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 ("MPower"), 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 businesses that would offer, among others, self-directed brokerage services, institutional trade execution services, innovative advisory services (RIA, CTA), and codeless algorithmic trading technologies. It was our expectation to develop these businesses over time, starting with the acquisition of a broker-dealer that could serve as a platform for growth. 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 of that agreement, we terminated the transaction onJune 14, 2022 , and commenced a search for alternative acquisitions within the brokerage industry. Further, until we are able to start this business, we recently elected to winddown the registration of a dormant investment advisor and commodity trading advisor we own as we concluded there to be no material benefit to retaining an interest in these regulated businesses until we are able to launch our broader-based financial services model. 23 Results of Operations Three Months EndedSeptember 30, 2022 Compared to Three Months EndedSeptember 30, 2021 Revenues Three Months Ended September 30, Increase 2022 2021 (Decrease) (unaudited) (unaudited) Subscription revenue, net of refunds, incentives, credits, and chargebacks$ 11,823,581 $ 14,034,214 $ (2,210,633 ) Mining revenue 2,777,634 8,338,759 (5,561,125 ) Cryptocurrency revenue 351,433 998,127 (646,694 ) Miner repair revenue 43,511 - 43,511 Digital wallet revenue - - - Total revenue, net$ 14,996,159 $ 23,371,100 $ (8,374,941 )
Revenue, net, decreased$8,374,941 , or 36%, from$23,371,100 for the three months endedSeptember 30, 2021 , to$14,996,159 for the three months endedSeptember 30, 2022 . The decrease can be explained by$2.2 million ,$5.6 million and$647 thousand decreases in our subscription revenue, mining revenue, and cryptocurrency revenue, respectively, offset by a$44 thousand increase in our miner repair revenue. The$2.2 million (16%) decrease in subscription revenue was due to negative market sentiment in the cryptocurrency markets resulting in decreased membership; the$5.6 million (67%) 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 analysis and repairs during the period; and the$647 thousand decrease in cryptocurrency revenue was due to an overall decrease in the number of sales of NDAU packages. Operating Costs and Expenses Three Months Ended September 30, Increase 2022 2021 (Decrease) (unaudited) (unaudited) Cost of sales and service$ 2,144,733 $ 2,101,490 $ 43,243 Commissions 6,551,195 9,934,991 (3,383,796 ) Selling and marketing 17,874 26,484 (8,610 ) Salary and related 2,359,225 1,153,402 1,205,823 Professional fees 601,367 132,778 468,589 Impairment expense 625 140,233 (139,608 )
Loss (gain) on disposal of assets (118,041 ) - (118,041 ) General and administrative 2,916,167
54,097,580 (51,181,413 )
Total operating costs and expenses
Operating costs decreased$53,113,813 , or 79%, from$67,586,958 for the three months endedSeptember 30, 2021 , to$14,473,145 for the three months endedSeptember 30, 2022 .$51,619,440 of that decrease was attributable to a non-recurring and non-cash charge arising in the three months endedSeptember 30, 2021 , from the manner in which the acquisition of the Prodigio Smart Trading Platform, as well as the other operating assets and intellectual property rights of MPower, was accounted for on our financial statements. After removing the charge relating to theSeptember 3, 2021 transaction with MPower, the remaining decrease of$1,494,373 can be explained by a decrease in commissions of$3.4 million , which was a result of decreases in our subscription and cryptocurrency revenue, offset by an increase in salary and related costs of$1.2 million due to the recognition of stock based compensation during the period, an increase in professional fees of$469 thousand due to increased legal and consulting expenses, and an increase in general and administrative costs of$438 thousand which was mainly driven by increased depreciation, as we continue to purchase and deploy additional mining equipment over time. Other Income and Expenses Three Months Ended September 30, 2022 2021 Change (unaudited) (unaudited)
Gain (loss) on debt extinguishment $ - $ 21,349$ (21,349 ) Gain (loss) on fair value of derivative liability 2,319 47,017 (44,698 ) Realized gain (loss) on cryptocurrency (318,000 ) 1,651,024 (1,969,024 ) Interest expense (4,726 ) (6,000 ) 1,274 Interest expense, related parties (310,595 )
(763,791 ) 453,196 Other income (expense) 49,872 22,168 27,704 Total other income (expense)$ (581,130 ) $ 971,767$ (1,552,897 )
