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LEASES | (11) LEASES The Company categorize leases at their inception as either operating or financing leases. Leases include various office and warehouse facilities which have been categorized as operating leases while certain equipment is leased under financing leases. During March 2022, the Company entered into a lease agreement for approximately 4,162 square feet of office space for the operations of ZMS in Boulder, Colorado. The lease began on April 1, 2022 and will run through April 1, 2025. The rent and common area maintenance charges are equal to $17.00 per square foot with annual increases of 3%. Upon lease commencement, the Company recorded an operating lease liability and corresponding right-of-use asset for $0.2 each. The Company’s operating leases do not provide an implicit rate, and therefore the Company uses its incremental borrowing rate as the discount rate when measuring the lease liability. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease. The Company’s weighted average borrowing rate was determined to be 4.03% for its operating lease liabilities. The Company’s equipment lease agreements have a weighted average rate of 9.39% which was used to measure its finance lease liability. As of December 31, 2022, the Company’s operating and financing leases have a weighted average remaining term of 4.76 years and 2.63 years respectively. The table below reconciles the undiscounted future minimum lease payments under the Company’s operating and finance leases to the total operating and capital lease liabilities recognized on the consolidated balance sheets as of December 31, 2022 (in thousands):
Operating and finance lease costs were $4.6 million and $3.7 million for years ended December 31, 2022 and 2021, which were included in the consolidated statement of income under the following headings (in thousands):
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