SECURITIES AND EXCHANGE COMMISSION


			Delaware			59-3551629
			(State or other jurisdiction of incorporation or organization)			(IRS Employer Identification No.)

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 ☒

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	ZVO	The Nasdaq Stock Market LLC

The total number of shares of common stock outstanding as of ~~May 2,~~July 29, 2022, was ~~34,095,968.~~34,206,052.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

(In thousands, except par value)


		As of March 31, 2022		As of December 31, 2021			As of June 30, 2022		As of December 31, 2021
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	33,698	$	28,265	Cash and cash equivalents	$	20,812	$	28,265
Restricted cash	Restricted cash	6,083		9,288		Restricted cash	6,079		9,288
Investments	Investments	905		974		Investments	227		974
Accounts receivable, net of allowance for credit losses of $1.1 million and $0.9 million at March 31, 2022 and December 31, 2021, respectively		6,596		9,631
Accounts receivable, net of allowance for credit losses of $1.2 million and $0.9 million at June 30, 2022 and December 31, 2021, respectively						Accounts receivable, net of allowance for credit losses of $1.2 million and $0.9 million at June 30, 2022 and December 31, 2021, respectively	4,951		9,631

Prepaid expenses and other current assets	Prepaid expenses and other current assets	17,243		13,423		Prepaid expenses and other current assets	8,633		13,423

Total current assets	Total current assets	64,525		61,581		Total current assets	40,702		61,581
Property and equipment, net	Property and equipment, net	24,965		26,382		Property and equipment, net	1,100		26,382
Operating lease assets	Operating lease assets	28,103		28,881		Operating lease assets	17,358		28,881

Goodwill and intangibles, net	Goodwill and intangibles, net	29,079		29,499		Goodwill and intangibles, net	23,915		29,499

Other long-term assets	Other long-term assets	2,079		2,691		Other long-term assets	2,358		2,691
Total assets	Total assets	$	148,751	$	149,034	Total assets	$	85,433	$	149,034
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	$	85,521	$	74,769	Accounts payable and accrued liabilities	$	35,523	$	74,769
Deferred revenue and student deposits	Deferred revenue and student deposits	15,157		14,939		Deferred revenue and student deposits	7,405		14,939

Total current liabilities	Total current liabilities	100,678		89,708		Total current liabilities	42,928		89,708
Rent liability	Rent liability	33,132		34,205		Rent liability	32,864		34,205

Other long-term liabilities	Other long-term liabilities	3,674		5,115		Other long-term liabilities	3,036		5,115
Total liabilities	Total liabilities	137,484		129,028		Total liabilities	78,828		129,028
Commitments and contingencies (see Note 14)	Commitments and contingencies (see Note 14)	0		0		Commitments and contingencies (see Note 14)	0		0
Stockholders' equity:	Stockholders' equity:					Stockholders' equity:
Preferred stock, $0.01 par value:	Preferred stock, $0.01 par value:					Preferred stock, $0.01 par value:
20,000 shares authorized; zero shares issued and outstanding at both March 31, 2022, and December 31, 2021		—		—
20,000 shares authorized; zero shares issued and outstanding at both June 30, 2022, and December 31, 2021						20,000 shares authorized; zero shares issued and outstanding at both June 30, 2022, and December 31, 2021	—		—
Common stock, $0.01 par value:	Common stock, $0.01 par value:					Common stock, $0.01 par value:
300,000 shares authorized; 67,764 and 67,255 issued, and 34,055 and 33,546 outstanding, at March 31, 2022 and December 31, 2021, respectively		681		676
300,000 shares authorized; 67,915 and 67,255 issued, and 34,206 and 33,546 outstanding, at June 30, 2022 and December 31, 2021, respectively						300,000 shares authorized; 67,915 and 67,255 issued, and 34,206 and 33,546 outstanding, at June 30, 2022 and December 31, 2021, respectively	682		676
Additional paid-in capital	Additional paid-in capital	170,753		172,060		Additional paid-in capital	170,763		172,060
Retained earnings	Retained earnings	276,533		283,970		Retained earnings	271,860		283,970

Treasury stock, 33,709 and 33,709 shares at cost at March 31, 2022, and December 31, 2021, respectively		(436,700)		(436,700)
Treasury stock, 33,709 shares at cost at both June 30, 2022, and December 31, 2021, respectively						Treasury stock, 33,709 shares at cost at both June 30, 2022, and December 31, 2021, respectively	(436,700)		(436,700)
Total stockholders' equity	Total stockholders' equity	11,267		20,006		Total stockholders' equity	6,605		20,006
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	148,751	$	149,034	Total liabilities and stockholders' equity	$	85,433	$	149,034

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

(In thousands, except per share amounts)


		Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021				2022		2021		2022		2021
Revenue	Revenue	$	59,624	$	74,107		Revenue	$	49,658	$	66,670	$	109,282	$	140,777

Other revenue	Other revenue	2,009		2,752			Other revenue	1,722		2,516		3,731		5,268
Revenue and other revenue	Revenue and other revenue	$	61,633	$	76,859		Revenue and other revenue	$	51,380	$	69,186	$	113,013	$	146,045
Costs and expenses:	Costs and expenses:						Costs and expenses:
Technology and academic services	Technology and academic services	$	18,498	$	19,144		Technology and academic services	$	17,290	$	18,056	$	35,788	$	37,200
Counseling services and support	Counseling services and support	21,331		25,325			Counseling services and support	17,705		23,173		39,036		48,498
Marketing and communication	Marketing and communication	21,914		25,831			Marketing and communication	18,272		21,729		40,186		47,560
General and administrative	General and administrative	7,122		15,896			General and administrative	7,836		8,376		14,958		24,272

Legal expense							Legal expense	920		—		920		—
Restructuring and impairment expense							Restructuring and impairment expense	35,887		2,341		35,887		2,341
Gain on transactions, net							Gain on transactions, net	(45,689)		—		(45,689)		—
Total costs and expenses	Total costs and expenses	68,865		86,196			Total costs and expenses	52,221		73,675		121,086		159,871
Operating loss	Operating loss	(7,232)		(9,337)			Operating loss	(841)		(4,489)		(8,073)		(13,826)

Other income (expense), net	Other income (expense), net	(127)		(73)			Other income (expense), net	(3,824)		232		(3,951)		159

Loss before income taxes	Loss before income taxes	(7,359)		(9,410)			Loss before income taxes	(4,665)		(4,257)		(12,024)		(13,667)
Income tax expense		78		83
Income tax expense (benefit)							Income tax expense (benefit)	8		(224)		86		(141)
Net loss	Net loss	$	(7,437)	$	(9,493)		Net loss	$	(4,673)	$	(4,033)	$	(12,110)	$	(13,526)
Loss per share:	Loss per share:						Loss per share:
Basic	Basic	$	(0.22)	$	(0.29)		Basic	$	(0.14)	$	(0.12)	$	(0.36)	$	(0.41)
Diluted	Diluted	$	(0.22)	$	(0.29)		Diluted	$	(0.14)	$	(0.12)	$	(0.36)	$	(0.41)
Weighted average number of common shares outstanding used in computing loss per share:	Weighted average number of common shares outstanding used in computing loss per share:						Weighted average number of common shares outstanding used in computing loss per share:
Basic	Basic	33,562		32,769			Basic	34,122		33,343		33,844		33,058
Diluted	Diluted	33,562		32,769			Diluted	34,122		33,343		33,844		33,058

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

(In thousands)


		Three Months Ended March 31,					Six Months Ended June 30,
		2022		2021			2022		2021
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net loss	Net loss	$	(7,437)	$	(9,493)	Net loss	$	(12,110)	$	(13,526)
Adjustments to reconcile net loss to net cash provided by operating activities:
Adjustments to reconcile net loss to net cash used in operating activities:						Adjustments to reconcile net loss to net cash used in operating activities:
Provision for bad debts	Provision for bad debts	201		661		Provision for bad debts	257		911
Depreciation and amortization	Depreciation and amortization	2,033		2,285		Depreciation and amortization	3,911		4,262

Stock-based compensation	Stock-based compensation	(1,169)		2,382		Stock-based compensation	(1,182)		2,629
Noncash lease expense	Noncash lease expense	1,433		2,077		Noncash lease expense	2,849		4,367

Net loss (gain) on marketable securities	Net loss (gain) on marketable securities	63		(68)		Net loss (gain) on marketable securities	140		(144)

Loss on disposal or impairment of fixed assets						Loss on disposal or impairment of fixed assets	35,887		61
Gain on transactions, net						Gain on transactions, net	(45,689)		—
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Accounts receivable	Accounts receivable	2,833		(288)		Accounts receivable	3,108		(1,628)
Prepaid expenses and other current assets	Prepaid expenses and other current assets	(3,820)		(2,776)		Prepaid expenses and other current assets	(1,643)		(614)
Other long-term assets	Other long-term assets	612		(305)		Other long-term assets	(1,611)		(1,568)
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	10,784		7,457		Accounts payable and accrued liabilities	(38,771)		(9,198)
Deferred revenue and student deposits	Deferred revenue and student deposits	218		(13)		Deferred revenue and student deposits	198		2,491
Operating lease liabilities	Operating lease liabilities	(1,705)		(2,598)		Operating lease liabilities	(3,456)		(5,243)
Other liabilities	Other liabilities	(1,440)		1,455		Other liabilities	925		940

