Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Sep. 30, 2020 | Dec. 21, 2020 | Mar. 31, 2020 | |
Document and Entity Information [Abstract] | |||
Entity Registrant Name | CREATIVE LEARNING Corp | ||
Entity Central Index Key | 0001394638 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --09-30 | ||
Document Type | 10-K | ||
Document Period End Date | Sep. 30, 2020 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2020 | ||
Entity a Well-known Seasoned Issuer | No | ||
Entity a Voluntary Filer | No | ||
Entity's Reporting Status Current | No | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Small Business | true | ||
Entity Shell Company | false | ||
Entity Emerging Growth Company | false | ||
Entity Common Stock, Shares Outstanding | 13,298,310 | ||
Entity Public Float | $ 687,853 | ||
Entity Filer Number | 000-52883 | ||
Entity Interactive Data Current | Yes | ||
Entity Incorporation State Country Code | DE |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Sep. 30, 2020 | Sep. 30, 2019 |
Current Assets: | ||
Cash | $ 427,659 | $ 522,071 |
Restricted Cash (marketing fund) | 20,194 | 17,950 |
Accounts receivable, less allowance for doubtful accounts of approximately $942,000 and $663,000, respectively | 269,211 | 279,109 |
Prepaid commission expense | 212,122 | 235,129 |
Prepaid expense | 10,452 | 7,867 |
Marketing Fund | ||
Notes receivables - current portion, less allowance for doubtful accounts of approximately $91,000 and $91,000, respectively | 9,159 | 3,000 |
Total Current Assets | 948,797 | 1,065,126 |
Prepaid commission expense- net of current portion | 512,756 | 773,062 |
Notes receivables - net of current portion | ||
Property and equipment, net of accumulated depreciation of approximately $416,000 and $383,000, respectively | 131,618 | 323,789 |
Deposits | 833 | |
Total Assets | 1,594,004 | 2,161,977 |
Current Liabilities: | ||
Accounts payable | 69,527 | 107,697 |
Notes payable | 119,980 | |
Deferred revenue | 915,103 | 986,039 |
Accrued liabilities | 8,743 | 125,720 |
Accrued marketing fund | ||
Total Current Liabilities | 1,113,353 | 1,219,456 |
Deferred revenue - net of current portion | 2,297,576 | 3,382,107 |
Total Liabilities | 3,410,929 | 4,601,563 |
Commitments and Contingencies (Note 10) | ||
Stockholders' Equity (Deficit) | ||
Preferred stock, $.0001 par value; 10,000,000 shares authorized; -0- shares issued and outstanding | ||
Common stock, $.0001 par value; 50,000,000 shares authorized 13,363,410 shares issued and 13,298,310 shares outstanding as of September 30, 2020; 13,607,102 shares issued and 13,542,002 shares outstanding as of September 30, 2019 | 1,334 | 1,360 |
Additional paid-in capital | 2,990,080 | 2,987,554 |
Treasury Stock 65,100 shares, at cost | (34,626) | (34,626) |
Accumulated Deficit | (4,773,713) | (5,393,874) |
Total Stockholders' Equity (Deficit) | (1,816,925) | (2,439,586) |
Total Liabilities and Stockholders' Equity (Deficit) | $ 1,594,004 | $ 2,161,977 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) | Sep. 30, 2020 | Sep. 30, 2019 |
Consolidated Balance Sheets | ||
Allowance for doubtful accounts receivable | $ 942,000 | $ 663,000 |
Allowance for doubtful notes receivable | 91,000 | 91,000 |
Accumulated depreciation | $ 446,813 | $ 382,367 |
Preferred stock, par value (in dollars per share) | $ .0001 | $ .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) | $ .0001 | $ .0001 |
Common stock, authorized | 50,000,000 | 50,000,000 |
Common stock, issued | 13,363,410 | 13,607,102 |
Common stock, outstanding | 13,298,310 | 13,542,002 |
Treasury stock, shares | 65,100 | 65,100 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 12 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Revenues | ||
TOTAL REVENUES | $ 3,038,440 | $ 4,517,964 |
COST OF GOODS SOLD | 272 | |
GROSS PROFIT | 3,038,440 | 4,517,692 |
OPERATING EXPENSES | ||
Salaries, payroll taxes and stock-based compensation | 613,683 | 884,715 |
Professional, legal and consulting fees | 565,996 | 540,196 |
Bad debt expense | 349,794 | (67,018) |
Other general and administrative expenses | 279,775 | 206,628 |
Franchise commissions | 288,734 | 605,620 |
Franchise training and expenses | 3,381 | 14,880 |
Depreciation | 112,543 | 115,627 |
General Advertising | 81,413 | 21,013 |
Franchisee marketing fund expense | 130,496 | 222,653 |
Office expense | 27,170 | 19,535 |
TOTAL OPERATING EXPENSES | 2,452,985 | 2,563,849 |
OPERATING INCOME (LOSS) | 585,455 | 1,953,843 |
OTHER INCOME (EXPENSE) | 34,706 | 63,497 |
INCOME (LOSS) BEFORE INCOME TAXES | 620,161 | 2,017,340 |
PROVISION FOR INCOME TAXES | ||
NET INCOME (LOSS) | $ 620,161 | $ 2,017,340 |
NET INCOME (LOSS) PER SHARE | ||
Basic | $ 0.05 | $ 0.17 |
Diluted | $ 0.04 | $ 0.17 |
Basic weighted average number of common shares outstanding | 13,402,981 | 12,043,558 |
Diluted weighted average number of common shares outstanding | 13,784,990 | 12,043,558 |
Royalties Fees [Member] | ||
Revenues | ||
TOTAL REVENUES | $ 1,448,228 | $ 1,695,788 |
Initial Franchise Fees [Member] | ||
Revenues | ||
TOTAL REVENUES | 1,237,994 | 2,479,921 |
Marketing Fund Revenue [Member] | ||
Revenues | ||
TOTAL REVENUES | 130,496 | 222,653 |
Technology Fees [Member] | ||
Revenues | ||
TOTAL REVENUES | 221,722 | 118,504 |
Merchandise Sales [Member] | ||
Revenues | ||
TOTAL REVENUES | $ 1,098 |
Consolidated Statement of Chang
Consolidated Statement of Changes in Stockholders' Equity/(Deficit) - USD ($) | Treasury Stock | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
Balance at Sep. 30, 2018 | $ (34,626) | $ 1,207 | $ 2,897,285 | $ (2,391,525) | $ 472,341 |
Balance (in shares) at Sep. 30, 2018 | (65,100) | 12,075,875 | |||
Stock-based compensation | $ 153 | 90,269 | 90,422 | ||
Stock-based compensation (in shares) | 1,531,227 | ||||
Adoption of ASC 606 | (5,019,689) | (5,019,689) | |||
Net income | 2,017,340 | 2,017,340 | |||
Balance at Sep. 30, 2019 | $ (34,626) | $ 1,360 | 2,987,554 | (5,393,874) | (2,439,586) |
Balance (shares) at Sep. 30, 2019 | (65,100) | 13,607,102 | |||
Stock-based compensation | $ 2 | 2,498 | 2,500 | ||
Stock-based compensation (in shares) | 35,714 | ||||
Shares cancelled | $ (28) | 28 | |||
Shares cancelled (in shares) | (279,406) | ||||
Net income | 620,161 | 620,161 | |||
Balance at Sep. 30, 2020 | $ (34,626) | $ 1,334 | $ 2,990,080 | $ (4,773,713) | $ (1,816,925) |
Balance (shares) at Sep. 30, 2020 | (65,100) | 13,363,410 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Cash flows from operating activities: | ||
Net Income/(Loss) | $ 620,161 | $ 2,017,340 |
Adjustments to reconcile net loss to net cash provided by/(used in) operating activities: | ||
Depreciation | 112,543 | 115,627 |
Gain on sale of assets held for sale | (20,603) | (65,257) |
Bad debt expense | 349,794 | (67,018) |
Stock based compensation | 2,500 | 90,422 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (339,896) | (17,256) |
Prepaid expenses | (2,585) | 21,858 |
Prepaid commission expense | 283,313 | 599,992 |
Deposits | (833) | 1,425 |
Accounts payable | (38,170) | (53,314) |
Accrued liabilities | (116,977) | 111,115 |
Deferred Revenue | (1,155,467) | (2,259,726) |
Accrued marketing fund | (97,334) | |
Net cash provided by (used in) operating activities | (306,220) | 397,874 |
Cash flows from investing activities: | ||
Acquisition of property and equipment | (118,838) | |
Proceeds from the sale of assets | 100,231 | 145,787 |
(Issuance)/Collection of Notes receivable | (6,159) | 12,000 |
Net cash provided by investing activities | 94,072 | 38,949 |
Cash flows from financing activities: | ||
Proceeds from notes payable | 119,980 | |
Net cash provided by financing activities | 119,980 | |
Net change in cash, cash equivalents and restricted cash | (92,168) | 436,823 |
Cash, cash equivalents and restricted cash at beginning of period | 540,021 | 103,198 |
Cash, cash equivalents and restricted cash at end of period | 447,853 | 540,021 |
Noncash financing activity: | ||
Shares cancelled | 28 | |
Noncash activity related to FASB ASC 606 | 5,019,689 | |
Supplemental cash flow information: | ||
Cash paid for interest | ||
Cash paid for income taxes |
Nature of Organization and Summ
Nature of Organization and Summary of Significant Accounting Policies | 12 Months Ended |
Sep. 30, 2020 | |
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. During fiscal year 2020, BFK eLearning LLC was formed in the State of Delaware. 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”), BFK eLearning LLC (“B4KEL”) and SF LLC (“Sew Fun Studios”). In 2020, the Company decided to put on hold the Sew Fun Studios business. The organizational documents for BFK Development Company LLC, B4KEL and SF LLC do not specify a termination date. Each of the above listed LLC’s has a single member, controlled 100% by CLC. The Company also owns a 49% non-controlling interest in Bricks4Schoolz, LLC, which is accounted for under the cost method (subject to the Company’s rescission of its interest). 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. CLC and its wholly owned subsidiaries BFK, BFKD, B4KEL, and SF LLC are hereinafter referred to collectively as the "Company". Basis of Presentation 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”). 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. Contracts are structured such that the Company collects revenue from foreign franchises in US dollars. We do not have international subsidiaries. The Company has multiple franchise concepts, but all concepts are managed centrally as one segment and are reviewed by the Company in total. Accordingly, decision-making regarding the Company's overall operating performance and allocation of Company resources are 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 CLC and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The accompanying financial statements do not include the accounts of Bricks4Schoolz, LLC, a 49% owned entity which accounted for under the cost method (subject to the Company’s rescission of its interest). Fiscal year The Company operates on a September 30 fiscal year-end. 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 significant estimates and assumptions made by management include allowance for doubtful accounts, allowance for deferred tax assets, depreciation of property and equipment, recoverability of long lived assets and fair 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, Restricted 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. The Company records restricted cash for marketing funds collected from the franchisees in excess of amounts spent for marketing. 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 8). Amounts recorded as cash, cash equivalents, and restricted cash in the statement of cash flows is as follows: September 30, 2020 2019 Cash $ 427,659 $ 522,071 Cash Equivalents — — Restricted Cash 20,194 17,950 Total $ 447,853 $ 540,021 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. The Company had approximately $-0- cash in excess of the federally insured limit at September 30, 2020 as compared to $241,000 at September 30, 2019. Accounts Receivable The Company reviews accounts receivable periodically for collectability and establishes an allowance for doubtful accounts and records bad debt expense when deemed necessary. The Company records an allowance for doubtful accounts 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. Accounts and receivables are written off against the allowance after all attempts to collect a receivable have failed. The Company believes its allowances for doubtful accounts at September 30, 2020 and 2019 are adequate, but actual write-offs could exceed the recorded allowance. During the years ended September 30, 2020 and 2019 the balance in the allowance for doubtful accounts was approximately $942,000 and $663,000, respectively. Notes Receivable Accounting Standards Codification (“ASC”) 310, Receivables, provides guidance for receivables and notes that arise from credit sales, loans or other transactions. Financing receivable includes loans and notes receivable. Originated loans we hold for which we have the intent and ability to hold for the foreseeable future or to maturity (or payoff) are classified as held for investment. Financing receivables held for investment are reported in our consolidated balance sheets at the outstanding principal balance adjusted for any write -offs, allowance for loan losses, deferred fees or costs, and any unamortized premiums or discounts. Interest income is accrued on outstanding principal as earned. Unamortized discounts and premiums are amortized using the interest method with the amortization recognized as part of interest income in the consolidated statements of operations. During the years ended September 30, 2020 and 2019 the balance in the allowance for doubtful notes receivable was approximately $91,000 and $91,000, respectively. Long-Lived Assets The Company’s long-lived assets currently consist of property and equipment, and prior to the year ended September 30, 2019 included 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. 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. Property and Equipment Useful Life Equipment 5 years Furniture and Fixtures 5 years Property Improvements 15-40 years Software 3 years Treasury stock The Company records treasury stock at cost. Treasury stock is comprised of shares of common stock purchased by the Company in the secondary market. Fair Value of Financial Instruments The carrying amounts of cash, accounts receivable, 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 doubtful accounts. 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 The Company generates almost all of its revenue from contracts with customers. The Company’s franchise agreements enter the parties into a contractual agreement, typically over a ten years term, and include performance obligations as follows: protected territory designation, access to proprietary manuals and handbooks, initial training and on-going assistance, consulting, promotion of goodwill, administration of marketing fund, marketing and promotion items, initial marketing program development assistance, company website access, Franchise Management Tool access, lessons and model plans, project kits, Duplo bricks, frames stop motion animation software, and use of the franchisor’s intellectual property (IP) (e.g., trade name – Bricks for Kidz). Upon entering into a franchise agreement, the Company charges an initial franchise fee, which is fully collectible and nonrefundable as of the date of the signing of the franchise agreement. Further, because 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. Per the terms of the franchise agreements, the Company charges for royalty fees on a monthly basis, generally set at a fixed amount, but in some cases are based on a percentage of franchisee’s monthly gross revenues. The Company also charges fees for a marketing fund, generally based on 2% of franchisee’s monthly gross revenues, which is managed by the Company, to allocate towards national branding of the Company’s concepts to benefit the franchisees. Lastly, the Company charges for technology fees on a monthly basis, generally at a fixed amount, for the use of the company Franchise Management tool as well as company emails, etc. The Company adopted the new revenue standard (ASC 606) on October 1, 2018 for contracts with remaining performance obligations as of October 1, 2018. The Company elected to apply the new standard retrospectively with an adjustment to the opening balance of retained earnings as of the date of adoption. Under ASC 606, the Company considers initial franchise fees to be a part of the license of symbolic intellectual property (“IP”), therefore the performance obligation related to these fees is satisfied over time as the Company fulfills its promise to grant the customer rights to use, and benefit from, the Company’s IP, as well as support and maintain the IP. The initial franchise fee, then, is recorded as deferred revenue at inception and recognized on a straight-line basis over the contract term. In accordance with ASC 606-10-55-65, the Company has determined that the royalty fees, marketing fees, and technology fees are subject to a sales and usage-based royalties’ constraint on licenses of IP. Accordingly, these fees are recognized as revenue at the later of when the sales or usage occurs or the related performance obligation is satisfied. Technology fees are recorded net of processing fees. Marketing fees are limited to marketing amounts expensed; therefore, the Company will recognize amounts received in excess of amounts spent on the balance sheet in the accrued marketing fund liability. The Company collects transfer fees when contracts are transferred between parties and accounts for the transfer as a contract modification under ASC 606. Because the transfer does not increase the scope of the contract or promise any additional goods or services and there are no new distinct services that will be provided after the transfer the Company considers the transfer fee part of the existing contract. Transfer fees, then, are recorded as deferred revenue at inception and recognized on a straight-line basis over the remaining contract term. When contracts are terminated due to default, or in conjunction with an early termination agreement, the Company accounts for the early termination as a contract modification under ASC 606. Because the termination eliminates any future performance obligations of the Company any deferred revenue associated with the terminated contract is recognized into revenue at the time of termination, along with any early termination fees, in the initial franchise fee line on the Company’s Statement of Operations. The Company generates revenue from sales of merchandise where the performance obligation is met, and therefore revenue recognized, upon the delivery of merchandise to the customer. Contract Liability – Deferred Revenue In conjunction with the adoption of ASC 606, effective October 1, 2018 the Company recorded deferred revenue as a contract liability for its initial franchise fees collected and related to contracts with remaining performance obligations. During the year ended September 30, 2019 and 2020 the activity in the deferred revenue account was as follows: Balance, September 30, 2018 $ - Deferred revenue recognized upon adoption of ASC 606 6,627,872 Initial franchise fees collected 220,195 Revenue recognized into revenue (2,479,921 ) Balance, September 30, 2019 4,368,146 Initial franchise fees collected 82,527 Revenue recognized into revenue (1,237,994 ) Balance, September 30, 2020 3,212,679 Current portion (915,103 ) Deferred revenue, net of current portion $ 2,297,576 Amounts expected to be recognized into revenue related to performance obligations that are unsatisfied (or partially unsatisfied) as of September 30, 2020 were as follows: Year ended September 30, 2021 $ 915,103 Year ended September 30, 2022 832,477 Year ended September 30, 2023 698,778 Year ended September 30, 2024 409,865 Year ended September 30, 2025 and thereafter 356,456 Total $ 3,212,679 Contract Liability – 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 owed to the Company are accounted for as a liability on the balance sheet and the actual collections are deposited into a marketing fund bank account, presented as restricted cash on the balance sheet. Expenses pertaining to the marketing fund activities are paid from the marketing fund and reduce the liability account. Upon adoption of FASB 606 on October 1, 2018, the Company presented these marketing fund revenues and expenses on a gross basis on its statement of operations. Any unused funds at the end of the period are recorded as accrued marketing fees. During the year ended September 30, 2019 and 2020 the activity in the accrued marketing fund liability account was as follows: Balance, September 30, 2018 $ 97,334 Marketing fund billings 125,319 Commissions recognized into expense (222,653 ) Balance, September 30, 2019 - Marketing fund billings 130,496 Commissions recognized into expense (130,496 ) Balance, September 30, 2020 $ - Contract Asset – Prepaid Commission Expense In accordance with ASC 606 the costs related to obtaining a contract are to be capitalized as long as the costs are recoverable and incremental. Effective October 1, 2019, the date the Company adopted ASC 606, they capitalized the value of sales commissions as a contract asset and is amortizing those costs straight-line over the contract life of the franchise agreement to which they relate. During the year ended September 30, 2019 and 2020 the activity in the contract asset account was as follows: Balance, September 30, 2018 $ - Prepaid commissions recognized upon adoption of ASC 606 1,608,185 Commissions paid 5,413 Commissions recognized into expense (605,404 ) Balance, September 30, 2019 1,008,191 Commissions paid 5,421 Commissions recognized into expense (288,734 ) Balance, September 30, 2020 724,878 Current portion (212,122 ) Prepaid commission expense, net of current portion $ 512,756 General Marketing Costs General marketing costs are expensed as incurred. The Company incurred general marketing costs for the years ended September 30, 2020 and 2019 of approximately $81,000 and $21,000, 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, 2020 and 2019, respectively, and has not recognized interest and/or penalties during the years ended September 30, 2020 and 2019, 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 2017 and forward by the U.S. Internal Revenue Service, and the years 2016 and forward for various states. Net earnings (loss) per share Basic earnings (loss) per share are computed by dividing net income (loss) 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. FASB ASC 260, Earnings per Share 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. Forfeitures are recognized as they occur. Reclassifications Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations. Recent accounting pronouncements 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, are required. The new standard was adopted by the Company in fiscal year 2020 but had no impact on the Company’s financial statements as the Company does not have any leases that meet the criteria under this standard. All other newly issued accounting pronouncements, but not yet effective, have been deemed either immaterial or not applicable. |
Liquidity
Liquidity | 12 Months Ended |
Sep. 30, 2020 | |
Going Concern [Abstract] | |
Liquidity | (2) Liquidity During the current year, the Company had net income of approximately $620,000 and has sufficient cash on hand to cover expenses for the next 12 months. The recent COVID-19 outbreak has been declared a pandemic by the World Health Organization, has spread to the United States and many other parts of the world and has adversely affected our business operations, employee availability, financial condition, liquidity and cash flow and the length of such impacts are uncertain. The outbreak of COVID-19 continues to grow both in the United States and globally, and related government and private sector responsive actions have and will continue to adversely affect our business operations. It is impossible to predict the effect and ultimate impact of the COVID-19 pandemic as the situation is rapidly evolving. The spread of COVID-19 has caused public health officials to recommend precautions to mitigate the spread of the virus, including warning against congregating in heavily populated areas, such as malls and shopping centers. Among the precautions has been the closure of a substantial portion of the schools in the United States, which has adversely impacted our royalty revenue from franchisees and our ability to sell new franchises. There is significant uncertainty around the breadth and duration of these school closures and other business disruptions related to COVID-19, as well as its impact on the U.S. and global economy. The extent to which COVID-19 impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of COVID-19 and the actions taken to contain it or treat its impact. We have asked our corporate employees whose jobs allow them to work remotely to do so for the foreseeable future. Such precautionary measures could create operational challenges, as we adjust to a remote workforce, which could adversely impact our bustiness. We had cash flows used in operating activities of approximately $306,000 for the year ended September 30, 2020 compared to cash flows provided by operating activities of approximately $398,000 for the year ended September 30, 2019. The decrease in cash flows provided by operating activities for the year ended September 30, 2020 compared to the year ended September 30, 2019 relates primarily to lower franchise and royalty revenues. We had cash flows provided by investing activities of approximately $94,000 for the year ended September 30, 2020 compared to cash flows provided by investing activities of approximately $39,000 for the year ended September 30, 2019. The increase in cash flows provided investing activities was primarily due to acquiring no property and equipment during the year ended September 30, 2020 compared to acquiring approximately $119,000 during the year ended September 30, 2019. We had cash flows provided by financing activities of approximately $120,000 for the year ended September 30, 2020, compared to $0 for the year ended September 30, 2019. This was due to the Company receiving proceeds from a loan from the Small Business Administration as further described in Note 10. The Company is dependent upon both franchise sales and royalty fees to continue current business operations and liquidity. |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Sep. 30, 2020 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | (3) Related Party Transactions In December 2017, the Company granted a total of 14,286 warrants to two Directors of the Company. These warrants were granted in conjunction with the issuance of standby letters of credit from the two directors. The warrants had an exercise price of $0.14 per share and expired five years from the date of grant. These warrants were valued using the Black Scholes method. The fair value of the warrants on the date of grant were $2,000, and the warrants vested immediately. The Company expensed $2,000 in connection with the grant during the year ended September 30, 2018. These warrants were exercised in September 2019 for 14,286 shares of common stock. The Company agreed to waive the $2,000 exercise price owed in total from these warrant holders. Effective September 30, 2019, Blake Furlow resigned as Chief Executive Officer of the Company. Mr. Furlow received a severance payment of $30,000 pursuant to the terms of a Severance Agreement. Pursuant to his employment agreement, the Company also issued an aggregate of 566,176 shares of Common Stock to Mr. Furlow. Effective September 30, 2019, Bart Mitchell, the Company’s Chief Financial Officer, was appointed Chief Executive Officer of the Company. In connection with his appointment, Mr. Mitchell entered into an Employment Agreement with the Company as of October 1, 2019 for the term of one year. In addition to cash compensation, he was entitled to receive stock grants valued at the lesser of $15,000 or 200,000 Shares of Common Stock on the last day of the completed year of employment. Mr. Mitchell continued to serve as a member of the Board of Directors of the Company, but no longer served as the Company’s Chief Financial Officer. On September 30, 2019, the Company approved the issuance of 166,667 shares to Mr. Mitchell pursuant to his prior employment agreement for compensation earned during the year ended September 30, 2019. Mr. Mitchell resigned as President on June 8, 2020. At such time he received a severance package of $50,000. During fiscal year 2020, Mr. Mitchell no longer wanted his 279,406 shares and returned them to the Company for no consideration and then the Company cancelled them. On September 27, 2019, in connection with their service on the Board of Directors for fiscal years 2017, 2018 and 2019, the Company approved the issuance of (i) 99,362, (ii) 272,472, (iii) 112,739 and (iv) 272,472 shares of Common Stock to Blake Furlow, Gary Herman, Bart Mitchell and JoyAnn Kenny-Charlton, respectively as well as a total of cash payments of $85,041. Christopher Rego has been a director since February 5, 2020, and our Chief Executive Officer since May 1, 2020. Prior to his appointment, Mr. Rego purchased an active franchise in California. During the year ended September 30, 2020 the Company recognized royalty revenue from the franchise of $16,650 and recognized marketing fee revenue from the franchise of $829. Total payments made by the franchisee were $7,681. As of September 30, 2020 and 2019 the accounts receivable balance with the franchise was $11,894 and $21,536, respectively and the franchises had deferred revenue balances of $0. John Simento has been a director of the Company since May 19, 2020. Prior to Mr. Rego’s and Mr. Simento’s appointments with the Company, they purchased a Company franchise in the United Arab Emirates (the “UAE”). The Company filed an arbitration complaint against them in December 2019 regarding issues related to opening the franchise. The complaint was resolved by a Settlement Agreement dated February 5, 2020. Under the Settlement Agreement, the Company forgave all back royalty fees through July 2019, equally $18,825, and agreed to defer all other fees until the franchise was able to obtain a business license to operate in the U.A.E., which is currently delayed due to the Coronavirus pandemic. The franchise is currently non-operational as a result of an inability to obtain the issuance of a business license form the UAE due to the Coronavirus pandemic. If the franchise is not able to procure the necessary authorizations to operate, the franchisees would not owe any franchise fees. As a consequence, we have not realized any revenue from the franchise. Mr. Rego is also the CEO of Teknowland, a software development company, with which the Company entered into an agreement on March 10, 2020. The term of the agreement is nine months and calls for a development fee of $12,900 per month. During the year ended September 30, 2020 the Company paid seven monthly payments of $12,900 in accordance with the terms of the agreement and paid an additional $15,700 for additional services, for a total of $106,000. On or about December 6, 2019, Christopher Rego and Rod Whiton (the “Solicitors”) commenced a consent solicitation to the shareholders of the Company and on February 5, 2020, the Company and the Solicitors entered into an agreement to settle their dispute over the consent solicitation. The settlement resulted in the Company paying $10,000 as reimbursement for certain costs that they incurred related to the consent solicitation. |
