What was the change in contract liabilities for Kitchen Solvers in 2022?

1 | 0 | | TN | 0 | 1 | 0 | | MN | 0 | 1 | 0 | | TOTAL | 0 | 3 | 0 |

Statements of Cash Flows

Years Ended December 31, 2024, 2023, and 2022

Notes to Financial Statements

See Independent Auditor's Report

Note 1 Summary of Significant Accounting Policies

Principal Business Activity

KS La Crosse Investment, LLC (the "Company") is a franchisor of retail outlets in cabinetry. The majority of the Company's revenue results from initial sales and continuing franchise fees and rebills.

During 2023, the Company began manufacturing and selling cabinets to its franchisees. The Company's raw materials are readily available, and the Company is not dependent on a single or few suppliers.

Basis of Accounting

The financial statements of the Company have been prepared on the accrual basis of accounting and accordingly reflect all significant receivables, payables, and other liabilities in accordance with accounting principles generally accepted in the United States of America (GAAP).

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all deposits in financial institutions with a maturity of three months or less to be cash equivalents.

Accounts Receivable

The Company considers accounts receivable to be fully collectible; according, no allowance for doubtful accounts is recorded. If amounts become uncollectible, they are charged to operations when that determination is made.

Revenue and Revenue Recognition

The Company recognizes revenue from franchisees for continuing services as they are provided. The performance obligation consists of providing continuous access to the CRM advertising, email, and reporting system, as well as providing continuous access to all licenses and products of the Company, and is recognized monthly. The fees consist of a monthly technology fee of $264, and monthly business development and royalty fees, which are variable and based on sales of the franchisees. A nonrefundable initial franchise fee is required of each new franchisee and is recognized over the life of the franchisee agreement, which is generally 10 years.

Product sales are recognized when the product is shipped, and all obligations of the Company have been satisfied.

Property, Equipment, and Depreciation

Property, plant and equipment is stated at cost. Expenditures for repairs and maintenance are charged to income as incurred. Additions and betterments with a unit acquisition cost of $5,000 or more will be capitalized. The cost and related accumulated depreciation on property, plant and equipment sold or otherwise disposed of are removed from the accounts and any gain or loss is reported as current year's revenue or expense.

Depreciation is computed on the straight-line method for financial reporting purposes, based on their estimated useful lives from 5 to 40 years. Depreciation expense for 2024, 2023, and 2022 was $10,880, $6,555, and $1,585, respectively.

Notes to Financial Statements

See Independent Auditor's Report

Note 1 Summary of Significant Accounting Policies (Continued)

Long-Lived Assets

GAAP requires that long-lived assets be reviewed for impairment when events or circumstances indicate the carrying value of an asset may not be recoverable. Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the related carrying amount may not be recoverable. When required, impairment losses on assets to be held and used are recognized based on fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value, less estimated cost to sell. As of December 31, 2024, there have been no such losses incurred by the Company.

Inventories

Inventories consist primarily of raw materials and are priced at the lower of cost (first-in, first-out) or market.

Income Taxes

The Company, with the consent of its members, has elected under the Internal Revenue Code to be an S corporation. In lieu of corporation income taxes, the members of an S corporation are taxed on their proportionate share of the Company's taxable income. Therefore, no provision or liability for federal income taxes has been included in the financial statements.

The federal and state income tax returns remain open to examination by taxing authorities through their statutory periods.

Leases

The determination of whether an arrangement is a lease is made at the lease's inception.

Source: Item 21 — Financial Statements (FDD pages 48–49)