INTRODUCTION
Administration’s Dialogue and Evaluation of Monetary Situation and Outcomes of
Operations ought to be learn at the side of Merchandise 8. Monetary Statements and
Supplementary Knowledge. This dialogue comprises forward-looking statements and
entails quite a few dangers and uncertainties, together with, however not restricted to these
described in Merchandise 1A. Danger Elements and under underneath the caption “Outlook.” Precise
outcomes could differ materially from these contained in any forward-looking
statements.
Enterprise Overview
We’re a supplier of sensible, high-quality, and value-based instructional
coaching on the matters of private finance, entrepreneurship, actual property
investing methods and methods. Our applications are supplied by means of a range
of codecs and channels, together with free workshops, primary trainings, boards,
phone mentoring, one-on-one mentoring, teaching and e-learning. We’re
persevering with to handle the affect of COVID-19, which is mentioned under. In
November 2020, we held our first reside post-COVID occasions.
Throughout 2021, the Firm performed further reside occasions following strict
security protocols in different areas as lockdown restrictions eased. We’ve
simplified our product choices and restructured our compensation program with
respect to each staff and unbiased contractors to cut back prices and
enhance margins, however there will be no assurances that the Firm might be
efficient in promoting its services, or what the affect such
actions can have on our monetary efficiency. Because of the pandemic, we’ve
shifted focus to eLearning alternatives.
Since January 1, 2020, we’ve operated underneath two manufacturers:
? Constructing Wealth with Legacy TM: gives sensible, high-quality and
value-based instructional coaching on the matters of private finance,
entrepreneurship, actual property, monetary markets and investing
methods and methods. This coaching program encompasses hands-on
expertise and the true spirit of investing from newbie to educated
investor. In response to the restrictions on journey and the social
distancing protocols arising out of the Coronavirus pandemic, the
Firm started advertising its Legacy EducationTM merchandise
transitioning
to model title Constructing Wealth with LegacyTM.
? Selfmade Investor by Tarek El MoussaTM introduces folks to the
investor mindset, actual property investing methods, and methods to
generate money move which might be designed to assist construct a basis of
data for his or her monetary targets. Selfmade Investor occasions supplied
nationwide free workshops, 3-day trainings and huge stage
occasions with
Tarek presenting because the keynote speaker, all promoting into our superior
coaching merchandise. In November 2020, we suspended conducting Selfmade
Investor by Tarek El MoussaTM gross sales occasions to deal with
growing our
proprietary Constructing Wealth with Legacy TM:
Our college students pay for his or her programs in full up-front or by means of fee
agreements with unbiased third events. Below United States of America
typically accepted accounting rules (“U.S. GAAP”), we acknowledge income
upon the sooner of (i) when our college students take their programs or (ii) the time period
for taking their course expires, each of which could possibly be a number of quarters after
the scholar purchases a program and pays the price. We acknowledge income
instantly once we promote our (i) proprietary merchandise delivered at time of sale
and (ii) third celebration merchandise gross sales. Our symposiums and boards mix a number of
superior coaching programs in a single location, permitting us to realize sure
economies of scale that scale back prices and enhance margins whereas additionally accelerating
U.S. GAAP income recognition, whereas on the identical time, enhancing our college students’
expertise, significantly, for instance, by means of the chance to community with
different college students.
We additionally present a richer expertise for our college students by means of one-on-one
mentoring (two to 4 days in size, on web site or remotely and phone
mentoring (10 to 16 weekly one-on-one or one-on-many phone periods).
Mentoring entails an issue knowledgeable interacting with the scholar remotely
or in individual and guiding the scholar, for instance, by means of his or her first actual
property transaction, offering an actual hands-on expertise.
We have been based in 1996, and thru a reverse merger, turned a publicly held
firm in November 2014. Right now we’re a world firm that has cumulatively
served greater than two million college students from greater than 150 nations and
territories over the course of our working historical past.
Our operations are managed by means of three working segments: (i) North America,
(ii) United Kingdom, and (iii) Different International Markets. Through the 12 months ended
2021, the Firm has targeted efforts on america within the North American
section.
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Latest Developments
Influence from COVID-19 Coronavirus.
Traditionally, our operations have relied closely on our and our college students’
means to journey and attend reside occasions the place giant teams of individuals collect in
native markets inside every of the segments by which we function. On March 11,
2020, the World Well being Group (WHO) declared the COVID-19 outbreak as a
pandemic which considerably disrupted companies all over the world. Consequently
of worldwide restrictions on journey and social distancing, in March 2020 we
quickly ceased conducting reside gross sales and success and furloughed
considerably all of our staff. We resumed gross sales operations in June 2020
with on-line gross sales occasions promoting into our suite of on-line, on-demand, and
over-the-phone merchandise. We additionally resumed on-line, on-demand, and over-the-phone
success actions in June 2020. We resumed reside operations in November
2020, with occasions in Florida and continued conducting further reside occasions in
different areas as lockdown restrictions continued to ease. The Firm continues
following strict security protocols on the reside occasions. We’ve simplified our
product choices and restructured our compensation program with respect to each
staff and unbiased contractors to cut back prices and enhance margins, however
there will be no assurances that the Firm might be efficient in promoting its
services, or what the affect such actions can have on our
monetary efficiency.
The last word affect from COVID-19 on the Firm’s operations and monetary
outcomes will depend upon, amongst different issues, the final word severity and scope of
the pandemic, the tempo at which governmental and personal journey restrictions and
public considerations about public gatherings will ease, the speed at which
traditionally giant will increase in unemployment charges will lower, if in any respect, and
the pace with which the economic system recovers. We’re not capable of absolutely quantify the
affect that these elements can have on our monetary outcomes, however count on
developments associated to COVID-19 to proceed to have an effect on the Firm’s monetary
efficiency in 2022 and past.
22
Outcomes of Operations
Our monetary outcomes proceed to be considerably impacted by the COVID-19
pandemic. Because of the severity and scope of the pandemic, the tempo at which
governmental and personal journey restrictions and public considerations about public
gathering will ease, the speed at which traditionally giant will increase of
unemployment charges will lower, and the pace with which the economic system recovers
are all elements that impacted our monetary outcomes. As well as, our monetary
outcomes have been impacted as a result of winding down our Wealthy Dad model and different
issues as disclosed within the litigation part of Be aware 16 “Commitments and
Contingencies” within the Notes to Consolidated Monetary Statements.
Our Outcomes of Operations in 2021 and 2020 have been as follows:
Years Ended December 31,
(in 1000’s, besides per share information) 2021
2020
Income $ 7,710 $
25,914
Working prices and bills:
Direct course bills 2,294
5,801
Promoting and gross sales bills 1,636
2,293
Royalty bills –
68
Basic and administrative bills 4,195
4,555
Complete working prices and bills 8,125
12,717
Revenue (loss) from operations (415 ) 13,197
Different expense:
Curiosity expense, internet (524 ) (210 )
Different revenue, internet 8 1,641
Acquire on forgiveness of PPP Mortgage 910
–
Complete different revenue, internet 394
1,431
Revenue (loss) from persevering with operations earlier than
revenue taxes (21 )
14,628
Revenue tax expense (716 ) (2,883 )
Web revenue (loss) from persevering with operations (737 )
11,745
Revenue from discontinued operations 171
4,264
Web revenue from discontinued operations 171
4,264
