Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Sep. 30, 2017 | Dec. 15, 2017 | Dec. 12, 2017 | |
Document And Entity Information | |||
Entity Registrant Name | CREATIVE LEARNING Corp | ||
Entity Central Index Key | 1,394,638 | ||
Document Type | 10-K | ||
Trading Symbol | CLCN | ||
Document Period End Date | Sep. 30, 2017 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --09-30 | ||
Entity a Well-known Seasoned Issuer | No | ||
Entity a Voluntary Filer | No | ||
Entity's Reporting Status Current | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $ 1,800,000 | ||
Entity Common Stock, Shares Outstanding | 12,075,875 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,017 |
Consolidated Balance Sheets (Un
Consolidated Balance Sheets (Unaudited) - USD ($) | Sep. 30, 2017 | Sep. 30, 2016 |
Current Assets: | ||
Cash | $ 213,950 | $ 276,685 |
Restricted cash (marketing fund) | 118,337 | 162,447 |
Accounts receivable, less allowance for doubtful accounts of approximately $262,000 and $218,000, respectively | 356,830 | 240,640 |
Prepaid expenses | 73,337 | 120,000 |
Notes receivables - current portion, less allowance for doubtful accounts of approximately $33,000 and $26,000, respectively | 2,730 | 16,595 |
Income tax receivable | 424,938 | |
Total Current Assets | 765,184 | 1,241,305 |
Notes receivables - net of current portion | 59,150 | 60,150 |
Property and equipment, net of accumulated depreciation of approximately $240,000 and $188,000, respectively | 260,094 | 299,320 |
Intangible assets | 23,300 | 100,504 |
Deposits | 15,053 | 1,425 |
Deferred tax assets | 343,444 | |
Total Assets | 1,122,781 | 2,046,148 |
Current Liabilities: | ||
Accounts payable | 148,021 | 171,828 |
Payroll accruals | 17,950 | 15,844 |
Accrued liabilities | 135,727 | 346,623 |
Unearned revenue | 188 | |
Accrued marketing fund | 131,909 | 147,227 |
Customer deposits | 5,000 | |
Total Current Liabilities | 433,607 | 686,710 |
Commitments and Contingencies - Note 9 | ||
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; 12,075,875 and 12,001,409 issued and outstanding, respectively | 1,207 | 1,200 |
Additional paid-in capital | 2,895,285 | 2,534,554 |
Treasury Stock 65,100 shares (cost method) | (34,626) | (34,626) |
Accumulated deficit | (2,172,692) | (1,141,690) |
Total Stockholders' Equity | 689,174 | 1,359,438 |
Total Liabilities and Stockholders' Equity | $ 1,122,781 | $ 2,046,148 |
Consolidated Balance Sheets (U3
Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) | Sep. 30, 2017 | Sep. 30, 2016 |
Consolidated Balance Sheets | ||
Allowance for doubtful accounts receivable | $ 262,000 | $ 218,000 |
Allowance for doubtful notes receivable | 33,000 | 26,000 |
Accumulated depreciation | $ 240,000 | $ 188,000 |
Preferred stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, authorized | 10,000,000 | 10,000,000 |
Preferred stock, issued | 0 | 0 |
Preferred stock, outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, authorized | 50,000,000 | 50,000,000 |
Common stock, issued | 12,075,875 | 12,001,409 |
Common stock, outstanding | 12,075,875 | 12,001,409 |
Treasury stock, shares | 65,100 |
Consolidated Statements of Oper
Consolidated Statements of Operations (Unaudited) - USD ($) | 12 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Revenues: | ||
Initial franchise fees | $ 206,950 | $ 931,638 |
Royalties fees | 2,249,023 | 2,306,124 |
Merchandise sales | 60 | 597 |
Total revenue | 2,456,033 | 3,238,359 |
Operating expenses: | ||
Franchise consulting and commissions | 161,776 | 537,109 |
Franchise training and expenses | 15,710 | 207,399 |
Salaries and payroll taxes | 716,610 | 888,477 |
Stock-based compensation | 360,738 | |
Advertising | 21,027 | 435,221 |
Professional fees & legal settlements | 1,316,838 | 2,710,699 |
Office expense | 8,514 | 34,202 |
Bad debt expense | 177,288 | 87,837 |
Depreciation | 57,175 | 53,711 |
Other general and administrative expenses | 312,809 | 679,418 |
Total operating expenses | 3,148,485 | 5,634,073 |
Loss from operations | (692,452) | (2,395,714) |
Other income | ||
Interest income - net | 87 | 3,323 |
Other income | 26,016 | 23,144 |
Total other income | 26,103 | 26,467 |
Loss before benefit from income taxes | (666,349) | (2,369,247) |
(Provision for) benefit from income taxes | (364,653) | 560,398 |
Net loss from continuing operations | (1,031,002) | (1,808,849) |
Discontinued operations: | ||
Operating loss from discontinued operations | (12,087) | |
Income tax benefit | 2,859 | |
Loss from discontinued operations | (9,228) | |
Net Loss | $ (1,031,002) | $ (1,818,077) |
Basic and diluted | ||
Continuing operations (in dollars per share) | $ (0.09) | $ (0.15) |
Discontinued operations (in dollars per share) | 0 | |
Total (in dollars per share) | $ (0.09) | $ (0.15) |
Basic and diluted weighted average number of common shares outstanding (in shares) | 12,007,736 | 12,001,409 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 12 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Cash flows from operating activities: | ||
Net Loss | $ (1,031,002) | $ (1,818,077) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Loss from discontinued operations | 9,228 | |
Depreciation | 57,175 | 53,711 |
Bad debt expense | 177,288 | 87,837 |
Deferred income taxes | 343,444 | (261,861) |
Stock issued for compensation | 14,500 | |
Stock options issued for compensation | 50,312 | |
Stock options issued for directors' fees | 295,926 | |
Impairment loss on Long-lived assets | 78,604 | |
Changes in operating assets and liabilities: | ||
Restricted cash | 44,110 | 86,330 |
Accounts receivable | (285,604) | 43,962 |
Prepaid expenses | 46,663 | (108,722) |
Notes receivable | 6,991 | 89,684 |
Deposits | (13,628) | 10,000 |
Accounts payable - related parties | (240) | |
Accounts payable - 3rd parties | (23,807) | 52,715 |
Accrued liabilities | (210,896) | (81,435) |
Unearned revenue | (188) | (35,712) |
Payroll accruals | 2,106 | (20,646) |
Accrued marketing | (15,318) | (48,684) |
Customer deposits | (5,000) | (14,982) |
Income tax receivable | 424,938 | (167,552) |
Net cash used in operating activates | (43,386) | (2,124,444) |
Net cash (used in) provided by discontinued operations | 19,596 | |
Cash flows from investing activities: | ||
Acquisition of property and equipment | (19,349) | (69,076) |
Net cash (used in) provided by investing activities | (19,349) | (69,076) |
Net change in cash | (62,735) | (2,173,924) |
Cash, beginning of period | 276,685 | 2,450,609 |
Cash, end of period | 213,950 | 276,685 |
Supplemental non-cash investing and financing activities: | ||
Acquisition of treasury stock in connection with disposition of CI | $ 16,500 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholder's Equity - USD ($) | Treasury Stock [Member] | Common Stock [Member] | Additional Paid-in Capital [Member] | Accumulated Deficit [Member] | Total |
Balance at Sep. 30, 2015 | $ (18,126) | $ 1,200 | $ 2,534,554 | $ 676,387 | $ 3,194,015 |
Balance (in shares) at Sep. 30, 2015 | (15,100) | 12,001,409 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Treasury stock (cost) | $ (16,500) | (16,500) | |||
Treasury stock (cost) (in shares) | 50,000 | ||||
Net loss | (1,818,077) | (1,818,077) | |||
Balance at Sep. 30, 2016 | $ (34,626) | $ 1,200 | 2,534,554 | (1,141,690) | $ 1,359,438 |
Balance (shares) at Sep. 30, 2016 | (65,100) | 12,001,409 | 12,001,409 | ||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Compensatory stock issuances | $ 7 | 14,493 | $ 14,500 | ||
Compensatory stock issuances (in shares) | 74,466 | ||||
Compensatory stock options issuances | 346,238 | 346,238 | |||
Net loss | (1,031,002) | (1,031,002) | |||
Balance at Sep. 30, 2017 | $ (34,626) | $ 1,207 | $ 2,895,285 | $ (2,172,692) | $ 689,174 |
Balance (shares) at Sep. 30, 2017 | (65,100) | 12,075,875 | 12,075,875 |
Nature of Organization and Summ
Nature of Organization and Summary of Significant Accounting Policies | 12 Months Ended |
Sep. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Organization and Summary of Significant Accounting Policies | (1) Nature of Organization and Summary of Significant Accounting Policies Nature of Organization Creative Learning Corporation (“CLC”), formerly B2 Health, Inc., was incorporated March 8, 2006 in the State of Delaware. BFK Franchise Company LLC (“BFK”) was formed in the State of Nevada on May 19, 2009. Effective July 2, 2010, CLC was acquired by BFK in a transaction classified as a reverse acquisition. CLC concurrently changed its name from B2 Health, Inc. to Creative Learning Corporation. BFK and CLC are hereinafter referred to collectively as the “Company”. In addition to the accounts of CLC and BFK, the accompanying consolidated financial statements include the accounts of CLC’s subsidiaries, BFK Development Company LLC (“BFKD”), and SF LLC (“Sew Fun Studios”). The organizational documents for BFK Development Company LLC and SF LLC do not specify a termination date. Each of the above listed LLC’s has a single member, controlled 100% by the Company. CLC operates wholly-owned subsidiaries BFK and SF under the trade names Bricks 4 Kidz® and Sew Fun Studios™ respectively, that offer children’s enrichment and education franchises. BFK Franchisees operated in 640 territories in 41 states and 44 countries. SF Franchisees operated in 12 territories in 5 states and 2 countries. Until December 2015, CLC operated the wholly-owned subsidiary CI Franchise Company, LLC (“CI”) under the trade name Challenge Island®. The Company sold the CI concept on December 9, 2015, and as a result the Company is reporting CI as Discontinued Operations in the consolidated financial statements - see Note 12. Basis of Presentation This summary of significant accounting policies is presented to assist the reader in understanding and evaluating the Company’s financial statements. The financial statements and notes are representation of the Company’s management, which is responsible for their integrity and objectivity. The Company financial statements are presented on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The Company has franchisees in 44 countries. International franchise fees vary and are set relative to the potential of the franchised territories. In addition, the Company awards master agreements outside of the United States and Canada. The royalty structure is the same for both our US and International franchisees. We recognize our revenue from foreign operations in US Dollars. We do not have international subsidiaries. The Company operates multiple franchise concepts, but all concepts are managed centrally as one segment based upon the Company’s organizational structure, the way in which the operations and investments are managed and evaluated by the COO, as well as the lack of availability of discrete financial information at a lower level. The Company’s COO reviews revenue by franchise concept but operating expenses such as rent, overhead and management salaries and other corporate expense are not allocated among the franchise concepts and net income is measured at the Company wide level to allocate resources and assess the Company’s overall performance. The Company shares common, centralized support functions, including finance, human resources, legal, information technology, and corporate marketing, all of which report directly to the COO. Accordingly, decision-making regarding the Company’s overall operating performance and allocation of Company resources is assessed on a consolidated basis. As such, the Company operates as one reporting segment. Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Fiscal year The Company operates on a September 30 fiscal year-end. Related Parties The Company has been involved in transactions with related parties. A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management, and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party. Use of Estimates The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. The more significant estimates and assumptions made by management include allowance for doubtful accounts, allowance for deferred tax assets, depreciation of property and equipment, amortization of intangible assets, recoverability of long lived assets and fair market value of equity instruments. Actual results could differ from those estimates as the current economic environment has increased the degree of uncertainty inherent in these estimates and assumptions. Cash and Cash Equivalents The Company considers all highly liquid securities with original maturities of three months or less when acquired, to be cash equivalents. We had no cash equivalents at September 30, 2017 and 2016. The Company has restricted cash of approximately $118,000 and $162,000, respectively at fiscal years ended September 30, 2017 and 2016, associated with marketing funds collected from the franchisees. Per the franchise agreements, a marketing fund of 2% of franchisees’ gross cash receipts is collected by the Company and held to be spent on the promotion of the brand (see Note 6). The Company maintains cash balances which at times exceed the federally insured limit of $250,000. The Company believes there is no significant risk with respect to these deposits. Accounts and Note Receivables The Company reviews accounts and notes receivable periodically for collectability and establishes an allowance for doubtful accounts and records bad debt expense when deemed necessary. The Company records an allowance for doubtful accounts and notes that is based on historical trends, customer knowledge, any known disputes, and considers the aging of the accounts receivable balances combined with management’s estimate of future potential recoverability. Receivables and notes are written off against the allowance after all attempts to collect a receivable have failed. The Company believes its allowance for doubtful accounts at September 30, 2017 and 2016 are adequate, but actual write-offs could exceed the recorded allowance. During the years ended September 30, 2017 and September 30, 2016, the values of accounts written-off to the reserve were approximately $125,000 and $89,000, respectively. Long-Lived Assets The Company’s long-lived assets consist of property and equipment, and intangible assets. The Company tests for impairment losses on long-lived assets used in operations whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Recoverability of an asset to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the asset. If such asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. Impairment evaluations involve management’s estimates of asset useful lives and future cash flows. Actual useful lives and cash flows could be different from those estimated by management which could have a material effect on our reporting results and financial positions. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. However, there can be no assurances that demand for the Company’s products or services will continue, which could result in an impairment of long-lived assets in the future. In connection with the sale of CI, the Company recorded a loss on assets held for sale in fiscal year 2016 (see Note 12 “Assets Held for Sale”). During fiscal year 2017, the Company recognized an Impairment loss on long-lived assets on assets and goodwill related to territory repurchases made in fiscal years 2013 & 2014. See Note 4 for more information. Property, Equipment and Depreciation Property and equipment are stated at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets. Expenditures for additions and improvements are capitalized, while repairs and maintenance costs are expensed as incurred. The cost and related accumulated depreciation of property and equipment sold or otherwise disposed of are removed from the accounts and any gain or loss is recorded in the year of disposal. Fixed Assets Useful Life Equipment 5 years Furniture and Fixtures 5 years Property Improvements 15-40 years Software 3 years Fair Value of Financial Instruments The carrying amounts of cash, accounts receivable, deposits, and accounts payable approximate fair value because of the relative short-term maturity of these items and current payment expected. These fair value estimates are subjective in nature and involve uncertainties and matters of significant judgment, and therefore cannot be determined with precision. Changes in assumptions could significantly affect these estimates. The Company does not hold or issue financial instruments for trading purposes, nor does it utilize derivative instruments. Notes receivable are recorded at par value less allowance for uncollectible notes. The carrying amount is consistent with fair value based upon similar notes issued to other franchisees. ASC 825, Financial Instruments, clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. It also requires disclosure about how fair value is determined for assets and liabilities and establishes a hierarchy for which these assets and liabilities must be grouped, based on significant levels of inputs as follows: Level 1: Quoted prices in active markets for identical assets or liabilities. Level 2: Quoted prices in active markets for similar assets and liabilities and inputs that are observable for the asset or liability. Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The carrying value of financial assets and liabilities recorded at fair value is measured on a recurring or nonrecurring basis. Financial assets and liabilities measured on a non-recurring basis are those that are adjusted to fair value when a significant event occurs. The Company had no financial assets or liabilities carried and measured on a recurring basis during the reporting periods. Financial assets and liabilities measured on a recurring basis are those that are adjusted to fair value each time a financial statement is prepared. Revenue Recognition Revenue is recognized on an accrual basis after services have been performed under contract terms and in accordance with regulatory requirements, the service price to the client is fixed or determinable, and collectability is reasonably assured Since the Company’s franchises are primarily a mobile concept and do not require finding locations or construction, the franchisees can begin operations as soon as they complete training. The franchise fees are fully collectible and nonrefundable as of the date of the signing of the franchise agreement, but the franchise fees are not recognized as revenue until initial training has been completed and when substantially all of the services required by the franchise agreement have been fulfilled by the Company in accordance with ASC Topic 952-605 Revenue Recognition-Franchisor At September 30, 2017 and 2016 the Company had approximately $-0- and $200, respectively, in unearned revenue for franchise fees collected but not yet earned per the revenue recognition policy. Advertising Costs Advertising costs are expensed as incurred. The Company incurred advertising costs for the years ended September 30, 2017 and 2016 of approximately $21,000 and $435,000, respectively. Income Taxes The provision for income taxes and deferred income taxes are determined using the asset and liability method. Deferred tax assets and liabilities are determined based on temporary differences between the financial carrying amounts and the tax basis of assets and liabilities using enacted tax rates in effect in the years in which the temporary differences are expected to reverse. On a periodic basis, the Company assesses the probability that its net deferred tax assets, if any, will be recovered. If after evaluating all of the positive and negative evidence, a conclusion is made that it is more likely than not that some portion or all of the net deferred tax assets will not be recovered, a valuation allowance is provided by a charge to tax expense to reserve the portion of the deferred tax assets which are not expected to be realized. The Company reviews its filing positions for all open tax years in all U.S. federal and state jurisdictions where the Company is required to file. When there are uncertainties related to potential income tax benefits, in order to qualify for recognition, the position the Company takes has to have at least a “more likely than not” chance of being sustained (based on the position’s technical merits) upon challenge by the respective authorities. The term “more likely than not” means a likelihood of more than 50 percent. Otherwise, the Company may not recognize any of the potential tax benefit associated with the position. The Company recognizes a benefit for a tax position that meets the “more likely than not” criterion at the largest amount of tax benefit that is greater than 50 percent likely of being realized upon its effective resolution. Unrecognized tax benefits involve management’s judgment regarding the likelihood of the benefit being sustained. The final resolution of uncertain tax positions could result in adjustments to recorded amounts and may affect our results of operations, financial position and cash flows. The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had no accrual for interest or penalties at September 30, 2017 and 2016, respectively, and has not recognized interest and/or penalties during the years ended September 30, 2017 and 2016, respectively, since there are no material unrecognized tax benefits. Management believes no material change to the amount of unrecognized tax benefits will occur within the next twelve months. The tax years subject to examination by major tax jurisdictions include the years 2014 and forward by the U.S. Internal Revenue Service, and the years 2013 and forward for various states. Net earnings (loss) per share Basic earnings per share are computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur if stock options or other contracts to issue common stock were exercised or converted during the period. Dilutive securities having an anti-dilutive effect on diluted earnings per share are excluded from the calculation. Stock-based compensation The Company accounts for employee stock awards for services based on the grant date fair value of the instrument issued and those issued to non-employees are recorded based on the grant date fair value of the consideration received or the fair value of the equity instrument, whichever is more reliably measurable. Stock Awards are expensed over the service period. Recent accounting pronouncements In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09 “Revenue with Contracts from Customers (Topic 606).” ASU 2014-09 supersedes the current revenue recognition guidance, including industry-specific guidance. The guidance introduces a five-step model to achieve its core principal of the entity recognizing revenue to depict the transfer of goods or services to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net).” ASU 2016-08 provides specific guidance to determine whether an entity is providing a specified good or service itself or is arranging for the good or service to be provided by another party. In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing.” ASU 2016-10 provides clarification on the subjects of identifying performance obligations and licensing implementation guidance. The requirements for these standards relating to Topic 606 will be effective for interim and annual periods beginning after December 15, 2017, which means the Company must adopt this standard effective October 1, 2018 for our fiscal year ending September 30, 2019. Management does not expect the new revenue recognition standard to materially impact the recognition of continuing royalty fees from franchisees. They do, however, expect the adoption of Topic 606 to impact the accounting for initial franchise fees. Currently, the Company recognizes revenue from initial franchise fees in a single, up-front transaction, upon the completion of training of new franchisees, in the period in which all material obligations and initial services have been performed. Upon the adoption of Topic 606, we believe the Company will need to recognize the revenue related to initial franchise fees over the term of the related franchise agreement. This will result in less revenue in the short-term and more deferred revenue recognized over a period of time. The company has not completed its analysis to estimate the impact of this standard on the consolidated financial statements, but we are considering early adoption of this accounting standard utilizing the full retrospective approach during our upcoming fiscal year. Management will continue to finalize these accounting policies, quantify the impact of adopting this standard, and design and implement internal controls for this change during the fiscal year ending September 30, 2018, In March 2016, the FASB issued ASU No. 2016-09, C ompensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, In November 2015, the FASB issued ASU 2015-17, “Balance Sheet Classification of Deferred Taxes”. The guidance requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. The guidance becomes effective for annual reporting periods beginning after December 15, 2016 with early adoption permitted. The Company adopted this guidance retrospectively as of October 1, 2015 in fiscal year 2016 and reclassified $90,727 from short-term deferred costs to long-term deferred tax liability in September of 2016. In February 2016, the FASB issued ASU No. 2016-02, “Leases”, which requires lessees to recognize a right-to-use asset and a lease obligation for all leases. Lessees are permitted to make an accounting policy election to not recognize an asset and liability for leases with a term of twelve months or less. Additional qualitative and quantitative disclosures, including significant judgments made by management, will be required. The new standard will become effective for the Company beginning with the first quarter 2020 and requires a modified retrospective transition approach and includes a number of practical expedients. Early adoption of the standard is permitted. The Company is currently evaluating the impacts the adoption of this accounting guidance will have on the consolidated financial statements. |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Sep. 30, 2017 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | (2) Related Party Transactions During the years ended September 30, 2017 and 2016, the Company incurred the following related party consulting fees and commissions: Commissions and Consulting Fiscal Year Ending September 30, Related Party 2017 2016 Leap Ahead Learning Company (owned by Dan O’Donnell)(1) $ — $ 2,275 $ — $ 2,275 (1) Leap Ahead Learning Company is 100% owned by Dan O’Donnell, who was a director and the Chief Operating Officer of the Company until his resignation on April 6, 2016. The related party payable was approximately $-0- and $2,275, respectively at September 30 2017 and 2016. In addition, all franchisees pay fees directly to Leap Ahead Learning Company for set-up and monthly support for the FMT (Franchise Management Tool) which is a software package. The set-up fee is a one-time charge of $250 for domestic and Canadian franchisees and a range of $250 to $3,000 for international franchisees. The monthly support fee, for all franchisees, is $75. Also, all domestic franchisees that wish to accept credit card payments in the FMT must be set-up for processing credit cards through a third-party servicer, authorize.net. Leap Ahead Learning Company receives a monthly administrative fee of $7.95 for each franchisee using the credit card processing services of authorize.net. Leap Ahead Learning Company is the broker and administrator on behalf of authorize.net. To ensure that the Company has sufficient liquidity, the Company received confirmation letters from certain Directors and Officers of the Company. Please see further discussion under Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources of this 10-K report. |
Property and Equipment
Property and Equipment | 12 Months Ended |
Sep. 30, 2017 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | (3) Property and Equipment Property and equipment consisted of the following: September 30, September 30, Description 2017 2016 Depreciable Fixed Assets: Equipment $ 66,969 $ 71,889 Furniture and Fixtures 83,427 83,427 Property Improvements 233,615 233,615 Software 98,307 98,307 Total Depreciable Fixed Assets 482,318 487,238 Accumulated Depreciation (240,493 ) (187,918 ) Total Net Depreciable Fixed Assets 241,825 299,320 Non-depreciable Fixed Assets: Work In Progress 18,269 — Total Net Fixed Assets $ 260,094 $ 299,320 Depreciation expense totaled approximately $57,000 and $54,000, respectively, for the years ended September 30, 2017 and 2016. |
Intangible Assets
Intangible Assets | 12 Months Ended |
Sep. 30, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets | (4) Intangible Assets Intangible Assets consist of purchased franchise rights and trademarks. The Intangible assets consists of Sew Fun Trademarks, Business Concepts and Curriculum which was purchased by the company. During the fiscal year 2017, the Company determined that certain long-lived assets, related to repurchases of BFK territories during fiscal year 2013 and 2014, were over-valued. The Company determined that these territories and their associated fixed assets had no fair market value outside of their unimproved territory value compared to other unsold territories. Below is a table listing the assets, and the Impairment loss related to each: Net Book Impairment Corrected Date acquired Value Loss Value Intangible Asset Denver Territory - Repurchase 6/3/2013 20,000 (20,000 ) — Auburn, AL Territory - Repurchase 9/30/2013 6,720 (6,720 ) — Las Vegas Territory - Repurchase 12/26/2013 40,484 (40,484 ) — St. Peters, MO Territory - Repurchase 2/26/2014 10,000 (10,000 ) — Equipment Exterior signs - Las Vegas territory 12/26/2013 1,400 (1,400 ) — Total Adjusted Value 78,604 (78,604 ) — The impairment loss of $78,604 related to the above assets is included in the other general and administrative expenses line on the Consolidated Statements of Operations. |
Notes and Other Receivables
Notes and Other Receivables | 12 Months Ended |
Sep. 30, 2017 | |
Receivables [Abstract] | |
Notes and Other Receivables | (5) Notes and Other Receivables At September 30, 2017 and 2016 respectively, the Company held certain notes receivable totaling approximately $95,000 and $102,000 respectively for extended payment terms of franchise fees. The notes were generally non-interest-bearing notes with monthly payments, payable within one to two years. 2018 2019 2020 2021 2022 Thereafter Total Payment schedule for Notes Receivable $ 36,184 $ 19,000 $ 12,950 $ 12,950 $ 12,950 $ 1,300 $ 95,334 |
Accrued Marketing Fund
Accrued Marketing Fund | 12 Months Ended |
Sep. 30, 2017 | |
Accrued Liabilities and Other Liabilities [Abstract] | |
Accrued Marketing Fund | (6) Accrued Marketing Fund Per the terms of the franchise agreements, the Company collects 2% of franchisee’s gross revenues for a marketing fund, managed by the Company, to allocate toward national branding of the Company’s concepts to benefit the franchisees. The marketing fund amounts are accounted for as a liability on the balance sheet and the actual collections are deposited into a marketing fund bank account. Expenses pertaining to the marketing fund activities are paid from the marketing fund and reduce the liability account. At September 30, 2017 and 2016, the accrued marketing fund liability balances were approximately $132,000 and $147,000 respectively. |
Accrued Liabilities
Accrued Liabilities | 12 Months Ended |
Sep. 30, 2017 | |
Payables and Accruals [Abstract] | |
Accrued Liabilities | (7) Accrued Liabilities The Company had accrued liabilities at September 30, 2017, and September 30, 2016 as follows: September 30, September 30, Accrued Liabilities 2017 2016 Accrued Accounting Fees — 13,753 Accrued Legal Fees 77,719 131,504 Accrued Legal Settlements 32,143 17,000 Accrued State Regulatory Settlement — 149,366 Accrued Exit Agreement 9,739 — Accrued Other 16,126 35,000 $ 135,727 $ 346,623 The Company accrued $149,366 for state regulatory settlements in 2016, which included $35,500 in state penalties and costs and $113,866 in reimbursement of 5 franchisees in 2016. |
Common Stock Repurchases
Common Stock Repurchases | 12 Months Ended |
Sep. 30, 2017 | |
Equity [Abstract] | |
Common Stock Repurchases | (8) Common Stock Repurchases On January 26, 2015, the Company’s board of directors (the “Board”) approved a plan pursuant to SEC Rule 10b-18 to purchase 100,000 shares of its common stock in the secondary market. At September 30, 2017 the Company has repurchased 15,100 shares of CLC common stock at a cumulative cost of approximately $18,000. The value of the treasury stock, based upon cost, is recorded in the equity section of the condensed consolidated balance sheet. In conjunction with the Company’s sale of the CI business in December 2015, the Company acquired 50,000 shares of the Company’s common stock that had been held by the purchaser. The shares are valued at $16,500. These shares are included in the equity section of the consolidated balance sheet. |
Stock-Based Compensation
Stock-Based Compensation | 12 Months Ended |