Property and Equipment
Property and Equipment | 12 Months Ended |
Sep. 30, 2020 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | (4) Property and Equipment Property and equipment consisted of the following: September 30, Description 2020 2019 Depreciable Property and Equipment: Equipment $ 76,434 $ 76,434 Furniture and Fixtures 83,427 83,427 Property and Improvements — 127,723 Software 418,570 418,572 Total Depreciable Property and Equipment 578,431 706,156 Accumulated Depreciation (446,813 ) (382,367 ) Total Net Property and Equipment $ 131,618 $ 323,789 Prior to the end of fiscal 2018, the Company listed one of its owned condominiums for sale located at 701 Market Street, Suite 113, St. Augustine, FL for $98,900. Property and equipment of $43,178 related to the net book value of this asset was classified as Assets Held for Sale in the Consolidated Balance Sheet at September 30, 2018. This condominium was sold in November 2018 for proceeds of approximately $86,000, therefore a gain on the sale of assets of approximately $43,000 was recorded in other income on the statement of operations. On July 9, 2019 the Company completed the sale of a condominium conference space listed for sale for proceeds of $60,000 and recorded a gain of approximately $22,000 which represented the excess of the proceeds over the carrying value on that date. On October 30, 2019, the Company completed the sale of a condominium conference space for proceeds of approximately $100,000 and recorded a gain of approximately $21,000, which represented the excess of the proceeds over the carrying value on that date. Depreciation expense totaled approximately $113,000 and $116,000, respectively, for the years ended September 30, 2020 and 2019. |
Notes and Other Receivables
Notes and Other Receivables | 12 Months Ended |
Sep. 30, 2020 | |
Receivables [Abstract] | |
Notes and Other Receivables | (5) Notes and Other Receivables At September 30, 2020 and 2019, respectively, the Company held certain notes receivable totaling approximately $100,000 and $94,000 respectively for extended payment terms of franchise fees. The Company had an allowance on notes receivable of $91,000 and $91,000 as of September 30, 2020 and 2019, respectively. The net notes receivable was approximately $9,000 and $3,000 and was included in the consolidated balance sheet as of September 30, 2020 and 2019 respectively. The notes were generally non-interest-bearing notes with monthly payments, payable within one to two years. 2020 Total Payment schedules for Notes Receivable $ 100,000 $ 94,000 |
Accrued Liabilities
Accrued Liabilities | 12 Months Ended |
Sep. 30, 2020 | |
Payables and Accruals [Abstract] | |
Accrued Liabilities | (6) Accrued Liabilities The Company had accrued liabilities at September 30, 2020, and September 30, 2019 as follows: Accrued Liabilities September 30, September 30, Accrued Board Compensation $ 5,000 $ 85,041 Accrued Compensation and payroll taxes 3,743 10,679 Accrued Severance — 30,000 $ 8,743 $ 125,720 |
Stock-Based Compensation
Stock-Based Compensation | 12 Months Ended |
Sep. 30, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Stock-Based Compensation | (7) Stock-Based Compensation In December 2017, the Company granted a total of 14,286 warrants to two Directors of the Company. These warrants were granted in conjunction with the issuance of standby letters of credit from the two directors. The warrants had an exercise price of $0.14 per share and expired five years from the date of grant. These warrants were valued using the Black Scholes method. The fair value of the warrants on the date of grant were $2,000, and the warrants vested immediately. The Company expensed $2,000 in connection with the grant during the year ended September 30, 2018. These warrants were exercised in September 2019 for 14,286 shares of common stock. The Company agreed to waive the $2,000 exercise price owed in total from these warrant holders. On March 27, 2019 and July 19, 2019, the Company approved the issuance of 13,265 and 13,788 shares of common stock, respectively, to a former President of the Company due to a calculation error in relation to her terminated employment agreement. All equity compensation relating to this agreement was properly fully recognized during the year ended September 30, 2017. On March 21, 2019, the Company agreed to cancel 260,630 outstanding stock options granted to the former President of the Company in connection with her terminated employment agreement and grant her 294,778 new options. The Company utilized the Black-Scholes valuation model for estimating fair value of these new options. Each grant was evaluated based upon assumptions at the time of the grant. The assumptions used in the calculations included no dividend yield, expected volatility of approximately 110%, a risk-free interest rate of 2.34%, and an expected term of 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 Securities and Exchange Commission (the “SEC”), due to no applicable historical exercise data available. The fair value of these new stock options did not exceed the fair value of the initially granted options. As per FASB ASC 718-20-35, additional compensation cost is required to be recorded for any incremental value between the initial equity award and any modifications, therefore no additional compensation was recorded for these new stock options. Effective September 30, 2019, Blake Furlow resigned as Chief Executive Officer of the Company. Mr. Furlow received a severance payment of $30,000 pursuant to the terms of a Severance Agreement. Pursuant to his employment agreement, the Company also issued an aggregate of 566,176 shares of Common Stock to Mr. Furlow valued at $35,000. Effective September 30, 2019, Bart Mitchell, the Company’s Chief Financial Officer, was appointed Chief Executive Officer of the Company. In connection with his appointment, Mr. Mitchell entered into an Employment Agreement with the Company as of October 1, 2019 for the term of one year. In addition to cash compensation, he was entitled to receive stock grants valued at the lesser of $15,000 or 200,000 Shares of Common Stock on the last day of the completed year of employment. Mr. Mitchell continued to serve as a member of the Board of Directors of the Company, but no longer served as the Company’s Chief Financial Officer. On September 30, 2019, the Company approved the issuance of 166,667 shares to Mr. Mitchell pursuant to his prior employment agreement for compensation earned during the year ended September 30, 2019, which were valued at $10,000. Mr. Mitchell resigned as President on June 8, 2020. At such time he received a severance package of $50,000. On September 27, 2019, in connection with their service on the Board of Directors for fiscal years 2017, 2018 and 2019, the Company approved the issuance of (i) 99,362, (ii) 272,472, (iii) 112,739 and (iv) 272,472 shares of Common Stock to Blake Furlow, Gary Herman, Bart Mitchell and JoyAnn Kenny-Charlton, respectively, for a value of $45,423, as well as a total of cash payments of $85,041. The following table represents option activity during the years ended September 30, 2020 and 2019: Weighted Weighted Average Weighted Number of Average Exercise Remaining Average Options Price (years) Fair Value Vested and Exercisable at September 30, 2018 2,143,423 $ 0.28 3.68 $ 0.16 Cancelled options (260,630 ) $ 0.20 — — Options granted March 21, 2019 294,778 $ 0.16 — $ 0.05 Vested and Exercisable at September 30, 2019 2,177,571 $ 0.26 2.89 $ 0.15 Cancelled options — $ — — — Options granted — $ — — $ — Vested and Exercisable at September 30, 2020 2,177,571 $ 0.27 1.89 $ 0.15 The following table represents all outstanding options as of September 30, 2020: Weighted Average Average Average Number of Exercise Expiration Remaining Grant Date Options Price Date Life (years) Fair Value Granted May 13, 2017 1,764,000 $ 0.30 05/13/22 1.62 $ 0.17 Granted September 30, 2017 118,793 $ 0.18 09/30/22 2.00 $ 0.13 Granted March 21, 2019 294,778 $ 0.17 03/19/24 3.47 $ 0.05 Vested and Exercisable at September 30, 2019 2,177,571 $ 0.23 $ 0.15 |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Sep. 30, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | (8) Commitments and Contingencies Litigation The Company is subject to litigation claims arising in the ordinary course of business. The Company believes that it has adequately accrued for legal matters in accordance with the requirements of GAAP. The Company records litigation accruals for legal matters which are both probable and estimable and for related legal costs as incurred. The Company does not reduce these liabilities for potential insurance or third-party recoveries. 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 (“Franventures”). 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. On October 8, 2020 the Court dismissed Brian Pappas’ indemnity counterclaim without prejudice. 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”) filed suit against the Company alleging 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 Franventures, 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 Mr. Pappas was serving as the Chief Executive Officer of CLC and as a member of its board of directors. The Company is actively litigating this matter. On October 27, 2016, Brian Pappas filed a motion to amend the complaint in Case No. CA 16-236 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 Mr. Pappas is granted the right to amend his complaint and does so, the Company will vigorously defend the proposed claim. The Company’s complaint against Mr. Pappas and Franventures (Case No. CA 15-1076) has been consolidated with Mr. Pappas’ and Franventures’ complaint against the Company (Case No. CA 16-236) for purposes of discovery, but not for any other purpose. 