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Table of Contents

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended October 31, 2023

 

or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from          to          

Commission File Number: 001-38960

 


 

Skillsoft Corp.

(Exact name of registrant as specified in its charter)

 

Delaware83-4388331

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer Identification No.)

 

7887 E. Belleview Ave, Suite 600

Greenwood Village, Colorado 80111

(Address of principal executive offices) (Zip Code)

 

Tel: (603) 821-3902

(Registrants telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Trading Symbol(s)Name of each exchange on which registered
Class A Common Stock, par value $0.0001 per shareSKILNew York Stock Exchange
WarrantsSKILW (1)(1)

 

(1) On October 25, 2023, the New York Stock Exchange filed a Form 25 to delist the Company's warrants and remove such securities from registration under Section 12(b) of the Securities Exchange Act of 1934, as amended. Effective October 26, 2023, the registrant's warrants are trading on the OTC Pink Marketplace under the symbol "SKILW".

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐Accelerated filer
Non-accelerated filer ☐Smaller reporting company
Emerging growth company  

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

 

The number of shares of registrant’s common stock outstanding as of November 30, 2023 was 8,068,823.

 

 

 

 

SKILLSOFT CORP.

 

FORM 10-Q

FOR THE QUARTER ENDED October 31, 2023

INDEX

 

  PAGE NO.
PART I — FINANCIAL INFORMATION - UNAUDITED  

Item 1. Unaudited Financial Statements:

2

Unaudited Condensed Consolidated Balance Sheets as of October 31, 2023 and January 31, 2023

2

Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended October 31, 2023 and 2022

3

Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended October 31, 2023 and 2022

4

Unaudited Condensed Consolidated Statements of Shareholders’ Equity (Deficit) for the three and nine months ended October 31, 2023 and 2022

5

Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended October 31, 2023 and 2022

7

Notes to Unaudited Condensed Consolidated Financial Statements

9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

25

Item 3. Quantitative and Qualitative Disclosures about Market Risk

35

Item 4. Controls and Procedures

35

PART II — OTHER INFORMATION

36

Item 1. Legal Proceedings

36

Item 1A. Risk Factors

36

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

36

Item 3. Defaults Upon Senior Securities

36

Item 4. Mine Safety Disclosures

36

Item 5. Other Information

36

Item 6. Exhibits

37

SIGNATURES

38

 

 

 

 

CAUTIONARY NOTES REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q (this “Form 10-Q”) includes statements that are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created by those laws. All statements, other than statements of historical facts, that address activities, events or developments that we expect or anticipate may occur in the future, including such things as our outlook, our product development and planning, our sales pipeline, future capital expenditures, share repurchases, financial results, the impact of regulatory changes, existing and evolving business strategies and acquisitions and dispositions, demand for our services, competitive strengths, the benefits of new initiatives, growth of our business and operations, our ability to successfully implement our plans, strategies, objectives, expectations and intentions are forward-looking statements. Also, when we use words such as “may", “will”, “would”, “anticipate”, “believe”, “estimate”, “expect”, “intend”, “plan”, “project”, “forecast”, “seek”, “outlook”, “target”, "goal”, “probably”, or similar expressions, we are making forward-looking statements. Such statements are based upon the current beliefs and expectations of Skillsoft’s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. All forward-looking disclosure is speculative by its nature, and we caution you against unduly relying on these forward-looking statements.

 

Factors that could cause or contribute to such differences include those described under “Part I - Item 1A. Risk Factors” in our Annual Report on Form 10‑K for the fiscal year ended January 31, 2023. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements included in the Annual Report and in our other periodic filings with the Securities and Exchange Commission. The forward-looking statements contained in this Form 10-Q represent our estimates only as of the date of this filing and should not be relied upon as representing our estimates as of any subsequent date. While we may elect to update these forward-looking statements in the future, we specifically disclaim any obligation to do so, whether to reflect actual results, changes in assumptions, changes in other factors affecting such forward-looking statements, or otherwise, except as required by law.

 

Although we believe that the assumptions underlying our forward-looking statements are reasonable, any of these assumptions, and therefore also the forward-looking statements based on these assumptions, could themselves prove to be inaccurate. Given the significant uncertainties inherent in the forward-looking statements included in this document, our inclusion of this information is not a representation or guarantee by us that our objectives and plans will be achieved. Annualized, pro forma, projected and estimated numbers are used for illustrative purposes only, are not forecasts and may not reflect actual results. Additionally, statements as to market share, industry data and our market position are based on the most current data available to us and our estimates regarding market position or other industry data included in this document or otherwise discussed by us involve risks and uncertainties and are subject to change based on various factors, including as set forth above.

 

 

1

 

PART I FINANCIAL INFORMATION

 

ITEM 1. UNAUDITED FINANCIAL STATEMENTS.

 

 

SKILLSOFT CORP.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except number of shares)

 

  

October 31, 2023

  

January 31, 2023

 

ASSETS

        

Current assets:

        

Cash and cash equivalents

 $129,806  $170,359 

Restricted cash

  6,953   7,197 

Accounts receivable, net of allowance for credit losses of approximately $426 and $221 as of October 31, 2023 and January 31, 2023, respectively

  110,833   183,592 

Prepaid expenses and other current assets

  52,505   44,596 

Total current assets

  300,097   405,744 

Property and equipment, net

  7,773   10,150 

Goodwill

  457,768   457,744 

Intangible assets, net

  630,403   738,066 

Right of use assets

  8,614   14,633 

Other assets

  20,316   16,350 

Total assets

 $1,424,971  $1,642,687 

LIABILITIES AND SHAREHOLDERS' EQUITY

        

Current liabilities:

        

Current maturities of long-term debt

 $6,404  $6,404 

Borrowings under accounts receivable facility

  40,486   39,693 

Accounts payable

  14,999   18,338 

Accrued compensation

  22,988   34,325 

Accrued expenses and other current liabilities

  28,545   41,474 

Lease liabilities

  3,591   4,198 

Deferred revenue

  203,588   280,676 

Total current liabilities

  320,601   425,108 
         

Long-term debt

  578,560   581,817 

Warrant liabilities

  4   4,754 

Deferred tax liabilities

  64,056   73,976 

Long-term lease liabilities

  9,506   11,947 

Deferred revenue - non-current

  2,208   1,778 

Other long-term liabilities

  10,088   11,551 

Total long-term liabilities

  664,422   685,823 

Commitments and contingencies

          

Shareholders’ equity:

        

Shareholders’ common stock - Class A common shares, $0.0001 par value: 18,750,000 shares authorized and 8,362,774 shares issued and 8,062,997 shares outstanding at October 31, 2023, and 8,264,308 shares issued and 8,182,794 shares outstanding at January 31, 2023

  1   1 

Additional paid-in capital

  1,543,063   1,521,587 

Accumulated equity (deficit)

  (1,076,152)  (972,193)

Treasury stock, at cost- 299,777 and 81,514 shares as of October 31, 2023 and January 31, 2023, respectively

  (10,891)  (2,845)

Accumulated other comprehensive income (loss)

  (16,073)  (14,794)

Total shareholders’ equity

  439,948   531,756 

Total liabilities and shareholders’ equity

 $1,424,971  $1,642,687 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

2

 

 

SKILLSOFT CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

 

   

Three Months Ended October 31,

   

Nine Months Ended October 31,

 
   

2023

   

2022

   

2023

   

2022

 

Revenues:

                               

Total revenues

  $ 138,956     $ 139,390     $ 415,697     $ 414,803  

Operating expenses:

                               

Costs of revenues

    36,407       36,655       114,698       109,662  

Content and software development

    16,126       17,252       51,024       53,276  

Selling and marketing

    43,983       44,680       130,321       126,089  

General and administrative

    22,308       28,281       72,689       83,994  

Amortization of intangible assets

    38,620       43,438       116,086       128,196  

Impairment of goodwill

          570,887             641,362  

Acquisition-related costs

    510       4,889       2,838       26,653  

Restructuring

    873       2,010       8,592       10,289  

Total operating expenses

    158,827       748,092       496,248       1,179,521  

Operating income (loss)

    (19,871 )     (608,702 )     (80,551 )     (764,718 )

Other income (expense), net

    19       1,601       (1,290 )     2,733  

Fair value adjustment of warrants

    1,105       9,128       4,750       26,080  

Fair value adjustment of hedge instruments

    3,981       20,314       11,186       5,249  

Interest income

    1,060       69       2,576       239  

Interest expense

    (16,492 )     (14,556 )     (48,683 )     (37,541 )

Income (loss) before provision for (benefit from) income taxes

    (30,198 )     (592,146 )     (112,012 )     (767,958 )

Provision for (benefit from) income taxes

    (2,462 )     (8,832 )     (8,735 )     (34,234 )

Income (loss) from continuing operations

    (27,736 )     (583,314 )     (103,277 )     (733,724 )

Gain (loss) on sale of business

          53,756       (682 )     53,756  

Income (loss) from discontinued operations, net of tax

          1,215             8,483  

Net income (loss)

  $ (27,736 )   $ (528,343 )   $ (103,959 )   $ (671,485 )
                                 

Net income (loss) per share:

                               

Ordinary – Basic and diluted - continuing operations

  $ (3.45 )   $ (70.98 )   $ (12.84 )   $ (93.38 )

Ordinary – Basic and diluted - discontinued operations

          6.69       (0.08 )     7.92  

Ordinary – Basic and diluted

  $ (3.45 )   $ (64.29 )   $ (12.92 )   $ (85.46 )

Weighted average common shares outstanding:

                               

Ordinary – Basic and diluted

    8,047       8,218       8,044       7,857  

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

3

 

 

SKILLSOFT CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

 

   

Three Months Ended October 31,

   

Nine Months Ended October 31,

 
   

2023

   

2022

   

2023

   

2022

 

Comprehensive income (loss):

                               

Net income (loss)

  $ (27,736 )   $ (528,343 )   $ (103,959 )   $ (671,485 )

Foreign currency adjustment, net of tax

    (2,650 )     (17,287 )     (1,279 )     (21,012 )

Total comprehensive income (loss)

  $ (30,386 )   $ (545,630 )   $ (105,238 )   $ (692,497 )

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

4

 

 

SKILLSOFT CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY (DEFICIT)

(in thousands, except number of shares)

 

                                                   

Accumulated

   

Total

 
   

Ordinary Shares

           

Additional

   

Accumulated

           

Other

   

Shareholders'

 
    Number     In     Common     Paid-in     Equity     Treasury     Comprehensive     Equity  
   

of Shares

   

Treasury

   

Stock

   

Capital

   

(Deficit)

   

Stock

   

Income (Loss)

   

(Deficit)

 

Balance January 31, 2022

    6,662,901           $ 1     $ 1,306,156     $ (247,229 )   $ -     $ 970     $ 1,059,898  

Share-based compensation

                      6,898                         6,898  

Common stock issued

    8,958                                            

Shares repurchased for tax withholding upon vesting of restricted stock-based awards

    (2,565 )                 (309 )                       (309 )

Common stock issued in connection with Codecademy acquisition

    1,518,721                   182,550                         182,550  

Fair value of share-based awards attributed to Codecademy acquisition

                      538                         538  

Translation adjustment

                                        (2,248 )     (2,248 )

Net income (loss)

                            (21,643 )                 (21,643 )

Balance April 30, 2022

    8,188,015             1       1,495,833       (268,872 )           (1,278 )     1,225,684  

Share-based compensation

                      10,017                         10,017  

Common stock issued

    41,442                                            

Shares repurchased for tax withholding upon vesting of restricted stock-based awards

    (14,057 )                 (1,409 )                       (1,409 )

Translation adjustment

                                        (1,477 )     (1,477 )

Net income (loss)

                            (121,499 )                 (121,499 )

Balance July 31, 2022

    8,215,400             1       1,504,441       (390,371 )           (2,755 )   $ 1,111,316  

Share-based compensation

                      8,396                         8,396  

Common stock issued

    51,560                                            

Shares repurchased for tax withholding upon vesting of restricted stock-based awards

    (18,846 )                 (884 )                       (884 )

Repurchase of common stock

          (32,271 )                       (1,433 )           (1,433 )

Translation adjustment

                                        (17,287 )     (17,287 )

Deconsolidation of SumTotal

                                        2,110       2,110  

Net income (loss)

                            (528,343 )                 (528,343 )

Balance October 31, 2022

    8,248,114       (32,271 )   $ 1     $ 1,511,953     $ (918,714 )   $ (1,433 )   $ (17,932 )   $ 573,875  

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

5

 

SKILLSOFT CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY (DEFICIT) - continued

(in thousands, except number of shares)

 

                                                   

Accumulated

   

Total

 
   

Ordinary Shares

           

Additional

   

Accumulated

           

Other

   

Shareholders'

 
    Number     In     Common     Paid-in     Equity     Treasury     Comprehensive     Equity  
   

of Shares

   

Treasury

   

Stock

   

Capital

   

(Deficit)

   

Stock

   

Income (Loss)

   

(Deficit)

 

Balance January 31, 2023

    8,264,308       (81,514 )   $ 1     $ 1,521,587     $ (972,193 )   $ (2,845 )   $ (14,794 )   $ 531,756  

Share-based compensation

                      9,128                         9,128  

Common stock issued

    22,538                                            

Shares repurchased for tax withholding upon vesting of restricted stock-based awards

    (8,131 )                 (289 )                       (289 )

Repurchase of common stock

          (218,263 )                       (8,046 )           (8,046 )

Translation adjustment

                                        875       875  

Net income (loss)

                            (44,224 )                 (44,224 )

Balance April 30, 2023

    8,278,715       (299,777 )     1       1,530,426       (1,016,417 )     (10,891 )     (13,919 )     489,200  

Share-based compensation

                      5,827                         5,827  

Common stock issued

    67,693                                            

Shares repurchased for tax withholding upon vesting of restricted stock-based awards

    (23,241 )                 (592 )                       (592 )

Repurchase of common stock

                                               

Translation adjustment

                                        496       496  

Net income (loss)

                            (31,999 )                 (31,999 )

Balance July 31, 2023

    8,323,167       (299,777 )     1       1,535,661       (1,048,416 )     (10,891 )     (13,423 )     462,932  

Share-based compensation

                      7,962                         7,962  

Common stock issued

    60,878                                            

Shares repurchased for tax withholding upon vesting of restricted stock-based awards

    (21,271 )                 (560 )                       (560 )

Repurchase of common stock

                                                 

Translation adjustment

                                        (2,650 )     (2,650 )

Net income (loss)

                            (27,736 )                 (27,736 )

Balance October 31, 2023

    8,362,774       (299,777 )   $ 1       1,543,063     $ (1,076,152 )   $ (10,891 )   $ (16,073 )   $ 439,948  

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

6

 

 

SKILLSOFT CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

   

Nine Months Ended October 31,

 
   

2023

   

2022

 

Cash flows from operating activities:

               

Net income (loss)

  $ (103,959 )   $ (671,485 )

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

               

Share-based compensation

    22,917       25,311  

Depreciation and amortization

    2,629       5,323  

Amortization of intangible assets

    116,086       134,541  

Provision for credit loss expense (recovery)

    205       275  

Provision for (benefit from) income taxes – non-cash

    (10,270 )     (43,115 )

Non-cash interest expense

    1,546       1,550  

Non-cash lease and property and equipment impairment charges

    4,265        

(Gain) loss on sale of business

    682       (53,756 )

Fair value adjustment of warrants

    (4,750 )     (26,080 )

Impairment of goodwill

    -       641,362  

Fair value adjustment of hedge instruments

    (11,186 )     (5,249 )

Change in assets and liabilities, net of effects from acquisitions:

               

Right-of-use assets

    2,184       4,302  

Accounts receivable

    70,645       76,821  

Prepaid expenses and other current assets

    2,726       (617 )

Accounts payable

    (3,283 )     (3,052 )

Accrued expenses and other liabilities, including long-term

    (20,820 )     (23,378 )

Lease liabilities

    (3,048 )     (2,261 )

Deferred revenues

    (75,250 )     (84,053 )

Net cash provided by (used in) operating activities

    (8,681 )     (23,561 )

Cash flows from investing activities:

               

Purchase of property and equipment

    (3,753 )     (4,713 )

Internally developed software - capitalized costs

    (8,055 )     (8,639 )

Sale of SumTotal, net of cash transferred

    (5,137 )     171,995  

Acquisition of Codecademy, net of cash received

          (198,842 )

Net cash used in investing activities

    (16,945 )     (40,199 )

Cash flows from financing activities:

               

Shares repurchased for tax withholding upon vesting of restricted stock-based awards

    (1,441 )     (2,603 )

Payments to acquire treasury stock

    (8,046 )     (1,433 )

Proceeds from issuance of term loans, net of fees

          157,088  

Proceeds from accounts receivable facility, net of borrowings

    793       (33,168 )

Principal payments on Term loans

    (4,803 )     (36,194 )

Net cash provided by (used in) financing activities

    (13,497 )     83,690  

Effect of exchange rate changes on cash and cash equivalents

    (1,674 )     (6,823 )

Net increase (decrease) in cash, cash equivalents and restricted cash

    (40,797 )     13,107  

Cash, cash equivalents and restricted cash, beginning of period

    177,556       168,923  

Cash, cash equivalents and restricted cash, end of period

  $ 136,759     $ 182,030  

Supplemental disclosure of cash flow information:

               

Cash and cash equivalents

  $ 129,806     $ 174,708  

Restricted cash

    6,953       7,322  

Cash, cash equivalents and restricted cash, end of period

  $ 136,759     $ 182,030  

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

7

 

 

SKILLSOFT CORP.