Net cash provided by operating activities		2,606		776
Net cash used in operating activities						Net cash used in operating activities	(57,187)		(16,260)
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Capital expenditures	Capital expenditures	(24)		(184)		Capital expenditures	(24)		(733)
Purchases of investments	Purchases of investments	(2)		(30)		Purchases of investments	(46)		(64)
Capitalized costs for intangible assets	Capitalized costs for intangible assets	(227)		(143)		Capitalized costs for intangible assets	(495)		(333)

Net proceeds from sale of assets						Net proceeds from sale of assets	48,921		—
Sale of investments	Sale of investments	8		247		Sale of investments	652		247

Net cash used in investing activities		(245)		(110)
Net cash provided by (used in) investing activities						Net cash provided by (used in) investing activities	49,008		(883)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:

Proceeds from the issuance of stock under employee stock purchase plan						Proceeds from the issuance of stock under employee stock purchase plan	35		76

Proceeds from long-term borrowings, net of fees						Proceeds from long-term borrowings, net of fees	29,627		—
Tax withholdings on issuance of stock awards	Tax withholdings on issuance of stock awards	(133)		(1,078)		Tax withholdings on issuance of stock awards	(144)		(1,166)

Repayments on long-term borrowing						Repayments on long-term borrowing	(32,001)		—

Net cash used in financing activities	Net cash used in financing activities	(133)		(1,078)		Net cash used in financing activities	(2,483)		(1,090)
Net increase (decrease) in cash, cash equivalents and restricted cash		2,228		(412)
Net decrease in cash, cash equivalents and restricted cash						Net decrease in cash, cash equivalents and restricted cash	(10,662)		(18,233)

Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	37,553		55,497		Cash, cash equivalents and restricted cash at beginning of period	37,553		55,497
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	39,781	$	55,085	Cash, cash equivalents and restricted cash at end of period	$	26,891	$	37,264

Reconciliation of cash, cash equivalents, and restricted cash:	Reconciliation of cash, cash equivalents, and restricted cash:					Reconciliation of cash, cash equivalents, and restricted cash:
Cash and cash equivalents	Cash and cash equivalents	$	33,698	$	35,052	Cash and cash equivalents	$	20,812	$	23,981
Restricted cash	Restricted cash	6,083		20,033		Restricted cash	6,079		13,283

Total cash, cash equivalents and restricted cash	Total cash, cash equivalents and restricted cash	$	39,781	$	55,085	Total cash, cash equivalents and restricted cash	$	26,891	$	37,264

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

ZOVIO INC

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Nature of Business

Zovio Inc (the “Company”) is a Delaware corporation, and is an education technology services company that partners with higher education institutions and employers to deliver innovative, personalized solutions to help learners and leaders achieve their aspirations. In April 2019, the Company acquired both Fullstack Academy, Inc. (“Fullstack”) and TutorMe.com, Inc. (“TutorMe”), each of which became wholly-owned subsidiaries of the Company at that time. Fullstack is an innovative web development school offering immersive technology bootcamps, and TutorMe is an online education platform that provides 24/7 on-demand tutoring and online courses.

On May 23, 2022, the Company completed the sale of TutorMe through an Asset Purchase Agreement (the “Purchase Agreement”). Pursuant to the Purchase Agreement, the Company and TutorMe sold substantially all of the assets of TutorMe’s business in consideration of $55.0 million in cash and the assumption of certain liabilities of TutorMe’s business. The consideration payable pursuant to the Purchase Agreement is subject to a customary post-closing working capital adjustment. The gain on sale of TutorMe is comprised as follows:


TutorMe sale consideration	$	55,000
Less: Disposed net assets:
Accounts receivable, net	1,314
Prepaid and other assets	619
Goodwill	3,472
Intangibles	376
Deferred revenue	(7,732)
Other liabilities	(631)
Less: Transaction fees and adjustments	6,079
Gain on sale of TutorMe	$	51,503

As previously disclosed, on December 1, 2020, the Company finalized a definitive Asset Purchase and Sale Agreement (the “Purchase Agreement”), by and among the Company, AU LLC (the “University”), the Arizona Board of Regents, a body corporate, for and on behalf of the University of Arizona (the “University of Arizona”), and the University of Arizona Global Campus (“Global ~~Campus”~~Campus or “UAGC”). Upon the closing of the Purchase Agreement, ~~(the “Sale Transaction”),~~ Global Campus owns and operates the University in affiliation with the University of Arizona and with a focus on expanding access to education for non-traditional adult learners, and the Company provides services to Global Campus under a long-term Strategic Services Agreement (the “Services Agreement”). The services that the Company provides to Global Campus under the Services Agreement include recruiting, admissions, marketing, student ~~finance,~~ financial aid processing, and financial aid advising, program advising, student retention advising, support services for academics, information technology and institutional ~~support.~~support services in exchange for the service fees described in the UAGC Services Agreement (collectively, the “UAGC Services Business”).

On July 31, 2022, the Company entered into a new asset purchase agreement (the “New Asset Purchase Agreement”), pursuant to which Zovio sold to UAGC all of the remaining assets of Zovio related to the UAGC Services Business (the “Transaction”). In connection with the Transaction, the parties terminated the previous agreements. In addition, UAGC (a) paid to Zovio cash in the amount of $1.00, (b) assumed all obligations under Zovio’s business contracts associated with the UAGC Services Businesses, including the lease for the facilities located in Chandler, Arizona, which has a remaining term of eight years and approximately $20.0 million in rent obligations, (c) released Zovio from all remaining obligations under the UAGC/Zovio Agreements, including from all indemnification obligations under the Original Asset Purchase Agreement and all minimum payment guarantees under the UAGC Services Agreement, and (d) granted Zovio a general release of all claims. In addition, UAGC hired substantially all of the UAGC Services Business employees (as determined by UAGC). In turn, Zovio (i) paid to UAGC cash in the amount of $5.5 million, reflecting the allocated minimum payment owed by Zovio to UAGC for the month of July 2022, (ii) paid to UAGC cash in the amount of $5.0 million, and assigned to UAGC the right to a security deposit in the amount of $2.7 million, for assumption of Zovio’s obligations under the Chandler lease, (iii) granted UAGC the right to any refund achieved by Zovio after the closing of the Transaction from the State of California as a result of its appeal of that

ZOVIO INC

Notes to Condensed Consolidated Financial Statements (Unaudited)

certain judgment set forth in the Statement of Decision issued by the Superior Court of the State of California, County of San Diego on March 3, 2022, (iv) released UAGC from all remaining obligations under the UAGC/Zovio Agreements, and (v) granted UAGC and University of Arizona a general release of all claims.

The gain on the sale of TutorMe noted above was partially offset by a $5.8 million loss on transaction recognized for the net asset adjustment from Global Campus in connection with the Transaction on July 31, 2022.

Following the consummation of the Transaction on July 31, 2022, Zovio and UAGC have no contractual or other relationship with one another, other than an agreement to reasonably cooperate to effect the Transaction. As of the date hereof, UAGC operates the University as an integrated, online university. Zovio will continue to support the continued growth and expansion of its Fullstack Academy subsidiary and simultaneously explore strategic alternatives for that business. For additional information, see Note 16, “Subsequent Events.”

Prior to the Transaction, the majority of the Company's cash ~~comes~~came from the Services Agreement with Global Campus. The service fees in the Services Agreement ~~are~~were subject to certain minimum residual liability adjustments, including performance-based adjustments, minimum profit level adjustments, and excess direct cost adjustments. These adjustments are all variable in nature in that they depend upon the Company’s performance during each service period, and to a certain extent the performance and forecast of Global Campus.

2. Summary of Significant Accounting Policies

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany transactions have been eliminated in consolidation.

Unaudited Interim Financial Information

The condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, these financial statements do not include all of the information and footnotes required by GAAP for complete annual financial statements and should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the Securities and Exchange Commission (“SEC”) on April 15, 2022. In the opinion of management, the condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, considered necessary to present a fair statement of the Company’s condensed consolidated financial position, results of operations and cash flows as of and for the periods presented.

Operating results for any interim period are not necessarily indicative of the results that may be expected for the full year. The year-end condensed consolidated balance sheet data was derived from audited consolidated financial statements but does not include all disclosures required by GAAP for complete annual consolidated financial statements.

Going Concern and Liquidity

As of June 30, 2022, the Company had combined cash and cash equivalents of $20.8 million, compared with combined cash and cash equivalents of $28.3 million as of December 31, 2021. During the three months ended June 30, 2022, the Company sold TutorMe for $55.0 million as described in Note 1, “Nature of Business,” and used the proceeds to pay down its debt of $31.5 million as described in Note 8, “Credit Facilities,” and pay the $22.4 million in statutory penalties for the California Attorney General matter as described in Note 14, “Commitments and Contingencies.” The Company had negative cash flows from operations of $15.4 million for the fiscal year 2021, and negative cash flows from operations of $57.2 million for the six months ended June 30, 2022.