Web revenue (loss) $ (566 ) $
16,009
Primary earnings (loss) per frequent share –
persevering with operations $ (0.02 ) $
0.51
Primary earnings (loss) per frequent share –
discontinued operations –
0.18
Primary earnings (loss) per frequent share $ (0.02 ) $
0.69
Diluted earnings (loss) per frequent share –
persevering with operations $ (0.03 ) $
0.50
Diluted earnings (loss) per frequent share –
discontinued operations –
0.18
Diluted earnings (loss) per frequent share $ (0.03 ) $
0.68
Primary weighted common frequent shares excellent 29,187
23,076
Diluted weighted common frequent shares
excellent 29,187 23,230
Complete revenue:
Web revenue (loss) $ (566 ) $ 16,009
International forex translation changes, internet of
tax of $0 421 (294 )
Complete complete revenue (loss) $ (145 ) $
15,715
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Our working outcomes expressed as a proportion of income are set forth within the
desk under:
Years Ended December 31,
2021 2020
Income 100 % 100 %
Working prices and bills:
Direct course bills 29.8
22.4
Promoting and gross sales bills 21.2 8.8
Royalty bills 0.0 0.3
Basic and administrative bills 54.4
17.6
Complete working prices and bills 105.4
49.1
Revenue (loss) from operations (5.4 ) 50.9
Different expense:
Curiosity expense, internet (6.7 ) (0.8 )
Different revenue, internet 0.1 6.3
Acquire on forgiveness of PPP Mortgage 11.8 –
Complete different revenue, internet 5.2 5.5
Revenue (loss) from persevering with operations earlier than
revenue taxes (0.2 )
56.4
Revenue tax (expense) (9.3 ) (11.1 )
Web revenue (loss) from persevering with operations (9.5 )
45.3
Revenue from discontinued operations 2.2
16.5
Web revenue from discontinued operations 2.2
16.5
Web revenue (loss) (7.3 )% 61.8 %
Outlook
Money gross sales have been $1.9 million for the 12 months ended December 31, 2021, in comparison with
$3.Eight million for the 12 months ended December 31, 2020, a lower of $1.9 million or
100.0%. The lower was pushed primarily by a $1.9 million lower in our
North American section resulting from Covid-19 limitations and the decreased quantity
of
reside in-person occasions.
We consider that money gross sales stay an essential metric when evaluating our
working efficiency. Pursuant to U.S. GAAP, we acknowledge income upon the
earlier of (i) when our college students take their programs or (ii) the time period for taking
their course expires, each of which could possibly be a number of quarters after the scholar
purchases a program. Our college students pay for his or her programs in full up-front or
by means of fee agreements with unbiased third events.
Traditionally, our operations have relied closely on our and our college students’
means to journey and attend reside occasions the place giant teams of individuals collect in
native markets inside every of the segments by which we function. On March 11,
2020, the World Well being Group (WHO) declared the COVID-19 coronavirus
outbreak as a pandemic. Because of worldwide restrictions on journey and
social distancing, in March 2020 we ceased conducting reside gross sales and success
occasions which had a cloth opposed affect on outcomes of our operations. We
resumed reside operations in November 2020, with occasions in Florida. The Firm
performed further reside occasions in different areas as lockdown restrictions
proceed to ease. The Firm will proceed following strict security protocols at
the reside occasions. We’ve simplified our product choices, shifted focus to
enhanced eLearning, and restructured our compensation program with respect to
each staff and unbiased contractors to cut back prices and enhance margins.
Because of the financial severity of the COVID-19 pandemic on the Firm’s outcomes
of operations, monetary situation, and liquidity, reside in-person occasions have been
quickly suspended in December 2021 to evaluate the Firm’s strategic plan
for fiscal 12 months 2022 and past. The affect of the non permanent suspension of
reside
occasions is unknown.
Working Segments
Traditionally, our operations are managed by means of three working segments: (i)
North America, (ii) United Kingdom, and (iii) Different International Markets.
