Note 11 - Restatements

 

The Company is restating its Condensed Consolidated Balance Sheet as of March 31, 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 March 31, 2017. The restatement shows the previously filed financial statements, the restatement adjustments and as restated columns for the Condensed Consolidated Balance Sheet as of March 31, 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 March 31, 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 first quarter 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 quarter ended March 31, 2017.

 

The following table represents the Condensed Consolidated Balance Sheet as previously reported, restatement adjustments, and as restated as of March 31, 2017:

 

LEGACY EDUCATION ALLIANCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share data)

 

		As Previously Reported				Restatement Adjustments				As Restated
ASSETS
Current assets:
Cash and cash equivalents		$	2,973			$				$	2,973
Restricted cash			3,669								3,669
Deferred course expenses			9,818				(34	)			9,784
Prepaid expenses and other current assets			3,707								3,707
Inventory			363								363
Total current assets			20,530				(34	)			20,496
Property and equipment, net			1,179								1,179
Deferred tax asset, net			1,497				11				1,508
Other assets			286								286
Total assets		$	23,492			$	(23	)		$	23,469
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable		$	3,226			$				$	3,226
Royalties payable			322								322
Accrued course expenses			2,296								2,296
Accrued salaries, wages and benefits			857								857
Other accrued expenses			2,406								2,406
Long-term debt, current portion			11								11
Deferred revenue, current portion			55,268				850				56,118
Total current liabilities			64,386				850				65,236
Long-term debt, net of current portion			28								28
Deferred revenue, net of current portion			688								688
Other liabilities			591				(343	)			248
Total liabilities			65,693				507				66,200
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, 22,630,927 and 22,630,927 shares issued and outstanding at March 31, 2017 and December 31, 2016, respectively			2								2
Additional paid-in capital			11,124								11,124
Cumulative foreign currency translation adjustment			2,370								2,370
Accumulated deficit			(55,697	)			(530	)			(56,227	)
Total stockholders’ deficit			(42,201	)			(530	)			(42,731	)
Total liabilities and stockholders’ deficit		$	23,492			$	(23	)		$	23,469

 

The following table represents the Condensed Consolidated Statement of Operations and Comprehensive Income (Loss) as previously reported, restatement adjustments, and as restated as of March 31, 2017:

 

LEGACY EDUCATION ALLIANCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(In thousands, except per share data)

 

		Three Months Ended March 31, 2017
		As Previously Reported				Restatement Adjustments				As Restated
Revenue		$	22,815			$	(850	)		$	21,965
Operating costs and expenses:
Direct course expenses			12,829				34				12,863
Advertising and sales expenses			4,591								4,591
Royalty expenses			893								893
General and administrative expenses			4,341								4,341
Total operating costs and expenses			22,654				34				22,688
Income (loss) from operations			161				(884	)			(723	)
Other income (expense):
Interest expense, net			(3	)							(3	)
Other income, net			83								83
Total other income, net			80								80
Income (loss) before income taxes			241				(884	)			(643	)
Income tax benefit (expense)			(21	)			354				333
Net income (loss)		$	220			$	(530	)		$	(310	)
Basic earnings (loss) per common share		$	0.01			$	(0.02	)		$	(0.01	)
Diluted earnings (loss) per common share		$	0.01			$	(0.02	)		$	(0.01	)
Basic weighted average common shares outstanding			21,284								22,631
Diluted weighted average common shares outstanding			22,631								22,631
Comprehensive income/(loss):
Net income (loss)		$	220			$	(530	)		$	(310	)
Foreign currency translation adjustments, net of tax of $0			(298	)							(298	)
Total comprehensive income (loss)		$	(78	)		$	(530	)		$	(608	)

 

The following table represents the Condensed Consolidated Statement of Changes in Stockholders' Deficit as previously reported, restatement adjustments, and as restated as of March 31, 2017:

 

LEGACY EDUCATION ALLIANCE, INC. AND SUBSIDIARIES 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT

(Unaudited)

(In thousands)

 

										Additional				Cumulative								Total								Total
		Common stock								paid-in				foreign				Accumulated				stockholder								stockholder
		Shares				Amount				capital				adjustment				deficit				deficit								deficit
																						As
																						Previously				Restatement				As
																						reported				Adjustments				Restated
Balance at December 31, 2016			22,631			$	2			$	11,073			$	2,668			$	(55,917	)		$	(42,174	)			-			$	(42,174	)
Share-based compensation expense			—				—				51				—				—				51				-				51
Foreign currency translation adjustment, net of tax of $0			—				—				—				(298	)			—				(298	)			-				(298	)
Net Income (loss)			—				—				—				—				220				220				(530	)			(310	)
Balance at March 31, 2017  (Restated)			22,631			$	2			$	11,124			$	2,370			$	(55,697	)		$	(42,201	)			(530	)		$	(42,731	)

   

The following table represents the Condensed Consolidated Statement of Cash Flow as previously reported, restatement adjustments, and as restated as of March 31, 2017:

 

LEGACY EDUCATION ALLIANCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

 

		Three Months Ended March 31,
		As												As
		previously				Restatement				As				previously
		reported				Adjustments				Restated				reported
		2017				2017				2017				2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)		$	220			$	(530	)		$	(310	)		$	593
Adjustments to reconcile net income  (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization			33								33				39
Gain on change in fair value of derivatives			(72	)							(72	)			(5	)
Share-based compensation			51								51				37
Deferred income taxes			(201	)			(354	)			(555	)			—
Changes in operating assets and liabilities:
Restricted cash			(502	)							(502	)			(454	)
Deferred course expenses			(751	)			34				(717	)			(54	)
Prepaid expenses and other receivable			(229	)							(229	)			(261	)
Inventory			(12	)							(12	)			30
Other assets			(27	)							(27	)			—
Accounts payable-trade			(143	)							(143	)			1,509
Royalties payable			146								146				144
Accrued course expenses			1,205								1,205				628
Accrued salaries, wages and benefits			16								16				(271	)
Other accrued expenses			432								432				(589	)
Deferred revenue			982				850				1,832				(1,034	)
Other liabilities			212								212				—
Net cash provided by operating activities			1,360				-				1,360				312
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment			(81	)							(81	)			(20	)
Net cash used in investing activities			(81	)			-				(81	)			(20	)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on debt			(3	)							(3	)			(2	)
Net cash used in financing activities			(3	)			-				(3	)			(2	)
Effect of exchange rate differences on cash			(14	)							(14	)			513
Net increase in cash and cash equivalents			1,262				-				1,262				803
Cash and cash equivalents, beginning of period		$	1,711			$	-			$	1,711			$	4,881
Cash and cash equivalents, end of period		$	2,973			$	-			$	2,973			$	5,684