9. LEASES

We lease approximately 2,000 square feet of office space at 3150 Almaden Expressway, San Jose, California (our principal executive offices) from an unrelated party pursuant to an operating lease that was to expire on September 30, 2021. Effective August 17, 2021, the lease was amended to extend the expiration date to September 30, 2024, with an option to extend the lease an additional two years. Our base rent is approximately $5,000 per month and the lease provides for annual increases of approximately 3% and an escalation clause for increases in certain operating costs. The amendment to the lease resulted in a right-of-use asset and lease liability of approximately $260,000 with a discount rate of 10%. Rent expense was approximately $17,000 and $17,000, respectively, for the three months ended July 31, 2023 and 2022, and approximately $50,000 and $50,000, respectively, for the nine months ended July 31, 2023 and 2022.

For operating leases, the lease liability is initially measured at the present value of the unpaid lease payments. The remaining 38-month lease term as of July 31, 2023 for the Company’s lease includes the noncancelable period of the lease and the additional two-year option period that the Company expects to exercise. All right-of-use assets are reviewed for impairment when indications of impairment are present.

As of July 31, 2023, the annual minimum future lease payments of our operating lease liabilities were as follows (in thousands):

 SCHEDULE OF MINIMUM LEASE PAYMENTS