Years Ended December 31,
As a proportion of complete income 2021 2020
North America 65.1 % 91.1 %
U.Okay. 34.9 % 3.3 %
Different international markets – % 5.6 %
Complete consolidated income 100.0 % 100.0 %
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Working outcomes for the segments are as follows:
Years Ended December 31,
2021 2020
Phase income (In 1000’s)
North America $ 5,021 $ 23,596
U.Okay. 2,689 846
Different international markets – 1,472
Complete consolidated income $ 7,710 $ 25,914
North America
Income derived from the Wealthy Dad manufacturers in our North America section was $2.5
million and $16.9 million or as a proportion of complete section income, 50.0% and
71.6%, for the years ended December 31, 2021, and 2020, respectively. We
proceed to meet contracts for college kids underneath the Wealthy Dad model, nevertheless, we
are now not actively promoting the Wealthy Dad model. The bulk pertained to
actual estate-related schooling, with the stability pertaining to monetary markets
coaching. We’re persevering with to develop strategies of connecting to our college students,
diversify our merchandise, and develop proprietary manufacturers so as to enhance the
North America section. Income derived from our Selfmade Investor model was $0.4
million and $1.Zero million or as a proportion of complete section income, 8.0% and
4.2%, for the years ended December 31, 2021 and 2020, respectively.
The North America section income was $5.Zero million and $23.6 million or as a
proportion of complete income was 65.1% and 91.1% for the years ended December 31,
2021 and 2020, respectively.
The lower in income of $18.6 million or 78.8% throughout the 12 months ended December
31, 2021 in comparison with the identical interval in 2020, was as a result of lower in
success of $4.Zero million and reduce in recognition of income from expired
contracts of $14.6 million.
U.Okay.
Income derived from the Wealthy Dad manufacturers in our U.Okay. section was $1.Eight million
and $0.7 million or as a proportion of complete section income was 66.7% and 87.5%
for the years ended December 31, 2021 and 2020, respectively. The bulk
pertained to actual estate-related schooling, with the stability pertaining to
monetary markets coaching. With the discontinued operations of UK Legacy, our
U.Okay. section is now not as numerous.
25
The U.Okay. section income was $2.7 million and $0.Eight million or as a proportion of
complete income was 34.9% and three.3% for the years ended December 31, 2021 and 2020,
respectively. The rise in income of $1.9 million for the 12 months ended
December 31, 2021 in comparison with the identical interval in 2020, was resulting from elevated
success of $0.1 million and a rise in recognition of income from
expired contracts of $1.Eight million.
Different International Markets
Our different international markets section consists of different European, Asian and African
nations. Income derived from the Wealthy Dad manufacturers was $0.Zero million and $0.7
million or as a proportion of complete section income was 0.0% and 46.7% for the
years ended December 31, 2021 and 2020, respectively.
The Different International Markets section income was $0.Zero million and $1.5 million or
as a proportion of complete income was 0.0% and 5.6% for the years ended December
31, 2021 and 2020, respectively.
The lower in income of $1.5 million or 100.0% throughout the 12 months ended December
31, 2021 in comparison with the identical interval in 2020, was resulting from decreased success
of $1.2 million and a lower in recognition of income from expired contracts
of $0.Three million. The section is in liquidation and we’re now not actively
promoting out there.
12 months Ended December 31, 2021 In comparison with 12 months Ended December 31, 2020
Income
Income was $7.7 million for the 12 months ended December 31, 2021 in comparison with $25.9
million for the 12 months ended December 31, 2020, a lower of $18.2 million or
70.3%. The lower was resulting from decreased success of $5.2 million or 70.5%
and a lower in recognition of income from expired contracts of $13.Zero million
or 70.2%.
Money gross sales have been $1.9 million for the 12 months ended December 31, 2021 in comparison with
$3.Eight million for the 12 months ended December 31, 2020, a lower of $1.9 million or
100.0%. The lower was pushed primarily by a $1.9 million lower in our
North American section.
Working Bills
Complete working prices and bills have been $8.1 million for the 12 months ended December
31, 2021 in comparison with $12.7 million for the 12 months ended December 31, 2020, a
lower of $4.6 million or 36.2%. The lower was resulting from a $3.5 million
lower in direct course bills, a $0.7 million lower in promoting and
gross sales bills, and a $0.1 million lower generally and administrative
bills, together with the ERC credit score from the Cares Act which decreased payroll
expense within the quantity of $292 thousand.
