Where in the Coffee News FDD can I find the Notes to Financial Statements?

0438 | 3 | | Ed Baldridge | 40 E Wolf Street, Avon Park, Florida, USA, 33825 863- 443-0617 | 3 | | NAME OF FRANCHISEE | ADDRESS / TELEPHONE | # OF FRANCHISES | | Vanessa Cole | 1102 Ridgelegh Circle Dalton, GA 30720 (706) 463-1117 | 6 |

Notes to Financial Statements December 31, 2024, 2023 and 2022

1. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying financial statements include the activities of Coffee News USA, Inc.

Nature of businesses

Coffee News USA, Inc. (the Company) owns the franchise rights for Coffee News, a weekly restaurant publication, for the United States, Mexico, Central America and the Caribbean. Revenues are generated from the sale of franchises, promotional material, the collection of weekly royalty fees and transfer fees, and the operation of a training school for all new publishers in North America, including Canada. Receivables arise from the sale of franchises and collection of franchise fees.

Cash

For purposes of the statement of cash flows, the Company considers all short-term debt securities purchased with a maturity of three months or less to be cash equivalents.

Accounts receivable

Effective January 1, 2024, the Company adopted FASB Accounting Standards Update (ASU) 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as amended, which modifies the measurement of expected claims and credit losses on certain financial instruments. Topic 326 requires measurement and recognition of expected versus incurred losses for financial assets held. Financial assets held by the Company that are subject to ASU 2016-13 include franchisee accounts receivable. The adoption of this ASU did not have a material impact on the Company's financial statements.

Accounts receivable consist of amounts due for the sale of franchises and monthly royalties. The sale of franchises and the collection of royalties are due and payable in advance. The franchisee agreement provides for a 60 day grace period for franchise fees before the rights are lost. Franchises are either returned to the franchisor, sold or transferred by the franchisee, and any outstanding accounts receivable subsequently paid. An allowance for credit losses is recorded when needed based upon management's estimate of uncollectible accounts, determined by analysis of specific customer accounts, historical experience, current conditions, and reasonable and supportable forecasts. The allowance for credit losses was $80,00 at December 31, 2024 and $120,000 at December 31, 2023 and 2022. Accounts are written off when management determines they are not collectible.

Accounts receivable over 90 days old totaled $86,445 in 2024, $131,366 in 2023 and $112,351 in 2022.

Management Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Repurchased Licenses

The Company occasionally repurchases franchise rights from sub-franchisors who have not made significant progress in developing the areas or who choose to focus on other countries. Repurchased franchise rights are recorded at cost when repurchased and are expensed as licenses when sold.

Furniture and Equipment

Furniture and equipment are depreciated by straight-line and accelerated methods over the asset's estimated useful lives. The Company capitalizes equipment with an estimated useful life greater than one year.

Notes to Financial Statements

December 31, 2024, 2023 and 2022

1. Summary of Significant Accounting Policies

Revenue Recognition

Revenue from the collection of royalty payments, training fees, and product promotional sales are recognized monthly since they are earned at a point in time. Revenues from the sale of franchises are recognized over the term of the initial franchise agreement, generally four years. The Company provides franchisees with the weekly content and other support in accordance with the franchise agreement.

Advertising Costs

Advertising costs of $41,044, $29,523, and $38,230 for years ended 2024, 2023 and 2022 are charged to expense as they are incurred.

Source: Item 23 — Receipts (FDD pages 36–118)