UNAUDITED SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION

(in thousands)

 

   

Nine Months Ended October 31,

 
   

2023

   

2022

 

Supplemental disclosure of cash flow information and non-cash investing and financing activities:

               

Cash paid for interest

  $ 50,583     $ 33,490  

Cash paid (received) for income taxes, net of refunds

    6,262       3,245  

Unpaid capital expenditures

          24  

Shares issued in connection with business combination

          182,550  

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

8

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

(1)    Description of Business and Basis of Presentation

 

Description of Business

 

Skillsoft Corp. (together with its consolidated subsidiaries, “Skillsoft”, “we”, “us”, “our” and the “Company”) has been listed on the New York Stock Exchange under the ticker symbol “SKIL” since June 14, 2021. Through a portfolio of high-quality content, an AI-enabled platform that is personalized and connected to customer needs, and a broad ecosystem of partners, Skillsoft drives continuous growth and performance for employees and their organizations by overcoming critical skills gaps, unlocking human potential, and transforming the workforce.

 

With more than 150,000 expert-led skills-building courses in modalities ranging from video and audio to instructor-led training, practice labs and a Generative AI-powered conversation simulator, Skillsoft offers transformative learning experiences for leaders to frontline workers, readers to hands-on learners.

 

References in the accompanying footnotes to the Company’s fiscal year refer to the fiscal year ended January 31 of that year (e.g., fiscal 2023 is the fiscal year ended January 31, 2023).

 

Reverse Stock Split

 

On September 29, 2023, we effected a 1-for-20 reverse stock split of our common stock and proportionately decreased the number of authorized shares of common stock. All shares, outstanding options, warrants, restricted stock unit ("RSU"), and per share information throughout this Quarterly Report on Form 10-Q have been retroactively adjusted to reflect the reverse stock split. The shares of common stock retain a par value of $0.0001 per share. Accordingly, an amount equal to the par value of the decreased shares resulting from the reverse stock split was reclassified from "Common stock" to "Additional paid-in capital".

 

Basis of Financial Statement Preparation

 

The accompanying condensed consolidated financial statements include the accounts of Skillsoft and its wholly owned subsidiaries. These financial statements are unaudited. However, in the opinion of management, the condensed consolidated financial statements reflect all normal and recurring adjustments necessary for their fair statement. Interim results are not necessarily indicative of results expected for any other interim period or a full year. We prepared the accompanying unaudited condensed consolidated financial statements in accordance with the instructions for Form 10-Q and Article 10 of Regulation S-X and, therefore, include all information and footnotes necessary for a complete presentation of operations, comprehensive income (loss), financial position, changes in shareholders’ equity (deficit) and cash flows in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The financial statements contained in these interim financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2023

 

Certain amounts reported in prior years have been reclassified to conform to the presentation in the current year. These reclassifications had no effect on total assets, total liabilities, total stockholders’ equity, or net income (loss) for the prior year.

 

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS” Act”), and has and may in the future take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. 

 

Principles of Consolidation

 

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation.

 

Use of Estimates

 

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the consolidated financial statements and the reported amounts of revenues and expenses during the reported periods. Actual results could differ from our estimates.

 

9

 
 

(2)    Summary of Significant Accounting Policies

 

The Company’s significant accounting policies are discussed in Note 2—Summary of Significant Accounting Policies to the financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2023 and should be read in connection with the reading of these interim unaudited financial statements.

 

Recently Adopted Accounting Guidance

 

Below we provide a description of our adoption of new Accounting Standards Updates (“ASUs”) issued by the Financial Accounting Standards Board (“FASB”) and the impact of the adoption on the condensed consolidated financial statements. ASUs not listed below were assessed and determined to be either not applicable or insignificant in presentation or amount.

 

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (“ASU 2016-13”), which provides new authoritative guidance with respect to the measurement of credit losses on financial instruments. This update changes the impairment model for most financial assets and certain other instruments by introducing a current expected credit loss (“CECL”) model. The CECL model is a more forward-looking approach based on expected losses rather than incurred losses, requiring entities to estimate and record losses expected over the remaining contractual life of an asset. We adopted ASU 2016-13 effective February 1, 2023, and the adoption of the standard did not have a material impact on our condensed consolidated financial statements.

 

Related to ASU 2016-13, there is risk and judgment involved in determining estimates of our allowances for credit losses, which reduce the carrying value of an asset to produce an estimate of the net amount that will be collected over the asset's life. We evaluate the expected credit loss of an asset on an individual basis, except in cases where assets collectively share similar risk characteristics where we pool them together. We evaluate and estimate our allowances for credit loss by considering reasonable, relevant, and supportable available information. The Company maintains an allowance based upon expected credit losses of outstanding accounts receivable. Management derives its estimate using a variety of factors, including historical collection and loss patterns; the current aging of receivables; customer-specific credit risk factors (when warranted); and probable future economic conditions which inform adjustments to historical loss patterns. The provision for expected credit losses is recorded in general and administrative in the accompanying consolidated statements of operations. Accounts receivable deemed to be uncollectible are written off, net of expected or actual recoveries.

