LEAI.OTC.PinkLegacy Education Alliance, INC
10-Q/A: Legacy Education Alliance Reports Q1 2024 Results Amidst Financial Challenges
Sentiment:
Quarterly Report
Legacy Education Alliance's Q1 2024 results show a slight revenue increase but ongoing losses and concerns about its ability to continue as a going concern.
Delay expectedThe company was unable to timely file its Annual Report on Form 10-K for the fiscal year ended December 31, 2023 and this Quarterly Report on Form 10-Q.The company was unable to include audited or reviewed financial statements in such filings.The company was unable to file iXBRL for the fiscal year ended December 31, 2023.
Capital raiseThe company is exploring alternative sources of capital.The company's failure to have audited financial statements prevents it from registering its securities for offers and sales under the Securities Act of 1933, as amended, thus making it more difficult to raise capital.
Worse than expectedThe company has an accumulated deficit, a working capital deficit, and negative cash flow from operating activities, raising substantial doubt about its ability to continue as a going concern.The company's disclosure controls and procedures were deemed ineffective.The company does not have an auditor to review or audit its financial statements.
Summary
- Legacy Education Alliance, Inc. reported its financial results for the quarter ended March 31, 2024.
- Revenue increased to $133,000 from $72,000 in the same period last year.
- The company experienced a net loss of $786,000, which is a slight improvement from the $878,000 loss in Q1 2023.
- The company's operations are currently managed primarily through the North America segment.
- The company has an accumulated deficit, a working capital deficit, and negative cash flow from operating activities, raising substantial doubt about its ability to continue as a going concern.
- The company is exploring alternative sources of capital.
- The company's disclosure controls and procedures were deemed ineffective due to a lack of capital, resources, and an auditor.
Sentiment
Score: 3
Explanation: The document presents a mixed picture, with a slight revenue increase but significant financial challenges and governance issues. The lack of an auditor and ineffective controls are major concerns.
Positives
- Revenue increased by 86% compared to the same quarter last year.
- Net loss decreased slightly compared to the same quarter last year.
- The company is exploring alternative sources of capital.
Negatives
- The company has an accumulated deficit, a working capital deficit, and negative cash flow from operating activities.
- The company's disclosure controls and procedures were deemed ineffective.
- The company does not have an auditor to review or audit its financial statements.
- The company has a total outstanding liability of $4,640,969 as of July 8, 2024, including promissory notes, convertible notes, or other convertible debt arrangements.
Risks
- The company's ability to continue as a going concern is dependent on generating profits, reducing costs, and sustaining adequate working capital.
- The company's lack of an auditor could prevent it from raising capital and could result in amendments or restatements to its financial statements.
- The company's failure to have audited financial statements could result in its common stock being removed from trading on the OTC Market.
- The company is involved in several legal proceedings, which could have a material adverse effect on its financial condition.
- The company's strategic initiatives, including the potential spinoff of Legacy Education and the proposed acquisition of Coopersmith Career Consulting, may not be successful.
Future Outlook
The company expects to restart live event operations primarily through its affiliate Legacy Live Inc. in 2024, subject to the availability of funds, and believes it will experience an increase in demand for its products and services as it develops its Building Wealth with Legacy TM brand and other revenue streams.
Management Comments
- The company is continuing to develop methods of connecting to our students, diversify products, and develop proprietary brands in order to increase the North America segment.
- The core strategies of the Company are being implemented through the establishment of affiliate companies, such as Legacy Live Inc., which are funded in part through the Company, with a goal of incubating these businesses for the purpose of ultimately being spun off as independent public companies, in which the Company would have a significant economic interest.
Industry Context
The educational training industry has been significantly impacted by the COVID-19 pandemic, with a shift towards online and on-demand training. Legacy Education Alliance is attempting to adapt to these changes by developing its online offerings and proprietary brands.
Comparison to Industry Standards
- It is difficult to compare Legacy Education Alliance's results to industry standards due to its unique business model and the impact of the COVID-19 pandemic.
- Companies like Skillsoft and Coursera have seen growth in their online learning platforms, while companies that rely on live events have struggled.
- Legacy's revenue of $133,000 for Q1 2024 is significantly lower than larger players in the online education market.
Legal Proceedings
- The company is involved in several legal proceedings, including Tranquility Bay of Pine Island, LLC v. Tigrent, Inc., et al., In the Matter of Legacy Education Alliance International, Ltd., In the Matter of Elite Legacy Education UK Ltd., Proposal for a Company Voluntary Arrangement, In the Matter of GLD Legacy Holders LLC Index No. 651638/2023, In the Matter of DMG Productions LLC, and other legal proceedings involving Mr. Kostiner.
- There are approximately 60 students of ELE that have not received complete fulfilment of the Companys contractual obligations.
Related Party Transactions
- On March 8, 2021, the Company issued a $375 thousand Senior Secured Convertible Debenture to Legacy Tech Partners, LLC, a related party.
- On May 4, 2021, the Company issued a 10% Subordinated Secured Convertible Debenture in the principal amount of $25 thousand to Michel Botbol, the Companys Chairman and Chief Executive Officer at the time.
- On August 27, 2021, the Company issued a $500 thousand Senior Secured Convertible Debenture to GLD Legacy Holdings, LLC.
- Between June 9, 2022 and March 31, 2024, the Company borrowed an aggregate of $2,620,500 from ABC Impact, evidenced by a series of 10% Convertible Debentures. ABC Impact is an entity in which an affiliate of Barry Kostiner, the Companys Chief Executive Officer and sole director, has a non-controlling passive interest.
Stakeholder Impact
- Shareholders face significant risks due to the company's financial challenges and governance issues.
- Employees may be affected by potential cost-cutting measures or restructuring.
- Customers may be impacted by the company's ability to deliver its products and services.
- Creditors face the risk of non-payment due to the company's financial difficulties.
Next Steps
- The company needs to secure additional capital to fund its operations and strategic initiatives.
- The company needs to appoint a new auditor to review and audit its financial statements.
- The company needs to improve its disclosure controls and procedures.
- The company needs to resolve its outstanding legal proceedings.
Key Dates
| Date | Description |
|---|---|
| 2014-11-10 | Company entered into an Agreement and Plan of Merger. |
| 2014-11 | Company became a publicly held company through a reverse merger. |
| 2016-12-16 | Argon Credit, LLC and Argon X, LLC filed petitions for relief under chapter 11 of title 11 of the United States Code. |
| 2017-03-16 | Suit was filed in the Twentieth Judicial Circuit In and For Lee County, Florida by Tranquility Bay of Pine Island, LLC against Tigrent Inc. and several of its present and former shareholders, officers and directors. |
| 2019-10-28 | Four creditors of Legacy Education Alliance International Ltd. obtained an order from the High Court of Justice, Business and Property Courts of England and Wales with respect to the business and affairs of Legacy UK. |
| 2019-11-15 | Creditors obtained an Administration Order from the English Court. |
| 2019-11-26 | Legacy UK's assets and deferred revenues sold for 300 thousand (British pounds) to Mayflower Alliance LTD. |
| 2020-03-18 | A Winding-Up Petition was filed in the High Court of Justice, Business and Property Courts of England and Wales against one of our UK subsidiaries, Elite Legacy Education UK Ltd. |
| 2020-04-27 | Elite Legacy Education, Inc. entered into a Promissory Note in favor of Pacific Premier Bank through the Small Business Administration Paycheck Protection Program. |
| 2020-07 | Company resumed online operations. |
| 2020-07-24 | The High Court entered an order finding that there was a genuine dispute on substantial grounds with respect to 461,459.70 of the Petitioners claim. |
| 2020-09-25 | Fund Recovery Services, LLC filed a complaint in the above-referenced action asserting a variety of claims against 37 defendants, including Mr. Kostiner. |
| 2020-11 | Company resumed live operations. |
| 2020-12-08 | Company paid $390,600 in cash and transferred our residential properties in the value of $363,000 as settlement of intercompany debts of two of our subsidiaries, LEAI Property Development UK, Ltd. and LEAI Property Investment UK, Ltd., totaling $924,000 to Legacy UK. |
| 2021-01-04 | A Settlement Agreement and Mutual Release was entered into by and between TBPI, M. Barry Strudwick, Carl Weiss and Susan Weiss (the Strudwick Parties) and Tigrent Inc., Legacy Education Alliance, Inc., Legacy Education Alliance Holdings, Inc., Mr. May, and Steven Barre (Defendants). |
| 2021-01-11 | The creditors of Elite Legacy Education UK Ltd approved a Proposal for a Company Voluntary Arrangement under the UK Insolvency Act 1986 and the UK Insolvency Rules 2016. |
| 2021-01-27 | Legacy Education Alliance Australia PTY Limited appointed Joint and Several Liquidators of LEA Australia, to supervise a Creditors Voluntary Liquidation of LEA Australia. |
| 2021-02-18 | Company agreed to pay the aggregate sum of $400,000 payable in one installment of $100,000 on February 18, 2021 and five quarterly installments of $60,000 commencing on May 19, 2021. |
| 2021-03-02 | Legacy Education Alliance Holdings, Inc. adopted a resolution to wind up voluntarily the affairs of LEA Hong Kong and to appoint Cosimo Borrelli and Li Chung Ngai as Joint and Several Liquidators of LEA Hong Kong. |
| 2021-03-07 | Tigrent Learning Canada Inc. filed an assignment in bankruptcy under section 49 of the Canada Bankruptcy and Insolvency Act. |
| 2021-03-08 | Company issued a $375 thousand Senior Secured Convertible Debenture to Legacy Tech Partners, LLC. |
| 2021-04-20 | ELE closed on an unsecured Paycheck Protection Program Note agreement to borrow $1,899,832 from Cross River Bank. |
| 2021-05-04 | Company issued a 10% Subordinated Secured Convertible Debenture in the principal amount of $25 thousand to Michel Botbol. |
| 2021-06-11 | An equal number of warrants were issued on June 11, 2021 (see Note 8 Stock Warrants). |
| 2021-07-02 | At the annual meeting of stockholders of the Company held on July 2, 2021, the stockholders approved the future issuance of shares to LTP upon conversion under the LTP Debenture in excess of the 19.9 % limitation, but no such shares have been issued . |
| 2021-08-04 | ELE received notice from TLS that its First Draw PPP Loan had been partially forgiven in the amount of $ 900 thousand in principal and $ 11 thousand in interest. |
| 2021-08-27 | Company issued a $500 thousand Senior Secured Convertible Debenture to GLD Legacy Holdings, LLC. |
| 2021-10-15 | Company received $100 thousand of the remaining $300 thousand funding obligation of LTP. |
| 2021-10-27 | LTP funded the remaining funding obligation of $200 thousand. |
| 2021-12 | Company suspended live in-person events to assess the strategic plan and will continue the suspension into fiscal year 2022. |
| 2022-03-08 | Company defaulted on the LTP Debenture in the remaining amount left unconverted of $46 thousand and $9 thousand accrued interest. |
| 2022-04-01 | The extension agreement was executed on April 1, 2022. |
| 2022-04-25 | Company executed the standard loan documents required for securing a loan from the SBA under is Economic Injury Disaster Loan assistance program. |
| 2022-05-11 | Company received a Notice of Breach and Obligation to Cure to Avoid Event of Default from GLD. |
| 2022-05-17 | Company entered into a Securities Purchase Agreement and issued and sold to TLC Management & Consulting LLC, a Convertible Promissory Note in the principal amount of $110,000. |
| 2022-06-09 | Between June 9, 2022 and March 31, 2024, the Company borrowed an aggregate of $ 2,620,500 from ABC Impact, evidenced by a series of 10 % Convertible Debentures. |
| 2022-07-15 | Company entered into a Forbearance Agreement with GLD with respect to the GLD Debenture, and LTP with respect to the LTP Debenture. |
| 2022-07-27 | The court granted the motion for summary judgment in favor of GLD in the amount of $ 624,121.50 , together with pre-judgment interest at the 18 % contractual rate from March 31, 2023. |
| 2022-10-05 | The court issued a judgment of $ 97,112.25 on October 5, 2022 related to the default on an invoice for $ 53,500 dated April 29, 2022. |
| 2022-10-07 | GLD provided the Company with formal, written notice that the Company is in default under the terms of the Forbearance Agreement and the GLD intends to exercise all available rights and remedies at law and/or at equity. |
| 2023-07-27 | The court granted the motion for summary judgment in favor of GLD in the amount of $ 624,121.50 , together with pre-judgment interest at the 18 % contractual rate from March 31, 2023. |
| 2023-08-22 | Company entered into a Securities Purchase Agreement and issued and sold to Eagle Pre IPO LLC, a Convertible Promissory Note in the principal amount of $50,000. |
| 2023-08-28 | Company received a letter from the Securities and Exchange Commission informing the Company that the Public Company Accounting Oversight Board revoked the registration of RAM Associates & Company LLC, the Companys then independent registered public accounting firm. |
| 2023-11-14 | Company entered into a Securities Purchase Agreement and issued and sold to Kolk Homes LLC, a Convertible Promissory Note in the principal amount of $100,000. |
| 2024-01-04 | Legacy Education Alliance, Inc. entered into a Securities Purchase Agreement with an accredited investor, pursuant to which the Company issued to the Investor a Convertible Promissory Note having a principal amount of $ 250,000 and a Common Stock Purchase Warrant. |
| 2024-03-31 | End of the quarterly period. |
| 2024-07-08 | The total outstanding liability including promissory notes, convertible notes, or other convertible debt arrangements as of July 8, 2024 is $ 4,640,969 . |
| 2024-07-15 | Number of shares of Legacy Education Alliance, Inc. Common Stock, $0.0001 par value, outstanding as of July 15, 2024: 49,239,875 . |
| 2024-07-17 | Report signed. |
Keywords
financial results, education, legacy education alliance, going concern, revenue, net loss, financial statements, debt, legal proceedings
Disclaimer:The information provided here is for general informational purposes only and does not constitute financial advice, recommendation, or endorsement of any kind. It may contain errors or omissions. You should not rely on this information to make financial decisions. Always seek the advice of a qualified financial professional before making any investment or financial decisions. Use of this information is at your own risk.