Note

Revenue Recognition

Contract balances

Information about contract balances subject to ASC

606

is as follows:

	November 30, 2019		December 1, 2018

Assets
Accounts receivable	$	58,853	$	36,337
Total Assets		58,853		36,337

Liabilities
Contract liabilities - current		622,724		647,594
Contract liabilities - long-term		80,110		106,948

Total Contract Liabilities	$	702,834	$	754,542

Accounts receivable represent weekly royalty payments and monthly vendor rebate payments that represent billed and unbilled receivables due as of

November 30, 2019

and

December 1, 2018.

The balance of contract liabilities includes franchise fees, license fees and vendor payments that have ongoing contract rights and the fees are being straight lined over the contract life. Contract liabilities also include marketing fund balances and gift card liability balances.

	Accounts Receivable			Contract Liabilities

Balance at December 1, 2018	$	36,337		$	754,542

Revenue Recognized		671,602			(1,141,617	)

Amounts (collected) or invoiced, net		(649,086	)		1,089,909
Balance at November 30, 2019	$	58,853		$	702,834

Transaction price allocated to remaining performance obligations (franchise agreements and license fee agreement) for the year ended

November 30:

2020		60,435
2021		17,704
2022		17,042
2023		12,348
2024		10,217
Thereafter		22,799
Total	$	140,545

The Company has elected to apply certain practical expedients as defined in ASC

606

through

606

14A,

including (i) performance obligations that are a part of a contract that has an original expected duration of

one

year or less; (ii) the right to invoice practical expedient; and (iii) variable consideration related to unsatisfied performance obligations that is allocated entirely to a wholly unsatisfied promise to transfer a distinct service that forms part of a single performance obligation, and the terms of that variable consideration relate specifically to our efforts to transfer the distinct service, or to a specific outcome from transferring the distinct service. As such, sales-based royalty and marketing income, as well as gift card breakage revenue, is

not

included in the above transaction price chart. Additionally, the Company has applied the transition practical expedient that allows the Company to omit the above disclosures for the fiscal year

November 30, 2018.

Impact of the Adoption of ASC

606

The adoption changed the timing of recognition of initial franchise fees, the reporting of advertising fund contributions and related expenditures, as well as timing of the recognition of gift card breakage.

In accordance with the new revenue standard requirements, the following tables summarize the effects of the new standard on the Company’s Consolidated Balance Sheet and Statement of Operations for fiscal year ended

November 30, 2019.

	As reported November 30, 2019			Effect of change			Balance without ASC 606 adoption

Assets
Prepaid expenses and other current assets	$	94,145		$	(1,348	)	$	95,493
Liabilities
Accrued gift card liability		170,863			29,286		$	141,577
Other current liabilities
Deferred revenue		140,545			80,033		$	60,512
Shareholders (deficit) equity
Accumulated deficit		(11,342,785	)		(107,971	)	$	(11,234,814	)

	As reported fiscal November 30, 2019			Effect of change			Balance without ASC606 adoption

Royalty revenue	$	1,645,639		$	-		$	1,645,639
Franchise fees		33,817			8,817			25,000
License fees		19,875			(6,625	)		26,500
Gift card revenue		4,494			(26,544	)		31,038
Sign Shop revenue		2,409			-			2,409
Settlement revenue		80,307			-			80,307
Nontradtional revenue		295,208			-			295,208
Marketing fund revenue		987,943			987,943			-
Net revenue		3,069,692			963,591			2,106,101

Expenses unaffected by ASC 606		1,608,268			-			1,608,268
Marketing fund expenses		987,943			987,943			-
Interest (income)/expense		(612	)		-			(612	)
Income tax expense		25,000			-			25,000
Net expenses		2,620,599			987,943			1,632,656

Net income	$	449,093		$	(24,352	)	$	473,445