INVESTVIEW, INC. Forward-Looking Statements
The following discussion should be read in conjunction with our consolidated financial statements and notes to our financial statements included elsewhere in this report. This discussion contains forward-looking statements that involve risks and uncertainties. When the words "believe," "expect," "plan," "project," "estimate," and similar expressions are used, they identify forward-looking statements. These forward-looking statements are based on management's current beliefs and assumptions and information currently available to management, and involve known and unknown risks, uncertainties, and other factors that may cause the actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by these forward-looking statements. Information concerning factors that could cause our actual results to differ materially from these forward-looking statements can be found in our periodic reports filed with theSecurities and Exchange Commission ("SEC"). The forward-looking statements included in this report are made only as of the date of this report. We disclaim any obligation to update any forward-looking statements whether as a result of new information, future events, or otherwise. Business Overview We operate a financial technology (FinTech) services company in several different businesses. We deliver multiple products and services through a direct selling network, also known as multi-level marketing, of independent distributors that offer our products and services through a subscription-based revenue model to our distributors, as well as by our distributors to a large base of customers that we refer to as "members". Through this business, we provide research, education, and investment tools designed to assist the self-directed investor in successfully navigating the financial markets. These services include research and education regarding equities, options, FOREX, ETFs, binary options, and cryptocurrency. In addition to research and education, we also offer full education and software applications to assist the individual in debt reduction, increased savings, budgeting, and proper tax management. Each product subscription includes a core set of trading tools and research along with the personal finance management suite to provide an individual with complete access to the information necessary to cultivate and manage his or her financial situation. In addition to our education subscriptions, through a distribution arrangement we have with a third party, we have provided our members with an opportunity to purchase through such third party, a specialty form of adaptive digital currency called "ndau". Through our direct selling model, we compensate our distributors with commissions under a standard bonus plan that allows for discretionary bonuses based on performance. We also operate a blockchain technology business that provides leading-edge research, development, and FinTech services involving the management of digital asset technologies with a focus on Bitcoin mining and the new generation of digital assets. As well, in order to, among other things, commercialize on the proprietary trading platform we recently acquired fromMPower Trading Systems, LLC , take advantage of the market's increasing acceptance and expansion of the ownership and use of digital currencies as an investable asset class, subject to applicable regulatory limitations, and to proactively respond to increasing regulatory scrutiny relative to cryptocurrency products, we have adopted a growth plan that contemplates the establishment of a suite of financial service companies that will include self-directed brokerage services, institutional trade execution services, innovative advisory services (RIA, CTA), and codeless algorithmic trading technologies, which will operate under our recently formed subsidiary,Investview Financial Group Holdings, LLC ("IFGH"). Towards that end, inMarch 2021 we entered into an agreement to acquire a brokerage firm from an affiliate of the former Chief Executive Officer of the Company. However, having been unable to secure the requisiteFINRA approval by the expiration date within the agreement, we terminated the transaction onJune 14, 2022 , and commenced a search for alternative acquisitions within the brokerage industry. Further, we have also recently withdrawn our state and NFA registrations associated with our wholly owned subsidiary,SAFE Management, LLC ("SAFE Management"), as we concluded there to be no material benefit to retaining an interest in a dormant investment advisor and commodity trading advisor. We plan to relaunch these services under the IFGH umbrella in the future to primarily focus on commodities and FOREX, however, most likely in conjunction with an acquisition within the brokerage industry. 23 Results of Operations Three Months EndedJune 30, 2022 Compared to Three Months EndedJune 30, 2021 Revenues Three Months Ended June 30, Increase 2022 2021 (Decrease) (unaudited) (unaudited) Subscription revenue, net of refunds, incentives, credits, and chargebacks$ 11,104,539 $ 10,849,697 $ 254,842 Mining revenue 3,058,144 8,371,562 (5,313,418 ) Cryptocurrency revenue 516,960 6,405,306 (5,888,346 ) Miner repair revenue 80,110 - 80,110 Digital wallet revenue 5,868 - 5,868 Total revenue, net$ 14,765,621 $
25,626,565$ (10,860,944 )
Revenue, net, decreased$10,860,944 , or 42%, from$25,626,565 for the three months endedJune 30, 2021 , to$14,765,621 for the three months endedJune 30, 2022 . The decrease can be explained by$5.3 million and$5.8 million decreases in our mining revenue and cryptocurrency revenue, respectively, offset by a$255 thousand increase in our net subscription revenue. The$255 thousand (2%) increase in subscription revenue was due to significant product enhancements and expansion into new markets globally, resulting in substantial growth in our membership; the$5.3 million (63%) decrease in mining revenue was a result of the decrease in the value of Bitcoin and an increase in the Bitcoin mining difficulty levels, as well as, older and less efficient Bitcoin mining equipment taken offline for repairs during the period; and the$5.8 million decrease in cryptocurrency revenue was due to an overall decrease in the number of sales of NDAU. Operating Costs and Expenses Three Months Ended June 30, Increase 2022 2021 (Decrease) (unaudited) (unaudited) Cost of sales and service$ 1,898,140 $ 2,186,152 $ (288,012 ) Commissions 6,445,793 8,782,421 (2,336,628 ) Selling and marketing 23,511 39,849 (16,338 ) Salary and related 1,641,345 1,372,325 269,020 Professional fees 770,345 661,884 108,461 Impairment expense 6,383 - 6,383
Loss (gain) on disposal of assets (247,209 ) - (247,209 ) General and administrative 2,627,884 2,046,484
581,400
Total operating costs and expenses
Operating costs decreased$1,922,923 , or 13%, from$15,089,115 for the three months endedJune 30, 2021 , to$13,166,192 for the three months endedJune 30, 2022 . We experienced a decrease in commissions of$2.3 million , which was a result of decreases in our cryptocurrency revenue, a decrease in our cost of sales and services of$288 thousand due to the relocation of our miners and a related decrease in our mining costs that included hosting, electrical and power costs, and a$247 thousand increase in gain on disposal of assets, where in the current period we sold assets with a total net book value of$371 thousand for cash of$618 thousand , with no similar sales occurring in the prior period. These decreases were offset by an increase in salary and related of$269 thousand as a result of general growth in the company, an increase in professional fees of$108 thousand due to higher legal fees, and an increase in general and administrative costs of$581 thousand which was mainly driven by depreciation, as we purchased and deployed additional mining equipment during the current period, partially offset by lower banking fees. Other Income and Expenses Three Months Ended June 30, 2022 2021 Change (unaudited) (unaudited) Gain (loss) on debt extinguishment $ 455$ 4,001 $ (3,546 ) Gain (loss) on fair value of derivative liability 61,679 236,648 (174,969 ) Realized gain (loss) on cryptocurrency (837,808 ) (1,282,970 ) 445,162 Interest expense (4,675 ) (5,934 ) 1,246 Interest expense, related parties (309,669 ) (759,686 ) 450,017 Other income (expense) 26,626 46,338 (19,712 ) Total other income (expense)$ (1,063,392 ) $ (1,761,603 ) $ 698,211 24
We recorded other expense of$1,063,392 for the three months endedJune 30, 2022 , which was a difference of$698,211 , or 40%, from the prior period other expense of$1,761,603 . The change is due to a realized loss recorded on cryptocurrency in the current period of$837 thousand compared to a realized loss of$1.3 million in the prior period, plus related party interest expense recorded in current period versus the prior period ($310 thousand for the three months endedJune 30, 2022 compared to$760 thousand for the three months endedJune 30, 2021 ), offset by a gain on fair value of derivative liability in the current period of$62 thousand compared to a gain of$237 thousand in the prior period.
Six Months Ended
Revenues
Six Months Ended June 30, Increase
2022 2021 (Decrease)
(unaudited) (unaudited)
Subscription revenue, net of refunds,
incentives, credits, and chargebacks $ 24,835,209 $ 18,799,414 $ 6,035,795 Mining revenue 6,635,117 16,708,921 (10,073,804 ) Cryptocurrency revenue 957,376 7,170,168 (6,212,792 ) Miner repair revenue 80,110 - 80,110 Digital wallet revenue 5,868 - 5,868 Fee revenue - 2,032 (2,032 ) Total revenue, net$ 32,513,680 $ 42,680,535 $ (10,166,855 ) Revenue, net, decreased$10,166,855 , or 24%, from$42,680,535 for the six months endedJune 30, 2021 , to$32,513,680 for the six months endedJune 30, 2022 . The decrease can be explained by$10.1 million and$6.2 million decreases in our mining revenue and cryptocurrency revenue, respectively, offset by a$6.0 million increase in our net subscription revenue. The$6.0 million (32%) increase in subscription revenue was due to significant product enhancements and expansion into new markets globally, resulting in substantial growth in our membership; the$10.1 million (60%) decrease in mining revenue was a result of the decrease in the value of Bitcoin and an increase in the Bitcoin mining difficulty levels, as well as, older and less efficient Bitcoin mining equipment taken offline for repairs during the period; and the$6.2 million decrease in cryptocurrency revenue was due to an overall decrease in the number of sales of NDAU. Operating Costs and Expenses Six Months Ended June 30, Increase 2022 2021 (Decrease) (unaudited) (unaudited) Cost of sales and service$ 3,728,481 $ 5,084,659 $ (1,356,178 ) Commissions 13,829,481 13,867,300 (37,819 ) Selling and marketing 35,265 67,500 (32,235 ) Salary and related 2,856,608 2,562,466 294,142 Professional fees 1,749,320 1,312,365 436,955 Impairment expense 6,383 534,438 (528,055 )
Loss (gain) on disposal of assets (271,509 ) - (271,509 ) General and administrative 4,695,700 3,863,881
831,819
Total operating costs and expenses
Operating costs decreased$662,880 , or 2%, from$26,929,729 for the six months endedJune 30, 2021 , to$26,078,383 for the six months endedJune 30, 2022 . We experienced a decrease in our cost of sales and services of$1.4 million due to the relocation of our miners and a related decrease in our mining costs that included hosting, electrical and power costs, a decrease in impairment expense of$528 thousand where in the prior period we wrote-off$534 thousand of intangible assets as a result of recoverability issues, with only a$6 thousand write-off of fixed assets occurring in the current period, and a$272 thousand increase in gain on disposal of assets, where in the current period we sold assets with a total net book value of$375 thousand for cash of$647 thousand , with no similar sales occurring in the prior period. These decreases were offset by an increase in salary and related of$294 thousand as a result of general growth in the company, an increase in professional fees of$437 thousand due to higher legal fees, and an increase in general and administrative costs of$832 thousand which was mainly driven by depreciation, as we purchased and deployed additional mining equipment during the current period, partially offset by
lower
banking fees.
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Other Income and Expenses
Six Months Ended June 30,
2022 2021 Change
(unaudited) (unaudited)Gain (loss) on debt extinguishment $ 455$ 411,803 $ (411,348 ) Gain (loss) on fair value of derivative liability 37,836 51,911 (14,075 ) Realized gain (loss) on cryptocurrency (1,020,597 ) (758,758 ) (261,839 ) Interest expense (9,298 ) (11,803 ) 2,505 Interest expense, related parties (2,029,134 ) (1,133,766
) (895,368 ) Other income (expense) 57,853 (86,902 ) 144,755 ) Total other income (expense)$ (2,962,885 ) $ (1,527,515 ) $ (1,435,370 ) We recorded other expense of$2,962,885 for the six months endedJune 30, 2022 , which was a difference of$1,435,370 , or 94%, from the prior period other expense of$1,527,515 . The change is due to a minimal gain on debt extinguishment recorded in the current period compared to a gain of$412 thousand recorded in the prior period, a realized loss recorded on cryptocurrency in the current period of$1.0 million compared to a realized loss of$759 thousand in the prior period, and more related party interest expense recorded in current period versus the prior period ($2.0 million for the six months endedJune 30, 2022 compared to$1.1 million for the six months endedJune 30, 2021 ). Amounts recorded in related party interest expense included the amortization of debt discounts, which was being recognized over the term of the debt, however, during the six months endedJune 30, 2022 we repaid two of our related party notes early, which resulted in the recognition of$1.2 million of the amortization of the related debt discount amounts into interest.
Liquidity and Capital Resources
During the six months endedJune 30, 2022 , we recorded net income of$2,279,321 and generated$4,491,640 in cash through our operating activities. We used this cash to fund operations, fund the purchase of$11,187,053 worth of fixed assets, to repay$2,493,013 worth of related party payable, and to repurchase shares for$1,724,008 . As a result, our cash, cash equivalents, and restricted cash decreased by$11,059,490 to$21,557,416 as compared to$32,616,906 at the beginning of the fiscal year. As ofJune 30, 2022 , our current assets exceeded our current liabilities to result in working capital of$15,509,390 .
