KUSTOM ENTERTAINMENT, INC. Leases Disclosure
NOTE 14. OPERATING LEASE
On May 8, 2025, the Company entered into an operating lease with a third party for a warehouse and office used by the Entertainment segment. The lease has a five-year term expiring in May 2030 and provides for base monthly rent of $16,035, subject to annual increases of 2.5%, with May 2025 rent prorated. The Company prepaid one year of rent, real estate taxes, and insurance totaling $247,105, which is applied to the first and final six months of the lease term, and also provided a $20,000 security deposit. The lease is structured as a triple-net lease, under which the Company is responsible for all real estate taxes, insurance, utilities, and other operating costs associated with the premises; real estate taxes for the period from lease commencement through December 31, 2025 were approximately $3,748 per month and insurance costs were approximately $432 per month, both subject to annual adjustment. The lease includes renewal options and an option to purchase the property after the 33rd month of the lease term. As of December 31, 2025, the remaining lease term was approximately 52 months.
In October 2023, the Company entered into an operating lease with a third party for copiers used for office and warehouse purposes. The lease originally provided for 48 monthly payments of $1,786 with a scheduled maturity in October 2027 and included an option to purchase the equipment at fair market value at maturity. The lease was terminated effective December 15, 2025, and accordingly, there was no remaining lease term outstanding as of December 31, 2025.
On November 27, 2024, the Company entered into an operating lease with a third party for a copier used for office purposes. The lease provides for 36 monthly payments of $90 and matures on November 27, 2027. The Company has the option to purchase the equipment at its estimated fair market value at maturity. As of December 31, 2025, the remaining lease term was approximately twenty-three months.
On October 16, 2024, the Company entered into an operating lease with a third party for office space used by the Entertainment segment and temporarily by the Video Solutions segment. The lease provides for 36 monthly payments of $7,251.92 and matures on October 31, 2027. As of December 31, 2025, the remaining lease term was approximately twenty-two months.
On May 13, 2020, the Company entered into an operating lease for warehouse and office space that served as its principal executive office and primary business location. On September 16, 2024, the Company and the landlord agreed to terminate the lease, and the Company recognized a net gain on lease extinguishment of $9,385 for the year ended December 31, 2024.
In connection with the September 2021 acquisition of Goody Tickets, LLC and TicketSmarter, LLC, the Company assumed responsibility for TicketSmarter’s office space lease. The lease was formally terminated in September 2025, and no separate lease obligation related to this location remained outstanding as of December 31, 2025.
Lease expense related to the Company’s office space and copier operating leases was recorded on a straight-line basis over the lease term. Total lease expense of $274,272 for the year ended December 31, 2025 includes expense under all operating leases active during the period, including partial-year expense under the copier lease that was terminated effective December 15, 2025.
The weighted-average remaining lease-term related to the Company’s lease liabilities as of December 31, 2025 and December 31, 2024 were 3.6 years and 2.8 years, respectively.
The discount rate implicit within the Company’s operating leases was not generally determinable, and therefore, the Company determined the discount rate based on its incremental borrowing rate on the information available at commencement date. As of the commencement date, the operating lease liabilities reflect a weighted average discount rate of 8%.
The following sets forth the operating lease right of use assets and liabilities as of December 31, 2025:
| Assets: | ||||
| Operating lease right of use assets, net | $ | 1,022,416 | ||
| Prepayment of rent | 82,368 | |||
| Total operating lease right of use asset | $ | 1,104,784 | ||
| Liabilities: | ||||
| Operating lease obligations-current portion | 180,900 | |||
| Operating lease obligations-less current portion | 841,516 | |||
| Total operating lease obligations | $ | 1,022,416 |
Following are the minimum lease payments for each year and in total.
| Year ending December 31: | ||||
| 2026 | $ | 258,429 | ||
| 2027 | 332,285 | |||
| 2028 | 263,789 | |||
| 2029 | 268,927 | |||
| 2030 and thereafter | 90,218 | |||
| Total undiscounted minimum future lease payments | 1,213,648 | |||
| Imputed interest | (191,232 | ) | ||
| Total operating lease liability | $ | 1,022,416 | ||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Apr 13, 2026 | Showing above |
| 2024 | May 2, 2025 | |
| 2023 | Apr 1, 2024 | |
| 2022 | Mar 31, 2023 | |
| 2021 | Apr 15, 2022 | |
| 2020 | Mar 31, 2021 | |
| 2019 | Apr 6, 2020 | |
| 2017 | Apr 13, 2018 | |
| 2016 | Mar 28, 2017 | |
| 2015 | Mar 7, 2016 | |
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.