How are variable lease payments that do not depend on an index or rate recognized by Cool Binz?

According to Cool Binz's 2025 Franchise Disclosure Document, the company addresses how it recognizes and measures leases. Cool Binz recognizes lease liabilities to make lease payments and right-of-use (ROU) assets at lease inception. ROU assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. Lease liabilities are measured at the present value of lease payments to be made over the lease term. These payments include fixed payments, variable lease payments dependent on an index or rate, and amounts expected to be paid under residual value guarantees.

For variable lease payments that do not depend on an index or a rate, Cool Binz recognizes these as expenses in the period in which the event or condition that triggers the payment occurs. This means that if a franchisee's lease payment fluctuates based on something other than a standard index or rate (such as a percentage of sales), Cool Binz will record the expense in the period when that specific event (the sales occurring) takes place.

Cool Binz has elected to combine lease and non-lease components. In calculating the present value of lease payments, the Company elected to use the Prime Rate at the lease commencement date for property leases. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made.