Going Concern
Management has evaluated whether we have sufficient liquidity to fund our working capital needs through December 31, 2010 and through 2011. In its analysis, management analyzed projected sales and expenses and considered the scalability of our business expenses relative to the size of our revenues. Significant efforts to control costs through reductions in staff and other cost-cutting measures, as well as potential additional cash flow from our continued efforts to sell our non-core assets, were taken into consideration. We continue to incur a negative cash flow (totaling $6.7 million for the nine months ended September 30, 2010) primarily due to the on-going challenges with our business. Management currently projects that our available cash balances may not be sufficient to maintain our operations beyond December 31, 2010, when considering all of the operational and external risks and uncertainties. These risks and uncertainties include, but are not limited to, the sale of our remaining non-core assets (which could be subject to further deterioration of fair value), creditor concessions, cash contributions from new and ongoing business initiatives, negative outcomes from SEC and DOJ investigations and current and potential future litigation matters. Therefore, management has concluded that we are not adequately capitalized, raising doubts about our ability to continue as a going concern beyond December 31, 2010. Our financial statements as of September 30, 2010 and December 31, 2009 and for the nine months ended September 30, 2010 and 2009 are prepared assuming we will continue as a going concern and do not include any adjustments that might result from our inability to meet our obligations and continue our operations.
Management’s Plan
In response to the continued decline in profitability and the related impact on our cash position, we have significantly reduced the number of live events, eliminated historically weak markets for live events and reduced the frequency in which we visit any one particular market. We believe these actions may improve the profitability of each event remaining on the live event schedule. While we implemented many of these changes early in 2010, upon reevaluation, we made additional significant modifications in the third quarter of 2010 and may make further modifications going forward as we attempt to optimize our operating structure. The primary focus of the reduction of scheduled events is in the U.S. In addition, we are striving to fulfill more of our advanced courses online in an effort to reduce costs. During the fourth quarter of 2010, we plan to continue development and testing of digitally-delivered programs, which are expected to decrease our event and fulfillment costs and lower our marketing costs.
In 2010, we implemented reductions in staff to align with our anticipated sales level. In addition, we have decreased occupancy costs and have reduced operating costs in all areas. Many of these cost-cutting actions occurred during the third quarter of 2010. In October 2010, we sold two of our non-core assets and will continue to pursue the sale of the remaining non-core assets but
cannot be assured when or if such sales will be completed. We are also in current discussions with some of our larger creditors to re-negotiate amounts owed. The sufficiency of our cash resources is dependent on these actions.
We may seek to obtain additional capital through issuance of equity which may dilute the equity holdings of current investors. In addition, we may seek to borrow additional capital from institutional and commercial banking sources or other sources to fund our operations on terms that may include restrictive covenants, liens on assets, high effective interest rates and repayment provisions that may reduce our cash resources and limit future access to capital markets. We do not currently have any commitments for future external funding. Our ability to raise additional capital may be adversely impacted by the current economic environment and our financial results and liquidity position.
If we cannot generate the required revenues to sustain our operations or obtain additional capital on acceptable terms, we will need to make further revisions to our business plan, sell or liquidate assets, file for bankruptcy or cease operations, which could cause our investors to suffer the loss of a significant portion or all of their investment in us. The financial statements do not include any adjustments that might result from the outcome from these uncertainties.
AI
