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Melt to restate financial results because of franchise accounting switch

LAGUNA HILLS Calif. Melt Inc., operator or franchisor of 16 Melt Gelato & Crepe Cafe locations, said Thursday it would restate financial results for the second and third quarters of 2006 to revise its accounting for franchise-fee revenue recognition and related income.

The change - which will allow Melt to recognize franchise fees as income only when the franchisee commences operations, rather than its previous standard of recognizing the revenue when the franchisee signed an agreement and paid a fee - will reduce fiscal 2006 revenue by $375,000 and will increase the company's annual net loss by the same amount.

"Management revised the revenue recognition policy to be more conservative and align with the industry standard," executive vice president and chief financial officer, Scott M. Miller, said in a statement.

The company said the amended statements should be completed by the end of this month.

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