Sep. 30, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock-Based Compensation | (9) Stock-Based Compensation On May 14, 2017, the Company granted options consistent with its corporate by-laws to purchase shares of the Company’s common stock to each of the members of the Company’s then Board, as follows: Charles Grant – 900,000 shares, Joseph Marucci – 324,000 shares, Michael Gorin – 324,000 shares and JoyAnn Kenny, 216,000 shares. Each of the options has an exercise price of $0.30 per share, and is exercisable in full at any time during the five-year period commencing on the date of grant. The option grants were approved by the Board based upon an investigation by an independent compensation consultant, who provided analysis and compensation recommendations to the Board. Among other things, the report concluded that the directors have: (i) served entirely without compensation (other than $4,500 paid to Mr. Marucci in or prior to July 2015) – Messrs. Grant and Marucci since March 2015 and Mr. Gorin and Ms. Kenny since July 2015; (ii) devoted more time and effort than what is to be expected or considered normal (especially the audit committee); (iii) been confronted by extenuating circumstances regarding the Company’s affairs that required substantial additional effort. Finally, the analysis indicated that Board Chair, Charles Grant, had expended a particularly large amount of effort, spending considerably more time performing board services than the other board members. On May 13, 2017, pursuant to the employment agreement of Karla Kretsch, the Company’s then President, the Company issued 8,000 shares of the Company’s common stock, and granted options to purchase 28,000 shares of the Company’s common stock at an exercise price of $0.25 per share, exercisable in full at any time during the five-year period commencing on the date of the grant. The shares and options were issued pursuant to the terms of Ms. Kretsch’s employment agreement with the Company, on account of Ms. Kretsch’s service to the Company for the quarter ended March 31, 2017. Based on the same employment agreement, for the quarter ending June 30, 2017, the Company issued 12,118 shares of the Company’s common stock, and granted options to purchase 42,414 shares of the Company’s common stock at an exercise price of $0.2063 per share, exercisable in full at any time during the five-year period commencing on the date of the grant. On July 26, 2017, Karla Kretsch informed the Company of her intention to resign as President of the Company. Since Ms. Kretsch’s employment was terminated by Ms. Kretsch for “Good Reason” (as such term is defined in the Employment Agreement), Ms. Kretsch will be paid an amount equivalent to her base salary for a period of three months following the date of termination in equal amounts every two weeks, and will also be entitled to receive the Equity Awards due for the quarter in which termination occurred, as well as the immediately following three quarters, paid as scheduled at quarter-end. Therefore, for the quarter ending September 30, 2017, the Company recorded a total of approximately $34,000 in stock-based compensation expense for the fair value of equity awards according to the Employment Agreement. The Employment Agreement requires the grant of stock options to purchase 190,216 shares of the Company’s common stock at an exercise price of $0.1840 per share, as well as stock grants for 54,348 shares. On October 26, 2017, the Board granted options to purchase 118,793 shares of the Company’s common stock at an exercise price of $0.1840 per share, exercisable in full at any time during the five-year period commencing on the date of the grant to Christian Miller per his employment agreement from July of 2016. These options were retroactively issued on September 30, 2017. The Company utilizes the Black-Scholes valuation model for estimating fair value of stock compensation for options awarded to officers and members of the Board. Each grant is evaluated based upon assumptions at the time of the grant. The assumptions used in our calculations are no dividend yield, expected volatility between 129.03% and 134.69%, risk-free interest rate of 1.85% to 1.89%, and expected term of 2.5 years. The dividend yield of zero is based on the fact that the Company does not pay cash dividends and has no present intention to pay cash dividends. Expected volatility is estimated based on the Company’s historical stock prices over a period equivalent to the expected life in years. The risk-free interest rate is based on the U.S. Treasury’s Daily Treasury Yield Curve Rates at the date of grant with a term consistent with the expected life of the options granted. The expected term calculation is based on the “simplified method” allowed by the SEC, due to no applicable historical exercise data available. The following are activity of options: Weighted Average Number of Average Expiration Average Grant Date Shares Exercise Price Date Remaining Life Fair Value Outstanding October 1, 2015 120,000 1.15 Granted Fiscal Year 2016 — — Forfeited shares (100,000 ) 1.55 Vested and Exercisable at September 30, 2016 20,000 1.55 2 Months — Forfeited shares (20,000 ) 1.55 Granted May 13, 2017 1,792,000 0.30 05/13/22 56.5 Months 0.17 Granted June 30, 2017 42,414 0.21 06/30/22 57 Months 0.15 Granted September 30, 2017 309,009 0.18 09/30/22 60 Months 0.13 Vested and Exercisable at September 30, 2017 2,143,423 0.29 0.16 |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Sep. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | (10) Commitments and Contingencies Lease Commitments The following table summarizes the Company’s contractual lease obligations at September 30, 2017: Obligation 2018 2019 Total Commercial Lease (Suite 114) $ 17,100 $ 12,113 $ 29,213 Rent expense was approximately $16,000 and $26,000, respectively, for the years ended September 30, 2017 and 2016. Litigation From time to time, the Company has been and may become involved in legal proceedings arising in the ordinary course of its business. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources, and other factors. On October 2, 2015, the Company filed suit in the state court in St. John’s County, Florida, Case No. CA 15-1076, against its former Chief Executive Officer Brian Pappas, Christine Pappas, its former Human Resources officer, and an independent company controlled by Mr. Pappas named Franventures, LLC (“FV”). The lawsuit seeks return of company emails and other electronic materials in the possession of the defendants, company control over the process by which the company’s documents are identified, and a court judgment that the property is the Company’s. Mr. and Mrs. Pappas have returned certain company documents that they have identified, but other issues remain. On December 11, 2017, Brian Pappas filed a counterclaim alleging the Company is required to indemnify him for a multitude of matters. The Company denies the allegation and intends to vigorously litigate this matter. In a separate suit, filed on March 7, 2016 in the state court in St. John’s County, Florida (Case No. CA 16-236), Franventures, LLC (“FV”) alleged that it is due an unstated amount of money from the Company pursuant to a contract the Company had previously terminated. On June 23, 2016, the Company filed a counterclaim against FV, which also included a complaint against former Chairman of the Board and Chief Executive Officer Brian Pappas. The counterclaim seeks redress for losses and expenditures caused by alleged fraud, conversion of company assets, and breaches of fiduciary duty that the Company alleges that defendants perpetrated upon CLC, including assertions regarding actions by Brian Pappas that the Company alleges occurred while Pappas was serving as the Chief Executive Officer of CLC and as a member of its board of directors. On October 27, 2016, Brian Pappas filed a motion to amend the complaint to add a claim alleging that the Company slandered him by virtue of a press release issued on or about August 1, 2016, in which the Company reported to shareholders on steps it had taken and improvements it had implemented. The motion has still not been ruled upon by the Court. If Pappas does amend his complaint, the Company will vigorously defend the proposed claim. On February 24, 2017, franchisee, Team Kasa, LLC, along with its three owners, filed suit in the Eastern District of New York (Case No. 2:17-cv-01074) against former CEO Brian Pappas, and Franventures, LLC. The same Plaintiffs also initiated arbitration on the same issues (American Arbitration Association, Case No. 01-17-0001-1968), alleging the Company is jointly and severally liable for damages resulting from the allegations against Mr. Pappas and Franventures. The Company is contesting the allegations and its liability for any damages. On May 9, 2017, franchisee, Back and 4th, LLC, along with its owner, Kristena Bins-Turner, initiated arbitration against the Company for breach of contract, alleging that they did not receive adequate value for royalty payments made under the franchise agreement, for fraud, alleging material misrepresentations and omissions prior to entry into the franchise agreements, and for misrepresentation violations of Florida Statute 817.416. (American Arbitration Association, Case. No. 01-16-004-3745). Franchisee and its owner seek an unspecified amount of damages. The Company contested the allegations and its liability for any damages at an evidentiary hearing held December 5-7, 2017. A final determination on the matter is pending. On November 8, 2017, franchisee, Indy Bricks, LLC, along with its two owners, Ben & Kate Schreiber initiated arbitration against the Company. (American Arbitration Association, Case No. 01-17-0006-8120). Plaintiffs allege breach of contract, fraud, material misrepresentations and omissions, violations of the Indiana Franchise Act, and violations of the Indiana Deceptive Franchise Practices Act. The Company is vigorously contesting the allegations and its liability for any damages. On August 21, 2017, the SEC filed a Civil Complaint against the Company and certain former executive officers and directors in the United States District Court for the Middle District of Florida, Jacksonville Division, as Civil Action No. 3:17-cv-00954-TJC-JRK. The Civil Complaint was in regards to alleged violations of federal securities law occurring between 2011 and 2015. On August 22, 2017, the SEC also filed with the court the Company’s formal Consent to a full resolution of all allegations pertaining to the Company. Pursuant to the Consent, without admitting or denying the allegations, the Company agreed to the entry of a final judgment that permanently enjoins it from violating the sections of the federal securities laws listed in the Civil Complaint. On September 20, 2017, the United States District Court for the Middle District of Florida, Jacksonville Division issued the final judgment order as to the Company in the Civil Action No. 3:17-cv-00954-TJC-JRK. The entering of the final judgment order has resolved all allegations pertaining to the Company. The Company was not assessed any monetary penalties. On September 21, 2017, the Company filed a notice of voluntary dismissal without prejudice in the United States District Court for the Middle District of Florida, Jacksonville Division, in its lawsuit against Blake and Anik Furlow relating to their conduct in the shareholder consent. The Company filed the complaint on May 15, 2017, and after consideration, decided it was not in the best interest of the Company to proceed with the litigation. |
Income Taxes
Income Taxes | 12 Months Ended |
