9. LEASES

A reconciliation of lease obligations for the years ended December 31, 2023 and 2022, is as follows:

As a result of the Zabala lease termination, The Company derecognized the right of use asset in the amount of $21,423 and lease obligation of $26,319, which resulted in a gain on termination of $4,896, which was recorded in Other Income/(expense).

During the year, the Company entered into a sale and leaseback transaction for its Spence Road facility. As part of the transaction, the Company sold the property for $19.4 million including assumption of the underlying mortgage. The Company leased back the facility for a ten-year period with 2 ten-year extension options. The Company accounted for the transaction as a sale recorded a gain of $3.04 million in Other income (expense). The lease back was classified as an operating lease.

All extension options that are reasonably certain to be exercised have been included in the measurement of lease obligations. The Company reassesses the likelihood of extension option exercise if there is a significant event or change in circumstances within its control.

The components of lease expense for the years ended December 31, 2023, and 2022, are as follows:

____________

(1) Included in cost of goods sold, general and administrative expenses and other expenses in the consolidated statement of operations.

(2) Included in interest expense in the consolidated statement of operations.

____________

(1) Included in cost of goods sold, general and administrative expenses and other expenses in the consolidated statement of operations.

The key assumptions used in accounting for leases as of December 31, 2023, were a weighted average remaining lease term of 8.9 years and a weighted average discount rate of 10%. The key assumptions used in accounting for leases as of December 31, 2022 were a weighted average remaining lease term of 14.6 years and a weighted average discount rate of 6%.

The future lease payments with initial remaining terms in excess of one year as of December 31, 2023 were as follows: