What is the timeframe considered in Exit's management's evaluation of its ability to meet financial obligations?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about EXIT Realty Corp. International's ability to continue as a going concern within one year after the date that the financial statements are available to be issued.
During the year ended December 31, 2023, management took several actions in an attempt to improve operating cash flows including the restructuring of notes payable owed to Exit Realty Corp. International, as disclosed in Note 3 – Notes Payable, and the negotiation of increased territory management with Exit Realty Corp. International as disclosed in Note 1 – Significant Accounting Policies: Intangible Assets. As of the date these financial statements were available to be issued, the Company continues to sell franchises, and is generating franchise commissions revenues from open and operating franchisees. The Company believes that the combination of the actions taken, along with the decrease in interest rates that are projected to induce housing market stimulation, will enable the Company to meet its funding requirements for one year from the date these financial statements were available to be issued. If necessary, stockholders of the Company intend to provide any financial assistance needed by the Company should its cash flows from operations combined with its cash balances not be sufficient to meet its working capital needs. Management believes that the stockholders have the intent and ability to provide the funds needed, if any, to continue to fund the operations of the Company for at least one year from the date these financial statements were available to be issued.
The Company has generated losses from its operations, has net capital deficiencies in 2024, 2023 and 2022, respectively and has consolidated bank overdrafts in 2024 and 2023. The Company has projected that the 2025 budgeted operations will be sufficient to fund the Company's operations and strategic objectives and to meet its obligations as they become due. An integral part of the Company's plan includes the Company streamlining its operations by implementing cost cutting measures.
As a result of the measures taken as outlined above, management believes that it is probable that the Company will meet its obligations as they become due and to continue in operational existence for at least one year from the date that these consolidated financial statements were available to be issued. Accordingly, management has determined that there is no substantial doubt about the Company's ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. If for any reason the Company is unable to continue as a going concern, it could have an impact on the Company's ability to realize assets at their recognized values, and to extinguish liabilities in the normal course of business at the amounts stated in the consolidated financial statements.
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, the management of Exit Realty Corp. International evaluates the company's ability to continue as a going concern within one year after the date that the financial statements are available to be issued. This evaluation is a standard accounting practice, requiring management to assess whether there are conditions or events that could raise substantial doubt about the company's ability to meet its financial obligations. This assessment is crucial for the auditors to form an opinion on the financial statements.
The FDD indicates that Exit's management took actions to improve operating cash flows during the year ended December 31, 2023, including restructuring notes payable to Exit Realty Corp. International and negotiating increased territory management. Management believes that these actions, combined with projected decreases in interest rates to stimulate the housing market, will enable the company to meet its funding requirements for one year from the date the financial statements were available to be issued. The stockholders of the company also intend to provide financial assistance if needed.
Furthermore, the FDD states that the company has generated losses from operations and has net capital deficiencies in 2024, 2023, and 2022, as well as consolidated bank overdrafts in 2024 and 2023. However, Exit projects that the 2025 budgeted operations will be sufficient to fund the company's operations, strategic objectives, and obligations as they become due. This plan includes streamlining operations by implementing cost-cutting measures. As a result, management believes that the company will meet its obligations and continue in operational existence for at least one year from the date that these consolidated financial statements were available to be issued, and there is no substantial doubt about the company's ability to continue as a going concern.