Sep. 30, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | (11) Income Taxes Components of Deferred Taxes are: 2017 2016 Deferred tax assets: Allowance for bad debt $ 104,056 $ 87,542 Charitable contributions 176 180 Stock-based compensation 121,919 — Foreign Tax Credit 66,085 — Benefit from net operating loss carryovers 466,998 525,283 Total gross deferred tax asset 759,234 613,004 Deferred tax liabilities: Depreciation timing difference (11,445 ) (6,919 ) Total deferred liability (11,445 ) (6,919 ) Gross net deferred tax asset 747,789 606,086 Less: Valuation allowances (747,789 ) (262,642 ) Net deferred tax asset $ — $ 343,444 The Company has recorded various deferred tax assets and liabilities as reflected above. In assessing the ability to realize the deferred tax assets, management considers, whether it is more likely than not, that some portion, or all of the deferred tax assets and liabilities will be realized. The ultimate realization is dependent on generating sufficient taxable income in future years. The valuation allowance is equal to 100% of the Net deferred tax asset. Given recurring losses, the Company cannot conclude that it is more likely than not that such assets will be realized, therefore a full valuation allowance has been recorded. The components of the provisions for income taxes for fiscal years 2017 and 2016 are as follows: 2017 2016 Current: Federal Continuing operations $ (53,587 ) $ (176,492 ) Discontinued operations — (2,287 ) Total (53,587 ) (178,779 ) State Continuing operations (10,497 ) (121,988 ) Discontinued operations — (615 ) Total (10,497 ) (122,603 ) Total Continuing operations (64,084 ) (298,480 ) Discontinued operations — (2,902 ) Total Current Tax (64,084 ) (301,382 ) Deferred: Additional deferred tax related to book tax differences (56,410 ) (524,516 ) Valuation allowance provision 485,147 262,642 Total Tax Provision $ 364,653 $ (563,256 ) A reconciliation of the provisions for income taxes for the fiscal years ended September 2017 and 2016 as compared to statutory rates is as follows: 2017 2016 Amount % Amount % Provision at statutory rates $ (226,559 ) 34.00 % $ (789,534 ) 34.00 % State income tax, net of federal benefit (24,188 ) 3.63 % (84,294 ) 3.63 % Non-Deductible items Penalties 18,815 -2.82 % 48,165 -2.07 % Meals & Entertainment 1,040 -0.16 % 1,440 -0.06 % Stock-based compensation 130,289 -19.55 % — 0.00 % Other tax differences (19,891 ) 2.99 % (1,674 ) 0.07 % Valuation allowance on net operating loss carryover 485,147 -72.81 % 262,641 -11.31 % Total income tax provision $ 364,653 -54.72 % $ (563,256 ) 24.26 % In December 2017, the United States Government passed new tax legislation that, among other provisions, will lower the corporate tax rate from 35% to 21%. In addition to applying the new lower corporate tax rate in 2018 and thereafter to any taxable income we may have, the legislation affects the way we can use and carryforward net operating losses previously accumulated and results in a revaluation of deferred tax assets and liabilities recorded on our balance sheet. Given that current deferred tax assets are offset by a full valuation allowance, these changes will have no net impact on the balance sheet. However, when we become profitable, we will receive a reduced benefit from such deferred tax assets. Had this legislation passed prior to our September 30 fiscal year-end, the effect of the legislation would have been a reduction in deferred tax assets and the corresponding valuation allowance of approximately $179,000, as of September 30, 2017. |
Assets Held For Sale
Assets Held For Sale | 12 Months Ended |
Sep. 30, 2017 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Assets Held For Sale | (12) Assets Held For Sale In September 2015, management committed to a plan to sell the CI concept because it was not a strategic fit with the Company’s existing BFK franchise brand. The Company executed a purchase and sale agreement on December 9, 2015. The sale included substantially all of the assets of the CI business, which were sold on an “as is where is” basis, with no Company representations or warranties surviving the consummation of the sale. The purchase price for the assets consisted of the transfer to the Company of 50,000 shares of the Company’s common stock that had been held by the purchaser, reversal of an accrual to issue 25,000 shares of the Company’s common stock and the assumption of certain liabilities related to the acquired assets. The following table lists the operating loss on the assets held for sale for September 30, 2016: FY ended Operating Loss on discontinued operations 09/30/16 Revenue 10,785 Advertising and promotion (7,635 ) General and administrative expenses (15,237 ) Operating Loss on discontinued operations (12,087 ) |
Earnings Per Share
Earnings Per Share | 12 Months Ended |
Sep. 30, 2017 | |
Net loss per share | |
Earnings Per Share | (13) Earnings Per Share The following table sets for the computation of basic and diluted net loss per share: Fiscal Years Ended September 30, Net loss attributed to common stockholders 2017 2016 Net loss from continuing operations $ (1,031,002 ) $ (1,808,849 ) Net loss from discontinued operations — (9,228 ) Net loss $ (1,031,002 ) $ (1,818,077 ) Net loss per share Continuing operations $ (0.09 ) $ (0.15 ) Discontinued operations — (0.00 ) Total $ (0.09 ) $ (0.15 ) Basic weighted average number of common shares outstanding 12,007,736 12,001,409 Potentially dilutive shares were excluded as the items were anti-dilutive as of September 30, 2017 and September 30, 2016. |
Nature of Organization and Su20
Nature of Organization and Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Sep. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Organization | Nature of Organization Creative Learning Corporation (“CLC”), formerly B2 Health, Inc., was incorporated March 8, 2006 in the State of Delaware. BFK Franchise Company LLC (“BFK”) was formed in the State of Nevada on May 19, 2009. Effective July 2, 2010, CLC was acquired by BFK in a transaction classified as a reverse acquisition. CLC concurrently changed its name from B2 Health, Inc. to Creative Learning Corporation. BFK and CLC are hereinafter referred to collectively as the “Company”. In addition to the accounts of CLC and BFK, the accompanying consolidated financial statements include the accounts of CLC’s subsidiaries, BFK Development Company LLC (“BFKD”), and SF LLC (“Sew Fun Studios”). The organizational documents for BFK Development Company LLC and SF LLC do not specify a termination date. Each of the above listed LLC’s has a single member, controlled 100% by the Company. CLC operates wholly-owned subsidiaries BFK and SF under the trade names Bricks 4 Kidz® and Sew Fun Studios™ respectively, that offer children’s enrichment and education franchises. BFK Franchisees operated in 640 territories in 41 states and 44 countries. SF Franchisees operated in 12 territories in 5 states and 2 countries. Until December 2015, CLC operated the wholly-owned subsidiary CI Franchise Company, LLC (“CI”) under the trade name Challenge Island®. The Company sold the CI concept on December 9, 2015, and as a result the Company is reporting CI as Discontinued Operations in the consolidated financial statements - see Note 12. |
Basis of Presentation | Basis of Presentation This summary of significant accounting policies is presented to assist the reader in understanding and evaluating the Company’s financial statements. The financial statements and notes are representation of the Company’s management, which is responsible for their integrity and objectivity. The Company financial statements are presented on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The Company has franchisees in 44 countries. International franchise fees vary and are set relative to the potential of the franchised territories. In addition, the Company awards master agreements outside of the United States and Canada. The royalty structure is the same for both our US and International franchisees. We recognize our revenue from foreign operations in US Dollars. We do not have international subsidiaries. The Company operates multiple franchise concepts, but all concepts are managed centrally as one segment based upon the Company’s organizational structure, the way in which the operations and investments are managed and evaluated by the COO, as well as the lack of availability of discrete financial information at a lower level. The Company’s COO reviews revenue by franchise concept but operating expenses such as rent, overhead and management salaries and other corporate expense are not allocated among the franchise concepts and net income is measured at the Company wide level to allocate resources and assess the Company’s overall performance. The Company shares common, centralized support functions, including finance, human resources, legal, information technology, and corporate marketing, all of which report directly to the COO. Accordingly, decision-making regarding the Company’s overall operating performance and allocation of Company resources is assessed on a consolidated basis. As such, the Company operates as one reporting segment. |
Principles of Consolidation | Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. |
Fiscal year | Fiscal year The Company operates on a September 30 fiscal year-end. |
Related Parties | Related Parties The Company has been involved in transactions with related parties. A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management, and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party. |
Use of Estimates | Use of Estimates The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. The more significant estimates and assumptions made by management include allowance for doubtful accounts, allowance for deferred tax assets, depreciation of property and equipment, amortization of intangible assets, recoverability of long lived assets and fair market value of equity instruments. Actual results could differ from those estimates as the current economic environment has increased the degree of uncertainty inherent in these estimates and assumptions. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid securities with original maturities of three months or less when acquired, to be cash equivalents. We had no cash equivalents at September 30, 2017 and 2016. The Company has restricted cash of approximately $118,000 and $162,000, respectively at fiscal years ended September 30, 2017 and 2016, associated with marketing funds collected from the franchisees. Per the franchise agreements, a marketing fund of 2% of franchisees’ gross cash receipts is collected by the Company and held to be spent on the promotion of the brand (see Note 6). The Company maintains cash balances which at times exceed the federally insured limit of $250,000. The Company believes there is no significant risk with respect to these deposits. |
Accounts and Note Receivables | Accounts and Note Receivables The Company reviews accounts and notes receivable periodically for collectability and establishes an allowance for doubtful accounts and records bad debt expense when deemed necessary. The Company records an allowance for doubtful accounts and notes that is based on historical trends, customer knowledge, any known disputes, and considers the aging of the accounts receivable balances combined with management’s estimate of future potential recoverability. Receivables and notes are written off against the allowance after all attempts to collect a receivable have failed. The Company believes its allowance for doubtful accounts at September 30, 2017 and 2016 are adequate, but actual write-offs could exceed the recorded allowance. During the years ended September 30, 2017 and September 30, 2016, the values of accounts written-off to the reserve were approximately $125,000 and $89,000, respectively. |
Long-Lived Assets | Long-Lived Assets The Company’s long-lived assets consist of property and equipment, and intangible assets. The Company tests for impairment losses on long-lived assets used in operations whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Recoverability of an asset to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the asset. If such asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. Impairment evaluations involve management’s estimates of asset useful lives and future cash flows. Actual useful lives and cash flows could be different from those estimated by management which could have a material effect on our reporting results and financial positions. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. However, there can be no assurances that demand for the Company’s products or services will continue, which could result in an impairment of long-lived assets in the future. In connection with the sale of CI, the Company recorded a loss on assets held for sale in fiscal year 2016 (see Note 12 “Assets Held for Sale”). During fiscal year 2017, the Company recognized an Impairment loss on long-lived assets on assets and goodwill related to territory repurchases made in fiscal years 2013 & 2014. See Note 4 for more information. |