Direct course bills
Direct course bills relate to our free preview workshops, primary and elite
coaching, and individualized mentoring applications, consisting of teacher charges,
facility prices, salaries, commissions and charges related to our area
representatives and associated journey bills. Direct course bills have been $2.3
million for the 12 months ended December 31, 2021 in comparison with $5.Eight million for the
12 months ended December 31, 2020, a lower of $3.5 million or 60.3%, which was
associated to decreases in gross sales and coaching compensation, as a result of financial
affect of the COVID-19 pandemic on customers.
Promoting and gross sales bills
We typically receive most of our potential clients by means of internet-based
promoting. Promoting and gross sales bills encompass bought media to
generate registrations to our free preview workshops and prices related to
supporting buyer recruitment. We receive nearly all of our clients by means of
free preview workshops. Traditionally, these preview workshops are supplied in
numerous metropolitan areas in North America, United Kingdom, and different
worldwide markets. Previous to the precise workshop, we spend a major
sum of money within the type of promoting by means of numerous media channels.
26
Promoting and gross sales bills have been $1.6 million for the 12 months ended December 31,
2021 in comparison with $2.Three million for the 12 months ended December 31, 2020, a lower
of $0.7 million or 30.4%. As a proportion of income, promoting and gross sales
bills have been 21.2% and eight.8% for the years ended December 31, 2021 and 2020,
respectively. The rise is primarily associated to the lower in COVID-19
restrictions on our means to function and resuming reside occasions.
Royalty bills
We’re required to pay royalties underneath the licensing and associated agreements
pursuant to which we develop, market, and promote Wealthy Dad and Selfmade Investor
branded reside seminars, coaching programs, and associated merchandise worldwide. There
have been no royalty bills for the years ended December 31, 2021 and 2020,
respectively resulting from transitioning gross sales to our proprietary Constructing Wealth
with
Legacy TM.
Basic and administrative bills
Basic and administrative bills primarily encompass compensation, advantages,
insurance coverage, skilled charges, amenities bills and journey bills for the
company employees, in addition to depreciation and amortization bills. Basic and
administrative bills have been $4.2 million for the 12 months ended December 31, 2021
in comparison with $4.6 million for the 12 months ended December 31, 2020, a lower of
$0.Four million, or 8.7%. The lower generally and administrative bills was
partially a results of a lower in our personnel bills resulting from the truth that
we furloughed considerably all of our staff throughout Q2 2020. As well as,
the Firm assessed eligibility for the enterprise reduction provision underneath the
CARES Act generally known as the Worker Retention Credit score (“ERC”), a refundable payroll
tax credit score, which decreased payroll expense $292 thousand.
Different revenue, internet
Different revenue was $0.Zero million for the 12 months ended December 31, 2021 in comparison with
different revenue of $1.6 million for the 12 months ended December 31, 2020, a lower in
different revenue of $1.6 million, primarily representing acquire on sale of our property
and tools, and funding property throughout the 12 months ended December 31, 2020.
Acquire on forgiveness of PPP Mortgage
In March 2021, we have been notified that PPBI bought considerably all of its PPP
loans, together with ELE’s mortgage, to The Mortgage Supply, Inc. (“TLS”), which, collectively
with its servicing accomplice, ACAP SME, LLC, took over the forgiveness and ongoing
servicing course of for ELE’s PPP mortgage. On August 4, 2021, we acquired discover from
TLS that its First Draw PPP Mortgage had been partially forgiven within the quantity of
$899.Zero thousand in principal and $11.Zero thousand in curiosity. Thus, throughout the
9 months ended September 30, 2021, we acknowledged the acquire on forgiveness of
PPP Mortgage within the complete quantity of $910.Zero thousand (see Be aware 6 – “Quick-Time period and
Lengthy-Time period Debt” to our Consolidated monetary statements for additional
dialogue).
Revenue tax expense
We recorded revenue tax expense of $0.7 million and $2.9 million for the 12 months
ended December 31, 2021 and 2020, respectively, a $2.2 million lower in
revenue tax expense.
