Annual report pursuant to Section 13 and 15(d)

Note 4 - Fresh-start Reporting - Consolidated Balance Sheet (Details)

v3.23.1
Note 4 - Fresh-start Reporting - Consolidated Balance Sheet (Details) - USD ($)
$ in Thousands
Jan. 31, 2023
Jan. 31, 2022
Jun. 11, 2021
Jan. 31, 2021
Aug. 27, 2020
Jan. 31, 2020
Current assets:            
Cash and cash equivalents $ 170,359 $ 138,176     $ 92,009  
Restricted cash 7,197 14,015     10,306  
Accounts receivable 183,592 173,876     74,317  
Prepaid expenses and other current assets 44,596 37,082     28,444  
Total current assets 405,744 427,223     205,076  
Property and equipment, net 10,150 11,475     16,023  
Reorganization value of Successor company in excess of asset fair value - Goodwill 457,744 795,811 $ 491,519 $ 491,653 495,135 $ 1,112,820
Fresh-start adjustment to acquired intangibles assets 738,066 793,859     766,086  
Right of use assets         17,821  
Other assets 16,350 10,780     3,594  
Total assets 1,642,687 2,221,948     1,503,735  
Current liabilities:            
Current portion of long-term debt 6,404 4,800     2,600  
Borrowings under accounts receivable facility 39,693 74,629     48,886  
Accounts payable 18,338 24,159     8,151  
Accrued compensation 34,325 40,822     24,987  
Accrued expenses and other liabilities 41,474 47,757     12,605  
Lease liabilities         4,769  
Deferred revenue 280,676 259,701     83,745  
Total current liabilities 425,108 545,722     185,743  
Long-term debt, net of current portion 581,817 462,185     512,350  
Long term lease liabilities         16,399  
Warrants         11,200  
Deferred tax liabilities 73,976 99,395     103,930  
Deferred revenue - non-current 1,778 1,248     655  
Other long-term liabilities 11,551 11,125     6,485  
Total long-term liabilities 685,823 616,328     651,019  
Liabilities subject to compromise         0  
Total liabilities         836,762  
Shareholders’ equity:            
Ordinary shares 14 11        
Additional paid-in capital 1,521,574 1,306,146        
Retained earnings (accumulated deficit) (972,193) (247,229)     0  
Accumulated other comprehensive loss (14,794) 970     0  
Total shareholders’ equity 531,756 1,059,898 105,027 $ 579,969 666,973 $ (2,761,744)
Total liabilities and shareholders’ equity $ 1,642,687 $ 2,221,948     1,503,735  
Software Luxembourg Holding and Point Well (Predecessor) [Member]            
Current assets:            
Reorganization value of Successor company in excess of asset fair value - Goodwill         999,628  
Shareholders’ equity:            
Ordinary shares         0  
Additional paid-in capital         0  
Total shareholders’ equity     $ 530,275      
Skillsoft Corp (Successor) [Member]            
Shareholders’ equity:            
Ordinary shares         40  
Additional paid-in capital         666,933  
Reorganization, Chapter 11, Predecessor, before Adjustment [Member]            
Current assets:            
Cash and cash equivalents         42,341  
Restricted cash         35,306  
Accounts receivable         73,607  
Prepaid expenses and other current assets         39,317  
Total current assets         190,571  
Property and equipment, net         15,523  
Reorganization value of Successor company in excess of asset fair value - Goodwill         1,070,674  
Fresh-start adjustment to acquired intangibles assets         249,962  
Right of use assets         17,454  
Other assets         17,313  
Total assets         1,561,497  
Current liabilities:            
Current portion of long-term debt         60,000  
Borrowings under accounts receivable facility         48,886  
Accounts payable         7,851  
Accrued compensation         23,587  
Accrued expenses and other liabilities         12,105  
Lease liabilities         1,699  
Deferred revenue         196,469  
Total current liabilities         350,597  
Long-term debt, net of current portion         0  
Long term lease liabilities         3,732  
Warrants         0  
Deferred tax liabilities         0  
Deferred revenue - non-current         1,783  
Other long-term liabilities         2,289  
Total long-term liabilities         7,804  
Liabilities subject to compromise         4,472,954  
Total liabilities         4,831,355  
Shareholders’ equity:            
Retained earnings (accumulated deficit)         (3,267,346)  
Accumulated other comprehensive loss         (2,733)  
Total shareholders’ equity         (3,269,858)  
Total liabilities and shareholders’ equity         1,561,497  
Reorganization, Chapter 11, Predecessor, before Adjustment [Member] | Software Luxembourg Holding and Point Well (Predecessor) [Member]            
Shareholders’ equity:            
Ordinary shares         138  
Additional paid-in capital         83  
Reorganization, Chapter 11, Predecessor, before Adjustment [Member] | Skillsoft Corp (Successor) [Member]            
Shareholders’ equity:            
Ordinary shares         0  
Additional paid-in capital         0  
Reorganization, Chapter 11, Plan Effect Adjustment [Member]            
Current assets:            
Cash and cash equivalents [1]         49,668  
Restricted cash [1]         (25,000)  
Accounts receivable [2]         1,700  
Prepaid expenses and other current assets [2]         (300)  
Total current assets         26,068  
Property and equipment, net [2]         500  
Reorganization value of Successor company in excess of asset fair value - Goodwill [2]         5,100  
Fresh-start adjustment to acquired intangibles assets         0  
Right of use assets         0  
Other assets [2]         (3,500)  
Total assets         28,168  
Current liabilities:            
Current portion of long-term debt [3]         (57,400)  
Borrowings under accounts receivable facility         0  
Accounts payable [2]         300  
Accrued compensation [2]         1,400  
Accrued expenses and other liabilities [2]         500  
Lease liabilities [4]         3,245  
Deferred revenue [2]         2,400  
Total current liabilities         (49,555)  
Long-term debt, net of current portion [3],[5]         517,400  
Long term lease liabilities [4]         12,442  
Warrants [4],[6]         11,200  
Deferred tax liabilities [4],[6]         30,484  
Deferred revenue - non-current         0  
Other long-term liabilities [4]         3,796  
Total long-term liabilities         575,322  
Liabilities subject to compromise [4]         (4,472,954)  
Total liabilities         (3,947,187)  
Shareholders’ equity:            
Retained earnings (accumulated deficit) [7]         3,308,603  
Accumulated other comprehensive loss         0  
Total shareholders’ equity         3,975,355  
Total liabilities and shareholders’ equity         28,168  
Reorganization, Chapter 11, Plan Effect Adjustment [Member] | Software Luxembourg Holding and Point Well (Predecessor) [Member]            
Shareholders’ equity:            
Ordinary shares [8]         (138)  
Additional paid-in capital [8]         (83)  
Reorganization, Chapter 11, Plan Effect Adjustment [Member] | Skillsoft Corp (Successor) [Member]            
Shareholders’ equity:            
Ordinary shares [4],[6]         40  
Additional paid-in capital [4],[6]         666,933  
Reorganization, Chapter 11, Fresh-Start Adjustment [Member]            
Current assets:            
Cash and cash equivalents         0  
Restricted cash         0  
Accounts receivable [9]         (990)  
Prepaid expenses and other current assets [10]         (10,573)  
Total current assets         (11,563)  
Property and equipment, net         0  
Reorganization value of Successor company in excess of asset fair value - Goodwill [11]         (580,639)  
Fresh-start adjustment to acquired intangibles assets [12]         516,124  
Right of use assets [13]         367  
Other assets [10]         (10,219)  
Total assets         (85,930)  
Current liabilities:            
Current portion of long-term debt         0  
Borrowings under accounts receivable facility         0  
Accounts payable         0  
Accrued compensation         0  
Accrued expenses and other liabilities         0  
Lease liabilities [13]         (175)  
Deferred revenue [14]         (115,124)  
Total current liabilities         (115,299)  
Long-term debt, net of current portion [15]         (5,050)  
Long term lease liabilities [13]         225  
Warrants         0  
Deferred tax liabilities [16]         73,446  
Deferred revenue - non-current [14]         (1,128)  
Other long-term liabilities [15]         400  
