Driveitaway Holdings, Inc. - Quarter Report: 2014 March (Form 10-Q)

clcn_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2014

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

For the transition period from __________ to __________

Commission File Number: 000-52883

CREATIVE LEARNING CORPORATION

(Exact name of registrant as specified in its charter)

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

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 x 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 x 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	x

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

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 11,809,409 shares of common stock as of May 12, 2014.

CREATIVE LEARNING CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Quarter Ended March 31, 2014

CREATIVE LEARNING CORPORATION

Consolidated Financial Statements

(Unaudited)

TABLE OF CONTENTS

	Page
CONSOLIDATED FINANCIAL STATEMENTS

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

CREATIVE LEARNING CORPORATION

Consolidated Balance Sheets

	(Unaudited)
	March 31,		September 30,
	2014		2013
Assets
Current Assets:
Cash	$	3,286,727		2,004,947
Accounts receivable, less allowance for doubtful accounts of $9,402 and $10,000, respectively		335,908		310,150
Prepaid expenses		45,111		826
Other receivables - current portion		91,605		94,301
Deferred tax asset		1,058		1,058
Total Current Assets		3,760,409		2,411,282

Note receivable from related party		70,000		70,000
Other receivables - net of current portion		84,017		37,491
Property and equipment, net of accumulated depreciation of $77,802 and $60,073, respectively		311,230		294,863
Intangible assets		125,754		95,270
Deposits		11,187		15,000

Total Assets	$	4,362,597		2,923,906

Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable:
Related parties	$	33,665		5,690
Other		275,025		171,889
Payroll accruals		26,298		13,105
Unearned revenue		204,000		35,900
Accrued marketing fund		133,159		100,754
Customer deposits		82,925		120,001
Income tax payable		400,230		13,131
Notes payable:
Related parties		20,000		20,000
Other		71,679		3,560
Total Current Liabilities		1,246,981		484,030

Other payables - net of current portion		15,000		5,297

Total Liabilities		1,261,981		489,327

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;
11,809,409 and 11,809,409 shares issued and outstanding, respectively		1,181		1,181
Additional paid-in capital		2,179,210		2,157,673
Retained earnings		920,225		275,725

Total Stockholders’ Equity		3,100,616		2,434,579

Total Liabilities and Stockholders’ Equity	$	4,362,597		2,923,906

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

CREATIVE LEARNING CORPORATION

Consolidated Statements of Operations

	(Unaudited)						(Unaudited)
	For The Three						For The Six
	Months Ended						Months Ended
	March 31,			March 31,			March 31,			March 31,
	2014			2013			2014			2013
Revenues:
Initial franchise fees	$	1,510,020		$	817,332		$	3,068,473		$	1,450,600
Royalty fees		440,771			229,743			741,423			379,277
Corporate Creativity Center sales		52,560			30,352			67,200			60,553
		2,003,351			1,077,427			3,877,096			1,890,430

Operating expenses:
Franchise consulting and commissions:
Related parties		182,608			109,007			431,452			245,272
Other		430,139			335,323			745,530			531,492
Franchise training and expenses		128,136			61,237			225,655			119,805
Salaries and payroll taxes		242,043			141,110			435,426			268,471
Advertising		171,665			134,175			363,607			194,625
Professional fees		80,424			37,576			129,617			65,314
Office expense		91,159			48,068			182,741			87,691
Depreciation		9,938			6,535			19,478			13,259
Stock based compensation		21,537			—			21,537			—
Other general and administrative expenses		129,842			94,480			332,172			255,987
Total operating expenses		1,487,491			967,511			2,887,215			1,781,916

Income (loss) from operations		515,860			109,916			989,881			108,514

Other income (expense):
Interest (expense)		(2	)		(1,861	)		(2	)		(1,995	)
Other income (expense)		41,598			(20,613	)		43,471			(20,613	)
Total other income (expense)		41,596			(22,474	)		43,469			(22,608	)

Income (loss) before provision for income taxes		557,456			87,442			1,033,350			85,906

Provision for income taxes (Note 1)		209,770			—			388,849			—

Net Income (loss)	$	347,686		$	87,442		$	644,501		$	85,906

Net Income (loss) per share
Basic	$	0.03		$	0.01		$	0.05		$	0.01
Basic Weighted average number of common shares outstanding		11,809,409			11,574,825			11,809,409			11,574,825
Diluted	$	0.03		$	0.01		$	0.05		$	0.01
Diluted Weighted average number of common shares outstanding		11,842,711			11,574,825			11,846,994			11,574,825

