Is the provision of services by Learningrx dependent on the payment of the initial franchise fee or continuing royalty fees?

ist of cash and cash equivalents. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements.

Revenues

The Corporation's revenues consist of fees from franchised locations operated by conventional franchisees. Revenues from franchisees consist of initial franchise fees, royalties based on a percentage of gross revenues, technology fees, and marketing fees.

On January 1, 2020, the Corporation adopted ASC 606, Revenue from Contracts with Customers using the modified retrospective method. This method allows the standard to be applied retrospectively through a cumulative catch-up adjustment recognized upon adoption. As such, comparative information in the Corporation's financial statements has not been restated and continues to be reported under the accounting standards in effect for those periods. Management determined that the effect of adopting ASC 606 did not have a material effect on the Corporation's financial statements.

ASC 606 provides that revenues are to be recognized when control of promised goods or services is transferred to a customer in an amount that reflects the considerations expected to be received for those goods or services. In implementing ASC 606, the Corporation evaluated all revenue sources using the fivestep approach: identify the contract, identify the performance obligations, determine the transaction price, allocate the transaction price, and recognize revenue.

For each franchised location, the Corporation enters into a formal franchise agreement that clearly outlines the transaction price, which includes an initial fee and ongoing royalties, marketing fees, and technology fees, and the Corporation's performance obligations.

1. Summary of Significant Accounting Policies - (continued)

Upon evaluation of the five-step process, the Corporation has determined that this standard does not impact the recognition of royalties, marketing fees, and technology fees from locations operated by a franchisee, which are based on a percentage of gross revenue and recognized at the time the underlying sales occur. ASC 606 does have an effect on the process management uses to evaluate the recognition of the initial franchise fees.

In allocating the transaction price and recognizing the revenue associated with initial franchise fees, the Corporation has elected to adopt the practical expedient for private company franchisors outlined in ASC 952-606, Franchisors—Revenue from Contracts with Customers. The practical expedient allows franchisors to account for pre-opening services as a single distinct performance obligation. These preopening services include the following:

• Assistance in the selection of a site
• Assistance in obtaining facilities and preparing the facilities for their intended use, including related financing, architectural, and engineering services, and lease negotiation
• Training of the franchisee's personnel or the franchisee in the LearningRx processes and systems
• Preparation and distribution of manuals and similar material concerning operations, administration, and record keeping
• Bookkeeping, information technology, and advisory services, including setting up the franchisee's
• Inspection, testing, and other quality control programs

The Corporation has determined that the fair value of pre-opening services exceeds the initial fees received; as such, the initial fees are allocated to the pre-opening services, which are recognized as revenue upon commencement of operations.

Accounts Receivable

Accounts receivable for franchise fees, royalties and product sales are recorded at the amounts the Corporation expects to collect on balances earned and outstanding at the end of the year. Management closely monitors outstanding balances and provides for estimates of uncollectible balances in an allowance for doubtful accounts. The allowance for doubtful accounts at September 30, 2024 and 2023 was $0 and $23,629, respectively.

**1.

Source: Item 23 — RECEIPT (FDD pages 54–209)