Property, Equipment and Depreciation | Property, Equipment and Depreciation Property and equipment are stated at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets. Expenditures for additions and improvements are capitalized, while repairs and maintenance costs are expensed as incurred. The cost and related accumulated depreciation of property and equipment sold or otherwise disposed of are removed from the accounts and any gain or loss is recorded in the year of disposal. Fixed Assets Useful Life Equipment 5 years Furniture and Fixtures 5 years Property Improvements 15-40 years Software 3 years |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The carrying amounts of cash, accounts receivable, deposits, and accounts payable approximate fair value because of the relative short-term maturity of these items and current payment expected. These fair value estimates are subjective in nature and involve uncertainties and matters of significant judgment, and therefore cannot be determined with precision. Changes in assumptions could significantly affect these estimates. The Company does not hold or issue financial instruments for trading purposes, nor does it utilize derivative instruments. Notes receivable are recorded at par value less allowance for uncollectible notes. The carrying amount is consistent with fair value based upon similar notes issued to other franchisees. ASC 825, Financial Instruments, clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. It also requires disclosure about how fair value is determined for assets and liabilities and establishes a hierarchy for which these assets and liabilities must be grouped, based on significant levels of inputs as follows: Level 1: Quoted prices in active markets for identical assets or liabilities. Level 2: Quoted prices in active markets for similar assets and liabilities and inputs that are observable for the asset or liability. Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The carrying value of financial assets and liabilities recorded at fair value is measured on a recurring or nonrecurring basis. Financial assets and liabilities measured on a non-recurring basis are those that are adjusted to fair value when a significant event occurs. The Company had no financial assets or liabilities carried and measured on a recurring basis during the reporting periods. Financial assets and liabilities measured on a recurring basis are those that are adjusted to fair value each time a financial statement is prepared. |
Revenue Recognition | Revenue Recognition Revenue is recognized on an accrual basis after services have been performed under contract terms and in accordance with regulatory requirements, the service price to the client is fixed or determinable, and collectability is reasonably assured Since the Company’s franchises are primarily a mobile concept and do not require finding locations or construction, the franchisees can begin operations as soon as they complete training. The franchise fees are fully collectible and nonrefundable as of the date of the signing of the franchise agreement, but the franchise fees are not recognized as revenue until initial training has been completed and when substantially all of the services required by the franchise agreement have been fulfilled by the Company in accordance with ASC Topic 952-605 Revenue Recognition-Franchisor At September 30, 2017 and 2016 the Company had approximately $-0- and $200, respectively, in unearned revenue for franchise fees collected but not yet earned per the revenue recognition policy. |
Advertising Costs | Advertising Costs Advertising costs are expensed as incurred. The Company incurred advertising costs for the years ended September 30, 2017 and 2016 of approximately $21,000 and $435,000, respectively. |
Income Taxes | Income Taxes The provision for income taxes and deferred income taxes are determined using the asset and liability method. Deferred tax assets and liabilities are determined based on temporary differences between the financial carrying amounts and the tax basis of assets and liabilities using enacted tax rates in effect in the years in which the temporary differences are expected to reverse. On a periodic basis, the Company assesses the probability that its net deferred tax assets, if any, will be recovered. If after evaluating all of the positive and negative evidence, a conclusion is made that it is more likely than not that some portion or all of the net deferred tax assets will not be recovered, a valuation allowance is provided by a charge to tax expense to reserve the portion of the deferred tax assets which are not expected to be realized. The Company reviews its filing positions for all open tax years in all U.S. federal and state jurisdictions where the Company is required to file. When there are uncertainties related to potential income tax benefits, in order to qualify for recognition, the position the Company takes has to have at least a “more likely than not” chance of being sustained (based on the position’s technical merits) upon challenge by the respective authorities. The term “more likely than not” means a likelihood of more than 50 percent. Otherwise, the Company may not recognize any of the potential tax benefit associated with the position. The Company recognizes a benefit for a tax position that meets the “more likely than not” criterion at the largest amount of tax benefit that is greater than 50 percent likely of being realized upon its effective resolution. Unrecognized tax benefits involve management’s judgment regarding the likelihood of the benefit being sustained. The final resolution of uncertain tax positions could result in adjustments to recorded amounts and may affect our results of operations, financial position and cash flows. The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had no accrual for interest or penalties at September 30, 2017 and 2016, respectively, and has not recognized interest and/or penalties during the years ended September 30, 2017 and 2016, respectively, since there are no material unrecognized tax benefits. Management believes no material change to the amount of unrecognized tax benefits will occur within the next twelve months. The tax years subject to examination by major tax jurisdictions include the years 2014 and forward by the U.S. Internal Revenue Service, and the years 2013 and forward for various states. |
Net earnings (loss) per share | Net earnings (loss) per share Basic earnings per share are computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur if stock options or other contracts to issue common stock were exercised or converted during the period. Dilutive securities having an anti-dilutive effect on diluted earnings per share are excluded from the calculation. |
Stock-based compensation | Stock-based compensation The Company accounts for employee stock awards for services based on the grant date fair value of the instrument issued and those issued to non-employees are recorded based on the grant date fair value of the consideration received or the fair value of the equity instrument, whichever is more reliably measurable. Stock Awards are expensed over the service period. |
Recent accounting pronouncements | Recent accounting pronouncements In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09 “Revenue with Contracts from Customers (Topic 606).” ASU 2014-09 supersedes the current revenue recognition guidance, including industry-specific guidance. The guidance introduces a five-step model to achieve its core principal of the entity recognizing revenue to depict the transfer of goods or services to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net).” ASU 2016-08 provides specific guidance to determine whether an entity is providing a specified good or service itself or is arranging for the good or service to be provided by another party. In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing.” ASU 2016-10 provides clarification on the subjects of identifying performance obligations and licensing implementation guidance. The requirements for these standards relating to Topic 606 will be effective for interim and annual periods beginning after December 15, 2017, which means the Company must adopt this standard effective October 1, 2018 for our fiscal year ending September 30, 2019. Management does not expect the new revenue recognition standard to materially impact the recognition of continuing royalty fees from franchisees. They do, however, expect the adoption of Topic 606 to impact the accounting for initial franchise fees. Currently, the Company recognizes revenue from initial franchise fees in a single, up-front transaction, upon the completion of training of new franchisees, in the period in which all material obligations and initial services have been performed. Upon the adoption of Topic 606, we believe the Company will need to recognize the revenue related to initial franchise fees over the term of the related franchise agreement. This will result in less revenue in the short-term and more deferred revenue recognized over a period of time. The company has not completed its analysis to estimate the impact of this standard on the consolidated financial statements, but we are considering early adoption of this accounting standard utilizing the full retrospective approach during our upcoming fiscal year. Management will continue to finalize these accounting policies, quantify the impact of adopting this standard, and design and implement internal controls for this change during the fiscal year ending September 30, 2018, In March 2016, the FASB issued ASU No. 2016-09, C ompensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, In November 2015, the FASB issued ASU 2015-17, “Balance Sheet Classification of Deferred Taxes”. The guidance requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. The guidance becomes effective for annual reporting periods beginning after December 15, 2016 with early adoption permitted. The Company adopted this guidance retrospectively as of October 1, 2015 in fiscal year 2016 and reclassified $90,727 from short-term deferred costs to long-term deferred tax liability in September of 2016. In February 2016, the FASB issued ASU No. 2016-02, “Leases”, which requires lessees to recognize a right-to-use asset and a lease obligation for all leases. Lessees are permitted to make an accounting policy election to not recognize an asset and liability for leases with a term of twelve months or less. Additional qualitative and quantitative disclosures, including significant judgments made by management, will be required. The new standard will become effective for the Company beginning with the first quarter 2020 and requires a modified retrospective transition approach and includes a number of practical expedients. Early adoption of the standard is permitted. The Company is currently evaluating the impacts the adoption of this accounting guidance will have on the consolidated financial statements. |
