognized in the statement of operations in cost of sales and general and administrative expenses.

The following table presents the future operating lease payments and lease liability included on the consolidated balance sheet related to the Company's operating lease as of

June 30, 2020 (

in thousands):

Year Ending June 30,
2021		290
2022		290
2023		290
2024		261
Total		1,131
Less: Imputed interest		(126	)
Total Lease Liability		1,005
Less current portion		(236	)
Non-current Lease Liability	$	769

Asse

t Retirement Obligation

The Company has an asset retirement obligation (ARO) associated with the facility it currently leases. In connection with the lease modification executed in

July 2019,

and the accretion of the lease liability, the ARO changed as follows (in thousands):

	Year ended June 30,
	2020			2019
Beginning balance	$	621		$	590
Accretion of discount		29			31
Gain on change in ARO estimate due to lease modification		(73	)		-
Ending Balance	$	577		$	621

July 2019,

the Company extended the lease term an additional

five

years thus extending the time before asset retirement costs would be incurred. The Company estimated retirement costs to be

$704,000,

which was discounted utilizing an interest rate of

5.1%

for a new ARO liability of

$555,000,

a reduction of

$73,000.

At the time of extension, the asset retirement asset had been fully amortized, thus the Company recognized a gain on change in the estimate of

$73,000.