What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-01-11 compared with 2020-12-30 · 390 added, 391 removed, 53 unchanged (94% of the section changed)

Management's Discussion and Analysis of Financial Condition and Results of Operations

following discussion and analysis should be read in conjunction with the consolidated financial statements and notes thereto included

elsewhere in this Form 10-K.

All information presented herein is based on the Company’s fiscal year, which ends September

Unless otherwise stated, references to particular years, quarters, months or periods refer to the Company’s fiscal years

ended in September and the associated quarters, months and periods of those fiscal years.

2020, the Company experienced a year of decline in the number of active franchises, compared to fiscal year 2019, decreasing from

503 franchise territories to 451, within the two brands.

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

The following

discussion and analysis should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere

in this Form 10-K.

All information presented herein is based on the Company’s fiscal year, which ends September 30.

otherwise stated, references to particular years, quarters, months or periods refer to the Company’s fiscal years ended in

September and the associated quarters, months and periods of those fiscal years.

During 2021, the

Company experienced a year of significant decline in the number of active franchises, compared to fiscal year 2020, decreasing

from 451 franchise territories to 274, within the two brands.

The reduction in the overall number of franchises was to the termination

of franchises during the period is the result of the company working to discharge non-performing franchisees from the system,

the interruption of sales of new franchises as a result of the Coronavirus (“COVID-19”) pandemic, and the cessation

of sales while the Company completed its audit for the fiscal year ended September 30, 2019.

The reduction in the growth rate

of franchises sold in fiscal year 2020 resulted in a decrease in initial franchise fees of approximately $1,242,000 in a year-to-year

Company’s royalty fees revenue decreased to approximately $1,448,000 in fiscal year 2020 from approximately $1,696,000 in

the prior year, a decrease of $248,000 (15%), primarily due to an increasing number of non-performing franchisees.

Marketing fund

revenue decreased approximately $92,000 in the year ended September 30, 2020 primarily due to the impact of COVID-19.

fees increased by 87% in the year ended September 30, 2020 due to the Company beginning to charge franchisees for the use of their

online platform in the prior year.

expenses remained fairly consistent overall in fiscal year 2020 as compared to fiscal 2019 with a 4% decrease year over year.

The Company had net income of approximately $620,000 in fiscal year 2020, down from a net income of approximately $2,018,000 the

prior year, a decrease of approximately $1,397,000 primarily due to the acceleration of deferred revenues in 2019, the slowdown

in new franchise sales, and franchisees that were provided a discount by the Company due to the impact of the COVID-19 pandemic

on their operations.

of Operations

following table represents the Company’s franchise sales activity for the fiscal years ended September 30, 2020 and 2019:

of franchises during the period is the result of the company working to discharge non-performing franchisees from the system and

the interruption of sales of new franchises as a result of the Coronavirus (“COVID-19”) pandemic.

The increased termination

of franchises in fiscal year 2021 resulted in a slight increase in initial franchise fees of approximately $19,000 in a year-to-year

comparison as a result of the acceleration of deferred franchise sale revenues.

The Company’s

royalty fees revenue decreased to approximately $774,000 in fiscal year 2021 from approximately $1,448,000 in the prior year, a

decrease of $674,000 (47%), primarily due to an increasing number of non-performing franchisees.

Marketing fund revenue decreased

approximately $130,000 in the year ended September 30, 2021 primarily due to the impact of COVID-19, as the Company elected not

to charge franchisees any marketing fund fees for fiscal 2021.

Technology fees decreased by 35% in the year ended September 30,

2021 primarily due to the impact of COVID-19 and the increasing number of non-performing franchises.

Operating expenses decreased overall

in fiscal year 2021 as compared to fiscal 2020 with a 24% decrease year over year.

The Company had net income of approximately $325,000

in fiscal year 2021, down from a net income of approximately $620,000 the prior year, a decrease of approximately $295,000.

in net income was primarily due to the decline in revenues in fiscal 2021 as compared to fiscal 2020, which was primarily due to the reduced

level of royalty revenues, marketing fund fees, and technology fees from active franchisees which were a direct result of the adverse

impact of the COVID-19 pandemic on our franchisees’ operations.

As a result of challenges

faced by our Learning Business, in December 2021, our board elected to change the business focus of the Company by entering into

the Share Exchange Agreement to acquire DIA and a separate agreement to dispose of our Learning Business if the acquisition of

See “ Item 1.

Business .” As a result, the following description of our operating results and liquidity

may not be representative of our future operating results and liquidity.

Results of Operations

The following table

represents the Company’s franchise sales activity for the fiscal years ended September 30, 2021 and 2020:

Franchises Sold

15 unchanged sentences

Total Franchises Sold

First Territory refers to the original territory purchased with the Franchise Agreement.

Territory refers to a secondary territory purchased in addition to the territory purchased with the Franchise Agreement.

changes of items in the Company’s Statement of Operations for the fiscal year ended September 30, 2020 as compared to the

prior year are discussed below .

franchise fees, Royalty fees and Merchandise sales

US First Territory refers to the original territory purchased with the Franchise Agreement.

Second Territory refers to a secondary territory purchased in addition to the territory purchased with the Franchise Agreement.

Material changes

of items in the Company’s Statement of Operations for the fiscal year ended September 30, 2021 as compared to the prior year

are discussed below .

Fiscal year Ended

(rounded to $1,000)

Item Description

September 30,

Item Description

Initial franchise fees

$ (1,241,927 )

Marketing fund revenue

2 unchanged sentences

Total Revenue

$ (1,479,524 )

The primary cause of the

decrease in initial franchise fees was due to the interruption of new franchise sales in fiscal 2020 as a result of the COVID-19

pandemic and delays in completing the Company’s audit for the fiscal year ending September 30, 2019.

The primary cause of

the decrease in royalties and marketing fund revenue is due to the acceleration of deferred revenues in 2019, fewer franchises

paying royalties as a result of the loss of territories during the period from the termination of non-performing franchisees from

the system, and the interruption of normal operation at remaining franchises because of the COVID-19 pandemic.

Also, due to the

impact of the COVID-19 pandemic on the business of our franchisees, we voluntarily elected to cease pursuing collections of our

marketing fees from our franchisees in March 2020.

The increase in technology fees is the result of the Company beginning to charge

franchisees for the use of their online platform in the prior year.

operating expenses for the comparable periods ended September 30, 2020 and 2019 were approximately $2,453,000 and $2,564,000,

respectively, a decrease of approximately $111,000.

The primary cause

of the slight increase in initial franchise fees was due to a higher level of acceleration of deferred revenues resulting from

an increase in the termination of non-performing franchisees in fiscal 2021, which was offset by a lower average level of deferred

revenues attributable to terminated franchise agreements in fiscal 2021.

The primary cause of the decrease in royalties and technology

fees was due to the fewer franchises paying royalties and technology fees as a result of the termination of non-performing franchisees

from the system, and the interruption of normal operation at remaining franchises because of the COVID-19 pandemic.

the impact of the COVID-19 pandemic on the business of our franchisees, we voluntarily elected to cease pursuing collections of

our marketing fees from our franchisees in March 2020, which continued for all of fiscal 2021.

During fiscal 2021 we were able to sell our Bricks 4 Kidz® supply kits

that were on hand (purchased and expensed in prior years), which resulted in an increase in merchandise sales with no related cost of

goods sold recorded.

Operating Expenses

Total operating expenses

for the comparable periods ended September 30, 2021 and 2020 were approximately $1,870,000 and $2,453,000, respectively, a decrease

of approximately $583,000.

Fiscal Year Ended September 30,

3 unchanged sentences

Salaries, payroll taxes & stock-based compensation

General marketing expenses

General advertising

Franchisee marketing

2 unchanged sentences

All other G&A expenses

changes in significant operating expenses are explained as follows:

commissions decreased primarily as a result of lower franchise sales.

Company incurred salaries, payroll expenses and stock-based compensation for the fiscal years ended September 30, 2020 and 2019

of approximately $614,000 and $885,000, respectively, a decrease of approximately $271,000, or 31%.

The decrease in total payroll

expenses is primarily due to the reduction of both employee headcount and remaining salaries.

Company paid general marketing expenses for the fiscal years ended September 30, 2020 and 2019 of approximately $81,000 and $21,000,

respectively, an increase of approximately $60,000, or 287%.

The increase related to higher lead advertising expenses.

marketing of approximately $130,000 was paid out of the marketing fund using funds collected from franchisees as per the terms

of their franchise agreements.

These funds were collected and remitted for the cost of national branding of the Company’s

concepts to benefit the franchisees.

The marketing fund amounts owed to the Company 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.

Upon adoption of FASB 606 on October 1, 2018, the Company presents

these revenues on a gross revenue basis on its statement of operations.

Any unused funds at the end of the period are recorded

on the balance sheet as accrued marketing fees.

Company paid professional, legal and consulting fees for the fiscal years ended September 30, 2020 and 2019 of approximately $566,000

and $540,000, respectively, an increase of approximately $26,000, or 5%.

The increase in professional, legal and consulting fees

is primarily due to the higher legal costs incurred in relation to a shareholder proxy solicitation in fiscal 2020, offset by

lower audit fees and lower legal costs from ongoing litigation.

Company recorded an additional reserve for both notes receivable and accounts receivable during the year ended September 30, 2019

due to the slowdown and issues in collections for both types of receivables.

During the year ended September 30, 2019 several

receivables deemed uncollectible in the prior year were collected causing a credit to bad debt expense.

The Company recorded an

additional reserve for accounts receivable during fiscal year 2020.

Total Operating Expenses

The changes in significant operating expenses

are explained as follows:

Franchise commissions

remained relatively unchanged primarily as a result of flat franchise sales.

The Company incurred

salaries, payroll expenses and stock-based compensation for the fiscal years ended September 30, 2021 and 2020 of approximately

$452,000 and $614,000, respectively, a decrease of approximately $161,000, or 26%.

The decrease in total payroll expenses is primarily

due to the reduction of both employee headcount and remaining salaries.

The Company paid

general advertising expenses for the fiscal years ended September 30, 2021 and 2020 of approximately $46,000 and $81,000, respectively,

a decrease of approximately $35,000, or 43%.

The decrease related to lower levels of advertising due to cost cutting measures.

No franchisee marketing

was paid out of the marketing fund using funds collected from franchisees as per the terms of their franchise agreements.

was because the Company did not collect any marketing funds during the year as a result of the COVID-19 pandemic.

The Company paid

professional, legal and consulting fees for the fiscal years ended September 30, 2021 and 2020 of approximately $424,000 and $566,000,

respectively, a decrease of approximately $142,000, or 25%.

The decrease in professional, legal and consulting fees is primarily

due to the settlement of two legal disputes during fiscal 2021, and fact that the remaining material litigation matter was in an

inactive status as a result of COVID-19 and ongoing settlement discussions.

Bad debt expense for the fiscal

years ended September 30, 2021 and 2020 was approximately $(49,000) and $350,000, respectively, a decrease of approximately $398,000,

During the year ended September 30, 2021 several receivables deemed uncollectible in the prior year were collected causing a

credit to bad debt expense.

