Skillsoft Corporation Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Note 6 - Discontinued Operations

Note 6 - Discontinued Operations

12 Months Ended

Jan. 31, 2023

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

(6) 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. Final net proceeds from the sale are $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 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 on our condensed consolidated Statement of Operations. The following table presents financial results of SumTotal for all periods presented in our condensed consolidated Statement of Operations (in thousands):

	*Fiscal 2023*			*Fiscal 2022*						*Fiscal 2021*
	*Successor*			*Successor*			*Predecessor (SLH)*			*Predecessor (SLH)*			*Predecessor (PL)*
	*From*			*From*			*From*			*From*			*From*
	*February 1, 2022 to*			*June 12, 2021 to*			*February 1, 2021*			*August 27, 2020 to*			*February 1, 2020 to*
	*January 31, 2023*			*January 31, 2022*			*to June 11, 2021*			*January 31, 2021*			*August 27, 2020*
Revenues:
Total revenues	$	60,706		$	75,911		$	37,142		$	35,518		$	76,179
Operating expenses:
Costs of revenues		19,027			25,688			13,838			17,728			24,932
Content and software development		12,246			16,114			9,072			10,751			16,030
Selling and marketing		11,507			13,116			7,539			10,784			15,152
General and administrative		730			1,164			746			887			1,583
Amortization of intangible assets		6,345			6,873			4,410			3,593			10,643
Impairment of intangible assets		—			—			—			—			132,242
Acquisition-related and recapitalization costs		1,609			607			297			582			1,242
Restructuring		42			121			(127	)		2,425			339
Total operating expenses		51,506			63,683			35,775			46,750			202,163
Operating income (loss) from discontinued operations		9,200			12,228			1,367			(11,232	)		(125,984	)
Other income (expense), net		2,681			31			(326	)		(110	)		(129	)
Interest income		12			18			4			9			21
Interest expense		(1,443	)		(1,176	)		(57	)		(92	)		(86	)
Reorganization items, net		—			—			—			—			(32,007	)
Income (loss) from discontinued operations before income taxes		10,450			11,101			988			(11,425	)		(158,185	)
Provision for (benefit from) income taxes		1,967			(839	)		(187	)		(7,457	)		7,761
Net income (loss) from discontinued operations	$	8,483		$	11,940		$	1,175		$	(3,968	)	$	(165,946	)

The following table presents the aggregate carrying amounts of the classes of assets and liabilities of discontinued operations of SumTotal (in thousands):

	*January 31, 2022*
Carrying amount of assets included as part of discontinued operations
Cash and cash equivalents	$	16,496
Restricted cash		236
Accounts receivable		38,587
Prepaid expenses and other current assets		8,755
Current assets of discontinued operations		64,074
Property and equipment, net		6,609
Goodwill		75,693
Intangible assets, net		75,628
Right of use assets		1,937
Other assets		4,945
Long-term assets of discontinued operations		164,812
Total assets classified as discontinued operations in the condensed consolidated balance sheet	$	228,886

Carrying amounts of liabilities included as part of discontinued operations:
Accounts payable	$	1,502
Accrued compensation		10,293
Accrued expenses and other current liabilities		3,260
Lease liabilities		508
Deferred revenue		71,904
Current liabilities of discontinued operations		87,467
Deferred revenue - non-current		292
Deferred tax liabilities		516
Long term lease liabilities		1,605
Other long-term liabilities		13
Long-term liabilities of discontinued operations		2,426
Total liabilities classified as discontinued operations in the condensed consolidated balance sheet	$	89,893

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