Annual report pursuant to Section 13 and 15(d)

Revenue from contracts with customers

v3.19.1
Revenue from contracts with customers
 12 Months Ended
Dec. 31, 2018
Revenue from Contract with Customer [Abstract]  
Revenue from Contract with Customer
Note 12 – Revenue from contracts with customers
 
On January 1, 2018, the Company adopted Accounting Standards Codification Topic 606 – “Revenue from Contracts with Customers” (“ASC 606”), using the modified retrospective method. Results for the year ended December 31, 2018 are presented under the new revenue recognition standard, while the prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for the prior periods.
 
The Company recorded a net increase to opening accumulated deficit of approximately $17.0 thousand as of January 1, 2018 due to the cumulative impact of adopting ASC 606, with the impact primarily related to the licensing of our restaurants and the amortization of fees associated with license agreements. The changes were as follows (in thousands):
 
 
 
December 31, 2017
 
 
ASC 606

Adjustments
 
 
January 1, 2018 
(1)
 
Assets
 
 
 
 
 
 
 
 
 
 
 
 
Accounts receivable
 
$
5,514
 
 
$
306
 
 
$
5,820
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
Deferred license revenue
 
$
115
 
 
$
273
 
 
$
388
 
Deferred license revenue, long-term
 
$
1,222
 
 
$
50
 
 
$
1,272
 
Equity
 
 
 
 
 
 
 
 
 
 
 
 
Accumulated deficit
 
$
(31,979
)
 
$
(17
)
 
$
(31,996
)
 
Under ASC 606, the Company has determined that the services it provides under its licensing agreements are primarily the rights to access and derive benefit from our symbolic intellectual property. As a result, the initial license fees and upfront fees are recognized on a straight-line basis over the term of the license agreement. Under previous guidance, initial license fees were recognized when the related services had been provided, which was generally upon the opening of the restaurant, and upfront fees were recognized on a pro-rata basis as restaurants under the development agreement were opened. These fees will continue to be recorded as a component of management, license and incentive fee revenue on the consolidated statement of operations and comprehensive income (loss). ASC 606 requires sales-based royalties to continue to be recognized as licensee restaurant sales occur.
 
The impact of adopting ASC 606 as compared to the previous recognition guidance on the Company’s consolidated statement of operations and comprehensive income (loss) was as follows (in thousands):
 
 
 
For the year ended December 31, 2018
 
 
 
As Reported
 
 
Balances without

ASC 606 Adoption
 
 
Adoption Impact

of ASC 606
 
Revenues
 
 
 
 
 
 
 
 
 
Management, license and incentive fee revenue
 
$
11,568
  
 
$
11,873
  
 
$
(305
)
Net income (loss)
 
$
3,907
  
 
$
4,212
  
 
$
(305
)
 
Contract Balances
 
The following table provides information about receivables and contract liabilities (deferred license revenue) from contracts with customers (in thousands):
 
 
 
December 31, 
2018
 
Receivables
(1)
 
$
174
 
Deferred license revenue
(2)
 
 
1,179
 
Deferred gift certificate revenue
(3)
 
$
491
 
 
(1)
Receivables are included in accounts receivable on the consolidated balance sheets.
 
(2)
Includes the current and long-term portion of deferred license revenue.
 
(3)
Deferred gift card revenue is included in deferred gift card revenue and other on the consolidated balance sheets.
 
Significant changes in deferred license revenue for the year ended December 31, 2018 are as follows (in thousands):
 
Deferred license revenue, as of January 1, 2018
(1)
 
$
1,660
 
Additions to deferred license revenue
 
 
538
 
Revenue recognized during the period
 
 
(1,019
)
Deferred license revenue, as of December 31, 2018
 
$
1,179
 
(1)
Includes the cumulative effect of adopting ASC 606.
 
As of December 31, 2018, the estimated deferred license revenue to be recognized in the future related to performance obligations that are unsatisfied as of December 31, 2018 were as follows for each year ending (in thousands):
 
2019
 
$
171
 
2020
 
 
154
 
2021
 
 
154
 
2022
 
 
154
 
2023
 
 
154
 
Thereafter
 
 
392
 
Total future estimated deferred license revenue
 
$
1,179
 
 
Significant changes in deferred gift certificate revenue for the year ended December 31, 2018 are as follows (in thousands):
 
Deferred gift certificates revenue, as of January 1, 2018
(1)
 
$
757
 
Additions to deferred certificates revenue
 
 
983
 
Revenue recognized during the period related to redemptions
 
 
(1,047
)
Revenue recognized during the period related to breakage
 
 
(202
)
Deferred gift certificate revenue, as of December 31, 2018
 
$
491
 
(1)
There was no cumulative effect of adopting ASC 606 for deferred gift certificates.