2.4.0.8106 - Disclosure - Nature of business and summary of significant accounting policiestruefalsefalse1falsefalsefalseP01_01_2013To06_30_2013http://www.sec.gov/CIK0001476719duration2013-01-01T00:00:002013-06-30T00:00:001true1us-gaap_OrganizationConsolidationAndPresentationOfFinancialStatementsAbstractus-gaap_truenadurationfalsefalsefalsefalsefalsefalsefalsefalse1falsefalsefalse00falsefalsefalsexbrli:stringItemTypestringfalse02false2us-gaap_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureAndSignificantAccountingPoliciesTextBlockus-gaap_truenadurationfalsefalsefalsefalsefalsefalsefalsefalseverboseLabel1falsefalsefalse00 <table border="0" style="clear:both;width:100%; table-layout:fixed;"> <tr> <td></td> </tr> </table> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif "> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> <strong><font style="times new roman,times,serif"></font></strong> <table style="clear:both;MARGIN-TOP: 0pt; FONT: 10pt Times New Roman, Times, Serif; MARGIN-BOTTOM: 0pt" cellspacing="0" cellpadding="0" width="100%"> <tr style="VERTICAL-ALIGN: top"> <td style="WIDTH: 0.25in"> <div><strong>1.</strong></div> </td> <td> <div><strong>Nature of business and summary of significant accounting policies</strong></div> </td> </tr> </table> </div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> <strong><font style="times new roman,times,serif">  </font></strong></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><em><font style="times new roman,times,serif"> Basis of presentation</font></em></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><em><font style="times new roman,times,serif">  </font></em></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><font style="times new roman,times,serif">The accompanying unaudited condensed consolidated interim financial statements of Crumbs Bake Shop, Inc. (“CBS”), formerly known as 57<sup>th</sup> Street General Acquisition Corp., and Crumbs Holdings LLC and its wholly-owned subsidiaries (CBS and Crumbs Holdings LLC and its wholly-owned subsidiaries are collectively referred to herein as “Crumbs”) as of June 30, 2013 and for the three and six months ended June 30, 2013 and 2012 have been prepared in conformity with the accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information, as required by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 270, “Interim Reporting,” and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all the information and notes required for annual financial statements. In the opinion of management, such unaudited financial statements include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the interim financial information. Operating results for the three and six months ended June 30, 2013 are not necessarily indicative of results that may be expected for any future interim period or the year ending December 31, 2013. The accompanying unaudited condensed consolidated interim financial statements should be read in conjunction with the audited financial statements and notes thereto included in CBS’ Annual Report on Form 10-K for the year ended December 31, 2012. As used in these notes, the term “Holdings” refers to Crumbs Holdings LLC and, unless the context requires otherwise, its wholly-owned subsidiaries.</font></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><em><font style="times new roman,times,serif">  </font></em></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><em><font style="times new roman,times,serif"> Reverse merger</font></em></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><em><font style="times new roman,times,serif">  </font></em></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px 0pt 1.1pt; FONT: 10pt Times New Roman, Times, Serif" align="justify"><font style="times new roman,times,serif">On January 9, 2011, CBS (then known as 57<sup>th</sup> Street General Acquisition Corp.), 57<sup>th</sup> Street Merger Sub LLC, a Delaware limited liability company and wholly-owned subsidiary of CBS (“Merger Sub”), Holdings, a Delaware limited liability company, the members of Holdings immediately prior to the consummation of the Merger (individually, a “Member” or, collectively, the “Members”) and the representatives of the Members and Holdings, entered into a Business Combination Agreement, amended on each of February 18, 2011, March 17, 2011 and April 7, 2011 (the “Business Combination Agreement”), pursuant to which Merger Sub merged with and into Holdings with Holdings surviving the merger as a non-wholly owned subsidiary of CBS (the “Merger”). The entity surviving the Merger kept the Crumbs Holdings LLC name; however, references herein to the Members of Holdings refer only to the members of Crumbs Holdings LLC immediately prior to the consummation of the Merger and Julian R. Geiger and, therefore, exclude the members of Merger Sub. The transactions contemplated by the consummation of the Merger and Business Combination Agreement are referred to herein collectively as the “Transaction.” Management has concluded that Holdings is the accounting acquirer based on its evaluation of the facts and circumstances of the acquisition.