LEGACY EDUCATION ALLIANCE, INC. Management report and analysis of the financial situation and operating results. (Form 10-Q)

INTRODUCTION

You should read the following discussion of our financial condition and results of operations together with our audited consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2021. This discussion contains forward-looking statements and involves numerous important risks, uncertainties, assumptions and other factors that could cause actual results, performance or our achievements, or industry results, to differ materially from historical results, future results, performance or achievements. expressed or implied by these forward-looking statements. See “Caution Regarding Forward-Looking Information”.

Business Overview

We are a provider of practical, high-quality, value-based training in the topics of personal finance, entrepreneurship, real estate, and financial markets investment strategies and techniques. Our programs are offered through a variety of formats and channels, including free workshops, basic training, forums, phone mentoring, one-on-one mentoring, coaching, and e-learning. In the six months ended June 30, 2022we have marketed our products and services under our Create wealth with the Legacy™ brand. During the year ended December 31, 2021, we marketed our products and services under two brands: Building Wealth with LegacyTM; and Home Investor by Tarek El Moussa.

Our students pay for their courses in full in advance or through payment agreements with independent third parties. Below the United States of America
generally accepted accounting principlesWE GAAP”), we recognize revenue at the earlier of (i) when our students take their course or (ii) the term for taking their course expires, both of which could be several quarters after the student has purchased a program and paid for We recognize revenue immediately when we sell our (i) proprietary products delivered at the time of sale and (ii) sales of third-party products. achieve certain economies of scale that reduce costs and improve margins while accelerating
WE Revenue recognition under GAAP, while enhancing the experience of our students, including, for example, through the opportunity to network with other students.

We also offer a richer experience to our students through one-to-one mentoring (duration of two to four days, on-site or remotely and telephone mentoring (10 to 16 one-to-one or one-to-one weekly telephone sessions) Mentoring involves an expert in the material interacts with the student remotely or in person and guides the student, for example, during his first real estate transaction, providing a real practical experience.

We were founded in 1996 and through a reverse merger became a public company in November 2014. Today, we are a global company that has served over two million students from more than 150 countries and territories during our operating history.

Historically, our operations have been managed through three operating segments: (i) North America(ii) UK, and (iii) Other Foreign Markets. We no longer operate in our Other Foreign Markets segment.

Since January 1, 2021we operated under two brands:

  ? 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 Building Wealth with LegacyTM. During the
    six months ended June 30, 2022, 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 nationwide free workshops, 3-day
    trainings and large stage events with Tarek presenting as the keynote speaker,
    all selling into our advanced training products.




31

Recent Developments

Impact of coronavirus COVID-19.

Historically, our operations have relied heavily on our ability and that of our students to travel and attend live events where large groups of people congregate in local markets within each of the segments in which we operate. On March 11, 2020the World Health Organization (WHO) called the COVID-19 outbreak a pandemic. Due to global travel restrictions and social distancing, in March 2020 we temporarily stopped doing live sales and orders and laid off almost all of our employees. We resumed sales operations in
June 2020 with online sales events selling in our product suite online, on-demand and over the phone. We have also resumed online, on-demand and telephone fulfillment activities in June 2020. We have resumed live operations on a limited basis, in November 2020with events in Florida. In December 2021, the company has temporarily suspended in-person live events and will continue to follow strict safety protocols at live events when they resume. We have simplified our product offerings and restructured our employee and independent contractor compensation program to reduce costs and improve margins, but there can be no assurance that the Company will be successful in selling its products and services, or what impact such activities will have on our financial performance. We are unable to fully quantify the continued impact these factors will have on our financial results, but we expect developments related to COVID-19 to continue to affect the Company’s financial performance in 2022 and into the future. -of the.

Results of Operations

Our financial results continue to be significantly impacted by the COVID-19 pandemic. Due to the severity and scale of the pandemic, the rate at which government and private travel restrictions and public concerns about public gatherings will ease, the rate at which historically large increases in unemployment rates will diminish and how quickly the economy recovers are all factors that have impacted our financial results. Additionally, our financial results have been impacted due to the phasing out of our Rich Dad brand and other matters, as discussed in the litigation section of Note 13 “Commitments and contingencies” of the Notes to the Consolidated Financial Statements.

Our Results of Operations in 2022 and 2021 were as follows (dollars in
thousands):



                                       Three Months Ended             Six Months Ended
                                            June 30,                      June 30,
                                      2022            2021           2022           2021
Revenue                                     68          3,362            353          5,982
Operating costs and expenses:
Direct course expenses                     100            790            204          1,224
Advertising and sales expenses              54            556            142            614
Royalty expenses                             0              0              0              0
General and administrative
expenses                                   662          1,398          1,309          2,396
Total operating costs and
expenses                                   816          2,744          1,655          4,234
Income (loss) from operations             (748 )          618         (1,302 )        1,748
Other income (expense):
Interest expense, net                     (112 )         (386 )         (237 )         (386 )
Other expense, net                           3             (1 )            3             (3 )
Gain on forgiveness of PPP Loan              -              -              -              -
Total other income (expense),
net                                       (109 )         (387 )         (234 )         (389 )
Income (loss) from continuing
operations before income taxes            (856 )          231         (1,535 )        1,359
Income tax (expense) benefit                 -            131            136           (915 )
Net income (loss) from
continuing operations                     (856 )          362         (1,399 )          444
Income from discontinued
operations                                   -              -              -            171
Net income from discontinued
operations                                   -              -              -     $      171
Net income (loss)                  $      (856 )   $      362     $   (1,399 )   $      615

Basic earnings (loss) per common
share - continuing operations      $     (0.04 )   $     0.01     $    (0.04 )   $     0.02
Basic earnings (loss) per common
share - discontinued operations              -              -              -     $        -
Basic earnings (loss) per common
share                              $     (0.04 )   $     0.01     $    (0.04 )   $     0.02

Diluted earnings (loss) per
common share - continuing
operations                         $     (0.04 )   $     0.01     $    (0.04 )   $     0.02
Diluted earnings (loss) per
common share - discontinued
operations                                   -              -              -     $        -
Diluted earnings (loss) per
common share                       $     (0.04 )   $     0.01     $    (0.04 )   $     0.02

Basic weighted average common
shares outstanding                      24,410         25,113         34,168         24,156
Diluted weighted average common
shares outstanding                      24,410         31,843         34,168         30,048
Comprehensive income:
Net income (loss)                         (856 )          362         (1,399 )          615
Foreign currency translation
adjustments, net of tax of $0              765            (52 )          621             51
Total comprehensive income
(loss)                             $       (91 )   $      310     $     (778 )   $      666




32






Our operating results are expressed as a percentage of revenue in the table
below:



                                        Three Months Ended                Six Months Ended
                                             June 30,                         June 30,
                                       2022             2021           2022              2021
Revenue                                     100             100 %           100              100
Operating costs and expenses:                                                                    %
Direct course expenses                      146              23              58               20
Advertising and sales expenses               78              17              40               10
Royalty expenses                              -               -               -                -
General and administrative
expenses                                    967              42             371               40
Total operating costs and
expenses                                  1,192              82             469               71
Income (loss) from operations            (1,092 )            18            (369 )             29
Other expense:                                -               -               -                -
Interest expense, net                       163             (11 )            67               (6 )
Other expense, net                           (4 )            (0 )            (1 )             (0 )
Gain on forgiveness of PPP Loan               -               -               -                -
Total other expense, net                    159             (12 )            66               (7 )
Income (loss) from continuing
operations before income taxes           (1,251 )             7            (435 )             23
Income tax (expense) benefit                  -               4              38              (15 )
Net income (loss) from
continuing operations                    (1,251 )            11            (396 )              7
Income from discontinued
operations                                    -               -               -                3
Net income from discontinued
operations                                    -               -               -                -
Net income (loss)                        (1,251 )            11 %          (396 )             10




Outlook

Cash sales were $0.1 for the six months ended June 30, 2022 compared to $0.7 million for the six months ended June 30, 2021a decrease of $0.7 or 100%. The decrease is due to the temporary suspension of in-person live events and the continued growth of students in the North America segment.

33

We believe that cash sales continue to be an important measure in evaluating our operational performance. In accordance with WE Under GAAP, we recognize revenue at the earliest (i) when our students take their course 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 in advance or through payment agreements with independent third parties.

Due to the economic severity of the COVID-19 pandemic on the Company’s results of operations, financial condition and liquidity, in-person events have been temporarily suspended at December 2021 focus on strategic initiatives. The impact of the temporary suspension of live events is unknown.

© Edgar Online, source Previews