CREATIVE LEARNING Corp - FORM 10-Q

Attached files

file	filename
EXCEL - IDEA: XBRL DOCUMENT - CREATIVE LEARNING Corp	Financial_Report.xls
EX-32 - CERTIFICATION - CREATIVE LEARNING Corp	btwo_ex32.htm
EX-31.2 - CERTIFICATION - CREATIVE LEARNING Corp	btwo_ex312.htm
EX-31.1 - CERTIFICATION - CREATIVE LEARNING Corp	btwo_ex311.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended December 31, 2011

o Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from __________ to __________

Commission File Number: 000-52883

CREATIVE LEARNING CORPORATION

(Exact name of registrant as specified in its charter)

Delaware		20-4456503
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

701Market St., Suite 113

St. Augustine, FL 32095

(Address of principal executive offices, including Zip Code)

(904) 824-3133

(Issuer’s telephone number, including area code)

________________________

(Former name or former address if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 11,431,075 shares of common stock as of February 10, 2012.

CREATIVE LEARNING CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Quarter Ended December 31, 2011

CREATIVE LEARNING CORPORATION

Consolidated Financial Statements

(Unaudited)

TABLE OF CONTENTS

	PAGE
CONSOLIDATED FINANCIAL STATEMENTS

Consolidated balance sheets	F-3
Consolidated statements of operation		F-4
Consolidated statements of operation		F-5
Consolidated statements of cash flows		F-6
Notes to consolidated financial statements		F-7

CREATIVE LEARNING CORPORATION

Consolidated Balance Sheets

	December 31,			September 30,
	2011			2011
Assets
Current Assets:
Cash	$	485,016		$	517,830
Accounts receivable, less allowance for doubtful
accounts of $11,0000 and $28,660, respectively		182,628			89,005
Other receivables		2,118			2,118
Total Current Assets		669,762			608,953

Note receivable from related party		14,000			10,000
Property and equipment, net of accumulated depreciation
of $15,145 and $11,280, respectively		154,348			157,619
Deposits		7,619			7,619

Total Assets	$	845,729		$	784,191
Liabilities and Stockholders’ Equity (Deficit)
Current Liabilities:
Accounts payable:
Related party	$	—		$	11,100
Other		90,377			69,534
Payroll accruals.		9,571			4,123
Accrued marketing fund		21,465
Customer deposits		5,000

Total Current Liabilities		126,413			84,757

Stockholders’ Equity (Deficit) :
Creative Learning Corporation stockholders' equity:
Preferred stock, $.0001 par value; 10,000,000 shares authorized;
-0- and -0- shares issued and outstanding, respectively		—			—
Common stock, $.0001 par value; 50,000,000 shares authorized;
11,451,075 and 10,288,575 shares issued and outstanding, respectively		1,145			1,029
Additional paid-in capital		1,984,129			1,975,445
Retained earnings (deficit)		(1,265,958	)		(1,277,040	)

Total Stockholders’ Equity (Deficit)		719,316			699,434

Total Liabilities and Stockholders’ Equity (Deficit)	$	845,729		$	784,191

The accompanying notes are an integral part of the consolidated financial statements

F-3

CREATIVE LEARNING CORPORATION

Consolidated Statements of Operations

	(Unaudited)
	For The Three
	Months Ended
	December 31,		December 31,
	2011		2010
Revenues:
Initial franchise fees	$	487,073	$	287,937
Royalties and marketing fees		88,385		—
		575,458		287,937

Operating expenses:
Franchise consulting and commissions:
Related parties		66,031		—
Other		153,596		135,993
Franchise training and expenses:
Related parties		7,750		—
Other		17,782		3,000
Salaries and payroll taxes		94,888		63,409
Advertising		64,289		28,845
Professional fees		54,378		9,094
Office expense		33,362		22,494
Depreciation		3,865		2,286
Stock-based compensation		8,800		—
Other general and administrative expenses		59,875		85,119
Total operating expenses		564,616		350,240

Loss from operations		10,842		(62,303	)

Other income (expense):
Interest expense:
Beneficial conversion feature		—		(19,630	)
Other		—		(6,473	)
Other income		240		33,890
Total other income (expense)		240		7,787
Loss before provision for income taxes		11,082		(54,516	)

Provision for income taxes (Note 11)		—		—
Net loss	$	11,082	$	(54,516	)
Net loss per share (Creative Learning Corporation):
Basic and diluted	$	-	$	-
Weighted average number of common
shares outstanding		11,340,409		2,590,656

The accompanying notes are an integral part of the consolidated financial statements

F-4

CREATIVE LEARNING CORPORATION

Consolidated Statement of Stockholders’ Equity (Deficit)

