LEGACY EDUCATION ALLIANCE, INC. 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 endedDecember 31, 2021 . 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 nine months endedSeptember 30, 2022 , we marketed our products and services under ourBuilding Wealth with LegacyTM brand. During the year endedDecember 31, 2021 , we marketed our products and services under two brands: Building Wealth with LegacyTM; and Homemade Investor byTarek El Moussa . Our students pay for their courses in full up-front or through payment agreements with independent third parties. UnderU.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 acceleratingU.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 four days in length, on site or remotely and telephone mentoring (10 to 16 weekly one-on-one or one-on-many telephone sessions). 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 inNovember 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 been managed through three operating segments: (i)North America , (ii)United Kingdom , and (iii) Other Foreign Markets. We no longer operate under our Other Foreign Markets segment.
Since
?Building Wealth with Legacy TM: 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 response to the
limitations on travel and the social distancing protocols arising out of the
Coronavirus pandemic, the Company began marketing its Legacy EducationTM
products transitioning to brand name
nine months ended
exclusively under this brand.
? Homemade Investor by
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 nationwide free workshops, 3-day
trainings and large stage events with Tarek presenting as the keynote speaker,
all selling into our advanced training products.
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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. OnMarch 11, 2020 , theWorld Health Organization (WHO ) declared the COVID-19 outbreak as a pandemic. As a result of worldwide restrictions on travel and social distancing, inMarch 2020 we temporarily ceased conducting live sales and fulfillment and furloughed substantially all of our employees. We resumed sales operations inJune 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 inJune 2020 . We resumed live operations on a limited basis, inNovember 2020 , with events inFlorida . InDecember 2021 , the Company temporarily suspended live in-person events and will continue following strict safety protocols at the live events when resumed. 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. We are not able to fully quantify the continued 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 2022 and beyond. Results of Operations
Our financial results continue to be significantly impacted by the COVID-19
pandemic. Due to the severity and scope of the pandemic, the pace at which
government and private travel restrictions and public concerns about public
gathering will ease, the rate at which historically large increases of
unemployment rates will decrease, and the speed with which the economy recovers
are all factors that impacted our financial results. In addition, our financial
results were impacted due to the 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 2022 and 2021 were as follows (dollars in
thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Revenue 57 1,379 410 7,361
Operating costs and expenses:
Direct course expenses 66 675 270 1,899
Advertising and sales expenses 27 729 169 1,343
Royalty expenses 0 0 0 0
General and administrative expenses 579 1,172 1,888 3,568
Total operating costs and expenses 672 2,576 2,327 6,810 Income (loss) from operations (615 ) (1,197 ) (1,917 ) 551 Other expense: Interest expense, net (188 ) (35 ) (424 ) (421 ) Other expense, net - 9 3 6
Gain on forgiveness of PPP Loan 1,148 910 1,148 910 Total other expense, net 960 884 727 495 Income (loss) from continuing operations before income taxes 346 (313 ) (1,190 ) 1,046 Income tax (expense) benefit - 118 136 (797 ) Net income (loss) from continuing operations 346 (195 ) (1,054 ) 249 Income from discontinued operations - -
- 171 Net income from discontinued operations - - -$ 171 Net income (loss)$ 346 $ (195 ) $ (1,054 ) $ 420 Basic earnings (loss) per common share - continuing operations$ 0.01 $ (0.01 ) $ (0.03 ) $ 0.02 Basic earnings (loss) per common share - discontinued operations - - - - Basic earnings (loss) per common share$ 0.01 $ (0.01 ) $
(0.03 )
Diluted earnings (loss) per common share - continuing operations$ 0.01 $ (0.01 ) $ (0.03 ) $ 0.01 Diluted earnings (loss) per common share - discontinued operations - - - - Diluted earnings (loss) per common share$ 0.01 $ (0.01 ) $ (0.03 ) $ 0.01 Basic weighted average common shares outstanding 35,696 33,064 34,683 26,373 Diluted weighted average common shares outstanding 35,696 33,064 34,683 41,776 Comprehensive income: Net income (loss) 346 (195 ) (1,054 ) 420 Foreign currency translation adjustments, net of tax of$0 101 336 722 387
Total comprehensive income (loss) 447 141
(332 ) 807
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Our operating results are expressed as a percentage of revenue in the table
below:
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Revenue 100 100 % 100 100
Operating costs and expenses:
Direct course expenses 115 49 66 26
Advertising and sales expenses 47 53 41 18
Royalty expenses - - - -
General and administrative expenses 1,012 85 460 48
Total operating costs and expenses 1,174 187
567 93
Income (loss) from operations (1,074 ) (87 ) (467 ) 7
Other expense: - - - -
Interest expense, net 328 (3 ) 103 (6 )
Other expense, net - 1 (1 ) 0Gain on forgiveness of PPP Loan (2,009 ) 66 (280 ) 12 Total other expense, net (1,680 ) 64 (177 ) 7 Income (loss) from continuing operations before income taxes 606 (23 ) (290 ) 14 Income tax (expense) benefit - 9 33 (11 ) Net income (loss) from continuing operations 606 (14 ) (257 ) 3 Income from discontinued operations - - - 2 Net income from discontinued operations - - - - Net income (loss) 606 (14 )% (257 ) 6 Outlook
Cash sales were$ 0.1 for the nine months endedSeptember 30, 2022 compared to$1.4 million for the nine months endedSeptember 30, 2021 , a decrease of$1.3 or 93%. The decrease was driven by the temporary suspension of live in-person events and ongoing student fulfillment in theNorth America segment. We believe that cash sales remain an important metric when evaluating our operating performance. Pursuant toU.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. Our students pay for their courses in full up-front or through payment agreements with independent third parties. Due to the economic severity of COVID-19 pandemic on the Company's results of operations, financial condition, and liquidity, live in-person events were temporarily suspended inDecember 2021 to focus on strategic initiatives. The impact of the temporary suspension of live events has caused a material adverse effect on our operations and results of operations.
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