Nature of Organization and Su21
Nature of Organization and Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Sep. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Property and Equipment Useful Lifes | The cost and related accumulated depreciation of property and equipment sold or otherwise disposed of are removed from the accounts and any gain or loss is recorded in the year of disposal. Fixed Assets Useful Life Equipment 5 years Furniture and Fixtures 5 years Property Improvements 15-40 years Software 3 years |
Related Party Transactions (Tab
Related Party Transactions (Tables) | 12 Months Ended |
Sep. 30, 2017 | |
Related Party Transactions [Abstract] | |
Schedule of Related Party Transactions | During the years ended September 30, 2017 and 2016, the Company incurred the following related party consulting fees and commissions: Commissions and Consulting Fiscal Year Ending September 30, Related Party 2017 2016 Leap Ahead Learning Company (owned by Dan O’Donnell)(1) $ — $ 2,275 $ — $ 2,275 (1) Leap Ahead Learning Company is 100% owned by Dan O’Donnell, who was a director and the Chief Operating Officer of the Company until his resignation on April 6, 2016. The related party payable was approximately $-0- and $2,275, respectively at September 30 2017 and 2016. |
Property and Equipment (Tables)
Property and Equipment (Tables) | 12 Months Ended |
Sep. 30, 2017 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property and Equipment | Property and equipment consisted of the following: September 30, September 30, Description 2017 2016 Depreciable Fixed Assets: Equipment $ 66,969 $ 71,889 Furniture and Fixtures 83,427 83,427 Property Improvements 233,615 233,615 Software 98,307 98,307 Total Depreciable Fixed Assets 482,318 487,238 Accumulated Depreciation (240,493 ) (187,918 ) Total Net Depreciable Fixed Assets 241,825 299,320 Non-depreciable Fixed Assets: Work In Progress 18,269 — Total Net Fixed Assets $ 260,094 $ 299,320 |
Intangible Assets (Tables)
Intangible Assets (Tables) | 12 Months Ended |
Sep. 30, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Intangible Assets | Below is a table listing the assets, and the Impairment loss related to each: Net Book Impairment Corrected Date acquired Value Loss Value Intangible Asset Denver Territory - Repurchase 6/3/2013 20,000 (20,000 ) — Auburn, AL Territory - Repurchase 9/30/2013 6,720 (6,720 ) — Las Vegas Territory - Repurchase 12/26/2013 40,484 (40,484 ) — St. Peters, MO Territory - Repurchase 2/26/2014 10,000 (10,000 ) — Equipment Exterior signs - Las Vegas territory 12/26/2013 1,400 (1,400 ) — Total Adjusted Value 78,604 (78,604 ) — |
Notes and Other Receivables (Ta
Notes and Other Receivables (Tables) | 12 Months Ended |
Sep. 30, 2017 | |
Receivables [Abstract] | |
Schedule of Future Payments for Notes and Other Receivables | The notes were generally non-interest-bearing notes with monthly payments, payable within one to two years. 2018 2019 2020 2021 2022 Thereafter Total Payment schedule for Notes Receivable $ 36,184 $ 19,000 $ 12,950 $ 12,950 $ 12,950 $ 1,300 $ 95,334 |
Accrued Liabilities (Tables)
Accrued Liabilities (Tables) | 12 Months Ended |
Sep. 30, 2017 | |
Payables and Accruals [Abstract] | |
Schedule of Accrued Liabilities | The Company had accrued liabilities at September 30, 2017, and September 30, 2016 as follows: September 30, September 30, Accrued Liabilities 2017 2016 Accrued Accounting Fees — 13,753 Accrued Legal Fees 77,719 131,504 Accrued Legal Settlements 32,143 17,000 Accrued State Regulatory Settlement — 149,366 Accrued Exit Agreement 9,739 — Accrued Other 16,126 35,000 $ 135,727 $ 346,623 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 12 Months Ended |
Sep. 30, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Schedule of Stock Option Activity | The following are activity of options: Weighted Average Number of Average Expiration Average Grant Date Shares Exercise Price Date Remaining Life Fair Value Outstanding October 1, 2015 120,000 1.15 Granted Fiscal Year 2016 — — Forfeited shares (100,000 ) 1.55 Vested and Exercisable at September 30, 2016 20,000 1.55 2 Months — Forfeited shares (20,000 ) 1.55 Granted May 13, 2017 1,792,000 0.30 05/13/22 56.5 Months 0.17 Granted June 30, 2017 42,414 0.21 06/30/22 57 Months 0.15 Granted September 30, 2017 309,009 0.18 09/30/22 60 Months 0.13 Vested and Exercisable at September 30, 2017 2,143,423 0.29 0.16 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 12 Months Ended |
Sep. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of Future Contractual Lease Obligations | The following table summarizes the Company’s contractual lease obligations at September 30, 2017: Obligation 2018 2019 Total Commercial Lease (Suite 114) $ 17,100 $ 12,113 $ 29,213 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Sep. 30, 2017 | |
Income Tax Disclosure [Abstract] | |
Schedule of Components of Deferred Taxes | Components of Deferred Taxes are: 2017 2016 Deferred tax assets: Allowance for bad debt $ 104,056 $ 87,542 Charitable contributions 176 180 Stock-based compensation 121,919 — Foreign Tax Credit 66,085 — Benefit from net operating loss carryovers 466,998 525,283 Total gross deferred tax asset 759,234 613,004 Deferred tax liabilities: Depreciation timing difference (11,445 ) (6,919 ) Total deferred liability (11,445 ) (6,919 ) Gross net deferred tax asset 747,789 606,086 Less: Valuation allowances (747,789 ) (262,642 ) Net deferred tax asset $ — $ 343,444 |
Schedule of Components of Provision For Income Taxes | The components of the provisions for income taxes for fiscal years 2017 and 2016 are as follows: 2017 2016 Current: Federal Continuing operations $ (53,587 ) $ (176,492 ) Discontinued operations — (2,287 ) Total (53,587 ) (178,779 ) State Continuing operations (10,497 ) (121,988 ) Discontinued operations — (615 ) Total (10,497 ) (122,603 ) Total Continuing operations (64,084 ) (298,480 ) Discontinued operations — (2,902 ) Total Current Tax (64,084 ) (301,382 ) Deferred: Additional deferred tax related to book tax differences (56,410 ) (524,516 ) Valuation allowance provision 485,147 262,642 Total Tax Provision $ 364,653 $ (563,256 ) |
Schedule of Reconciliation of Income Tax Provision | A reconciliation of the provisions for income taxes for the fiscal years ended September 2017 and 2016 as compared to statutory rates is as follows: 2017 2016 Amount % Amount % Provision at statutory rates $ (226,559 ) 34.00 % $ (789,534 ) 34.00 % State income tax, net of federal benefit (24,188 ) 3.63 % (84,294 ) 3.63 % Non-Deductible items Penalties 18,815 -2.82 % 48,165 -2.07 % Meals & Entertainment 1,040 -0.16 % 1,440 -0.06 % Stock-based compensation 130,289 -19.55 % — 0.00 % Other tax differences (19,891 ) 2.99 % (1,674 ) 0.07 % Valuation allowance on net operating loss carryover 485,147 -72.81 % 262,641 -11.31 % Total income tax provision $ 364,653 -54.72 % $ (563,256 ) 24.26 % |
Assets Held For Sale (Tables)
Assets Held For Sale (Tables) | 12 Months Ended |
Sep. 30, 2017 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Schedule of Assets Held For Sale | The following table lists the operating loss on the assets held for sale for September 30, 2016: FY ended Operating Loss on discontinued operations 09/30/16 Revenue 10,785 Advertising and promotion (7,635 ) General and administrative expenses (15,237 ) Operating Loss on discontinued operations (12,087 ) |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 12 Months Ended |
Sep. 30, 2017 | |
Net loss per share | |
Schedule of Computation of Basic and Diluted Net Loss Per Share | The following table sets for the computation of basic and diluted net loss per share: Fiscal Years Ended September 30, Net loss attributed to common stockholders 2017 2016 Net loss from continuing operations $ (1,031,002 ) $ (1,808,849 ) Net loss from discontinued operations — (9,228 ) Net loss $ (1,031,002 ) $ (1,818,077 ) Net loss per share Continuing operations $ (0.09 ) $ (0.15 ) Discontinued operations — (0.00 ) Total $ (0.09 ) $ (0.15 ) Basic weighted average number of common shares outstanding 12,007,736 12,001,409 |
Nature of Organization and Su32
Nature of Organization and Summary of Significant Accounting Policies (Details) | 12 Months Ended |
Sep. 30, 2017 | |
Equipment [Member] | |
Property, Plant and Equipment [Line Items] | |
Property and equipment useful lives | 5 years |
Furniture and Fixtures [Member] | |
Property, Plant and Equipment [Line Items] | |
Property and equipment useful lives | 5 years |
Property Improvements [Member] | Minimum [Member] | |
Property, Plant and Equipment [Line Items] | |
Property and equipment useful lives | 15 years |
Property Improvements [Member] | Maximum [Member] | |
Property, Plant and Equipment [Line Items] | |
Property and equipment useful lives | 40 years |
Software [Member] | |
Property, Plant and Equipment [Line Items] | |
Property and equipment useful lives | 3 years |
Nature of Organization and Su33
Nature of Organization and Summary of Significant Accounting Policies (Details Narrative) | 12 Months Ended | |
Sep. 30, 2017USD ($)TerritoryStateCountry | Sep. 30, 2016USD ($) | |
Restricted cash | $ 118,337 | $ 162,447 |
Cash amount insured by FDIC | 250,000 | |
Value of accounts written-off to reserve during period | 125,000 | 89,000 |
Unearned revenue | 188 | |
Advertising costs | $ 21,027 | 435,221 |
Long-term deferred tax liability | $ 90,727 | |
BFK Franchise Co., LLC ("BFK") [Member] | Franchise Agreements [Member] | ||
Number of territories | Territory | 640 | |
Number of states | State | 41 | |
Number of countries | Country | 44 | |
Percentage of gross revenues collected for marketing fund | 2.00% | |
SF Franchise Company, LLC ("SF") [Member] | ||
Number of territories | Territory | 12 | |
Number of states | State | 5 | |
Number of countries | Country | 2 |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) | 12 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | ||
Commissions and consulting fees incurred with related parties | $ 2,275 | ||
Leap Ahead Learning Company [Member] | |||
Commissions and consulting fees incurred with related parties | [1] | $ 2,275 | |
[1] | Leap Ahead Learning Company is 100% owned by Dan O'Donnell, who was a director and the Chief Operating Officer of the Company until his resignation on April 6, 2016. The related party payable was approximately $-0- and $2,275, respectively at September 30 2017 and 2016. |
Related Party Transactions (D35
Related Party Transactions (Details Narrative) - Leap Ahead Learning Company [Member] | Sep. 30, 2017USD ($) |
Related Party Transaction [Line Items] | |
One-time set-up fee charge paid by all domestic franchisees to related party | $ 250 |
Monthly support fee owed by all franchisees to related party | 75 |
Minimum [Member] | |
Related Party Transaction [Line Items] | |
One-time set-up fee charge paid by all domestic franchisees to related party | 250 |
Maximum [Member] | |
Related Party Transaction [Line Items] | |
One-time set-up fee charge paid by all domestic franchisees to related party | $ 3,000 |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) | Sep. 30, 2017 | Sep. 30, 2016 |
Property, Plant and Equipment [Line Items] | ||
Total Depreciable Fixed Assets | $ 482,318 | $ 487,238 |
Accumulated Depreciation | (240,000) | (188,000) |
Total Net Depreciable Fixed Assets | 241,825 | 299,320 |
Work In Progress | 18,269 | |