All other general

and administrative expenses for the fiscal years ended September 30, 2021 and 2020 were approximately $698,000 and $423,000, respectively,

an increase of approximately $276,000, or 65%.

The change in fiscal 2021 as compared to fiscal 2020 was primarily the result of

a loss on legal settlements of $290,000 incurred in fiscal 2021.

Absent the legal settlement, all other general and administrative

expenses were relatively flat year to year.

and Capital Resources

the current year, the Company had net income of approximately $620,000 and has sufficient cash on hand to cover expenses for the

next 12 months.

recent COVID-19 outbreak has been declared a pandemic by the World Health Organization, has spread to the United States and many

other parts of the world and has adversely affected our business operations, employee availability, financial condition, liquidity

and cash flow and the length of such impacts are uncertain.

outbreak of COVID-19 continues to grow both in the United States and globally, and related government and private sector responsive

actions have and will continue to adversely affect our business operations.

It is impossible to predict the effect and ultimate

impact of the COVID-19 pandemic as the situation is rapidly evolving.

spread of COVID-19 has caused public health officials to recommend precautions to mitigate the spread of the virus, including

warning against congregating in heavily populated areas, such as malls and shopping centers.

Among the precautions has been the

closure of a substantial portion of the schools in the United States, which has adversely impacted our royalty revenue from franchisees

and our ability to sell new franchises.

There is significant uncertainty around the breadth and duration of these school closures

and other business disruptions related to COVID-19, as well as its impact on the U.S.

and global economy.

The extent to which

COVID-19 impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including

new information that may emerge concerning the severity of COVID-19 and the actions taken to contain it or treat its impact.

have asked our corporate employees whose jobs allow them to work remotely to do so for the foreseeable future.

During the current year, the Company

had net income of approximately $325,000 and has sufficient cash on hand to cover expenses for the next 12 months, provided the Company

only operates the Learning Business for the next 12 months.

However, the Company has entered into agreements to acquire DIA and dispose

of the Learning Business, and if those agreements are consummated the Company’s liquidity will be determined in reference to DIA’s

profitability and capital needs instead.

The COVID-19 outbreak

has been declared a pandemic by the World Health Organization, has spread to the United States and many other parts of the world

and has adversely affected our business operations, employee availability, financial condition, liquidity and cash flow and the

length of such impacts are uncertain.

The outbreak of COVID-19

continues to affect the United States and globally, and related government and private sector responsive actions have and will

continue to adversely affect our business operations.

It is impossible to predict the effect and ultimate impact of the COVID-19

pandemic as the situation continues to evolve.

The spread of COVID-19

has caused public health officials to recommend precautions to mitigate the spread of the virus, including warning against congregating

in heavily populated areas without masks, vaccinations and testing, such as malls and shopping centers.

Among the precautions was

the cessation of in-person learning at a substantial portion of the schools in the United States, which has adversely impacted

our royalty revenue from franchisees and our ability to sell new franchises.

There is significant uncertainty around the breadth

and duration of these school closures and other business disruptions related to COVID-19, as well as its impact on the U.S.

global economy.

Many public schools resumed some or all in person learning in the Fall of 2021, but many have since reverted back

to remote learning with the advent of the Omicron strain of COVID-19 in December 2021.

The extent to which COVID-19 impacts our

results will depend on future developments, which are highly uncertain and cannot be predicted, including new information that

may emerge concerning the severity of COVID-19 and the actions taken to contain it or treat its impact.

We have asked some of our

corporate employees whose jobs allow them to work remotely to do so a few days a week for the foreseeable future.

Such precautionary

measures could create operational challenges, as we adjust to a remote workforce, which could adversely impact our business.

had cash flows used in operating activities of approximately $306,000 for the year ended September 30, 2020 compared to cash flows

provided by operating activities of approximately $398,000 for the year ended September 30, 2019.

The decrease in cash flows provided

by operating activities for the year ended September 30, 2020 compared to the year ended September 30, 2019 relates primarily

to lower initial franchise fees and royalty revenues which resulted in a lower net income.

had cash flows provided by investing activities of approximately $94,000 for the year ended September 30, 2020 compared to cash

flows provided by investing activities of approximately $39,000 for the year ended September 30, 2019.

The increase in cash flows

provided investing activities was primarily due to lower investments in property and equipment, offset by a reduction in assets

held for sale as we contemplated the liquidation of unneeded real estate assets in the 2020 fiscal year.

During the fiscal years

ended September 30, 2020 and 2019, the Company purchased property and equipment totaling approximately $0 and $119,000, respectively,

and no intangible property.

had cash flows provided by financing activities of approximately $120,000 for the year ended September 30, 2020 compared to cash

flows provided by financing activities of $0 for the year ended September 30, 2019.

The increase in cash flows provided financing

activities was primarily due to receipt of a Paycheck Protection Program (the “PPP”) under Division A, Title I of

the CARES Act, which was enacted March 27, 2020 in the amount of $119,980 in fiscal 2020.

The loan, which was in the form of a

note dated April 24, 2020 issued by the Company, matures on April 23, 2022 and bears interest at a rate of 1% per annum, payable

monthly commencing on October 23, 2020.

The note may be prepaid by the Company at any time prior to maturity with no prepayment

Funds from the loan may only be used for payroll costs, cost used to continue group health care benefits, mortgage

payments, rent, utilities and interest on other debt obligations incurred before February 15, 2020.

The Company used the entire

loan amount for qualifying expenses.

Under the terms of the PPP, certain amounts of the loan may be forgiven if they are used

for qualifying expenses as described in the CARES Act.

During the first half

of fiscal 2020, the Company temporarily suspended domestic franchise offers and sales of Bricks 4 Kidz®

and Sew Fun Studios®

franchises in compliance with FTC Franchise Rule, Section 436.7(a) due to delays in completion of the Company’s fiscal year

2018 and 2019 consolidated audited financial statements, in the second half of fiscal 2020 the Company’s sales of new franchises

was hindered by the COVID-19 pandemic.

Company is dependent upon both franchise sales and royalty fees to continue current business operations and liquidity.

On November 1, 2020

the Company leased office space at 475 W Townplace, Suite, A, St.

Augustine, FL 32092, for monthly rent of $750, where it maintains

its principal office.

In October 2019, the

Company signed a 21 month lease for office space at 5995 W State Street Suite B, Garden City, ID 83703, where it previously maintained

its principal office.

The Company has prepaid rent for the remainder of the lease term at this space, and has no further obligation

under the lease.

Sheet Arrangements

Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future material

effect on the Company’s financial condition, changes in financial condition, and results of operations, liquidity or capital

Party Transactions

December 2017, the Company granted a total of 14,286 warrants to two Directors of the Company.

These warrants were granted in

conjunction with the issuance of standby letters of credit from the two directors.

The warrants had an exercise price of $0.14

per share and expired five years from the date of grant.

These warrants were valued using the Black Scholes method.

The fair value

of the warrants on the date of grant were $2,000, and the warrants vested immediately.

The Company expensed $2,000 in connection

with the grant during the year ended September 30, 2018.

These warrants were exercised in September 2019 for 14,286 shares of

common stock.

The Company agreed to waive the $2,000 exercise price owed in total from these warrant holders.

September 30, 2019, Blake Furlow resigned as Chief Executive Officer of the Company.

Furlow received a severance payment of

$30,000 pursuant to the terms of a Severance Agreement.

Pursuant to his employment agreement, the Company also issued an aggregate

of 566,176 shares of Common Stock to Mr.

Effective September

30, 2019, Bart Mitchell, the Company’s Chief Financial Officer, was appointed Chief Executive Officer of the Company.

connection with his appointment, Mr.

Mitchell entered into an Employment Agreement with the Company as of October 1, 2019 for the

term of one year.

In addition to cash compensation, he was entitled to receive stock grants valued at the lesser of $15,000 or

200,000 Shares of Common Stock on the last day of the completed year of employment.

Mitchell continued to serve as a member

of the Board of Directors of the Company, but no longer served as the Company’s Chief Financial Officer.

On September 30,

2019, the Company approved the issuance of 166,667 shares to Mr.

Mitchell pursuant to his prior employment agreement for compensation

earned during the year ended September 30, 2019.

Mitchell resigned as President on June 8, 2020.

At such time he received a

severance package of $50,000.

During fiscal year 2020, Mr.

Mitchell no longer wanted his 279,406 shares and returned them to the

Company for no consideration and then the Company cancelled them.

On September 27, 2019,

in connection with their service on the Board of Directors for fiscal years 2017, 2018 and 2019, the Company approved the issuance

of (i) 99,362, (ii) 272,472, (iii) 112,739 and (iv) 272,472 shares of Common Stock to Blake Furlow, Gary Herman, Bart Mitchell

and JoyAnn Kenny-Charlton, respectively, as well as a total of cash payments of $85,041.

Rego has been a director since February 5, 2020, and our Chief Executive Officer since May 1, 2020.

Prior to his appointment,

Rego purchased an active franchise in California.

During the year ended September 30, 2020 the Company recognized royalty

revenue from the franchise of $16,650 and recognized marketing fee revenue from the franchise of $829.

Total payments made by

the franchisee were $7,681.

As of September 30, 2020 and 2019 the accounts receivable balance with the franchise was $11,894 and

$21,536, respectively and the franchises had deferred revenue balances of $0.

John Simento has been

a director of the Company since May 19, 2020.

Rego’s and Mr.

Simento’s appointments with the Company,

they purchased a Company franchise in the United Arab Emirates (the “UAE”).

We had cash flows

used in operating activities of approximately $75,000 for the year ended September 30, 2021 compared to cash flows used in operating

activities of approximately $306,000 for the year ended September 30, 2020.

The decrease in cash flows used in operating activities

for the year ended September 30, 2021 compared to the year ended September 30, 2020 relates primarily to the successful collection

of receivables in the current year that had been allowed for in the prior year and increases in accrued liabilities in fiscal 2021.

We had cash flows

used in investing activities of approximately $18,000 for the year ended September 30, 2021 compared to cash flows provided by

investing activities of approximately $94,000 for the year ended September 30, 2020.

The decrease in cash flows provided by investing

activities was primarily due to a reduction in assets held for sale as we completed the liquidation of unneeded real estate assets

in the 2020 fiscal year and the purchase of the intangible assets of Bricks4Schoolz, LLC in 2021.

During the fiscal years ended

September 30, 2021 and 2020, the Company purchased for cash property and equipment totaling approximately $3,100 and $0, respectively.

We had $0 cash flows

provided by financing activities for the year ended September 30, 2021 compared to cash flows provided by financing activities

of $120,000 for the year ended September 30, 2020.

The decrease in cash flows provided financing activities was primarily due to

receipt of a Paycheck Protection Program (the “PPP”) under Division A, Title I of the CARES Act, which was enacted

March 27, 2020 in the amount of $119,980 in fiscal 2020.

The loan, which was in the form of a note dated April 24, 2020 issued

by the Company, matures on April 23, 2022 and bears interest at a rate of 1% per annum, payable monthly commencing on October 23,

The note may be prepaid by the Company at any time prior to maturity with no prepayment penalties.

Funds from the loan may

only be used for payroll costs, cost used to continue group health care benefits, mortgage payments, rent, utilities and interest

on other debt obligations incurred before February 15, 2020.

Under the terms of the PPP, certain amounts of the loan may be forgiven

if they are used for qualifying expenses as described in the CARES Act.

The Company used the entire loan amount for qualifying

expenses, and expects the loan to be forgiven, and therefore has not recorded any accrued interest on the loan.

During the first

half of fiscal 2020, the Company temporarily suspended domestic franchise offers and sales of Bricks 4 Kidz® and Sew Fun Studios®

franchises in compliance with FTC Franchise Rule, Section 436.7(a) due to delays in completion of the Company’s fiscal year

2018 and 2019 consolidated audited financial statements.

In addition, in the second half of fiscal 2020 the Company’s sales

of new franchises were hindered by the COVID-19 pandemic.

The Company obtained approval to offer and sell new franchises in

many jurisdictions in fiscal 2021;

however, new sales continued to be hampered by the COVID-19 pandemic.

The Company is dependent

upon both franchise sales and royalty fees to continue current business operations and liquidity.

Contractual Obligations

On October 21, 2021,

the Company leased approximately 2,480 square feet of office space at 1637 S.

Main Street, Milpitas, CA 94035 for its corporate

The lease has a term of two years and one month.

The Company is obligated to pay base rent of $4,588 per month in the

first year, $4,726 per month in the second year, and $4,867 per month in the last month, plus a pro rata share of common area expenses.

Off-Balance Sheet Arrangements

The Company does

not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on the

Company’s financial condition, changes in financial condition, and results of operations, liquidity or capital resources.

Related Party Transactions

On or about December

6, 2019, Christopher Rego and Rod Whiton (the “Solicitors”), prior to their appointments as officers or directors of

the Company, commenced a consent solicitation to the shareholders of the Company and on February 5, 2020, the Company and the Solicitors

entered into an agreement to settle their dispute over the consent solicitation.

The settlement resulted in the Company paying

$10,000 as reimbursement for certain costs that they incurred related to the consent solicitation, the Company agreeing to appoint

Whiton to the board, and the Company’s agreeing to appoint Mr.

Rego as chief executive officer, among other

The Company ultimately paid a total of $20,000 in costs incurred by Messrs.

Rego and Whiton in relation to the consent

solicitation.

Bart Mitchell resigned

as President of the Company on June 8, 2020 at which time he received a severance package of $50,000.

Additionally, during the

year ended September 30, 2020, Mr.

Mitchell no longer wanted his 279,406 shares, therefore, he returned them to the Company for no

consideration and the Company cancelled them.

Christopher Rego has been a director

since February 5, 2020, and our Chief Executive Officer since May 1, 2020.

Prior to his appointment, Mr.

Rego purchased an active franchise

in California.

During the years ended September 30, 2021 and 2020, the Company recognized royalty revenues from the franchise of $6,750

and $16,650, respectively, recognized technology fee revenues from the franchise of $900 and $900, respectively, and recognized marketing

fee revenues from the franchise of $0 and $829, respectively.

Total payments made by the franchisee were $7,650 and $8,581, respectively.

As of September 30, 2021 and 2020 the accounts receivable balance with the franchise was $1,897 and the Company had allowed for $1,334

and $1,116, respectively, for net AR balances of $563 and $781, respectively.

Accordingly, during the year ended September 30, 2021 the

Company increased their allowance for Mr.

Rego’s franchise accounts by $218.

As of September 30, 2021 and 2020 the franchises had

deferred revenue balances of $0.

John Simento has

been a director of the Company since May 19, 2020.

Rego’s and Mr.

Simento’s appointments with the Company,

they purchased a Company franchise in the United Arab Emirates (the “UAE”).

The Company filed an arbitration complaint

2 unchanged sentences

dated February 5, 2020.

Under the Settlement Agreement, the Company forgave all back royalty fees through July 2019, equally $18,825,

and agreed to defer all other fees until the franchise was able to obtain a business license to operate in the U.A.E., which is

currently delayed due to the Coronavirus pandemic.

The franchise is currently non-operational as a result of an inability to obtain

the issuance of a business license form the UAE due to the Coronavirus pandemic.

If the franchise is not able to procure the necessary

authorizations to operate, the franchisees would not owe any franchise fees.

As a consequence, we have not realized any revenue

from the franchise.

Rego is also the

CEO of Teknowland, a software development company, with which the Company entered into an agreement on March 10, 2020.

of the agreement is nine months and calls for a development fee of $12,900 per month.

During the year ended September 30, 2020

the Company paid seven months payments of $12,900 in accordance with the terms of the agreement and paid an additional $15,700

for additional services, for a total of $106,000.

or about December 6, 2019, Christopher Rego and Rod Whiton (the “Solicitors”), prior to their appointments as officers

or directors of the Company, commenced a consent solicitation to the shareholders of the Company and on February 5, 2020, the Company

and the Solicitors entered into an agreement to settle their dispute over the consent solicitation.

The settlement resulted in

the Company agreeing to pay $10,000 as reimbursement for certain costs that they incurred related to the consent solicitation,

the Company agreeing to appoint Mr.

Whiton to the board, and the Company’s agreeing to appoint Mr.

Rego as chief

executive officer, among other provisions.

The Company ultimately paid a total of $20,000 in costs incurred by Messrs.

Whiton in relation to the consent solicitation.

