UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the quarterly period ended
Commission
File Number:
(Exact Name of Registrant as Specified in its Charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
| ( | ||
| (Address of principal executive offices, including zip code) | (Registrant’s telephone number, including area code) |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant
to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:
| Large Accelerated filer: | ☐ | Accelerated filer: | ☐ |
| ☒ | Smaller reporting company: | ||
| Emerging growth company: |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Legacy Education Alliance, Inc. |
Number
of shares of Legacy Education Alliance, Inc. Common Stock, $0.0001 par value, outstanding as of August 16, 2021:
Index to Quarterly Report
on Form 10-Q for
Quarter Ended June 30, 2021
i
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
Some of the statements in this Quarterly Report on Form 10-Q under the headings “Consolidated Financial Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We may also make written or oral forward-looking statements in our periodic reports on Forms 10-Q and 8-K, in press releases and other written materials and in oral statements made by our officers, directors or employees to third parties. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. Forward-looking statements are often characterized by the use of words such as “outlook, “believes,” “estimates,” “expects,” “projects,” “may,” “intends,” “plans,” “anticipates,” “foresees,” “future,” or by discussions of strategy, plans or intentions; including, but not limited to, our discussions regarding the results projected from the introduction of new brands, products and services, expansion into new geographic markets, combinations with third parties, including, but not limited to our licensors; the development of ecommerce capabilities; projections of international growth; projected increase in profitability from our symposium-style course delivery model that should lead to increased margins; our ability to address or manage corruption concerns in certain locations in which we operate; our ability to address and manage cyber-security risks; our ability to protect our intellectual property, on which our business is substantially dependent; our expectations regarding future divided payments; our ability to manage our relationships with credit card processors, and our expectations regarding the impact of general economic conditions on our business; the effects of the COVID-19 pandemic on the global and national economies and on our business operations and financial results; and the estimates and matters described under the caption “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Our assumptions used for the purposes of the forward-looking statements represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry, and other circumstances, including the development, acceptance and sales of our products and our ability to raise additional funding sufficient to implement our strategy. Such forward-looking statements involve assumptions, known and unknown risks, uncertainties, and other important factors that could cause the actual results, performance or our achievements, or industry results, to differ materially from historical results, any future results, or performance or achievements expressed or implied by such forward-looking statements. There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in this report. Important factors that could cause our actual results to differ materially from those expressed as forward-looking statements are set forth in this report, in our latest Annual Report on Form 10-K, including but not limited to “Part I, Item 1A. Risk Factors” and “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” therein, and in our other filings with the Securities and Exchange Commission (the “SEC”). There may be other factors of which we are currently unaware or deem immaterial that may cause our actual results to differ materially from the forward-looking statements. Although we believe the assumptions underlying our forward-looking statements are reasonable, any of these assumptions, and, therefore, also the forward-looking statements based on these assumptions could themselves prove to be inaccurate. In addition, to the extent any inconsistency or conflict exists between the information included in this report and the information included in our prior reports and other filings with the SEC, the information contained in this report updates and supersedes such information.
Forward-looking statements are based on current plans, estimates, assumptions and projections, and therefore you should not place undue reliance on them. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update them publicly in light of new information or future events.
Presentation of Financial Statements
The terms “Legacy Education Alliance, Inc.,” the “Company,” “we,” “our,” “us” or “Legacy” as used in this report refer collectively to Legacy Education Alliance, Inc., a Nevada corporation (“Legacy”), the registrant, which was formerly known as Priced In Corp., and, unless the context otherwise requires, together with its wholly-owned subsidiary, Legacy Education Alliance Holdings, Inc., a Colorado corporation, other operating subsidiaries and any predecessor of Legacy Education Alliance Holdings, Inc., including Tigrent Inc., a Colorado corporation (“TIGE”).
This Form 10-Q includes financial statements and related notes that present the consolidated financial position, results of operations, comprehensive income, and cash flows of Legacy and its subsidiaries.
ii
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements.
LEGACY EDUCATION ALLIANCE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share data)
| June 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Deferred course expenses | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Inventory | ||||||||
| Discontinued operations current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Right-of-use assets | ||||||||
| Other assets | ||||||||
| Discontinued operations-other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Royalties payable | ||||||||
| Accrued course expenses | ||||||||
| Accrued salaries, wages and benefits | ||||||||
| Operating lease liability, current portion | ||||||||
| Other accrued expenses | ||||||||
| Deferred revenue | ||||||||
| Current portion of long term debt | ||||||||
| Discontinued operations-current liabilities | ||||||||
| Total current liabilities | ||||||||
| Long-term debt, net of current portion | ||||||||
| Deferred tax liability, net | ||||||||
| Other long term liabilities | ||||||||
| Operating lease liability, net of current portion | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 13) | ||||||||
| Stockholders’ deficit: | ||||||||
| Preferred stock, $ | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Cumulative foreign currency translation adjustment | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities and stockholders’ deficit | $ | $ | ||||||
See Notes to Unaudited Consolidated Financial Statements
1
LEGACY EDUCATION ALLIANCE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited)
(In thousands, except per share data)
| Three
Months Ended June 30, | Six
Months Ended June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Operating costs and expenses: | ||||||||||||||||
| Direct course expenses | ||||||||||||||||
| Advertising and sales expenses | ||||||||||||||||
| Royalty expenses | — | |||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Total operating costs and expenses | ||||||||||||||||
| Income from operations | ||||||||||||||||
| Other expense: | ||||||||||||||||
| Interest expense, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other expense, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total other expense, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income from continuing operations before income taxes | ||||||||||||||||
| Income tax (expense) benefit | ( | ) | ( | ) | ( | ) | ||||||||||
| Net income from continuing operations | ||||||||||||||||
| Income from discontinued operations | — | |||||||||||||||
| Net income from discontinued operations | — | $ | $ | |||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||
| Basic earnings per common share - continuing operations | $ | $ | $ | $ | ||||||||||||
| Basic earnings per common share - discontinued operations | — | $ | — | |||||||||||||
| Basic earnings per common share | $ | $ | $ | $ | ||||||||||||
| Diluted earnings per common share - continuing operations | $ | $ | $ | $ | ||||||||||||
| Diluted earnings per common share - discontinued operations | — | — | ||||||||||||||
| Diluted earnings per common share | $ | $ | $ | $ | ||||||||||||
| Basic weighted average common shares outstanding | ||||||||||||||||
| Diluted weighted average common shares outstanding | ||||||||||||||||
| Comprehensive income: | ||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||
| Foreign currency translation adjustments, net of tax of $ | ( | ) | ( | ) | ||||||||||||
| Total comprehensive income | $ | $ | $ | $ | ||||||||||||
See Notes to Unaudited Consolidated Financial Statements
2
LEGACY EDUCATION ALLIANCE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(Unaudited)
(In thousands)
| Additional | Cumulative foreign currency | Total | ||||||||||||||||||||||
| Common stock | paid-in | translation | Accumulated | stockholders’ | ||||||||||||||||||||
| Shares | Amount | capital | adjustment | deficit | deficit | |||||||||||||||||||
| Balance at December 31, 2019 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||
| Share-based compensation expense | — | |||||||||||||||||||||||
| Foreign currency translation adjustment, net of tax of $ | — | |||||||||||||||||||||||
| Net Income | — | |||||||||||||||||||||||
| Balance at March 31, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||
| Share-based compensation expense | — | |||||||||||||||||||||||
| Foreign currency translation adjustment, net of tax of $ | — | ( | ) | ( | ) | |||||||||||||||||||
| Net Income | — | — | — | — | ||||||||||||||||||||
| Balance at June 30, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||
| Additional | Cumulative foreign currency | Total | ||||||||||||||||||||||
| Common stock | paid-in | translation | Accumulated | stockholders’ | ||||||||||||||||||||
| Shares | Amount | capital | adjustment | deficit | deficit | |||||||||||||||||||
| Balance at December 31, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||
| Beneficial conversion feature for senior secured convertible debenture – related party | — | |||||||||||||||||||||||
| Foreign currency translation adjustment, net of tax of $ | — | |||||||||||||||||||||||
| Net Income | — | |||||||||||||||||||||||
| Balance at March 31, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||
| Common stock and warrants issued from conversion of senior secured convertible debt – related party | ||||||||||||||||||||||||
| Beneficial conversion feature for senior secured convertible debenture – related party | — | |||||||||||||||||||||||
| Share-based compensation expense | ||||||||||||||||||||||||
| Foreign currency translation adjustment, net of tax of $ | — | ( | ) | ( | ) | |||||||||||||||||||
| Net Income | — | — | — | — | ||||||||||||||||||||
| Balance at June 30, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||
See Notes to Unaudited Consolidated Financial Statements
3
LEGACY EDUCATION ALLIANCE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
| Six
Months Ended June 30, | ||||||||
| 2021 | 2020 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net income | $ | $ | ||||||
| Less net income from discontinued operations | ||||||||
| Net income from continuing operations | $ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Non-cash lease expense | ||||||||
| Gain on the sale of fixed assets and investment property | ( | ) | ||||||
| Share-based compensation | ||||||||
| Amortization of debt discount | ||||||||
| Deferred income taxes | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Deferred course expenses | ||||||||
| Prepaid expenses and other receivable | ||||||||
| Inventory | ||||||||
| Other assets | ||||||||
| Accounts payable-trade | ( | ) | ( | ) | ||||
| Royalties payable | ( | ) | ( | ) | ||||
| Accrued course expenses | ( | ) | ||||||
| Accrued salaries, wages and benefits | ( | ) | ( | ) | ||||
| Operating lease liability | ( | ) | ( | ) | ||||
| Other accrued expenses | ||||||||
| Deferred revenue | ( | ) | ( | ) | ||||
| Net cash used in operating activities - continuing operations | ( | ) | ( | ) | ||||
| Net cash (used in) provided by operating activities - discontinued operations | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Proceeds from sale of investment property | ||||||||
| Net cash provided by investing activities - continuing operations | ||||||||
| Net cash used in investing activities - discontinued operations | ||||||||
| Net cash provided by investing activities | ||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from borrowing Paycheck Protection Program loan | ||||||||
| Proceeds from debentures with related parties | ||||||||
| Net cash provided by financing activities - continuing operations | ||||||||
| Net cash provided by financing activities - discontinued operations | ||||||||
| Net cash provided by financing activities | ||||||||
| Effect of exchange rate differences on cash | ( | ) | ||||||
| Net decrease in cash and cash equivalents and restricted cash | ( | ) | ( | ) | ||||
| Cash and cash equivalents and restricted cash, beginning of period | $ | $ | ||||||
| Cash and cash equivalents and restricted cash, end of period | $ | $ | ||||||
| Supplemental disclosures: | ||||||||
| Cash paid during the period for interest | $ | $ | ||||||
| Cash paid during the period for income taxes, net of refunds received | $ | $ | ||||||
| Supplemental disclosure of non-cash activity: | ||||||||
| Supplemental non-cash amounts of lease liabilities arising from obtaining right-of-use assets/(decrease) of lease liability due to cancellation of leases | $ | $ | ( | ) | ||||
| Common stock and warrants issued from conversion of senior convertible debenture – related party | $ | $ | ||||||
| Initial recognition of beneficial conversion feature for senior secured convertible debt - related party | $ | $ | ||||||
See Notes to Unaudited Consolidated Financial Statements
4
LEGACY EDUCATION ALLIANCE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - General
Business Description.
We are a provider of practical, high-quality, and value-based educational training on the topics of personal finance, entrepreneurship, real estate, and financial markets investing strategies and techniques. Our programs are offered through a variety of formats and channels, including free workshops, basic trainings, forums, telephone mentoring, one-on-one mentoring, coaching and e-learning. During the six months ended June 30, 2021, we marketed our products and services under our Building Wealth with LegacyTM brand. During the year ended December 31, 2020, we marketed our products and services under two brands: Building Wealth with LegacyTM; and Homemade Investor by Tarek El MoussaTM.
Our students pay for their courses in full up-front or through payment agreements with independent third parties. Under United States of America generally accepted accounting principles (“U.S. GAAP”), we recognize revenue upon the earlier of (i) when our students take their courses or (ii) the term for taking their course expires, both of which could be several quarters after the student purchases a program and pays the fee. We recognize revenue immediately when we sell our (i) proprietary products delivered at time of sale and (ii) third party products sales. Our symposiums and forums combine multiple advanced training courses in one location, allowing us to achieve certain economies of scale that reduce costs and improve margins while also accelerating U.S. GAAP revenue recognition, while at the same time, enhancing our students’ experience, particularly, for example, through the opportunity to network with other students.
We also provide a richer experience for our students through one-on-one mentoring (two to three days in length, on site or remotely, although we temporarily suspended providing on-site mentorships as a result of the COVID-19 pandemic) and telephone mentoring (10 to 16 weekly one-on-one or one-on-many telephone sessions). During the third quarter of 2021, we have resumed providing on-site mentorships on a limited basis. Mentoring involves a subject matter expert interacting with the student remotely or in person and guiding the student, for example, through his or her first real estate transaction, providing a real hands-on experience.
We were founded in 1996, and through a reverse merger, became a publicly-held company in November 2014.
Historically, our operations have relied heavily on our and our students’ ability to travel and attend live events where large groups of people gather in local markets within each of the segments in which we operate. In March 2020, as a result of the COVID-19 pandemic, and the resulting worldwide restrictions on travel and social distancing, we temporarily ceased conducting live sales and fulfillment and furloughed substantially all of our employees. We resumed online operations in July 2020, and live operations on a limited basis in November 2020. The Company expects to conduct additional live events as lockdown restrictions continue to ease and hopes to return to a normal schedule over the coming months. The Company will continue following strict safety protocols at the live events. We have simplified our product offerings and restructured our compensation program with respect to both employees and independent contractors to reduce costs and improve margins, but there can be no assurances that the Company will be effective in selling its products and services, or what the impact of such activities will have on our financial performance. We are not able to fully quantify the impact that these factors will have on our financial results, but expect developments related to COVID-19 to continue to affect the Company’s financial performance in 2021 and beyond.
Our
operations are managed through
Since January 1, 2020, we have operated under two brands:
| ● | Building Wealth with LegacyTM: provides practical, high-quality and value-based educational training on the topics of personal finance, entrepreneurship, real estate, financial markets and investing strategies and techniques. This training program encompasses hands-on experience and the true spirit of investing from beginner to educated investor. In the fourth quarter of 2020, the Company began transitioning to its proprietary brand name Building Wealth with LegacyTM. During the six months ended June 30, 2021, we marketed our products and services exclusively under this brand. |
5
| ● | Homemade Investor by Tarek El MoussaTM introduces people to the investor mindset, real estate investing strategies, and ways to generate cash flow that are designed to help build a foundation of knowledge for their financial goals. Homemade Investor events offered free workshops nationwide, 3-day trainings and large stage events with Tarek presenting as the keynote speaker, all selling into our advanced training products. In November 2020, we suspended conducting Homemade Investor by Tarek El MoussaTM sales events to focus on developing our proprietary Building Wealth with LegacyTM brand. |
Basis of Presentation.
The terms “Legacy Education Alliance, Inc.,” the “Company,” “we,” “our,” “us” or “Legacy” as used in this report refer collectively to Legacy Education Alliance, Inc., a Nevada corporation (“Legacy”), the registrant, which was formerly known as Priced In Corp., and, unless the context otherwise requires, together with its wholly-owned subsidiary, Legacy Education Alliance Holdings, Inc., a Colorado corporation, other operating subsidiaries and any predecessor of Legacy Education Alliance Holdings, including Tigrent Inc., a Colorado corporation. All intercompany balances and transactions have been eliminated in consolidation. As discussed in Note 4 “Discontinued Operations”, the sale of the assets and deferred revenues of Legacy Education Alliance International Ltd (Legacy UK), and liquidations of Legacy Education Alliance Hong Kong Limited (Legacy HK), Legacy Education Alliance Australia Pty, Ltd. (Legacy Australia) and Tigrent Learning Canada, Inc. (Tigrent Canada) are reflected as discontinued operations in the consolidated financial statements.
The accompanying unaudited Consolidated Financial Statements presented in this report are for us and our consolidated subsidiaries, each of which is a wholly-owned subsidiary. All significant intercompany transactions have been eliminated. These interim financial statements should be read in conjunction with the consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and reflect all normal recurring adjustments that are, in the opinion of management, necessary to present fairly our results of operations and financial position. Amounts reported in our Consolidated Statements of Operations and Comprehensive income are not necessarily indicative of amounts expected for the respective annual periods or any other interim period.
