Item 4.02
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Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review
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On November 13, 2017, the Audit Committee
of the Board of Directors of Legacy Education Alliance, Inc. (the “Company”) concluded, after consulting with
management and discussions with its independent public accounting firm, MaloneBailey, LLP (“Malone”), that the Company’s
unaudited financial statements for the quarter ended March 31, 2017 and June 30, 2017 should no longer be relied upon because of
certain overstatements and understatements.
The Company’s
previously reported results for the quarter ended March 31, 2017 erroneously overstated Revenue, understated Direct Course Expense,
Total Operating Costs and Expenses, overstated Income From Operations, Income Before Income Taxes, Net Income, Basic and Diluted
Earnings Per Share, on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) and Deferred
Course Expenses, Total Current Assets, Total Assets, understated Deferred Revenue (current portion), Total Current Liabilities,
and Total Liabilities on the Condensed Consolidated Balance Sheets (Unaudited). The Company has made necessary conforming changes
in (i) “Financial Information,” (ii) “Management’s Discussion and Analysis of Financial Condition and Results
of Operations,” (iii) “Controls and Procedures,” and "Exhibits," resulting from the correction of these
errors on Form 10-Q/A for this quarterly period filed on November 14, 2017.
The Company’s
previously reported results for the quarter ended June 30, 2017 erroneously understated Revenue, understated Direct Course expense,
Total Operating Costs and Expenses, understated Income From Operations, Income Before Income Taxes, Net Income, Basic and Diluted
Earnings Per Share, on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) and overstated
Deferred Course Expenses, Total Current Assets, Total Assets, Deferred Revenue (current portion), Total Current Liabilities, and
Total Liabilities on the Condensed Consolidated Balance Sheets (Unaudited). The Company has made necessary conforming changes in
(i) “Financial Information,” (ii) “Management’s Discussion and Analysis of Financial Condition and Results
of Operations,” and (iii) “Controls and Procedures,” resulting from the correction of these errors on Form 10-Q/A
for this quarterly period filed on November 14, 2017.
Our principal
executive and principal financial officers reevaluated the effectiveness of our disclosure controls and procedures as of March
31, 2017 and June 30, 2017, including whether the errors identified were the result of a material weakness in our internal control
over financial reporting. As part of this assessment, the Company reconsidered whether our existing disclosure controls and procedures
around the presentation and disclosure of the recognition of deferred revenue are effective. Based on this assessment, our Chief
Executive Officer and Chief Financial Officer have concluded that due to the material weakness our disclosure controls and procedures
were not effective as of March 31, 2017 and June 30, 2017.
To remediate the
material weakness surrounding the presentation and disclosure of the recognition of deferred revenue, the Company has fully tested
and validated that the software program used in the accounting for deferred revenue is operating effectively. In addition, the
Company will be migrating to a new NetSuite Enterprise Resource Planning system, effective January 1, 2018.
The Audit Committee
has discussed the matters disclosed in this Item 4.02 with Malone and the Board of Directors has authorized and directed the Company
to restate the applicable quarterly reports. The Company corrected the accounting and restated its quarterly filings on November
14, 2017.