Accounting Policies

Management’s

Discussion and Analysis of Financial Condition and Results of Operations is based upon our consolidated financial statements,

which have been prepared in accordance with U.S.

Under the Settlement Agreement, the Company forgave all back royalty fees through July 2019, equaling $18,825,

and agreed to defer all other fees until the franchise was able to obtain a business license to operate in the UAE., which is currently

delayed due to the Coronavirus pandemic.

The franchise is currently non-operational as a result of an inability to obtain the issuance

of a business license from the UAE due to the Coronavirus pandemic.

If the franchise is not able to procure the necessary authorizations

to operate, the franchisees would not owe any franchise fees.

As a consequence, we have not realized any revenue from the franchise

and no payments have been received on outstanding balances.

As of September 30, 2021 and 2020 the accounts receivable balance with

the franchise was $10,613 and the Company had allowed for $10,613 and $8,925, respectively, for net AR balances of $0 and $1,688,

respectively.

Accordingly, during the year ended September 30, 2021 the Company increased their allowance for the UAE franchise

account by $1,688.

the CEO of Teknowland, a software development company, with which the Company entered into an agreement on March 10, 2020 to perform

development and maintenance services in relation to the Company’s franchise management software.

The term of the agreement

was six months, subject to auto-renewal until Teknowland had completed its obligations under the agreement, but subject to each

party’s right to terminate the agreement at any time on 30 days’ notice.

Under the agreement, the Company was obligated

to pay Teknowland a fee of $12,900 per month for development and maintenance services.

Starting in November 2020, the Company and

Teknowland orally agreed to reduce the monthly amount that the Company is obligated to pay to $3,000 per month.

During the year ended

September 30, 2020, the Company and Mr.

Rego orally agreed that Mr.

Rego and Teknowland would develop an eLearning program to enable

the Company to offer educational programs over the internet.

No agreement was reached regarding whether the Company or Teknowland

would own the eLearning program, or the terms under which the Company would be entitled to use the program on a long-term basis,

whether as owner or licensee.

The Company orally agreed to pay Teknowland $10,000 per month for five months for hosting and content

costs incurred by Teknowland.

After testing the program, the Company’s board decided in December 2020 not to pursue the E-Learning

Beginning in January

2021, Teknowland began hosting the Company’s website at a cost of $5,000 per month pursuant to an oral agreement.

On February 12, 2021,

the Company, Chris Rego and Teknowland entered into an agreement under which the parties mutually agreed to terminate the March

10, 2020 agreement to develop and maintain the Company’s franchise management system, and the oral agreement under which

Teknowland hosted the Company’s website.

In both cases, the Company has engaged an independent firm to provide the services.

Under the same agreement, the Company agreed to transfer and assign to Teknowland all of the Company’s rights in the E-Learning

program developed by Teknowland for the Company.

The Company evaluated the E-Learning program on a trial basis, and elected not

to pursue it as a line of business.

The Company agreed to pay Teknowland $50,000 to pay all invoices associated with the two agreements

and the E-Learning program, of which $20,000 was payable at execution of the agreement, $20,000 was payable 30 days later and $10,000

was payable 60 days later.

As of September 30, 2021 the entire amount had been paid.

During the year ended

September 30, 2021, JoyAnn Kenny-Charlton, a former director of the Company, agreed to relinquish 272,472 shares previously approved

for issuance to her for director services for no consideration.

Critical Accounting Policies

Discussion and Analysis of Financial Condition and Results of Operations is based upon our consolidated financial statements, which

have been prepared in accordance with U.S.

generally accepted accounting principles.

The preparation of our consolidated

financial statements requires management to make estimates, assumptions and judgments that affect the reported amounts of assets,

liabilities, net sales and expenses and related disclosure of contingent assets and liabilities.

Management bases its estimates

on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results

of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent

from other sources.

The preparation of our consolidated financial

statements requires management to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities,

net sales and expenses and related disclosure of contingent assets and liabilities.

Management bases its estimates on historical

experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form

the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates under different assumptions or conditions.

7 unchanged sentences

see Note 1 of the Consolidated Financial Statements.

Company generates almost all of its revenue from contracts with customers.

The Company’s franchise agreements enter the

parties into a contractual agreement, typically over a ten years term, and include performance obligations as follows:

territory designation, access to proprietary manuals and handbooks, initial training and on-going assistance, consulting, promotion

of goodwill, administration of marketing fund, marketing and promotion items, initial marketing program development assistance,

company website access, Franchise Management Tool access, lessons and model plans, project kits, Duplo bricks, frames stop motion

animation software, and use of the franchisor’s intellectual property (IP) (e.g., trade name –

Bricks for Kidz).

entering into a franchise agreement, the Company charges an initial franchise fee, which is fully collectible and nonrefundable

as of the date of the signing of the franchise agreement.

Further, because 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 terms of the franchise agreements, the Company charges for royalty fees on a monthly basis, generally set at a fixed amount,

but in some cases are based on a percentage of franchisee’s monthly gross revenues.

The Company also charges fees for a

marketing fund, generally based on 2% of franchisee’s monthly gross revenues, which is managed by the Company, to allocate

towards national branding of the Company’s concepts to benefit the franchisees.

Lastly, the Company charges for technology

fees on a monthly basis, generally at a fixed amount, for the use of the company Franchise Management tool as well as company

Company adopted the new revenue standard (ASC 606) on October 1, 2018 for contracts with remaining performance obligations as

of October 1, 2018.

The Company elected to apply the new standard retrospectively with an adjustment to the opening balance of

retained earnings as of the date of adoption.

