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

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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
ended December 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 ended September 30, 2022, we marketed our
products and services under our Building Wealth with LegacyTM brand. During the
year ended December 31, 2021, we marketed our products and services under two
brands: Building Wealth with LegacyTM; and Homemade Investor by Tarek El Moussa.



Our students pay for their courses in full up-front or through payment
agreements with independent third parties. Under U.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 accelerating
U.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 in November 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 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 investment strategies and

techniques. This training program includes practical experience and the real

the investment mind from the beginner to the educated investor. In response to the

travel limitations and social distancing protocols arising from the

Coronavirus pandemic, the Company launched the marketing of its Legacy EducationTM

products changing to the brand name Create wealth with Legacy™. During the

nine months ended September 30, 2022we have marketed our products and services

exclusively under this brand.

? Home investor by Tarek El Moussa™ introduce people to the investor

mindset, real estate investment strategies and ways to generate cash flow that

are designed to help build a knowledge base for their finances

Goals. Homemade Investor events offered nationwide free workshops, 3 days

training and major stage events with Tarek as keynote speaker,

    all selling into our advanced training products.




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Impact of coronavirus COVID-19.



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. On March 11,
2020, the World Health Organization (WHO) declared the COVID-19 outbreak as a
pandemic. As a result of worldwide restrictions on travel and social distancing,
in March 2020 we temporarily ceased conducting live sales and fulfillment and
furloughed substantially all of our employees. We resumed sales operations in
June 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 in June 2020. We resumed live operations
on a limited basis, in November 2020, with events in Florida. In December 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 ) $0.02

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 )              0
Gain 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 ended September 30, 2022 compared to
$1.4 million for the nine months ended September 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 the North America segment.



We believe that cash sales remain an important metric when evaluating our
operating performance. Pursuant to U.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 in December 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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