|6 Months Ended|
Jun. 30, 2020
|Subsequent Events [Abstract]|
Note 14 – Subsequent Events
Impact from COVID-19 Coronavirus.
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. These activities required the re-engagement by the Company of some furloughed employees and independent contractors. 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 during 2020 will depend on, among other things, the ultimate severity and scope of the pandemic, 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 whether, 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 during 2020 and beyond, but expect developments related to COVID-19 to materially affect the Company's financial performance in 2020.
Entry Into Material Commercial Contract.
On July 24, 2020 (the "Effective Date"), 1612 E. Cape Coral Parkway Holding Co., LLC (the Seller"), a subsidiary of the Company, entered into a Commercial Contract with Daniel Thom, as Trustee of Torstonbo Trust, a Florida revocable trust ("Buyer") for the sale of the real property and improvements located at 1612 E. Cape Coral Parkway, Cape Coral, Florida (the "Property"), subject to the terms and conditions of the Commercial Contract. The Property is currently used as the US headquarters of the Company and various of its subsidiaries. The aggregate purchase price for the Property is $2.5 million to be paid in cash at closing. The Property is encumbered by a mortgage with an outstanding principal amount of $0.5 million (see Note 7 "Short-Term and Long-Term Debt"), which, along with accrued interest, will be paid at Closing.
The material terms of the Commercial Contract include: (i) an initial deposit from the Buyer of $0.2 million, non-refundable to the Buyer (except as otherwise provided in the Commercial Contract) after the expiration of a 20-day due diligence period, which ended on August 13, 2020; (ii) a second deposit into escrow from the Buyer of $0.2 million within three (3) days after the expiration of the 20-day due diligence period; and (iii) a closing date thirty (30) days following the Effective Date. The Commercial Contract provides that subject to certain conditions to Closing contained in the Commercial Contract, including the obligation of Seller to deliver marketable title, the Seller will deliver the Property to the Buyer at closing in its current condition "as is" condition, ordinary wear and tear excepted and without warranty other than marketability of title. There is no financing contingency. The foregoing description of the Commercial Contract does not purport to be complete and is qualified in its entirety by reference to the text of such agreement.
Promissory Note and Mortgage, Assignment of Rents and Security Agreement
On August 6, 2020, 1612 E. Cape Coral Parkway Holding Co., LLC ("Borrower"), a Florida limited liability company and subsidiary of the Company entered into a Promissory Note and Mortgage, Assignment of Rents, and Security Agreement (collectively, the "Loan Documents") with Northern Equity Group, Inc., JKH Ventures, Inc., and Donald Ross, LLC (collectively "Lenders") pursuant to which Borrower borrowed the principal amount of $1 million. The Promissory Note requires monthly payments of interest only at a fixed rate of 12% per annum. Payment of unpaid principal and any accrued and unpaid interest is due on August 5, 2021. Pursuant to the Mortgage, Assignment of Rents and Security Agreement, repayment of the Promissory Note is secured by a first mortgage on the real property and improvements located at 1612 East Cape Coral Parkway, Cape Coral, FL. 33904 (the "Collateral"). At closing, we received $396,762 in net proceeds after closing costs and other fees and costs and after paying off the outstanding principal in the amount of $0.5 million, plus accrued interest, under a Promissory Note held by USA Regrowth Fund LLC.
The Borrower may prepay any part of the loan at any time however any such prepayments made before February 6, 2021 will be subject to a prepayment fee unless such prepayment is made in connection with the sale of the Collateral to a bona fide third-party purchaser. The Loan Documents contain covenants usual and customary for loans of its type, including, the obligation to maintain, repair, and insure, and not to encumber the Collateral.
The entire disclosure for significant events or transactions that occurred after the balance sheet date through the date the financial statements were issued or the date the financial statements were available to be issued. Examples include: the sale of a capital stock issue, purchase of a business, settlement of litigation, catastrophic loss, significant foreign exchange rate changes, loans to insiders or affiliates, and transactions not in the ordinary course of business.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef