Restatements |
Note 11 - Restatements
The Company is restating its Condensed Consolidated Balance Sheet as of June 30, 2017, and the Condensed Consolidated Statement of Operations and Comprehensive Income (Loss), Condensed Consolidated Statement of Changes in Stockholders' Deficit, and Condensed Consolidated Statement of Cash Flow for the period ended June 30, 2017. The restatement shows the previously filed financial statements, the restatement adjustments and as restated columns for the Condensed Consolidated Balance Sheet as of June 30, 2017, and the Condensed Consolidated Statement of Operations and Comprehensive Income (Loss), Condensed Consolidated Statement of Changes in Stockholders' Deficit, and Condensed Consolidated Statement of Cash Flow for the period ended June 30, 2017. The restatement of our financial statements in this Form 10-Q/A reflects the correction of certain identified errors related to revenue, deferred revenue, and deferred expenses that affected the timing of our recognition of revenue and deferred transactions that impacted the second quarter and year to date of 2017. The errors relate to our assessment of revenue recognition, deferred revenue, and deferred expenses associated with our student attendance (i.e. fulfillment) and expired contracts. The restatement also reflects the correction of errors related to the income tax effects of such revenue errors as well as the correction of certain other tax items in the period ended June 30, 2017.
The following table represents the Condensed Consolidated Balance Sheet as previously reported, restatement adjustments, and as restated as of June 30, 2017:
LEGACY EDUCATION ALLIANCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
|
|
As Previously Reported June 30, |
|
|
Restatement |
|
|
As Restated June 30, |
|
|
December 31, |
|
|
|
2017 |
|
|
Adjustments |
|
|
2017 |
|
|
2016 |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
4,705 |
|
|
|
- |
|
|
|
4,705 |
|
|
|
1,711 |
|
Restricted cash |
|
|
3,403 |
|
|
|
- |
|
|
|
3,403 |
|
|
|
3,148 |
|
Deferred course expenses |
|
|
9,711 |
|
|
|
(247 |
) |
|
|
9,464 |
|
|
|
9,067 |
|
Prepaid expenses and other current assets |
|
|
4,083 |
|
|
|
- |
|
|
|
4,083 |
|
|
|
3,458 |
|
Inventory |
|
|
373 |
|
|
|
- |
|
|
|
373 |
|
|
|
348 |
|
Total current assets |
|
|
22,275 |
|
|
|
(247 |
) |
|
|
22,028 |
|
|
|
17,732 |
|
Property and equipment, net |
|
|
1,170 |
|
|
|
- |
|
|
|
1,170 |
|
|
|
1,130 |
|
Deferred tax asset, net |
|
|
1,563 |
|
|
|
(27 |
) |
|
|
1,536 |
|
|
|
1,295 |
|
Other assets |
|
|
305 |
|
|
|
- |
|
|
|
305 |
|
|
|
207 |
|
Total assets |
|
|
25,313 |
|
|
|
(274 |
) |
|
|
25,039 |
|
|
|
20,364 |
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
|
3,049 |
|
|
|
- |
|
|
|
3,049 |
|
|
|
3,344 |
|
Royalties payable |
|
|
376 |
|
|
|
- |
|
|
|
376 |
|
|
|
175 |
|
Accrued course expenses |
|
|
1,840 |
|
|
|
- |
|
|
|
1,840 |
|
|
|
1,082 |
|
Accrued salaries, wages and benefits |
|
|
1,127 |
|
|
|
- |
|
|
|
1,127 |
|
|
|
840 |
|
Other accrued expenses |
|
|
2,583 |
|
|
|
- |
|
|
|
2,583 |
|
|
|
2,052 |
|
Long-term debt, current portion |
|
|
11 |
|
|
|
- |
|
|
|
11 |
|
|
