Year-End Audit Call: AR Reserves, Debt Restructuring, and Action Items

Hey JD. Hey. Hey JD.

How are you guys doing?

Pretty good. How about yourself? How's the baby?

I've actually been meaning— I've been excited to get on this call because you mentioned, I think it's just in passing, like, hey, I've got a great book for you if you want to teach your newborn how to sleep. And we're just like in the trenches right now with her, like waking up every 2 hours. So we're about to do the whole like Ferber method, like put her, put her in the room.

Happy Sleeper, dude.

Yeah.

So that's the name of the book.

If that doesn't take, I'm gonna be— she, she, I don't know, she, my wife's got her own process, but if that doesn't take, I'm coming to you next.

Yeah. Uh, famous last words, I'm sure. Yeah.

Right. How you doing, Lonnie?

Hey, Lonnie.

Lottie, can you hear us? She may not be able to. Shane, how are you doing?

Uh, pretty good in the, uh, in the throes of busy season, but, um, right, hopefully, hopefully this call should be fairly straightforward. Should we wait for her to get back or should we just get started? Some of these are like This is probably a mix of like, I have to ask it because of the rules, and, um, the other half of them would just be observations or questions for you to kind of flesh out with you.

Yeah, uh, let's go and get started. If she, uh, there'll probably be some things that if she's going to be better informed, we'll, uh, we'll let her answer. Um, but we'll get started.

All right, sounds good. So, um, for, for cash, so, um, two, two questions. One is, um, were there any held checks? So held check would be like you cut a check but leave it in your drawer for, for 2 weeks? Usually the answer is no, but again, this is one of those standard things.

I don't believe there are any held checks. Lottie might— no, there wouldn't have been any.

Okay, um, and then, and then moving to accounts receivable, so I think that we saw in, in the aging Um, there's roughly 1.2 million of '91 or older AR items, right? And then we saw a reserve for like 570. So I think last year it was like reserve for all the old stuff. Um, so this is more of a question of like, do there need to be additional reserves to cover some of those aged balances?

So my understanding was that a majority of that '90, there was a reserve for it, but The numbers you're saying, that, that sounds like more than I expected. Lottie, does that sound right to you? The $1.2 million over 90 and then $570,000 for a reserve?

Um, let me look and see.

So I know, weren't there two accounts at one point where we were holding reserves? Um, like there was a doubtful account and then there's something else that I can't remember off the top of my head, but yeah, there were two accounts.

Yes.

Because the way we usually go about it is anything over 90 on the damage stuff, like, we'll write off down— we'll reserve up to like 90%, and then we'll just reserve 100%. We'll still keep them open because sometimes damage claims take a year to process with insurance.

Um, that's for uncollectible. I'm just pulling up the balance sheet now to get an idea of what the—

yeah, I think a majority of that's just going to be the damage items, um, that we haven't either written off or that we still think are collectible. Um, because I believe rental would have been about $500,000 to $600,000, um, of receivables at the end of the year. So the other $400,000 to $500,000. So I'm showing $1.8 million of trade receivables in that 1250 account and 1251 being negative $743,000. So like a little under $1.1 million. So yeah, I guess that'd be like $500,000 to $600,000 of damage. Um, yeah, it might be worth taking another pass through because we do this quarterly, right, Lottie? So last time we would have looked at this was with Vlad saying what he could write off.

So the total reserve amount that we have was about $817,000.

And is that all damage or is that rental as well?

That is all damage.

All damage.

Okay.

We take out cars plus.

Okay. Um, yeah, so I guess, Shane, what do you— what would you—

I mean, I'd like for you to look at it or confirm that the reserve's good.

I think, I think this is accurate, um, because we do look at it quarterly and we're pretty confident that our damage process usually results in these things being collected, so I do think that this is collectible.

Bear with me one second. I was just trying to open the TB because for whatever reason we had a different reserve number and I want to make sure we're not missing something. Of course, it's taking forever. I'll come back to it in a second if I have one. So the other thing for AR is when we're looking at the Okay, sorry, I'm going to go back. So, Lottie, you mentioned there was 8-something of reserves?

Sorry, I meant 743. Yeah, $743,000.

Okay. And then what is account 1254?

I actually had a similar question. I'm not sure. Oh, that's the CARS Plus related, but why would CARS Plus be positive if it was an allowance?