Critical Accounting Policies
Basis of Presentation
Our policy is to prepare our financial statements on the accrual basis of accounting in accordance with accounting principles generally accepted inthe United States of America . Prior toSeptember 20, 2021 we operated the Company on aMarch 31 , fiscal year end. EffectiveSeptember 30, 2021 we changed our fiscal year toDecember 31 . The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations (Regulation S-X) of theSecurities and Exchange Commission (the "SEC") and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The results of operations for the six months endedJune 30, 2022 , are not necessarily indicative of the operating results that may be expected for the filing of ourDecember 31, 2022 Form 10-K. These unaudited condensed consolidated financial statements should be read in conjunction with theDecember 31, 2021 consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year endedDecember 31, 2021 .
Principles of Consolidation
The consolidated financial statements include the accounts ofInvestview, Inc. , and our wholly owned subsidiaries: iGenius, LLC (formerlyKuvera, LLC ), Kuvera France S.A.S (through its closure date in June of 2021),Apex Tek, LLC (formerlyRazor Data, LLC ),SAFETek, LLC (formerlyWealthGen Global, LLC ),S.A.F.E . Management, LLC, United Games, LLC, United League, LLC, Investment Tools & Training, LLC, iGenius Global LTD (formerly Kuvera (N.I.) LTD),Investview Financial Group Holdings, LLC , andInvestview MTS, LLC . All intercompany transactions and balances have been eliminated in consolidation. 26 Use of Estimates
The preparation of these financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Revenue Recognition
Subscription Revenue
Most of our revenue is generated by subscription sales and payment is received at the time of purchase. We recognize subscription revenue in accordance with ASC 606-10 where revenue is measured based on a consideration specified in a contract with a customer and recognized when we satisfy the performance obligation specified in each contract. Our performance obligation is to provide services over a fixed subscription period; therefore, we recognize revenue ratably over the subscription period and deferred revenue is recorded for the portion of the subscription period subsequent to each reporting date. Additionally, we offer a designated trial period to first time subscription customers, during which a full refund can be requested if a customer does not wish to continue with the subscription. Revenues are deferred during the trial period as collection is not probable until that time has passed. Revenues are presented net of refunds, sales incentives, credits, and known and estimated credit card chargebacks. As ofJune 30, 2022 andDecember 31, 2021 our deferred revenues were$2,659,069 and$3,288,443 , respectively.
Mining Revenue
Through our wholly owned subsidiary,SAFETek, LLC , we leased equipment under a sales-type lease through June of 2020. In June of 2020 we cancelled all leases and purchased all of the rights and obligations under the leases, which included obtaining ownership of all equipment. We use the equipment on blockchain networks to validate and add blocks of transactions to blockchain ledgers (commonly referred to as "mining"). As compensation for mining we are issued fees from processors and/or block rewards that are newly created cryptocurrency units granted to us. Our mining activities constitute our ongoing major and central operations ofSAFETek, LLC . Because we do not have contracts, nor do we have customers associated with our mining revenue, we recognize revenue when fees and/or rewards are settled, or ultimately granted to us as a result of
our mining activities. Cryptocurrency Revenue We generate revenue from the sale of cryptocurrency packages to our customers through an arrangement with third-party suppliers. The various packages include different amounts of coin with differing rates of returns and terms and, in some cases prior toJanuary 2022 , include a product protection option that allows the purchaser to protect their initial purchase price. The protection allows the purchaser to obtain 50% of their purchase price at five years or 100% of their purchase price at ten years. Both the coin and protection option are delivered by third-party suppliers. We recognize cryptocurrency revenue in accordance with ASC 606-10 where revenue is measured based on a consideration specified in a contract with a customer and recognized when we satisfy the performance obligation specified in each contract. Our performance obligation is to arrange for the third-parties to provide coin and protection (if applicable) to our customers and payment is received from our customers at the time of order placement. All customers are given two weeks to request a refund, therefore we record a customer advance on our balance sheet upon receipt of payment. After the two weeks have passed from order placement, we request our third-party suppliers to deliver coin and protection (if applicable), at which time we recognize revenue and the amounts due to our suppliers on our books. As ofJune 30, 2022 andDecember 31, 2021 our customer advances related to cryptocurrency revenue were$301,399 and$75,702 , respectively. Fee Revenue We generate fee revenue from our customers through SAFE Management, our subsidiary licensed as a Registered Investment Advisor and Commodities Trading Advisor. We recognize fee revenue in accordance with ASC 606-10 where revenue is measured based on a consideration specified in a contract with a customer and recognized when we satisfy the performance obligation specified in each contract. Our performance obligation is to deliver fully managed trading services to individuals who do not meet the requirements ofQualified Investors and who lack the time to trade for themselves. We recognize fee revenue as our performance obligation is met and we receive payment for such advisory fees in the month following recognition.
Miner Repair Revenue
Through our wholly owned subsidiary,SAFETek, LLC , we repair broken mining equipment for sale to third-party customers. We recognize miner repair revenue in accordance with ASC 606-10 where revenue is measured based on a consideration specified in a contract with a customer and recognized when we satisfy the performance obligation specified in each contract. Our performance obligation is to deliver the promised goods to our customers. 27 Digital Wallet Revenue We generate revenue from the sale of digital wallets to our customers through an arrangement with a third-party supplier. We offer three tiers of wallets which include different features. The digital wallets are delivered by a third-party supplier. We recognize digital wallet revenue in accordance with ASC 606-10 where revenue is measured based on a consideration specified in a contract with a customer and recognized when we satisfy the performance obligation specified in each contract. Our performance obligation is to arrange for the third-parties to provide the wallet to our customers and payment is received from our customers at the time of order placement.
Revenue generated for the six months ended
Subscription Cryptocurrency Mining Miner Repair Digital Wallet
Revenue Revenue Revenue Revenue Revenue Total
Gross billings/receipts $ 26,448,766 $ 1,874,382 $ 6,635,117 $ 80,110 $ 7,157 $ 35,045,532
Refunds, incentives,
credits, and chargebacks (1,613,557 ) - - - - (1,613,557 )
Amounts paid to providers - (917,006 ) - - (1,289 ) (918,295 )
Net revenue $ 24,835,209 $ 957,376 $ 6,635,117 $ 80,110 $ 5,868 $ 32,513,680 For the six months ended
Revenue generated for the six months ended
Subscription Cryptocurrency Mining
Revenue Revenue Revenue Fee Revenue Total
Gross billings/receipts $ 19,939,584 $ 17,752,763 $ 16,708,921 $ 2,032 $ 54,403,300
Refunds, incentives,
credits, and chargebacks (1,140,170 ) - - - (1,140,170 )
Amounts paid to providers - (10,582,595 ) - - (10,582,595 )
Net revenue $ 18,799,414 $ 7,170,168 $ 16,708,921 $ 2,032 $ 42,680,535 For the six months ended
Revenue generated for the three months ended
Subscription Cryptocurrency Mining Miner Repair Digital Wallet
Revenue Revenue Revenue Revenue Revenue Total
Gross billings/receipts $ 11,754,793 $ 1,035,960 $ 3,058,144 $ 80,110 $ 7,157 $ 15,936,164
Refunds, incentives,
credits, and chargebacks (650,254 ) - - - - (650,254 )
Amounts paid to providers - (519,000 ) - - (1,289 ) (520,289 )
Net revenue $ 11,104,539 $ 516,960 $ 3,058,144 $ 80,110 $ 5,868 $ 14,765,621 For the three months ended
Revenue generated for the three months ended
Subscription Cryptocurrency Mining
Revenue Revenue Revenue Fee Revenue Total
Gross billings/receipts $ 11,532,061 $ 15,875,577 $ 8,371,562 $ - $ 35,779,200
Refunds, incentives,
credits, and chargebacks (682,364 ) - - - (682,364 )
Amounts paid to
providers - (9,470,271 ) - - (9,470,271 )
Net revenue $ 10,849,697 $ 6,405,306 $ 8,371,562 $ - $ 25,626,565 For the three months ended
28
Recently Issued Accounting Pronouncements
We have noted no recently issued accounting pronouncements that we have not yet adopted that we believe are applicable or would have a material impact on our financial statements.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, and results of operations, liquidity, or capital expenditures.
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