The Company’s Services Agreement with Global Campus was subject to certain adjustments that impacted the amount and timing of cash flows, which payment terms were modified in April 2022 for the months of July, August and September

ZOVIO INC

Notes to Condensed Consolidated Financial Statements (Unaudited)

2022. Further, Global Campus incurred higher costs in their fourth quarter (the Company's second quarter) than the Company previously budgeted. On or about June 15, 2022, Global Campus advised the Company that Global Campus received a notice from the Department of Defense that they were placed on probation which would preclude them from enrolling new military students, pending completion of a comprehensive review. Additionally, there were communications from the Department of Defense to current Global Campus students cautioning them to consider leaving the University. We were advised by Global Campus that this matter should be resolved in a timely manner, however, it became apparent over the following weeks that these prolonged actions were having a negative impact on the University's revenue and therefore a negative impact on the Company's financial outlook. As a result, the Company entered into a new agreement with Global Campus, effective on July 31, 2022, which allowed Global Campus to acquire the business previously used to provide services to Global Campus. For additional information, see Note 16, “Subsequent Events.”

The Company will continue to support the continued growth and expansion of its Fullstack subsidiary and simultaneously explore strategic alternatives for that business. The ability of the Company to continue as a going concern is dependent on the Company generating cash from its operations and availability to other funding sources. Due to the Company’s negative cash flows from operations and projected future negative cash flows from operations resulting from the Transaction with Global Campus and reduction of availability of debt financing, substantial doubt exists about the Company’s ability to continue as a going concern for the twelve months following the issuance of these condensed consolidated financial statements. Management plans to cover any shortfall from operations by selling its Fullstack subsidiary or obtaining debt financing. However, there can be no assurance the Company will be successful in these efforts.

The condensed consolidated financial statements have been prepared on a going concern basis which contemplates the realization of assets and the settlement of liabilities in the normal course of business. The condensed consolidated financial statements do not include any adjustment that might be necessary if the Company is unable to continue as a going concern.

Impairment of Long-Lived Assets

The Company assesses potential impairment to its long-lived assets under ASC 360, Property and Equipment. The Company makes this assessment when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss is recorded if the carrying amount of the long-lived asset is not recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Any required impairment loss is measured as the amount by which the carrying amount of a long-lived asset exceeds fair value and is recorded as a reduction in the carrying value of the related asset and an expense to operating results. Due to the Transaction with Global Campus on July 31, 2022, the Company’s qualitative assessment indicated that an impairment in the Company’s long-lived assets occurred as of June 30, 2022. For additional information, see Note 16, “Subsequent Events.”

The Company recorded an impairment of its long-lived assets during the six-months ended June 30, 2022 in the consolidated statements of income (loss) of $35.9 million as follows:


Property and equipment, net	$	22,596
Operating lease assets	10,370
Intangibles, net	976
Other long-term assets	1,945
Impairment of long-lived assets	$	35,887

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the condensed consolidated financial statements. Actual results could differ from those estimates. As noted above, these condensed consolidated financial statements have been prepared on a going concern basis which contemplates the realization of assets and the settlement of liabilities in the normal course of business.

ZOVIO INC

Notes to Condensed Consolidated Financial Statements (Unaudited)

Comprehensive ~~Income (Loss)~~Loss

The Company has no components of other comprehensive income (loss), and therefore, comprehensive ~~income (loss)~~loss equals net ~~income (loss).~~loss.

Recent Accounting Pronouncements

None noted as applicable.

3. Revenue, Other Revenue and Deferred Revenue

The following table presents the Company’s net revenue disaggregated based on the revenue source (in thousands):


		Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021				2022		2021		2022		2021
Strategic services revenue	Strategic services revenue	$	50,289	$	66,927		Strategic services revenue	$	41,022	$	59,688	$	91,310	$	126,614
Transition services income	Transition services income	2,009		2,752			Transition services income	1,722		2,516		3,731		5,268
Tuition revenue, net	Tuition revenue, net	9,246		7,089			Tuition revenue, net	8,576		6,866		17,822		13,956
Other revenue, net (1)	Other revenue, net (1)	89		91			Other revenue, net (1)	60		116		150		207
Total revenue, net	Total revenue, net	$	61,633	$	76,859		Total revenue, net	$	51,380	$	69,186	$	113,013	$	146,045

(1) ~~Primarily consists of revenues~~Represents revenue generated from various services and other miscellaneous fees.

The following table presents the Company’s net revenue disaggregated based on the timing of revenue recognition (in thousands):


		Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021				2022		2021		2022		2021
Over time, over period of instruction	Over time, over period of instruction	$	61,592	$	76,768		Over time, over period of instruction	$	51,340	$	69,135	$	112,932	$	145,903

Point in time (1)	Point in time (1)	41		91			Point in time (1)	40		51		81		142
Total revenue, net	Total revenue, net	$	61,633	$	76,859		Total revenue, net	$	51,380	$	69,186	$	113,013	$	146,045

(1)Represents revenue generated from digital textbooks and other miscellaneous fees.

The Company operates under 2 reportable segments and has no significant foreign operations or assets located outside of the United States. For additional information on segmentation, see Note 15, “Segment Information.”

ZOVIO INC

Notes to Condensed Consolidated Financial Statements (Unaudited)

Deferred Revenue and Student Deposits

Current deferred revenue and student deposits consisted of the following (in thousands):


		As of March 31, 2022		As of December 31, 2021			As of June 30, 2022		As of December 31, 2021
Deferred revenue, current	Deferred revenue, current	$	14,734	$	14,469	Deferred revenue, current	$	6,901	$	14,469
Student deposits	Student deposits	423		470		Student deposits	504		470
Total current deferred revenue and student deposits	Total current deferred revenue and student deposits	$	15,157	$	14,939	Total current deferred revenue and student deposits	$	7,405	$	14,939

Below are the opening and closing balances of current deferred revenue from the Company’s contracts with customers (in thousands):


		March 31, 2022		March 31, 2021			June 30, 2022		June 30, 2021
Current deferred revenue opening balance, January 1	Current deferred revenue opening balance, January 1	$	14,469	$	7,477	Current deferred revenue opening balance, January 1	$	14,469	$	7,477
Current deferred revenue closing balance, March 31		14,734		7,307
Current deferred revenue closing balance, June 30						Current deferred revenue closing balance, June 30	6,901		9,981
Increase (decrease)	Increase (decrease)	$	265	$	(170)	Increase (decrease)	$	(7,568)	$	2,504

For further information on receivables, refer to Note 6, “Accounts Receivable, Net” within the condensed consolidated financial statements.

Deferred revenue consists of cash payments that are received or due in advance of the Company’s performance. As of ~~March 31,~~June 30, 2022 the deferred revenue balance relates entirely to the Zovio Growth segment. For the majority of the Company’s customers, payment for services is due prior to services being provided and is included in current deferred revenue. However, there ~~are~~were previously contracts which ~~include~~included deferred revenue that iswas deemed to be long-term. For additional information, refer to Note 7, “Other Significant Balance Sheet Accounts - Other Long-Term Liabilities” within the condensed consolidated financial statements.

The difference between the opening and closing balances of deferred revenue primarily results from the timing difference between the Company’s performance and the customer’s payment. For the ~~three~~six months ended ~~March 31,~~June 30, 2022, the Company recognized ~~$6.7~~$8.0 million of revenue that was included in the deferred revenue balance as of January 1, 2022. For the ~~three~~six months ended ~~March 31,~~June 30, 2021, the Company recognized ~~$4.7~~$6.1 million of revenue that was included in the deferred revenue balance as of January 1, 2021. Amounts reported in the closing balance of deferred revenue are expected to be recognized as revenue within the next 12 months.

4. Restructuring and Impairment Expense

During the three and six months ended June 30, 2022, the Company recognized $35.9 million of asset impairment charges in the restructuring and impairment expense line item on the Company’s condensed consolidated statements of income (loss).

During the three and six months ended June 30, 2021, the Company recognized $2.3 million of severance costs in the restructuring and impairment expense line item on the Company’s condensed consolidated statements of income (loss).

The following table summarizes the amounts recorded in the restructuring and impairment expense line item on the Company’s condensed consolidated statements of income (loss) for each of the periods presented (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Asset impairment	$	35,887	$	—	$	35,887	$	—

Severance costs	$	—	$	2,341	$	—	$	2,341

Total restructuring and impairment expense	$	35,887	$	2,341	$	35,887	$	2,341

ZOVIO INC

Notes to Condensed Consolidated Financial Statements (Unaudited)

The Company previously vacated or consolidated properties and subsequently reassessed its non-cancelable leases. Additionally, the Company previously implemented restructuring plans to reduce operating expenses, implement cost reductions and conserve cash resources. The severance costs and lease costs are expected to substantially all be paid out over the next 12 months.

The following table summarizes the changes in the Company's restructuring and impairment liability by type during the ~~three~~six months ended ~~March 31,~~June 30, 2022 (in thousands):


		Student Transfer Costs		Severance Costs		Lease Exit and Other Costs		Total			Asset Impairment		Student Transfer Costs		Severance Costs		Lease Exit and Other Costs		Total
Balance at December 31, 2021	Balance at December 31, 2021	$	1,282	$	520	$	398	$	2,200	Balance at December 31, 2021	$	—	$	1,282	$	520	$	398	$	2,200

Restructuring and impairment expense										Restructuring and impairment expense	35,887		—		—		—		35,887
Payments and adjustments	Payments and adjustments	—		(294)		(67)		(361)		Payments and adjustments	—		—		(520)		(140)		(660)

Balance at March 31, 2022		$	1,282	$	226	$	331	$	1,839
Non-cash transaction										Non-cash transaction	(35,887)		—		—		—		(35,887)
Balance at June 30, 2022										Balance at June 30, 2022	$	—	$	1,282	$	—	$	258	$	1,540

The restructuring liability amounts are recorded within either the (i) accounts payable and accrued liabilities account or (ii) rent liability account on the condensed consolidated balance sheets.

~~ZOVIO INC~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

5. Fair Value Measurements

The following tables summarize fair value information as of ~~March 31,~~June 30, 2022 and December 31, 2021, respectively (in thousands):
As of March 31, 2022
Level 1 Level 2 Level 3 Total
Mutual funds $ 905 $ — $ — $ 905


	As of June 30, 2022
	Level 1		Level 2		Level 3		Total
Mutual funds	$	227	$	—	$	—	$	227


	As of December 31, 2021
	Level 1		Level 2		Level 3		Total
Mutual funds	$	974	$	—	$	—	$	974

The mutual funds in the tables above, represent deferred compensation asset balances, which are considered to be trading securities. The Company’s deferred compensation asset balances are recorded in the investments line item on the Company’s condensed consolidated balance sheets, and are classified as Level 1 securities. There were no transfers between any level categories for investments during the periods presented.

There were no differences between amortized cost and fair value of investments as of ~~March 31,~~June 30, 2022 or December 31, 2021, and no reclassifications out of accumulated other comprehensive income during the ~~three~~six months ended ~~March 31,~~June 30, 2022 or 2021.

6. Accounts Receivable, Net

Accounts receivable, net, consisted of the following (in thousands):
As of March 31, 2022 As of
December 31, 2021
Accounts receivable $ 7,726 $ 10,562
Less allowance for credit losses 1,130 931
Accounts receivable, net $ 6,596 $ 9,631

~~The following table presents the changes in the allowance for credit losses for the three months ended March 31, 2022 (in thousands):~~
Beginning
Balance Charged to
Expense Write-offs Recoveries of amounts Ending
Balance
$ 931 $ 201 $ (2) $ — $ 1,130

~~The following table presents the changes in the allowance for credit losses for the three months ended March 31, 2021 (in thousands):~~
Beginning
Balance Charged to
Expense Write-offs Recoveries of amounts Ending
Balance
$ 1,216 $ 661 $ (159) $ — $ 1,718


	As of June 30, 2022		As of December 31, 2021
Accounts receivable	$	6,113	$	10,562
Less allowance for credit losses	1,162		931
Accounts receivable, net	$	4,951	$	9,631

ZOVIO INC

Notes to Condensed Consolidated Financial Statements (Unaudited)

The following table presents the changes in the allowance for credit losses for the six months ended June 30, 2022 (in thousands):


Beginning Balance		Charged to Expense		Write-offs		Recoveries of amounts		Ending Balance


$	931	$	257	$	(43)	$	17	$	1,162

The following table presents the changes in the allowance for credit losses for the six months ended June 30, 2021 (in thousands):


Beginning Balance		Charged to Expense		Write-offs		Recoveries of amounts		Ending Balance


$	1,216	$	911	$	(299)	$	—	$	1,828

7. Other Significant Balance Sheet Accounts

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following (in thousands):


		As of March 31, 2022		As of December 31, 2021			As of June 30, 2022		As of December 31, 2021
Prepaid expenses	Prepaid expenses	$	3,760	$	2,664	Prepaid expenses	$	2,565	$	2,664
Prepaid licenses	Prepaid licenses	3,685		1,233		Prepaid licenses	2,652		1,233

Prepaid insurance	Prepaid insurance	2,437		2,254		Prepaid insurance	2,500		2,254

Insurance recoverable	Insurance recoverable	515		496		Insurance recoverable	377		496
Other current assets (1)	Other current assets (1)	6,846		6,776		Other current assets (1)	539		6,776
Total prepaid expenses and other current assets	Total prepaid expenses and other current assets	$	17,243	$	13,423	Total prepaid expenses and other current assets	$	8,633	$	13,423

(1) ~~Other current assets includes a~~Decrease in balances is primarily due to the $5.8 million loss on transaction recognized for the net asset adjustment ~~due~~ from Global Campus ~~related to~~in connection with the ~~Sale~~ Transaction ~~which is currently in mediation.~~on July 31, 2022. See Note 16, “Subsequent Events.”

Property and Equipment, Net

Property and equipment, net, consisted of the following (in thousands):


		As of March 31, 2022		As of December 31, 2021			As of June 30, 2022		As of December 31, 2021

Furniture and office equipment	Furniture and office equipment	$	22,001	$	22,032	Furniture and office equipment	$	1,383	$	22,032
Software	Software	4,493		4,493		Software	—		4,493
Leasehold improvements	Leasehold improvements	15,921		15,921		Leasehold improvements	—		15,921
Vehicles	Vehicles	22		22		Vehicles	—		22

Total property and equipment(1)	Total property and equipment(1)	42,437		42,468		Total property and equipment(1)	1,383		42,468
Less accumulated depreciation and amortization	Less accumulated depreciation and amortization	(17,472)		(16,086)		Less accumulated depreciation and amortization	(283)		(16,086)
Total property and equipment, net	Total property and equipment, net	$	24,965	$	26,382	Total property and equipment, net	$	1,100	$	26,382

(1)Decrease in balances are partially due to the asset impairment recognized in connection with the transaction with Global Campus. See Note 16, “Subsequent Events.”

For the three months ended ~~March 31,~~June 30, 2022 and 2021, depreciation and amortization expense related to property and equipment was ~~$1.4~~$1.3 million and $1.3 million, respectively. For the six months ended June 30, 2022 and 2021, depreciation and amortization expense related to property and equipment was $2.7 million and $2.6 million, respectively.

ZOVIO INC

Notes to Condensed Consolidated Financial Statements (Unaudited)

Goodwill and Intangibles, Net

Goodwill and intangibles, net, consisted of the following (in thousands):


		March 31, 2022							June 30, 2022
Definite-lived intangible assets:	Definite-lived intangible assets:	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Definite-lived intangible assets:	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Capitalized curriculum costs		$	14,012	$	(12,733)	$	1,279
Capitalized curriculum costs (1)								Capitalized curriculum costs (1)	$	570	$	(114)	$	456
Purchased intangible assets	Purchased intangible assets	14,185		(9,561)		4,624		Purchased intangible assets	12,455		(8,700)		3,755
Total definite-lived intangible assets	Total definite-lived intangible assets	$	28,197	$	(22,294)	$	5,903	Total definite-lived intangible assets	$	13,025	$	(8,814)	$	4,211
Goodwill	Goodwill					23,176		Goodwill					19,704
Total goodwill and intangibles, net	Total goodwill and intangibles, net					$	29,079	Total goodwill and intangibles, net					$	23,915

		December 31, 2021							December 31, 2021
Definite-lived intangible assets:	Definite-lived intangible assets:	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Definite-lived intangible assets:	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Capitalized curriculum costs	Capitalized curriculum costs	$	13,982	$	(12,796)	$	1,186	Capitalized curriculum costs	$	13,982	$	(12,796)	$	1,186
Purchased intangible assets	Purchased intangible assets	14,185		(9,048)		5,137		Purchased intangible assets	14,185		(9,048)		5,137
Total definite-lived intangible assets	Total definite-lived intangible assets	$	28,167	$	(21,844)	$	6,323	Total definite-lived intangible assets	$	28,167	$	(21,844)	$	6,323
Goodwill	Goodwill					23,176		Goodwill					23,176
Total goodwill and intangibles, net	Total goodwill and intangibles, net					$	29,499	Total goodwill and intangibles, net					$	29,499

(1)Decrease in balances are partially due to the asset impairment recognized in connection with the Transaction with Global Campus. See Note 16, “Subsequent Events.”

For the three months ended ~~March 31,~~June 30, 2022 and 2021, amortization expense was $0.6 million and ~~$1.0~~$0.7 million, respectively. For the six months ended June 30, 2022 and 2021, amortization expense was $1.3 million and $1.7 million, respectively.

The following table summarizes the estimated remaining amortization expense as of each fiscal year ended below (in thousands):


Year Ended December 31,	Year Ended December 31,			Year Ended December 31,
Remainder of 2022	Remainder of 2022	$	1,887	Remainder of 2022	$	960
2023	2023	2,477		2023	1,919
2024	2024	910		2024	584
2025	2025	257		2025	129
2026	2026	137		2026	122
Thereafter	Thereafter	235		Thereafter	497
Total future amortization expense	Total future amortization expense	$	5,903	Total future amortization expense	$	4,211

ZOVIO INC

Notes to Condensed Consolidated Financial Statements (Unaudited)

Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities consisted of the following (in thousands):
As of March 31, 2022 As of
December 31, 2021
Accounts payable $ 9,952 $ 5,967
Accrued salaries and wages 7,205 5,434
Accrued bonus 1,714 3,625
Accrued vacation 3,055 3,037
Accrued litigation and fees 22,376 22,376
Minimum residual liability (1)
22,481 14,987
Accrued expenses 12,816 13,400
Current leases payable 4,515 4,492
Accrued insurance liability 1,280 1,404
Accrued income taxes payable 127 47
Total accounts payable and accrued liabilities $ 85,521 $ 74,769

~~(1)~~Amount represents approximately 75% of the total amount anticipated to be remitted to Global Campus in June 2022. The amount payable could be materially different than the current estimate projected by management.


	As of June 30, 2022		As of December 31, 2021
Accounts payable	$	7,791	$	5,967
Accrued salaries and wages	4,364		5,434
Accrued bonus	1,360		3,625
Accrued vacation	2,915		3,037
Accrued litigation and fees	—		22,376
Minimum residual liability	68		14,987
Accrued expenses	14,025		13,400

Current leases payable	4,071		4,492
Accrued insurance liability	929		1,404
Accrued income taxes payable	—		47
Total accounts payable and accrued liabilities	$	35,523	$	74,769

Other Long-Term Liabilities

Other long-term liabilities consisted of the following (in thousands):


		As of March 31, 2022		As of December 31, 2021			As of June 30, 2022		As of December 31, 2021

Notes payable	Notes payable	$	2,759	$	2,723	Notes payable	$	2,797	$	2,723
Deferred revenue	Deferred revenue	673		807		Deferred revenue	—		807
Other long-term liabilities	Other long-term liabilities	242		1,585		Other long-term liabilities	239		1,585
Total other long-term liabilities	Total other long-term liabilities	$	3,674	$	5,115	Total other long-term liabilities	$	3,036	$	5,115

8. Credit Facilities

The Company has issued letters of credit that are collateralized with cash, in the aggregate amount of $6.0 million as of ~~March 31,~~June 30, 2022. The letters of credit relate primarily to the Company's leased facilities and insurance requirements. The collateralized cash is held in restricted cash on the Company's condensed consolidated balance sheets.

The Company is required to provide surety bonds in certain states in which it does business. As a result, the Company previously entered into a surety bond facility with an insurance company to provide such bonds when required. Although there are no remaining issued bonds on the Company’s behalf under this facility as of ~~March 31,~~June 30, 2022, the Company still holds certain liability associated with any required collateral.

~~Subsequent to the quarter end, on~~On April 14, 2022, the Company entered into a Financing Agreement (the “Credit Facility”) among the Company, as borrower, each of its wholly-owned subsidiaries as subsidiary guarantors (the “Guarantors”), the lenders party thereto from time to time (the “Lenders”) and Blue Torch Finance LLC, as administrative agent and collateral agent for the Lenders (the “Agent”). The Credit Facility ~~provides~~provided for ~~among other things,~~ a term loan in the aggregate principal amount of $31.5 million (the “Term Loan”). The proceeds of the Term Loan ~~will be~~were used (i) ~~if necessary,~~ to satisfy ~~any final~~the judgement in the CA Attorney General lawsuit, and (ii) ~~thereafter,~~ to fund the working capital of the Company and the Guarantors.

~~ZOVIO INC~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

Subject to the terms of Credit Facility, the Term Loan ~~bears~~had an interest ~~at a~~ rate per annum equal to LIBOR plus 9.0%, payable monthly. The principal amount of the Term Loan ~~will~~was to be ~~repayable~~repaid in equal quarterly installments of $393,750 beginning June 30, 2023 and through March 31, 2025, with the remaining unpaid principal amount of the Term Loan, and all accrued and unpaid interest thereon, due and payable on the maturity date of April 14, 2025.

The Credit Facility ~~contains~~contained customary

ZOVIO INC

Notes to Condensed Consolidated Financial Statements (Unaudited)

representations, warranties, affirmative and negative covenants (including financial covenants), and indemnification provisions in favor of the Agent and the Lenders. ~~The financial covenants include a minimum cash flow covenant that takes effect six months following~~

Concurrent with the ~~Effective Date and that is to be tested~~sale of TutorMe on ~~a monthly basis for the trailing twelve month period, a minimum liquidity covenant that requires~~May 23, 2022, the Company ~~to maintain unrestricted cash on hand at~~repaid in full all ~~times of at least $7.5 million (inclusive of any proceeds~~outstanding obligations of the ~~Term Loan in excess of the amounts used~~Company owed to ~~satisfy any final judgment in the CA Attorney General lawsuit, and minimum revenue covenants applicable to each of the Company’s Fullstack Academy,~~Blue Torch Finance, LLC and ~~TutorMe, LLC subsidiaries and that are~~the Lenders pursuant to ~~be tested on a monthly basis beginning June 30, 2022 for~~ the ~~trailing twelve month period.~~

Credit Facility. In connection with the Company’s repayment of the outstanding obligations under the Credit Facility, Blue Torch terminated the ~~Company issued warrants (the “Warrants”) to~~Credit Facility and released all of its security interests in and liens on all of the ~~Lenders to purchase at any time or from time to time on or after the date that is six months from the Effective Date, at an exercise price of $0.01 per share, such number of shares of common stock~~assets of the Company ~~as equals 5.0%~~and its subsidiaries.

There was an extinguishment of debt and an early termination of the ~~outstanding fully-diluted shares~~loan during the period ended June 30, 2022. All fees associated with the term loan, including a termination fee of ~~common stock~~$0.5 million, and the write-off of the ~~Company~~unamortized financing fees of $3.0 million. These along with normal interest expense of $0.3 million and amortization of issuance costs of $0.1 million, were included as part of “Other income (expense), net” in the ~~issuance date.~~condensed consolidated statements of income (loss).

9. Lease Obligations

The Company leases various office and classroom facilities with terms that expire at various dates through 2033. These facilities are used for academic operations, corporate functions, enrollment services and student support services. The Company does not have any leases other than its office facilities and classrooms. All of the leases were classified as operating leases for the period ended ~~March 31,~~June 30, 2022, and the Company does not have any finance leases. All of the leases, other than those that may qualify for the short-term scope exception of 12 months or less, are recorded on the Company’s condensed consolidated balance sheets.

In 2021, the Company entered into a new lease in New York for classrooms and office space and recorded a right-of-use asset of $14.6 million in exchange for lease obligations. However, in the fourth quarter of 2021, the Company began to market this space for sublease. There is no impairment indicator at this time, but there is no guarantee that the Company will be able to sublease the space at rates materially similar to that of the current lease.

The Company's 1 active sublease as of ~~March 31,~~June 30, 2022 relates to office space of approximately 21,000 square feet in Denver, Colorado with a remaining commitment to lease of 118 months and net lease payments of ~~$0.6~~$0.4 million. Sublease income for the ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021 was ~~$0.1~~$0.3 million and ~~$0.6~~$1.3 million, respectively. The Company’s sublease does not include any options to extend or for early termination and do not contain any residual value guarantees or restrictive covenants. The sublease was classified as an operating lease for the period ended ~~March 31,~~June 30, 2022.

10. ~~Income (Loss)~~Loss Per Share

Basic ~~income (loss)~~loss per share is calculated by dividing net ~~income (loss)~~loss available to common stockholders for the period by the weighted average number of common shares outstanding for the period.

Diluted ~~income (loss)~~loss per share is calculated by dividing net ~~income (loss)~~loss available to common stockholders for the period by the sum of (i) the weighted average number of common shares outstanding for the period, plus (ii) potentially dilutive securities outstanding during the period, if the effect is dilutive. Potentially dilutive securities for the periods presented include stock options, unvested restricted stock units (“RSUs”) and unvested performance stock units (“PSUs”).

ZOVIO INC

Notes to Condensed Consolidated Financial Statements (Unaudited)

The following table sets forth the computation of basic and diluted ~~income (loss)~~loss per share for the periods indicated (in thousands, except per share data):


		Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021				2022		2021		2022		2021
Numerator:	Numerator:						Numerator:
Net income (loss)		$	(7,437)	$	(9,493)
Net loss							Net loss	$	(4,673)	$	(4,033)	$	(12,110)	$	(13,526)
Denominator:	Denominator:						Denominator:
Weighted average number of common shares outstanding	Weighted average number of common shares outstanding	33,562		32,769			Weighted average number of common shares outstanding	34,122		33,343		33,844		33,058
Effect of dilutive options and stock units	Effect of dilutive options and stock units	—		—			Effect of dilutive options and stock units	—		—		—		—

Diluted weighted average number of common shares outstanding	Diluted weighted average number of common shares outstanding	33,562		32,769			Diluted weighted average number of common shares outstanding	34,122		33,343		33,844		33,058
Income (loss) per share:
Loss per share:							Loss per share:
Basic	Basic	$	(0.22)	$	(0.29)		Basic	$	(0.14)	$	(0.12)	$	(0.36)	$	(0.41)
Diluted	Diluted	$	(0.22)	$	(0.29)		Diluted	$	(0.14)	$	(0.12)	$	(0.36)	$	(0.41)

The following table sets forth the number of stock options and stock units excluded from the computation of diluted ~~income (loss)~~loss per share for the periods indicated below because their effect was anti-dilutive (in thousands):


		Three Months Ended March 31,		Three Months Ended June 30,			Six Months Ended June 30,
		2022	2021			2022	2021	2022	2021
Stock options	Stock options	1,096	1,582		Stock options	800	1,308	949	1,445
Stock units	Stock units	3,163	1,461		Stock units	3,187	1,269	3,077	1,094

11. Stock-Based Compensation

The Company recorded a reversal of ~~$1.2 million~~$13.0 thousand of stock-based compensation expense for the three months ended ~~March 31,~~June 30, 2022, primarily relating to the forfeitures of certain performance-based PSUs not meeting their targets. The Company recorded ~~$2.4~~$0.2 million of stock-based compensation expense for the three months ended ~~March 31,~~June 30, 2021. The related income tax expense was $3.0 thousand for the three months ended June 30, 2022, and the related income tax benefit was $0.1 million for the three months ended June 30, 2021.

The Company recorded a reversal of $1.2 million for the six months ended June 30, 2022, primarily relating to the forfeitures of certain performance-based PSUs not meeting their targets. The Company recorded an expense of $2.6 million of stock-based compensation expense for the six months ended June 30, 2021. The related income tax expense was $0.3 million for the ~~three~~six months ended ~~March 31,~~June 30, 2022, and the related income tax benefit was ~~$0.6~~$0.7 million for the ~~three~~six months ended ~~March 31,~~June 30, 2021.

During the ~~three~~six months ended ~~March 31,~~June 30, 2022, the Company granted 1.0 million RSUs at a weighted average grant date fair value of $0.84 and ~~0.5~~0.6 million RSUs vested. During the ~~three~~six months ended ~~March 31,~~June 30, 2021, the Company granted ~~0.5~~1.0 million RSUs at a weighted average grant date fair value of ~~$4.25,~~$3.39, and ~~0.8~~0.9 million RSUs vested.

During the ~~three~~six months ended ~~March 31,~~June 30, 2022, the Company granted 0.4 million performance-based PSUs at a weighted average grant date fair value of ~~$0.91,~~$0.90, and 0.2 million performance-based or market-based PSUs vested. During the ~~three~~six months ended ~~March 31,~~June 30, 2021, the Company ~~did not~~granted 0.8 million performance-based PSUs at a weighted average grant ~~any performance-based or market-based PSUs~~date fair value of 2.73, and no performance-based or market-based PSUs vested.

During each of the ~~three~~six months ended ~~March 31,~~June 30, 2022, and 2021, the Company did not grant any stock options and no stock options were exercised.

~~As of March 31, 2022, unrecognized compensation cost was $5.8 million related to unvested stock options, RSUs and PSUs.~~

ZOVIO INC

Notes to Condensed Consolidated Financial Statements (Unaudited)

As of June 30, 2022, unrecognized compensation cost was $4.3 million related to unvested stock options, RSUs and PSUs.

The Company uses the asset-liability method to account for taxes. Under this method, deferred income tax assets and liabilities result from temporary differences between the tax basis of assets and liabilities and their reported amounts in the condensed consolidated financial statements that will result in income and deductions in future years.

The Company recognizes deferred tax assets if realization of such assets is more-likely-than-not. In order to make this determination, the Company evaluates a number of factors including the ability to generate future taxable income from reversing taxable temporary differences, forecasts of financial and taxable income or loss, and the ability to carryback certain operating losses to refund taxes paid in prior years. The cumulative loss incurred over the three-year period ended ~~March 31,~~June 30, 2022 constituted significant negative objective evidence against the Company’s ability to realize a benefit from its federal deferred tax assets. Such objective evidence limited the ability of the Company to consider in its evaluation certain subjective evidence such as the Company’s projections for future growth. On the basis of its evaluation, the Company determined that its deferred tax assets were not more-likely-than-not to be realized and that a valuation allowance against its deferred tax assets should continue to be maintained as of ~~March 31,~~June 30, 2022.

The Company’s current effective income tax rate that has been applied to normal, recurring operations for the ~~three~~six months ended ~~March 31,~~June 30, 2022, after discrete items, was ~~(1.1)~~(0.7)%.

As of both ~~March 31,~~June 30, 2022, and December 31, 2021, the Company did not have any gross unrecognized tax benefits. Although the Company believes the tax accruals provided are reasonable, the final determination of tax returns under review or returns that may be reviewed in the future and any related litigation could result in tax liabilities that materially differ from the Company’s historical income tax provisions and accruals.

The Company has analyzed filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions. The 2017 tax year ~~are~~and forward are open to examination for federal income tax purposes, and the 2015 tax year and forward are open to examination for state income tax purposes.

The Company is subject to extensive regulation by federal and state governmental agencies and accrediting bodies. In particular, the Higher Education Act of 1965, as amended (“Higher Education Act”), and the regulations promulgated thereunder by the U.S. Department of Education (“Department”) subject the Company and its university partners to significant regulatory scrutiny on the basis of numerous standards that institutions of higher education must satisfy in order to participate in the various federal student financial aid programs under Title IV of the Higher Education Act (“Title IV programs”). ~~After~~

Following the ~~sale of the University to~~July 31, 2022 Transaction with Global Campus, the Company ~~remains responsible for liabilities resulting~~was released from ~~any violation of these regulatory requirements during~~all remaining obligations under the ~~time it owned and operated~~UAGC/Zovio Agreements, including from all indemnification obligations under the ~~University, either directly or by an obligation to indemnify Global Campus.~~Original Asset Purchase Agreement. For additional information, see Note 16, “Subsequent Events.”

Department of Education On-Site Program Review of former Ashford University

In December 2016, the Department informed the University that it intended to continue the on-site program review, which commenced in January 2017 and initially covered the 2015-2016 and 2016-2017 award years, but may be expanded if the Department deems such expansion appropriate. To date, the Company has not received a draft report from the Department.

~~ZOVIO INC~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

Department of Education Close Out Audit of University of the Rockies

During the fiscal year 2018, the Company recorded an expense of $1.5 million, in relation to the close out audit of University of the Rockies resulting from its merger with the University in October 2018. The expense was recorded in relation to borrower defense to repayment regulations. On September 26, 2019, the Department sent the University a Final Audit

ZOVIO INC

Notes to Condensed Consolidated Financial Statements (Unaudited)

Determination letter for the University of the Rockies. This letter confirmed that with the exception of the borrower defense to repayment regulations, none of the other audit findings resulted in financial liability. The Department also stated that additional liabilities could accrue in the future. On December 19, 2019, the Company filed an administrative appeal with the Department appealing the alleged liability on the basis that the University of Rockies did not close but rather merged with the University. The briefing on the appeal is complete and the Company is awaiting a decision by the administrative law judge.

WSCUC Accreditation of Global Campus (formerly Ashford University)

Global Campus is regionally accredited by WASC Senior College and University Commission (“WSCUC”). In June 2019, WSCUC acted to reaffirm accreditation through Spring 2025.

In November 2020, WSCUC approved the change of control application filed to complete the ~~Sale Transaction,~~Original Asset Purchase Agreement, subject to certain conditions. WSCUC notified Global Campus that the provisions of the Notice of Concern issued as part of the reaffirmation of the University in July 2019 also remain in effect.

Department of Education ~~Regulation~~

On December 1, 2020, the parties to the Purchase Agreement entered into Amendment No. 1 to the Purchase Agreement (“Amendment”) pursuant to which, among other things, the University of Arizona and Global Campus waived the closing condition regarding issuance of a pre-acquisition review notice by the Department of Education. Under the terms of the Purchase Agreement, as amended, the Closing was subject to customary closing conditions for transactions in this sector. The Department iswas expected to conduct a post-closing review of Global Campus, ~~following the Sale Transaction,~~ consistent with the Department’s procedures during which the Department makes a determination on the institution’s request for recertification from the Department following the change of control, including whether to impose or place other conditions or restrictions. To be eligible to participate in Title IV programs, an institution must comply with the Higher Education Act and the regulations thereunder that are administered by the Department.

On July 1, 2022, the Department notified the Company that as a result of the Statement of Decisions issued in the California Attorney General matter as described below in Note 14, “Commitments and Contingencies,” the Department was conducting a preliminary review of the Company’s participation in Title IV Higher Education Act programs and requested various documents and information from the Company. The Company is evaluating the request and cooperating with the Department.

Borrowers Defense to Repayment

On October 28, 2016, the Department published borrower defense to repayment regulations to change processes that assist students in gaining relief under certain provisions of the Direct Loan Program regulations. These defense to repayment regulations allow a borrower to assert a defense to repayment on the basis of a substantial misrepresentation, any other misrepresentation in cases where certain other factors are present, a breach of contract or a favorable nondefault contested judgment against a school for its act or omission relating to the making of the borrower’s loan or the provision of educational services for which the loan was provided. In addition, the financial responsibility standards contained in the new regulations establish the conditions or events that trigger the requirement for an institution to provide the Department with financial protection in the form of a letter of credit or other security against potential institutional liabilities. Triggering conditions or events include, among others, certain state, federal or accrediting agency actions or investigations, and in the case of publicly traded companies, receipt of certain warnings from the SEC or the applicable stock exchange, or the failure to timely file a required annual or quarterly report with the SEC. The new regulations also prohibit schools from requiring that students agree to settle future disputes through arbitration.

On March 15, 2019, the Department issued guidance for the implementation of parts of the regulations. The guidance covers an institution’s responsibility in regard to reporting mandatory and discretionary triggers as part of the financial responsibility standards, class action bans and pre-dispute arbitration agreements, submission of arbitral and judicial records, and repayment rates.