							Additional			Retained
	Common Stock						Paid-in			Earnings			Noncontrolling
	Shares			Par Value			Capital			(Deficit)			Interest			Total

Balance, September 30, 2010		2,581,268		$	258		$	670,427		$	(771,026	)	$	(54,734	)	$	(155,075	)

Acquisition of non-controlling interest (Note 1)		—			—			(54,734	)		—			54,734			—
Common stock sales (Note 6)		1,156,734			116			951,061			—			—			951,177
Compensatory stock issuances (Note 6)		1,310,573			131			409,215			—			—			409,346
Stock issued under exchange agreement (Note 2)		5,240,000			524			(524	)		—			—			—
Net income for the year ended September 30, 2011		—			—			—			(506,014	)		—			(506,014	)
Balance, September 30, 2011		10,288,575		$	1,029		$	1,975,445		$	(1,277,040	)	$	—		$	699,434

Stock issued under exchange agreement (Note 2)		1,185,000			118			(118	)		-			-			—
Compensatory stock issuances (Note 6)		11,000			1			8,799			-			-			8,800
Cancellation of prior shares issued erroneously		(33,500	)		(3	)		3									—
Net income for the year ended December 31, 2011		—			—			—			11,082			—			11,082

Balance, December 31, 2011		11,451,075		$	1,145		$	1,984,129		$	(1,265,958	)	$	—		$	719,316

The accompanying notes are an integral part of the consolidated financial statements

F-5

CREATIVE LEARNING CORPORATION

Consolidated Statements of Cash Flows

	(Unaudited)
	December 31,			December 31,
	2011			2010
Cash flows from operating activities:
Net income (loss	$	11,082		$	(54,516	)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation		3,865			2,286
Compensatory equity issuances		8,800			—
Changes in operating assets and liabilities:
Accounts receivable		(93,623	)		—
Accounts payable		9,743			14,818
Accrued liabilities		5,448			19,630
Accrued marketing funds		21,465			—
Customer deposits		5,000			—
Net cash provided by (used in)
operating activities		(28,220	)		(17,782	)

Cash flows from investing activities:
Property and equipment purchases		(594	)		(6,357	)
Loan distributed to a related party in exchange
for a promissory note		(4,000	)		—
Net cash used in
investing activities		(4,594	)		(6,357	)

Cash flows from financing activities:
Proceeds from sale of common stock		—			21,124
Net cash provided by
financing activities		—			21,124

Net change in cash.		(32,814	)		(3,015	)

Cash, beginning of period..		517,830			27,271

Cash, end of period	$	485,016		$	24,256

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Income taxes	$	—		$	—
Interest	$	—		$	—
Non-cash investing and financing activities:
Common stock issued for services	$	8,800		$	—

The accompanying notes are an integral part of the consolidated financial statements

F-6

CREATIVE LEARNING CORPORATION

(formerly B2 Health, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Creative Learning Corporation (formerly B2 Health, Inc.) was incorporated March 8, 2006 in the State of Delaware. BFK Franchise Company LLC was formed in the State of Nevada on May 19, 2009. Effective July 2, 2010 Creative Learning Corporation was acquired by BFK Franchise Company LLC in a transaction classified as a reverse acquisition. Creative Learning Corporation concurrently changed its name from B2 Health, Inc. to Creative Learning Corporation. The financial statements represent the activity of BFK Franchise Company LLC from May 19, 2009 forward, and the consolidated activity of BFK Franchise Company LLC and Creative Learning Corporation from July 2, 2010 forward. BFK Franchise Company LLC and Creative Learning Corporation are hereinafter referred to collectively as the "Company". The Company, primarily through franchises, offers educational programs designed to teach principles of engineering, architecture and physics to children using Lego ® bricks. The Company may also engage in any other business that is permitted by law, as designated by the Board of Directors of the Company.

Basis of Presentation

The accompanying unaudited financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and disclosures required by generally accepted accounting principles for complete financial statements. All adjustments which are, in the opinion of management, necessary for a fair presentation of the results of operations for the interim periods have been made and are of a recurring nature unless otherwise disclosed herein. The results of operations for such interim periods are not necessarily indicative of operations for a full year.

Fiscal year

The Company employs a fiscal year ending September 30.

Principles of consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All intercompany accounts and transactions have been eliminated in consolidation.

Cash and cash equivalents

The Company considers all highly liquid investments with an original maturity of three months or less as cash equivalents.

F-7

CREATIVE LEARNING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):

Accounts receivable

The Company reviews accounts receivable periodically for collectability and establishes an allowance for doubtful accounts and records bad debt expense when deemed necessary. At December 31, 2011 and 2010 the Company had $11,000 and $-0- in its allowance for doubtful accounts.