Our efficient tax fee was (3409.5)% and 19.7percentfor the 12 months ended December 31,
2021 and 2020, respectively. Our efficient tax charges differed from the U.S.
statutory company tax fee of 21.0%, primarily due to the combination of pre-tax
revenue or loss earned in sure jurisdictions, and intercompany actions.
We file a valuation allowance when it’s extra probably than not that some
portion, or all, of the deferred tax belongings is not going to be realized. We’ve
retained a full valuation allowances of $3.5 million in opposition to the deferred tax
belongings of our Australian, Canadian, U.Okay., Hong Kong, and South Africa
subsidiaries as of December 31, 2021. We’ve retained full valuation allowances
of $3.6 million in opposition to the deferred tax belongings of our Australian, Canadian,
U.Okay., Hong Kong, and South Africa subsidiaries as of December 31, 2020. Essentially the most
important detrimental issue that was thought-about in figuring out whether or not a
valuation allowance was required is a cumulative latest historical past of losses in all
jurisdictions for the entities talked about above.
Web revenue (loss) from persevering with operations
Web loss from persevering with operations was $0.7 million or ($0.02) per primary and
diluted frequent share for the 12 months ended December 31, 2021, in comparison with internet
revenue from persevering with operations of $11.7 million or $0.51 per primary and $0.50
per diluted frequent share for the 12 months ended December 31, 2020, a lower in internet
revenue from persevering with operations of $12.Four million or $0.53 per primary and $0.52
per diluted frequent share.
Web revenue from discontinued operations
Web revenue from discontinued operations was $0.1 million or $0.Zero per primary and
diluted frequent share for the 12 months ended December 31, 2021, in comparison with internet
revenue from discontinued operations of $$0.1 million or $4.Three million or $0.18
per primary and diluted frequent share for the 12 months ended December 31, 2020.
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Important Accounting Insurance policies and Estimates
The preparation of economic statements in accordance with GAAP requires
administration to make estimates and assumptions that have an effect on reported quantities and
associated disclosures. Along with the estimates offered under, there are
different objects inside our consolidated monetary statements that require estimation
however usually are not deemed crucial as outlined under. We consider these estimates are
affordable and acceptable. Nonetheless, if precise expertise differs from the
assumptions and different issues used, the ensuing modifications may have a
materials impact on the monetary statements taken as a complete.
Administration believes that the next insurance policies and estimates are crucial
as a result of they contain important judgments, assumptions, and estimates.
Traditionally, administration has mentioned the event and choice of the
crucial accounting estimates with the Audit Committee of our Board of Administrators
and the Audit Committee has reviewed the disclosures offered under referring to
these insurance policies and estimates. We at the moment don’t have an audit committee.
Lengthy-Lived Property
We consider the carrying quantity of our long-lived belongings for impairment at any time when
occasions or modifications in circumstances point out that the carrying quantity of an asset
will not be recoverable. We file an impairment loss when indications of
impairment are current and undiscounted money flows estimated to be generated by
these belongings are lower than belongings’ carrying worth. We consider the remaining
life and recoverability of long-lived belongings at any time when occasions or modifications in
circumstances point out that the carrying quantity of those belongings will not be
recoverable. At such time, we estimate the long run money flows anticipated from the
use of the belongings and their eventual tendencies and, if decrease than the
carrying quantities, regulate the carrying quantity of the belongings to their estimated
honest worth. Due to our altering enterprise circumstances together with present and
projected degree of revenue, enterprise traits, prospects and market circumstances, our
estimates of money flows to be generated from our operations may change
materially, leading to the necessity to file further impairment expenses.
Income Recognition
We acknowledge income when our clients receive management of promised items or
companies, in an quantity that displays the consideration which we count on to
obtain in alternate for these items or companies, in accordance with Subject 606.
We adopted Subject 606 utilizing the modified retrospective technique utilized to these
contracts which weren’t accomplished as of January 1, 2018. Income quantities
offered in our consolidated monetary statements are acknowledged internet of gross sales
tax, value-added taxes, and different taxes.
Within the regular course of enterprise, we acknowledge income based mostly on the purchasers’
attendance of the course, mentoring coaching, teaching session or supply of
the software program, information or course supplies on-line. After a buyer contract
expires, we file breakage income much less a reserve for instances the place we enable a
buyer to attend after expiration. We had deferred income of $4.Four million and
$10.Four million associated to contractual commitments with clients the place the
efficiency obligation might be happy over time, which ranges from one to 2
years as of December 31, 2021 and 2020, respectively. The income related
with these efficiency obligations is acknowledged as the duty is happy.
The next desk disaggregate our section income by income supply:
Years Ended December 31, 2021 Years Ended December 31, 2020
Different Complete Different Complete
international Consolidated North international Consolidated
Income Sort: North America U.Okay. markets Income America U.Okay. markets Income
(In 1000’s) (In 1000’s)
Seminars $ 4,564 $ 880 $ – $ 5,444 $ 16,353 $ 245 $ 1,406 $ 18,004
Merchandise 199 – – 199 478 – – 478
Teaching and Mentoring – – – – 1,050 – 3
1,053
On-line and Subscription 76 – –
76 1,421 – 40 1,461
Different 182 1,809 – 1,991 4,294 601 23 4,918
Complete income $ 5,021 $ 2,689 $ – $ 7,710 $ 23,596 $ 846 $ 1,472 $ 25,914
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Revenue Taxes
We account for revenue taxes in conformity with the necessities of ASC 740,
Revenue Taxes (“ASC 740”). Per ASC 740, the supply for revenue taxes is
calculated utilizing the asset and legal responsibility method of accounting for revenue
taxes. We acknowledge deferred tax belongings and liabilities, at enacted revenue tax
charges, based mostly on the non permanent variations between the monetary reporting foundation
and the tax foundation of our belongings and liabilities. We embody any results of
modifications in revenue tax charges or tax legal guidelines within the provision for revenue taxes within the
interval of enactment. When it’s extra probably than not {that a} portion or all of a
deferred tax asset is not going to be realized sooner or later, we offer a
corresponding valuation allowance in opposition to the deferred tax asset.
ASC 740 additionally clarifies the accounting for uncertainty in revenue taxes acknowledged
in an organization’s monetary statements and prescribes a recognition threshold of
extra probably than not and a measurement course of for monetary assertion
recognition and measurement of a tax place taken or anticipated to be taken in a
tax return. In making this evaluation, an organization should decide whether or not it’s
extra probably than not {that a} tax place might be sustained upon examination,
based mostly solely on the technical deserves of the place and should assume that the
tax place might be examined by taxing authorities. ASC 740 additionally gives
steerage on derecognition, classification, curiosity and penalties, accounting in
interim intervals, disclosures and transition.
Accounting for Litigation and Settlements
We’re concerned in numerous authorized proceedings. Resulting from their nature, such authorized
proceedings contain inherent uncertainties together with, however not restricted to, courtroom
rulings, negotiations between affected events, and the potential for
governmental intervention. Administration assesses the likelihood of loss for such
contingencies and accrues a legal responsibility and/or discloses the related
circumstances as acceptable. Whereas sure of those issues contain substantial
quantities, administration believes, based mostly on accessible data, that the final word
decision of such authorized proceedings is not going to have a cloth opposed impact on
our monetary situation or outcomes of operations.
The crucial accounting insurance policies mentioned above usually are not supposed to be a
complete record of all of our accounting insurance policies. In lots of instances, the
accounting remedy of a selected transaction is particularly dictated by
accounting rules typically accepted within the U.S., without having for
administration’s judgment of their utility. There are additionally areas by which
administration’s judgment in choosing any accessible different wouldn’t produce a
materially completely different consequence.
29
LIQUIDITY AND CAPITAL RESOURCES
Recognized Tendencies and Uncertainties
On the whole, we consider we’ll expertise a rise in demand for our merchandise
and companies in comparison with prior intervals as we develop our Constructing Wealth with
Legacy TM model and different income streams. We consider that our merchandise and
companies attraction to those that search elevated monetary freedom. If we expertise
a chronic decline in demand for our services, it may have a
materials opposed impact on our future working outcomes.
Traditionally, we’ve funded our working capital and capital expenditures utilizing
money and money equivalents available. Nonetheless, given our decreased working money
flows throughout the previous two years mixed, it has been needed for us to handle
our money place to make sure the long run viability of our enterprise. Our money flows
are topic to plenty of dangers and uncertainties, together with, however not restricted
to, earnings, favorable phrases from our service provider processors, seasonality, and
fluctuations in international forex alternate charges.
We proceed to take steps to make sure our bills are in keeping with our projected
money gross sales and liquidity necessities for 2021 and based mostly upon present and
anticipated ranges of operations, we consider money and money equivalents available
is not going to be enough to fund our anticipated monetary obligations and
anticipated liquidity necessities for the fiscal 12 months 2022. Nonetheless, we’re
exploring different sources of capital, however there will be no assurances any
such capital might be obtained. For the 12 months ended December 31, 2021, we had an
gathered deficit, a working capital deficit and a detrimental money move from
working actions. These circumstances elevate substantial doubt as to our
means to proceed as a going concern. Our means to proceed as a going
concern depends upon our means to generate income by increasing present
operations in addition to decreasing our prices and rising our working margins,
and to maintain enough working capital to finance our operations. The failure
to realize the mandatory ranges of profitability and money flows could be
detrimental to us.
The next is a abstract of our money move actions for the intervals acknowledged
(in 1000’s):
Years Ended December 31,
2021 2020
Web money utilized in working actions (4,832 ) (6,965 )
Web money supplied by investing actions –
2,891
Web money supplied by financing actions 3,102
1,400
Impact of alternate fee variations on money – (860 )
Web lower in money and money equivalents and
restricted money (1,730 ) (3,534 )
Working Money Flows and Liquidity
Web money utilized in working actions was $4.Eight million within the 12 months ended
December 31, 2021 in comparison with internet money utilized in working actions of $7.0
million within the 12 months ended December 31, 2020, representing a period-over-period
enhance of $2.2 million. This enhance was primarily the results of a lower
in present liabilities for deferred course expense 2021 in comparison with 2020.
Investing Money Flows
Web money supplied by investing actions totaled $0.Zero million in comparison with internet
money supplied by investing actions of $2.9 million within the years ended
December 31, 2021 and 2020, respectively, representing proceeds on sale of
property and tools, and funding property within the 12 months ended December
31,
2020.
Financing Money Flows
Our consolidated capital construction as of December 31, 2021 was 17% debt and 83%
fairness. As of December 31, 2020, our consolidated capital construction was 14%
debt
and 86% fairness.
Web money supplied by financing actions totaled $3.1 million throughout the 12 months
ended December 31, 2021, together with our internet proceeds from borrowings of the
second draw of the Paycheck Safety Program mortgage of $1.9 million, proceeds
from debentures with associated events of $0.7 million and proceeds from issuance
of the GLD Debenture of $0.5 million. Web money supplied by financing actions
totaled $1.Four million within the 12 months ended December 31, 2020, together with our internet
proceeds from borrowings of the primary draw of the Paycheck Safety Program
mortgage.
We count on that our working capital deficit, which is primarily a results of our
important deferred income stability, will proceed for the foreseeable future.
As of December 31, 2021, and 2020, our consolidated present deferred income was
$4.Four million and $10.Four million, respectively.
Our money and money equivalents have been, and proceed to be, invested in short-term,
liquid, cash market funds. Restricted money balances consisted primarily of
funds on deposit with bank card processors and money collateral with our credit score
card distributors. Restricted money balances held by bank card processors are
unavailable to us except we discontinue sale of our merchandise or discontinue the
utilization of a vendor’s bank card. As gross sales of the services associated
to our home enterprise have decreased, our bank card distributors haven’t
returned funds held as collateral, leading to increased restricted money balances.
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