On August 30, 2019, the Department finalized the regulations derived from the 2017-2018 negotiated rulemaking process and subsequent public comments. This version of the borrower defense regulations applies to all federal student loans made on

ZOVIO INC

Notes to Condensed Consolidated Financial Statements (Unaudited)

or after July 1, 2020, and, among other things: grants borrowers the right to assert borrower defense to repayment claims

~~ZOVIO INC~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

against institutions, regardless of whether the loan is in default or in collection proceedings; allows borrowers to file defense to repayment claims three years from either the student’s date of graduation or withdrawal from the institution; and gives students the ability to allege a specific amount of financial harm and to obtain relief in an amount determined by the Department, which may be greater or lesser than their original claim amount. It also includes financial triggers and other factors for recalculating an institution’s financial responsibility composite score that differ from those in the 2016 regulations.

On March 18, 2021, the Department announced it would adopt a streamlined approach for granting full debt relief to borrowers reversing the methodology first announced in December 2019 that allowed for partial student loan cancellation for borrowers. The Department determined that the previous methodology did not result in an appropriate relief determination.

In July 2020, the Department notified the Company that they would be initiating a preliminary review of borrower defense applications from borrowers who made claims regarding the University. As part of the initial fact-finding process, the Department will send individual student claims to the University and allow the institution the opportunity to submit a response to the borrower’s allegations. In 2020, the Company received and timely responded to the submitted claims and cannot predict the outcome of the Department’s review at this time. In 2022, Global Campus also received additional borrower defense applications from borrowers. Global Campus is responding to these additional submitted claims and we cannot predict the outcome of the Department's review at this time.

14. Commitments and Contingencies

From time to time, the Company is a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. When the Company becomes aware of a claim or potential claim, it assesses the likelihood of any loss or exposure. In accordance with GAAP, the Company records loss contingencies in its financial statements only for matters in which losses are probable and can be reasonably estimated. Where a range of loss can be reasonably estimated, the best estimate within that range should be accrued. If no estimate is better than another, the Company records the minimum estimated liability in the range. If the loss is not probable or the amount of the loss cannot be reasonably estimated, the Company discloses the nature of the specific claim if the likelihood of a potential loss is reasonably possible and the amount involved could be material. The Company continuously assesses the potential liability related to the Company’s pending litigation and revises its estimates when additional information becomes available. Other than the specific liabilities assumed by Global Campus, the Company and AU LLC will generally remain responsible for liabilities of the University relating to periods prior to the closing of the Sale Transaction. Below is a list of material legal proceedings to which the Company or its subsidiaries is a party.

California Attorney General Investigation of For-Profit Educational Institutions

In January 2013, the Company received from the Attorney General of the State of California (“CA Attorney General”) an Investigative Subpoena relating to the CA Attorney General’s investigation of for-profit educational institutions. Pursuant to the Investigative Subpoena, the CA Attorney General requested documents and detailed information for the time period March 1, 2009 to the date of the Investigative Subpoena. On July 24, 2013, the CA Attorney General filed a petition to enforce certain categories of the Investigative Subpoena related to recorded calls and electronic marketing data. On September 25, 2013, the Company reached an agreement with the CA Attorney General to produce certain categories of the documents requested in the petition and stipulated to continue the hearing on the petition to enforce from October 3, 2013 to January 9, 2014. On January 13, 2014 and June 19, 2014, the Company received additional Investigative Subpoenas from the CA Attorney General, each requesting additional documents and information for the time period March 1, 2009 through each such date.

Representatives from the Company met with representatives from the CA Attorney General’s office on several occasions to discuss the status of the investigation, additional information requests, and specific concerns related to possible unfair business practices in connection with the Company’s recruitment of students and debt collection practices. The parties also discussed a potential resolution involving injunctive relief, other non-monetary remedies and a payment to the CA Attorney General and in the third quarter of 2016, the Company recorded an expense of $8.0 million related to the cost of resolving this matter.

~~ZOVIO INC~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

The parties did not reach a resolution and on November 29, 2017, the CA Attorney General filed suit against the Company. The Company vigorously defended this case and emphatically denies the allegations made by the CA Attorney General that it ever deliberately misled its students, falsely advertised its programs, or in any way were not fully accurate in its statements to investors. A trial took place from November 2021 through December 2021.

ZOVIO INC

Notes to Condensed Consolidated Financial Statements (Unaudited)

On March 7, 2022, the Superior Court of the State of California, County of San Diego (the “Court”), issued a Statement of Decision regarding the Lawsuit in favor of the CA Attorney General. In the Statement of Decision, the Court ordered the Company to pay $22.4 million in statutory penalties. As a result, the Company accrued an additional $14.3 million in the fourth quarter of 2021, ~~and the~~for a total of $22.4 million ~~remains~~ accrued as of ~~March~~December 31, ~~2022.~~2021. The Court denied the CA Attorney General’s demands for restitution and injunctive relief finding no evidence postdating 2017 that would necessitate an injunction. The Company is disappointed by the Court’s decision and believes that its practices were at all times in compliance with California law. ~~The Company is currently considering all options available to it related to the Statement of Decision.~~ On ~~April 7,~~June 10, 2022, the Company filed a ~~motion for~~notice of appeal on the Statement of Decision. During the second quarter of 2022, the Company paid $23.3 million, which included the full amount of the judgment as well as applicable costs and accrued interest. This payment does not waive the Company’s right to appeal the judgment.

In connection with the Transaction closed on July 31, 2022, the Company granted UAGC the right to any refund achieved from the State of California as a ~~new trial and/or to set aside and vacate~~result of the ~~judgement, which is currently set for a hearing on May 13, 2022.~~appeal. For additional information, see Note 16, “Subsequent Events.”

15. Segment Information

The Company operates in 2 reportable segments: University Partners and Zovio Growth. The Company reports segment information based upon the management approach, and how the chief operating decision maker views the operations. ~~The~~

Until the sale of TutorMe, the Company ~~has~~had three operating segments: Fullstack, TutorMe, and Zovio, and ~~two~~2 reportable segments: University Partners and Zovio Growth. On May 23, 2022, the Company completed the sale of TutorMe by which the Company sold substantially all of the assets of TutorMe’s business in consideration of cash and the assumption of certain liabilities of TutorMe’s business. For additional information, see Note 1, “Nature of Business.”

The Company’s operating segments are determined based on (i) financial information reviewed by the CEO, who is the chief operating decision maker, (ii) internal management and related reporting structure, and (iii) the basis upon which the chief operating decision maker makes resource allocation decisions. ~~The~~

Fullstack and TutorMe, ~~operating segments~~through sale date, are aggregated into a single reportable segment, called Zovio Growth. The aggregation of the Fullstack and TutorMe operating segments iswas based on their uniform customer bases and methods of services provided as required by ASC 280-10-50-12. Based on these same quantitative tests, the Zovio operating segment is a separate reportable segment, called University Partners. ~~This change in~~The segment reporting did not have any impact on the determination of reporting units used to assess impairment under ASC 350, Intangibles - Goodwill and Other.

The University Partners segment includes the technology and services provided to colleges and universities to enable the online delivery of degree programs and related goods and services.

ZOVIO INC

Notes to Condensed Consolidated Financial Statements (Unaudited)

The following table summarizes financial information regarding each reportable segment’s results of operations for the periods presented (in thousands):


		Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021				2022		2021		2022		2021
Revenue by segment	Revenue by segment						Revenue by segment
University Partners	University Partners	$	52,333	$	69,679		University Partners	$	42,784	$	62,254	$	95,117	$	131,933
Zovio Growth	Zovio Growth	9,300		7,180			Zovio Growth	8,596		6,932		17,896		14,112
Total revenue and other revenue	Total revenue and other revenue	$	61,633	$	76,859		Total revenue and other revenue	$	51,380	$	69,186	$	113,013	$	146,045

Segment profitability	Segment profitability						Segment profitability
University Partners	University Partners	$	(2,626)	$	(5,437)		University Partners	$	3,039	$	(654)	$	413	$	(6,091)
Zovio Growth	Zovio Growth	(2,573)		(1,615)			Zovio Growth	(2,002)		(1,858)		(4,575)		(3,473)
Total segment profitability(1)	Total segment profitability(1)	$	(5,199)	$	(7,052)		Total segment profitability(1)	$	1,037	$	(2,512)	$	(4,162)	$	(9,564)

(1) Segment profitability represents EBITDA.

The following table reconciles total loss before income taxes to total segment profitability (in thousands):


		Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021				2022		2021		2022		2021
Loss before income taxes	Loss before income taxes	$	(7,359)	$	(9,410)		Loss before income taxes	$	(4,665)	$	(4,257)	$	(12,024)	$	(13,667)
Adjustments:	Adjustments:						Adjustments:
Other expense, net	Other expense, net	127		73			Other expense, net	3,824		(232)		3,951		(159)
Depreciation and amortization expense	Depreciation and amortization expense	2,033		2,285			Depreciation and amortization expense	1,878		1,977		3,911		4,262

Total segment profitability	Total segment profitability	$	(5,199)	$	(7,052)		Total segment profitability	$	1,037	$	(2,512)	$	(4,162)	$	(9,564)

During both the three months ended ~~March 31,~~and six months ended June 30, 2022 and ~~March 31,~~June 30, 2021, Global Campus accounted for the entire amount of the University Partners segment revenue, respectively.

During both the a three months ended ~~March 31,~~and six months ended June 30, 2022 or 2021, there were no customers or individual university clients which accounted for 10% or more of the Zovio Growth segment revenue.

