Item 2.02 Results of Operations and Financial Condition
Creative Learning Corporation (the "Company") hereby updates the status of its
annual report on Form 10-K for the year ended September 30, 2019. The Company
expects to complete its audit for the just-completed fiscal year, and file its
Form 10-K on or about February 15, 2020. The Company's delay in filing its Form
10-K is due to the complexities of implementing a new accounting rule,
Accounting Standards Update 2014-09, Revenue from Contracts with Customers
("Topic 606"), which the Company adopted as of the fiscal year beginning October
1, 2018. The adoption of the new guidance changed the timing of recognition of
franchise sales and franchise renewal revenue and related commissions paid on
franchise sales. Specifically, the Company previously recognized revenue at the
time of sale. Under the new revenue standard, the franchise sale initial fees
are considered to be a part of the license of symbolic intellectual property,
which is now recognized over the contractual term of the franchise agreement,
which is typically 10 years. Also, the commissions related to franchise sales
are now recorded as an asset on the balance sheet, and are recognized over the
contractual term of the franchise agreement in "commission expense" on the
statement of operations. Previously, such commissions were expensed as incurred.
The Company believes that its revenues, net income and operating cash flow for
the three months and year ended September 30, 2019 will be consistent with prior
periods assuming the Company was subject to Topic 606 in all prior periods.
The Company expects to release this information orally to its shareholders on a
case by case basis.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On January 27, 2020, Bart Mitchell informed the Company's board of directors
that he declined to stand for reelection to the board of directors. Mr. Mitchell
is also the Company's chief executive officer, a position from which he does not
intend to resign. Mr. Mitchell informed the board that he believed that he
should not serve as both chief executive officer and a member of the board,
which oversees the chief executive officer, as a matter of good corporate
governance. Mr. Mitchell serves on the board's Executive Committee and the
Compensation Committee.
Item 5.08 Shareholder Director Nominations
On January 27, 2020, the Company's board of directors approved a resolution to
hold an annual meeting of shareholders of the Company on April 15, 2020 in
Boise, Idaho (the "Annual Meeting"). At the Annual Meeting, shareholders will
vote on the election of directors, who will hold office until the next annual
meeting of shareholders of the Company, and whether to ratify the board's
selection independent public accountants for the next fiscal year. The board is
in the process of evaluating its nominees for election at the Annual Meeting,
which will be disclosed in its proxy materials for the Annual Meeting.
Nominations by shareholder of persons to be elected as directors at the Annual
Meeting are due by the close of business on February 6, 2020, and will be valid
only if they include the information specified in the Company's bylaws.
© Edgar Online, source Glimpses