Property and equipment

Property and equipment are recorded at cost and depreciated under straight line or accelerated methods over each item's estimated useful life.

Revenue recognition

Revenue is recognized on an accrual basis after services have been performed under contract terms, the service price to the client is fixed or determinable, and collectability is reasonably assured.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Income tax

The Company accounts for income taxes pursuant to ASC 740. Under ASC 740 deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

F-8

CREATIVE LEARNING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):

Prior to fiscal year 2010 the Company operated as an LLC, was a pass-through entity for federal income tax purposes and paid no income tax at the company level. At December 31, 2011 and December 31, 2010 the Company had net operating loss carryforwards of approximately $1,265,958 and $771,027 respectively, which begin to expire in 2031. The deferred tax asset of approximately $253,192 and $154,205 respectively created by the net operating loss has been offset by a 100% valuation allowance. The change in the valuation allowance in the three month interim period ended December 31, 2011 and 2010 was decreased by $2,216 and increased by $10,903 respectively.

Advertising costs

Advertising costs are expensed as incurred. The Company had advertising costs for the nine month period ended December 31, 2011 and 2010 was $64,289 and $128,478 respectively.

Net income (loss) per share

The net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of shares of common outstanding. Warrants, stock options, and common stock issuable upon the conversion of the Company's preferred stock (if any), are not included in the computation if the effect would be anti-dilutive and would increase the earnings or decrease loss per share.

Financial Instruments

The carrying value of the Company’s financial instruments, as reported in the accompanying balance sheets, approximates fair value.

Long-Lived Assets

In accordance with ASC 350, the Company regularly reviews the carrying value of intangible and other long-lived assets for the existence of facts or circumstances, both internally and externally, that may suggest impairment. If impairment testing indicates a lack of recoverability, an impairment loss is recognized by the Company if the carrying amount of a long-lived asset exceeds its fair value.

F-9

CREATIVE LEARNING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):

Stock based compensation

The Company accounts for employee and non-employee stock awards under ASC 718, whereby equity instruments issued to employees for services are recorded based on the fair value of the instrument issued and those issued to non-employees are recorded based on the fair value of the consideration received or the fair value of the equity instrument, whichever is more reliably measurable.

At December 31, 2011 the company issued 11,000 shares of stock in exchange for services valued at $8,800.

F-10

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF OPERATION

The following discussion and analysis should be read in conjunction with the unaudited financial statements and notes thereto contained in this report.

Results of Operations

The Company was formed in March 2006 to design, manufacture and sell chiropractic tables and beds. The Company generated only limited revenue and essentially abandoned its business plan in March 2008.

Although from a legal standpoint the Company, on July 2, 2010, acquired BFK Franchise Company, for financial reporting purposes, the acquisition of BFK constituted a recapitalization, and the acquisition was accounted for similar to a reverse merger, with the result that BFK was deemed to have acquired the Company. As a result, the financial statements of the Company included as part of this report represent the activity of BFK from May 19, 2009 (the inception of BFK) to July 2, 2010, and the consolidated activity of BFK and the Company from July 2, 2010 forward.

Unless otherwise indicated, any reference to the operations of the Company includes the operations of BFK.

BFK, which conducts business under the trade name, BRICKS 4 KIDS®, offers programs designed to teach principles of engineering, architecture and physics to children ages 3-12+ using LEGO® bricks. BFK provides classes (both in school and after school), special events programs and day camps that are designed to enhance and enrich the traditional school curriculum, trigger young children’s lively imaginations and build self-confidence. BFK’s programs foster creativity and provide a unique atmosphere for students to develop problem solving and critical thinking skills by designing and building machines, catapults, pyramids, race cars, buildings and numerous other systems and devices using LEGO® bricks.

BFK operates through Corporate Creativity Centers and franchisees.

A Corporate Creativity Center is a store-front location, owned and operated by BFK, where BFK coordinates in school field trips, after school classes, parties, camps and other programs – as well as the retail sales of LEGO® merchandise.

BFK sold its first franchise in September 2009. Since that time BFK has:

·	opened one Corporate Creativity Center in Florida; and

·	sold 116 additional franchises.

As of January 31, 2012 BFK, through its franchises, was operating in 26 states, three foreign countries, and Puerto Rico.

Material changes of items in the Company’s Statement of Operations for the three months ended December 31, 2011 as compared to the same period in 2010 are discussed below.

Item	Increase (I) or Decrease (D)	Reason

Revenues	I	Growth of business resulting in increased sales of franchises and an increase in royalties received from franchisees.

Operating Expenses	I	Growth in business.

