Basis of Presentation and Significant Accounting Policies | Note 2. Basis of Presentation and Significant Accounting Policies Interim Financial Information The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Seediv, LLC. All intercompany accounts and transactions were eliminated in consolidation. The accompanying The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto for the year ended December 31, 2017 included in the Company’s Annual Report on Form 10-K. Information presented as of December 31, 2017 is derived from the audited consolidated financial statements. The results of operations for the three- and nine-month periods ended September 30, 2018 are not necessarily indicative of the results that the Company will have for any subsequent quarter or full fiscal year. This summary of significant accounting policies is provided to assist the reader in understanding the Company’s financial statements. The financial statements and notes thereto are representations of the Company’s management. The Company’s management is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America (“GAAP”) and have been consistently applied in the preparation of the financial statements. Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Going Concern Prior to December 31, 2017, certain facts about the Company’s financial results created an uncertainty about the Company’s ability to continue as a going concern. Segment Disclosure The Company has both Company-owned restaurants and franchised restaurants Segment Reporting Revenue Recognition On January 1, 2018, the Company adopted the provisions of FASB ASC 606, Revenue From Contracts With Customers provides a single framework in which revenue is required to be recognized to depict the transfer of goods or services to customers in amounts that reflect the consideration to which a company expects to be entitled in exchange for those goods or services. The Company adopted this new guidance effective the first day of fiscal year 2018, using the . Under this method, the cumulative effect of initially adopting the guidance was recognized as an adjustment to the opening balance of equity at January 1, 2018. Therefore, the comparative period has not been adjusted and continues to be reported under the previous revenue recognition guidance. The details of the significant changes and quantitative impact of the changes are discussed below. Franchise Fees ASC 606 impacted the timing of recognition of franchise fees. Under previous guidance, these fees were typically recognized upon the opening of restaurants. Under ASC 606, the fees are deferred and recognized as revenue over the term of the individual franchise agreements. The effect of the required deferral of fees received in a given year will be mitigated by the recognition of revenue from fees retrospectively deferred from prior years. As a result of the adoption of ASC 606, the Company recognized deferred franchise fees in the amount of $196,478 on its condensed consolidated balance sheets as of January 1, 2018 and an increase in its accumulated deficit by the same amount on that date. Advertising Funds ASC 606 also impacted the accounting for transactions related to the Company’s general advertising fund. Under previous guidance, franchisee contributions to and expenditures by the fund were not included in the Company’s condensed consolidated financial statements. Under ASC 606, the Company records contributions to and expenditures by the fund as revenue and expenses within the Company’s condensed consolidated financial statements. The Company recognized contributions to and expenditures by the fund of $46,816 and $145,076 during the three- and nine-month periods ended September 30, 2018. Gift Card Funds Additionally, ASC 606 impacted the accounting for transactions related to the Company’s gift card program. Under previous guidance, estimated breakage income on gift cards was deferred until it was deemed remote that the unused gift card balance would be redeemed. Under ASC 606, breakage income on gift cards is recognized as gift cards are utilized. This effect of this change on the Company’s financial statements was negligible. Impact on Financial Statements The following table summarizes the impacts of adopting the revenue recognition standard on the Company’s condensed consolidated financial statements as of and for the three- and nine-month periods ended September 30, 2018: Adjustments As Franchise Fees Advertising Funds Balances Condensed Consolidated Balance Sheets Deferred franchise fees $ 26,803 $ (26,803 ) $ — $ — Total current liabilities 3,054,745 (26,803 ) — 3,027,942 Deferred franchise fees, net of current portion 124,411 (124,411 ) — — Total liabilities 14,421,071 (124,411 ) — 14,296,660 Accumulated deficit (4,875,520 ) 151,214 — (4,724,306 ) Total stockholders’ deficit (324,617 ) 151,214 — (173,403 ) Condensed Consolidated Statements of Operations – Three-Month Period Ended September 30, 2018 Franchise and other revenue $ 231,983 $ (6,500 ) $ (42,806 ) $ 182,677 Franchise and other revenue – related party 23,256 (750 ) (4,010 ) 18,496 Total revenue 2,452,702 (7,250 ) (46,816 ) 2,398,636 General and administrative expenses 418,301 — (46,816 ) 371,485 Total operating expenses 2,916,504 — (46,816 ) 2,869,688 Loss from operations (463,802 ) (7,250 ) — (471,052 ) Net income 97,467 (7,250 ) — 90,217 Condensed Consolidated Statements of Operations – Nine-Month Period Ended September 30, 2018 Franchise and other revenue $ 690,892 $ (19,250 ) $ (125,958 ) $ 545,684 Franchise and other revenue – related party 100,994 (26,014 ) (19,118 ) 55,862 Total revenue 4,868,193 (45,264 ) (145,076 ) 4,677,853 General and administrative expenses 720,033 — (145,076 ) 574,957 Total operating expenses 5,414,567 — (145,076 ) 5,269,491 Loss from operations (546,374 ) (45,264 ) — (591,638 ) Net income 89,550 (45,264 ) — 44,286 Condensed Consolidated Statement of Cash Flows Cash flows from operating activities: Net income $ 89,550 $ (45,264 ) $ — $ 44,286 Changes in operating assets and liabilities: Deferred franchise fees (45,264 ) 45,264 — — Disaggregation of Revenue The following table disaggregate revenue by primary geographical market and source: Three Months Ended September 30, Nine Months September 30, Primary geographic markets Florida $ 1,377,676 $ 3,694,208 Georgia 47,050 146,009 Kentucky 232,744 232,744 West Virginia 795,232 795,232 Total revenue $ 2,452,702 $ 4,868,193 Sources of revenue Restaurant sales $ 2,197,463 $ 4,076,307 Royalties 197,369 591,847 Franchise fees 7,250 45,264 Advertising fund fees 46,816 145,077 Other revenue 3,804 9,698 Total revenue $ 2,452,702 $ 4,868,193 Contract Balances The following table presents changes in deferred franchise fees as of and for the nine-month period ended September 30, 2018: Total Deferred franchise fees at January 1, 2018 $ 196,478 Revenue recognized during the period (45,264 ) New deferrals due to cash received — Deferred franchise fees at September 30, 2018 $ 151,214 Anticipated Future Recognition of Deferred Franchise Fees The following table presents the estimated franchise fees to be recognized in the future related to performance obligations that were unsatisfied at September 30, 2018: Year Franchise 2018 $ 7,250 2019 25,719 2020 24,000 2021 22,923 2022 21,000 Thereafter 50,322 Total $ 151,214 The estimated franchise fees for 2018 represent the fees to be recognized during the remainder of the 2018 fiscal year. Other Receivables and Payables Other receivables was comprised primarily of receipts from credit card sales by Company-owned Fat Patty’s restaurants that occurred after the Company completed the acquisition of Fat Patty’s that were held by the former owner of Fat Patty’s, all of which are expected to be collected in full by the Company during the next 12 months. Other payables included within accounts payable and accrued expenses consisted of $243,261 of accounts payable owed to the former owner of Fat Patty’s for alcohol and other items purchase by the former owner of Fat Patty’s in connection with the operation of the franchise. Intangible Assets The Company acquired various intangible assets in connection with the acquisition of Fat Patty’s. Intangible assets include a tradename, an assembled workforce and a non-compete agreement. The Company amortizes the assembled workforce and non-compete agreement on a straight-line basis over the expected period of benefit, which is three and five years, respectively. The tradename has an indefinite life and is not subject to amortization but tested for impairment on an annual basis. The amount of amortization recognized for the assembled workforce and non-compete agreement was $759 during the three- and nine-month periods ended September 30, 2018. Recent Accounting Pronouncements In February 2016, the FASB issued ASU 2016-02, Leases In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows: Restricted Cash In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business In March 2018, the FASB issued ASU 2018-05, Income Taxes (Topic 740) The Company reviewed all other significant newly-issued accounting pronouncements and concluded that they either are not applicable to the Company’s operations or that no material effect is expected on the Company’s financial statements as a result of future adoption. |