</font></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><font style="times new roman,times,serif">  </font></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px 0pt 1.1pt; FONT: 10pt Times New Roman, Times, Serif" align="justify"><font style="times new roman,times,serif">Upon consummation of the Merger, the Members of Holdings received consideration in the form of newly issued securities and approximately $<font style=" FONT-SIZE: 10pt">22,086,000</font> in cash. The securities consisted of (i) <font style=" FONT-SIZE: 10pt">4,541,394</font> New Crumbs Class B Exchangeable Units (“Class B Units”) issued by Holdings (the aggregate of which were exchangeable for 4,541,394 shares of CBS common stock, and 2,201,394 of which have been exchanged to date for shares of CBS common stock (See Note 10)), and (ii) <font style=" FONT-SIZE: 10pt">454,139.4</font> shares of Series A Voting Preferred Stock (“Series A Preferred Stock”) issued by CBS (each such share entitling its holder <font style=" FONT-SIZE: 10pt">the right to cast 10 votes per share in all matters</font> for which the holders of common stock are entitled to vote, and <font style=" FONT-SIZE: 10pt">220,139.4</font> of which have been surrendered and redeemed by CBS in connection with the above-mentioned exchange of <font style=" FONT-SIZE: 10pt">2,201,394</font> Class B Units for the <font style=" FONT-SIZE: 10pt">2,201,394</font> shares of common stock (See Note 10)). CBS also reserved an additional <font style=" FONT-SIZE: 10pt">4,400,000</font> shares of its common stock for issuance in exchange for up to <font style=" FONT-SIZE: 10pt"> 4,400,000</font> Class B Units which may be earned by the Members if certain financial or stock price targets are met (the “Contingency Consideration”) as follows:</font></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px 0pt 1.1pt; FONT: 10pt Times New Roman, Times, Serif" align="justify"><font style="times new roman,times,serif">   </font></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt"> <table style="clear:both;MARGIN-TOP: 0pt; FONT: 10pt Times New Roman, Times, Serif; MARGIN-BOTTOM: 0pt" cellspacing="0" cellpadding="0" width="100%"> <tr style="VERTICAL-ALIGN: top"> <td style="WIDTH: 0.25in"> <div> </div> </td> <td style="WIDTH: 0.25in"> <div><font style="FONT-FAMILY: Symbol;times new roman,times,serif"> ⋅</font></div> </td> <td style="TEXT-ALIGN: justify"> <div><font style="BORDER-BOTTOM: medium none; BORDER-LEFT: medium none; FONT-FAMILY: Times New Roman, Times, Serif; BORDER-TOP: medium none; BORDER-RIGHT: medium none;times new roman,times,serif"> 1,466,666.7 Class B Units in the event the common stock of CBS has a trading price at $15.00 or above for 20 trading days out of 30 consecutive trading days during the calendar year 2011 (“First Stock Target”); and/or</font></div> </td> </tr> </table> </div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt">  </div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt"> <table style="clear:both;MARGIN-TOP: 0pt; FONT: 10pt Times New Roman, Times, Serif; MARGIN-BOTTOM: 0pt" cellspacing="0" cellpadding="0" width="100%"> <tr style="VERTICAL-ALIGN: top"> <td style="WIDTH: 0.25in"> <div> </div> </td> <td style="WIDTH: 0.25in"> <div><font style="FONT-FAMILY: Symbol;times new roman,times,serif"> ⋅</font></div> </td> <td style="TEXT-ALIGN: justify"> <div><font style="FONT-FAMILY: Times New Roman, Times, Serif;times new roman,times,serif"> 1,466,666.7 Class B Units in the event the common stock of CBS has a trading price at $<font style=" FONT-SIZE: 10pt">17.50</font> or above for 20 trading days out of 30 consecutive trading days during either the calendar year 2011 or 2012 (“Second Stock Target”); and/or</font></div> </td> </tr> </table> </div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt">  </div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt"> <table style="clear:both;MARGIN-TOP: 0pt; FONT: 10pt Times New Roman, Times, Serif; MARGIN-BOTTOM: 0pt" cellspacing="0" cellpadding="0" width="100%"> <tr style="VERTICAL-ALIGN: top"> <td style="WIDTH: 0.25in"> <div> </div> </td> <td style="WIDTH: 0.25in"> <div><font style="FONT-FAMILY: Symbol;times new roman,times,serif"> ⋅</font></div> </td> <td style="TEXT-ALIGN: justify"> <div><font style="FONT-FAMILY: Times New Roman, Times, Serif;times new roman,times,serif"> 1,466,666.6 Class B Units in the event the common stock of CBS has a trading price at $<font style=" FONT-SIZE: 10pt">20.00</font> or above for 20 trading days out of 30 consecutive trading days during any of the calendar years 2011, 2012 or 2013 (“Third Stock Target”); and/or</font></div> </td> </tr> </table> </div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt">  </div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt"> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> In the event a stock target is not met, Members may still be entitled to the Contingency Consideration from the stock target should subsequent stock targets be achieved prior to the expiration of the Third Stock Target.</div> </div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt">  </div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt"> <table style="clear:both;MARGIN-TOP: 0pt; FONT: 10pt Times New Roman, Times, Serif; MARGIN-BOTTOM: 0pt" cellspacing="0" cellpadding="0" width="100%"> <tr style="VERTICAL-ALIGN: top"> <td style="WIDTH: 0.25in"> <div> </div> </td> <td style="WIDTH: 0.25in"> <div><font style="FONT-FAMILY: Symbol;times new roman,times,serif"> ⋅</font></div> </td> <td style="TEXT-ALIGN: justify"> <div><font style="FONT-FAMILY: Times New Roman, Times, Serif;times new roman,times,serif"> to the extent that not all of the foregoing Stock Targets have been achieved, <font style=" FONT-SIZE: 10pt">2,200,000</font> Class B Units in the event CBS achieves $<font style=" FONT-SIZE: 10pt">17,500,000</font> in Adjusted EBITDA (as described in the Business Combination Agreement) for the twelve months ending December 31, 2013; and/or</font></div> </td> </tr> </table> </div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt">  </div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt"> <table style="clear:both;MARGIN-TOP: 0pt; FONT: 10pt Times New Roman, Times, Serif; MARGIN-BOTTOM: 0pt" cellspacing="0" cellpadding="0" width="100%"> <tr style="VERTICAL-ALIGN: top"> <td style="WIDTH: 0.25in"> <div> </div> </td> <td style="WIDTH: 0.25in"> <div><font style="FONT-FAMILY: Symbol;times new roman,times,serif"> ⋅</font></div> </td> <td style="TEXT-ALIGN: justify"> <div><font style="FONT-FAMILY: Times New Roman, Times, Serif;times new roman,times,serif"> to the extent that not all of the foregoing Stock Targets have been achieved, <font style=" FONT-SIZE: 10pt">2,200,000</font> Class B Units in the event CBS achieves $<font style=" FONT-SIZE: 10pt">25,000,000</font> in Adjusted EBITDA for the twelve months ending December 31, 2014; and/or</font></div> </td> </tr> </table> </div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt">  </div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt"> <table style="clear:both;MARGIN-TOP: 0pt; FONT: 10pt Times New Roman, Times, Serif; MARGIN-BOTTOM: 0pt" cellspacing="0" cellpadding="0" width="100%"> <tr style="VERTICAL-ALIGN: top"> <td style="WIDTH: 0.25in"> <div> </div> </td> <td style="WIDTH: 0.25in"> <div><font style="FONT-FAMILY: Symbol;times new roman,times,serif"> ⋅</font></div> </td> <td style="TEXT-ALIGN: justify"> <div><font style="FONT-FAMILY: Times New Roman, Times, Serif;times new roman,times,serif"> any remaining Contingency Consideration not otherwise achieved hereunder up to the Maximum Contingency Consideration in the event CBS achieves $<font style=" FONT-SIZE: 10pt">30,000,000</font> in Adjusted EBITDA for the twelve months ending December 31, 2015.</font></div> </td> </tr> </table> <font style="times new roman,times,serif"></font></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><em><font style="times new roman,times,serif">  </font></em></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><em><font style="times new roman,times,serif"> Nature of business</font></em></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><font style="times new roman,times,serif">  </font></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><font style="times new roman,times,serif">Crumbs engages in the business of selling a wide variety of cupcakes, cakes, cookies and other baked goods as well as hot and cold beverages. Crumbs offers these products through its stores, e-commerce division, catering services and wholesale distribution business. Crumbs offers gourmet sandwiches and salads in select locations in New York.</font></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><em><font style="times new roman,times,serif">  </font></em></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><em><font style="times new roman,times,serif"> Principles of consolidation</font></em></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><font style="times new roman,times,serif">  </font></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><font style="times new roman,times,serif">The accompanying condensed consolidated financial statements include the accounts of CBS and Holdings. Intercompany transactions and balances have been eliminated in consolidation.</font></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><font style="times new roman,times,serif">  </font></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><em><font style="times new roman,times,serif"> Restricted certificates of deposit</font></em></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><em><font style="times new roman,times,serif">  </font></em></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><font style="times new roman,times,serif">As of both June 30, 2013 and December 31, 2012, Crumbs had $<font style=" FONT-SIZE: 10pt">673,000</font> of cash restricted from withdrawal and held by banks as certificates of deposit securing letters of credit (see Note 8). The letters of credit are required as security deposits for certain of Crumbs’ non-cancellable store operating leases.</font></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><em><font style="times new roman,times,serif">  </font></em></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><em><font style="times new roman,times,serif">Fair value of financial instruments</font></em></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><em><font style="times new roman,times,serif">  </font></em></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><font style="times new roman,times,serif"> Crumbs’ financial instruments consist primarily of cash in banks, certificates of deposit and trade receivables. The carrying amounts for cash and cash equivalents, certificates of deposit and trade receivables approximate fair value due to the short term nature of the instruments.</font></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><font style="times new roman,times,serif">  </font></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><em><font style="times new roman,times,serif"> Intangible assets</font></em></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><em><font style="times new roman,times,serif">  </font></em></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><font style="times new roman,times,serif"> Intangible assets related to branding costs and website design are amortized over their useful lives, estimated to be five years. Intangible assets related to Crumbs’ trademark costs, including initial registration, are considered to have indefinite useful lives and are evaluated annually for impairment.