The Company’s total assets by segment are as follows (in thousands):
As of March 31, 2022 As of
December 31, 2021
University Partners $ 88,172 $ 86,628
Zovio Growth 60,579 62,406
Total assets $ 148,751 $ 149,034

~~As of March 31, 2022, approximately $34.3 million of the assets in University Partners were considered to be entity-wide assets.~~


	As of June 30, 2022		As of December 31, 2021
University Partners	$	35,907	$	86,628
Zovio Growth	49,526		62,406
Total assets	$	85,433	$	149,034

ZOVIO INC

Notes to Condensed Consolidated Financial Statements (Unaudited)

The Company’s accounts receivable ~~and current deferred revenue~~ in each segment are as follows (in thousands):


		As of March 31, 2022		As of December 31, 2021			As of June 30, 2022		As of December 31, 2021
University Partners	University Partners	$	64	$	78	University Partners	$	252	$	78
Zovio Growth	Zovio Growth	6,532		9,553		Zovio Growth	4,699		9,553
Total accounts receivable	Total accounts receivable	$	6,596	$	9,631	Total accounts receivable	$	4,951	$	9,631

University Partners		$	—	$	—
Zovio Growth		15,157		14,939
Total deferred revenue and student deposits, current		$	15,157	$	14,939

As of each ~~March 31,~~June 30, 2022 and December 31, 2021, the University Partners accounts receivable balance was immaterial. As of each ~~March 31,~~June 30, 2022 and December 31, 2021, there were no individual partners or customers which accounted for 10% or more of the Zovio Growth accounts receivable balance, as customers are individual students or third parties paying on their behalf, rather than university clients.

The Company’s deferred revenue and student deposit amounts as of June 30, 2022 and December 31, 2021, respectively, are fully attributable to the Zovio Growth segment. For additional information on deferred revenue and student deposits, see Note 3, “Revenue, Other Revenue and Deferred Revenue.”

The Company’s goodwill amounts as of ~~March 31,~~June 30, 2022 and December 31, 2021, respectively, are fully attributable to the Zovio Growth segment. For additional information on goodwill, see Note 7, “Other Significant Balance Sheet Accounts - Goodwill and intangibles, net.”

16. Subsequent Events

The Company performed an evaluation of events occurring between the end of our most recent quarter end and the date of filing these condensed consolidated financial statements.



PART I—FINANCIAL INFORMATION		3
Item 1. Financial Statements		3
	Condensed Consolidated Balance Sheets (Unaudited)	3
	Condensed Consolidated Statements of Income (Loss) (Unaudited)	4

	Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)	5
	Condensed Consolidated Statements of Cash Flows (Unaudited)	6
	Notes to Condensed Consolidated Financial Statements (Unaudited)	7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		2224
Item 3. Quantitative and Qualitative Disclosures About Market Risk		2833
Item 4. Controls and Procedures		3034

PART II—OTHER INFORMATION		3135
Item 1. Legal Proceedings		3135
Item 1A. Risk Factors		3135
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		3135
Item 3. Defaults Upon Senior Securities		3135
Item 4. Mine Safety Disclosures		3135
Item 5. Other Information		3135
Item 6. Exhibits		3237
SIGNATURES		3338


Supplemental disclosure of non-cash transactions:	Supplemental disclosure of non-cash transactions:					Supplemental disclosure of non-cash transactions:
Purchase of equipment included in accounts payable and accrued liabilities	Purchase of equipment included in accounts payable and accrued liabilities	$	—	$	16	Purchase of equipment included in accounts payable and accrued liabilities	$	—	$	14
Issuance of common stock for vested restricted stock units	Issuance of common stock for vested restricted stock units	$	560	$	3,461	Issuance of common stock for vested restricted stock units	$	654	$	3,774
Debt extinguishment						Debt extinguishment	$	—	$	3,095
Issuance of notes payable						Issuance of notes payable	$	—	$	2,809


		Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021				2022		2021		2022		2021
Revenue and other revenue	Revenue and other revenue	100.0	%	100.0	%		Revenue and other revenue	100.0	%	100.0	%	100.0	%	100.0	%
Costs and expenses:	Costs and expenses:						Costs and expenses:
Technology and academic services	Technology and academic services	30.0		24.9			Technology and academic services	33.7		26.1		31.7		25.5
Counseling services and support	Counseling services and support	34.6		32.9			Counseling services and support	34.5		33.5		34.5		33.2
Marketing and communication	Marketing and communication	35.6		33.6			Marketing and communication	35.6		31.4		35.6		32.6
General and administrative	General and administrative	11.6		20.8			General and administrative	15.3		12.2		13.2		16.6

Legal expense							Legal expense	1.8		—		0.8		—
Restructuring and impairment expense							Restructuring and impairment expense	69.7		3.4		31.7		1.6
Gain on transactions, net							Gain on transactions, net	(88.9)		—		(40.4)		—
Total costs and expenses	Total costs and expenses	111.8		112.2			Total costs and expenses	101.7		106.6		107.1		109.5
Operating loss	Operating loss	(11.8)		(12.2)			Operating loss	(1.7)		(6.6)		(7.1)		(9.5)
Other income (expense), net	Other income (expense), net	(0.2)		(0.1)			Other income (expense), net	(7.4)		0.3		(3.5)		0.1
Loss before income taxes	Loss before income taxes	(12.0)		(12.3)			Loss before income taxes	(9.1)		(6.3)		(10.6)		(9.4)
Income tax expense		0.1		0.1
Income tax expense (benefit)							Income tax expense (benefit)	0.0		(0.3)		0.1		(0.1)
Net loss	Net loss	(12.1)	%	(12.4)	%		Net loss	(9.1)	%	(5.8)	%	(10.7)	%	(9.3)	%


Exhibit		Description
2.1	(#)	Asset Purchase Agreement dated May 23, 2022, by and among Zovio Inc, TutorMe, LLC, Liminex, Inc. and Zorro Holdco, LLC
2.2	(#)	Asset Purchase and Sale Agreement dated July 31, 2022 between Zovio Inc and University of Arizona Global Campus
10.1		Financing Agreement, dated as of April 14, 2022, by and among Zovio Inc and Blue Torch Finance, LLC.
10.2		Pledge and Security Agreement, dated as of April 14, 2022, by and among Zovio Inc and Blue Torch Finance, LLC.
10.3		Warrant to purchase shares of Common Stock of Zovio Inc , dated April 14, 2022.
31.1		Certification of Principal Executive Officer pursuant to Rule 13a-14(a) of the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Principal Financial Officer pursuant to Rule 13a-14(a) of the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, executed by Randy J. Hendricks, Chief Executive Officer, and Kevin Royal, Chief Financial Officer.
101		The following financial information from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~March 31,~~June 30, 2022, filed with the SEC on ~~May 10,~~August 4, 2022, formatted in Extensible Business Reporting Language (“XBRL”): (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Income (Loss); (iii) the Condensed Consolidated Statements of Stockholders’ Equity; (iv) the Condensed Consolidated Statements of Cash Flows; and (v) the Notes to Condensed Consolidated Financial Statements.
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


			ZOVIO INC

~~May 10,~~August 4, 2022			/s/ KEVIN ROYAL
			Kevin Royal Chief Financial Officer (Principal financial officer and duly authorized to sign on behalf of the registrant)


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


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


		Common Stock			Additional Paid-in Capital		Retained Earnings				Treasury Stock					Common Stock			Additional Paid-in Capital				Retained Earnings				Treasury Stock
		Shares	Par Value						Total	Treasury Stock			Shares			Par Value	Additional Paid-in Capital
Balance at December 31, 2020	Balance at December 31, 2020	66,454	$	668	$	179,489	$	326,319			$	(447,259)	$	59,217	Balance at December 31, 2020	66,454					$	179,489			$	326,319	$	(447,259)	$	59,217

Stock-based compensation	Stock-based compensation	—	—		2,382		—				—		2,382		Stock-based compensation	—	—		2,382				—				—		2,382

Stock issued under stock incentive plan, net of shares held for taxes	Stock issued under stock incentive plan, net of shares held for taxes	563	5		(1,083)		—				—		(1,078)		Stock issued under stock incentive plan, net of shares held for taxes	563	5		(1,083)				—				—		(1,078)

Contingent consideration	Contingent consideration	—	—		(122)		—				—		(122)		Contingent consideration	—	—		(122)				—				—		(122)
Stock issued for acquisition	Stock issued for acquisition	—	—		(10,559)		—				10,559		—		Stock issued for acquisition	—	—		(10,559)				—				10,559		—
Net loss	Net loss	—	—		—		(9,493)				—		(9,493)		Net loss	—	—		—				(9,493)				—		(9,493)

Balance at March 31, 2021	Balance at March 31, 2021	67,017	$	673	$	170,107	$	316,826			$	(436,700)	$	50,906	Balance at March 31, 2021	67,017	$	673	$	170,107			$	316,826			$	(436,700)	$	50,906
Stock-based compensation															Stock-based compensation	—	—		247				—				—		247
Stock issued under employee stock purchase plan															Stock issued under employee stock purchase plan	31	—		76				—				—		76
Stock issued under stock incentive plan, net of shares held for taxes															Stock issued under stock incentive plan, net of shares held for taxes	79	1		(89)				—				—		(88)

Net loss															Net loss	—	—		—				(4,033)				—		(4,033)
Balance at June 30, 2021															Balance at June 30, 2021	67,127	$	674	$	170,341			$	312,793			$	(436,700)	$	47,108