Small Cap Updates & New Recommendations for July 12, 2014
This week we have an update on LiqTech International (LIQT) and we introduce a fast growing company called Creative Learning Corp (CLCN).
LiqTech International (LIQT – $2.08), a Danish clean technology company that manufactures state-of-the-art filtration products received a $200,000 order for Silicon Carbide (SiC) Membranes. The membranes will be installed at a German power plant to remove heavy metals from a flue gas cleaning process.
LiqTech and the end-user have developed a solution around the SiC membranes that reduces the environmental impact from coal and biomass fired power plants.
Mr. Finn Helmer, LiqTech’s CEO, commented, “We have developed a solution that reduces the annual load of toxic heavy metals being discharged into our environment. The solution is a great example of the benefits of SiC membranes compared to conventional technologies and competitor membrane products due to SiC membranes unique capability combining high filtration efficiency with extremely robust properties. Mr Helmer concluded, “We expect to see more orders this year from this application.”
LiqTech continues to be an attractive company. Its progress is somewhat slower than we anticipated, but its products have such high capabilities and are useful is so many different sectors that it’s a matter of time before the breakthrough occurs.
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Its strong sales and earnings growth, along with its continued rapid expansion, has brought Creative Learning Corp (CLCN – $2.32) to our radar screen.
The company announced record quarterly net income of $347,686, or $.03 per share, for the second quarter ended March 31, 2014, compared to $87,442 or $.01 per share for the comparable period in 2013, an increase of almost 300% in net income. Net sales for the second quarter ended March 31, 2014 were $2.00 million, compared to $1.08 million in the comparable period of 2013, an increase of 86%.
Net income for the six months ended March 31, 2014 was $644,501, or $.05 per share, compared to $85,906, or $.01 per share in same period last year, a 650% increase in net income. Net sales for the six months ended March 31, 2014 were $3.88 million, compared to $1.89 million in the same period in 2013, an increase of 105%.
Creative Learning Corp is an educational company focusing on teaching children science, technology, engineering and mathematics. The company offers three franchises:
- Bricks 4 Kidz is based on the operation of after-school classes in preschools, elementary schools and middle schools, in-school field trips, camps, birthday parties and other activities using the extremely popular LEGO bricks as the basis for hands-on activities where students design and build interesting and challenging projects using LEGO bricks and other products.
- In September of 2012, Creative Learning started a second franchise concept known as Challenge Island, which provides challenge-based programs designed to foster critical and creative thinking skills, problem solving methodology, and core STEM (Science, Technology, Engineering, Mathematics) principles in children ages 3-13+. CI began selling franchises during the 2013 fiscal year.
- Finally, in early 2013, the company also formed Sew Fun Franchise Company LLC as a wholly owned subsidiary for the purpose of operating a third franchise concept known as Sew Fun. Sew Fun is a brick and mortar business featuring stores/studios located in strip malls and offering after-school classes, camps and birthday parties for children ages 8-13+, as well as adult classes, in fashion design.
Bricks 4 Kidz sells franchises both domestically and internationally. International sales can be a single franchise or a Master Franchise, where the Master Franchisee operates a franchise, but is also able to develop, sell and manage sub-franchises.
A franchisee pays a one-time, non-refundable franchise fee upon the execution of the franchise agreement. Domestically, there can be variations on the franchise fees depending on the size or territories being purchased, and other factors of the territory. The typical sized, domestic, single territory franchise fee is $25,900. If the franchisee buys more than one franchise at the time the initial franchise is purchased, the fee for the other territory is approximately $10,000 to $12,000 .
International franchise fees vary and are set relative to the potential of the franchised territories. To give an example, during the year ended September 30, 3013, Bricks 4 Kidz sold three Master Franchises at an average price of $81,667. In the case of a Master Franchise, Bricks 4 Kidz receives a percentage of the franchise fee paid to the Master Franchisee by any sub-franchisee.
In addition, domestic and international franchisees are required to pay Bricks 4 Kidz a royalty fee of 7%. BRICKS 4 KIDZ also receives a percentage of royalty payments received by Master Franchisees from their sub-franchisees.
We believe another big plus of the company is that it only has about 11.8 million shares outstanding and that approximately 3.6 million of those shares are held by the founders, Brian Pappas and Michelle Cote.
Creative Learning CEO Brian Pappas attributes Creative Learning’s stellar quarterly and six month performance to a substantial increase in interest from franchise seekers as a result of increased marketing expenditures, recognition from Entrepreneur Magazine as the #1 Children’s Enrichment Franchise in the country and #2 Best New Franchise.
CLCN recently awarded its 590th franchise and has franchises in 28 countries. The company expects to have 650 franchises by the end of the year.
As the number of franchises grows, Creative Learning not only receives one-time fees, but also recurring royalties, safeguarding its growth.
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