Reclassification.
We have reclassified certain amounts in our prior-period financial statements to conform to the current period’s presentation.
Significant Accounting Policies.
Our significant accounting policies have been disclosed in Note 2 - Significant Accounting Policies in our most recent Annual Report on Form 10-K. There have been no changes to our accounting policies disclosed therein, except for those discussed in Note 2 - New Accounting Pronouncements, - “Accounting Standards Adopted in the Current Period.”
Going Concern.
The accompanying consolidated financial statements and notes have been prepared assuming we will continue as a going concern. For the six months ended June 30, 2021 we had an accumulated deficit, a working capital deficit and a negative cash flow from operating activities. These circumstances raise substantial doubt as to our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to generate profits by expanding current operations as well as reducing our costs and increasing our operating margins, and to sustain adequate working capital to finance our operations. The failure to achieve the necessary levels of profitability and cash flows would be detrimental to us. The consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.
Use of Estimates.
Conformity with GAAP requires the use of estimates and judgments that affect the reported amounts in our consolidated financial statements and accompanying notes. These estimates form the basis for judgments we make about the carrying values of our assets and liabilities, which are not readily apparent from other sources. We base our estimates and judgments on historical information and on various other assumptions that we believe are reasonable under the circumstances. GAAP requires us to make estimates and judgments in several areas, including, but not limited to, those related to deferred revenues, reserve for breakage, deferred costs, revenue recognition, commitments and contingencies, fair value of financial instruments, useful lives of property and equipment, right-of-use assets, and income taxes. These estimates are based on management’s knowledge about current events and expectations about actions we may undertake in the future. Actual results could differ materially from those estimates.
6
Cash and Cash Equivalents.
We consider all highly liquid instruments with an original maturity of three months or less to be cash or cash equivalents. We continually monitor and evaluate our investment positions and the creditworthiness of the financial institutions with which we invest and maintain deposit accounts. When appropriate, we utilize Certificate of Deposit Account Registry Service (CDARS) to reduce banking risk for a portion of our cash in the United States. A CDAR consists of numerous individual investments, all below the FDIC limits, thus fully insuring that portion of our cash. At June 30, 2021 and December 31, 2020, we did not have a CDAR balance.
Restricted Cash.
Restricted cash balances consist primarily of funds on deposit with credit card and other payment processors. These balances do not have the benefit of federal deposit insurance and are subject to the financial risk of the parties holding these funds. Restricted cash balances held by credit card processors are unavailable to us unless, and for a period of time after, we discontinue the use of their services. Because a portion of these funds can be accessed and converted to unrestricted cash in less than one year in certain circumstances, that portion is considered a current asset. Restricted cash is included with cash and cash equivalents in our consolidated statements of cash flows.
Deposits with Credit Card Processors.
The deposits with our credit card processors are held due to arrangements under which our credit card processors withhold credit card funds to cover charge backs in the event we are unable to honor our commitments. These deposits are included in restricted cash on our consolidated balance sheet.
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts in the consolidated cash flow statements:
| June 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| (in thousands) | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Total cash, cash equivalents, and restricted cash shown in the cash flow statement | $ | $ | ||||||
Convertible Instruments
The Company evaluates and accounts for conversion options embedded in convertible instruments in accordance with ASC 815 “Derivatives and Hedging Activities”.
Applicable GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.
The Company accounts for convertible instruments (when it has been determined that the embedded conversion options should not be bifurcated from their host instruments) as follows: The Company records when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt.
7
Stock Warrants.
The Company accounts for stock warrants as equity in accordance with ASC 480 – Distinguishing Liabilities from Equity. Stock warrants are accounted for a derivative in accordance with ASC 815 – Derivatives and Hedging, if the stock warrants contain other terms that could potentially require “net cash settlement” and therefore, do not meet the scope exception for treatment as a derivative.
Income Tax in Interim Periods.
We conduct operations in separate legal entities in different jurisdictions. As a result, income tax amounts are reflected in these consolidated financial statements for each of those jurisdictions. Tax laws and tax rates vary substantially in these jurisdictions and are subject to change based on the political and economic climate in those countries. We file our tax returns in accordance with our interpretations of each jurisdiction’s tax laws. We record our tax provision or benefit on an interim basis using the estimated annual effective tax rate. This rate is applied to the current period ordinary income or loss to determine the income tax provision or benefit allocated to the interim period.
We record our interim provision for income taxes by applying our estimated annual effective tax rate to our year-to-date pre-tax income and adjusting for discrete tax items recorded in the period. Deferred income taxes result from temporary differences between the reporting of amounts for financial statement purposes and income tax purposes. These differences relate primarily to different methods used for income tax reporting purposes, including for depreciation and amortization, warranty and vacation accruals, and deductions related to allowances for doubtful accounts receivable and inventory reserves. Our provision for income taxes includes current federal and state income tax expense, as well as deferred federal and state income tax expense.
Losses from jurisdictions for which no benefit can be realized and the income tax effects of unusual and infrequent items are excluded from the estimated annual effective tax rate. Valuation allowances are provided against the future tax benefits that arise from the losses in jurisdictions for which no benefit can be realized. The effects of unusual and infrequent items are recognized in the impacted interim period as discrete items.
The estimated annual effective tax rate may be affected by nondeductible expenses and by our projected earnings mix by tax jurisdiction. Adjustments to the estimated annual effective income tax rate are recognized in the period during which such estimates are revised.
We have established valuation allowances against our deferred tax assets, including net operating loss carryforwards and income tax credits. Valuation allowances take into consideration our expected ability to realize these deferred tax assets and reduce the value of such assets to the amount that is deemed more likely than not to be realizable. Our ability to realize these deferred tax assets is dependent on achieving our forecast of future taxable operating income over an extended period of time. We review our forecast in relation to actual results and expected trends on a quarterly basis. A change in our valuation allowance would impact our income tax expense/benefit and our stockholders’ deficit and could have a significant impact on our results of operations or financial condition in future periods.
Discontinued Operations.
ASC 205-20-45, “Presentation of Financial Statements Discontinued Operations” requires discontinued operations to be reported if the disposal of a business component represents a strategic shift that has a major effect on an entity’s operations and financial reports. We have determined that the sale of the assets and deferred revenues of Legacy UK, and liquidations of Legacy HK, Legacy Australia and Tigrent Canada meet this criterion. Accordingly, the assets, deferred revenues, and income statement of these entities were transferred to discontinued operations to close out the business. See Note 4 – “Discontinued Operations”, for additional disclosures regarding these entities.
8
Note 2 - New Accounting Pronouncements
Accounting Standards Adopted in the Current Period.
We have implemented all new accounting pronouncements that are in effect and that management believes would materially affect our financial statements.
Recently Issued Accounting Pronouncements.
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06 – Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40) – Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The ASU simplifies the guidance on the issuer’s accounting for convertible debt instruments by removing the separation models for (1) convertible debt with a cash conversion feature and (2) convertible instruments with a beneficial conversion feature. As a result, entities will not separately present in equity an embedded conversion feature in such debt. Instead, they will account for a convertible debt instrument wholly as debt, unless certain other conditions are met. The elimination of these models will reduce reported interest expense and increase reported net income for entities that have issued a convertible instrument that was within the scope of those models before the adoption of ASU 2020-06. Also, ASU 2020-06 requires the application of the if-converted method for calculating diluted earnings per share, and the treasury stock method will be no longer available. The provisions of ASU 2020-06 are applicable for fiscal years beginning after December 15, 2023, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. The Company is currently evaluating the impact of ASU 2020-06 on its consolidated financial statements.
Note 3 - Share-Based Compensation
We account for share-based awards under the provisions of ASC 718, “Compensation—Stock Compensation.” Accordingly, share-based compensation cost is measured at the grant date based on the fair value of the award and we expense these costs using the straight-line method over the requisite service period.