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

CREATIVE LEARNING CORPORATION

Consolidated Statements of Cash Flows

	(Unaudited)
	For the Six Months Ended
	March 31,			March 31,
	2014			2013
Cash flows from operating activities:
Net income	$	644,501		$	85,906
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		19,478			13,259
Loss on disposal of assets		1,475			—
Gain on sale of assets		(18,335	)		—
Materials purchased with notes payables		26,300			—
Compensatory equity issuances		21,537			47,800
Changes in operating assets and liabilities:
Accounts receivable		(25,758	)		(70,806	)
Accounts payable		131,110			(25,514	)
Accrued liabilities		13,193			866
Accrued marketing funds		32,405			54,801
Customer deposits		(37,076	)		19,979
Deposits		3,813			19,082
Income tax payable		387,099			—
Other receivables		(43,830	)		51,999
Prepaid expenses		(44,284	)		—
Unearned revenue		168,100			4,779
Net cash provided by operating activites		1,279,728			202,151
Cash flows from investing activities:
Property and equipment purchases		(31,321	)		(17,928	)
Intangible asset purchases		(10,000	)		(27,800	)
Intangible asset sale		65,325			—
Net cash provided (used) by investing activities		24,004			(45,728	)
Cash flows from financing activities:
Notes payable		(21,952	)		(23,500	)
Net cash (used) by financing activities		(21,952	)		(23,500	)
Net change in cash		1,281,780			132,923
Cash, beginning of period		2,004,947			1,041,786

Cash, end of period	$	3,286,727		$	1,174,709
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Income taxes	$	1,750		$	—
Interest	$	—		$	1,995
Supplemental non-cash investing and financing activities:
Intangible assets acquired with notes payables	$	66,774		$	—
Intangible assets sold with notes receivables	$	39,425		$
Equipment acquired with notes payables	$	6,000		$	—

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

CREATIVE LEARNING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

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. The financial statements represent the activity of BFK from May 19, 2009 forward, and the consolidated activity of BFKF and CLC from July 2, 2010 forward. BFK and CLC are hereinafter referred to collectively as the "Company".

In addition to the accounts of CLC and BFK, the accompanying consolidated financial statements include the accounts of CLC’s subsidiaries, BFK Development Company LLC (“BFKD”) from November 25, 2009 (BFKD’s inception) forward, CI Franchise Company LLC (“CI”) from September 14, 2012 (CI’s inception) forward, and Sew Fun Franchise Company LLC (SF) from January 8, 2013 (SF’s inception) forward.

Creative Learning Corporation operates through its wholly owned subsidiaries BFK FRANCHISE COMPANY, LLC, CI FRANCHISE COMPANY, LLC AND SEW FUN FRANCHISE COMPANY, LLC under the trade names Bricks 4 Kidz®, Challenge Island®, and Sew Fun Studios™ respectively, that offer children's enrichment and education franchises.

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 subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

CREATIVE LEARNING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

Reclassifications

Certain amounts in the prior year’s consolidated financial statements have been reclassified to conform to the current year presentation. The reclassifications did not have any effect on the prior year net loss.

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 had no cash equivalents at March 31, 2014 or September 30, 2013.

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, 2014 and September 30, 2013 the Company had $9,402 and $10,000, respectively, in its allowance for doubtful accounts.

Property and equipment

Property and equipment are stated at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets, currently set at five years. 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.

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.

Since the Company’s franchises are primarily a mobile concept and do not require finding locations or construction, the franchisees can begin operations as soon as they leave training. The franchise fees are fully collectible as of the date of the signing of the franchise agreement, but the franchise fees are not recognized as revenue until the last day they complete training when substantially all of the services required by the franchise agreement have been provided by the Company. Royalty fees are recognized as earned.

As of March 31, 2014 and September 30, 2013, the Company had $204,000 and $35,900, respectively, in unearned revenue for franchise fees collected but for which franchisees had not completed training.

CREATIVE LEARNING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

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.

For the six months ended March 31, 2014 and 2013, the Company recorded a tax provision of $388,849 and $-0- respectively on its pretax income of $1,033,350 and $85,906 respectively. The tax provision does not include any tax provision or benefit for certain foreign currency remeasurement gains and losses that are not recognized in any tax jurisdiction

The tax provision for the six month period ended March 31, 2014 is based on an estimated annual effective rate, which requires management to make its best estimate of annual pretax income or loss. During the year, management regularly updates forecasted annual pretax results. To the extent that actual fiscal year ended September 30, 2014 pretax results for income or loss vary from estimate, the actual tax provision or benefit recognized for the fiscal year ended September 30, 2014 could be materially different from the forecasted amount used to estimate the tax provision for the six months ended March 31, 2014.

Advertising costs

Advertising costs are expensed as incurred. Advertising costs for the six month periods ended March 31, 2014 and 2013 were $363,607 and $194,625, respectively.

CREATIVE LEARNING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

Net earnings (loss) per share

ASC 260-10-45, “Earnings Per Share”, requires presentation of "basic" and "diluted" earnings per share on the face of the statements of operations for all entities with complex capital structures. Basic earnings per share are computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted during the period. Dilutive securities having an anti-dilutive effect on diluted earnings per share are excluded from the calculation. When the Company is in loss position, no dilutive effect is considered.

Fair Value of Financial Instruments

Accounting Standards Codification (“820-10”) defines fair value as 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:

Inputs other than quoted prices that are observable for an asset or liability. These include: quoted prices for similar assets or liabilities in active market; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market-corroborated inputs).

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 amounts of cash, accounts receivable and current liabilities approximate fair value because of the short-term maturity of these items. 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.

CREATIVE LEARNING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

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.

Notes and Other Receivables

In July of 2013, the Company issued a $70,000 loan to a related party company, personally guaranteed by the related party, at 6% interest, monthly interest only payments and fully due and payable by July 1, 2015. The Note is convertible up to the maturity date to unrestricted shares in the related party company for any unpaid balance at $0.35 per share.

At March 31, 2014 and September 30, 2013, the Company had notes receivables from related parties of $70,000 and $70,000, respectively.

At March 31, 2014 the Company held certain notes and other receivables totaling $175,622, of which $154,162 was for extended payment terms of Franchise Fees, generally non-interest bearing notes with monthly payments, payable within one to two years, and Foreign Tax Credits of $21,460. These receivables are reported in the accompanying financial statements as current and long term other receivables in the accompanying financial statements.

At September 30, 2013, the Company had notes and other receivables of $131,792.

Notes Payables

In September 2012 the Company issued a non-interest bearing promissory note of $40,000 to a related party for consulting services payable by the issuance of 40,000 shares of the Company’s common stock. As of March 31, 2014 and September 30, 2013 the remaining balance on this promissory note was $20,000 and $20,000 respectively. This liability is reported in the accompanying financial statements as notes payable, related party, and will be paid with the issuance of the remaining 20,000 shares during the remainder of fiscal year 2014.

In December of 2013, the Company entered into a settlement agreement to purchase three territories from a Nevada franchisee. As part of this settlement, the Company agreed to two non-interest bearing notes, payable in monthly installments over the next eighteen months. As of March 31, 2014 the remaining balance for these notes was $81,364 and is reported in the accompanying financial statements as current and long term other notes payables.

CREATIVE LEARNING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

On March 31, 2014 and September 30, 2013 the Company owed $5,315 and $8,857, respectively, in deferred commission payments, non-interest bearing, payable in monthly payments, on deferred payment schedules related to extended payment terms of Franchise Fees.

Stock based compensation

The Company accounts for employee stock awards under ASC 718. Equity instruments issued to employees for services are recorded based on the fair value of the instrument issued. The Company accounts for non-employee stock awards under ACS 505-50. Equity instruments awarded 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.

Subsequent Events

Between April 1, 2014 and May 12, 2014 BFK Franchise Company, sold 17 new US franchises and 5 new international franchises. During this period CI Franchise Company sold 2 new US franchises and one Master Franchise in the Philippines.

In accordance with ASC 855-10, the Company has analyzed its operations subsequent to March 31, 2014 through the date these financial statements were issued and has determined that it does not have any material subsequent events to disclose in these financial statement other than the events described above.

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

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. The Company 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 primarily through a mobile franchise model.

BFK sold its first franchise in September 2009 and as of March 31, 2014, BFK has sold 497 franchises, operating in 40 states, the District of Columbia, Puerto Rico and 25 foreign countries.

On September 14, 2012, the Company formed CI Franchise Company LLC (“CI”) as a wholly owned subsidiary for purpose of operating a second franchise concept known as Challenge Island®, which provides unique challenge-based programs designed to foster critical and creative thinking skills, problem solving methodology, and core STEM (Science, Technology, Engineering, Mathematics) principles in children ages 3-13+. CI began selling franchises during the 2013 fiscal year.

As of March 31, 2014 CI has sold 16 franchises in the United States and 1 foreign country.

On January 8, 2013 the Company formed Sew Fun Franchise Company LLC (“SF”) as a wholly owned subsidiary for the purpose of operating a third franchise concept known as Sew Fun. Sew Fun is a brick and mortar business featuring stores/studios located in strip malls and offering after-school classes, camps and birthday parties for children ages 8-13+, as well as adult classes, in fashion design.

The Company is in the process registering SF with state franchising regulators, and as of March 31, 2014, no state registrations have been completed.

Unless otherwise indicated, all references to the Company include the operations of BFK, BFKD, CI and SF.

Material changes of items in the Company’s Statement of Operations for the six months ended March 31, 2014, as compared to the same period in 2013, are discussed below.

Item	Increase (I) or Decrease (D)	Reason
Revenues	I	Sale of more franchises and increase in royalties paid by established franchises.

Franchise consulting and commissions	I	Increased sales of franchises.

Franchise training and expenses	I	Increase in size of training classes.

Salaries and payroll taxes	I	Increase in staff to support the growth of the business.

Advertising	I	Increased expenditures to grow the business.

Professional fees	I	Increase in international franchise and trademarking legal fees

Office expense	I	Increased printing, office supplies, lego supplies and office expenses to support the growth of the Company.

Other general and administrative expenses	I	Overhead and administrative increases to support the growth of the Company.

Provision for income taxes	I	Income tax liabilities due to profits depleting prior net operating loss carryovers.

The Company expects that its revenue will continue to increase during the fiscal year ending September 30, 2014 as additional franchises are sold.

With the exception of the foregoing, the Company does not know of any trends, events or uncertainties that have had, or are reasonably expected to have, a material impact on the Company’s revenues or expenses.

Liquidity and Capital Resources

Sources and (uses) of funds for the six months ended March 31, 2014 and 2013 were as follows:

	Six months ended March 31,
	2014			2013

Cash provided by operations		1,279,728			202,151
Purchase of property and equipment		(31,321	)		(17,928	)
Purchase of intangible assets		(10,000	)		(27,800	)
Sale of intangible assets		65,325			--
Loans (repayment of loans)		(21,952	)		(23,500	)

As of March 31, 2014 the Company’s operating cash requirements were approximately $457,000 per month.

The Company anticipates that its capital requirements for the twelve-month period ending March 31, 2015 will be as follows:

Franchise consulting, commissions, training and related expenses	$	2,475,000
Salaries and payroll taxes	$	1,135,000
Advertising	$	785,000
Other operating expenses	$	1,350,000

The Company collects and allocates 2% of the franchisee gross revenues to a marketing fund, managed by the Company, which is used for the national branding of the Company’s concepts to benefit the franchisees. The marketing fund amounts are accounted for as a liability on the balance sheet and the actual collections are deposited into a marketing fund bank account. Expenses pertaining to the marketing fund activities are paid from the marketing fund and reduce the liability account. The Marketing Fund liability is actually offset with the matching amount of cash in the Marketing Fund bank account.

Contractual Obligations

The Company owns its corporate headquarters, but leases an additional office suite. The following table summarizes the Company’s contractual lease obligations as of December 31, 2013:

	2014		2015		2016		2017		Total

Lease of office space	$	5,400	$	10,800	$	10,800	$	0	$	27,000
Notes Payable		56,679		35,000		15,000		0	$	106,679

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

The Company saw another year of significant growth in the sales of franchises in fiscal year 2013 expanding from 210 to 395 franchises sold with its two brands in operation, resulting in increased revenues from franchise fees, including international growth and exposure. That trend continued for the first six months for the 2014 fiscal year setting a record in new sales revenues and adding an additional 117 franchises, both domestic and internationally. In addition, with franchisees being in the system longer, there were significant increases in royalty fees.

As a result of this growth, the Company experienced a significant increase in liquidity and expects all of these trends to continue through this fiscal year.

By the end of the 2013 fiscal year, the Company had used all of its startup, tax net loss carryovers, and will be liable for income taxes on reported net income.

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, 2014, 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, 2014, that materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

PART II

Item 6. Exhibits

Exhibits

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

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

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

101.INS **		XBRL Instance Document

101.SCH **		XBRL Taxonomy Extension Schema Document

101.CAL **		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF **		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB **		XBRL Taxonomy Extension Label Linkbase Document

101.PRE **		XBRL Taxonomy Extension Presentation Linkbase Document

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** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

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 19, 2014	By:	/s/ Brian Pappas
		Brian Pappas, Principal Executive, Financial and Accounting Officer