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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b>(1) Nature
of Organization, Operations and Summary of Significant Accounting Policies:</b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>Nature
of Organization</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">Creative
Learning Corporation (the “Company”) operates wholly owned subsidiaries, BFK Franchise Co., LLC (“BFK”)
and SF Franchise Company, LLC (“SF”) under the trade names Bricks 4 Kidz® and Sew Fun Studios™ respectively
that offer children's enrichment and education franchises. As of March 31, 2018, BFK franchisees operated in 631 territories in
40 states and 45 countries, and SF franchisees operated in 10 territories in 5 states and 2 countries.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>Basis
of Presentation</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b><i> </i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">The
accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally
accepted in the United States for interim financial information, with the instructions to Form 10-Q and with Rule 10-01 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes required for complete financial statements. In the
opinion of management, these consolidated financial statements contain all normal recurring adjustments considered necessary for
a fair presentation of the Company’s results for the interim periods that have been included. The results for the six months
ended March 31, 2018 are not necessarily indicative of the results to be expected for the full year. These statements should be
read in conjunction with the Company’s audited consolidated financial statements and management’s discussion and analysis
included in the Company’s annual report on Form 10-K for the year ended September 30, 2017.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>Use
of Estimates</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">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 the financial statements and the reported amounts of revenues and expenses during the reporting period. The more
significant estimates and assumptions made by management include the allowance for doubtful accounts, the valuation allowance
for deferred tax assets, depreciation of property and equipment, amortization of intangible assets, recoverability of long-lived
assets, and fair market value of equity instruments. Actual results could differ from those estimates as the current economic
environment has increased the degree of uncertainty inherent in these estimates and assumptions.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b><i> </i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>Restricted
Cash</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">The
Company had restricted cash of approximately $81,000 and $118,000 at March 31, 2018 and September 30, 2017, respectively, associated
with marketing funds collected from the franchisees. Per the franchise agreements, a marketing fund of 2% of franchisees’
gross cash receipts is collected and held to be spent on the promotion of the brand (see Note 4).</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>Accounts
and Notes Receivable</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">The
Company reviews accounts and notes receivable periodically for collectability, establishes an allowance for doubtful accounts,
and records bad debt expense when deemed necessary. The Company records an allowance for doubtful accounts and notes that is based
on historical trends, customer knowledge, any known disputes, and the aging of the accounts receivable balances combined with
management’s estimate of future potential recoverability. Receivables and notes are written off against the allowance after
all attempts to collect a receivable have failed. The Company believes its allowance for doubtful accounts at March 31, 2018 and
September 30, 2017 are adequate, but actual write-offs could exceed the recorded allowance.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>Property,
Equipment and Depreciation</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">Property
and equipment are stated at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of
the related assets, which range from three to forty 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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" align="center" style="font-size: 10pt; width: 50%; border-collapse: collapse">
<tr style="vertical-align: top">
<td style="width: 79%; border-bottom: black 1pt solid; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Fixed
Assets</font></td>
<td style="width: 1%; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 20%; border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Useful
Life</font></td></tr>
<tr style="vertical-align: top">
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Equipment</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">5
years</font></td></tr>
<tr style="vertical-align: top">
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Furniture and Fixtures</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">5
years</font></td></tr>
<tr style="vertical-align: top">
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Property and Improvements</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">15-40
years</font></td></tr>
<tr style="vertical-align: top">
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Software</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">3
years</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>Revenue
Recognition</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">Revenue
is recognized on an accrual basis after services have been performed under contract terms and in accordance with regulatory requirements,
the service price to the client is fixed or determinable, and collectability is reasonably assured.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">Since
the Company’s franchises are primarily a mobile concept and do not require finding locations or construction, the franchisees
can begin operations as soon as they complete training. The Initial Franchise Fees are fully collectible and nonrefundable as
of the date of the signing of the franchise agreement, but the franchise fees are not recognized as revenue until initial training
has been completed and when substantially all of the services required by the franchise agreement have been fulfilled by the Company
in accordance with ASC Topic 952-605 <i>Revenue Recognition-Franchisor</i>.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">Royalties
are recognized as earned on a monthly basis.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>Advertising
Costs</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">Advertising
costs are expensed as incurred. The Company incurred advertising costs for the quarters ended March 31, 2018 and 2017 of approximately
$3,000 and $10,000, respectively.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>Income
Taxes</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">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 with the ultimate realization being dependent
on generating sufficient taxable income in future years. 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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">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 March 31, 2018 and September 30, 2017, respectively, and has not recognized interest
and/or penalties during the three months ended March 31, 2018, 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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">The
tax years subject to examination by major tax jurisdictions include the years 2014 and forward by the U.S. Internal Revenue Service.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>Net
earnings (loss) per share</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">Basic
earnings per share are computed by dividing net income (loss) by the weighted average number of common shares outstanding for
the period. Diluted earnings (loss) per share reflect the potential dilution that could occur if stock options or other contracts
to issue common stock were exercised or converted during the period. Dilutive securities having an anti-dilutive effect on diluted
earnings per share are excluded from the calculation.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>Stock-based
compensation</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b><i> </i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>Recent
accounting pronouncements</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">In
May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update No. 2014-09, Revenue
from Contracts with Customers (Topic 606) (“ASU 2014-09”), which amends the existing accounting standards for revenue
recognition. Topic 606 is based on principles that govern the recognition of revenue at an amount an entity expects to be entitled
when products are transferred to customers. Topic 606 is required to be adopted by the Company on October 1, 2018. Early adoption
is permitted. The Company is currently evaluating the impact of adopting the new revenue standard on its consolidated financial
statements. Under the prior revenue recognition rules, the Company generally recorded revenue for initial franchise sales up front
upon the completion of the sale transaction and corresponding training obligations. Under Topic 606, franchise sales revenue is
generally deferred and recognized over the life of the franchise agreement as there is an ongoing obligation of the company to
perform under the agreement. Accordingly, the Company expects a significant impact upon adoption as prior franchise sales which
had previously been recognized up front will need to be recast as deferred over the remaining life of the agreements from the
adoption date. The recognition of royalty revenue is not expected to change under Topic 606. The Company’s initial calculations
in regards to the change in revenue recognition would create a deferred liability of approximately $7MM to $10MM with recognition
of this deferred revenue of $80,000 to $250,000 per month depending on the activity during the period.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">In
March 2016, the FASB issued ASU No. 2016-09, C<i>ompensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based
Payment Accounting, </i>which is intended to improve and simplify several aspects of the accounting for employee share-based payment
transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification
on the statement of cash flows. Under the new standard, income tax benefits and deficiencies are to be recognized as income tax
expense or benefit in the income statement and the tax effects of exercised or vested awards should be treated as discrete items
in the reporting period in which they occur. An entity should also recognize excess tax benefits regardless of whether the benefit
reduces taxes payable in the current period. Excess tax benefits should be classified along with other income tax cash flows as
an operating activity. In regards to forfeitures, the entity may make an entity-wide accounting policy election to either estimate
the number of awards that are expected to vest or account for forfeitures when they occur. The Company has adopted this standard,
and there was no material effect on the consolidated financial statements.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif"><b><i> </i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">In
November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB
Emerging Issues Task Force)”. The amendments in ASU 2016-18 require that a statement of cash flows explain the change during
the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents.
Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash
equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU
2016-18 becomes effective for fiscal years beginning after December 15, 2017 with early adoption permitted. The Company is currently
evaluating the impact ASU 2016-18 will have on its consolidated financial statements.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">In
February 2016, the FASB issued ASU 2016-02, “Leases“, which requires lessees to recognize a right-to-use asset and
a lease obligation for all leases. Lessees are permitted to make an accounting policy election to not recognize an asset and liability
for leases with a term of twelve months or less. Additional qualitative and quantitative disclosures, including significant judgments
made by management, will be required. The new standard will become effective for the Company beginning with the first quarter
2020 and requires a modified retrospective transition approach including a number of practical expedients. Early adoption of the
standard is permitted. The Company is currently evaluating the impact the adoption of this accounting guidance will have on the
consolidated financial statements.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b>(2)
Related Party </b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b> </b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">A
party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls,
is controlled by, or is under common control with the Company. Related parties include principal owners of the Company, its management,
members of the immediate families of principal owners of the Company and its management, and other parties with which the Company
may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that
one of the transacting parties might be prevented from fully pursuing its own separate interests.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">On
December 29<sup>th</sup> and 31<sup>st</sup>, 2017 the Company entered into two separate line of credit agreements in the amount
of $50,000 each with two members of the Company’s Board of Directors. These agreements were intended to provide liquidity
in the event the Company needed access to such. The agreements are payable upon demand, have an initial term of 5 years, and bear
interest at market rates. As of March 31, 2018, no amounts were outstanding on these lines of credit.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">The
Company has formed a not for profit entity, Bricks 4 Kidz, Inc., which was approved for 501(c)(3) designation during the quarter
ended March 31, 2018. The entity will provide specialized educational programs and training support to underserved communities
to teach the fundamentals of S.T.E.M. (science, technology, engineering and math) education for the benefit of school age children
and teachers. This entity may allow our franchisees to have greater outreach in their communities. The Company paid approximately
$7,000 in costs and fees related to the formation of Bricks 4 Kidz, Inc.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b>(3) Notes
and Other Receivables</b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b><i> </i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">At
March 31, 2018 and September 30, 2017, the Company held certain notes receivable totaling approximately $101,000 and $95,000,
respectively, for extended payment terms of franchise fees. The Company only writes off franchisees’ receivables in the
event that they leave the network. In addition, the Company analyzes the collectability of all receivables and reserves accordingly.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; border-collapse: collapse; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td nowrap="nowrap" style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" nowrap="nowrap" style="border-bottom: black 1pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">2018</font></td>
<td nowrap="nowrap" style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" nowrap="nowrap" style="border-bottom: black 1pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">2019</font></td>
<td nowrap="nowrap" style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" nowrap="nowrap" style="border-bottom: black 1pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">2020</font></td>
<td nowrap="nowrap" style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" nowrap="nowrap" style="border-bottom: black 1pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">2021</font></td>
<td nowrap="nowrap" style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" nowrap="nowrap" style="border-bottom: black 1pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">2022</font></td>
<td nowrap="nowrap" style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" nowrap="nowrap" style="border-bottom: black 1pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">Thereafter</font></td>
<td nowrap="nowrap" style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" nowrap="nowrap" style="border-bottom: black 1pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">Total</font></td>
<td nowrap="nowrap" style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 30%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">Payment
schedules for Notes Receivable</font></td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 7%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">11,804</font></td>
<td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 7%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">19,539</font></td>
<td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 7%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">16,235</font></td>
<td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 7%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">15,370</font></td>
<td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 7%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">15,571</font></td>
<td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 7%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">22,715</font></td>
<td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 7%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">101,234</font></td>
<td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>(4) Accrued
Marketing Fund</b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">Per
the terms of the franchise agreements, the Company collects 2% of a franchisee’s gross revenues for a marketing fund, managed
by the Company, to allocate towards national branding of the Company’s concepts to benefit the franchisees.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">At
March 31, 2018 and September 30, 2017, the accrued marketing fund liability balances were approximately $100,000 and $132,000,
respectively.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>(5)
Accrued Liabilities</b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b> </b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">The
Company had accrued liabilities at March 31, 2018, and September 30, 2017 as follows:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" align="center" style="width: 55%; border-collapse: collapse; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td nowrap="nowrap" style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" nowrap="nowrap" style="text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">March
31,</font></td>
<td nowrap="nowrap"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" nowrap="nowrap" style="text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">September
30,</font></td>
<td nowrap="nowrap"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td nowrap="nowrap" style="border-bottom: black 1pt solid"><font style="font: 10pt Times New Roman, Times, Serif">Accrued
Liabilities</font></td>
<td nowrap="nowrap"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" nowrap="nowrap" style="border-bottom: black 1pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">2018</font></td>
<td nowrap="nowrap" style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="border-bottom: black 1pt solid"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" nowrap="nowrap" style="border-bottom: black 1pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">2017</font></td>
<td nowrap="nowrap" style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 64%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">Accrued
Legal Fees</font></td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 15%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">28,967</font></td>
<td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 15%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">77,719</font></td>
<td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">Accrued Legal Settlements</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">55,714</font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">32,143</font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">Accrued Exit Agreement</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">9,739</font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">Accrued
Other</font></td>
<td style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">5,916</font></td>
<td style="padding-bottom: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">16,126</font></td>
<td style="padding-bottom: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 2.5pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 2.5pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.5pt double; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.5pt double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">90,597</font></td>
<td style="padding-bottom: 2.5pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 2.5pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.5pt double; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.5pt double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">135,727</font></td>
<td style="padding-bottom: 2.5pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>(6)
Stock-Based Compensation</b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b> </b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">On
December 29<sup>th</sup> and 31<sup>st</sup>, 2017, the Company issued an aggregate of 14,286 shares of Common Stock to two Directors
of the Company. These shares were issued in conjunction with the issuance of lines of credit from the two directors. The fair
value of the shares on the date of grant were $2,000, and the shares vested immediately. The Company expensed $2,000 in connection
with the grant during the quarter ended December 31, 2017.</font></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b>(7)
Commitments and Contingencies</b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>Lease
Commitments</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0pt 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">Rent
expense was approximately $5,000 and $6,000, respectively, for the three months ended March 31, 2018 and 2017, and $9,000 and
$9,000, respectively, for the six months ended March 31, 2018 and 2017.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">  </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>Litigation
</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">Except
as disclosed below, there have been no significant developments in the pending legal proceedings as previously reported in Footnote
10, Commitments and Contingencies, of our Consolidated Financial Statements in our Annual Report on Form 10-K, for the year ended
September 30,2017.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0pt 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">On
April 24th, 2018 the Company paid $45,000 to Kristena Bins-Turner and Back and 4th, LLC to settle an arbitration award entered
on February 13, 2018. That amount included reimbursement of $15,381.01 for arbitration costs related to the eight franchise territories
that Back and 4th LLC owned. The Company accrued for the costs related to this arbitration in the 1st Quarter of 2018</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"> </p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>Nature
of Organization</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">Creative
Learning Corporation (the “Company”) operates wholly owned subsidiaries, BFK Franchise Co., LLC (“BFK”)
and SF Franchise Company, LLC (“SF”) under the trade names Bricks 4 Kidz® and Sew Fun Studios™ respectively
that offer children's enrichment and education franchises. As of March 31, 2018, BFK franchisees operated in 631 territories in
40 states and 45 countries, and SF franchisees operated in 10 territories in 5 states and 2 countries.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>Basis
of Presentation</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b><i> </i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">The
accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally
accepted in the United States for interim financial information, with the instructions to Form 10-Q and with Rule 10-01 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes required for complete financial statements. In the
opinion of management, these consolidated financial statements contain all normal recurring adjustments considered necessary for
a fair presentation of the Company’s results for the interim periods that have been included. The results for the six months
ended March 31, 2018 are not necessarily indicative of the results to be expected for the full year. These statements should be
read in conjunction with the Company’s audited consolidated financial statements and management’s discussion and analysis
included in the Company’s annual report on Form 10-K for the year ended September 30, 2017.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>Use
of Estimates</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">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 the financial statements and the reported amounts of revenues and expenses during the reporting period. The more
significant estimates and assumptions made by management include the allowance for doubtful accounts, the valuation allowance
for deferred tax assets, depreciation of property and equipment, amortization of intangible assets, recoverability of long-lived
assets, and fair market value of equity instruments. Actual results could differ from those estimates as the current economic
environment has increased the degree of uncertainty inherent in these estimates and assumptions.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>Restricted
Cash</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">The
Company had restricted cash of approximately $81,000 and $118,000 at March 31, 2018 and September 30, 2017, respectively, associated
with marketing funds collected from the franchisees. Per the franchise agreements, a marketing fund of 2% of franchisees’
gross cash receipts is collected and held to be spent on the promotion of the brand (see Note 4).</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>Accounts
and Notes Receivable</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">The
Company reviews accounts and notes receivable periodically for collectability, establishes an allowance for doubtful accounts,
and records bad debt expense when deemed necessary. The Company records an allowance for doubtful accounts and notes that is based
on historical trends, customer knowledge, any known disputes, and the aging of the accounts receivable balances combined with
management’s estimate of future potential recoverability. Receivables and notes are written off against the allowance after
all attempts to collect a receivable have failed. The Company believes its allowance for doubtful accounts at March 31, 2018 and
September 30, 2017 are adequate, but actual write-offs could exceed the recorded allowance.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>Property,
Equipment and Depreciation</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">Property
and equipment are stated at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of
the related assets, which range from three to forty 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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" align="center" style="font-size: 10pt; width: 50%; border-collapse: collapse">
<tr style="vertical-align: top">
<td style="width: 79%; border-bottom: black 1pt solid; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Fixed
Assets</font></td>
<td style="width: 1%; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 20%; border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Useful
Life</font></td></tr>
<tr style="vertical-align: top">
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Equipment</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">5
years</font></td></tr>
<tr style="vertical-align: top">
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Furniture and Fixtures</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">5
years</font></td></tr>
<tr style="vertical-align: top">
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Property and Improvements</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">15-40
years</font></td></tr>
<tr style="vertical-align: top">
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Software</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">3
years</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>Revenue
Recognition</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">Revenue
is recognized on an accrual basis after services have been performed under contract terms and in accordance with regulatory requirements,
the service price to the client is fixed or determinable, and collectability is reasonably assured.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">Since
the Company’s franchises are primarily a mobile concept and do not require finding locations or construction, the franchisees
can begin operations as soon as they complete training. The Initial Franchise Fees are fully collectible and nonrefundable as
of the date of the signing of the franchise agreement, but the franchise fees are not recognized as revenue until initial training
has been completed and when substantially all of the services required by the franchise agreement have been fulfilled by the Company
in accordance with ASC Topic 952-605 <i>Revenue Recognition-Franchisor</i>.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">Royalties
are recognized as earned on a monthly basis.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>Advertising
Costs</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">Advertising
costs are expensed as incurred. The Company incurred advertising costs for the quarters ended March 31, 2018 and 2017 of approximately
$3,000 and $10,000, respectively.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>Income
Taxes</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">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 with the ultimate realization being dependent
on generating sufficient taxable income in future years. 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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">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 March 31, 2018 and September 30, 2017, respectively, and has not recognized interest
and/or penalties during the three months ended March 31, 2018, 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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">The
tax years subject to examination by major tax jurisdictions include the years 2014 and forward by the U.S. Internal Revenue Service.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>Net
earnings (loss) per share</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">Basic
earnings per share are computed by dividing net income (loss) by the weighted average number of common shares outstanding for
the period. Diluted earnings (loss) per share reflect the potential dilution that could occur if stock options or other contracts
to issue common stock were exercised or converted during the period. Dilutive securities having an anti-dilutive effect on diluted
earnings per share are excluded from the calculation.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>Stock-based
compensation</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b><i> </i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>Recent
accounting pronouncements</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">In
May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update No. 2014-09, Revenue
from Contracts with Customers (Topic 606) (“ASU 2014-09”), which amends the existing accounting standards for revenue
recognition. Topic 606 is based on principles that govern the recognition of revenue at an amount an entity expects to be entitled
when products are transferred to customers. Topic 606 is required to be adopted by the Company on October 1, 2018. Early adoption
is permitted. The Company is currently evaluating the impact of adopting the new revenue standard on its consolidated financial
statements. Under the prior revenue recognition rules, the Company generally recorded revenue for initial franchise sales up front
upon the completion of the sale transaction and corresponding training obligations. Under Topic 606, franchise sales revenue is
generally deferred and recognized over the life of the franchise agreement as there is an ongoing obligation of the company to
perform under the agreement. Accordingly, the Company expects a significant impact upon adoption as prior franchise sales which
had previously been recognized up front will need to be recast as deferred over the remaining life of the agreements from the
adoption date. The recognition of royalty revenue is not expected to change under Topic 606. The Company’s initial calculations
in regards to the change in revenue recognition would create a deferred liability of approximately $7MM to $10MM with recognition
of this deferred revenue of $80,000 to $250,000 per month depending on the activity during the period.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">In
March 2016, the FASB issued ASU No. 2016-09, C<i>ompensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based
Payment Accounting, </i>which is intended to improve and simplify several aspects of the accounting for employee share-based payment
transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification
on the statement of cash flows. Under the new standard, income tax benefits and deficiencies are to be recognized as income tax
expense or benefit in the income statement and the tax effects of exercised or vested awards should be treated as discrete items
in the reporting period in which they occur. An entity should also recognize excess tax benefits regardless of whether the benefit
reduces taxes payable in the current period. Excess tax benefits should be classified along with other income tax cash flows as
an operating activity. In regards to forfeitures, the entity may make an entity-wide accounting policy election to either estimate
the number of awards that are expected to vest or account for forfeitures when they occur. The Company has adopted this standard,
and there was no material effect on the consolidated financial statements.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif"><b><i> </i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">In
November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB
Emerging Issues Task Force)”. The amendments in ASU 2016-18 require that a statement of cash flows explain the change during
the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents.
Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash
equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU
2016-18 becomes effective for fiscal years beginning after December 15, 2017 with early adoption permitted. The Company is currently
evaluating the impact ASU 2016-18 will have on its consolidated financial statements.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">In
February 2016, the FASB issued ASU 2016-02, “Leases“, which requires lessees to recognize a right-to-use asset and
a lease obligation for all leases. Lessees are permitted to make an accounting policy election to not recognize an asset and liability
for leases with a term of twelve months or less. Additional qualitative and quantitative disclosures, including significant judgments
made by management, will be required. The new standard will become effective for the Company beginning with the first quarter
2020 and requires a modified retrospective transition approach including a number of practical expedients. Early adoption of the
standard is permitted. The Company is currently evaluating the impact the adoption of this accounting guidance will have on the
consolidated financial statements.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">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.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" align="center" style="font-size: 10pt; width: 50%; border-collapse: collapse">
<tr style="vertical-align: top">
<td style="width: 79%; border-bottom: black 1pt solid; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Fixed
Assets</font></td>
<td style="width: 1%; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 20%; border-bottom: black 1pt solid; text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Useful
Life</font></td></tr>
<tr style="vertical-align: top">
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Equipment</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">5
years</font></td></tr>
<tr style="vertical-align: top">
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Furniture and Fixtures</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">5
years</font></td></tr>
<tr style="vertical-align: top">
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Property and Improvements</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">15-40
years</font></td></tr>
<tr style="vertical-align: top">
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Software</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: center; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">3
years</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">In
addition, the Company analyzes the collectability of all receivables and reserves accordingly.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; border-collapse: collapse; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td nowrap="nowrap" style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" nowrap="nowrap" style="border-bottom: black 1pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">2018</font></td>
<td nowrap="nowrap" style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" nowrap="nowrap" style="border-bottom: black 1pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">2019</font></td>
<td nowrap="nowrap" style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" nowrap="nowrap" style="border-bottom: black 1pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">2020</font></td>
<td nowrap="nowrap" style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" nowrap="nowrap" style="border-bottom: black 1pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">2021</font></td>
<td nowrap="nowrap" style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" nowrap="nowrap" style="border-bottom: black 1pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">2022</font></td>
<td nowrap="nowrap" style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" nowrap="nowrap" style="border-bottom: black 1pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">Thereafter</font></td>
<td nowrap="nowrap" style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" nowrap="nowrap" style="border-bottom: black 1pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">Total</font></td>
<td nowrap="nowrap" style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 30%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">Payment
schedules for Notes Receivable</font></td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 7%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">11,804</font></td>
<td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 7%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">19,539</font></td>
<td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 7%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">16,235</font></td>
<td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 7%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">15,370</font></td>
<td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 7%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">15,571</font></td>
<td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 7%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">22,715</font></td>
<td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 7%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">101,234</font></td>
<td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">The
Company had accrued liabilities at March 31, 2018, and September 30, 2017 as follows:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" align="center" style="width: 55%; border-collapse: collapse; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td nowrap="nowrap" style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" nowrap="nowrap" style="text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">March
31,</font></td>
<td nowrap="nowrap"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" nowrap="nowrap" style="text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">September
30,</font></td>
<td nowrap="nowrap"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td nowrap="nowrap" style="border-bottom: black 1pt solid"><font style="font: 10pt Times New Roman, Times, Serif">Accrued
Liabilities</font></td>
<td nowrap="nowrap"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" nowrap="nowrap" style="border-bottom: black 1pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">2018</font></td>
<td nowrap="nowrap" style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="border-bottom: black 1pt solid"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" nowrap="nowrap" style="border-bottom: black 1pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">2017</font></td>
<td nowrap="nowrap" style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 64%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">Accrued
Legal Fees</font></td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 15%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">28,967</font></td>
<td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 15%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">77,719</font></td>
<td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">Accrued Legal Settlements</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">55,714</font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">32,143</font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">Accrued Exit Agreement</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">9,739</font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">Accrued
Other</font></td>
<td style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">5,916</font></td>
<td style="padding-bottom: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">16,126</font></td>
<td style="padding-bottom: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 2.5pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 2.5pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.5pt double; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.5pt double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">90,597</font></td>
<td style="padding-bottom: 2.5pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 2.5pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.5pt double; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.5pt double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">135,727</font></td>
<td style="padding-bottom: 2.5pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
P5Y
P5Y
P15Y
P40Y
P3Y
631
10
40
5
45
2
0.02
7000000
10000000
80000
250000
50000
50000
P5Y
P5Y
11804
19539
16235
15370
15571
22715
101234
95000
101000
77719
28967
32143
55714
9739
16126
5916
14286
2000
2000
5000
9000
6000
9000
607970
1204807
581785
1320671
45309
10313
140313
94209
557888
571472
1180298
1105825
4773
4773
60
45000
15381.01