Yeah, that's what I was wondering.

Let me see.

I think—

let me see.

Give me one second.

All right, just giving— it's just taking a minute to open.

You're good.

It looks like I'm just from what I'm seeing that $1,254 is cars plus related AR instead of the damage AR.

But yes, correct.

I'm not sure why that'd be going positive.

So yeah, JD, if you guys want to just get back to us on that one. Okay. I think maybe that's our question.

Yeah, we'll take a look at that, Lottie, and see what's going on.

Okay, we'll do. Okay, next question is, so the other thing is when we look at the AR aging, we will typically look to see if there's any net customer credit balances. So sometimes it could be, you know, a couple absolute dollars or debit balances, and then you have a big negative. Um, ultimately we saw about 90-something, like 90, roughly $90,000 of net customer credits.

Yeah.

Um, are those legit? So like stuff that's owed back to customers? I think like, you know, FedEx is one of them, Daydream Pictures. So there's a few of them look like production, and then A couple of them are called FedEx.

So occasionally what will happen is we'll get a payment that gets applied to a customer, but the, the ultimate customer is in that KARS Plus line item that is significant. So like, let's say we get a payment from a specific vendor whose AR we're not recognizing in QuickBooks. We're actually recognizing it inside of KARS Plus. So they'll create a vendor for that account. So it'll be a negative amount versus the positive that would be in that KARS Plus. Vendor. The two ones you described specifically, that sounds like what the scenario would be. I also know that sometimes we just do one parking invoice, and for whatever reason, that gets applied to a different customer than paid the park— that should have paid the parking invoice. So that one customer will have a balance of like a credit of $119 or something along those lines. Um, and that should just be recognized as revenue and moved on because that was misapplied to a customer. So it just got it showed up in the AR as a credit rather than being applied to the correct customer.

Uh, it sounds like a mess.

Yes, you're right. That's why we're trying to move off of this Cars Plus system so we can actually get the AR, the true AR coming in from a rental management system that we can apply invoices directly to the customer rather than needing to pull it in.

Yeah. Can you see my screen?

Yes.

Yep. So you mentioned, like you said offhand, like the 119s or whatever, like those are probably need to be income items, right? Yep. Where do you think the like line in the sand here is for it's legitimately offsetting a KARS Plus invoice versus like it needs to be an income item?

I would say that any— so anything that's in all capitals is definitely— I mean, I know that's not a great rule, but that's a KARS Plus they're just bringing over like what the Cars Plus name looks like. Um, so that'd be— those are all just offsets of Cars Plus. Um, it's funny, so those $357, that's a— that's 3 times $119, so I know that should be income. Um, but outside of that, I would say anything, anything from that—

it's not very much, right? You're probably talking about a couple thousand bucks.

It's like that $200, probably anything over $200 except for those $357,000 is a KARS Plus offset. Anything under should just be income items. It'll just be income.

All right, got it. Okay, that's helpful.

Should we at our site just do journal entry to write those off, the capital ones, to KARS Plus, or, uh, do anything on our end?

Yeah, we should do that. I mean, Shane, do you want us to wait till you guys put everything together.

I mean, I'd love for you guys to like tell us instead of like me be the arbiter of what's an adjustment and not an adjustment. Yeah. And I'd say that like in the short term, Lottie, your suggestion is great, which is do a journal entry, but the long term is probably you want to get like get those entries removed from the aging as well, like to clear them out.

Yeah, we'll do a journal entry and we'll match them up so that way they clear out.

Yeah.

Okay.

We'll make those changes and send them over. There's a couple— there's also a couple other changes that we made that we found after we send you the TVs that we'll discuss when we get to that section.

Yeah, sounds good. And for any of these things where it's like, you know, you guys like just send us the journal entry or just tell, you know, just tell us what we got to adjust and we'll— we basically run a separate version. So we get your TV, we import it, and then we'll like book journal entries against it, obviously. So. Okay. All right. Just let us know. Um, for accounts payable, so standard question, like confirming all expenses and AP is cut off appropriately?

Yes.

Perfect. Um, and then I would assume there's nothing in AP that should be long-term, should all be current, right?

Uh, that's correct. The only thing I think there was commissions. I don't believe that's in there. There's a commission payable to our real estate, uh, broker who's a friend who was going to take it on a long term rather than current, but I think that's out of there, so everything else should be current.