Under ASC 606, the Company considers initial franchise fees to be a part of the

license of symbolic intellectual property (“IP”), therefore the performance obligation related to these fees is satisfied

over time as the Company fulfills its promise to grant the customer rights to use, and benefit from, the Company’s IP, as

well as support and maintain the IP.

The initial franchise fee, then, is recorded as deferred revenue at inception and recognized

on a straight-line basis over the contract term.

accordance with ASC 606-10-55-65, the Company has determined that the royalty fees, marketing fees, and technology fees are subject

to a sales and usage-based royalties’

constraint on licenses of IP.

Accordingly, these fees are recognized as revenue at

the later of when the sales or usage occurs or the related performance obligation is satisfied.

Technology fees are recorded net

of processing fees.

Marketing fees are limited to marketing amounts expensed;

therefore, the Company will recognize amounts received

in excess of amounts spent on the balance sheet in the accrued marketing fund liability.

Company collects transfer fees when contracts are transferred between parties and accounts for the transfer as a contract modification

Use of Estimates

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 financial statements and the reported amounts of revenues and expenses during the reporting period.

The significant estimates

and assumptions made by management include allowance for doubtful accounts, allowance for deferred tax assets, depreciation of

property and equipment, recoverability of long-lived assets and fair 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.

Revenue Recognition

The Company generates

almost all of its revenue from contracts with customers.

The Company’s franchise agreements enter the parties into a contractual

agreement, typically over a ten years term, and include performance obligations as follows:

protected territory designation, access

to proprietary manuals and handbooks, initial training and on-going assistance, consulting, promotion of goodwill, administration

of marketing fund, marketing and promotion items, initial marketing program development assistance, company website access, Franchise

Management Tool access, lessons and model plans, project kits, Duplo bricks, frames stop motion animation software, and use of

the franchisor’s intellectual property (IP) (e.g., trade name – Bricks for Kidz).

Upon entering into a franchise agreement,

the Company charges an initial franchise fee, which is fully collectible and nonrefundable as of the date of the signing of the

franchise agreement.

Further, because 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.

Per the terms of the franchise

agreements, the Company charges for royalty fees on a monthly basis, generally set at a fixed amount, but in some cases are based on a

percentage of franchisee’s monthly gross revenues.

The Company also charges fees for a marketing fund, generally based on 2% of

franchisee’s monthly gross revenues, which is managed by the Company, to allocate towards national branding of the Company’s

concepts to benefit the franchisees.

Lastly, the Company charges for technology fees on a monthly basis, generally at a fixed amount,

for the use of the company Franchise Management tool as well as company emails, etc.

adopted the new revenue standard (ASC 606) on October 1, 2018 for contracts with remaining performance obligations as of October 1, 2018.

The Company elected to apply the new standard retrospectively with an adjustment to the opening balance of retained earnings as of the

date of adoption.

Under ASC 606, the Company considers initial franchise fees to be a part of the license of symbolic intellectual property

(“IP”), therefore the performance obligation related to these fees is satisfied over time as the Company fulfills its promise

to grant the customer rights to use, and benefit from, the Company’s IP, as well as support and maintain the IP.

The initial franchise

fee, then, is recorded as deferred revenue at inception and recognized on a straight-line basis over the contract term.

In accordance

with ASC 606-10-55-65, the Company has determined that the royalty fees, marketing fees, and technology fees are subject to a sales and

usage-based royalties’ constraint on licenses of IP.

Accordingly, these fees are recognized as revenue at the later of when the

sales or usage occurs or the related performance obligation is satisfied.

Technology fees are recorded net of processing fees.

fees are limited to marketing amounts expensed;

therefore, the Company will recognize amounts received in excess of amounts spent on the

balance sheet in the accrued marketing fund liability.

The Company collects transfer

fees when contracts are transferred between parties and accounts for the transfer as a contract modification under ASC 606.

transfer does not increase the scope of the contract or promise any additional goods or services and there are no new distinct services

that will be provided after the transfer the Company considers the transfer fee part of the existing contract.

Transfer fees, then, are

recorded as deferred revenue at inception and recognized on a straight-line basis over the remaining contract term.

When contracts are terminated

due to default, or in conjunction with an early termination agreement, the Company accounts for the early termination as a contract modification

under ASC 606.

Because the transfer does not increase the scope of the contract or promise any additional goods or services and

there are no new distinct services that will be provided after the transfer the Company considers the transfer fee part of the

existing contract.

Transfer fees, then, are recorded as deferred revenue at inception and recognized on a straight-line basis

over the remaining contract term.

contracts are terminated due to default, or in conjunction with an early termination agreement, the Company accounts for the early

termination as a contract modification under ASC 606.

Because the termination eliminates any future performance obligations of

the Company any deferred revenue associated with the terminated contract is recognized into revenue at the time of termination,

along with any early termination fees, in the initial franchise fee line on the Company’s Statement of Operations.

Company generates revenue from sales of merchandise where the performance obligation is met, and therefore revenue recognized,

upon the delivery of merchandise to the customer.

for Doubtful Accounts —

Company reviews accounts receivable periodically for collectability and establishes an allowance for doubtful accounts and records

bad debt expense when deemed necessary.

The Company records an allowance for doubtful accounts that is based on historical trends,

customer knowledge, any known disputes, and considers the aging of the accounts receivable balances combined with management’s

estimate of future potential recoverability.

Accounts and receivables are written off against the allowance after all attempts

to collect a receivable have failed.

The Company believes its allowances for doubtful accounts at September 30, 2020 and 2019

are adequate, but actual write-offs could exceed the recorded allowance.

During the years ended September 30, 2020 and 2019 the

balance in the allowance for doubtful accounts was approximately $942,000 and $663,000, respectively.

