05,000 | | Royalties | 328,716 | 366,119 | 277,921 | | Marketing fund | 46,960 | 52,303 | 39,703 | | Other income | 15,481 | 7,352 | 5,828 | | Net operating revenue | 866,156 | 1,398,273 | 628,453 |

Crave Franchising, LLC A Wyoming Limited Liability Company Notes to the Financial Statements December 31, 2024

1. Organization

Crave Franchising, LLC (the "Company") is a Wyoming limited liability company formed in February 2018. The Company was formed for the purpose of franchising restaurants nationally in the United States. The Company is owned by one individual member ("Member").

For the years ended December 31, 2024, 2023, and 2022, total capital contributions were $0, $0, and $0, respectively. For the years ended December 31, 2024, 2023, and 2022, total capital distributions were $169,340, $483,344 and $446,770, respectively.

2. Summary of significant accounting policies and nature of operations

Basis of presentation

The Company prepares its financial statements on the accrual basis of accounting consistent with accounting principles generally accepted in the United States of America.

Use of estimates

The preparation of financial statements in accordance 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.

Cash and cash equivalents

Cash and cash equivalents include all cash balances on deposit with financial institutions and highly liquid investments with a maturity of three months or less at the date of acquisition.

The Company maintains its cash in bank deposit accounts which could exceed federally insured limits. The Company has not experienced an instance where cash held in the account exceeded insured limits since their inception and have not had losses in such accounts. The Company believes it is not exposed to any significant credit risk on cash and cash equivalents.

Accounts receivable

Management considers receivables to be fully collectible. If amounts become uncollectible, they are charged to operations in the period in which that determination is made. Accounting principles generally accepted in the United States of America require that the allowance method be used to recognize bad debts; however, the effect of using the direct write-off method is not materially different from the results that would have been obtained under the allowance method. For the period ended December 31, 2024, there were no write-offs and no allowance deemed necessary.

Property and equipment

Property and equipment will be stated at cost. Depreciation will be computed using the straight-line method of depreciation over the estimated useful life of the assets.

Crave Franchising, LLC A Wyoming Limited Liability Company Notes to the Financial Statements December 31, 2024

2. Summary of significant accounting policies and nature of operations (continued)

Revenue and expenses

Operating income consists of contractual franchise royalties based on a percentage of monthly sales which are recognized as revenue in the month earned as well as revenue from other contractual agreements.

Initial franchise fees are recognized as revenue once substantially all of the initial services of the Company required by franchise agreement have been performed and no other material conditions or obligations related to the determination of substantial performance exist. For the years ended December 31, 2024, 2023, and 2022, initial franchise fees billed were $485,000, $725,000, and $795,000, respectively.

Other revenue sources include initial fees for new franchisees which is mainly focused on marketing and initial set up of the franchisee, royalties, technology, and other service fees that are invoiced and earned either monthly or when a franchisee signs a franchise agreement.

Revenue recognition

The Company recognizes revenue in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers ("ASC 606") which outlines a single, comprehensive model for accounting for revenue from contracts with customers.

Under ASC 606, revenue is recognized in accordance with a five-step model, as follows: identifying the contract with the customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations and recognizing revenue when (or as) the Company satisfies a performance obligation.

Source: Item 23 — RECEIPTS (FDD pages 63–253)