</font></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><font style="times new roman,times,serif">  </font></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><em><font style="times new roman,times,serif">Tax receivable agreement</font></em></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><em><font style="times new roman,times,serif">  </font></em></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><font style="times new roman,times,serif"></font> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> <font style="times new roman,times,serif">Holdings has made an election under Section 754 of the Internal Revenue Code (the "Code"), which resulted in and may continue to result in an adjustment to the tax basis of the assets of Holdings at the time of an exchange of Class B Units. As a result of both the initial purchase of Class B Units from the Members in connection with the Merger and subsequent exchanges, CBS will become entitled to a proportionate share of the existing tax basis of the assets of Holdings. In addition, the purchase of Class B Units and subsequent exchanges are expected to result in increases in the tax basis of the assets of Holdings that otherwise would not have been available. Both this proportionate share and these increases in tax basis may reduce the amount of tax that CBS would otherwise be required to pay in the future. These increases in tax basis may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets.</font></div> </div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><font style="times new roman,times,serif">  </font></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><font style="times new roman,times,serif"><font style="COLOR: black">CBS entered into a tax receivable agreement with Holdings that will provide for the payment by CBS to the Members of up to 75% of the amount of the tax benefits, if any, that CBS is deemed to realize as a result of (i) the existing tax basis in the assets of Holdings on the date of the Merger, (ii) these increases in tax basis and (iii) certain other tax benefits related to Crumbs entering into the tax receivable agreement, including tax benefits attributable to payments under the tax receivable agreement. These payment obligations are obligations of CBS and not of Holdings. On November 14, 2011, Julian Geiger became a party to the tax receivable agreement as part of the Geiger Employment Agreement (</font>see Note 11<font style="COLOR: black">). For purposes of the tax receivable agreement, the benefit deemed realized by CBS will be computed by comparing the actual income tax liability of CBS (calculated with certain assumptions) to the amount of such taxes that CBS would have been required to pay had there been no increase to the tax basis of the assets of Holdings as a result of the purchase or exchanges, had there been no tax benefit from the tax basis in the intangible assets of Holdings on the date of the Merger and had CBS not entered into the tax receivable agreement. The term of the tax receivable agreement will continue until all such tax benefits have been utilized or expired, unless CBS exercises its right to terminate the tax receivable agreement for an amount based on the agreed payments remaining to be made under the agreement or CBS breaches any of its material obligations under the tax receivable agreement, in which case all obligations will generally be accelerated and due as if CBS had exercised its right to terminate the agreement.</font></font></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><font style="times new roman,times,serif">  </font></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><em><font style="times new roman,times,serif"> Warrant liability</font></em></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><font style="times new roman,times,serif">  </font></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><font style="times new roman,times,serif">Crumbs accounts for CBS’ <font style=" FONT-SIZE: 10pt"> 5,456,300</font> outstanding publicly-traded warrants in accordance with the guidance contained in FASB ASC 815-40-15-7D. Pursuant to this guidance, management has determined that the warrants do not meet the criteria for equity treatment and must be recorded as a liability. Accordingly, Crumbs classifies the warrant instruments as a liability at their fair value and adjusts the instruments to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised or expired, and any change in fair value is recognized in Crumbs’ condensed consolidated statements of operations. The fair value of warrants issued by CBS has been estimated using the warrants’ quoted market price.</font></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><strong><em><font style="times new roman,times,serif"> </font></em></strong></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><em><font style="times new roman,times,serif">Fair value - definition and hierarchy</font></em></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><font style="times new roman,times,serif">  </font></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><font style="times new roman,times,serif">Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date.</font></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;TEXT-INDENT: 0.5in; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><font style="times new roman,times,serif">  </font></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><font style="times new roman,times,serif">In determining fair value, Crumbs uses various valuation approaches. A fair value hierarchy for inputs is used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs are to be used when available. Observable inputs are those that market participants would use in pricing the asset or liability based on market data obtained from sources independent of Crumbs. Unobservable inputs reflect Crumbs’ assumptions about the inputs market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The fair value hierarchy is categorized into three levels based on the inputs as follows:</font></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><em><font style="times new roman,times,serif">  </font></em></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px 0pt 0.25in; FONT: 10pt Times New Roman, Times, Serif" align="justify"><font style="times new roman,times,serif"><em> Level 1</em> - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that Crumbs has the ability to access. Valuation adjustments are not applied to Level 1 investments. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these investments does not entail a significant degree of judgment.</font></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px 0pt 0.25in; FONT: 10pt Times New Roman, Times, Serif" align="justify"><font style="times new roman,times,serif">  </font></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px 0pt 0.25in; FONT: 10pt Times New Roman, Times, Serif" align="justify"><font style="times new roman,times,serif"><em> Level 2</em> - Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.</font></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><font style="times new roman,times,serif">  </font></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px 0pt 0.25in; FONT: 10pt Times New Roman, Times, Serif" align="justify"><font style="times new roman,times,serif"><em> Level 3 -</em> Valuations based on inputs that are unobservable and significant to the overall fair value measurement.</font></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px 0pt 0.25in; FONT: 10pt Times New Roman, Times, Serif" align="justify"><strong><font style="times new roman,times,serif">  </font></strong></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><em><font style="times new roman,times,serif">Fair Value - valuation techniques and inputs</font></em></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><strong><font style="times new roman,times,serif">  </font></strong></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><font style="times new roman,times,serif">Warrant liability: Crumbs determined the fair value of the warrant liability using the quoted market prices for the warrants. On reporting dates where there are no active trades, Crumbs uses the last reported closing sales price of the warrants to determine the fair value (Level 2). There were no transfers between Levels 1, 2 or 3 during the six months ended June 30, 2013 and for the year ended December 31, 2012.</font></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> <em><font style="times new roman,times,serif">  </font></em></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><em><font style="times new roman,times,serif">Use of estimates</font></em></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><em><font style="times new roman,times,serif">  </font></em></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;TEXT-INDENT: 0in; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><font style="FONT-WEIGHT: normal;times new roman,times,serif">The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed consolidated financial statements, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates.</font></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> <font style="times new roman,times,serif"> </font></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> <em><font style="times new roman,times,serif">Recently issued accounting standards</font></em></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> <font style="times new roman,times,serif">  </font></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><font style="times new roman,times,serif">Crumbs does not believe that the adoption of any recently issued accounting standards will have a material impact on its current financial position and results of operations.</font></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><font style="times new roman,times,serif">  <em> </em></font></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><em><font style="times new roman,times,serif"> Reclassifications</font></em></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><em><font style="times new roman,times,serif">  </font></em></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"><font style="times new roman,times,serif">Certain reclassifications have been made to amounts previously reported for 2012 to conform with the 2013 presentation. Such reclassifications have no effect on previously reported net loss.</font></div> </div> falsefalsefalsenonnum:textBlockItemTypenaThe entire disclosure for the organization, consolidation and basis of presentation of financial statements disclosure, and significant accounting policies of the reporting entity. May be provided in more than one note to the financial statements, as long as users are provided with an understanding of (1) the significant judgments and assumptions made by an enterprise in determining whether it must consolidate a VIE and/or disclose information about its involvement with a VIE, (2) the nature of restrictions on a consolidated VIE's assets reported by an enterprise in its statement of financial position, including the carrying amounts of such assets, (3) the nature of, and changes in, the risks associated with an enterprise's involvement with the VIE, and (4) how an enterprise's involvement with the VIE affects the enterprise's financial position, financial performance, and cash flows. Describes procedure if disclosures are provided in more than one note to the financial statements.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 275
-SubTopic 10
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=6927468&loc=d3e6003-108592
false0falseNature of business and summary of significant accounting policiesUnKnownUnKnownUnKnownUnKnowntruefalsefalseSheethttp://www.crumbs.com/role/NatureOfBusinessAndSummaryOfSignificantAccountingPolicies12