310, Receivables, provides guidance for receivables and notes that arise from credit sales, loans or other transactions.

receivable includes loans and notes receivable.

Originated loans we hold for which we have the intent and ability to hold for

the foreseeable future or to maturity (or payoff) are classified as held for investment.

Financing receivables held for investment

are reported in our consolidated balance sheets at the outstanding principal balance adjusted for any write -offs , allowance

for loan losses, deferred fees or costs, and any unamortized premiums or discounts.

Interest income is accrued on outstanding

principal as earned.

Unamortized discounts and premiums are amortized using the interest method with the amortization recognized

as part of interest income in the consolidated statements of operations.

During the years ended September 30, 2020 and 2019 the

balance in the allowance for doubtful notes receivable was approximately $91,000 and $91,000, respectively.

of Property, Plant and Equipment and Goodwill and Other Intangible Assets

Company’s long-lived assets currently consist of property and equipment, and prior to the year ended September 30, 2020

included intangible assets.

The Company tests for impairment losses on long-lived assets used in operations whenever events or

changes in circumstances indicate that the carrying amount of the asset may not be recoverable.

Recoverability of an

asset to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows

expected to be generated by the asset.

If such asset is considered to be impaired, the impairment to be recognized is measured

by the amount by which the carrying amount of the asset exceeds its fair value.

Impairment evaluations involve management’s

estimates of asset useful lives and future cash flows.

Actual useful lives and cash flows could be different from those

estimated by management which could have a material effect on our reporting results and financial positions.

is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party

independent appraisals, as considered necessary.

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.

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.

Company reviews its filing positions for all open tax years in all U.S.

federal and state jurisdictions where the Company is required

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

Otherwise, the Company may not recognize any of the potential tax benefit associated with the position.

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.

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.

Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense.

had no accrual for interest or penalties at September 30, 2020 and 2019, respectively, and has not recognized interest and/or

penalties during the years ended September 30, 2020 and 2019, respectively, 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.

tax years subject to examination by major tax jurisdictions include the years 2017 and forward by the U.S.

Internal Revenue Service,

and the years 2016 and forward for various states.

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.

Forfeitures are recognized

as they occur.

Accounting Pronouncements

February 2016, the FASB issued ASU No.

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, are required.

The new standard was adopted by the Company in fiscal year 2020 but had no impact

on the Company’s financial statements as the Company does not have any leases that meet the criteria under this standard.

other newly issued accounting pronouncements, but not yet effective, have been deemed either immaterial or not applicable.

Quantitative and Qualitative Disclosures about Market Risk

a smaller reporting company, we are not required to provide the information required by this Item.

Financial Statements and Supplementary Data

consolidated financial statements and related notes required by this item are set forth as a separate section of this Report.

See Part IV, Item 15 of this Form 10-K.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Because the termination eliminates any future performance obligations of the Company any deferred revenue associated with

the terminated contract is recognized into revenue at the time of termination, along with any early termination fees, in the initial franchise

fee line on the Company’s Statement of Operations.

The Company generates revenue

from sales of merchandise where the performance obligation is met, and therefore revenue recognized, upon the delivery of merchandise

to the customer.

Contract Liability – Deferred Revenue

In conjunction with the adoption

of ASC 606, effective October 1, 2018 the Company recorded deferred revenue as a contract liability for its initial franchise fees collected

and related to contracts with remaining performance obligations.

Contract Liability / Asset – Accrued Marketing

Fund / Marketing Fund Receivable

Per the terms of the franchise

agreements, the Company collects 2% of franchisee’s gross revenues for a marketing fund, managed by the Company, to allocate toward

national branding of the Company’s concepts to benefit the franchisees.

The marketing fund amounts owed

to the Company are accounted for as a liability on the balance sheet and the actual collections are deposited into a marketing fund bank

account, presented as restricted cash on the balance sheet.

Expenses pertaining to the marketing fund activities are paid from the marketing

fund and reduce the liability account.

Upon adoption of FASB 606 on October 1, 2018, the Company presents these marketing fund revenues

and expenses on a gross basis on its statement of operations.

Any unused funds at the end of the period are recorded as accrued marketing

fees or any funds used in excess of funds collected are recorded as a marketing fund receivable.

The Company expects to collect this advance

in future periods from the 2% fees collected on future franchisee gross revenues.

Contract Asset – Prepaid Commission Expense

In accordance with ASC 606 the

costs related to obtaining a contract are to be capitalized as long as the costs are recoverable and incremental.

Effective October 1,

2019, the date the Company adopted ASC 606, they capitalized the value of sales commissions as a contract asset and is amortizing those

costs straight-line over the contract life of the franchise agreement to which they relate.

Accounts Receivable

The Company reviews accounts receivable

periodically for collectability and establishes an allowance for doubtful accounts and records bad debt expense when deemed necessary.

The Company records an allowance for doubtful accounts that is based on historical trends, customer knowledge, any known disputes, and

considers the aging of the accounts receivable balances combined with management’s estimate of future potential recoverability.

Accounts and receivables are written off against the allowance after all attempts to collect a receivable have failed.

Recent Accounting Pronouncements

The Company has reviewed all newly issued

accounting pronouncements, including those that are not yet effective, and all have been deemed either immaterial or not applicable.

Quantitative and Qualitative

Disclosures about Market Risk

As a smaller reporting company, we are

not required to provide the information required by this Item.

Financial Statements and

Supplementary Data

Our consolidated

financial statements and related notes required by this item are set forth as a separate section of this Report.

Item 15 of this Form 10-K.

Changes in and

Disagreements with Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis