Which pages contain the Notes to Financial Statements for Fly Fitness?

NOTES TO FINANCIAL STATEMENTS

December 31, 2023

1. SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES

A. Nature of Business

Fly Fitness Franchise LLC (the Company) was formed in 2021 to franchise gym studios and classes. The stated mission is to create a space that centers physical and mental growth by facilitating a strong community and challenging members to be stronger in every element of their lives.

As of December 31, 2023, a single franchise in Loveland, Colorado has been issued. This location was not open as of the end of 2023.

B. Basis of Accounting

The financial statements are prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America.

C. Estimates and Assumptions

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

D. Concentration of Risks

The Company maintains bank accounts in which balances at times exceed the federally insured limit of $250,000. At December 31, 2023 none of the Company's bank accounts exceeded the FDIC coverage limit.

The Company's trade accounts and notes receivable also subject the Company to credit risk as management grants unsecured trade credit in the form of trade accounts receivable to its franchisees. In addition, the Company has granted credit in the form of notes receivable from stockholders and select franchisees. These notes are not collateralized.

E. Cash Equivalents

For the purposes of the statement of cash flows, the Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.

NOTES TO FINANCIAL STATEMENTS

December 31, 2023

SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES - Continued

F. Franchise Operations and Revenue Recognition

Revenue is recognized on the transfer or goods or services to customers in an amount that reflects the consideration to which the entity expects to realize in exchange for those goods or services.

NOTES TO FINANCIAL STATEMENTS

December 31, 2022

1. SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES

A. Nature of Business

Fly Fitness Franchise LLC (the Company) was formed in 2021 to franchise gym studios and classes. The stated mission is to create a space that centers physical and mental growth by facilitating a strong community and challenging members to be stronger in every element of their lives.

As of December 31, 2022 no franchises have been issued and opened.

B. Basis of Accounting

The financial statements are prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America.

C. Estimates and Assumptions

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

D. Concentration of Risks

The Company maintains bank accounts in which balances at times exceed the federally insured limit of $250,000. At December 31, 2022 none of the Company's bank accounts exceeded the FDIC coverage limit.

The Company's trade accounts and notes receivable also subject the Company to credit risk as management grants unsecured trade credit in the form of trade accounts receivable to its franchisees. In addition, the Company has granted credit in the form of notes receivable from stockholders and select franchisees. These notes are not collateralized.

E. Cash Equivalents

For the purposes of the statement of cash flows, the Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.

NOTES TO FINANCIAL STATEMENTS

December 31, 2022

SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES - Continued

F. Franchise Operations and Revenue Recognition

Revenue is recognized on the transfer or goods or services to customers in an amount that reflects the consideration to which the entity expects to realize in exchange for those goods or services.

Franchise Fees

NOTES TO FINANCIAL STATEMENTS

December 31, 2023

SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES - Continued

J. Income Taxes

Under the provisions of the Internal Revenue Code, limited liability companies are treated as partnerships not subject to income taxes, and any income or loss realized is taxed to the individual members. Accordingly, no provision for federal income taxes appears in the financial statements.

The Company reviews and assesses its tax positions taken or expected to be taken in its tax returns. Based on this assessment, the Company determines whether it is more likely than not that the positions would be sustained under examination by the taxing authorities. The Company's assessment has not identified any significant positions that it believes would not be sustained under examination.

The Company's income tax returns for 2021, 2022 and 2023 remain subject to possible examination by the Internal Revenue Service, generally for three years after they are filed.

K. Subsequent Events

Management evaluated transactions and events occurring subsequent to December 31, 2023 and through February 20, 2024, the date of the independent auditor's report (the date the financial statements were available to be issued), to determine whether any events should be recognized or disclosed in these statements. There were no material transactions or events in the subsequent period requiring disclosure or recognition in the statements.

2. INTANGIBLE ASSETS

The Company entered into a licensing agreement with "Fly – A Fitness Revolution" during 2022 for the use of intellectual property, including trademarks, logos and the Fly Fitness name. This agreement included a $125,000 lump-sum payment at the inception of the agreement and an additional $20,000 per year fee for the life of the agreement. The total contract is for a 10-year term.

NOTES TO FINANCIAL STATEMENTS

December 31, 2022

SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES - Continued

J. Income Taxes

Under the provisions of the Internal Revenue Code, limited liability companies are treated as partnerships not subject to income taxes, and any income or loss realized is taxed to the individual members. Accordingly, no provision for federal income taxes appears in the financial statements.

The Company reviews and assesses its tax positions taken or expected to be taken in its tax returns. Based on this assessment, the Company determines whether it is more likely than not that the positions would be sustained under examination by the taxing authorities. The Company's assessment has not identified any significant positions that it believes would not be sustained under examination.

The Company's income tax returns for 2021 and 2022 remain subject to possible examination by the Internal Revenue Service, generally for three years after they are filed.

K. Subsequent Events

Management evaluated transactions and events occurring subsequent to December 31, 2022 and through March 21, 2023, the date of the independent auditor's report (the date the financial statements were available to be issued), to determine whether any events should be recognized or disclosed in these statements. There were no material transactions or events in the subsequent period requiring disclosure or recognition in the statements.

2. INTANGIBLE ASSETS

The Company entered into a licensing agreement with "Fly – A Fitness Revolution" during 2022 for the use of intellectual property, including trademarks, logos and the Fly Fitness name. This agreement included a $125,000 lump-sum payment at the inception of the agreement and an additional $20,000 per year fee for the life of the agreement. The total contract is for a 10-year term.

Source: Item 21 — FINANCIAL STATEMENTS (FDD page 44)