Share-based
compensation expenses related to our restricted stock grants were $
On
April 20, 2021, pursuant to the 2015 Incentive Plan, we awarded a total of
Note 4 - Discontinued Operations
On January 27, 2021, Legacy Education Alliance Australia PTY Limited (“LEA Australia”), a wholly owned subsidiary of Legacy Education Alliance, Inc. (“LEAI”), appointed Brent Leigh Morgan and Christopher Stephen Bergin, both of the firm of Rodgers Reidy, 326 William Street, Melbourne VIC 3000 Australia, as Joint and Several Liquidators of LEA Australia, to supervise a Creditors Voluntary Liquidation of LEA Australia. Subject to the approval of the creditors of LEA Australia at a meeting held on February 23, 2021 AEDT (February 22, 2021 EST), the Joint Liquidators will wind down the business of LEA Australia and make distributions, if any, to its creditors in accordance with the applicable provisions of the Australian Corporations Act of 2001. The first meeting of creditors of LEA Australia was held on February 24, 2021 (AEDT), at which no resolutions were proposed by the creditors, no nominations for a Committee of Inspection were made, and no alternative liquidator was proposed.
9
On March 2, 2021, Legacy Education Alliance Holdings, Inc. the sole shareholder of Legacy Education Alliance Hong Kong Limited (“LEA Hong Kong”), a subsidiary of the Company, adopted a resolution to wind up voluntarily the affairs of LEA Hong Kong and to appoint Cosimo Borrelli and Li Chung Ngai (also known as Anson Li), both of Borrelli Walsh Limited, Level 17, Tower 1, Admiralty Centre, 18 Harcourt Road, Hong Kong as Joint and Several Liquidators of LEA Hong Kong. At a meeting of the creditors of LEA Hong Kong held on March 2, 2021, the creditors similarly approved the voluntary winding up of LEA Hong Kong and the appointment of Cosimo Borrelli and Li Chung Ngai (also known as Anson Li), as Joint and Several Liquidators. The Joint and Several Liquidators will wind up the business of LEA Hong Kong and make distributions, if any, to its creditors in accordance with the applicable provisions of the Companies (Winding Up and Miscellaneous Provisions) Ordinance of Hong Kong.
On March 7, 2021, Tigrent Learning Canada Inc. (“Tigrent Canada”), a wholly owned subsidiary of Legacy Education Alliance, Inc., filed an assignment in bankruptcy under section 49 of the Canada Bankruptcy and Insolvency Act (the “Act”) in the Office of the Superintendent of Bankruptcy Canada, District of Ontario, Division of Toronto, Court No. 31-2718213. Also on March 7, 2021, A. Farber & Partners was appointed trustee of the estate of Tigrent Canada. The trustee will wind down the business of Tigrent Canada and make distributions, if any, to its creditors in accordance with the applicable provisions of the Act. At the First Meeting of Creditors held on March 23, 2021, the creditors of Tigrent Canada approved the appointment of A. Farber & Partners as trustee of the estate of Tigrent Canada.
On
October 28, 2019, four creditors of Legacy Education Alliance International Ltd. (“Legacy UK”), one of our UK subsidiaries,
obtained an order from the High Court of Justice, Business and Property Courts of England and Wales (the “English Court”)
with respect to the business and affairs of Legacy UK. Pursuant to the Administration Order of November 15, 2019, from the English Court,
the two individuals appointed as administrators engaged a third-party to market Legacy UK’s business and assets for sale to one
or more third parties.
The major classes of assets and liabilities of the entities classified as discontinued operations were as follows:
| June 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| (in thousands) | ||||||||
| Major classes of assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Deferred course expenses | ||||||||
| Discontinued operations-current assets | ||||||||
| Other assets | ||||||||
| Total major classes of assets - discontinued operations | $ | $ | ||||||
| Major classes of liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued course expenses | ||||||||
| Other accrued expenses | ||||||||
| Deferred revenue | ||||||||
| Total major classes of liabilities - discontinued operations | $ | $ | ||||||
The financial results of the discontinued operations are as follows:
| Three
Months Ended June 30, | Six
Months Ended June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| (in thousands) | ||||||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Total operating costs and expenses | ||||||||||||||||
| (Loss) income from discontinued operations | ( | ) | ||||||||||||||
| Other expense, net | ( | ) | ||||||||||||||
| Income tax benefit | ||||||||||||||||
| Net income from discontinued operations | $ | $ | $ | $ | ||||||||||||
10
Note 5 - Earnings Per Share (“EPS”)
Basic EPS is computed by dividing net income (loss) by the basic weighted-average number of shares outstanding during the period.
Diluted EPS is computed by dividing net income by the diluted weighted-average number of shares outstanding during the period and, accordingly, reflects the potential dilution that could occur if securities or other agreements to issue common stock, such as stock options, were exercised, settled or converted into common stock and were dilutive. The diluted weighted-average number of shares used in our diluted EPS calculation is determined using the treasury stock method for stock options and warrants, and the if-converted method for convertible notes. Under the if-converted method, the convertible notes are assumed to have been converted at the beginning of the period or at time of issuance, if later, and the resulting common shares are included in the denominator. For periods in which we recognize losses, the calculation of diluted loss per share is the same as the calculation of basic loss per share.
Unvested awards of share-based payments with rights to receive dividends or dividend equivalents, such as our restricted stock awards, are considered to be participating securities, and therefore, the two-class method is used for purposes of calculating EPS. Under the two-class method, a portion of net income is allocated to these participating securities and is excluded from the calculation of EPS allocated to common stock. Our restricted stock awards are subject to forfeiture and restrictions on transfer until vested and have identical voting, income and distribution rights to the unrestricted common shares outstanding.
Our
weighted average unvested restricted stock awards outstanding were
The calculations of basic and diluted EPS are as follows:
| Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | |||||||||||||||||||||||
| Net Income | Weighted Average Shares Outstanding | Earnings Per Share | Net Income | Weighted Average Shares Outstanding | Earnings Per Share | |||||||||||||||||||
| (in thousands, except per share data) | (in thousands, except per share data) | |||||||||||||||||||||||
| Basic: | ||||||||||||||||||||||||
| As reported | $ | $ | ||||||||||||||||||||||
| Amounts allocated to unvested restricted shares | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Amounts available to common stockholders | $ | $ | $ | $ | ||||||||||||||||||||
| Diluted: | ||||||||||||||||||||||||
| Amounts allocated to unvested restricted shares | ||||||||||||||||||||||||
| Stock warrants | ||||||||||||||||||||||||
| Incremental shares to be issued for convertible note – related party | — | |||||||||||||||||||||||
| Amounts reallocated to unvested restricted shares | ( |
) | ( |
) | ||||||||||||||||||||
| Amounts available to stockholders and assumed conversions | $ | $ | $ | $ | ||||||||||||||||||||
11
| Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | |||||||||||||||||||||||
Net Income | Weighted Average Shares Outstanding | Earnings Per Share | Net Income | Weighted Average Shares Outstanding | Earnings Per Share | |||||||||||||||||||
| (in thousands, except per share data) | (in thousands, except per share data) | |||||||||||||||||||||||
| Basic: | ||||||||||||||||||||||||
| As reported | $ | $ | ||||||||||||||||||||||
| Amounts allocated to unvested restricted shares and warrants | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Amounts available to common stockholders | $ | $ | $ | $ | ||||||||||||||||||||
| Diluted: | ||||||||||||||||||||||||
| Amounts allocated to unvested restricted shares | ||||||||||||||||||||||||
| Stock warrants | ||||||||||||||||||||||||
| Incremental shares to be issued for convertible note – related party | — | |||||||||||||||||||||||
| Amounts reallocated to unvested restricted shares | ( |
) | ( |
) | ||||||||||||||||||||
| Amounts available to stockholders and assumed conversions | $ | $ | $ | $ | ||||||||||||||||||||
Note 6 - Fair Value Measurements
ASC 820, “Fair Value Measurements and Disclosures” defines fair value, establishes a consistent framework for measuring fair value and expands disclosure requirements of fair value measurements. ASC 820 requires entities to, among other things, maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
ASC 820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions.
In accordance with ASC 820, these two types of inputs have created the following fair value hierarchy:
| ● | Level 1-Inputs that are quoted prices (unadjusted) for identical assets or liabilities in active markets; |
| ● | Level 2-Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability, including: |
| ● | Quoted prices for similar assets or liabilities in active markets |
| ● | Quoted prices for identical or similar assets or liabilities in markets that are not active |
| ● | Inputs other than quoted prices that are observable for the asset or liability |
| ● | Inputs that are derived principally from or corroborated by observable market data by correlation or other means; and |
| ● | Level 3-Inputs that are unobservable and reflect our assumptions used in pricing the asset or liability based on the best information available under the circumstances (e.g., internally derived assumptions surrounding the timing and amount of expected cash flows). |
12
For the six-month ended June 30, 2021, and for the year ended December 31, 2020, the Company does not have any financial assets or liabilities measured and recorded at fair value on its consolidated balance sheet on a recurring basis.