Liquidity and Capital Resources

Sources and (uses) of funds for the three months ended December 31, 2011 and 2010 are shown below:

	Three Months ended December 31,
	2011			2010
Cash used in operations	$	(28,220	)	$	(17,782	)
Purchase of equipment		(594	)		(6,357	)
Loan to a shareholder		(4,000	)		-
Sale of common stock		-			21,124
Cash on hand at beginning of period		32,814		$	3,015

Between January 4, 2011 and December 31, 2011 the Company sold 1,026,405 shares of its common stock to private investors. The Company received $951,177 from the sale of these shares.

As of January 31, 2012 the Company’s fixed operating expenses (i.e. utilities, telephone, base salaries and office condominium payments) were approximately $47,000 per month. Variable expenses include legal, accounting, travel, advertising, franchise sales commissions, franchisee training and new franchisee fulfillment (i.e. materials supplied to new franchisees as part of their franchise purchase). Advertising expenses have been averaging $15,000 per month. Commissions, franchisee training, and new franchisee fulfillment expense are incurred only when a franchise is sold.

The Company anticipates that its capital requirements for the twelve-month period ending December 31, 2012 will be as follows:

General and administrative expenses	$	620,000
Marketing	$	240,000
Business development	$	120,000
Opening new Corporate Creativity Centers	$	80,000

The Company does not have any commitments or arrangements from any person to provide the Company with any additional capital. The Company may not be successful in raising the capital it needs.

As of December 31, 2011 the Company’s liabilities consisted primarily of trade payables. In October and November 2011, the Company began to generate a positive cash flow from its operations. Notwithstanding the above, there is no assurance the Company’s operations will be profitable or that the Company will continue to generate a positive cash flow.

Contractual Obligations

The following table summarizes the Company’s contractual obligations as of December 31, 2011:

	2012		2013		2014		Total

Lease of corporate office	$	18,000		-		-	$	18,000

Lease of Corporate Creativity Center	$	45,000		50,928		54,526	$	150,454

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements that have or are reasonable likely to have a current or future material effect on the Company’s financial condition, changes in financial condition, results of operations, liquidity or capital resources.

Outlook

Other than as disclosed above, the Company does not know of any trends, demands, commitments, events or uncertainties that will result in, or that are reasonably likely to result in, the Company’s liquidity increasing or decreasing in any material way.

Other than as disclosed above, the Company does not know of any significant changes in its expected sources and uses of cash

Critical Accounting Policies and Recent Accounting Pronouncements

See Note 1 to the Company’s financial statements included as part of this report for a discussion of the Company’s critical accounting policies and recent accounting Pronouncements, the adoption of which may have a material effect on the Company’s financial statements.

ITEM 4. CONTROLS AND PROCEDURES.

(a) The Company maintains a system of controls and procedures designed to ensure that information required to be disclosed in reports filed or submitted under the Securities Exchange Act of 1934, as amended (“1934 Act”), is recorded, processed, summarized and reported, within time periods specified in the SEC's rules and forms and to ensure that information required to be disclosed by the Company in the reports that it files or submits under the 1934 Act, is accumulated and communicated to the Company’s management, including its Principal Executive and Financial Officer, as appropriate to allow timely decisions regarding required disclosure. As of December 31, 2011, the Company’s Principal Executive and Financial Officer evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation, the Principal Executive and Financial Officer concluded that the Company’s disclosure controls and procedures were effective.

(b) Changes in Internal Controls. There were no changes in the Company’s internal control over financial reporting during the quarter ended December 31, 2011, that materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

PART II

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the three months ended December 31, 2011 the Company issued:

·	10,000 shares of common stock to an investor relations consultant for services rendered and

·	1,000 shares of common stock to a franchisee in consideration of their purchase of a franchise.

The Company relied upon the exemption provided by Section 4(2) of the Securities Act of 1933 with respect to the issuance of these shares. The persons who acquired these shares were sophisticated investors and were provided full information regarding the Company’s business and operations. There was no general solicitation in connection with the offer or the sale of these shares. The persons who acquired these shares acquired them for their own account. The certificates representing these shares bear a restricted legend providing that they cannot be sold except pursuant to an effective registration statement or an exemption from registration. No commission or other form of remuneration was given to any person in connection with the issuance of these shares.

ITEM 6. EXHIBITS

Exhibits

31.1

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification pursuant to Section 906 of the Sarbanes-Oxley Act.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	CREATIVE LEARNING CORPORATION

February 14, 2012	By:	/s/ Brian Pappas
		Brian Pappas, Principal Executive, Financial and Accounting Officer

Attached files

Stock widget

Investing forum

CREATIVE LEARNING Corp Reports

Also read