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, as well as four other defendants seeking damages under the New York Franchise Sales Act. The same Plaintiffs also initiated an arbitration proceeding against the Company 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 in the arbitration case. Both cases have been held in abeyance as the parties seek a resolution. On November 8, 2017, franchisee, Indy Bricks, LLC, along with its two owners, Ben and Kate Schreiber, initiated arbitration against the Company (American Arbitration Association, Case No. 01-17-0006-8120). The 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. On April 23, 2020, a settlement agreement was entered into between the Plaintiffs and the Company under which the arbitration was dismissed. Pursuant to the settlement agreement, Indy Bricks, LLC will pay the Company an agreed amount of past due franchise fees, monthly marketing and royalty fees, and monthly fees to utilize the Company’s franchise management software. On December 6, 2019, the Company initiated arbitration against two franchise owners. This case was settled on February 5, 2020. In July 2019, the Company entered into an operating agreement for a joint venture known as Bricks4Schoolz, LLC, with BPL Enterprises for Bricks4Schoolz LLC (“BPL”). Under the operating agreement, the joint venture is granted a license to distribute certain intellectual property of the Company through a software system developed by BPL for the joint venture, provided that the joint venture may only distribute the intellectual property to elementary and middle schools in territories which are not covered by an existing franchisee of the Company. Due to disputes regarding the scope of the license, and the fact that neither Bricks4Schoolz, LLC or BPL were legal entities at the time the operating agreement was executed, the Company has rescinded the operating agreement. |
Income Taxes
Income Taxes | 12 Months Ended |
Sep. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | (9) Income Taxes The components of the deferred tax assets at September 30, 2020 and September 30, 2019 were as follows: 2020 2019 Deferred tax assets: Allowance for bad debt $ 79,399 $ 191,083 Charitable contributions 127 127 Stock-based compensation 87,675 87,675 Foreign tax credit 149,238 123,127 Net operating loss 463,512 283,342 Total gross deferred tax asset 779,951 685,355 Deferred tax liabilities: Depreciation timing difference (16,614 ) (31,324 ) ASC 606 Adjustment (797,356 ) (797,356 ) Total deferred tax liability (813,970 ) (828,680 ) Gross net deferred tax asset (34,019 ) (143,325 ) Less: Valuation allowances 34,019 143,325 Net deferred tax asset $ — $ — 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 the fiscal years ended September 30, 2020 and 2019 are as follows: 2020 2019 Current: Federal $ — $ — State — — Total — — Deferred: Additional deferred tax related to book tax differences (179,955 ) 109,081 Valuation allowance 179,955 (109,081 ) Total tax provision $ — $ — A reconciliation of the provisions for income taxes for the fiscal years ended September 2020 and 2019 as compared to statutory rates is as follows: 2020 2019 Amount % Amount % Provision at statutory rates $ (141,072 ) 19.85 % $ 30,835 19.85 % State income tax, net of federal benefit (39,098 ) 5.50 % 8,546 5.50 % Penalties — 0.00 % — 0.00 % Meals & entertainment 215 -0.03 % 2,923 1.88 % Stock-based compensation — 0.00 % — 0.00 % Tax credits — 0.00 % — 0.00 % Other tax differences — 0.00 % — 0.00 % Change in rate — 0.00 % — 0.00 % Valuation allowance on deferred tax assets 179,955 -25.3 % (42,304 ) -27.2 % Total income tax provision $ — 0.00 % $ — 0.00 % |
Note Payable
Note Payable | 12 Months Ended |
Sep. 30, 2020 | |
Debt Disclosure [Abstract] | |
Note Payable | ( 10) Note Payable On April 28, 2020, the Company was granted a loan (the “Loan”) from First Bank of the Lake in aggregate amount of $119,980, pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the CARES Act, which was enacted March 27, 2020. The Loan, which was in the form of a Note dated April 24, 2020 issued by the Company, matures on April 23, 2022 and bears interest at a rate of 1% per annum, payable monthly commencing on October 23, 2020. The Note may be prepaid by the Borrower at any time prior to maturity with no prepayment penalties. Funds from the Loan may only be used for payroll costs, cost used to continue group health care benefits, mortgage payments, rent, utilities and interest on other debt obligations incurred before February 15, 2020. The Company used the entire Loan amount for qualifying expenses. Under the terms of the PPP, certain amounts of the Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act. |
Subsequent Events
Subsequent Events | 12 Months Ended |
Sep. 30, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Events | (11) Subsequent Events The Company performed a review of events subsequent to the balance sheet date through the date the financial statements were issued and determined that there were no such events requiring recognition or disclosure in the financial statements. |
Nature of Organization and Su_2
Nature of Organization and Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Sep. 30, 2020 | |
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. During fiscal year 2020, BFK eLearning LLC was formed in the State of Delaware. 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”), BFK eLearning LLC (“B4KEL”) and SF LLC (“Sew Fun Studios”). In 2020, the Company decided to put on hold the Sew Fun Studios business. The organizational documents for BFK Development Company LLC, B4KEL and SF LLC do not specify a termination date. Each of the above listed LLC’s has a single member, controlled 100% by CLC. The Company also owns a 49% non-controlling interest in Bricks4Schoolz, LLC, which is accounted for under the cost method (subject to the Company’s rescission of its interest). 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. CLC and its wholly owned subsidiaries BFK, BFKD, B4KEL, and SF LLC are hereinafter referred to collectively as the "Company". |
Basis of Presentation | Basis of Presentation 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”). 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. Contracts are structured such that the Company collects revenue from foreign franchises in US dollars. We do not have international subsidiaries. The Company has multiple franchise concepts, but all concepts are managed centrally as one segment and are reviewed by the Company in total. Accordingly, decision-making regarding the Company's overall operating performance and allocation of Company resources are 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 CLC and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The accompanying financial statements do not include the accounts of Bricks4Schoolz, LLC, a 49% owned entity which accounted for under the cost method (subject to the Company’s rescission of its interest). |
Fiscal year | Fiscal year The Company operates on a September 30 fiscal year-end. |
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 significant estimates and assumptions made by management include allowance for doubtful accounts, allowance for deferred tax assets, depreciation of property and equipment, recoverability of long lived assets and fair 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, Restricted 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. The Company records restricted cash for marketing funds collected from the franchisees in excess of amounts spent for marketing. 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 8). Amounts recorded as cash, cash equivalents, and restricted cash in the statement of cash flows is as follows: September 30, 2020 2019 Cash $ 427,659 $ 522,071 Cash Equivalents — — Restricted Cash 20,194 17,950 Total $ 447,853 $ 540,021 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. The Company had approximately $-0- cash in excess of the federally insured limit at September 30, 2020 as compared to $241,000 at September 30, 2019. |
Accounts Receivables | Accounts Receivable The Company reviews accounts receivable periodically for collectability and establishes an allowance for doubtful accounts and records bad debt expense when deemed necessary. The Company records an allowance for doubtful accounts 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. Accounts and receivables are written off against the allowance after all attempts to collect a receivable have failed. The Company believes its allowances for doubtful accounts at September 30, 2020 and 2019 are adequate, but actual write-offs could exceed the recorded allowance. During the years ended September 30, 2020 and 2019 the balance in the allowance for doubtful accounts was approximately $942,000 and $663,000, respectively. |
Notes Receivable | Notes Receivable Accounting Standards Codification (“ASC”) 310, Receivables, provides guidance for receivables and notes that arise from credit sales, loans or other transactions. Financing receivable includes loans and notes receivable. Originated loans we hold for which we have the intent and ability to hold for the foreseeable future or to maturity (or payoff) are classified as held for investment. Financing receivables held for investment are reported in our consolidated balance sheets at the outstanding principal balance adjusted for any write -offs, allowance for loan losses, deferred fees or costs, and any unamortized premiums or discounts. Interest income is accrued on outstanding principal as earned. Unamortized discounts and premiums are amortized using the interest method with the amortization recognized as part of interest income in the consolidated statements of operations. During the years ended September 30, 2020 and 2019 the balance in the allowance for doubtful notes receivable was approximately $91,000 and $91,000, respectively. |
Long-Lived Assets | Long-Lived Assets The Company’s long-lived assets currently consist of property and equipment, and prior to the year ended September 30, 2019 included 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. |
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. Property and Equipment Useful Life Equipment 5 years Furniture and Fixtures 5 years Property Improvements 15-40 years Software 3 years |
Treasury stock | Treasury stock The Company records treasury stock at cost. Treasury stock is comprised of shares of common stock purchased by the Company in the secondary market. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The carrying amounts of cash, accounts receivable, 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 doubtful accounts. 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 The Company generates almost all of its revenue from contracts with customers. The Company’s franchise agreements enter the parties into a contractual agreement, typically over a ten years term, and include performance obligations as follows: protected territory designation, access to proprietary manuals and handbooks, initial training and on-going assistance, consulting, promotion of goodwill, administration of marketing fund, marketing and promotion items, initial marketing program development assistance, company website access, Franchise Management Tool access, lessons and model plans, project kits, Duplo bricks, frames stop motion animation software, and use of the franchisor’s intellectual property (IP) (e.g., trade name – Bricks for Kidz). Upon entering into a franchise agreement, the Company charges an initial franchise fee, which is fully collectible and nonrefundable as of the date of the signing of the franchise agreement. Further, because 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. Per the terms of the franchise agreements, the Company charges for royalty fees on a monthly basis, generally set at a fixed amount, but in some cases are based on a percentage of franchisee’s monthly gross revenues. The Company also charges fees for a marketing fund, generally based on 2% of franchisee’s monthly gross revenues, which is managed by the Company, to allocate towards national branding of the Company’s concepts to benefit the franchisees. Lastly, the Company charges for technology fees on a monthly basis, generally at a fixed amount, for the use of the company Franchise Management tool as well as company emails, etc. The Company adopted the new revenue standard (ASC 606) on October 1, 2018 for contracts with remaining performance obligations as of October 1, 2018. The Company elected to apply the new standard retrospectively with an adjustment to the opening balance of retained earnings as of the date of adoption. Under ASC 606, the Company considers initial franchise fees to be a part of the license of symbolic intellectual property (“IP”), therefore the performance obligation related to these fees is satisfied over time as the Company fulfills its promise to grant the customer rights to use, and benefit from, the Company’s IP, as well as support and maintain the IP. The initial franchise fee, then, is recorded as deferred revenue at inception and recognized on a straight-line basis over the contract term. In accordance with ASC 606-10-55-65, the Company has determined that the royalty fees, marketing fees, and technology fees are subject to a sales and usage-based royalties’ constraint on licenses of IP. Accordingly, these fees are recognized as revenue at the later of when the sales or usage occurs or the related performance obligation is satisfied. Technology fees are recorded net of processing fees. Marketing fees are limited to marketing amounts expensed; therefore, the Company will recognize amounts received in excess of amounts spent on the balance sheet in the accrued marketing fund liability. The Company collects transfer fees when contracts are transferred between parties and accounts for the transfer as a contract modification under ASC 606. Because the transfer does not increase the scope of the contract or promise any additional goods or services and there are no new distinct services that will be provided after the transfer the Company considers the transfer fee part of the existing contract. Transfer fees, then, are recorded as deferred revenue at inception and recognized on a straight-line basis over the remaining contract term. When contracts are terminated due to default, or in conjunction with an early termination agreement, the Company accounts for the early termination as a contract modification under ASC 606. Because the termination eliminates any future performance obligations of the Company any deferred revenue associated with the terminated contract is recognized into revenue at the time of termination, along with any early termination fees, in the initial franchise fee line on the Company’s Statement of Operations. The Company generates revenue from sales of merchandise where the performance obligation is met, and therefore revenue recognized, upon the delivery of merchandise to the customer. Contract Liability – Deferred Revenue In conjunction with the adoption of ASC 606, effective October 1, 2018 the Company recorded deferred revenue as a contract liability for its initial franchise fees collected and related to contracts with remaining performance obligations. During the year ended September 30, 2019 and 2020 the activity in the deferred revenue account was as follows: Balance, September 30, 2018 $ - Deferred revenue recognized upon adoption of ASC 606 6,627,872 Initial franchise fees collected 220,195 Revenue recognized into revenue (2,479,921 ) Balance, September 30, 2019 4,368,146 Initial franchise fees collected 82,527 Revenue recognized into revenue (1,237,994 ) Balance, September 30, 2020 3,212,679 Current portion (915,103 ) Deferred revenue, net of current portion $ 2,297,576 Amounts expected to be recognized into revenue related to performance obligations that are unsatisfied (or partially unsatisfied) as of September 30, 2020 were as follows: Year ended September 30, 2021 $ 915,103 Year ended September 30, 2022 832,477 Year ended September 30, 2023 698,778 Year ended September 30, 2024 409,865 Year ended September 30, 2025 and thereafter 356,456 Total $ 3,212,679 Contract Liability – 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 owed to the Company are accounted for as a liability on the balance sheet and the actual collections are deposited into a marketing fund bank account, presented as restricted cash on the balance sheet. Expenses pertaining to the marketing fund activities are paid from the marketing fund and reduce the liability account. Upon adoption of FASB 606 on October 1, 2018, the Company presented these marketing fund revenues and expenses on a gross basis on its statement of operations. Any unused funds at the end of the period are recorded as accrued marketing fees. During the year ended September 30, 2019 and 2020 the activity in the accrued marketing fund liability account was as follows: Balance, September 30, 2018 $ 97,334 Marketing fund billings 125,319 Commissions recognized into expense (222,653 ) Balance, September 30, 2019 - Marketing fund billings 130,496 Commissions recognized into expense (130,496 ) Balance, September 30, 2020 $ - Contract Asset – Prepaid Commission Expense In accordance with ASC 606 the costs related to obtaining a contract are to be capitalized as long as the costs are recoverable and incremental. Effective October 1, 2019, the date the Company adopted ASC 606, they capitalized the value of sales commissions as a contract asset and is amortizing those costs straight-line over the contract life of the franchise agreement to which they relate. During the year ended September 30, 2019 and 2020 the activity in the contract asset account was as follows: Balance, September 30, 2018 $ - Prepaid commissions recognized upon adoption of ASC 606 1,608,185 Commissions paid 5,413 Commissions recognized into expense (605,404 ) Balance, September 30, 2019 1,008,191 Commissions paid 5,421 Commissions recognized into expense (288,734 ) Balance, September 30, 2020 724,878 Current portion (212,122 ) Prepaid commission expense, net of current portion $ 512,756 |
General Marketing Costs | General Marketing Costs General marketing costs are expensed as incurred. The Company incurred general marketing costs for the years ended September 30, 2020 and 2019 of approximately $81,000 and $21,000, 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, 2020 and 2019, respectively, and has not recognized interest and/or penalties during the years ended September 30, 2020 and 2019, 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 2017 and forward by the U.S. Internal Revenue Service, and the years 2016 and forward for various states. |
Net earnings (loss) per share | Net earnings (loss) per share Basic earnings (loss) per share are computed by dividing net income (loss) 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. FASB ASC 260, Earnings per Share |
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. Forfeitures are recognized as they occur. |
Reclassifications | Reclassifications Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations. |
Recent accounting pronouncements | Recent accounting pronouncements 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, are required. The new standard was adopted by the Company in fiscal year 2020 but had no impact on the Company’s financial statements as the Company does not have any leases that meet the criteria under this standard. All other newly issued accounting pronouncements, but not yet effective, have been deemed either immaterial or not applicable. |
Nature of Organization and Su_3
Nature of Organization and Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Sep. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Schedule of Cash and Cash Equivalents | Amounts recorded as cash, cash equivalents, and restricted cash in the statement of cash flows is as follows: September 30, 2020 2019 Cash $ 427,659 $ 522,071 Cash Equivalents — — Restricted Cash 20,194 17,950 Total $ 447,853 $ 540,021 |
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. Property and Equipment Useful Life Equipment 5 years Furniture and Fixtures 5 years Property Improvements 15-40 years Software 3 years |
Summary of deferred revenue activity | During the year ended September 30, 2019 and 2020 the activity in the deferred revenue account was as follows: Balance, September 30, 2018 $ - Deferred revenue recognized upon adoption of ASC 606 6,627,872 Initial franchise fees collected 220,195 Revenue recognized into revenue (2,479,921 ) Balance, September 30, 2019 4,368,146 Initial franchise fees collected 82,527 Revenue recognized into revenue (1,237,994 ) Balance, September 30, 2020 3,212,679 Current portion (915,103 ) Deferred revenue, net of current portion $ 2,297,576 |
Summary of performance obligations | Amounts expected to be recognized into revenue related to performance obligations that are unsatisfied (or partially unsatisfied) as of September 30, 2020 were as follows: Year ended September 30, 2021 $ 915,103 Year ended September 30, 2022 832,477 Year ended September 30, 2023 698,778 Year ended September 30, 2024 409,865 Year ended September 30, 2025 and thereafter 356,456 Total $ 3,212,679 |
Summary of accrued marketing fund for advertising fund revenue accounts | During the year ended September 30, 2019 and 2020 the activity in the accrued marketing fund liability account was as follows: Balance, September 30, 2018 $ 97,334 Marketing fund billings 125,319 Commissions recognized into expense (222,653 ) Balance, September 30, 2019 - Marketing fund billings 130,496 Commissions recognized into expense (130,496 ) Balance, September 30, 2020 $ - |
Summary of contract asset activity | During the year ended September 30, 2019 and 2020 the activity in the contract asset account was as follows: Balance, September 30, 2018 $ - Prepaid commissions recognized upon adoption of ASC 606 1,608,185 Commissions paid 5,413 Commissions recognized into expense (605,404 ) Balance, September 30, 2019 1,008,191 Commissions paid 5,421 Commissions recognized into expense (288,734 ) Balance, September 30, 2020 724,878 Current portion (212,122 ) Prepaid commission expense, net of current portion $ 512,756 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 12 Months Ended |
Sep. 30, 2020 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property and Equipment | Property and equipment consisted of the following: September 30, Description 2020 2019 Depreciable Property and Equipment: Equipment $ 76,434 $ 76,434 Furniture and Fixtures 83,427 83,427 Property and Improvements — 127,723 Software 418,570 418,572 Total Depreciable Property and Equipment 578,431 706,156 Accumulated Depreciation (446,813 ) (382,367 ) Total Net Property and Equipment $ 131,618 $ 323,789 |
Notes and Other Receivables (Ta
Notes and Other Receivables (Tables) | 12 Months Ended |
Sep. 30, 2020 | |
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. 2020 Total Payment schedules for Notes Receivable $ 100,000 $ 94,000 |
Accrued Liabilities (Tables)
Accrued Liabilities (Tables) | 12 Months Ended |
Sep. 30, 2020 | |
Payables and Accruals [Abstract] | |
Schedule of Accrued Liabilities | The Company had accrued liabilities at September 30, 2020, and September 30, 2019 as follows: Accrued Liabilities September 30, September 30, Accrued Board Compensation $ 5,000 $ 85,041 Accrued Compensation and payroll taxes 3,743 10,679 Accrued Severance — 30,000 $ 8,743 $ 125,720 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 12 Months Ended |
Sep. 30, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Schedule of Stock Option Activity | The following table represents option activity during the years ended September 30, 2020 and 2019: Weighted Weighted Average Weighted Number of Average Exercise Remaining Average Options Price (years) Fair Value Vested and Exercisable at September 30, 2018 2,143,423 $ 0.28 3.68 $ 0.16 Cancelled options (260,630 ) $ 0.20 — — Options granted March 21, 2019 294,778 $ 0.16 — $ 0.05 Vested and Exercisable at September 30, 2019 2,177,571 $ 0.26 2.89 $ 0.15 Cancelled options — $ — — — Options granted — $ — — $ — Vested and Exercisable at September 30, 2020 2,177,571 $ 0.27 1.89 $ 0.15 |
Schedule of Options Outstanding | The following table represents all outstanding options as of September 30, 2020: Weighted Average Average Average Number of Exercise Expiration Remaining Grant Date Options Price Date Life (years) Fair Value Granted May 13, 2017 1,764,000 $ 0.30 05/13/22 1.62 $ 0.17 Granted September 30, 2017 118,793 $ 0.18 09/30/22 2.00 $ 0.13 Granted March 21, 2019 294,778 $ 0.17 03/19/24 3.47 $ 0.05 Vested and Exercisable at September 30, 2019 2,177,571 $ 0.23 $ 0.15 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Sep. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
Schedule of Components of Deferred Taxes | The components of the deferred tax assets at September 30, 2020 and September 30, 2019 were as follows: 2020 2019 Deferred tax assets: Allowance for bad debt $ 79,399 $ 191,083 Charitable contributions 127 127 Stock-based compensation 87,675 87,675 Foreign tax credit 149,238 123,127 Net operating loss 463,512 283,342 Total gross deferred tax asset 779,951 685,355 Deferred tax liabilities: Depreciation timing difference (16,614 ) (31,324 ) ASC 606 Adjustment (797,356 ) (797,356 ) Total deferred tax liability (813,970 ) (828,680 ) Gross net deferred tax asset (34,019 ) (143,325 ) Less: Valuation allowances 34,019 143,325 Net deferred tax asset $ — $ — |
Schedule of Components of Provision For Income Taxes | The components of the provisions for income taxes for the fiscal years ended September 30, 2020 and 2019 are as follows: 2020 2019 Current: Federal $ — $ — State — — Total — — Deferred: Additional deferred tax related to book tax differences (179,955 ) 109,081 Valuation allowance 179,955 (109,081 ) Total tax provision $ — $ — |
Schedule of Reconciliation of Income Tax Provision | A reconciliation of the provisions for income taxes for the fiscal years ended September 2020 and 2019 as compared to statutory rates is as follows: 2020 2019 Amount % Amount % Provision at statutory rates $ (141,072 ) 19.85 % $ 30,835 19.85 % State income tax, net of federal benefit (39,098 ) 5.50 % 8,546 5.50 % Penalties — 0.00 % — 0.00 % Meals & entertainment 215 -0.03 % 2,923 1.88 % Stock-based compensation — 0.00 % — 0.00 % Tax credits — 0.00 % — 0.00 % Other tax differences — 0.00 % — 0.00 % Change in rate — 0.00 % — 0.00 % Valuation allowance on deferred tax assets 179,955 -25.3 % (42,304 ) -27.2 % Total income tax provision $ — 0.00 % $ — 0.00 % |
Nature of Organization and Su_4
Nature of Organization and Summary of Significant Accounting Policies (Details) - USD ($) | Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2018 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||
Cash | $ 427,659 | $ 522,071 | |
Cash Equivalents | |||
Restricted Cash | 20,194 | 17,950 | |
Total | $ 447,853 | $ 540,021 | $ 103,198 |
Nature of Organization and Su_5
Nature of Organization and Summary of Significant Accounting Policies (Details 1) | 12 Months Ended |
Sep. 30, 2020 | |
Equipment [Member] | |
Property, Plant and Equipment [Line Items] | |
Property and Equipment | 5 years |
Furniture and Fixtures [Member] | |
Property, Plant and Equipment [Line Items] | |
Property and Equipment | 5 years |
Property Improvements [Member] | Minimum [Member] | |
Property, Plant and Equipment [Line Items] | |
Property and Equipment | 15 years |
Property Improvements [Member] | Maximum [Member] | |
Property, Plant and Equipment [Line Items] | |
Property and Equipment | 40 years |
Software [Member] | |
Property, Plant and Equipment [Line Items] | |
Property and Equipment | 3 years |
Nature of Organization and Su_6
Nature of Organization and Summary of Significant Accounting Policies (Details 2) - USD ($) | 12 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Deferred revenue at beggining | $ 4,368,146 | |
Deferred revenue recognized upon adoption of ASC 606 | 6,627,872 | |
Initial franchise fees collected | 82,527 | 220,195 |
Revenue recognized into revenue | (1,237,994) | (2,479,921) |
Deferred revenue at end | 3,212,679 | 4,368,146 |
Current portion | (915,103) | (986,039) |
Deferred revenue, net of current portion | $ 2,297,576 | $ 3,382,107 |
Nature of Organization and Su_7
Nature of Organization and Summary of Significant Accounting Policies (Details 3) | Sep. 30, 2020USD ($) |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Year ended September 30, 2021 | $ 915,103 |
Year ended September 30, 2022 | 832,477 |
Year ended September 30, 2023 | 698,778 |
Year ended September 30, 2024 | 409,865 |
Year ended September 30, 2025 and thereafter | 356,456 |
Total | $ 3,212,679 |
Nature of Organization and Su_8
Nature of Organization and Summary of Significant Accounting Policies (Details 4) - USD ($) | 12 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Accrued marketing fund for advertising fund revenue at beginning | $ 97,334 | |
Marketing fund billings | 130,496 | 125,319 |
Commissions recognized into expense | (130,496) | (222,653) |
Accrued marketing fund for advertising fund revenue at ending |
Nature of Organization and Su_9
Nature of Organization and Summary of Significant Accounting Policies (Details 5) - USD ($) | 12 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Commission expense at beginning | $ 1,008,191 | |
Prepaid commissions recognized upon adoption of ASC 606 | 1,608,185 | |
Commissions paid | 5,421 | 5,413 |
Commissions recognized into expense | (288,734) | (605,404) |
Commissions expense at end | 724,878 | 1,008,191 |
Current portion | (212,122) | |
Prepaid commission expense, net of current portion | $ 512,756 | $ 773,062 |
Nature of Organization and S_10
Nature of Organization and Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 12 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Cash amount insured by FDIC | $ 250,000 | |
Allowance for doubtful accounts | 942,000 | $ 663,000 |
Allowance receivable | 91,000 | 91,000 |
General marketing costs | $ 81,000 | $ 21,000 |
Loss per share | $ 1,795,562 | $ 2,177,571 |
Bricks4Schoolz [Member] | ||
Non-controlling interest rate | 49.00% | |
BFK Franchise Co., LLC ("BFK") [Member] | Franchise Agreements [Member] | ||
Percentage of gross revenues collected for marketing fund | 2.00% |
Liquidity (Details)
Liquidity (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Going Concern [Abstract] | ||
Net loss | $ 620,161 | |
Cash provided by operating activities | (306,220) | $ 397,874 |
Net cash provided by investing activities | 94,072 | 38,949 |
Acquisition of property and equipment | (118,838) | |
Net cash provided by financing activities | $ 119,980 |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) - USD ($) | Feb. 05, 2020 | Sep. 30, 2019 | Sep. 27, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2017 |
Related Party Transaction [Line Items] | |||||||
Related Party Expense | $ 2,000 | ||||||
Warrant exercise | 14,286 | 14,286 | |||||
Proceeds from warrant exercise | $ 2,000 | ||||||
Value of stock issued | $ 85,041 | ||||||
Revenue | $ 3,038,440 | 4,517,964 | |||||
Deferred revenue | $ 986,039 | 915,103 | 986,039 | ||||
Franchise [Member] | |||||||
Related Party Transaction [Line Items] | |||||||
Revenue | 7,681 | ||||||
Accounts receivable | 21,536 | 11,894 | 21,536 | ||||
Deferred revenue | $ 0 | 0 | $ 0 | ||||
Franchise [Member] | Royalty Revenue [Member] | |||||||
Related Party Transaction [Line Items] | |||||||
Revenue | 16,650 | ||||||
Franchise [Member] | Marketing Revenue [Member] | |||||||
Related Party Transaction [Line Items] | |||||||
Revenue | $ 829 | ||||||
Settlement Agreement [Member] | |||||||
Related Party Transaction [Line Items] | |||||||
Forgave of back royalty fees | $ 18,825 | ||||||
Two Director [Member] | |||||||
Related Party Transaction [Line Items] | |||||||
Warrants granted | 14,286 | ||||||
Fair value of the warrants | $ 2,000 | ||||||
Blake Furlow | |||||||
Related Party Transaction [Line Items] | |||||||
Number of shares issued | 566,176 | 99,362 | |||||
Severance package | $ 30,000 | ||||||
Mitchell [Member] | |||||||
Related Party Transaction [Line Items] | |||||||
Value of stock grant | $ 15,000 | ||||||
Number of stock grant | 200,000 | ||||||
Number of shares issued | 166,667 | ||||||
Severance package | $ 50,000 | ||||||
Shares cancelled | 279,406 | ||||||
Gary Herman | |||||||
Related Party Transaction [Line Items] | |||||||
Number of shares issued | 272,472 | ||||||
Bart Mitchell | |||||||
Related Party Transaction [Line Items] | |||||||
Number of shares issued | 112,739 | ||||||
JoyAnn Kenny-Charlton | |||||||
Related Party Transaction [Line Items] | |||||||
Number of shares issued | 272,472 | ||||||
Mr. Rego [Member] | |||||||
Related Party Transaction [Line Items] | |||||||
Development fee | $ 106,000 | ||||||
Services fees | $ 15,700 | ||||||
Solicitors [Member] | |||||||
Related Party Transaction [Line Items] | |||||||
Payment for settlement | $ 10,000 |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) | Sep. 30, 2020 | Sep. 30, 2019 |
Property, Plant and Equipment [Line Items] | ||
Total Depreciable Property and Equipment | $ 578,431 | $ 706,156 |
Accumulated Depreciation | (446,813) | (382,367) |
Total Net Property and Equipment | 131,618 | 323,789 |
Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Total Depreciable Property and Equipment | 76,434 | 76,434 |
Furniture and Fixtures [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Total Depreciable Property and Equipment | 83,427 | 83,427 |
Property Improvements [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Total Depreciable Property and Equipment | 127,723 | |
Software [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Total Depreciable Property and Equipment | $ 418,570 | $ 418,572 |
Property and Equipment (Detai_2
Property and Equipment (Details Narrative) - USD ($) | Jul. 09, 2019 | Oct. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2018 |
Depreciation expense | $ 112,543 | $ 115,627 | |||
Assets held for sale | $ 43,178 | ||||
Proceeds from sale of condominium | 86,000 | ||||
Gain on sale of condominium | $ 43,000 | ||||
Land [Member] | |||||
Proceeds from sale of condominium | $ 60,000 | $ 100,000 | |||
Gain on sale of condominium | $ 22,000 | $ 21,000 |
Notes and Other Receivables (De
Notes and Other Receivables (Details) | Sep. 30, 2020USD ($) |
Receivables [Abstract] | |
2020 | $ 100,000 |
Total | $ 94,000 |
Notes and Other Receivables (_2
Notes and Other Receivables (Details Narrative) - USD ($) | Sep. 30, 2020 | Sep. 30, 2019 |
Receivables [Abstract] | ||
Other receivables | $ 100,000 | $ 94,000 |
Allowance on notes receivable | 91,000 | 91,000 |
Notes receivable | $ 9,000 | $ 3,000 |
Accrued Liabilities (Details)
Accrued Liabilities (Details) - USD ($) | Sep. 30, 2020 | Sep. 30, 2019 |
Payables and Accruals [Abstract] | ||
Accrued Board Compensation | $ 5,000 | $ 85,041 |
Accrued Compensation and payroll taxes | 3,743 | 10,679 |
Accrued Severance | 30,000 | |
Accrued Liabilities | $ 8,743 | $ 125,720 |
Stock-Based Compensation (Detai
Stock-Based Compensation (Details) - $ / shares | 1 Months Ended | 12 Months Ended | ||
Mar. 21, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2018 | |
Number of Options | ||||
Option vested and Exercisable at beginning of period | 2,177,571 | 2,143,423 | 118,793 | |
Cancelled options | (260,630) | |||
Options granted | 294,778 | |||
Options vested and exercisable at end of period | 294,778 | 2,177,571 | 2,177,571 | 2,143,423 |
Weighted Average Exercise Price | ||||
Options vested and Exercisable outstanding at beginning of period | $ 0.26 | $ 0.28 | $ 0.18 | |
Cancelled options | 0 | 0.2 | ||
Options granted | 0 | 0.16 | ||
Options vested and Exercisable at end of period | $ 0.17 | $ 0.23 | $ 0.26 | $ 0.28 |
Remaining Life | ||||
Vested and Exercisable | 1 year 10 months 21 days | 2 years 10 months 21 days | 3 years 8 months 5 days | |
Weighted Average Grant Date Fair Value | ||||
Vested and Exercisable at beginning of period | $ 0.15 | $ 0.16 | ||
Granted | 0.05 | |||
Vested and Exercisable at end of period | $ 0.15 | $ 0.15 |
Stock-Based Compensation (Det_2
Stock-Based Compensation (Details 1) - $ / shares | May 13, 2017 | Mar. 21, 2019 | Sep. 30, 2017 | Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2018 |
Share-based Payment Arrangement [Abstract] | ||||||
Options vested and exercisable | 1,764,000 | 294,778 | 118,793 | 2,177,571 | 2,177,571 | 2,143,423 |
Options vested and Exercisable Average Exercise Price | $ 0.3 | $ 0.17 | $ 0.18 | $ 0.23 | $ 0.26 | $ 0.28 |
Expiration Date | May 13, 2022 | Mar. 19, 2024 | Sep. 30, 2022 | |||
Average Remaining Life | 1 year 7 months 13 days | 3 years 5 months 20 days | 2 years | |||
Vested and Exercisable weighted Average Grant Date Fair Value | $ 0.17 | $ 0.05 | $ 0.13 | $ 0.15 |
Stock-Based Compensation (Det_3
Stock-Based Compensation (Details Narrative) - USD ($) | Jun. 08, 2020 | Sep. 30, 2019 | Sep. 27, 2019 | Jul. 19, 2019 | Mar. 27, 2019 | Mar. 21, 2019 | Dec. 31, 2017 | Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2018 |
Value of stock issued | $ 85,041 | |||||||||
Value of shares issued | $ 45,423 | |||||||||
Number of shares granted | 294,778 | |||||||||
Related Party Expense | $ 2,000 | |||||||||
Proceeds from warrant exercise | $ 2,000 | |||||||||
Warrant exercised | 14,286 | 14,286 | ||||||||
Two Directors [Member] | ||||||||||
Number of shares granted | 14,286 | |||||||||
Exercise price | $ 0.14 | |||||||||
Fair value of the warrants | $ 2,000 | |||||||||
Related Party Expense | 2,000 | |||||||||
Proceeds from warrant exercise | $ 2,000 | |||||||||
Warrant exercised | 14,286 | 14,286 | ||||||||
Former President | ||||||||||
Number of shares issued | 13,788 | 13,265 | ||||||||
Number of shares granted | 294,778 | |||||||||
Dividend yield | 0.00% | |||||||||
Expected volatility rate | 110.00% | |||||||||
Risk-free interest rate | 2.34% | |||||||||
Expected term | 5 years | |||||||||
Option cancelled | 260,630 | |||||||||
Blake Furlow | ||||||||||
Number of shares issued | 566,176 | 99,362 | ||||||||
Value of shares issued | $ 35,000 | |||||||||
Severance package | 30,000 | |||||||||
Mitchell [Member] | ||||||||||
Number of shares issued | 166,667 | |||||||||
Severance package | $ 50,000 | |||||||||
Value of stock grant | $ 15,000 | |||||||||
Number of stock grant | 200,000 | |||||||||
Former Chief Financial Officer [Member] | ||||||||||
Severance package | $ 50,000 | |||||||||
Stock issued for compensation, shares | 166,667 | |||||||||
Stock issued for compensation, value | $ 10,000 | |||||||||
Gary Herman | ||||||||||
Number of shares issued | 272,472 | |||||||||
Bart Mitchell | ||||||||||
Number of shares issued | 112,739 | |||||||||
JoyAnn Kenny-Charlton | ||||||||||
Number of shares issued | 272,472 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | Sep. 30, 2020 | Sep. 30, 2019 |
Deferred tax assets: | ||
Allowance for bad debt | $ 79,399 | $ 191,083 |
Charitable contributions | 127 | 127 |
Stock-based compensation | 87,675 | 87,675 |
Foreign tax credit | 149,238 | 123,127 |
Net operating loss | 463,512 | 283,342 |
Total gross deferred tax asset | 779,951 | 685,355 |
Deferred tax liabilities: | ||
Depreciation timing difference | (16,614) | (31,324) |
ASC 606 Adjustment | (797,356) | (797,356) |
Total deferred liability | (813,970) | (828,680) |
Gross net deferred tax asset | (34,019) | (143,325) |
Less: Valuation allowances | 34,019 | 143,325 |
Net deferred tax asset |
Income Taxes (Details 1)
Income Taxes (Details 1) - USD ($) | 12 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Current | ||
Federal | ||
State | ||
Total | ||
Deferred: | ||
Additional deferred tax related to book tax differences | 179,955 | 109,081 |
Valuation allowance provision | (179,955) | (109,081) |
Total tax provision |
Income Taxes (Details 2)
Income Taxes (Details 2) - USD ($) | 12 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Income Tax Provision Reconciliation (Amount): | ||
Provision at statutory rates | $ (141,072) | $ 30,835 |
State income tax, net of federal benefit | (39,098) | 8,546 |
Penalties | ||
Meals & entertainment | 215 | 2,923 |
Stock-based compensation | ||
Tax credits | ||
Other tax differences | ||
Change in rate | ||
Valuation allowance on net operating loss carryover | 179,955 | (42,304) |
Total Tax Provision | ||
Income Tax Provision Reconciliation (%): | ||
Provision at statutory rates | 19.85% | 19.85% |
State income tax, net of federal benefit | 5.50% | 5.50% |
Penalties | 0.00% | 0.00% |
Meals & entertainment | (0.03%) | 1.88% |
Stock-based compensation | 0.00% | 0.00% |
Tax credits | 0.00% | 0.00% |
Other tax differences | 0.00% | 0.00% |
Change in rate | 0.00% | 0.00% |
Valuation allowance on net operating loss carryover | (25.30%) | (27.20%) |
Total income tax provision | 0.00% | 0.00% |
Note Payable (Details Narrative
Note Payable (Details Narrative) - Paycheck Protection Program [Member] | 1 Months Ended |
Apr. 28, 2020USD ($) | |
Proceeds from loan | $ 119,980 |
Interest rate | 1.00% |
Maturity date | Apr. 23, 2022 |