Financial Instruments. Financial instruments consist primarily of cash and cash equivalents, accounts payable, deferred course expenses, accrued expenses, deferred revenue, and debt. U.S. GAAP requires the disclosure of the fair value of financial instruments, including assets and liabilities recognized in the balance sheets. Management believes the carrying value of the other financial instruments recognized on the consolidated balance sheet date, including receivables, payables and accrued liabilities approximate their fair value.
Note 7 - Short-Term and Long-Term Debt
| (in thousands) | As
of June 30, 2021 | As
of December 31, 2020 | ||||||
| Senior Secured Convertible Debenture – related party | $ | $ | ||||||
| Debt Discount | ( | ) | ||||||
| Senior Secured Convertible Debenture, net | ||||||||
| Paycheck Protection Program loan | ||||||||
| Paycheck Protection Program loan 2 | ||||||||
| Total debt | ||||||||
| Less current portion of long-term debt | ( | ) | ||||||
| Total long-term debt, net of current portion | $ | $ | ||||||
The following is a summary of scheduled debt maturities by year (in thousands):
| 2021 | $ | |||
| 2022 | ||||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| Thereafter | ||||
| Total debt | $ |
First Draw Paycheck Protection Program Note Agreement.
On
April 27, 2020, Elite Legacy Education, Inc. (“ELE”), a subsidiary of the Company, entered into a Promissory Note in favor
of Pacific Premier Bank (“PPBI”), the lender, through the Small Business Administration (“SBA”) Paycheck Protection
Program (“PPP”) established pursuant to the CARES Act. The unsecured loan (the “First Draw PPP Loan”) proceeds
were in the amount of $
In
March, 2021, ELE was notified that PPBI sold substantially all of its PPP loans, including ELE’s loan, to The Loan Source, Inc.
(“TLS”), which, together with its servicing partner, ACAP SME, LLC, took over the forgiveness and ongoing servicing process
for ELE’s PPP loan. On August 4, 2021, ELE received notice from TLS that its First Draw PPP Loan had been partially forgiven in
the amount of $899 thousand in principal and $
13
Senior Secured Convertible Debenture and Exercise of Conversion Rights.
On
March 8, 2021, the Company issued a $
Second Draw Paycheck Protection Program Note Agreement.
On
April 20, 2021, Elite Legacy Education, Inc (ELE), a wholly-owned subsidiary of the Company, closed on an unsecured Paycheck Protection
Program Note agreement (the “Promissory Note”) to borrow $
14
Debenture, Warrant and Guaranty Agreements, and Exercise of Conversion Rights.
On
May 4, 2021 Legacy Education Alliance, Inc., a Nevada corporation (the “Company”), issued a
Note 8 – Stock Warrants
On
May 4, 2021, the Company issued
On
June 11, 2021, the Company issued
A summary of the warrant activities for the six months ended June 30, 2021, is as follows:
| Warrants Outstanding | ||||||||||||||||
| Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term in Years | Aggregate Intrinsic Value (in 000’s)1 | |||||||||||||
| Balance as of January 1, 2021 | ||||||||||||||||
| Granted | $ | |||||||||||||||
| Balance as of June 30, 2021 | $ | |||||||||||||||
| Exercisable as of June 30, 2021 | $ | $ | ||||||||||||||
| 1 | The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying warrants and the closing stock price of $ |
15
Note 9 - Income Taxes
In
response to liquidity issues that businesses are facing as a result of the recent novel coronavirus (“COVID-19”) global pandemic,
the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was signed into law on March 27, 2020 by the U.S.
government. The CARES Act allows for Net Operating Losses (NOLs) to offset
We
recorded income tax benefit of $
The
Company assessed the weight of all available positive and negative evidence and determined it was more likely than not that future earnings
will be sufficient to realize the associated deferred tax assets. As of June 30, 2021 and December 31, 2020, we retained a valuation
allowance of $
During
the six months ended June 30, 2021 and 2020, there were no material changes in uncertain tax positions. We do not expect any significant
changes to unrecognized tax benefits in this and next year. We estimate $
We record interest and penalties related to unrecognized tax benefits within the provision for income taxes. We believe that no current tax positions that have resulted in unrecognized tax benefits will significantly increase or decrease within one year. We file income tax returns in the U.S. federal jurisdiction and in various state and foreign jurisdictions.
We are not currently under examination in any jurisdiction. In the event of any future tax assessments, we have elected to record the income taxes and any related interest and penalties as income tax expense on our consolidated statements of operations and comprehensive income.
Our federal income tax returns for the years subsequent to 2018 are subject to examination by the Internal Revenue Service. Our state tax returns for all years after 2018 or 2017, depending on each state’s jurisdiction, are subject to examination. In addition, our Canadian tax returns and United Kingdom tax returns for all years after 2014 are subject to examination.
Note 10 - Concentration Risk
Cash and cash equivalents.
We
maintain deposits in banks in amounts that might exceed the federal deposit insurance available. Management believes the potential risk
of loss on these cash and cash equivalents to be minimal. All cash balances as of June 30, 2021 and December 31, 2020, including foreign
subsidiaries, without FDIC coverage were $
Revenue.
A
significant portion of our revenue was derived from the Rich Dad brands, as a result of contracts with students entered into prior to
the expiration, in 2019, of our License Agreement with Rich Dad Operating Company, LLC. For the three months ended June 30, 2021 and
2020, Rich Dad brands provided
The License Agreement with Rich Dad Operating Company, LLC pursuant to which we licensed the Rich Dad Education brand expired on September 30, 2019. Notwithstanding the expiration of the License Agreement, the Company may continue to use Licensed Intellectual Property, as defined in the License Agreement, including, but not limited to, the Rich Dad trademark and stylized logo, for the purpose of honoring and fulfilling orders by its customers in existence as of the date of the expiration of the Agreement.
16
Note 11 - Segment Information
We
manage our business in
The proportion of our total revenue attributable to each segment is as follows:
| Three
Months Ended June 30, | Six
Months Ended June 30, | |||||||||||||||
| As a percentage of total revenue | 2021 | 2020 | 2021 | 2020 | ||||||||||||
| North America | % | % | % | % | ||||||||||||
| U.K. | % | % | % | % | ||||||||||||
| Other foreign markets | — | % | % | — | % | % | ||||||||||
| Total consolidated revenue | % | % | % | % | ||||||||||||
Operating results for the segments are as follows:
| Three
Months Ended June 30, | Six
Months Ended June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Segment revenue | (In thousands) | (In thousands) | ||||||||||||||
| North America | $ | $ | $ | $ | ||||||||||||
| U.K. | ||||||||||||||||
| Other foreign markets | ||||||||||||||||
| Total consolidated revenue | $ | $ | $ | $ | ||||||||||||
| Three
Months Ended June 30, | Six
Months Ended June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Segment gross profit contribution * | (In thousands) | (In thousands) | ||||||||||||||
| North America | $ | $ | $ | $ | ||||||||||||
| U.K. | ||||||||||||||||
| Other foreign markets | ||||||||||||||||
| Total consolidated gross profit | $ | $ | $ | $ | ||||||||||||
| * | Segment gross profit is calculated as revenue less direct course expenses, advertising and sales expenses and royalty expenses. |
| Three
Months Ended June 30, | Six
Months Ended June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Depreciation and amortization expenses | (In thousands) | (In thousands) | ||||||||||||||
| North America | $ | — | $ | $ | $ | |||||||||||
| U.K. | ||||||||||||||||
| Other foreign markets | — | |||||||||||||||
| Total consolidated depreciation and amortization expenses | $ | $ | $ | $ | ||||||||||||
17
| June 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Segment identifiable assets | (In thousands) | |||||||
| North America | $ | $ | ||||||
| U.K. | ||||||||
| Other foreign markets | ||||||||
| Total consolidated identifiable assets | $ | $ | ||||||
Note 12 - Revenue Recognition
We recognize revenue when our customers obtain control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services, in accordance with implemented Topic 606 - an update to Topic 605. Revenue amounts presented in our consolidated financial statements are recognized net of sales tax, value-added taxes, and other taxes.
In
the normal course of business, we recognize revenue based on the customers’ attendance of the course, mentoring training, coaching
session or delivery of the software, data or course materials on-line. After a customer contract expires, we record breakage revenue
less a reserve for cases where we allow a customer to attend after expiration. As of June 30, 2021, we have deferred revenue of $
The following tables disaggregate our segment revenue by revenue source:
| Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | |||||||||||||||||||||||||||||||
| North America | U.K. | Other foreign markets | Total Consolidated Revenue | North America | U.K. | Other foreign markets | Total Consolidated Revenue | |||||||||||||||||||||||||
| (In thousands) | (In thousands) | |||||||||||||||||||||||||||||||
| Revenue Type: | ||||||||||||||||||||||||||||||||
| Seminars | $ | $ | $ | — | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Products | — | — | — | — | — | — | ||||||||||||||||||||||||||
| Coaching and Mentoring | — | — | — | — | — | — | ||||||||||||||||||||||||||
| Online and Subscription | — | — | — | |||||||||||||||||||||||||||||
| Other | — | — | — | — | — | |||||||||||||||||||||||||||
| Total revenue | $ | $ | $ | — | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | |||||||||||||||||||||||||||||||
| North America | U.K. | Other foreign markets | Total Consolidated Revenue | North America | U.K. | Other foreign markets | Total Consolidated Revenue | |||||||||||||||||||||||||
| (In thousands) | (In thousands) | |||||||||||||||||||||||||||||||
| Revenue Type: | ||||||||||||||||||||||||||||||||
| Seminars | $ | $ | $ | — | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Products | — | — | — | — | ||||||||||||||||||||||||||||
| Coaching and Mentoring | — | — | — | — | — | — | ||||||||||||||||||||||||||
| Online and Subscription | — | — | — | |||||||||||||||||||||||||||||
| Other | — | — | — | |||||||||||||||||||||||||||||
| Total revenue | $ | $ | $ | — | $ | $ | $ | $ | $ | |||||||||||||||||||||||
18
Note 13 - Commitments and Contingencies
Licensing agreements.
We
are committed to pay royalties for the usage of certain brands, as governed by various licensing agreements, including T&B Seminars,
Inc., and Rich Dad.
Custodial and Counterparty Risk.
We
are subject to custodial and other potential forms of counterparty risk in respect to a variety of contractual and operational matters.
In the course of ongoing Company-wide risk assessment, management monitors our arrangements that involve potential counterparty risk,
including the custodial risk associated with amounts prepaid to certain vendors and deposits with credit card and other payment processors.
Deposits held by our credit card processors at June 30, 2021 and December 31, 2020, were $
Litigation.
We and certain of our subsidiaries, from time to time, are parties to various legal proceedings, claims and disputes that have arisen in the ordinary course of business. These claims may involve significant amounts, some of which would not be covered by insurance.
Tranquility
Bay of Pine Island, LLC v. Tigrent, Inc., et al. On March 16, 2017, suit was filed in the Twentieth Judicial Circuit In and For Lee
County, Florida (the “Court”) by Tranquility Bay of Pine Island, LLC (“TBPI”) against Tigrent Inc. and various
of its present and former shareholders, officers and directors. By amendment dated May 24, 2019, the Company and its General Counsel
and former Chief Executive Officer were named as defendants to a civil conspiracy count. The suit, as originally filed, primarily related
to the alleged obligation of Tigrent to indemnify the Plaintiff pursuant to an October 6, 2010 Forbearance Agreement. The suit, as originally
filed, included claims for Breach of Contract, Permanent and Temporary Injunction, Breach of Fiduciary Duty, Civil Conspiracy, Tortious
Interference and Fraudulent Transfer. On March 20, 2019, the Court dismissed the complaint in its entirety with leave to amend. On April
11, 2019, TBPI filed its Second Amended Complaint with the Court against Tigrent Inc. (“Tigrent”), Legacy Education Alliance
Holdings, Inc. (“Holdings”), and certain shareholders of the Company. The Second Amended Complaint included claims for Breach
of Contract, Breach of Fiduciary Duty against Tigrent, Civil Conspiracy against Tigrent and Holdings, and various Counts of Fraudulent
Transfer against various shareholders of the Company. On May 24, 2019, with leave from the court, TBPI filed its Third Amended Complaint,
which included claims for Breach of Contract against Tigrent, Breach of Fiduciary Duty against Tigrent, Damages for Violation of Unfair
and Deceptive Business Practices Act against Tigrent, Civil Conspiracy against Tigrent and Holdings, and various Counts of Fraudulent
Transfer against various shareholders of Tigrent, including the Company’s current General Counsel, James E. May. On June 23, 2020,
the Court entered summary judgment in favor of Tigrent with respect to TBPI’s claims against Tigrent alleging (i) breach of fiduciary
duty, (ii) violation of the Florida Deceptive and Unfair Trade Practices Act, and (iii) indemnification against certain attorney’s
fees claimed to have been incurred by TBPI. On September 17, 2020, the Court (i) granted summary judgment in favor of Tigrent and Holdings
on TBPI’s claim for conspiracy; (ii) denying TBPI’s motion for summary judgment against Tigrent in which TBPI sought a declaration
by the Court that claims against TBPI in a lawsuit to which neither Tigrent nor Holdings is a party (“Third Party Lawsuit”)
were within the scope of Tigrent’s indemnity obligations under the Forbearance Agreement; and (iii) denying TBPI’s motion
for summary judgment in which TBPI sought a declaration by the Court that TBPI’s attorney’s fees incurred the Third Party
Lawsuit were also within the scope of Tigrent’s indemnity obligations under the Forbearance Agreement. On August 18, 2020, TBPI
voluntarily dismissed all shareholder defendants, other than Mr. May and Steven Barre, Tigrent’s former Chief Executive Officer.
On January 4, 2021, a Settlement Agreement and Mutual Release was entered into by and between TBPI, M. Barry Strudwick, Carl Weiss and
Susan Weiss (the “Strudwick Parties”) and Tigrent Inc., Legacy Education Alliance, Inc., Legacy Education Alliance Holdings,
Inc., Mr. May, and Steven Barre (Defendants) pursuant to which the Strudwick Parties agreed to dismiss the lawsuit with prejudice against
all parties and the Company agreed to pay the aggregate sum of $
19
In
the Matter of Legacy Education Alliance International, Ltd. On October 28, 2019, an Application for Administration was filed in the
High Court of Justice, Business and Property Courts of England and Wales (the “English Court”), whereby four creditors of
Legacy Education Alliance, International Ltd (“Legacy UK”), one of our UK subsidiaries, sought an administration order with
respect to the business affairs of the subsidiary, the appointment of an administrator, and such other ancillary orders as the applicants
may request or as the court deemed appropriate. On November 15, 2019, the creditors obtained an Administration Order from the English
Court. Under the terms of the Administration Order, two individuals have been appointed as administrators of Legacy UK and will manage
Legacy UK and operate its affairs, business and property under the jurisdiction of the English Court. The administrators engaged a third-party
to market Legacy UK’s business and assets for sale to one or more third parties. On November 26, 2019, Legacy UK’s assets
and deferred revenues sold for £
In
the Matter of Elite Legacy Education UK Ltd. On March 18, 2020, a Winding-Up Petition, CR-2020-001958, was filed in the High Court
of Justice, Business and Property Courts of England and Wales (the “High Court”) against one of our UK subsidiaries, Elite
Legacy Education UK Ltd. (“ELE UK”), by one of its creditors (“Petitioner”) pursuant to which the Petitioner
was claiming a debt of £
Other Legal Proceeding.
In the Matter of Elite Legacy Education UK Ltd., Proposal for a Company Voluntary Arrangement. At a meeting held on January 11, 2021 (“Creditors’ Meeting”), the creditors of Elite Legacy Education UK Ltd (“ELE UK”), a wholly owned subsidiary of Legacy Education Alliance, Inc. (“LEAI”), approved a Proposal for a Company Voluntary Arrangement (the “CVA”) under the UK Insolvency Act 1986 (the “IA”) and the UK Insolvency Rules 2016 (the “IR”). Under the terms of the CVA, CVR Global LLP has been appointed as Supervisor of ELE UK for the purposes of administering the Arrangement. At the Creditors Meeting, the creditors also approved a modification to the CVA whereby any tax refunds due to ELE UK would be paid to the Supervisor and made available for distribution to creditors. The Supervisor will wind down the business of ELE UK and make distributions to ELE UK’s non-student creditors in accordance with the applicable provisions of the IA and the IR, on and subject to the terms and conditions set forth in the CVA in satisfaction of the non-student creditors’ respective claims against ELE UK. During the quarter ended June 30, 2021, and pursuant to the CVA, student creditors of ELE UK were provided the opportunity to receive trainings from an independent training provider in satisfaction of their respective claims against ELE UK; as a result, all obligations of ELE UK to student creditors have been satisfied. Pursuant to the CVA, and at its conclusion, the remaining assets of ELE UK, if any, would be distributed to LEAI. As a result of the CVR, the Winding-Up Petition, CR-2020-001958, filed in the High Court of Justice, Business and Property Courts of England and Wales has been dismissed. At this time, LEAI management is unable to anticipate any distributions that would be received from ELE UK.
