UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K/A
(Amendment No. 1)
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þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended September 30, 2016
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number 000-52883
CREATIVE LEARNING CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware |
| 14-1708544 |
(State or other jurisdiction of |
| (I.R.S. Employer |
incorporation or organization) |
| Identification No.) |
701 Market Street, Suite 113
St. Augustine, FL 32095
(904) 824-3133
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.0001 per share
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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No þ.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ¨ No þ.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 ¨ No þ.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨
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 ¨.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ¨ | Accelerated filer | ¨ |
Non-accelerated filer | ¨ | 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 ¨ No þ.
As of March 31, 2016, the aggregate market value of the common stock held by nonaffiliates of the registrant, based on the $0.15 closing price of the registrant’s common stock as reported on the OTC bulletin board on that date, was approximately $1.8 million. For purposes of this computation, all officers, directors and 10% beneficial owners of the registrant are deemed to be affiliates. Such determination should not be deemed to be an admission that such officers, directors or 10% beneficial owners are, in fact, affiliates of the registrant.
At December 12, 2016, there 12,100,409 shares of common stock of the registrant outstanding.
EXPLANATORY NOTE
This Amendment No. 1 on Form 10-K/A (this “Form 10-K/A”) amends the Annual Report on Form 10-K for the year ended September 30, 2016 (the “Original Form 10-K”) of Creative Learning Corporation filed with the Securities and Exchange Commission (the “SEC”) on December 22, 2016. This Form 10-K/A is being filed solely to revise Item 9A “Controls and Procedures.” This Form 10-K/A amends and restates in its entirety Item 9A of the Original Form 10-K.
Except as otherwise expressly noted herein and the filing of related certifications, this Form 10-K/A does not amend any other information set forth in the Original Form 10-K, and we have not updated disclosures contained therein to reflect any events that occurred at a date subsequent to the date of the Original Form 10-K. Accordingly, this Form 10-K/A should be read in conjunction with the Original Form 10-K and our other filings with the SEC.
Unless the context otherwise requires, when we use the words the “Company,” “Creative Learning,” “we,” “us,” “our” or “our Company” in this Form 10-K, we are referring to Creative Learning Corporation, a Delaware corporation, and its subsidiaries
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TABLE OF CONTENTS
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ITEM 9A.
Evaluation of Disclosure Controls and Procedures
An evaluation was carried out under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Disclosure controls and procedures are procedures designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time period specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and is communicated to management, including the Company’s Principal Executive Officer and Principal Financial Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, the Company’s Principal Executive Officer and Principal Financial Officer concluded that, because of the material weakness in the Company’s internal control over financial reporting described below, the Company’s disclosure controls and procedures were not effective as of September 30, 2015. The internal controls over financial reporting were not effective until the 4th fiscal quarter of 2016 when the remediation initiatives described below were fully implemented. Our Disclosure Committee met on December 1, 2016 and concluded the Company’s internal controls over financial reporting were effective on September 30, 2016.
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting and for the assessment of the effectiveness of internal control over financial reporting. Internal control over financial reporting is a process designed by, or under the supervision of the Company’s Principal Executive Officer and Principal Financial Officer and effected by the Company’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles and includes those policies and procedures that:
| (i) | pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; |
| (ii) | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and |
| (iii) | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures my deteriorate.
Management has conducted an assessment of the effectiveness of the Company’s internal control over financial reporting throughout FY2016 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway commission, or the COSO Framework. Management’s assessment included an evaluation of the design of the Company’s internal control over financial reporting and testing of the operational effectiveness of those controls. The internal controls over financial reporting were not effective until the 4th fiscal quarter of 2016. Our Disclosure Committee met on December 1, 2016 and concluded the Company’s internal controls over financial reporting were effective on September 30, 2016.
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Management’s Remediation Initiatives
In an effort to remediate the identified material weaknesses and other deficiencies and enhance the Company’s internal control over financial report, changes were made in the board of directors and management team. A new independent board was appointed, with the chairman being from outside the Company’s operating management team. Additional new independent board members were appointed in late July 2015, at which time a new interim CEO was appointed to direct the operations of the Company, replacing Brian Pappas. As of late July 2015, the board was comprised of seven members, four of whom are independent members possessing diverse professional experience including backgrounds varying from executive management, finance, auditing and franchise law. This improved the business acuity of the board. As of January 27, 2016, the number of board members was reduced to six with the resignation of Mr. Pappas, leaving four independent members and two from current company management. In addition, the Company appointed a new Chief Financial Officer on July 5, 2016. These major changes were designed to facilitate the Company’s ability to change and improve policies and practices. Since late July 2015, the Company has taken numerous other significant steps in remediation, including (1) terminated all corporate relationships – employees, consultants and contractors – that appeared to be the result of nepotism; (2) instituted a business approach designed to align the incentives of company employees with enhancement of shareholder value (see points 1 and 5 of this paragraph); (3) made changes in management and organizational structure including replacement of the CEO; (4) implementation of new corporate policies including without limitation a code of ethics, an insider trading policy, terminating the payment of commissions to company executives; (5) took corporate action to terminate the payment of commissions to Brian Pappas on new franchisee sales; (6) evaluating the development of a new Franchise Management Tool to improve systemic operations with franchisees; (7) retention of legal counsel with expertise in numerous issues central to company operations including without limitation SEC matters (including financial reporting), franchising law, corporate governance, trademark, litigation to represent the Company; (8) implementation of a new company electronic mail system under complete company control; (9) formulated new board committees to facilitate independent review and oversight of company activities (including executive, compensation and audit committees); (10) implemented policies barring brokers from participating in discussions regarding financing in relation to franchise sales; (11) outside franchise counsel conducted compliance training of company staff; (12) actively recruiting additional experienced senior management; (13) stricter controls related to disbursements; (14) implementing a more thorough review process around all aspects of financial reporting and (15) retaining individuals with the requisite background to better insure accurate and timely financial reporting. In addition to the foregoing, the Company intends to continue to aggressively address the issue of internal controls going forward as well.
This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm as such attestation is not required for smaller reporting filers such as us pursuant to applicable SEC rules.
Changes in Internal Control over Financial Reporting
Except as described under “—Management’s Remediation Initiatives” above, there were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2016 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.
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Pursuant to the requirements of Section 13 or 15(d) 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 |
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By: | /s/ Rod Whiton |
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| Rod Whiton Interim Chief Executive Officer |
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By: | /s/ Christian Miller |
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| Christian Miller Chief Financial Officer |
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Date: March 1, 2017
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.
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/s/ Rod Whiton |
| Interim Chief Executive Officer |
| March 1, 2017 |
Rod Whiton |
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/s/ Christian Miller |
| Chief Financial Officer |
| March 1, 2017 |
Christian Miller |
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| Director |
| March 1, 2017 |
Charles Grant |
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| Director |
| March 1, 2017 |
JoyAnn Kenny-Charlton |
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| Director |
| March 1, 2017 |
Michael Gorin |
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| Director |
| March 1, 2017 |
Joe Marucci |
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By: | /s/ Christian Miller |
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| Christian Miller |
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| Attorney-in-Fact |
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EXHIBIT 31.1
CERTIFICATIONS
I, Rod Whiton, certify that:
1. I have reviewed this annual report on Form 10-K of Creative Learning Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of the internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
March 1, 2017 |
| /s/ Rod Whiton |
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| Rod Whiton |
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| Interim Chief Executive Officer |
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| (Principal Executive Officer) |
EXHIBIT 31.2
CERTIFICATIONS
I, Christian Miller, certify that:
1. I have reviewed this annual report on Form 10-K of Creative Learning Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of the internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
March 1, 2017 |
| /s/ Christian Miller |
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| Christian Miller |
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| Chief Financial Officer |
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| (Principal Financial and Accounting Officer) |
EXHIBIT 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Creative Learning Corporation (the "Company") on Form 10-K for the period ending September 30, 2016 as filed with the Securities and Exchange Commission (the "Report"), Rod Whiton, the Company’s Principal Executive Officer, certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:
(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of the Company.
March 1, 2017 |
| /s/ Rod Whiton |
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| Rod Whiton |
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| Interim Chief Executive Officer |
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| (Principal Executive Officer) |
EXHIBIT 32.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Creative Learning Corporation (the "Company") on Form 10-K for the period ending September 30, 2016 as filed with the Securities and Exchange Commission (the "Report"), Christian Miller, the Company’s Principal Financial Officer, certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:
(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of the Company.
March 1, 2107 |
| /s/ Christian Miller |
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| Christian Miller |
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| Chief Financial Officer |
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| (Principal Financial and Accounting Officer) |