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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2012

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

For the transition period from __________ to __________

Commission File Number:    000-52883

CREATIVE LEARNING CORPORATION
(Exact name of registrant as specified in its charter)

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

701 Market St., Suite 113
St. Augustine, FL 32095
 (Address of principal executive offices, including Zip Code)
 
(904) 824-3133
 (Issuer’s telephone number, including area code)

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

Check whether the issuer (1) filed all reports required to be filed by section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes þ    No o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes  þ     No o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer o Accelerated filer o
       
Non-accelerated filer o Smaller reporting company þ
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes o     No þ
  
State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:   11,451,075 shares of common stock as of April 30, 2012.
 


 
 

 
 

 
 
 


 
CREATIVE LEARNING CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Quarter Ended March 31, 2012
 
 
 
 
 
 
 
 

 
2

 

CREATIVE LEARNING CORPORATION
Consolidated Financial Statements
(Unaudited)


TABLE OF CONTENTS

 
CONSOLIDATED FINANCIAL STATEMENTS Page
   
Consolidated balance sheets
4
Consolidated statements of operation
5
Consolidated statements of cash flows
6
Notes to consolidated financial statements
7-10

 
3

 

CREATIVE LEARNING CORPORATION
Consolidated Balance Sheets
                                                                                                                                                                                                                                                              
    March 31,    
September 30,
 
    2012     2011  
Assets
           
Current Assets:
           
Cash
  $ 487,294     $ 517,830  
Accounts receivable, less allowance for doubtful accounts of $11,000 and $28,660, respectively     283,172       89,005  
Prepaid expenses
    24,276          
Other receivables
    34,118       2,118  
                 
Total Current Assets
    828,860       608,953  
                 
Note receivable from related party
    11,806       10,000  
Property and equipment, net of accumulated depreciation of $19,010 and $11,280, respectively
    186,333       157,619  
Deposits
    7,619       7,619  
                 
Total Assets
  $ 1,034,618     $ 784,191  
                 
Liabilities and Stockholders’ Equity (Deficit)
               
                 
Current Liabilities:
               
                 
Accounts payable:
               
                 
Related party
  $     $ 11,100  
Other
    46,643       69,534  
Payroll accruals
    5,280       4,123  
Accrued marketing fund
    39,171        
Customer deposits
    2,000        
                 
Total Current Liabilities
    93,094       84,757  
                 
Stockholders’ Equity (Deficit) :
               
Creative Learning Corporation stockholders' equity:
               
Preferred stock, $.0001 par value; 10,000,000 shares authorized;  -0- and -0- shares issued and outstanding, respectively
           
Common stock, $.0001 par value; 50,000,000 shares authorized;  11,451,075 and 10,288,575 shares issued and outstanding,  respectively     1,145       1,029  
Additional paid-in capital
    1,984,129       1,975,445  
Retained earnings (deficit)
    (1,043,750 )     (1,277,040 )
Total Stockholders’ Equity
    941,524       699,434  
Total Liabilities and Stockholders’ Equity
  $ 1,034,618     $ 784,191  
 
The accompany notes are an integral part of the consolidated financial statements

 
4

 

CREATIVE LEARNING CORPORATION
Consolidated Statement of Operations
 
   
(Unaudited)
   
(Unaudited)
 
   
For The Three
   
For The Six
 
   
Months Ended
   
Months Ended
 
   
March 31,
   
March 31,
   
March 31,
   
March 31,
 
   
2012
   
2011
   
2012
   
2011
 
Revenues:
                       
Initial franchise fees
  $ 718,949     $ 358,450     $ 1,206,022     $ 646,387  
Royalties and marketing fees
    83,278             171,663        
      802,227       358,450       1,377,685       646,387  
Operating expenses:
                               
Franchise consulting and commissions:
                               
Related parties
    96,626             162,657        
Other
    188,074       171,658       341,670       307,651  
Franchise training and expenses:
                               
Related parties
    3,149             10,899        
Other
    12,782             30,564       15,678  
Salaries and payroll taxes
    86,833       69,876       181,721       133,285  
Advertising
    42,094       29,024       106,383       57,869  
Professional fees
    72,022       20,386       126,400       29,480  
Office expense
    12,424       28,784       45,788       54,328  
Depreciation
    3,865       2,399       7,730       4,691  
Stock-based compensation
                8,800        
Other general and administrative expenses
    62,896       204,092       122,771       273,479  
Total operating expenses
    580,765       526,219       1,145,383       876,461  
                                 
Income (loss) from operations
    221,462       (167,769 )     232,302       (230,074 )
                                 
Other income (expense):
                               
Interest expense:
                               
Beneficial conversion feature
                      (19,630 )
Other
          (7,716 )           (14,189 )
Other income
    749       16,995       988       50,887  
Total other income (expense)
    749       9,279       988       17,068  
                                 
Loss before provision for income taxes
    222,211       (158,490 )     233,290       (213,006 )
                                 
Provision for income taxes (Note 11)
                       
                                 
Net income (loss)
  $ 222,211     $ (158,490 )   $ 233,290       (213,006 )
                                 
Net loss per share (Creative Learning Corporation):
                               
Basic and diluted
  $ 0.02     $ (0.06 )     0.02     $ (0.08 )
Weighted average number of common
                               
shares outstanding
    11,395,741       2,666,039       11,395,471       2,666,039  
 
The accompany notes are an integral part of the consolidated financial statements

 
5

 
 
CREATIVE LEARNING CORPORATION
Consolidated Statement of Cash Flows
 
   
(Unaudited)
 
   
March 31,
   
March 31,
 
   
2012
   
2011
 
Cash flows from operating activities:
           
Net income (loss)
  $ 233,290     $ (213,006 )
Adjustments to reconcile net loss to net cash
               
provided by (used in) operating activities:
               
Depreciation
    7,730       4,691  
Compensatory equity issuances
    8,800       147,207  
Beneficial conversion feature
            19,630  
Changes in operating assets and liabilities:
               
Accounts receivable
    (194,167 )      
Other receivables
    (32,000 )      
Prepaid expenses
    (24,276 )      
Accounts payable
    (33,989 )     (18,109 )
Accrued liabilities
    1,157       10,132  
Accrued marketing funds
    39,171        
Customer deposits
    2,000        
                 
Net cash provided by (used in) operating activities     7,716       (49,455 )
Cash flows from investing activities:
               
Property and equipment purchases
    (36,445 )     (6,357 )
Loan to a related party
               
(net of repayments)
    (1,807 )      
Net cash used in investing activities     (38,252 )     (6,357 )
Cash flows from financing activities:
               
Notes payable - borrowings
            (10,000 )
Proceeds from sale of common stock
          151,425  
                 
 Net cash provided by financing activities
          141,425  
Net change in cash     (30,536     85,613   
Cash, beginning of period
    517,830       27,271  
                 
Cash, end of period
  $ 487,294     $ 112,884  
Supplemental disclosure of cash flow information:
               
Cash paid during the period for:
               
Income taxes
  $     $  
Interest
  $     $  
Non-cash investing and financing activities:
               
Common stock issued for services
  $ 8,800     $  

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

 
6

 
 
CREATIVE LEARNING CORPORATION
(formerly B2 Health, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

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

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

Basis of Presentation

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

Fiscal year
 
The Company employs a fiscal year ending September 30.
 
Principles of consolidation

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

Cash and cash equivalents

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

 
7

 
 
CREATIVE LEARNING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


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

The Company reviews accounts receivable periodically for collectability and establishes an allowance for doubtful accounts and records bad debt expense when deemed necessary. At March 31, 2012 and 2011 the Company had $11,000 and $-0- in its allowance for doubtful accounts.

Property and equipment

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

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

Use of Estimates

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

Income tax

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

 
8

 
 
CREATIVE LEARNING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):

Prior to fiscal year 2010 the Company operated as an LLC, was a pass-through entity for federal income tax purposes and paid no income tax at the company level. At March 31, 2012 and March 31, 2011 the Company had net operating loss carryforwards of approximately $1,043,750 and $984,033 respectively, which begin to expire in 2031. The deferred tax asset of approximately $208,750 and $196,807 respectively created by the net operating loss has been offset by a 100% valuation allowance. The change in the valuation allowance in the six month period ended March 31, 2012 and 2012 was decreased by $46,658 and increased by $42,602 respectively.
 
Advertising costs

Advertising costs are expensed as incurred. The Company had advertising costs for the six month period ended March 31, 2012 and 2011 was $42,094 and $106,383 respectively.
 
Net income (loss) per share

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

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

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

 
9

 
 
CREATIVE LEARNING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


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

Stock based compensation

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

At March 31, 2012 the Company issued 11,000 shares of stock in exchange for services valued at $8,800.

 
10

 
 
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF OPERATION
 
The following discussion and analysis should be read in conjunction with the unaudited financial statements and notes thereto contained in this report.

Results of Operations

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

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

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

BFK operates through Corporate Creativity Centers and franchisees.

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

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

  
opened one Corporate Creativity Center in Florida; and
  
sold 150 additional franchises.

As of April 30, 2012 BFK, through its franchises, was operating in 26 states, the District of Columbia, four foreign countries, and Puerto Rico.
 
 
11

 

Material changes of items in the Company’s Statement of Operations for the three and six months ended March 31, 2012 as compared to the same period in 2011 are discussed below.
 
Item  
Increase (I) or
Decrease (D) 
  Reason
         
Revenues   I   Growth of business resulting in increased sales of franchises and an increase in royalties received from franchisees.
         
Operating Expenses   I   Growth in business.
 
Liquidity and Capital Resources

Sources and (uses) of funds for the six months ended March 31, 2012 and 2011 are shown below:
 
    Six Months ended March 31,  
    2012     2011  
             
 Cash provided by (used in) operations    $ 7,716     $ (49,455 )
                 
 Purchase of equipment     (36,445     (6,357 )
                 
 Loan to a shareholder     (1,807 )     (10,000 )
                 
 Sale of common stock      -       151,425  
                 
 Cash on hand at beginning of period    $ 30,536       -  
 
Between January 4, 2011 and March 31, 2012 the Company sold 1,026,405 shares of its common stock to private investors. The Company received $951,177 from the sale of these shares.

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

The Company anticipates that its capital requirements for the twelve-month period ending March 31, 2013 will be as follows:
 
General and administrative expenses   $ 620,000  
Marketing    $ 240,000  
Business development    $ 120,000  
Opening new Corporate Creativity Centers   $ 80,000  
                                            
As of March 31, 2012 the Company’s liabilities consisted primarily of trade payables.

There is no assurance the Company’s operations will continue to be profitable or that the Company will continue to generate a positive cash flow from its operations.
 
The Company does not have any commitments or arrangements from any person to provide the Company with any additional capital. The Company may not be successful in raising the capital it needs.
 
 
12

 

Contractual Obligations
 
The following table summarizes the Company’s contractual obligations as of March 31, 2012:
 
    2012     2013     2014      Total  
                         
 Lease of corporate office   $ 18,000       -       -     $ 18,000  
                                 
 Lease of Corporate Creativity Center   $ 45,000       50,928       54,526     $ 150,454  
 
Off-Balance Sheet Arrangements
 
The Company does not have any off-balance sheet arrangements that have or are reasonable likely to have a current or future material effect on the Company’s financial condition, changes in financial condition, results of operations, liquidity or capital resources.

Outlook

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

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

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

ITEM 4.  CONTROLS AND PROCEDURES.
 
(a)           The Company maintains a system of controls and procedures designed to ensure that information required to be disclosed in reports filed or submitted under the Securities Exchange Act of 1934, as amended (“1934 Act”), is recorded, processed, summarized and reported, within time periods specified in the SEC's rules and forms and to ensure that information required to be disclosed by the Company in the reports that it files or submits under the 1934 Act, is accumulated and communicated to the Company’s management, including its Principal Executive and Financial Officer, as appropriate to allow timely decisions regarding required disclosure.  As of March 31, 2012, the Company’s Principal Executive and Financial Officer evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures.  Based on that evaluation, the Principal Executive and Financial Officer concluded that the Company’s disclosure controls and procedures were effective.

(b)           Changes in Internal Controls.  There were no changes in the Company’s internal control over financial reporting during the quarter ended March 31, 2012, that materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.


 
13

 

PART II

ITEM 6.  EXHIBITS
 
Exhibits

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

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

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

 
14

 
 
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
  CREATIVE LEARNING CORPORATION  
       
May 15, 2012
By:
/s/ Brian Pappas  
    Brian Pappas,  
    Principal Executive, Financial and Accounting Officer  
       
 
 
 


15