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Note 14 - Leases
Right-of-Use Assets and Leases Obligations
We
lease office space and office equipment under non-cancelable operating leases, with terms typically ranging from
We determine whether a contract is or contains a lease at inception of the contract and whether that lease meets the classification criteria of a finance or operating lease. When available, we use the rate implicit in the lease to discount lease payments to present value; however, most of our leases do not provide a readily determinable implicit rate. Therefore, we must discount lease payments based on an estimate of its incremental borrowing rate.
We do not separate lease and non-lease components of contracts. There are no material residual value guarantees associated with any of our leases. There are no significant restrictions or covenants included in our lease agreements other than those that are customary in such arrangements.
Lease Position as of June 30, 2021 and December 31, 2020
The table below presents the lease related assets and liabilities recorded on the Company’s Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020:
| Classification on the Balance Sheet | June 30, 2021 | December 31, 2020 | ||||||
| (in thousands) | ||||||||
| Operating lease right of use assets | $ | $ | ||||||
| Total lease assets | $ | $ | ||||||
| Current operating lease liabilities | $ | $ | ||||||
| Long-term operating lease liabilities | $ | $ | ||||||
| Total lease liabilities | $ | $ | ||||||
Lease cost for the three and six months ended June 30, 2021 and 2020
The table below presents the lease related costs recorded on the Company’s Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020:
| Three
Months Ended June 30, | Six
Months Ended June 30, | |||||||||||||||
| Classification | 2021 | 2020 | 2021 | 2020 | ||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
| General and administrative expenses | $ | $ | $ | $ | ||||||||||||
| Total lease cost | $ | $ | $ | $ | ||||||||||||
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Other Information
The table below presents supplemental cash flow information related to leases for the six months ended June 30, 2021 and 2020:
| Six
Months Ended June 30, | ||||||||
| 2021 | 2020 | |||||||
| (in thousands) | ||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||
| Operating cash flows for operating leases | $ | $ | ||||||
| Supplemental non-cash amounts of lease liabilities arising from obtaining right-of-use assets/(decrease) of lease liability due to cancellation of leases | ( | ) | ||||||
Lease Terms and Discount Rates
The table below presents certain information related to the weighted average remaining lease terms and weighted average discount rates for the Company’s operating leases as of June 30, 2021 and December 31, 2020:
| June 30, 2021 | December 31, 2020 | |||||||
| Weighted average remaining lease term - operating leases | ||||||||
| Weighted average discount rate - operating leases | % | % | ||||||
There are no lease arrangements where the Company is the lessor.
Note 15 - Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the consolidated balance sheet date up to August 16, 2021, the date that the financial statements were issued. Other than as described in Note 7 “Short-Term and Long-Term Debt”, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
INTRODUCTION
You should read the following discussion of our financial condition and results of operations with our audited consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020. This discussion contains forward-looking statements and involves numerous risks, uncertainties, assumptions and other important factors that could cause the actual results, performance or our achievements, or industry results, to differ materially from historical results, any future results, or performance or achievements expressed or implied by such forward-looking statements. See “Cautionary Statement Regarding Forward-Looking Information.”
Business Overview
We are a provider of practical, high-quality, and value-based educational training on the topics of personal finance, entrepreneurship, real estate, and financial markets investing strategies and techniques. Our programs are offered through a variety of formats and channels, including free workshops, basic trainings, forums, telephone mentoring, one-on-one mentoring, coaching and e-learning. During the six months ended June 30, 2021, we marketed our products and services under our Building Wealth with LegacyTM brand. During the year ended December 31, 2020, we marketed our products and services under two brands: Building Wealth with LegacyTM; and Homemade Investor by Tarek El MoussaTM.
Our students pay for their courses in full up-front or through payment agreements with independent third parties. Under United States of America generally accepted accounting principles (“U.S. GAAP”), we recognize revenue upon the earlier of (i) when our students take their courses or (ii) the term for taking their course expires, both of which could be several quarters after the student purchases a program and pays the fee. We recognize revenue immediately when we sell our (i) proprietary products delivered at time of sale and (ii) third party products sales. Our symposiums and forums combine multiple advanced training courses in one location, allowing us to achieve certain economies of scale that reduce costs and improve margins while also accelerating U.S. GAAP revenue recognition, while at the same time, enhancing our students’ experience, particularly, for example, through the opportunity to network with other students.
We also provide a richer experience for our students through one-on-one mentoring (two to three days in length, on site or remotely, although we temporarily suspended providing on-site mentorships as a result of the COVID-19 pandemic) and telephone mentoring (10 to 16 weekly one-on-one or one-on-many telephone sessions). During the third quarter of 2021, we have resumed providing on-site mentorships on a limited basis. Mentoring involves a subject matter expert interacting with the student remotely or in person and guiding the student, for example, through his or her first real estate transaction, providing a real hands-on experience.
We were founded in 1996, and through a reverse merger, became a publicly-held company in November 2014. Today we are a global company that has cumulatively served more than two million students from more than 150 countries and territories over the course of our operating history.
Historically, our operations have relied heavily on our and our students’ ability to travel and attend live events where large groups of people gather in local markets within each of the segments in which we operate. In March 2020, as a result of the COVID-19 pandemic, and the resulting worldwide restrictions on travel and social distancing, we temporarily ceased conducting live sales and fulfillment and furloughed substantially all of our employees. We resumed online operations in July 2020, and live operations on a limited basis in November 2020. The Company expects to conduct additional live events as lockdown restrictions continue to ease and hopes to return to a normal schedule over the coming months. The Company will continue following strict safety protocols at the live events. We have simplified our product offerings and restructured our compensation program with respect to both employees and independent contractors to reduce costs and improve margins, but there can be no assurances that the Company will be effective in selling its products and services, or what the impact of such activities will have on our financial performance. We are not able to fully quantify the impact that these factors will have on our financial results, but expect developments related to COVID-19 to continue to affect the Company’s financial performance in 2021 and beyond.
Our operations are managed through three operating segments: (i) North America, (ii) United Kingdom, and (iii) Other Foreign Markets.
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Since January 1, 2020, we have operated under two brands:
| ● | Building Wealth with LegacyTM: provides practical, high-quality and value-based educational training on the topics of personal finance, entrepreneurship, real estate, financial markets and investing strategies and techniques. This training program encompasses hands-on experience and the true spirit of investing from beginner to educated investor. In the fourth quarter of 2020, the Company began transitioning to its proprietary brand name Building Wealth with LegacyTM. During the six months ended June 30, 2021, we marketed our products and services exclusively under this brand. |
| ● | Homemade Investor by Tarek El MoussaTM introduces people to the investor mindset, real estate investing strategies, and ways to generate cash flow that are designed to help build a foundation of knowledge for their financial goals. Homemade Investor events offered free workshops nationwide, 3-day trainings and large stage events with Tarek presenting as the keynote speaker, all selling into our advanced training products. In November 2020, we suspended conducting Homemade Investor by Tarek El MoussaTM sales events to focus on developing our proprietary Building Wealth with LegacyTM brand. |
Recent Developments
Impact from COVID-19 Pandemic.
Historically, our operations have relied heavily on our and our students’ ability to travel and attend live events where large groups of people gather in local markets within each of the segments in which we operate. On March 11, 2020, the World Health Organization (WHO) declared the COVID-19 outbreak as a pandemic. As a result of worldwide restrictions on travel and social distancing, in March 2020 we temporarily ceased conducting live sales and fulfillment and furloughed substantially all of our employees. We resumed sales operations in June 2020 with online sales events selling into our suite of online, on-demand, and over-the-phone products. We also resumed online, on-demand, and over-the-phone fulfillment activities in June 2020. We resumed live operations on a limited basis, in November 2020, with events in Florida. The Company expects to conduct additional live events in other areas as lockdown restrictions continue to ease and hopes to return to a normal schedule over the coming months. The Company will continue following strict safety protocols at the live events. We have simplified our product offerings and restructured our compensation program with respect to both employees and independent contractors to reduce costs and improve margins, but there can be no assurances that the Company will be effective in selling its products and services, or what the impact such activities will have on our financial performance.
The ultimate impact from COVID-19 on the Company’s operations and financial results will depend on, among other things, the ultimate severity and scope of the pandemic, the efficacy and public acceptance of the various vaccinations against COVID-19, the pace at which governmental and private travel restrictions and public concerns about public gatherings will ease, the rate at which historically large increases in unemployment rates will decrease, if at all, and the speed with which the economy recovers. We are not able to fully quantify the impact that these factors will have on our financial results, but expect developments related to COVID-19 to continue to affect the Company’s financial performance in 2021 and beyond.
Second Draw Paycheck Protection Program Note Agreement
On April 20, 2021, Elite Legacy Education, Inc (ELE), a wholly-owned subsidiary of the Company, closed on an unsecured Paycheck Protection Program Note agreement (the “Promissory Note”) to borrow $1,899,832 from Cross River Bank, the lender, pursuant to the Paycheck Protection Program (“PPP”), originally created under the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, and extended to “Second Draw” PPP loans as described below. The PPP is intended to provide loans to qualified businesses to cover payroll and certain other identified costs. Funds from the loan may only be used for certain purposes, including payroll, benefits, rent, utilities, and certain covered operating expenses. All or a portion of the loan may be forgivable, as provided by the terms of the PPP. The Second Draw PPP Loan has an interest rate of 1.0% per annum and a term of 60 months. Payments will be deferred in accordance with the CARES Act, as modified by the Paycheck Protection Program Flexibility Act of 2020; however, interest will accrue during the deferral period. If all or any portion of the loan is not forgiven in accordance with the terms of the program, ELE will be obligated to make monthly payments of principal and interest in amounts to be calculated after the amount of loan forgiveness, if any, is determined to repay the balance of the loan in full prior to maturity. The Promissory Note contains customary events of default relating to, among other things, payment defaults and breaches of representations. ELE may prepay the loan at any time prior to maturity with no prepayment penalties.
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Changes in Management and Board of Directors
On March 8, 2021, the Company’s Board of Directors (the “Board”) elected Michel Botbol, 61, as a Director, Chairman of the Board, and Chief Executive Officer of the Company. On the same date, the Board appointed James E. May, 66, as General Counsel of the Company, a position he held prior to his appointment as Interim CEO of the Company in January 2019. Upon the assumption of his position as General Counsel, Mr. May resigned as Director and Chief Executive Officer.
On May 3, 2021, the Board of Directors set the number of director seats on the Company’s Board of Directors at four (4) and appointed Barry M. Kostiner, 49, to the Board. Mr. Kostiner is President of, and holds a 25% membership interest in, Legacy Tech Partners, LLC (LTP).
Results of Operations
Our financial results in the second quarter of 2021 were negatively impactec by the COVID-19 pandemic, slower than we anticipated establishment of our new Homemade Investor brand, as well as the effect of winding down our Rich Dad brand and other matters as disclosed in the litigation section of Note 13 “Commitments and Contingencies” in the Notes to Consolidated Financial Statements.
Our Results of Operations in 2021 and 2020 were as follows:
| Three
Months Ended June 30, | Six
Months Ended June 30, | |||||||||||||||
| (in thousands, except per share data) | 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Revenue | $ | 3,362 | $ | 5,765 | $ | 5,982 | $ | 14,125 | ||||||||
| Operating costs and expenses: | ||||||||||||||||
| Direct course expenses | 790 | 1,155 | 1,224 | 3,843 | ||||||||||||
| Advertising and sales expenses | 556 | 171 | 614 | 1,913 | ||||||||||||
| Royalty expenses | — | 3 | — | 59 | ||||||||||||
| General and administrative expenses | 1,398 | 1,021 | 2,396 | 2,478 | ||||||||||||
| Total operating costs and expenses | 2,744 | 2,350 | 4,234 | 8,293 | ||||||||||||
| Income from operations | 618 | 3,415 | 1,748 | 5,832 | ||||||||||||
| Other expense: | ||||||||||||||||
| Interest expense, net | (386 | ) | (20 | ) | (386 | ) | (103 | ) | ||||||||
| Other expense, net | (1 | ) | (33 | ) | (3 | ) | (7 | ) | ||||||||
| Total other expense, net | (387 | ) | (53 | ) | (389 | ) | (110 | ) | ||||||||
| Income from continuing operations before income taxes | 231 | 3,362 | 1,359 | 5,722 | ||||||||||||
| Income tax (expense) benefit | 131 | (1,122 | ) | (915 | ) | (995 | ) | |||||||||
| Net income from continuing operations | 362 | 2,240 | 444 | 4,727 | ||||||||||||
| Income from discontinued operations | — | 1,563 | 171 | 2,109 | ||||||||||||
| Net income from discontinued operations | — | 1,563 | 171 | 2,109 | ||||||||||||
| Net income | $ | 362 | $ | 3,803 | $ | 615 | $ | 6,836 | ||||||||
| Basic earnings per common share - continuing operations | $ | 0.01 | $ | 0.09 | $ | 0.02 | $ | 0.21 | ||||||||
| Basic earnings per common share - discontinued operations | — | 0.07 | — | 0.09 | ||||||||||||
| Basic earnings per common share | $ | 0.01 | $ | 0.16 | $ | 0.02 | $ | 0.30 | ||||||||
| Diluted earnings per common share - continuing operations | $ | 0.01 | $ | 0.09 | $ | 0.02 | $ | 0.20 | ||||||||
| Diluted earnings per common share - discontinued operations | — | 0.07 | — | 0.09 | ||||||||||||
| Diluted earnings per common share | $ | 0.01 | $ | 0.16 | $ | 0.02 | $ | 0.29 | ||||||||
| Basic weighted average common shares outstanding | 25,113 | 23,017 | 24,156 | 23,001 | ||||||||||||
| Diluted weighted average common shares outstanding | 31,843 | 23,163 | 30,048 | 23,163 | ||||||||||||
| Comprehensive income: | ||||||||||||||||
| Net income | $ | 362 | $ | 3,803 | $ | 615 | $ | 6,836 | ||||||||
| Foreign currency translation adjustments, net of tax of $0 | (52 | ) | (682 | ) | 51 | 1,228 | ||||||||||
| Total comprehensive income | $ | 310 | $ | 3,121 | $ | 666 | $ | 8,064 | ||||||||
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Our operating results are expressed as a percentage of revenue in the table below:
| Three
Months Ended June 30, | Six
Months Ended June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Revenue | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||
| Operating costs and expenses: | ||||||||||||||||
| Direct course expenses | 23.5 | 20.0 | 20.5 | 27.2 | ||||||||||||
| Advertising and sales expenses | 16.5 | 3.0 | 10.3 | 13.5 | ||||||||||||
| Royalty expenses | — | 0.1 | 0.0 | 0.4 | ||||||||||||
| General and administrative expenses | 41.6 | 17.7 | 40.1 | 17.5 | ||||||||||||
| Total operating costs and expenses | 81.6 | 40.8 | 70.9 | 58.6 | ||||||||||||
| Income from operations | 18.4 | 59.2 | 29.1 | 41.4 | ||||||||||||
| Other expense: | ||||||||||||||||
| Interest expense, net | (11.5 | ) | (0.3 | ) | (6.4 | ) | (0.7 | ) | ||||||||
| Other expense, net | — | (0.6 | ) | — | (0.1 | ) | ||||||||||
| Total other expense, net | (11.5 | ) | (0.9 | ) | (6.4 | ) | (0.8 | ) | ||||||||
| Income from continuing operations before income taxes | 6.9 | 58.3 | 22.7 | 40.6 | ||||||||||||
| Income tax (expense) benefit | 3.9 | (19.4 | ) | (15.3 | ) | (7.1 | ) | |||||||||
| Net income from continuing operations | 10.8 | 38.9 | 7.4 | 33.5 | ||||||||||||
| Income from discontinued operations | — | 27.1 | 2.9 | 14.9 | ||||||||||||
| Net income from discontinued operations | — | 27.1 | 2.9 | |||||||||||||