In April 2022, the Company entered into a new lease agreement for its main office facility. The lease is for the Company's operations, warehouse, sales, marketing and back office functions. The facility is approximately 6,000 square feet and located in San Diego, California. The lease term is three years with a total lease obligation of approximately $0.4 million. The lease does not include an option to renew. Based on the present value of the lease payments for the remaining lease term, the Company recognized an operating lease asset of $0.3 million and lease liabilities for operating leases of $0.4 million, respectively, on May 1, 2022. As of June 30, 2024, the Company had an operating lease obligation and operating lease asset of $0.1 million related to the facility.

In May 2024, the Company acquired Elevated Softgels and assumed its outstanding lease agreement (refer to Note 3). The facility of Elevated Softgels is approximately 7,200 square feet and located in Grand Junction, Colorado. The lease expires on March 31, 2025 and has options to renew the lease through March 31, 2027. Based on on the present value of the lease payments, the Company recognized

an operating lease asset and lease liability for operating leases of $0.4 million on May 13, 2024. As of June 30, 2024, the Company had an operating lease obligation and operating lease asset of $0.3 million related to the facility.

The Company's operating leases are included in "Right of use assets" on the Company's June 30, 2024 Condensed Consolidated Balance Sheet, and represents the Company's right to use the underlying assets for the lease term. The Company's obligation to make lease payments is included in "Operating lease liability - current" and "Operating lease liability" on the Company's June 30, 2024 Condensed Consolidated Balance Sheet. Operating lease expense is recognized on a straight-line basis over the lease term. During the three and six months ended June 30, 2024, the Company's total lease cost was $49,638 and $77,876, respectively. Total lease costs was mostly comprised of operating lease costs. Short-term lease costs related to short-term operating leases and variable lease costs were immaterial.

Because the rate implicit in the leases is not readily determinable, the Company uses the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term in an amount equal to the lease payments in a similar economic environment. Information related to the Company's operating lease assets and related lease liabilities were as follows: