Creative Learning Corporation Recaps Operational Developments

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Creative Learning Corporation (CLCN) reports significant improvements in structure, systems, operations and policy.

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Creative Learning Corporation (CLCN) is pleased to be able to report that it is working very effectively with its new independent auditor toward completion of its 2015 audit. While that process proceeds, CLCN wanted to make a concise initial report to its shareholders regarding some of the numerous significant steps it has taken since Brian Pappas’ departure to reverse prior mismanagement, and implement the Company’s structure, systems, operations and policy expected of a publicly-traded company so as to maximize shareholder value. The improvements that have been made include:

(1)    Eliminated the previous commission-based executive compensation system to align officer compensation with enhancement of shareholder value, thereby focusing officers upon maximizing corporate profits rather than the commissions the officers received on sales irrespective of franchisee suitability. Current management believes that company officers must be unqualifiedly incented to enhance shareholder value;
(2)    Implemented previously absent cash flow measures to plan and track spending;
(3)    Implemented previously absent expenditure controls to ensure proper documentation and independent review/approval, thereby installing standard corporate controls and acting to foreclose prior misuse of company assets;
(4)    Populated the Board with four independent directors, three with extensive experience in finance and/or public company operations including Sarbanes-Oxley (“SOX”) compliance, and the fourth with extensive experience as a franchising lawyer;
(5)    Each of the four new directors is independent from the company and each other, most having not met until their appointment to the board;
(6)    Formulated new board committees to facilitate independent review and oversight of Company activities (including executive, compensation and audit committees);
(7)    Implemented myriad new corporate policies including without limitation a code of ethics, an insider trading policy, an anti-nepotism policy, and expenditure review and approval policies;
(8)    Retained a CFO with experience in public companies and SOX compliance;
(9) Dramatically increased emphasis upon compliance to forestall future regulatory expense, including without limitation careful monitoring of broker activity, outside franchise counsel compliance training of company staff, increased training of franchisees;
(10) 43% increase in sales of international master franchisees year-over-year 2016 to 2015;
(11) Implemented an IT system (including emails) under complete company control to replace the previous system, which was not under full company control, and thus permitted Brian Pappas and others to handle core company operations and Company documents via private web portals not under company control;
(12) Terminated all corporate relationships – employees, consultants and contractors – that appeared to be the result of nepotism with Brian Pappas;
(13) Sold Company affiliate Challenge Island, which presented substantial financial and legal risk to the Company under various contractual relationships;
(14) Resolved state regulatory investigations in Virginia;
(15) Retained legal counsel with expertise in numerous issues central to Company operations including without limitation SEC matters (including financial reporting), the sale of Challenge Island, franchising law, corporate governance, trademarks, complex contracts, and litigation to represent the Company. The Company believes that by effective legal advice, the Company will stand on more stable footing than it did previously, avoiding time-consuming and costly expense.

Additionally, the Company has begun implementing a plan designed to dramatically enhance coordination with and assistance to its franchisee base to, among other things: (1) provide leadership resources to help franchisees achieve operational improvements and increased profitability, (2) improve franchisee training, (3) enhance and professionalize marketing and marketing coordination with the Company; and (4) update and improve course curriculum. The Company believes that strengthening the quality of its product and franchisee base will provide important benefits to shareholders in the form of Company stability, product image, growth and profitability.

The CLCN believes that many of the changes made were necessary to bring the Company up to the standards required of a public company. Additionally, the Company expects that the foregoing improvements together with other initiatives under development will avoid many of the costly difficulties the Company has had to resolve over the past year. Moreover, the Company anticipates that a large number of the adjustments yield meaningful benefits in terms of operational effectiveness and corporate stability, thereby saving the Company money and allowing it to focus more on franchise sales and product development. In summary, CLCN is intensively focused upon dramatically enhancing shareholder value.

This press release contains forward-looking statements can be identified by the use of forward-looking terminology, including the words “believes,” “estimates,” “anticipates,” “expects,” “intends,” “plans,” “may,” “will,” “potential,” “projects,” “predicts,” “continue,” or “should,” or, in each case, their negative or other variations or comparable terminology. There can be no assurance that actual results will not materially differ from expectations. Forward-looking statements involve known and unknown risks and uncertainties that may cause our actual future results to differ materially from those projected or contemplated in the forward-looking statements.

Inquiries regarding this release should be directed to investorrelations(at)creativelearningcorp(dot)com.

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