We recorded other expense of$581,130 for the three months endedSeptember 30, 2022 , which was a difference of$1,552,897 , or 160%, from the prior period other income of$971,767 . The change is due to a realized loss recorded on cryptocurrency in the current period of$318 thousand compared to a realized gain of$1.7 million in the prior period, offset by a decrease in related party interest expense recorded in the current period versus the prior period ($311 thousand for the three months endedSeptember 30, 2022 compared to$764 thousand for the three months endedSeptember 30, 2021 ). 24 Nine Months EndedSeptember 30, 2022 Compared to Nine Months EndedSeptember 30, 2021 Revenues Nine Months Ended September 30, Increase 2022 2021 (Decrease) (unaudited) (unaudited) Subscription revenue, net of refunds, incentives, credits, and chargebacks$ 36,658,790 $ 32,833,628 $ 3,825,162 Mining revenue 9,412,751 25,047,680 (15,634,929 ) Cryptocurrency revenue 1,308,809 8,168,295 (6,859,486 ) Miner repair revenue 123,621 - 123,621 Digital wallet revenue 5,868 - 5,868 Fee revenue - 2,032 (2,032 ) Total revenue, net$ 47,509,839 $
66,051,635$ (18,541,796 )
Revenue, net, decreased$18,541,796 , or 28%, from$66,051,635 for the nine months endedSeptember 30, 2021 , to$47,509,839 for the nine months endedSeptember 30, 2022 . The decrease can be explained by$15.6 million and$6.9 million decreases in our mining revenue and cryptocurrency revenue, respectively, offset by a$3.8 million increase in our net subscription revenue. The$3.8 million (12%) increase in subscription revenue was due to significant product enhancements and expansion into new markets globally, partially offset by negative market sentiment, mainly in the cryptocurrency markets; the$15.6 million (62%) 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 analysis and repairs during the period; and the$6.9 million decrease in cryptocurrency revenue was due to an overall decrease in the number of sales of NDAU packages.
Operating Costs and Expenses
Nine Months Ended September 30, Increase
2022 2021 (Decrease)
(unaudited) (unaudited)
Cost of sales and service $ 5,873,214 $ 7,186,149 $ (1,312,935 )
Commissions 20,380,676 23,802,291 (3,421,615 )
Selling and marketing 53,139 93,984 (40,845 )
Salary and related 5,215,833 3,715,868 1,499,965
Professional fees 2,350,687 1,445,143 905,544
Impairment expense 7,008 674,671 (667,663 )
Loss (gain) on disposal of assets (389,550 ) - (389,550 )
General and administrative 7,611,867
57,961,461 (50,349,594 )
Total operating costs and expenses
Operating costs decreased$53,776,693 , or 57%, from$94,879,567 for the nine months endedSeptember 30, 2021 , to$41,102,874 for the nine months endedSeptember 30, 2022 .$51,619,440 of that decrease was attributable to a non-recurring and non-cash charge arising in the nine months endedSeptember 30, 2021 , from the manner in which the acquisition of the Prodigio Smart Trading Platform, as well as the other operating assets and intellectual property rights of MPower, was accounted for on our financial statements. After removing the charge relating to theSeptember 3, 2021 transaction with MPower, the remaining decrease of$2,157,253 can be explained by a decrease in our cost of sales and services of$1.3 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 commissions of$3.4 million mainly due to lower cryptocurrency sales, and a decrease in impairment expense of$668 thousand where in the prior period we wrote-off a significant amount of intangible assets as a result of recoverability issues, with only a$7 thousand write-off of fixed assets occurring in the current period. These decreases were offset by an increase in salary and related costs of$1.5 million as a result of stock-based compensation recognized during the period and by an increase in professional fees of$906 thousand due to higher legal and consulting fees, and an increase in general and administrative costs of$1.3 million which was mainly driven by depreciation, as we purchased and deployed additional mining equipment during the current period. 25 Other Income and Expenses Nine Months Ended September 30, 2022 2021 Change (unaudited) (unaudited) Gain (loss) on debt extinguishment $ 455$ 433,152 $ (432,697 ) Gain (loss) on fair value of derivative liability 40,155 98,928 (58,733 ) Realized gain (loss) on cryptocurrency (1,338,597 ) 892,266 (2,230,863 ) Interest expense (14,024 ) (17,803 ) 3,779 Interest expense, related parties (2,339,729 ) (1,897,557 ) (442,172 ) Other income (expense) 107,725 (64,734 ) 172,459 ) Total other income (expense)$ (3,544,015 ) $ (555,748 ) $ (2,988,267 )
We recorded other expense of$3,544,015 for the nine months endedSeptember 30, 2022 , which was a difference of$2,988,267 , or 538%, from the prior period other expense of$555,748 . The change is due to a minimal gain on debt extinguishment recorded in the current period compared to a gain of$433 thousand recorded in the prior period, a realized loss recorded on cryptocurrency in the current period of$1.3 million compared to a realized gain of$892 thousand in the prior period, and more related party interest expense recorded in current period versus the prior period ($2.3 million for the nine months endedSeptember 30, 2022 compared to$1.9 million for the nine months endedSeptember 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 nine months endedSeptember 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 