 

Changes in the allowance for credit loss on accounts receivable (in thousands) for the nine months ended October 31, 2023 were as follows: 

 

  Amount 

Balance as of February 1, 2023

 $221 

Additions to (reductions from) provision for credit loss expense

  205 

Balance as of October 31, 2023

 $426 
 

(3)    Business Combination

 

Ryzac, Inc. (Codecademy)

 

On April 4, 2022, the Company acquired Ryzac, Inc. (“Codecademy”). Codecademy is a learning platform providing high-demand technical skills to approximately 40 million registered learners in nearly every country worldwide. The platform offers interactive, self-paced courses and hands-on learning in 14 programming languages across multiple domains such as application development, data science, cloud and cybersecurity.

 

The acquisition was accounted for as a business combination under ASC 805, Business Combinations, utilizing the acquisition method. Under the acquisition method, the acquisition date fair value of the consideration paid by the Company was allocated to the assets acquired and the liabilities assumed based on their estimated fair values.

 

The following summarizes the purchase consideration (in thousands):

 

Description

 

Amount

 

Cash payments

 $202,119 

Class A common stock issued

  182,550 

Cash settlement of seller transaction costs and other

  1,315 

Total purchase price

 $385,984 

 

The Company recorded the fair value of the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed as follows (in thousands):

 

  

Final Purchase

 

Description

 

Price Allocation

 

Cash, cash equivalents and restricted cash

 $4,053 

Current assets

  3,671 

Property and equipment

  385 

Intangible assets

  119,000 

Total assets acquired

  127,109 

Current liabilities

  (6,166)

Deferred revenue

  (18,396)

Deferred tax liabilities

  (21,621)

Total liabilities assumed

  (46,183)

Net assets acquired

  80,926 

Goodwill

  305,058 

Total purchase price

 $385,984 

 

10

 

The values allocated to identifiable intangible assets and their estimated useful lives are as follows (in thousands):

 

Description

 

Amount

  

Life (in years)

 

Trade name

 $44,000   13.8 

Developed technology

  43,000   5.0 

Content

  17,000   5.0 

Customer relationships

  15,000   5.8 

Total

 $119,000     

 

Values and useful lives assigned to intangible assets were based on estimated value and use of these assets by a market participant. The customer relationships were valued using the income approach. The trade name was valued using the relief from royalty method. The courseware and proprietary delivery software were valued using the replacement cost approach.

 

Goodwill represents the excess of the purchase price over the net identifiable tangible and intangible assets acquired. The Company determined that the acquisition of Codecademy resulted in the recognition of goodwill primarily because the acquisition is expected to help the Company to meet its long-term operating profitability objectives through achievement of synergies. The majority of goodwill is not deductible for tax purposes.

 

In the three and nine months ended October 31, 2022, the Company incurred $2.5 million and $7.7 million, respectively, in acquisition-related costs, which primarily consisted of transaction fees and legal, accounting, and other professional services. These costs are included in the "acquisition-related costs" in the accompanying condensed consolidated statements of operations.

 

Unaudited Pro Forma Financial Information

 

The unaudited pro forma financial information below is presented in accordance with Regulation S-X, Article 11 to enhance comparability for all periods by including operating results for Codecademy as if the merger had closed on February 1, 2022 (in thousands):

 

  

Unaudited Pro Forma

  

Unaudited Pro Forma

 
  

Statement of Operations

  

Statement of Operations

 
  

Three Months Ended October 31,

  

Nine Months Ended October 31,

 
  

2022

  

2022

 

Revenue

 $139,390  $422,861 

Net loss from continuing operations

  (16,134)  (100,472)

 

The unaudited pro forma financial information does not assume any impacts from revenue, cost, or other operating synergies that could be generated as a result of the acquisition. The unaudited pro forma financial information is for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved had the acquisition been consummated on February 1, 2022. The unaudited pro forma financial information includes adjustments to reflect intangible asset amortization based on the economic values derived from definite-lived intangible assets and interest expense on the new debt financing. The pro forma results of operations also exclude acquisition-related costs other than the transaction costs specific to the business combination occurring in April 2022. These transaction costs are presented as if they occurred in February 2022.

 

11

 
 

(4)    Discontinued Operations

 

On June 12, 2022, Skillsoft entered into a Stock Purchase Agreement (the “Purchase Agreement”), by and among Skillsoft, Skillsoft (US) Corporation (“Seller”), Amber Holding Inc. (“SumTotal”), and Cornerstone OnDemand, Inc. (“Buyer”), pursuant to which, subject to the certain terms and conditions contained therein, Seller agreed to sell, and Buyer agreed to purchase, all of Seller’s right, title and interest in and to one hundred percent (100%) of the outstanding shares of capital stock of SumTotal. The sale was completed on August 15, 2022. Net proceeds from the sale were $174.9 million, after final working capital adjustments in April 2023.

 

In connection with the sale, the parties to the Purchase Agreement entered into certain other agreements, including a transition services agreement pursuant to which each of Seller and Buyer agreed to provide the other party with certain transition services for a limited period following the closing.

 

The Company determined that the sale of the SumTotal business met the criteria to be classified as discontinued operations, and its assets and liabilities held for sale, as of June 12, 2022. Accordingly, the Company classified the assets and liabilities of the discontinued operations as held for sale in its consolidated balance sheets at the lower of carrying amount or fair value less cost to sell. Classification for the assets and liabilities in comparative periods retained their previous classification as current or long-term. No losses were recognized upon classification of the discontinued operations' assets and liabilities as held for sale. Depreciation and amortization ceased on assets classified as held for sale. The operating results of SumTotal are reported as discontinued operations, for all periods presented, as the disposition reflects a strategic shift that has, or will have, a major effect on the Company’s operations and financial results.

 

The financial results of SumTotal are presented as Income from discontinued operations, net of tax in our condensed consolidated statements of operations. The following presents financial results of SumTotal for the three and nine months ended October 31, 2022 in our condensed consolidated statements of operations (in thousands):

 

  

Three Months

  

Nine Months

 
  

Ended

  

Ended

 
  

October 31, 2022

  

October 31, 2022

 

Revenues:

        

Total revenues

 $4,178  $60,706 

Operating expenses:

        

Costs of revenues

  1,250   19,027 

Content and software development

  956   12,246 

Selling and marketing

  800   11,507 

General and administrative

  67   730 

Amortization of intangible assets

     6,345 

Acquisition-related costs

  1,056   1,609 

Restructuring

  (159)  42 

Total operating expenses

  3,970   51,506 

Operating income from discontinued operations

  208   9,200 

Other income (expense), net

  2,223   2,681 

Interest income

     12 

Interest expense

  (101)  (1,443)

Income (loss) from discontinued operations before income taxes

  2,330   10,450 

Provision for (benefit from) income taxes

  1,115   1,967 

Net income (loss) from discontinued operations

 $1,215  $8,483 

 

In addition, the amounts described in other footnotes within these condensed consolidated financial statements have been updated to reflect the amounts applicable to continuing operations, unless otherwise noted.

 

12

 
 

(5)    Intangible Assets

 

Intangible assets consisted of the following (in thousands):

 

  

October 31, 2023

  

January 31, 2023

 
  

Gross

      

Net

  

Gross

      

Net

 
  

Carrying

  

Accumulated

  

Carrying

  

Carrying

  

Accumulated

  

Carrying

 
  

Amount

  

Amortization

  

Amount

  

Amount

  

Amortization

  

Amount

 

Developed software/courseware

 $383,466  $185,016  $198,450  $374,057  $123,219  $250,838 

Customer contracts/relationships

  335,084   74,084   261,000   336,182   42,026   294,156 

Vendor relationships

  39,158   37,911   1,247   39,887   36,666   3,221 

Trademarks and trade names

  44,000   3,884   40,116   44,000   1,454   42,546 

Publishing rights

  41,100   19,614   21,486   41,100   13,449   27,651 

Backlog

  49,700   42,650   7,050   49,700   32,780   16,920 

Skillsoft trademark

  84,700      84,700   84,700      84,700 

Global Knowledge trademark

  22,656   6,302   16,354   23,080   5,046   18,034 

Total intangible assets

 $999,864  $369,461  $630,403  $992,706  $254,640  $738,066 

 

Amortization expense related to the existing finite-lived intangible assets is expected to be as follows (in thousands) for the fiscal years ended January 31:

 

  

Amortization Expense

 

2024 (three months remaining)

 $37,206 

2025

  133,177 

2026

  129,291 

2027

  82,322 

2028

  42,037 

Thereafter

  121,670 

Total future amortization

 $545,703 

 

Amortization expense related to intangible assets in the aggregate was $38.6 million, $116.1 million for the three and nine months ended October 31, 2023, respectively, and, $43.4 million and $128.2 million the three and nine months ended October 31, 2022, respectively.

 

Impairment Review Requirements

 

The Company reviews intangible assets subject to amortization if any adverse conditions exist or a change in circumstances has occurred that would indicate impairment or a change in remaining useful life. The Company reviews indefinite lived intangible assets, including goodwill, on the annual impairment test date ( January 1) or more frequently if there are indicators of impairment.

 

In connection with the impairment evaluation, the Company may first consider qualitative factors to determine whether the existence of events or circumstances indicates that it is more likely than not (i.e., a likelihood of more than 50%) that the fair value of a reporting unit is less than its carrying amount. Performing a quantitative goodwill and indefinite lived intangible impairment test is not necessary if an entity determines based on this assessment that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company fails or elects to bypass the qualitative assessment, the goodwill impairment test must be performed. This test requires a comparison of the carrying value of the reporting unit to its estimated fair value. If the carrying value of a reporting unit’s goodwill exceeds its fair value, an impairment loss equal to the difference is recorded, not to exceed the amount of goodwill allocated to the reporting unit. In determining reporting units, the Company first identifies its operating segments, and then assesses whether any components of these segments constitute a business for which discrete financial information is available and where segment management regularly reviews the operating results of that component.

 

The Company completed the qualitative assessment discussed above for the nine months ended October 31, 2023 and concluded that there were not indicators of impairment for our reporting units.

 

A roll forward of goodwill is as follows:

 

Description

 

Content & Platform

  

Instructor-Led Training

  

Consolidated

 

Goodwill, net January 31, 2023

 $417,340  $40,404  $457,744 

Foreign currency translation adjustment

  (701)  725   24 

Goodwill, net October 31, 2023

 $416,639  $41,129  $457,768 

 

As of October 31, 2023, there was $569.3 million and $72.1 million of accumulated impairment losses for the Content & Platform (formerly referred to as Skillsoft Content) and Instructor-Led Training (formerly referred to as Global Knowledge) segments, respectively.

 

If current discount rates rise or if relevant market-based inputs for our impairment assessment worsen during the remainder of fiscal 2024, and if our stock price and market capitalization remain at current levels for a prolonged period of time, we will need to reassess intangible impairment at the end of each quarter. Subsequent reviews of goodwill and intangibles could result in impairment during fiscal 2024. Factors that could result in an impairment include, but are not limited to, the following:

 

 

Prolonged period of our estimated fair value of our reporting units exceeding our market capitalization;

 

Lower expectations for future bookings, revenue, or profitability, which in part could be impacted by legislative, regulatory or tax changes that affect the cost of, or demand for, products and services as well as the loss of key personnel;

 

Deterioration in key assumptions used in our income approach estimates of fair value, such as higher discount rates from higher stock market volatility; and

 

Valuations of significant mergers or acquisitions of companies that provide relevant market-based inputs for our impairment assessment that could support less favorable conclusions regarding the estimated fair value of our reporting units.

 

13

 
 

(6)    Taxes

 

For the three and nine months ended October 31, 2023, for continuing operations, the Company recorded a tax benefit of $2.5 million and $8.7 million, respectively, on a pretax loss of $30.2 million and $112.0 million, respectively. The tax benefit reflects the effect of non-deductible items, current period changes in the Company’s valuation allowance on its deferred tax assets and the impact of foreign tax rate differential.

 

For the three and nine months ended October 31, 2022, for continuing operations, the Company recorded a tax benefit of $8.8 million and $34.2 million, respectively, on a pretax loss of $592.1 million and $768.0 million, respectively. The tax benefit reflects the effect of non-deductible items, current period changes in the Company’s valuation allowance on its deferred tax assets and the impact of foreign tax rate differential.

 

(7)    Restructuring

 

In connection with strategic initiatives implemented during the three and nine months ended October 31, 2023 and October 31, 2022, the Company’s management approved and initiated plans to reduce its cost structure and better align operating expenses with existing economic conditions and the Company’s operating model. The Company recorded restructuring charges of $0.9 million and $8.6 million during the three and nine months ended October 31, 2023, respectively, and $2.0 million and $10.3 million for the three and nine months ended October 31, 2022, respectively. These restructuring charges are presented separately in the accompanying condensed consolidated statements of operations and include primarily the severance costs of terminated employees and lease termination and lease impairment charges.

 

(8)    Leases, Commitments and Contingencies

 

The Company’s lease portfolio includes office space, training centers, and vehicles to support its research and development activities, sales operations and other corporate and administrative functions in North America, Europe and Asia. The Company’s leases have remaining terms of one year to ten years. Some of the Company’s leases include options to extend or terminate the lease prior to the end of the agreed upon lease term. For purposes of calculating lease liabilities, lease terms include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options.

 

Operating lease right-of-use ("ROU") assets and liabilities are recognized based on the present value of the future minimum lease payments over the expected lease term. As the Company’s operating leases generally do not provide an implicit rate, the Company uses an estimated incremental borrowing rate in determining the present value of future payments. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at the acquisition date to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease within a particular location and currency environment. The weighted average incremental borrowing rate for its operating leases as of October 31, 2023 and January 31, 2023 was 5.8% and 5.5%, respectively.

 

The operating leases are included in the captions “Right of use assets”, “Lease liabilities”, and “Long-term lease liabilities” on the Company’s condensed consolidated balance sheets as of October 31, 2023 and January 31, 2023. The weighted-average remaining lease term of the Company’s operating leases is 6.0 years as of October 31, 2023. Lease costs for minimum lease payments are recognized on a straight-line basis over the lease term. The lease costs were $3.9 million and related cash payments were $3.8 million for the nine months ended October 31, 2023. The lease costs were $5.0 million and related cash payments were $5.9 million for the nine months ended October 31, 2022. Lease costs are included within the content and software development, selling and marketing, and general and administrative lines on the condensed consolidated statements of operations, and the operating leases related cash payments were included in the operating cash flows and the finance leases related cash payments were included in the financing cash flows on the condensed consolidated statements of cash flows. Short-term lease costs and variable lease costs are not material.

 

See Note 7 for a discussion related to restructuring charges associated with lease termination and lease impairment charges.

 

The below reconciles (in thousands) the undiscounted future minimum lease payments under non-cancellable leases to the total lease liabilities recognized on the condensed consolidated balance sheets as of October 31, 2023.

 

     

Fiscal year ended January 31:

   

2024 (three months remaining)

 $1,199 

2025

  3,707 

2026

  2,490 

2027

  2,324 

2028

  1,507 

Thereafter

  4,124 

Total future minimum lease payments

  15,351 

Effects of discounting

  (2,254)

Total lease liabilities

 $13,097 
     

Current lease liabilities

 $3,591 

Long-term lease liabilities

  9,506 

Total lease liabilities

 $13,097 

 

14

 

Litigation

 

On November 21, 2023, the Company was named as a nominal defendant in a shareholder derivative action filed in the Delaware Court of Chancery captioned Norcross v. Prosus N.V., et al. The plaintiff, a Company shareholder, alleges that the Company's directors and controlling shareholders breached their fiduciary duties to plaintiffs by causing the Company to acquire Codecademy at an above-market price. Plaintiff seeks money damages as compensation for the harm caused by the alleged breaches. We currently cannot estimate any possible loss that may result from this action.

 

In addition, the Company is, from time to time, party to general legal proceedings and claims, which arise in the ordinary course of business including those relating to commercial and contractual disputes, employment matters, intellectual property, and other business matters. When appropriate, management consults with legal counsel and other appropriate experts to assess claims. If, in management’s opinion, we have incurred a probable loss as determined in accordance with GAAP, an estimate is made of the loss and the appropriate accrual is reflected in our condensed consolidated financial statements. Currently, there are no material amounts accrued. While it is not possible to quantify the financial impact or predict the outcome of all pending claims and litigation, management does not anticipate that the outcome of any current proceedings or known claims, either individually or in aggregate, will materially affect the Company’s financial position, results of operations or cash flows.

 

Guarantees

 

The Company’s software license arrangements and hosting services are typically warranted to perform in a manner consistent with general industry standards that are reasonably applicable and substantially in accordance with the Company’s product documentation under normal use and circumstances. The Company’s arrangements also include certain provisions for indemnifying customers against liabilities if its products or services infringe a third party’s intellectual property right. The Company has entered into service level agreements with some of its hosted application customers warranting certain levels of uptime reliability and such agreements permit those customers to receive credits against monthly hosting fees or terminate their agreements in the event that the Company fails to meet those levels for an agreed upon period of time.

 

To date, the Company has not incurred any material costs as a result of such indemnifications or commitments and has not accrued any liabilities related to such obligations in the accompanying condensed consolidated financial statements.

 

(9)    Long-Term Debt

 

Debt consisted of the following (in thousands):

 

  

October 31, 2023

  

January 31, 2023

 

Term Loan - current portion

 $6,404  $6,404 

Current maturities of long-term debt

  6,404   6,404 
         

Term Loan - long-term portion

  589,798   594,601 

Original issue discount - long-term portion

  (7,284)  (8,286)

Deferred financing costs - long-term portion

  (3,954)  (4,498)

Long-term debt

 $578,560  $581,817 

 

On July 16, 2021, Skillsoft Finance II, Inc. (“Skillsoft Finance II”), a subsidiary of Skillsoft Corp., entered into a Credit Agreement (the “Credit Agreement”), by and among Skillsoft Finance II, as borrower, Skillsoft Finance I, Inc., as holdings (“Holdings”), the lenders party thereto and Citibank, N.A., as administrative agent and collateral agent, pursuant to which the lenders provided a $480 million term loan facility (the “Term Loan Facility”) to Skillsoft Finance II, the proceeds of which, together with cash on hand, were used to refinance existing debt. The Term Loan Facility is scheduled to mature on July 16, 2028.

 

In connection with the closing of the Codecademy acquisition, Skillsoft Finance II entered into Amendment No. 1 to the Credit Agreement, dated as of April 4, 2022 (the “First Amendment”), among Skillsoft Finance II, Holdings, certain subsidiaries of Skillsoft Finance II, as guarantors, Citibank N.A., as administrative agent, and the financial institutions party thereto as Term B-1 Lenders, which amended the Credit Agreement (as amended by the First Amendment, the “Amended Credit Agreement”).

 

The First Amendment provided for the incurrence of up to $160 million of Term B-1 Loans (the “Term B-1 Loans”) under the Amended Credit Agreement. In addition, the First Amendment, among other things, (a) provided for early opt-in to Secured Overnight Financing Rate ("SOFR") for the existing term loans under the Credit Agreement (such existing term loans together with the Term B-1 Loans, the “Initial Term Loans”) and (b) provided for the applicable margin for the Initial Term Loans at 4.25% with respect to base rate borrowings and 5.25% with respect to SOFR borrowings.

 

The Company received $153.2 million of net proceeds (net of $4.0 million of financing costs and $2.8 million of original issuance discounts) from the Term Loan Facility on April 4, 2022. The Company used the net proceeds and cash on hand for the closing of the Codecademy acquisition on April 4, 2022. 

 

The refinancing was accounted for as a modification for certain lenders and an extinguishment for other lenders and debt issuance costs and lender fees were accounted for in proportion to whether the related principal balance was considered modified or extinguished. Accordingly, both newly incurred and deferred financing costs and original issuance discounts of $0.1 million and $2.8 million, respectively, will be amortized as additional interest expense over the term of the Initial Term Loans.

 

Prior to the maturity thereof, the Initial Term Loans will be subject to quarterly amortization payments of 0.25% of the principal amount.

 

On August 15, 2022, pursuant to the Purchase Agreement entered on June 12, 2022 by and among Skillsoft, Skillsoft (US) Corporation (“Seller”), Amber Holding Inc. (“SumTotal”), and Cornerstone OnDemand, Inc. (“Buyer”), Seller completed the sale of one hundred percent (100%) of the outstanding shares of capital stock of SumTotal to Buyer. As a result of the asset sale, the Company made a mandatory prepayment of $31.4 million to the lenders in August 2022. The remaining net cash proceeds attributable to the sale of SumTotal were subject to reinvestment provisions and could not be used for general corporate purposes. As defined in the Amended Credit Agreement, no additional repayment was required.

 

All obligations under the Amended Credit Agreement, and the guarantees of those obligations (as well as certain cash management obligations and interest rate hedging or other swap agreements), are secured by substantially all of Skillsoft Finance II’s personal property as well as the assets of each subsidiary guarantor.

 

15

 

Amounts outstanding under the Term Loan Facility bear interest, at the option of Skillsoft Finance II, at a rate equal to (a) SOFR (subject to a floor of 0.75%) plus a credit premium based on the tenor of the interest period plus 5.25% for SOFR Loans or (b) the highest of (i) the Federal Funds Effective Rate plus 10.50%, (ii) the “prime rate” quoted by the administrative agent, (iii) Adjusted Term SOFR plus 1.00% and (iv) 1.75%, plus 3.75% for alternative base rate loans. As of October 31, 2023, the balance of $596.2 million of Initial Term Loans bears interest at a rate equal to SOFR plus a credit premium of 0.11% plus a spread of 5.25%, per annum, with a SOFR floor of 0.75%, and quarterly principal repayments of $1.6 million until maturity.

 

Voluntary prepayment is permitted under the Term Loan Facility. Loan parties are subject to various affirmative and negative covenants and reporting obligations under the Amended Credit Agreement. These include, among other things, limitations on indebtedness, liens, sale and leaseback transactions, investments, fundamental changes, assets sales, restricted payments, affiliate transactions, and restricted debt payments. Events of default under the Term Loan Facility include non-payment of amounts due to the lenders, violation of covenants, materially incorrect representations, defaults under other material indebtedness, judgments and specified insolvency-related events, certain ERISA events, and invalidity of loan or collateral documents, subject to, in certain instances, specified thresholds, cure periods and exceptions. As of  October 31, 2023, the Company is in compliance with all covenants.

 

The Company’s debt outstanding as of October 31, 2023 matures (in thousands) as shown below.

 

Future principal payments due for fiscal years ended January 31:

    

2024 (three months remaining)

 $1,601