The Company leases office and warehouse space in four locations: Del Mar, California, Hayward, California, San Diego, California and Edwardsville, Illinois. The Company determined that all of its lease arrangements are classified as operating leases.

On August 12, 2022, the Company entered into an agreement with Liberty Industrial Park, LLC pursuant to which the Company leases 6,627 square feet of industrial space in San Diego, California. The lease has a commencement date of September 1, 2022. It provides for an initial monthly base rent of $11,266, which increases on an annual basis to $13,180 per month in the final year. In addition, the Company is obligated to pay its share of maintenance costs of common areas.

On June 1, 2023, the Company amended its Edwardsville office building lease with David Ludwig, extending the term of the agreement to May 31, 2027 and setting rent amounts for the new term. It provides for an initial monthly base rent of $9,412, which increases on an annual basis to $9,914 per month in the final year.

The right-of-use assets and lease liabilities for each lease location are as follows (in thousands):


	June 30,		December 31,
	2023		2022
Right-of-use assets:
Del Mar, CA	$	262	$	336
Hayward, CA		1,664		1,800
San Diego, CA		535		590
Edwardsville, IL		395		50
Total right-of-use assets	$	2,856	$	2,776

Lease liabilities
Del Mar, CA	$	283	$	360
Hayward, CA		1,726		1,852
San Diego, CA		553		605
Edwardsville, IL		396		50
Total lease liabilities	$	2,958	$	2,867

The Company’s leases generally do not provide an implicit rate, and, therefore, the Company uses its incremental borrowing rate as the discount rate when measuring operating lease liabilities. 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 within a particular currency environment. The Company used its incremental borrowing rate as of January 1, 2019 for operating leases that commenced prior to that date. As of January 1, 2019, the Company’s incremental borrowing rate was 5.25%. For leases commencing after January 1, 2019 the Company uses its incremental borrowing rate at time of commencement. On September 1, 2022 and June 1, 2023, the Company’s incremental borrowing rate was 5.50%. and 7.25%, respectively. The weighted average remaining lease term for operating leases is 4.6 years and the weighted average discount rate is 5.35% as of June 30, 2023.

Lease expense is recognized on a straight-line basis over the lease term. For the six months ended June 30, 2023 and 2022, lease expense was approximately $0.4 million and $0.3 million, respectively. As of June 30, 2023, undiscounted future minimum lease payments related to leases that have initial or remaining lease terms in excess of one year are as follows (in thousands):


2023 (remainder of year from July 1, 2023 to December 31, 2023)	$	385
2024		789
2025		662
2026		649
2027		546
Thereafter		312
Total undiscounted future minimum lease payments		3,343
Less: imputed interest		(385	)
Present value of lease liabilities	$	2,958