Yeah, we have that question for later, but yes.

Yep, there you go.

Um, okay, great. Um, and then, and then for accrued payroll, so I'm, I'm assuming we're probably looking at this wrong, but like we were, we were looking at two payroll registers, um, one for the payroll paid 1/2/26, and then, and the one for the payroll paid 1/16. And so we were coming up with an accrual that's different than what was on the financial statements. So maybe my question is like, how did you guys come up with yours? Or separately, I could send you our math and you could just tell us what we're doing wrong.

I'm just pulling up our accrual now.

Um, the only thing that jumps out potentially is PTO— or not, sorry, not PTO. Sometimes you get holiday hours mixed in there and that can throw off, like, if we're not looking just at regular pay, um, and it could be under under-reserved or under-accrued because PTO doesn't get counted in there. But Lottie, you'll probably—

we're the other way. We're calculating— well, maybe, maybe we're not. We're calculating a bigger accrual than what the books show.

Got it. And you named off two different payrolls. So we basically just took the 12/15 to 12/28 payroll and accrued 3 days off of that payroll.

It went— when was the money for that payroll period? When was that pulled from the company's bank account?

For the 1/2?

Yeah, for 1/2. Was that pulled in '25?

Um, uh, I don't know. Let me see.

I think it would have been 'Cause either, like, I agree with you, Lottie, if the entire 1/2 payroll was out of cash. But otherwise, I'd say you'd need to accrue that entire payroll plus 3 days.

The check date is 1/2. I'm assuming we had either accrued the entire one for that one or it was pulled in 2025.

Yeah, if it was pulled in '25, then I think I agree with you.

Okay, so it was paid December 31st, 2025. I can share.

Okay.

Yeah, here's the— right here, these two amounts. This is the payroll tax and this is the—

perfect.

The funds themselves on 12/31.

Okay, perfect. I think that makes sense. Next question. So it looked like there were some new accounts from or do to and do from Versatile Studios?

Yes.

What is Versatile?

You don't know about Versatile?

I think so. Um, we do.

So yeah, I don't know, I, James may have mentioned it, but it was a, um, a company that we were in the process of acquiring in 2025. Um, we're currently operating under an MSA because they needed to get some liabilities shored off. They couldn't contribute the assets of the business, namely the production supplies and the vehicles that they had, because they were under a lien with the SBA, um, that the owner of the company had, and it tied up those assets. So he could not contribute those assets until that lien was removed or those assets were excluded from the lien that he had. So currently we're operating under an MSA. There's a company called VS Rentals OpCo LLC where we pay a management fee to, um, Versatile Studios, which is the other entity outside— that, that's the, um, the foreign entity to our group of companies. We pay them a managed service fee, we collect all the revenue, we pay all the employees through Silverco, and there are some expenses that are run through VS Rentals OpCo specifically. So when you look at due to Versatile Studios and due from Versatile Studios, that is our operating company that is the shell where the MSA is, the MSA lives for a company called Versatile Studios.

So Versatile Studios interaction with Silver Co. is strictly through the balance sheet, through these intercos? That is correct. So like, does, does Silver Co. reflect revenue or pay— I mean, I think you said they pay payroll, right? And so is that what goes through that asset account?

So the employees of what we call Versatile Studios are paid, are on Silverco's books. There's no like Paylocity instance for Versatile Studios. We just run them through Silverco. So when you see, um, we do all of the like allocations outside of QuickBooks. We don't do them inside of QuickBooks directly. We just say like, if Silverco incurred the cost, it's going to show up on Silverco's books because they're all part of the same partnership that flows up to MT Studio Services. So we don't necessarily worry about allocating it in QuickBooks. Yeah, I think the only thing you're going to see back and forth is just funds being sent to— like, we're not, we're not accruing payroll or anything and saying that is allocated in that asset account. It's just money moving back and forth between the two entities.

So like in the, in the, in the payroll example, instead of recording payroll expense for the folks on the, on the pay run, related to Versatile, you don't record an expense, you record a due from Versatile in that case.

No, that's incorrect. SilverCo records the payroll cost, but when we do company-prepared financials or we're doing a report, we will subtract that cost from payroll for SilverCo and then allocate it to the Versatile P&L that we're building for them.