Total long-term liabilities         67,893  
Liabilities subject to compromise         0  
Total liabilities         (47,406)  
Shareholders’ equity:            
Retained earnings (accumulated deficit) [15]         (41,257)  
Accumulated other comprehensive loss [17]         2,733  
Total shareholders’ equity         (38,524)  
Total liabilities and shareholders’ equity         (85,930)  
Reorganization, Chapter 11, Fresh-Start Adjustment [Member] | Software Luxembourg Holding and Point Well (Predecessor) [Member]            
Current assets:            
Reorganization value of Successor company in excess of asset fair value - Goodwill         1,075,800  
Shareholders’ equity:            
Ordinary shares         0  
Additional paid-in capital         0  
Reorganization, Chapter 11, Fresh-Start Adjustment [Member] | Skillsoft Corp (Successor) [Member]            
Current assets:            
Reorganization value of Successor company in excess of asset fair value - Goodwill         495,100  
Shareholders’ equity:            
Ordinary shares         0  
Additional paid-in capital         $ 0  
[1] The table below reflects the sources and uses of cash on the Effective Date from implementation of the Plan of Reorganization (in thousands): Sources: Release of restricted cash (a) $ 25,000 Additional funding from First Out Term Loan 50,000 Reconsolidation of Canadian subsidiary 1,100 Total sources of cash 76,100 Uses: Exit Facility and DIP Facility rollover financing costs paid upon Effective Date (5,032 ) Professional success fees paid upon Effective Date (21,400 ) Total uses of cash (26,432 ) Net increase in cash $ 49,668 (a) A portion of DIP Facility funds from restricted cash was released upon Effective Date
[2] On June 17, 2020, the Company’s Canadian subsidiary, Skillsoft Canada Ltd., voluntarily commenced parallel recognition proceedings under the Companies’ Creditors Arrangement Act (“CCAA”) with the Court of Queen’s Bench of New Brunswick in Canada seeking recognition and enforcement of the Debtors’ Chapter 11 Cases, including the DIP Facility. This action resulted in the deconsolidation of Skillsoft Canada Ltd. under ASC 810, and the Company recognizing its retained noncontrolling interest in the Canadian subsidiary at its fair value of $4.8 million. On August 17, 2020, the Canadian Court entered an order recognizing and enforcing the Chapter 11 Cases and Plan in Canada and upon the August 27, 2020 Effective Date, when the Plan of Reorganization was consummated and Pointwell Limited emerged from Chapter 11, the Company reconsolidated Skillsoft Canada Ltd and de-recognized the non-controlling interest. The Company applied guidance ASC 805 for recognizing a new accounting basis for the Canadian subsidiary. Working capital accounts were generally carried over at carrying value which approximated their fair values. Deferred revenue was reduced to an amount intended to approximate the costs to fulfill contractual obligations plus a reasonable margin. Identified intangible assets were recognized based on their fair values using market participant assumptions and goodwill was recorded reflecting synergies from the consolidation by the Company.
[3] Reflects the net effect of the conversion of $60 million of the debtor-in-possession financing to First Out Term Loan, net of principal payments of $2.6 million related to the First Out Term Loan and Second Out Term Loan due over the twelve-month period from Effective Date.
[4] As part of the Plan of Reorganization, the Bankruptcy Court approved the settlement of claims reported within Liabilities subject to compromise in the Company's Consolidated balance sheet at their respective allowed claim amounts.
[5] In accordance with the Plan of Reorganization, the Company entered into the Term Loan Facility Agreement with a principal amount of $520 million.
[6] In Settlement of the company’s Predecessor (PL) first and second lien debt obligations, the holders of the Predecessor (PL)’s first lien received a total of 3,840,000 of Class A common shares. Predecessor (PL)’s second lien holders received a total of 160,000 of Class B common shares and a total of 705,882 warrants to purchase additional common shares.