|
11 |
|
Deferred revenue, current portion |
|
|
57,397 |
|
|
|
(578 |
) |
|
|
56,819 |
|
|
|
54,389 |
|
Total current liabilities |
|
|
66,383 |
|
|
|
(578 |
) |
|
|
65,805 |
|
|
|
61,893 |
|
Long-term debt, net of current portion |
|
|
26 |
|
|
|
- |
|
|
|
26 |
|
|
|
31 |
|
Deferred revenue, net of current portion |
|
|
555 |
|
|
|
- |
|
|
|
555 |
|
|
|
235 |
|
Other liabilities |
|
|
479 |
|
|
|
(118 |
) |
|
|
361 |
|
|
|
379 |
|
Total liabilities |
|
|
67,443 |
|
|
|
(696 |
) |
|
|
66,747 |
|
|
|
62,538 |
|
Commitments and contingencies (Note 10) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ deficit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, $0.0001 par value, 20,000,000 shares authorized, none issued |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Common stock, $0.0001 par value, 200,000,000 shares authorized, 23,030,929 and 22,630,927 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively |
|
|
2 |
|
|
|
- |
|
|
|
2 |
|
|
|
2 |
|
Additional paid-in capital |
|
|
11,180 |
|
|
|
- |
|
|
|
11,180 |
|
|
|
11,073 |
|
Cumulative foreign currency translation adjustment |
|
|
1,390 |
|
|
|
- |
|
|
|
1,390 |
|
|
|
2,668 |
|
Accumulated deficit |
|
|
(54,702 |
) |
|
|
422 |
|
|
|
(54,280 |
) |
|
|
(55,917 |
) |
Total stockholders’ deficit |
|
|
(42,130 |
) |
|
|
422 |
|
|
|
(41,708 |
) |
|
|
(42,174 |
) |
Total liabilities and stockholders’ deficit |
|
|
25,313 |
|
|
|
(274 |
) |
|
|
25,039 |
|
|
|
20,364 |
|
The following table represents the Condensed Consolidated Statement of Operations and Comprehensive Income (Loss) as previously reported, restatement adjustments, and as restated as of June 30, 2017:
LEGACY EDUCATION ALLIANCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(In thousands, except share data)
|
|
As Previously Reported Three months ended Jun 30, 2017 |
|
|
Restatement Adjustments |
|
|
As Restated Three months ended Jun 30, 2017 |
|
|
Three months ended Jun 30, 2016 |
|
|
As Previously Reported Three months ended Jun 30, 2017 |
|
|
Restatement Adjustments |
|
|
As Restated Three months ended Jun 30, 2017 |
|
|
Three months ended Jun 30, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
24,780 |
|
|
$ |
1,428 |
|
|
$ |
26,208 |
|
|
$ |
23,375 |
|
|
$ |
47,595 |
|
|
$ |
578 |
|
|
$ |
48,173 |
|
|
$ |
46,113 |
|
Operating costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct course expenses |
|
|
13,007 |
|
|
|
213 |
|
|
|
13,220 |
|
|
|
12,584 |
|
|
|
25,836 |
|
|
|
247 |
|
|
|
26,083 |
|
|
|
24,238 |
|
Advertising and sales expenses |
|
|
5,131 |
|
|
|
0 |
|
|
|
5,131 |
|
|
|
5,322 |
|
|
|
9,722 |
|
|
|
0 |
|
|
|
9,722 |
|
|
|
10,589 |
|
Royalty expenses |
|
|
1,639 |
|
|
|
0 |
|
|
|
1,639 |
|
|
|
1,070 |
|
|
|
2,532 |
|
|
|
0 |
|
|
|
2,532 |
|
|
|
2,043 |
|
General and administrative expenses |
|
|
4,231 |
|
|
|
0 |
|
|
|
4,231 |
|
|
|
3,685 |
|
|
|
8,572 |
|
|
|
0 |
|
|
|
8,572 |
|
|
|
7,744 |
|
Total operating costs and expenses |
|
|
24,008 |
|
|
|
213 |
|
|
|
24,221 |
|
|
|
22,661 |
|
|
|
46,662 |
|
|
|
247 |
|
|
|
46,909 |
|
|
|
44,614 |
|
Income from operations |
|
|
772 |
|
|
|
1,215 |
|
|
|
1,987 |
|
|
|
714 |
|
|
|
933 |
|
|
|
331 |
|
|
|
1,264 |
|
|
|
1,499 |
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income (expense), net |
|
|
(2 |
) |
|
|
0 |
|
|
|
(2 |
) |
|
|
1 |
|
|
|
(5 |
) |
|
|
0 |
|
|
|
(5 |
) |
|
|
(2 |
) |
Other income, net |
|
|
69 |
|
|
|
- |
|
|
|
69 |
|
|
|
319 |
|
|
|
152 |
|
|
|
- |
|
|
|
152 |
|
|
|
140 |
|
Total other income (expense), net |
|
|
67 |
|
|
|
0 |
|
|
|
67 |
|
|
|
320 |
|
|
|
147 |
|
|
|
0 |
|
|
|
147 |
|
|
|
138 |
|
Income before income taxes |
|
|
839 |
|
|
|
1,215 |
|
|
|
2,054 |
|
|
|
1,034 |
|
|
|
1,080 |
|
|
|
331 |
|
|
|
1,411 |
|
|
|
1,637 |
|
Income tax benefit/(expense) |
|
|
156 |
|
|
|
(263 |
) |
|
|
(107 |
) |
|
|
(9 |
) |
|
|
135 |
|
|
|
91 |
|
|
|
226 |
|
|
|
(19 |
) |
Net income |
|
$ |
995 |
|
|
$ |
952 |
|
|
$ |
1,947 |
|
|
$ |
1,025 |
|
|
$ |
1,215 |
|
|
$ |
422 |
|
|
$ |
1,637 |
|
|
$ |
1,618 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share |
|
$ |
0.04 |
|
|
$ |
0.05 |
|
|
$ |
0.09 |
|
|
$ |
0.05 |
|
|
$ |
0.05 |
|
|
$ |
0.02 |
|
|
$ |
0.07 |
|
|
$ |
0.08 |
|
Diluted earnings per common share |
|
$ |
0.04 |
|
|
$ |
0.04 |
|
|
$ |
0.08 |
|
|
$ |
0.04 |
|
|
$ |
0.05 |
|
|
$ |
0.02 |
|
|
$ |
0.07 |
|
|
$ |
0.07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average common shares outstanding |
|
|
21,284 |
|
|
|
0 |
|
|
|
21,284 |
|
|
|
20,961 |
|
|
|
21,284 |
|
|
|
0 |
|
|
|
21,284 |
|
|
|
20,961 |
|
Diluted weighted average common shares outstanding |
|
|
22,763 |
|
|
|
0 |
|
|
|
22,763 |
|
|
|
21,846 |
|
|
|
22,697 |
|
|
|
0 |
|
|
|
22,697 |
|
|
|
21,846 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income/(loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
995 |
|
|
$ |
952 |
|
|
$ |
1,947 |
|
|
$ |
1,025 |
|
|
$ |
1,215 |
|
|
$ |
422 |
|
|
$ |
1,637 |
|
|
$ |
1,618 |
|
Foreign currency translation adjustments, net of tax of $0 |
|
|
(980 |
) |
|
|
- |
|
|
|
(980 |
) |
|
|
1,474 |
|
|
|
(1,278 |
) |
|
|
- |
|
|
|
(1,278 |
) |
|
|
1,959 |
|
Total comprehensive income (loss) |
|
$ |
15 |
|
|
$ |
952 |
|
|
$ |
967 |
|
|
$ |
2,499 |
|
|
$ |
(63 |
) |
|
$ |
422 |
|
|
$ |
359 |
|
|
$ |
3,577 |
|
The following table represents the Condensed Consolidated Statement of Changes in Stockholders' Deficit as previously reported, restatement adjustments, and as restated as of June 30, 2017:
LEGACY EDUCATION ALLIANCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
(Unaudited)
(In thousands)
|
|
Common stock |
|
|
Additional paid-in |
|
|
Cumulative foreign currency translation |
|
|
Accumulated |
|
|
Total stockholders’ |
|
|
|
Shares |
|
|
Amount |
|
|
capital |
|
|
adjustment |
|
|
deficit |
|
|
deficit |
|
Balance at December 31, 2016 |
|
|
22,631 |
|
|
$ |
2 |
|
|
$ |
11,073 |
|
|
$ |
2,668 |
|
|
$ |
(55,917 |
) |
|
$ |
(42,174 |
) |
Share-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
107 |
|
|
|
— |
|
|
|
— |
|
|
|
107 |
|
Issuance of common stock |
|
|
400 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Foreign currency translation adjustment, net of tax of $0 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,278 |
) |
|
|
— |
|
|
|
(1,278 |
) |
Net Income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,637 |
|
|
|
1,637 |
|
Balance at June 30, 2017 (Restated) |
|
|
23,031 |
|
|
$ |
2 |
|
|
$ |
11,180 |
|
|
$ |
1,390 |
|
|
$ |
(54,280 |
) |
|
$ |
(41,708 |
) |
The following table represents the Condensed Consolidated Statement of Cash Flow as previously reported, restatement adjustments, and as restated as of June 30, 2017:
LEGACY EDUCATION ALLIANCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW
(Unaudited)
(In thousands)
|
|
As Previously Reported Six Months Ended June 30, 2017 |
|
|
Restatement Adjustments |
|
|
As Restated Six Months Ended June 30, 2017 |
|
|
Six Months Ended June 30, 2016
|
|
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
1,215 |
|
|
$ |
422 |
|
|
$ |
1,637 |
|
|
$ |
1,618 |
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
65 |
|
|
|
- |
|
|
|
65 |
|
|
|
78 |
|
Gain on change in fair value of derivatives |
|
|
(87 |
) |
|
|
- |
|
|
|
(87 |
) |
|
|
(3 |
) |
Share-based compensation |
|
|
107 |
|
|
|
- |
|
|
|
107 |
|
|
|
74 |
|
Deferred income taxes |
|
|
(264 |
) |
|
|
(91 |
) |
|
|
(355 |
) |
|
|
(1 |
) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted cash |
|
|
(186 |
) |
|
|
- |
|
|
|
(186 |
) |
|
|
(721 |
) |
Deferred course expenses |
|
|
(487 |
) |
|
|
247 |
|
|
|
(240 |
) |
|
|
(161 |
) |
Prepaid expenses and other receivable |
|
|
(539 |
) |
|
|
- |
|
|
|
(539 |
) |
|
|
(447 |
) |
Inventory |
|
|
(18 |
) |
|
|
- |
|
|
|
(18 |
) |
|
|
180 |
|
Other assets |
|
|
(27 |
) |
|
|
— |
|
|
|
(27 |
) |
|
|
(3 |
) |
Accounts payable-trade |
|
|
(388 |
) |
|
|
- |
|
|
|
(388 |
) |
|
|
2,153 |
|
Royalties payable |
|
|
201 |
|
|
|
- |
|
|
|
201 |
|
|
|
103 |
|
Accrued course expenses |
|
|
725 |
|
|
|
- |
|
|
|
725 |
|
|
|
390 |
|
Accrued salaries, wages and benefits |
|
|
280 |
|
|
|
- |
|
|
|
280 |
|
|
|
(618 |
) |
Other accrued expenses |
|
|
656 |
|
|
|
- |
|
|
|
656 |
|
|
|
(1,124 |
) |
Deferred revenue |
|
|
1,832 |
|
|
|
(578 |
) |
|
|
1,254 |
|
|
|
(2,089 |
) |
Other liabilities |
|
|
100 |
|
|
|
- |
|
|
|
100 |
|
|
|
— |
|
Net cash provided by (used in) operating activities |
|
|
3,185 |
|
|
|
0 |
|
|
|
3,185 |
|
|
|
(571 |
) |
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
|
(103 |
) |
|
|
- |
|
|
|
(103 |
) |
|
|
(37 |
) |
Net cash used in investing activities |
|
|
(103 |
) |
|
|
- |
|
|
|
(103 |
) |
|
|
(37 |
) |
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal payments on debt |
|
|
(5 |
) |
|
|
- |
|
|
|
(5 |
) |
|
|
(5 |
) |
Net cash used in financing activities |
|
|
(5 |
) |
|
|
- |
|
|
|
(5 |
) |
|
|
(5 |
) |
Effect of exchange rate differences on cash |
|
|
(83 |
) |
|
|
- |
|
|
|
(83 |
) |
|
|
703 |
|
Net increase in cash and cash equivalents |
|
|
2,994 |
|
|
|
0 |
|
|
|
2,994 |
|
|
|
90 |
|
Cash and cash equivalents, beginning of period |
|
$ |
1,711 |
|
|
$ |
- |
|
|
$ |
1,711 |
|
|
$ |
4,881 |
|
Cash and cash equivalents, end of period |
|
$ |
4,705 |
|
|
$ |
0 |
|
|
$ |
4,705 |
|
|
$ |
4,971 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the period for interest |
|
$ |
5 |
|
|
$ |
- |
|
|
$ |
5 |
|
|
$ |
5 |
|
Cash paid during the period for income taxes, net of refunds received |
|
$ |
30 |
|
|
$ |
2 |
|
|
$ |
32 |
|
|
$ |
34 |
|
|