Okay, so you track it. Then obviously.

Yeah, we track it. Like we, in Paylocity, we know which employees are allocated to Versatile. So we'll just run that number every month. And then for our company prepared financials, move them across so that we know the difference.

So for us, I think assuming I'm like hearing this correctly, like it feels like we're, we're paying employees, we're paying the cost of employees for one of our affiliates. And so typically that falls into a section where we have like related party disclosure requirements.

Right.

And so to the extent Silverco is paying for an affiliate's employees, we'll probably want to just disclose that that's happening and that's included in Silverco's results. So I'll probably need you to give us that number for '25.

Do you want it now? Or do you want me to just follow up after and I can send it to you?

Yeah, just send it to us.

Yeah. Okay.

And then are there other things like that other than, other than employees where there's a blurring of the lines, so to speak?

Let me think. Well, I mean, to the degree, like, Verstile, the company Verstile, I keep calling Versatile Studios, but Versatile also runs out of one of the locations that Avon has in, um, Hollywood. So you could say that, like, we split it 50/50 when we do company prepared, but all of that cost is hitting the Silverco books. Versatile also runs out of that building, so you could say that they're— they should incur a portion of that cost as well. Um, they're under our insurance. Because that insurance is at the MT Studio level. So all the affiliated or all the entities would be insured, but we don't pay any additional costs and Versatile doesn't have to burden that or share that burden.

Meaning there's a single corporate policy that sits above all the entities that encapsulates all of them?

That's correct. And the other thing, and vehicle-wise, we They have like 40 badged vehicles that are versatile. That was part of the deal where we'd badge them for them. They'd have their versatile branding and they could rent them out. We get all the proceeds, obviously, but we're not charging Versatile for the use of those vehicles. Similar to how we do the, the intercompany lease, we still just charge that intercompany lease to Silverco rather than move it off to Versatile because it's all an intercompany anyway, and it's for the sake of paying sales taxes on behalf of the asset company. I think that's probably everything major that Silverco would be burdened with.

Okay, and then Versatile, it's, it's more of like a brother-sister, is it? Which entity owns it directly?

Uh, it would be directly would be, um, let me think, MT Studio Services. It's just another affiliate of MT Studio Services.

Awesome. Um, there was a, a decent amount of legal fees in '25, so more— I think, I think that's obviously the canary in the coal mine in terms of like, are there legal matters or— that's the segue into, are there legal matters that are ongoing and/or what was going on in '25 that caused all that spend? I believe, was the Nelson contract that got resolved in '25?

The Nelson contract got resolved the beginning of '25. So that is not an ongoing legal matter. The significant legal fees are actually due to that Versatile deal, just us running it. and doing that process. I don't think outside of that, uh, there is any pending litigation. No, there shouldn't be. There's just some general—

were there any settlements in the year?

Um, I know there were a couple small ones that I'll have to track down. Um, like an employee would damage a vehicle doing some sort of transportation. And we would give the claimant like $5,000 or something like that. There might have been one or two of those, but nothing substantial.

Okay. And then no major outstanding ongoing legal matters, whether pending or threatened or otherwise currently?

No, there are not.

There is one lawsuit thing for Olga Sanchez.

That's the one I was thinking of. Yeah, that was like $12,500 maybe. That sounds exactly— I think that's the only one where he paid out something.

Yeah, I saw that number. That makes sense.

Yeah.

Okay. So for, for two-family now shifting off of Silverco, there's a GL called GL number 6200 called other income or expense. Is that interest expense? Is that where you guys put interest expense?

Is that a significant balance?

Yeah, it's like $460 grand.

Um, other income and expense, let me check. Lottie, do you know off the top of your head?

I'm switching to— I think that sounds right, but I'm switching companies now.

Um, yeah, I'm pulling it up as well. You said the interest— there we have $456,000 of interest expense, and it's under other expenses. Is that what you're looking at?

That's what I was asking.

Yeah, yeah, that's our, that's our line of credit, um, with First Source, the interest expense there.

Okay. Um, no, no board minutes?

No board minutes.

Um, for Joanna, um, we, we had a note going back a few years, um, to a maximum amount of $500,000. It looks like she put a couple more bucks in during '25.

That's correct.

Were there new notes executed for that or amendments to the existing note?

Um, I don't believe so. I'll double-check with James. Let me send a message right now just to confirm.

Yeah, perfect. And then a marginally similar question for Alexander Tang, whether there's an agreement or what supports that.

Yeah, there is an agreement for him. I will try— I think I know where it is. I'll make sure that gets sent over.

Perfect. Still typing.

I'm looking to see if I have that— if I had the docs handy. I mean, I have a folder.

What's his relationship? Friend, family, and part of the investor group?

Um, Carbon Capital Partners is him and James, so he's a member of that.

Like, oh, is that the guy that's over Singapore? He's like, yeah, Singapore.

Yeah, he's the Singaporean. Yep. Um, okay, so you need, uh, any additional language for Joanna as well as the Tang note? Or Lion? Any docs? Okay.

And then let's see, for NCNT, there's an— it looks like there's a Note B.

Okay, yeah. This is a good one.

All right, um, anytime you start by laughing, I know that I'm in for quite a yarn.

Yeah, um, basically First Source restructured our, our debt. Um, this is unpaid interest and, um, fees and a bit of a like service fee on top of restructuring our debt at the end of 2025. So that is the sum balance of all three entities because there was a— there's two-family and their unpaid interest and and fees. And then there's like an Avon Rental Holdings $500K line of credit against AR, and that got rolled into it too. And I didn't want them to roll it all into NC&T because it's not truly NC&T's burden, but they did, and it's on NC&T's name on behalf of the books. So all that is— it's considered the, uh, what would you call it, like a zero-interest note that they're not accruing any sort of fees or interest on. It just sits there and it's everything, and it sits below all the other active lines of credit with the business. So we're still servicing the A note for NC&T and two families' line of credit and the ARH working capital line, and this sits beneath it, um, and will be there until everything else is extinguished.

Um, do you have new agreements for all that restructure?

Yeah, I'm gonna— James has them. I'm gonna have to get him to send me all that language, but he should have everything executed.

Yeah, and it's like, I just broadly, like anything related to the restructure, I guess, you know, this isn't a question necessarily specific to the, to the $2 million, but just the global restructuring, because we'll have to make sure that if or in so much as it impacts footnotes that we're updating the language and documenting that appropriately.

Yeah, got it. I just sent a note to James. Hopefully you can send me everything that he has.

Um, and then, and then I think you, you touched on this for Silverco. Is there a $500,000 note with those for that?

Yeah, so it's technically with ARH. Um, like the, the lender is Avon Rental Holdings, but we put it at Silverco just because that's the company that has the bank account. That pays First Source, and that's the books we maintain.

So if we're reporting on Silverco, NC&T, and two-family, not ARH, do we have that loan or not in what we're reporting on? Um, because we're not, we're not actually doing ARH, right?

That's a good question, um, because technically the note is not to Silverco, it's to ARH. So I guess for the purposes of the exercise, it should be excluded. Although when we give these financials to First Source, they're going to get a balance sheet for the consolidated balance sheet that doesn't have a note that they have out with us.

But yeah, because I kind of assume it's at Silverco, it's probably a characterization issue, right? Which is I don't know, let's just assume cash was there. I don't know if cash came in or didn't come in, but presumably ARH would have gotten the cash and then loaned it down into Silverco. And so whether it's due to First Source or whether it's due to ARH, I think in either case, the liability is there. I think it's just—

That's true. Yeah.

How we describe the liability.

I think when we drew the funds, they got drawn into a Silverco bank account. It's not like we—

yeah, I mean, I just assume that's the case, given, like you said, ARH doesn't even have anything. Like, right, where would it put it even if I got it?

So, so yeah, so you're right, the liability is there, whether it's due to First Source or due to ARH. Like, the liability should still display.

Yeah, I mean, I just think from a strict legal liability perspective, it's due to ARH, and I'm going to assume There's no formal documentation between ARH and Silverco?

That's correct.

Okay, yeah, so we'll, we'll just take some liberties with writing up what we think the economics are, um, and then when you read it you can tell us if you disagree. Okay, got it. Okay, cool. Um, for to family. I think we were given a loan history spreadsheet. I'm not sure if that's our naming convention or yours. And it's shown as slightly different. I think we talked about before there's $456,000 of interest in the GL. And I think we thought that that schedule might have suggested to us there should be about $490,000. Or so of interest. I think my question is just which one's right. Should it be what's in the books, or are we missing some sort of accrual or something?

I would have to take a look back and see. I'd be able to figure it out, I think, right away. But the— you're saying that loan history where it just has every transaction for the full year. If you add up all the interest for that, it's $490,000.

Yeah, $483,000.

But yeah, $483,000.

Okay, I think it's just confirmed for us if— I don't know, I usually assume we're thinking about things wrong, and so it's probably us interpreting the data or looking at the schedule wrong. But, um, I think we just want to make sure we're not missing an interest accrual, for example, for unpaid interest or something like that.

I'll take a look and see why, um, we have different numbers.

Perfect. Um, and I think a similar question on NC&T as well.

Yeah, I was gonna say, if you, if you're getting the same something for two-family, there's probably the same issue for NC&T.

That's a bigger difference. I think our, our calculated difference there was like closer to $120 grand. But yeah, I think, I think both of them, it's just making sure we're thinking about interest expense properly.

And you're, uh, just to clarify, you're saying you're expecting it to be higher than it actually ended up being, is that right?

We are calculating a higher number using the loan history spreadsheet than what's in the GL.

Okay, I will take a look.

Cool.

Um, moving on, so back to Silverco, there's a line of credit for Bossert, something like that. Yeah, Bossert. Um, did that—

how, how—

what's the arrangement on that? Are you guys making interest-only payments, or are you making no payments and accruing interest?

Bossert specifically, we are making interest payments to him.

Okay, so you made interest-only payments throughout the year, which is why we don't see anything being accrued. That's because you've made payments as the year has progressed?

That's correct.

Okay, perfect. For NCNT and two-family, we got a file last year that had amortization schedules. And the reason— really what we need to make sure we're getting is we want to understand the magnitude of principal that's due and payable within 12 months. And then we want to understand the magnitude of principal that will become due and payable over the next 5 years. So for GAAP, we have to disclose future maturities, future principal payments.

Right.

So if it's an amortization schedule, that works. If it's the information I need, that works. But we just need you guys to confirm for us some of those information points.

So I believe our, um, this note, or these notes, are up for renewal at some, like, August 2027, maybe. So, and we have scheduled payments of $430,000 a month, which we can put into an amortization table, principal and interest, easy enough. But how would you handle it if it's up for renewal, we don't know what that payment would be in 2027? Would you just extend out past that period for 5 years, assuming the same?

No, it's, it's just gonna— it's gonna be due and payable in '27.

Got it.

Okay, so it's like, said differently, if you say you had a 5-year note with a big balloon, like at the end of year 5 you just got a big-ass balloon in your principal maturity schedule, right?

Okay, so I think that is how we should assume it is then, um, assume the arrangement. I'll pull up the docs and send them to you and I'll make sure that's how it reads, but that's how we understand it to be.

Okay, sounds good. And then has, has anything happened in '26, whether that's lease agreements, loan agreements, debt agreements, related party loan agreements, litigation, anything else that would fit in the category of being a subsequent event?

Oh, we have a couple of new subleases that take some of the real estate expense off our books. Um, is that something you're looking for?

Yeah.

Yeah.

Can you send us the subleases, please?

Yeah. I think there's two right now that are signed and executed, and then we're working on a third.

So I'll send that over.

Anything else? I don't think there's anything else other than that. Um, Yeah, not off the top of my head. Maybe something might come to me, but no, no litigation, no related parties, no additional debt agreements or anything like that.

Okay. We saw an account at Silverco number 1500 called Restricted Cash 76800. What, what's, what are the restrictions on that?

So that is a bond that the state of California holds for our insurance. Um, I think effectively it makes us so that we're self-insured up to the first $75,000, and then there's interest accruing at like 4% annually on that bond. But we can't— we need it to maintain our insurance policy, so we don't have access to it unless we cancel our insurance and ask for it back payable when I believe 60 to 90 days is their schedule because it's in like a some sort of instrument.

Got it. So is it, is it held in, is it in a bank account or is the money sitting with, um, the insurance company?

The money is sitting with the state of California. Yeah, the DMV Department. So I think it's the DMV they, they hold it. Um, but we don't have access to a bank account where we can see that, those funds.

And I'm just trying to, from a characterization standpoint, is it a financial instrument? Like you said, it's in a— invested in a bond?

In a— I don't know what they, they pay out something in the range of like 4% interest a year on it. So it accrues interest as it's sitting there. So we'll get back like $81,000 or whatever it is at the end of the term. Uh, we don't just get $75,000 back. So yeah, that's why it's not just cash, it's some sort of financial instrument.

Okay. Um, For Silverco again, this is GL 1270 deposits. I think we saw that that went up quite a bit. So the deposit account is now like $240,000. Is that because of new locations or I guess what was causing— what's the cause of that increase?

Let me take a look. I believe it's related to real estate. Activity? Um, yes, yeah, that should be, uh, real estate deposits. Let me see if I have specific details. Um, yeah, we added— we put $150,000 down, um, at our Coinga lease, which is our lease in Hollywood. So that was the— that was the activity in that account.

And was that— that's because you like— was that a renewal requirement?

That was a new lease that we entered into. So we got out of our old Hollywood location and moved into a new one, and, uh, I believe May 15th was the effective date.

Uh, that, um, okay, moving down the balance sheet, this is still Silverco account. 2310, it's called credits due customers, $142,000. I think we're just wondering like what is it and how did that number get calculated or arrived at?

What was— oh, 2310.

I think that was where I had asked about where that number came from for y'all last year, and you said it was all the credits from the AR. So then we basically summed up all the credits from the AR and put it there so that we would tie out. So I basically just tried to mimic what y'all did last year.

Okay. So, and so what did you end up book— did you book it out of— so you debited AR and then credited this due to customers? Right. Um, sublease security deposits. Um, so I, I don't know if I have a question other than just, you know, confirming there's $100,000, roughly $165,000 of sublease deposits the company's holding on behalf of various subtenants.

Yeah, that's correct.

There's this accrued expense account, number 2015. It's got about $104,000 in it. I think we were just wanting to understand what the nature of that balance is or that accrual.

I believe some of it is related to some of our lease obligations. I think there's some, some property taxes that potentially need to be paid in the new year.

Property taxes and then one rent, the $76,000.

Yeah, the one $76,000. Yeah, that was not paid for Lowey Limited, which is our satellites.

1 lease payment for $76,000, and the difference was property taxes.

Property taxes, and then $6,000 for CAM.

Yeah, CAM charges related to one of the leases.

Got it.

Um, this is one I think we already talked about, number 2050, the commission payable. Um, that was The broker that you guys had kind of a handshake deal with, right?

Yeah. So that's our— that's a friend of James's, done a lot of sublease work on our behalf. And he's agreed to take up more flexible payment terms on those invoices.

Okay, what, what do you think the payment plan there is?

Uh, well, for example, we just paid him $15,000 today, so typically he's more on like a fixed amount being paid back, prioritizing the payments that need to go to the other party's brokers, not him necessarily. So he's trying to make sure that all of his other obligations are handled before his portion of it. Um, yeah, it was at— was it at, uh, $150,000 at the end of '25? Is that what you have?

Yep.

Okay, so that represents basically he worked out a deal, um, back in 2023, and the broker kind of screwed him out because this is when we were trying to lease property.

The—

or they went directly, they didn't use a broker. They said, we're not paying you your broker fee because we're just not going to do it. We know your tenant's still going to need to pay. So he said, look, we will give you $150,000 just to like, because we appreciate the work you did on this, but it's not going to happen anytime soon. Like you're going to have to carry it for a while. So that's what that is. And then we've had similar things with the subleases we've entered into in 2026 where we have a larger balance now that we're just chipping away at. Piece by piece. So that $150,000 is all to him related to a lease that we, um, that we took down, that we said we would pay.

And by definition, he's not a related party, right? He's just related in so much as he knows James from— yeah, correct.

Yeah, he's no equity holder, no other relation.

Perfect. Um, For the sales tax liability for NCNT and two-family, I think— was it NCNT? That's the one that has the payment plan?

That's correct.

Um, what's the status of that payment plan currently, you know, in terms of the state's expectations, your compliance with all that?

Um, we got it further. I think we were paying like $41K a month at the end of 2025. We're down to $32,000 a month. We re— basically redid it, um, over the course of the next 24 months, but that was being paid timely and just being chunked at monthly. Um, and I have an amortization table because they only let you capture it the one time you request it and then it goes away. Um, so I took a screenshot of it so we'd have it going forward, but that was in 2026. So it's being serviced.

Yeah, if you could get us that because the, the, the payment cadence in '26 does kind of inform our '25 presentation a little bit. So yeah, whatever you have would be super helpful.

Okay. I'll make sure I send that over.

And then, and then two-family, like it's obviously substantially less of a balance. Like, are they on a payment plan or are they just like caught up and they're making normal recurring sales tax payments?

Yeah, normal recurring. That would have been the accrued amount for 12/31/25 that was paid in '26. So That's all squared.

Okay, perfect. We need to get from you a listing of customers that comprise 10% or more of revenues. And I think our historical issue with this has been aggregating the studios— or sorry, aggregating the individual productions into a studio level.

Yeah, because no single production accounts for more than 10%. But if you're looking at it, but I think we got it.

I mean, assuming it all falls under like the legal umbrella, like I think it's like how much is Netflix doing with you guys or versus how much is whomever else? Because each of these, each production is not its own. Well, it might have its own legal entity, but it all sits under the Netflix kind of banner. And so I think you helped us last year put it together and kind of aggregate it to more of a studio view, which is like, hey, look, Here's the amount of revenue we did with 1, 2, 3, or 4 studios. I have to go look and see what the concentration was last year.

If you have the, if you have the '24 data, that'd be helpful to see, just, just because I want to make sure it's apples to apples. We don't really, we don't track the studios. It's easy enough to find because I know the production. Um, I would imagine there's only a couple that would be over 10%.

Um, yeah, Netflix, what we got last year. Okay. And then, and then for the 842 lease stuff, so I think that you guys gave us calculations. Is— did you guys— is there anything we're helping you with on that, or did you guys like fully— you did 842 and it's in the books and everything's good, it's complete, you did it for all the new leases? Leases and subleases and yada, yada, yada?

We did it for all the leases that y'all sent us, and then I think if there is a new— I don't remember if there was a new lease. If so, we copied what y'all did from a previous tab to create it for a new lease. I don't think we have 842s for our subleases.

Okay. And then did you book? I don't have it in front of me, or I guess I'm not— I have it in front of me. I'm not looking at it. Looking at this specifically, like, did you book the current portion of the leases or is it just like one? Like, did you go through the motions of figuring out like how much of the lease liability is current versus long-term?

We do have, I think, short-term versus long-term lease liability.

I think so. Yeah. Okay.

Awesome. I think that that's all that I had for this one. I know that there's a couple homework items, JD. Yeah. Did you have all of— did you write all that as we went, or—

yeah, I got it down. Um, if you guys— I mean, I don't know if you guys are planning on sending some over. I'll try to— I think I've got it all.

Um, but if you just send us what you had and have on your list, just so that we don't burn time rehashing it, and then if there's anything missing thereafter, we'll, we'll just hit you back.

Yeah.

Um, with, hey, what about XYZ? Okay.

That works.

Cool. And JD, Mike and I— and Lottie— Mike and I plan on reaching out later in the week regarding fixed assets.

Yes. Oh, that was one thing that I wanted to mention. Um, so the, the fixed assets that we had on the books for two-family, the net of the ACUM and the total capital cost was correct, but they were all understated. So we did a journal entry to adjust everything up. So the net is still the same, But we wanted to make sure that everything was correct. And we'll send you— I'll send you the journal entry. Um, can you say that again? So like, for example, we had a net vehicles of like $13 million, but it was on a capital cost of $26 and an accumulated amortization of $13, but it should have been $28 and $15. So we made that change to make sure we had the correct original cost on the books of the vehicles.

So whether— because we noted the various— the variance in cost, are you saying that the cost was written down for a bunch of assets? Uh, I think he's saying they were written up.

Yeah, the schedule— the schedule had a higher amount than the QuickBooks did on the capital cost. So now QuickBooks matches what the schedule has for the original capital cost of those vehicles.

Got it.

Okay. And then I believe NC&T might have a similar issue. I haven't had a chance to actually make those changes yet, but we'll probably do that before we get into the text of all of it. Okay. Yeah. So that was the only other thing. All right. So I will send you guys just on that chain the information that, that we discussed. And then if there's anything else, just let me know.

Will do.

Great. Thank you for the time.

Appreciate it. Bye.