[7] The table reflects the cumulative impact of the reorganization adjustments discussed above (in thousands): Gain on settlement of liabilities subject to compromise $ 3,339,191 Provision for income taxes (4,377 ) Professional success fees paid upon Effective Date (21,400 ) Exit Facility and DIP Facility rollover financing costs paid upon Effective Date (5,032 ) Cancellation of predecessor shares and additional paid in capital 221 Net impact on accumulated deficit $ 3,308,603
[8] Pursuant to the terms of the Plan of Reorganization, as of the Effective Date, all Predecessor (PL) common stock was cancelled without any distribution.
[9] Reflects the fair value adjustment as of August 27, 2020 made to accounts receivable to reflect management's best estimate of expected collectability of accounts receivable balances, in connection with fresh-start reporting.
[10] This adjustment reflects the write-off of deferred contract cost assets which do not provide economic benefit to Predecessor (SLH).
[11] Predecessor goodwill of $1,075.8 million was eliminated and Successor goodwill of $495.1 million was established based on the calculated reorganization value which was not attributed to specific tangible or identifiable intangible assets. Goodwill arising from the fresh-start accounting is not deductible for tax purposes.
[12] The Company recorded an adjustment to intangible assets for $516.1 million as follows (in thousands): Estimated Estimated fair value useful life (years) Developed software/ courseware $ 261,600 3 - 5 Customer contracts/ relationships 279,500 12.4 Trademarks and trade names 6,300 9.4 Backlog 90,200 4.4 Skillsoft trademark 91,500 Indefinite Publishing rights 35,200 5 Capitalized software 1,786 5 Total intangible asset upon emergence 766,086 Elimination of historical acquired intangible assets (249,962 ) Fresh-start adjustment to acquired intangibles assets $ 516,124 Values and useful lives assigned to intangible assets were based on estimated value and use of these assets by a market participant. The customer contracts/relationships and backlog were valued using the income approach. The trademarks and trade names were valued using the relief from royalty method. The developed software/courseware and publishing rights were valued using the replacement cost approach.
[13] The operating lease obligation as of August 27, 2020 had been calculated using an incremental borrowing rate of the Predecessor (PL), as of the later of the date of adoption of ASC 842 ( February 1, 2020) or the lease commencement date. Upon application of fresh-start reporting, the lease obligation was recalculated using the incremental borrowing rate applicable to Predecessor (SLH) after emergence from bankruptcy and commensurate to its new capital structure. The Company’s operating lease right-of-use assets were further adjusted to reflect the market value as of August 28, 2020.
[14] The fair value of deferred revenue, which principally relates to amounts that have been billed in advance for products or services to be provided, was determined by estimating the fulfillment costs, which represent only those costs that are directly related to fulfilling the legal performance obligation assumed by the Successor.
[15] The table below reflects the cumulative impact of the fresh-start adjustments as discussed above (in thousands): Fresh-start adjustment to accounts receivable, net $ (990 ) Fresh-start adjustment to prepaid assets and other assets (including long-term) (20,792 ) Fresh-start adjustment to goodwill (580,639 ) Fresh-start adjustment to intangible assets, net 516,124 Fresh-start adjustment to operating lease right-of-use assets and liabilities, net 317 Fresh-start adjustment to deferred revenue (current and non-current) 116,252 Fair value adjustment to debt 5,050 Fair value adjustment to other long-term liabilities (400 ) Total fresh-start adjustments impacting reorganization items, net 34,922 Elimination of accumulated other comprehensive loss (2,733 ) Tax impact of fresh-start adjustments (73,446 ) Net impact on accumulated deficit $ (41,257 )
[16] The adjustment represents the establishment of deferred tax liabilities related to book/tax differences created by fresh-start reporting adjustments. The amount is net of the release of the valuation allowance on deferred tax assets, which management believes more likely than not will be realized as a result of future taxable income from the reversal of such deferred tax liabilities
[17] Elimination of accumulated other comprehensive loss