nine months endedSeptember 30, 2022 , we recorded net income of$1,858,642 and generated$7,334,474 in cash through our operating activities. We used this cash, as well as other cash on hand, to fund operations, fund the purchase of$15,265,360 worth of fixed assets, to repay$2,718,142 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$12,528,341 to$20,088,565 as compared to$32,616,906 at the beginning of the fiscal year. As ofSeptember 30, 2022 , our current assets exceeded our current liabilities to result in working capital of$14,565,190 . We believe we will have sufficient resources, including cash flow from operations and access to capital markets, to meet debt service obligations in a timely manner and be able to meet our short-term business objectives. 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 30, 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 nine months endedSeptember 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-KT for the nine months 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 ofSeptember 30, 2022 andDecember 31, 2021 our deferred revenues were$2,046,443 and$3,288,443 , respectively. Mining Revenue Through our wholly owned subsidiary,SAFETek, LLC , we leased equipment under a sale-leaseback arrangement. However, 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 our mining activities, we are issued fees from processors and/or block rewards that are newly created cryptocurrency units granted to us. Our mining activities constitute the principal 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 a third-party supplier with whom our Chairman is affiliated (see Note 5-Related Party Transactions). The various packages include different amounts of coin with differing rates of returns and terms and, in some cases prior toJanuary 2022 , included a product protection option that allows the purchaser to protect their initial purchase price. InJanuary 2022 , we suspended any further offering of the product protection option after the third-party provider of that protection package was unable to comply with our standard vendor compliance protocols, citing certain offshore confidentiality entitlements. That suspension will remain in place until we are able to further validate the continued integrity of the product protection and the vendor's ability to honor its commitments to our members. 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 ofSeptember 30, 2022 andDecember 31, 2021 our customer advances related to cryptocurrency revenue were$142,070
and$75,702 , respectively. Fee Revenue
We generate minimal 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. However, since these businesses were largely dormant, during 2022, we elected to winddown and withdraw the SAFE Management state and NFA registrations, as we concluded there to be no material benefit to retaining an interest in these regulated businesses until we are able to launch our broader-based financial services model. 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 nine months endedSeptember 30, 2022 , is as follows: Miner Digital Subscription Cryptocurrency Mining Repair Wallet Revenue Revenue Revenue Revenue Revenue Total Gross billings/receipts$ 39,087,141 $ 2,548,316 $ 9,412,751 $ 123,621 $ 7,157 $ 51,178,986 Refunds, incentives, credits, and chargebacks (2,428,351 ) - - - - (2,428,351 ) Amounts paid to providers - (1,239,507 ) - - (1,289 ) (1,240,796 ) Net revenue$ 36,658,790 $ 1,308,809 $ 9,412,751 $ 123,621 $ 5,868 $ 47,509,839
For the nine months ended
Revenue generated for the nine months endedSeptember 30, 2021 , is as follows: Subscription Cryptocurrency Mining Fee Revenue Revenue Revenue Revenue Total Gross billings/receipts$ 34,843,588 $ 20,082,329 $ 25,047,680 $ 2,032 $ 79,975,629 Refunds, incentives, credits, and chargebacks (2,009,960 ) - - - (2,009,960 ) Amounts paid to providers - (11,914,034 ) - - (11,914,034 ) Net revenue$ 32,833,628 $ 8,168,295 $ 25,047,680 $ 2,032 $ 66,051,635
For the nine months ended
Revenue generated for the three months endedSeptember 30, 2022 , is as follows: Miner Digital Subscription Cryptocurrency Mining Repair Wallet Revenue Revenue Revenue Revenue Revenue Total Gross billings/receipts$ 12,638,375 $ 673,933 $ 2,777,634 $ 43,511 $ -$ 16,133,454 Refunds, incentives, credits, and chargebacks (814,794 ) - - - - (814,794 ) Amounts paid to providers - (322,500 ) - - - (322,500 ) Net revenue$ 11,823,581 $ 351,433 $ 2,777,634 $ 43,511 $ -$ 14,996,159
For the three months ended
Revenue generated for the three months endedSeptember 30, 2021 , is as follows: Subscription Cryptocurrency Mining Fee Revenue Revenue Revenue Revenue Total Gross billings/receipts$ 14,904,004 $ 2,329,566 $ 8,338,759 $ -$ 25,572,329 Refunds, incentives, credits, and chargebacks (869,790 ) - - - (869,790 ) Amounts paid to providers - (1,331,439 ) - - (1,331,439 ) Net revenue$ 14,034,214 $ 998,127 $ 8,338,759 $ -$ 23,371,100
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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