Total Net Fixed Assets | 260,094 | 299,320 |
Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Total Depreciable Fixed Assets | 66,969 | 71,889 |
Furniture and Fixtures [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Total Depreciable Fixed Assets | 83,427 | 83,427 |
Property Improvements [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Total Depreciable Fixed Assets | 233,615 | 233,615 |
Software [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Total Depreciable Fixed Assets | $ 98,307 | $ 98,307 |
Property and Equipment (Detai37
Property and Equipment (Details Narrative) - USD ($) | 12 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Property And Equipment Details Narrative | ||
Depreciation expense | $ 57,175 | $ 53,711 |
Intangible Assets (Details)
Intangible Assets (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Net Book Value | $ 78,604 | |
Impairment loss | (78,604) | |
Corrected Value | ||
Denver Territory - Repurchase [Member} | ||
Date acquired | Jun. 3, 2013 | |
Net Book Value | $ 20,000 | |
Impairment loss | (20,000) | |
Corrected Value | ||
Auburn, AL Territory - Repurchase [Member} | ||
Date acquired | Sep. 30, 2013 | |
Net Book Value | $ 6,720 | |
Impairment loss | (6,720) | |
Corrected Value | ||
Las Vegas Territory - Repurchase [Member} | ||
Date acquired | Dec. 26, 2013 | |
Net Book Value | $ 40,484 | |
Impairment loss | (40,484) | |
Corrected Value | ||
St. Peters, MO Territory - Repurchase [Member} | ||
Date acquired | Feb. 26, 2014 | |
Net Book Value | $ 10,000 | |
Impairment loss | (10,000) | |
Corrected Value | ||
Equipment Exterior signs - Las Vegas territory [Member} | ||
Date acquired | Dec. 26, 2013 | |
Net Book Value | $ 1,400 | |
Impairment loss | (1,400) | |
Corrected Value |
Notes and Other Receivables (De
Notes and Other Receivables (Details) | Sep. 30, 2017USD ($) |
Receivables [Abstract] | |
2,018 | $ 36,184 |
2,019 | 19,000 |
2,020 | 12,950 |
2,021 | 12,950 |
2,022 | 12,950 |
Thereafter | 1,300 |
Total | $ 95,334 |
Notes and Other Receivables (40
Notes and Other Receivables (Details Narrative) - USD ($) | Sep. 30, 2017 | Sep. 30, 2016 |
Receivables [Abstract] | ||
Other receivables | $ 95,000 | $ 102,000 |
Accrued Marketing Fund (Details
Accrued Marketing Fund (Details Narrative) - USD ($) | Sep. 30, 2017 | Sep. 30, 2016 |
Accrued marketing fund | $ 131,909 | $ 147,227 |
BFK Franchise Co., LLC ("BFK") [Member] | Franchise Agreements [Member] | ||
Percentage of gross revenues collected for marketing fund | 2.00% |
Accrued Liabilities (Details)
Accrued Liabilities (Details) - USD ($) | Sep. 30, 2017 | Sep. 30, 2016 |
Payables and Accruals [Abstract] | ||
Accrued Accounting Fees | $ 13,753 | |
Accrued Legal Fees | 77,719 | 131,504 |
Accrued Legal Settlements | 32,143 | 17,000 |
Accrued State Regulatory Settlement | 149,366 | |
Accrued Exit Agreement | 9,739 | |
Accrued Other | 16,126 | 35,000 |
Accrued Liabilities | $ 135,727 | $ 346,623 |
Accrued Liabilities (Details Na
Accrued Liabilities (Details Narrative) | Sep. 30, 2017USD ($) | Sep. 30, 2016USD ($)Franchisee |
Accrued Liabilities Details Narrative | ||
Accrued State Regulatory Settlement | $ 149,366 | |
Amount of state penalties and costs | 35,500 | |
Amount of reimbursement from franchisees | $ 113,866 | |
Number of franchisees | Franchisee | 5 |
Common Stock Repurchases (Detai
Common Stock Repurchases (Details Narrative) - USD ($) | 1 Months Ended | 12 Months Ended | ||
Dec. 31, 2015 | Sep. 30, 2016 | Sep. 30, 2017 | Jan. 26, 2015 | |
Treasury stock, shares | 65,100 | |||
Value of stock repurchased during period | $ 16,500 | |||
Common Stock [Member] | ||||
Number of common shares authorized to be repurchased | 100,000 | |||
Treasury stock, shares | 15,100 | |||
Value of stock repurchased during period | $ 18,000 | |||
Number of shares acquired | 50,000 | |||
Value for shares acquired | $ 16,500 |
Stock-Based Compensation (Detai
Stock-Based Compensation (Details) - $ / shares | Jun. 30, 2017 | May 13, 2017 | Sep. 30, 2017 | Sep. 30, 2016 |
Number of Shares | ||||
Options outstanding at beginning of period | 120,000 | |||
Granted | 42,414 | 1,792,000 | 309,009 | |
Forfeited shares | (20,000) | (100,000) | ||
Options vested and exercisable at end of period | 2,143,423 | 20,000 | ||
Average Exercise Price | ||||
Options outstanding at beginning of period | $ 1.15 | |||
Options granted | $ 0.21 | $ 0.30 | $ 0.18 | |
Forfeited shares | 1.55 | 1.55 | ||
Vested and Exercisable at end of period | $ 0.29 | $ 1.55 | ||
Expiration Date | Jun. 30, 2022 | May 13, 2022 | Sep. 30, 2022 | |
Average Remaining Life | ||||
Vested and Exercisable | 57 months | 56 months 15 days | 60 months | 2 months |
Weighted Average Grant Date Fair Value | ||||
Granted | $ 0.15 | $ 0.17 | $ 0.13 | |
Vested and Exercisable at end of period | $ 0.16 |
Stock-Based Compensation (Det46
Stock-Based Compensation (Details Narrative) - USD ($) | Oct. 26, 2017 | Jun. 30, 2017 | May 14, 2017 | May 13, 2017 | Jul. 31, 2015 | Sep. 30, 2017 | Jun. 30, 2017 | Sep. 30, 2017 | Sep. 30, 2016 |
Number of shares granted | 42,414 | 1,792,000 | 309,009 | ||||||
Exercise price (in dollars per share) | $ 0.21 | $ 0.30 | $ 0.18 | ||||||
Compensation paid | $ 1,316,838 | $ 2,710,699 | |||||||
Dividend yield | 0.00% | ||||||||
Expected term | 2 years 6 months | ||||||||
Minimum [Member] | |||||||||
Expected volatility rate | 129.03% | ||||||||
Risk-free interest rate | 1.85% | ||||||||
Maximum [Member] | |||||||||
Expected volatility rate | 134.69% | ||||||||
Risk-free interest rate | 1.89% | ||||||||
Employment Agreement [Member] | |||||||||
Number of shares issued | 12,118 | ||||||||
Number of shares granted | 42,414 | ||||||||
Exercise price (in dollars per share) | $ 0.2063 | ||||||||
Exercisable contractual term | 5 years | ||||||||
Mr. Charles Grant [Member] | |||||||||
Number of shares granted | 900,000 | ||||||||
Exercise price (in dollars per share) | $ 0.30 | ||||||||
Exercisable contractual term | 5 years | ||||||||
Mr. Joseph Marucci [Member] | |||||||||
Number of shares granted | 324,000 | ||||||||
Exercise price (in dollars per share) | $ 0.30 | ||||||||
Exercisable contractual term | 5 years | ||||||||
Compensation paid | $ 4,500 | ||||||||
Mr. Michael Gorin [Member] | |||||||||
Number of shares granted | 324,000 | ||||||||
Exercise price (in dollars per share) | $ 0.30 | ||||||||
Exercisable contractual term | 5 years | ||||||||
Mr. JoyAnn Kenny [Member] | |||||||||
Number of shares granted | 216,000 | ||||||||
Exercise price (in dollars per share) | $ 0.30 | ||||||||
Exercisable contractual term | 5 years | ||||||||
Ms. Karla Kretsch [Member] | |||||||||
Number of shares issued | 8,000 | 190,216 | |||||||
Number of shares granted | 28,000 | 54,348 | |||||||
Exercise price (in dollars per share) | $ 0.25 | $ 0.1840 | |||||||
Exercisable contractual term | 5 years | 5 years | |||||||
Compensation paid | $ 34,000 | ||||||||
Christian Miller [Member] | Employment Agreement [Member] | Subsequent Event [Member] | Stock Grants, Per Employment Agreement [Member] | |||||||||
Number of shares granted | 118,793 | ||||||||
Exercise price (in dollars per share) | $ 0.1840 | ||||||||
Exercisable contractual term | 5 years |
Commitments and Contingencies47
Commitments and Contingencies (Details) - Commercial Lease Suite 114 [Member] | Sep. 30, 2017USD ($) |
Operating Leased Assets [Line Items] | |
2,018 | $ 17,100 |
2,019 | 12,113 |
Total | $ 29,213 |
Commitments and Contingencies48
Commitments and Contingencies (Details Narrative) - USD ($) | 12 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Rent expense | $ 16,000 | $ 26,000 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | Sep. 30, 2017 | Sep. 30, 2016 |
Deferred tax assets: | ||
Allowance for bad debt | $ 104,056 | $ 87,542 |
Charitable contributions | 176 | 180 |
Stock-based compensation | 121,919 | |
Foreign Tax Credit | 66,085 | |
Benefit from net operating loss carryovers | 466,998 | 525,283 |
Total gross deferred tax asset | 759,234 | 613,004 |
Deferred tax liabilities: | ||
Depreciation timing difference | (11,445) | (6,919) |
Total deferred liability | (11,445) | (6,919) |
Gross net deferred tax asset | 747,789 | 606,086 |
Less: Valuation allowances | (747,789) | (262,642) |
Net deferred tax asset | $ 343,444 |
Income Taxes (Details 1)
Income Taxes (Details 1) - USD ($) | 12 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Current Federal: | ||
Continuing operations | $ (53,587) | $ (176,492) |
Discontinued operations | (2,287) | |
Total | (53,587) | (178,779) |
Current State: | ||
Continuing operations | (10,497) | (121,988) |
Discontinued operations | (615) | |
Total | (10,497) | (122,603) |
Total current provision continuing operations | (64,084) | (298,480) |
Total current discontinued operations | (2,902) | |
Total Current Tax | (64,084) | (301,382) |
Deferred: | ||
Additional deferred tax related to book tax differences | (56,410) | (524,516) |
Valuation allowance provision | 485,147 | 262,642 |
Total Tax Provision | $ 364,653 | $ (563,256) |
Income Taxes (Details 2)
Income Taxes (Details 2) - USD ($) | 12 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Income Tax Provision Reconciliation (Amount): | ||
Provision at statutory rates | $ (226,559) | $ (789,534) |
State income tax, net of federal benefit | (24,188) | (84,294) |
Non-Deductible items | ||
Penalties | 18,815 | 48,165 |
Meals & Entertainment | 1,040 | 1,440 |
Stock-based compensation | 130,289 | |
Other tax differences | (19,891) | (1,674) |
Valuation allowance on net operating loss carryover | 485,147 | 262,641 |
Total Tax Provision | $ 364,653 | $ (563,256) |
Income Tax Provision Reconciliation (%): | ||
Provision at statutory rates | 34.00% | 34.00% |
State income tax, net of federal benefit | 3.63% | 3.63% |
Non-Deductible items | ||
Penalties | (2.82%) | (2.07%) |
Meals & Entertainment | (0.16%) | (0.06%) |
Stock-based compensation | (19.55%) | 0.00% |
Other tax differences | (2.99%) | 0.07% |
Valuation allowance on net operating loss carryover | (72.81%) | (11.31%) |
Total income tax provision | (54.72%) | 24.26% |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) | 1 Months Ended | 12 Months Ended |
Dec. 31, 2017 | Sep. 30, 2017 | |
Subsequent Event [Line Items] | ||
Corporate tax rate | 35.00% | |
Deferred tax assets valuation allowance | $ 179,000 | |
Subsequent Event [Member] | ||
Subsequent Event [Line Items] | ||
Corporate tax rate | 21.00% |
Assets Held For Sale (Details)
Assets Held For Sale (Details) | 12 Months Ended |
Sep. 30, 2016USD ($) | |
Operating Loss on discontinued operations | |
Revenue | $ 10,785 |
Advertising and promotion | (7,635) |
General and administrative expenses | (15,237) |
Operating Loss on discontinued operations | $ (12,087) |
Assets Held For Sale (Details N
Assets Held For Sale (Details Narrative) - Purchase And Sale Agreement [Member] | Dec. 09, 2015shares |
Number of shares of stock issued for assets purchased | 50,000 |
Number of shares previously accrued to be issued | 25,000 |
Earnings Per Share (Details)
Earnings Per Share (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Net loss attributed to common stockholders | ||
Net loss from continuing operations | $ (1,031,002) | $ (1,808,849) |
Net loss from discontinued operations | (9,228) | |
Net loss | $ (1,031,002) | $ (1,818,077) |
Net loss per share | ||
Continuing operations | $ (0.09) | $ (0.15) |
Discontinued operations | 0 | |
Total | $ (0.09) | $ (0.15) |
Basic weighted average number of common shares outstanding | 12,007,736 | 12,001,409 |