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

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

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 þ No o

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

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.

If an emerging growth company, indicate by checkmark 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 o No þ


	October 31,			April 30,				January 31,				April 30,
	2017			2017				2018				2017
	(Unaudited)							(Unaudited)
Assets

Current assets:
Cash	$	5,379,694		$	2,756,217
Accounts receivable, net of allowance of $414,364 and $328,864, respectively		6,390,633			4,434,862
Cash and cash equivalents							$	3,803,080			$	2,756,217
Restricted cash								190,506				—
Accounts receivable, net of allowance of $544,492 and $328,864, respectively								8,592,958				4,434,862
Prepaid expenses		172,923			133,531				288,640				133,531
Promissory note receivable		900,000			900,000				—				900,000
Other receivables		470,049			81,464				233,862				81,464
Accrued interest receivable		44,800			8,000				—				8,000
Total current assets		13,358,099			8,314,074				13,109,046				8,314,074

Property and equipment:
Call center equipment		82,606			53,748				96,305				53,748
Computer and office equipment		105,717			103,649				130,137				103,649
Furniture and fixtures		282,932			255,984				712,209				255,984
Software		2,459,932			2,131,344				2,590,297				2,131,344
		2,931,187			2,544,725				3,528,948				2,544,725
Less accumulated depreciation and amortization		(1,192,350	)		(1,090,010	)			(1,161,030	)			(1,090,010	)
Total property and equipment, net		1,738,837			1,454,715				2,367,918				1,454,715
Goodwill								5,011,432				—
Intangible assets, net								9,916,667				—
Courseware, net		143,254			145,477				137,557				145,477
Accounts receivable, secured - related party, net of allowance of $625,963, and $625,963, respectively		45,329			45,329				45,329				45,329
Long term contractual receivable		753,326			657,542				935,878				657,542
Other assets		89,609			56,417				585,206				56,417

Total assets	$	16,128,454		$	10,673,554			$	32,109,033			$	10,673,554

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


	October 31,			April 30,			January 31,			April 30,
	2017			2017			2018			2017
	(Unaudited)						(Unaudited)
Liabilities and Stockholders’ Equity

Current liabilities:
Accounts payable	$	934,367		$	756,701		$	1,273,990		$	756,701
Accrued expenses		246,415			262,911			596,633			262,911
Deferred revenue		2,314,163			1,354,989			4,156,550			1,354,989
Refunds due Students		734,938			310,576
Refunds due students							730,722			310,576
Deferred rent, current portion		7,550			11,200			7,429			11,200
Convertible notes payable- related party, current portion							1,000,000			—
Convertible notes payable, current portion		50,000			50,000			50,000			50,000
Other current liabilities							186,134			—
Total current liabilities		4,287,433			2,746,377			8,001,458			2,746,377

Senior secured loan payable, net of discount		4,302,144			—
Warrant liability		52,500			52,500
Convertible note payable - related party							1,000,000			—
Senior secured term loan, net of discount							6,769,932			—
Warrant Liability							—			52,500
Deferred rent		30,478			34,437			60,295			34,437
Total liabilities		8,672,555			2,833,314			15,831,685			2,833,314

Commitments and contingencies - See Note 6		—			—
Commitments and contingencies - See Note 7							—			—

Stockholders’ equity:
Common stock, $0.001 par value; 250,000,000 shares authorized, 13,613,996 issued and 13,597,329 outstanding at October 31, 2017, 13,504,012 issued and 13,487,345 outstanding at April 30, 2017		13,613			13,504
Common stock, $0.001 par value; 250,000,000 shares authorized,
15,072,332 issued and 15,055,665 outstanding at January 31, 2018
13,504,012 issued and 13,487,345 outstanding at April 30, 2017							15,072			13,504
Additional paid-in capital		34,471,602			33,607,423			45,439,538			33,607,423
Treasury stock (16,667 shares)		(70,000	)		(70,000	)		(70,000	)		(70,000	)
Accumulated deficit		(26,959,316	)		(25,710,687	)		(29,107,262	)		(25,710,687	)
Total stockholders’ equity		7,455,899			7,840,240			16,277,348			7,840,240

Total liabilities and stockholders’ equity	$	16,128,454		$	10,673,554		$	32,109,033		$	10,673,554

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


	For the						For the						For the						For the
	Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended
	October 31,						October 31,						January 31,						January 31,
	2017			2016			2017			2016			2018			2017			2018			2017

Revenues	$	4,851,639		$	3,465,026		$	9,094,525		$	6,221,841		$	5,701,958		$	3,735,626		$	14,796,483		$	9,957,467

Operating expenses
Cost of revenues (exclusive of depreciation and amortization shown separately below)		1,864,659			1,234,856			3,617,150			2,130,915			2,665,664			1,359,131			6,282,814			3,490,046
General and administrative		3,166,391			1,913,403			6,297,725			4,095,481			4,677,359			2,133,074			10,975,085			6,228,554
Program review settlement expense													—			25,000			—			25,000
Depreciation and amortization		145,355			139,005			284,074			290,055			347,894			132,727			631,969			422,782
Total operating expenses		5,176,405			3,287,264			10,198,949			6,516,451			7,690,917			3,649,932			17,889,868			10,166,382

Operating (loss) income		(324,766	)		177,762			(1,104,424	)		(294,610	)		(1,988,959	)		85,694			(3,093,385	)		(208,915	)

Other expense:
Other income (expense):
Other income		23,111			1,307			41,888			1,364			46,179			1,684			88,067			3,047
Gain on extinguishment of warrant liability													52,500			—			52,500			—
Interest expense		(179,896	)		(62,528	)		(186,093	)		(95,661	)		(257,665	)		(80,001	)		(443,757	)		(175,662	)
Total expense, net		(156,785	)		(61,221	)		(144,205	)		(94,297	)
Total other expense, net													(158,986	)		(78,317	)		(303,190	)		(172,615	)

(Loss) income before income taxes		(481,551	)		116,541			(1,248,629	)		(388,907	)		(2,147,945	)		7,377			(3,396,575	)		(381,530	)

Income tax expense (benefit)		—			—			—			—			—			—			—			—

Net (loss) income	$	(481,551	)	$	116,541		$	(1,248,629	)	$	(388,907	)	$	(2,147,945	)	$	7,377		$	(3,396,575	)	$	(381,530	)

Net (loss) income per share allocable to common stockholders - basic	$	(0.04	)	$	0.01		$	(0.09	)	$	(0.03	)	$	(0.15	)	$	0.00		$	(0.25	)	$	(0.03	)

Net (loss) income per share allocable to common stockholders - diluted	$	(0.04	)	$	0.01		$	(0.09	)	$	(0.03	)	$	(0.15	)	$	0.00		$	(0.25	)	$	(0.03	)

Weighted average number of common shares outstanding: basic		13,587,535			11,479,845			13,548,672			11,402,751			14,491,634			11,467,345			13,862,992			11,419,270

Weighted average number of common shares outstanding: diluted		13,587,535			12,140,263		13,548,672			11,402,751				14,491,634			13,040,970			13,862,992			11,419,270

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


	For the
	Six Months Ended						For the
	October 31,						Nine months ended
	2017			2016			January 31,
							2018			2017
Cash flows from operating activities:
Net loss	$	(1,248,629	)	$	(388,907	)	$	(3,396,575	)	$	(381,530	)
Adjustments to reconcile net loss to net cash used in operating activities:
Bad debt expense		85,500			—
Bad debt expense (recovery)							298,144			(25,680	)
Gain on extinguishment of warrant liability							(52,500	)		—
Depreciation and amortization		284,074			290,055			631,969			422,782
Loss on asset disposal							27,590			—
Stock-based compensation		303,924			157,335			466,468			253,833
Amortization of debt discounts		—			6,250			99,726			15,625
Amortization of prepaid shares for services		—			35,000			37,039			52,500
Warrant buyback expense		—			206,000			—			206,000
Changes in operating assets and liabilities:
Accounts receivable		(2,137,055	)		(1,304,754	)		(4,534,118	)		(2,331,140	)
Other receivables		(388,585	)		—
Prepaid expenses		(39,392	)		20,118			(59,451	)		28,715
Accrued interest receivable		(36,800	)		—			(45,400	)		—
Other receivables							(152,398	)		—
Other assets		(33,192	)		(23,240	)		(528,789	)		(25,241	)
Accounts payable		177,666			609,562			366,044			875,110
Accrued expenses		(16,496	)		55,974			218,476			105,111
Deferred rent		(7,609	)		20,513			22,087			17,318
Refunds due students		424,362			167,344			420,146			124,912
Deferred revenue		959,174			175,073			2,340,461			562,643
Net cash (used in) provided by operating activities		(1,673,058	)		26,323
Other liabilities							186,134			—
Net cash used in operating activities							(3,654,947	)		(99,042	)

Cash flows from investing activities:
Cash paid in asset acquisition							(2,589,719	)		—
Proceeds from promissory note interest receivable							53,400			—
Increase in restricted cash							(190,506	)		—
Purchases of courseware							(33,369	)		(6,550	)
Purchases of property and equipment		(540,873	)		(382,490	)		(1,171,473	)		(565,306	)
Purchases of courseware		(25,100	)		(6,550	)
Proceeds from promissory note receivable							900,000			—
Net cash used in investing activities		(565,973	)		(389,040	)		(3,031,667	)		(571,856	)

Cash flows from financing activities:
Warrant Buyback		—			(400,000	)		—			(400,000	)
Borrowing from bank line of credit		—			247,000
Repayment of bank line of credit		—			(248,783	)
Third party line of credit		—			750,000
Borrowing of bank line of credit							—			247,000
Payments for bank line of credit							—			(248,783	)
Borrowing of third party line of credit							—			1,250,000
Third party line of credit financing costs		—			(60,000	)		—			(60,000	)
Senior secured term loan - net		4,780,572			—
Proceeds of warrant exercises		33,598			—
Proceeds of stock options exercised		53,045			—
Proceeds of warrant and stock options exercised							598,876			—
Offering costs paid on debt financing							(351,366	)		—
Disbursements for equity offering costs		(4,707	)		(1,917	)		(14,033	)		(4,017	)
Proceeds from senior secured term loan							7,500,000			—
Net cash provided by financing activities		4,862,508			286,300			7,733,477			784,200

Net increase (decrease) in cash		2,623,477			(76,417	)

Net increase in cash							1,046,863			113,302
Cash at beginning of period		2,756,217			783,796			2,756,217			783,796

Cash at end of period	$	5,379,694		$	707,379		$	3,803,080		$	897,098

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

Aspen Group, Inc. (together with its ~~subsidiary,~~subsidiaries, the “Company” or ~~“Aspen”~~“AGI”) is a holding ~~company. Its subsidiary~~company, which has two subsidiaries. Aspen University Inc. (“Aspen University”) was organized in ~~1987. On March 13, 2012, the Company~~1987 and United States University Inc. (“USU”) was ~~recapitalized in a reverse merger. All references to the Company or Aspen before March 13, 2012 are to Aspen University.~~formed May 2017 and certain assets were acquired and liabilities assumed on December 1, 2017. (See Note 10)

~~Aspen’s mission~~Aspen Group’s vision is to offer any motivated college-worthy student the opportunity to receive a high quality, responsibly priced distance-learning education for the purpose of achieving sustainable economic and social benefits for themselves and their families. Aspen is dedicated to providing the highest quality education experiences taught by top-tier professors - 54% of our adjunct professors hold doctorate degrees.

make college affordable again in America. Because we believe higher education should be a catalyst to our students’ long-term economic success, we exert financial prudence by offering affordable tuition that is one of the greatest values in online higher education. In March 2014, Aspen University unveiled a monthly payment plan aimed at reversing the college-debt sentence plaguing working-class Americans. The monthly payment plan offers bachelor students (except RN to BSN) the opportunity to pay their tuition at $250/month for 72 months ($18,000), nursing bachelor students (RN to BSN) $250/month for 39 months ($9,750), master students $325/month for 36 months ($11,700) and doctoral students ~~$375 per~~ $375/month for 72 months ($27,000), interest free, thereby giving students a monthly payment tuition payment option versus taking out a federal financial aid loan.

~~On November 10, 2014, Aspen~~United States University ~~announced~~(USU) began offering monthly payment plans in the ~~Commission on Collegiate Nursing Education (“CCNE”) has granted accreditation~~summer of 2017. Today, monthly payment plans are available for the RN to ~~its Bachelor of Science in Nursing~~BSN program ~~(RN to BSN) until December 31, 2019.~~($250/month), MBA/M.A.Ed/MSN programs ($325/month), and the MSN-FNP program ($375/month).

Since 1993, ~~we have~~Aspen University has been nationally accredited by the Distance Education and Accrediting Council (“DEAC”), a national accrediting agency recognized by the U.S. Department of Education (the “DOE”). On February 25, 2015, the DEAC informed Aspen University that it had renewed its accreditation for five years to January, 2019.

~~On August 22, 2017, the DOE informed Aspen~~Since 2009, USU has been regionally accredited by WASC Senior College and University ~~of its determination that the institution has~~Commission. (“WSCUC”).

Both universities are qualified to participate under the Higher Education Act of 1965, as amended (HEA) and the Federal student financial assistance programs (Title IV, HEA programs)~~, and set~~. USU has a ~~subsequent program participation agreement reapplication date of March 31, 2021.~~provisional certification.

The interim consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). In the opinion of the Company’s management, all adjustments (consisting of normal recurring adjustments and reclassifications and non-recurring adjustments) necessary to present fairly our results of operations for the three and ~~six~~nine months ended ~~October~~January 31, ~~2017~~2018 and ~~2016,~~2017, our cash flows for the ~~six~~nine months ended ~~October~~January 31, ~~2017~~2018 and ~~2016,~~2017, and our financial position as of ~~October~~January 31, ~~2017~~2018 have been made. The results of operations for such interim periods are not necessarily indicative of the operating results to be expected for the full year.

Certain information and disclosures normally included in the notes to the annual consolidated financial statements have been condensed or omitted from these interim consolidated financial statements. Accordingly, these interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Report on Form 10-K for the period ended April 30, 2017 as filed with the SEC on July 25, 2017. The April 30, 2017 balance sheet is derived from those statements.

At ~~October~~January 31, ~~2017,~~2018, the Company had a cash balance of ~~$5,379,694.~~$3,803,080 plus $190,506 in restricted cash.

On July 25, 2017, the Company signed a $10 million senior secured term loan with Runway Growth Capital Fund (formerly known as GSV Growth Capital Fund). The Company drew $5 million under the facility at closing, with an additional $2.5 million drawn following the closing of the Company’s acquisition of substantially all the assets of ~~the~~ United States University, including receipt of all required regulatory approvals, among other conditions to funding. Terms of the 4-year senior loan include a 10% over 3-month LIBOR per annum interest rate. (See Notes 5 and 8)10).

The unaudited consolidated financial statements include the accounts of Aspen Group, Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

The preparation of the unaudited consolidated financial statements in conformity with accounting principles generally accepted ~~accounting principles~~ in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts in the unaudited consolidated financial statements. Actual results could differ from those estimates. Significant estimates in the accompanying unaudited consolidated financial statements include the allowance for doubtful accounts and other receivables, the valuation of collateral on certain receivables, amortization periods and valuation of courseware, intangibles and software development costs, valuation of beneficial conversion features in convertible debt, valuation of goodwill, valuation of loss contingencies, valuation of stock-based compensation and the valuation allowance on deferred tax assets.

For the purposes of the unaudited consolidated statements of cash flows, the Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents at ~~October~~January 31, ~~2017~~2018 and April 30, 2017. The Company maintains its cash in bank and financial institution deposits that at times may exceed federally insured limits of $250,000 per financial institution. The Company has not experienced any losses in such accounts from inception through ~~October~~January 31, ~~2017.~~2018. As of ~~October~~January 31, ~~2017~~2018 and April 30, 2017, there were deposits totaling ~~$5,486,370~~$3,594,104 and $2,687,461 respectively, held in two separate institutions greaterthan the federally insured limits.

Goodwill represents the excess of purchase price over the fair market value of assets acquired and liabilities assumed from Educacion Significativa, LLC. Goodwill has an indefinite life and is not amortized. Goodwill is tested annually for impairment.

Intangibles represent both indefinite lived and definite lived assets. Accreditation and regulatory approvals and Trade name and trademarks are deemed to have indefinite useful lives and accordingly are not amortized but are tested annually for impairment. Student relationships and curriculums are deemed to have definite lives and are amortized accordingly.

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. The Company classifies assets and liabilities recorded at fair value under the fair value hierarchy based upon the observability of inputs used in valuation techniques. Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed market assumptions. The fair value measurements are classified under the following hierarchy:

Level 1—Observable inputs that reflect quoted market prices (unadjusted) for identical assets and liabilities in active markets;

Level 2—Observable inputs, other than quoted market prices, that are either directly or indirectly observable in the marketplace for identical or similar assets and liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets and liabilities; and

Level 3—Unobservable inputs that are supported by little or no market activity that are significant to the fair value of assets or liabilities.

The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.

The Company receives Title IV funds from the ~~DOE~~Department of Education to cover tuition and living expenses. After deducting tuition and fees, the Company sends checks for the remaining balances to the students.

Revenues consist primarily of tuition and fees derived from courses taught by the Company online as well as from related educational resources that the Company provides to its students, such as access to our online materials and learning management system. Tuition revenue is recognized pro-rata over the applicable period of instruction. ~~The Company allows a student to make three monthly tuition payments during each class.~~ The Company maintains an institutional tuition refund policy, which provides for all or a portion of tuition to be refunded if a student withdraws during stated refund periods. Certain states in which students reside impose separate, mandatory refund policies, which override the Company’s policy to the extent in conflict. If a student withdraws at a time when a portion or none of the tuition is refundable, then in accordance with its revenue recognition policy, the Company recognizes as revenue the tuition that was not refunded. Since the Company recognizes revenue pro-rata over the term of the course and because, under its institutional refund policy, the amount subject to refund is never greater than the amount of the revenue that has been deferred, under the Company’s accounting policies revenue is not recognized with respect to amounts that could potentially be refunded. The Company’s educational programs have starting and ending dates that differ from its fiscal quarters. Therefore, at the end of each fiscal quarter, a portion of revenue from these programs is not yet earned and is therefore deferred. The Company also charges students annual fees for library, technology and other services, which are recognized over the related service period. Deferred revenue represents the amount of tuition, fees, and other student payments received in excess of the portion recognized as revenue and it is included in current liabilities in the accompanying consolidated balance sheets. Other revenues may be recognized as sales occur or services are performed.

The Company has revenues from students outside the United States representing ~~2.2%~~2.1% of the revenues for the quarter ended ~~October~~January 31, ~~2017.~~2018.

The Company evaluates its convertible instruments, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under ASC Topic 815, “Derivatives and Hedging”. The result of this accounting treatment is that the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income (expense). Upon conversion, exercise, or ~~exercise~~other extinguishment (transaction) of a derivative instrument, the instrument is marked to fair value at the ~~conversion~~transaction date and then that fair value is ~~reclassified to equity.~~recognized as an extinguishment gain or loss. Equity instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815 are reclassified to liability at the fair value of the instrument on the reclassification date.

We include the results of operations of businesses we acquire from the date of the respective acquisition. We allocate the purchase price of acquisitions to the assets acquired and liabilities assumed at fair value. The excess of the purchase price of an acquired business over the amount assigned to the assets acquired and liabilities assumed is recorded as goodwill. We expense transaction costs associated with business combinations as incurred.

Net income (loss) per common share is based on the weighted average number of common shares outstanding during each period. Options to purchase ~~2,669,286~~2,872,546 and ~~1,849,832~~1,963,481 common shares, ~~of common stock,~~ warrants to purchase ~~1,001,557~~743,773 and 934,555 ~~shares of~~ common ~~stock,~~shares, and $50,000 and $350,000 of convertible debt (convertible into 4,167 and 75,596 ~~shares of~~ common ~~stock, respectively)~~shares) were outstanding ~~during the three months ending October~~at January 31, ~~2017~~2018 and ~~2016,~~2017, respectively, but ~~during certain periods~~ were not included in the computation of diluted loss per share because the effects would have been anti-dilutive. The options, warrants and convertible debt are considered to be common stock equivalents and are only included in the calculation of diluted earnings per common share when their effect is dilutive, as noted in the chart below.

As required to be disclosed for quarters with net income, basic and diluted income per share for the three months ended January 31, 2017, were calculated as follows:

ASU 2017-01 - In January 2017, the Financial Accounting Standards Board issued Accounting Standards Update No. 2017-01: "Business Combinations (Topic 805)- to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This guidance is effective for interim and annual reporting periods beginning after December 15, 2017. The Company will implement this guidance effective February 1, 2018.

ASU 2017-04 - In January 2017, the Financial Accounting Standards Board issued Accounting Standards Update No. 2017-04: "Intangibles - Goodwill and Other (Topic 350)” - to simplify how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. This guidance is effective for interim and annual reporting periods beginning after December 15, 2019. The Company is evaluating the effects of this standard on its consolidated financial statements.

ASU 2016-02- In February 2016, the Financial Accounting Standards Board issued Accounting Standards Update No. 2016-02: “Leases (Topic 842)”whereby lessees will need to recognize almost all leases on their balance sheet as a right of use asset and a lease liability. This guidance is effective for interim and annual reporting periods beginning after December 15, 2018. The Company expects this ASU will increase its assets and liabilities, but have no net material impact on its consolidated financial statements.

~~Basic~~ASU 2014-09 - In May 2014, the Financial Accounting Standards Board issued Update No. 2014-09: “Revenue from Contracts with Customers (Topic 606)” which requires that an entity recognize revenue to depict the transfer of promised goods and ~~diluted income per share~~services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. Since the ~~three months ended October 31, 2016, were calculated as follows:~~

~~There have been no~~issuance of the original standard, the FASB has issued several updates to the standard which i) clarify the application of the principal versus agent guidance; ii) clarify the guidance relating to performance obligations and licensing; iii) clarify assessment of the collectability criterion, presentation of sales taxes, measurement date for non-cash consideration and completed contracts at transaction; and iv) clarify narrow aspects of ASC 606 or corrects unintended application of the guidance. The new ~~relevant pronouncements since those disclosed~~revenue recognition standard, amended by the updates, becomes effective in the ~~April 30, 2017 Consolidated Financial Statements.~~first quarter of fiscal 2019 and is to be applied retrospectively using one of two prescribed methods. Early adoption is permitted. The Company currently plans to adopt the new standard effective May 1, 2018 and does not believe the adoption of this standard will have a material impact on the amount or timing of its revenues.

As property and equipment become fully expired, the fully expired asset is written off against the associated accumulated depreciation. There is no expense impact for such write offs. Property and equipment consisted of the following at ~~October~~January 31, ~~2017~~2018 and April 30, 2017:


	October 31,			April 30,			January 31,			April 30,
	2017			2017			2018			2017
Call center hardware	$	82,606		$	53,748		$	96,305		$	53,748
Computer and office equipment		105,717			103,649			130,137			103,649
Furniture and fixtures		282,932			255,984			712,209			255,984
Software		2,459,932			2,131,344			2,590,297			2,131,344
		2,931,187			2,544,725			3,528,948			2,544,725
Accumulated depreciation and amortization		(1,192,350	)		(1,090,010	)		(1,161,030	)		(1,090,010	)
Property and equipment, net	$	1,738,837		$	1,454,715		$	2,367,918		$	1,454,715

Software consisted of the following at ~~October~~January 31, ~~2017~~2018 and April 30, 2017:


	October 31,			April 30,			January 31,			April 30,
	2017			2016			2018			2017
Software	$	2,459,932		$	2,131,344		$	2,590,297		$	2,131,344
Accumulated amortization		(1,065,740	)		(994,017	)		(1,012,655	)		(994,017	)
Software, net	$	1,394,192		$	1,137,327		$	1,577,642		$	1,137,327

Depreciation and Amortization expense for all Property and Equipment as well as the portion for just software is presented below for three and ~~six~~nine months ended ~~October~~January 31, ~~2017~~2018 and ~~2016:~~2017:

The following is a schedule of estimated future amortization expense of software at January 31, 2018:

~~The following is a schedule of estimated future amortization expense of software at October 31, 2017:~~

Courseware costs capitalized were ~~$25,100 and $6,550~~$33,369 for the ~~six~~nine months ended ~~October~~January 31, ~~2017 and 2016 respectively. When Courseware becomes fully amortized it~~2018. Fully expired courseware is written off against the accumulated amortization. There is no expense impact ~~to these~~for such write-offs.

Courseware consisted of the following at ~~October~~January 31, ~~2017~~2018 and April 30, 2017:


	October 31,			April 30,			January 31,			April 30,
	2017			2017			2018			2017
Courseware	$	279,677		$	271,777		$	283,046		$	271,777
Accumulated amortization		(136,423	)		(126,300	)		(145,489	)		(126,300	)
Courseware, net	$	143,254		$	145,477		$	137,557		$	145,477

Amortization expense of courseware for the three and ~~six~~nine months ended ~~October~~January 31, ~~2017~~2018 and ~~2016:~~2017:

The following is a schedule of estimated future amortization expense of courseware at ~~October~~January 31, ~~2017:~~2018:


Year Ending April 30,
2018	$	27,494	$	14,152
2019		54,489		56,143
2020		40,647		42,301
2021		13,683		15,336
2022		6,941		9,625
Total	$	143,254	$	137,557

On July 25, 2017, the Company signed a $10 million senior secured term loan with Runway Growth Capital Fund (formerly known as GSV Growth Capital Fund). The Company drew $5 million under the facility at closing, ~~with~~then subsequently drew $2.5 million ~~to be drawn~~ following the closing of the Company’s acquisition of substantially all the assets of the United States University, including receipt of all required regulatory approvals, among other conditions to funding. Terms of the 4-year senior loan include a 10% over 3-month LIBOR per annum interest rate. ~~(See Note 8)~~

The Company will be required to begin making principal repayments upon the 24-month anniversary of the initial closing (July 24, 2019), and each month thereafter will repay 1/24th of the total loan amount outstanding. Should the Company achieve both annualized revenue growth of at least 30% and operating margin of at least 7.5% for any 12-month trailing period, then at the quarter-end of that 12-month trailing period, the Company may elect to extend the interest only period for the quarter immediately following the 12-month trailing period throughout the duration of the loan.

Additionally, the Company paid a 0.25% origination fee on the initial $5 million draw and ~~will pay~~paid another 0.25% origination fee upon the second ~~closing,~~$2.5 million draw, will be subject to a final payment fee of 3.25% of the principal lent, and issued 224,174 5-year warrants at an exercise price of $6.87. The relative fair value of the warrants was $478,428 and was recorded as debt discount along with other direct costs of the term loan and is being amortized to interest expense over the term of the loan.

On December 1, 2017, the Company completed the acquisition of USU and, as part of the consideration, a $2.0 million convertible note (the “Note”) was issued, bearing 8% annual interest that matures over a two-year period after the closing. (See Note 7)10) At the option of the Note holder, on each of the first and second anniversaries of the closing date, $1,000,000 of principal and accrued interest under the Note will be convertible into shares of the Company’s common stock based on the volume weighted average price per share for the ten preceding trading days (subject to a floor of $2.00 per share) or become payable in cash. There was no beneficial conversion feature on the note date and the conversion terms of the note exempt it from derivative accounting.

From time to time, the Company enters into employment agreements with certain of its employees. These agreements typically include bonuses, some of which are performance-based in nature. As of ~~October~~January 31, ~~2017,~~2018, no performance bonuses have been earned.

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of ~~October~~January 31, ~~2017,~~2018, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations.

The Company’s ~~subsidiary,~~subsidiaries, Aspen University isand United States University, are subject to extensive regulation by Federal and State governmental agencies and accrediting bodies. In particular, the Higher Education Act (the “HEA”) and the regulations promulgated thereunder by the DOE subject ~~Aspen University~~the subsidiaries to significant regulatory scrutiny on the basis of numerous standards that schools must satisfy to participate in the various types of federal student financial assistance programs authorized under Title IV of the HEA.

On August 22, 2017, the DOE informed Aspen University of its determination that the institution has qualified to participate under the HEA and the Federal student financial assistance programs (Title IV, HEA programs), and set a subsequent program participation agreement reapplication date of March 31, 2021.

USU currently has provisional certification to participate in the Title IV Programs due to the business combination. The provisional certification allows the school to continue to receive Title IV funding as it did prior to the change of ownership.

The HEA requires accrediting agencies to review many aspects of an institution's operations in order to ensure that the education offered is of sufficiently high quality to achieve satisfactory outcomes and that the institution is complying with accrediting standards. Failure to demonstrate compliance with accrediting standards may result in the imposition of probation, the requirements to provide periodic reports, the loss of accreditation or other penalties if deficiencies are not remediated.

Because Aspen University ~~operates~~and USU operate in a highly regulated industry, it may be subject from time to time to audits, investigations, claims of noncompliance or lawsuits by governmental agencies or third parties, which allege statutory violations, regulatory infractions or common law causes of action.

An institution participating in Title IV Programs must correctly calculate the amount of unearned Title IV Program funds that have been disbursed to students who withdraw from their educational programs before completion and must return those unearned funds in a timely manner, no later than 45 days of the date the school determines that the student has withdrawn. Under Department regulations, failure to make timely returns of Title IV Program funds for 5% or more of students sampled on the institution's annual compliance audit in either of its two most recently completed fiscal years can result in the institution having to post a letter of credit in an amount equal to 25% of its required Title IV returns during its most recently completed fiscal year. If unearned funds are not properly calculated and returned in a timely manner, an institution is also subject to monetary liabilities or an action to impose a fine or to limit, suspend or terminate its participation in Title IV Programs.

12Subsequent to a compliance audit, USU recognized that it had not fully complied with all requirements for calculating and making timely returns of Title IV funds (R2T4). In 2016, USU had a material finding related to the same issue and is required to maintain a letter of credit in the amount of $71,634 as a result of this finding. The letter of credit has been provided to the Department of Education by AGI.

~~OCTOBER 31, 2017~~Aspen University is a Delaware corporation. Delaware law requires an institution to obtain approval from the Delaware Department of Education (“Delaware DOE”) before it may incorporate with the power to confer degrees. In July 2012, Aspen received notice from the Delaware DOE that it was granted provisional approval status effective until June 30, 2015. On April 25, 2016 the Delaware DOE informed Aspen University it was granted full approval to operate with degree-granting authority in the State of Delaware until July 1, 2020. Aspen University is authorized by the Colorado Commission on Education to operate in Colorado as a degree granting institution.

USU is also a Delaware corporation and is in the process of obtaining Delaware approval.

Effective May 24, 2017, the Company entered into waiver agreements with all of its investors in the April 2017 common stock offering. In consideration for waiving their registration rights, the Company paid to each of the investors 1.5% of their investment amount in the offering. The total amount paid was $112,500 and was recorded in general and administrative expenses during the quarter ended July 31, 2017.

In November 2017, the company issued 5,000 restricted shares each to two consultants assisting with establishing the new campus. The shares were valued at $88,700 based on the trading price of $8.87 on the grant date and recorded as a prepaid asset being amortized over the six month term of the agreement. (See Note 11)

On December 1, 2017 certain assets were acquired and certain liabilities assumed from Educacion Significativa, LLC (dba United States University) by United States University, Inc. United States University, Inc. is a wholly owned subsidiary of Aspen Group Inc. As part of the purchase price the company issued 1,203,209 shares of AGI stock were valued at the quoted closing price of $8.49 per share as of November 30, 2017. (See Note 10)

A summary of the Company’s warrant activity during the ~~six~~nine months ended ~~October~~January 31, 2017 is presented below:


						Weighted										Weighted
				Weighted		Average								Weighted		Average
				Average		Remaining		Aggregate						Average		Remaining			Aggregate
	Number of			Exercise		Contractual		Intrinsic		Number of				Exercise		Contractual			Intrinsic
Warrants	Shares			Price		Term		Value		Shares				Price		Term			Value
Balance Outstanding, April 30, 2017		914,123		$	2.82		1.6	$	1,991,067
Balance outstanding, April 30, 2017										914,123			$	2.82		1.6		$	1,100,203
Granted		224,174			6.87		4.75		—		224,174				6.87		5.0			307,118
Exercised		(125,404	)		0.27		—		—		(356,267	)			0.55		—			—
Forfeited		—			—		—		—		—				—		—			—
Expired		(11,336	)		—		—		—		(38,257	)			—		—			—
Balance Outstanding, October 31, 2017		1,001,557		$	3.79		1.99	$	4,169,798
Balance outstanding, January 31, 2018										743,773			$	4.08		2.1		$	3,095,502

Exercisable, October 31, 2017		1,001,557		$	3.79		1.99	$	4,169,798
Exercisable, January 31, 2018										743,773			$	4.08		2.1		$	3,095,502

In connection with the Senior Secured Term Loan that was finalized on July 25, 2017, the Company issued 224,174 5-year warrants at an exercise price of $6.87. (See Note 5)

The Company issued ~~93,386~~241,514 shares of Common Stock in conjunction with the cash and cashless exercise of ~~125,404~~356,267 warrants. The Company received ~~$33,598~~$143,489 in conjunction with the cash exercises.

On March 13, 2012, the Company adopted the 2012 Equity Incentive Plan (the “Plan”) that provides for the grant of 1,691,667 shares effective November 2015, 2,108,333 shares effective June 2016 and 3,500,000 shares effective July 2017, in the form of incentive stock options, non-qualified stock options, restricted shares, stock appreciation rights and restricted stock units to employees, consultants, officers and directors. As of ~~October~~January 31, ~~2017,~~2018, there were ~~830,714~~622,454 shares remaining under the Plan for future issuance. The Company estimates the fair value of share-based compensation utilizing the Black-Scholes option pricing model, which is dependent upon several variables such as the expected option term, expected volatility of the Company’s stock price over the expected term, expected risk-free interest rate over the expected option term, expected dividend yield rate over the expected option term, and an estimate of expected forfeiture rates. The Company believes this valuation methodology is appropriate for estimating the fair value of stock options granted to employees and directors which are subject to ASC Topic 718 requirements. These amounts are estimates and thus may not be reflective of actual future results, nor amounts ultimately realized by recipients of these grants. The Company recognizes compensation on a straight-line basis over the requisite service period for each award. The following table summarizes the assumptions the Company utilized to record compensation expense for stock options granted to employees during the ~~three~~nine months ended ~~October~~January 31, ~~2017 and 2016.~~2018.


	January 31,
	2018
Expected life (years)		4-6.5
Expected volatility		40-43	%
Risk-free interest rate		0.00	%
Dividend yield		n/a

The Company utilized the simplified method to estimate the expected life for stock options granted to employees. The simplified method was used as the Company does not have sufficient historical data regarding stock option exercises. The expected volatility is based on the average of the expected volatilities from the most recent audited financial statements available for comparative public companies that are deemed to be similar in nature to the Company. The risk-free interest rate is based on the U.S. Treasury yields with terms equivalent to the expected life of the related option at the time of the grant. Dividend yield is based on historical trends. While the Company believes these estimates are reasonable, the compensation expense recorded would increase if the expected life was increased, a higher expected volatility was used, or if the expected dividend yield increased.

A summary of the Company’s stock option activity for employees and directors during the ~~six~~nine months ended ~~October~~January 31, ~~2017,~~2018, is presented below:


						Weighted
				Weighted		Average								Weighted		Average
				Average		Remaining		Aggregate						Average		Remaining			Aggregate
	Number of			Exercise		Contractual		Intrinsic		Number of				Exercise		Contractual			Intrinsic
Options	Shares			Price		Term		Value		Shares				Price		Term			Value
Balance Outstanding, April 30, 2017		2,097,384		$	2.42		3.1	$	7,267,892
Balance outstanding, April 30, 2017										2,097,384			$	1.86		2.7		$	12,489,871
Granted		588,500			5.07		5.0		843,750		844,000			$	3.53		3.4			1,867,740
Exercised		(16,598	)		4.20		0.0		—		(63,838	)		$	3.13		—			—
Forfeited		—			—		—		—		—				—		—			—
Expired		—			—		—		—		—				—		—			—
Balance Outstanding, October 31, 2017		2,669,286		$	2.99		3.2	$	17,291,782
Balance outstanding, January 31, 2018										2,877,546			$	3.52		3.24		$	17,658,268

Exercisable, October 31, 2017		1,449,136		$	2.25		1.3	$	11,249,199
Exercisable, January 31, 2018										1,083,484			$	2.22		2.07		$	8,727,757

On May 13, 2017, the Company granted its executive officers a total of 500,000 five-year options to purchase shares of the Company’s common stock under the Plan. The options vest annually over three years, subject to continued employment at each applicable vesting date, and are exercisable at $4.90 per share. The Chairman and Chief Executive Officer received 200,000 options with a fair value of $282,000, the Chief Operating Officer received 200,000 options with a fair value of $282,000, the Chief Academic Officer received 70,000 options with a fair value of $98,700 and the Chief Financial Officer received 30,000 options with a fair value of $42,300.

In May 2017, the Company issued 5,500 stock options to various employees at exercise prices ranging from $4.95 to $5.10 per share.

Effective June 11, 2017, the Company granted the Chief Academic Officer 30,000 five-year options. The options vest quarterly over a three-year period in 12 equal quarterly increments with the first vesting date being September 11, 2017, subject to continued employment on each applicable vesting date. The options are exercisable at $6.28 per share and the fair value is $54,000.

On August 21, 2017, 53,000 options were issued to 26 employees with an exercise price of $5.95 per share and a fair value of $90,630.

~~The~~On January 4, 2018, 180,000 options were issued to the board of directors with an exercise price of $9.07 per share and a fair value of $421,200.

On January 14, 2018, 75,500 options were issued to employees with an exercise price of $8.57 per share and a fair value of $152,510.

During the nine months ended January 31, 2018, the company issued ~~16,598~~113,597 shares of common stock in conjunction with the exercise of ~~16,598~~63,838 stock options. The company received ~~$53,045~~$455,387 related to these exercises.

As of ~~October~~January 31, ~~2017,~~2018, there was ~~$1,141,751~~$1,474,855 of unrecognized compensation costs related to nonvested share-based compensation arrangements. That cost is expected to be recognized over a weighted-average period of ~~1.53~~2.0 years.

The Company recorded compensation expense of ~~$303,924~~$466,468 and ~~$157,335~~$253,833 for the ~~six~~nine months ended ~~October~~January 31, ~~2017~~2018 and ~~2016,~~2017, respectively, in connection with stock options.

~~There~~On December 1, 2017 certain assets were acquired and certain liabilities assumed from Educacion Significativa, LLC (dba United States University) by United States University, Inc. United States University, Inc. is a wholly owned subsidiary of Aspen Group Inc. (“AGI”) and was set up for purposes of finalizing the asset purchase transaction. For purposes of purchase accounting, Aspen Group, Inc. is referred to as the acquirer. Aspen Group, Inc. acquired the assets and assumed the liabilities of Educacion Significativa, LLC (dba United States University) for a purchase price of approximately $14.8 million. The purchase consideration consisted of a cash payment of $2,500,000 less an adjustment for working capital of approximately $110,000 plus approximately $200,000 of additional costs paid to/on behalf of and for the benefit of the seller, a convertible note of $2,000,000 and 1,203,209 shares of AGI stock valued at the quoted closing price of $8.49 per share as of November 30, 2017. The stock consideration represents $10,215,244 of the purchase consideration.

The acquisition was accounted for by AGI in accordance with the acquisition method of accounting pursuant to ASC 805 “Business Combinations” and pushdown accounting was applied to record the fair value of the assets acquired and liabilities assumed on United States University, Inc. Under this method, the purchase price is allocated to the identifiable assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The excess of the amount paid over the estimated fair values of the identifiable net assets was $5,011,432 which has been reflected in the balance sheet as goodwill.

The following is a summary of the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition:

We determined the fair value of assets acquired and liabilities assumed based on assumptions that reasonable market participants would use while employing the concept of highest and best use of the respective items. We used the following assumptions, the majority of which include significant unobservable inputs (Level 3), and valuation methodologies to determine fair value:

Intangibles - We used the multiple period excess earnings method to value the Accreditation and regulatory approvals. The Trade name and trademarks were valued using the relief-from-royalty method, which represents the benefit of owning these intangible assets rather than paying royalties for their use. The Student relationships were valued using the excess earnings method. The curriculum was valued using the replacement cost approach.

Other assets and liabilities - The carrying value of all other assets and liabilities approximated fair value at the time of acquisition.

The goodwill resulting from the acquisition may become deductible for tax purposes in the future. The goodwill resulting from the acquisition is principally attributable to the future earnings potential associated with enrollment growth and other intangibles that do not qualify for separate recognition such as the assembled workforce.

We assigned an indefinite useful life to the accreditation and regulatory approvals and the trade name and trademarks as we believe they have the ability to generate cash flows indefinitely. In addition, there are no ~~stock options granted~~legal, regulatory, contractual, economic or other factors to ~~non-employees during six months ended October~~limit the intangibles’ useful life and we intend to renew the intangibles, as applicable, and renewal can be accomplished at little cost. We determined all other acquired intangibles are finite-lived and we are amortizing them on either a straight-line basis or using an accelerated method to reflect the pattern in which the economic benefits of the assets are expected to be consumed. Amortization for the period of inception through January 31, ~~2017 and 2016.~~ 2018 was $183,333.

The expected benefits from the business acquisition will allow USU, Inc. to achieve its vision of making college affordable again on a much broader scale along with providing various accreditations.

The Company ~~recorded no compensation expense for~~is in the ~~six months ended October 31, 2017~~process of completing its accounting and ~~2016. There~~valuations of USU, Inc. and accordingly, the estimated fair values and allocation of purchase price noted above is provisional pending the final valuation of the assets acquired and liabilities assumed which will not exceed one-year in accordance with ASC 805.

The total acquisition costs that AGI incurred was ~~no unrecognized compensation cost at October 31, 2017. All remaining options expired during~~approximately $1,050,000, of which approximately $200,000 was incurred in the fiscal year ended April 30, 2017 and $850,000 was incurred in the current year.

The results of operations of USU are included in the Company’s consolidated statement of operations from the date of acquisition of December 1, 2017. The following supplemental unaudited pro forma combined information assumes that the acquisitions had occurred as of the beginning of each period present:

The pro forma financial information is not necessarily indicative of the results that would have occurred if these acquisitions had occurred on the dates indicated or that result in the future.

On ~~December 1, 2017,~~February 20, 2018, AGI announced that Aspen University is entering the ~~Company~~pre-licensure Bachelor of Science in Nursing (BSN) degree program business. Aspen’s first campus will be located in Phoenix, Arizona and the university is targeting to begin enrolling students for the upcoming summer semester.

Aspen’s pre-licensure BSN program is offered as a full-time, three-year (nine semester) program that is specifically designed for students who do not currently hold a state nursing license and have no prior nursing experience. Aspen will admit students into three tracks; 1) High school graduates with no prior college credits, 2) students that have less than 48 general education prerequisites completed, and 3) students that have completed all 48 general education prerequisite credits and are ready to enter the ~~acquisition of the operating assets of United States~~core Nursing courses and clinical experiences.

Related to that announcement, Aspen University ~~(USU),~~has entered into a regionally accredited for-profit university based in San Diego, for consideration of: (i) approximately $1,150,000 in cash (after deduction of closing adjustments including the loan referred to in clause (iii)), (ii) the issuance of 1,203,209 shares of the Company’s common stock, (iii) the forgiveness of an outstanding loan in the amount of principal and accrued interest of $953,400, and (iv) $2.0 million in the form of a convertible note (the “Note”) bearing 8% annual interest that matures over a two-year period after the closing. The common shares were valued at the quoted trading price on the acquisition date of $8.49 per share92 month lease for a total ~~value~~ of ~~approximately $10.2 million. At~~38,014 rentable square feet in a building complex in Phoenix for both the ~~option~~pre-licensure program and the enrollment center. The lease commencement date is expected to be in the spring of 2018 and upon commencement, the ~~Note holder, on each of the first and second anniversaries of the closing date, $1,000,000 of principal and accrued interest under the Note~~monthly payments will be ~~convertible into shares of~~approximately $67,000 per month subject to escalation terms. During the ~~Company’s common stock at the then-current market prices (subject to a floor of $2.00 per share) or become payable in cash. In addition,~~quarter ended 1-31-18, the Company ~~assumed certain liabilities, principally operating liabilities. On December 1, 2017, the value~~paid a deposit of the USU acquisition was approximately $14.7 million, which consisted of substantially all intangibles and goodwill. Aside from intangibles and goodwill, assets acquired were approximately $1.2 Million and liabilities assumed were approximately $1.1 million. The Company is in the process of completing its accounting and valuations of USU and accordingly, more detailed disclosures will be provided in future filings. The estimated fair values and allocation of purchase price noted above is provisional pending the final valuation of the assets acquired and liabilities assumed.$519,000.

~~The acquisition of United States University will allow Aspen Group to achieve its vision of making college affordable again on a much broader scale.~~

In connection with the asset purchase, the Company has also agreed to appoint Oksana Malysheva to the Company’s board of directors which will occur at the Company’s next board meeting which is scheduled for December 15, 2017. She was the controlling person of the former owner of USU and was designated by them in accordance with rights granted under the Asset Purchase Agreement.

On December 4, 2017, in connection with the closing of the acquisition of substantially all the assets of the USU, the Company borrowed another $2.5 million under the credit facility with Runway Growth Fund.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

You should read the following discussion in conjunction with our consolidated financial statements, which are included elsewhere in this Form 10-Q. Management’s Discussion and Analysis of Financial Condition and Results of Operations contain forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed in the Risk Factors contained in the Annual Report on Form 10-K filed on July 25, 2017 with the Securities and Exchange Commission, or the SEC.

All references to “we,” ~~“our”~~“our,” “us,” “AGI,” and ~~“us”~~“Aspen” refer to Aspen Group, Inc. and its subsidiaries, Aspen University Inc. (“Aspen University”) and United States University Inc. (“USU”), unless the context otherwise indicates. ~~In referring to academic matters, these words refer solely to Aspen University, Inc., (“Aspen”).~~

Aspen Group, Inc. (together with its subsidiaries, the “Company” or “AGI”) is a ~~post-secondary education company with an overarching~~holding company. AGI has two subsidiaries, Aspen University Inc. (“Aspen University”) organized in 1987 and United States University Inc. (“USU”). On March 13, 2012, the Company was recapitalized in a reverse merger.

Aspen Group’s vision ~~of making higher education~~is to make college affordable again in America. To date, Aspen Group’s sole operating subsidiary has been Aspen University, Inc., doing business as Aspen University. On December 1, 2017, Aspen Group completed the acquisition of United States University (USU), a regionally accredited for-profit university based in San Diego, California. In connection with the closing of the acquisition of United States University, the Company borrowed an additional $2.5 million under the $10 million senior secured term loan facility with Runway Growth Capital Fund.

~~Given the acquisition of USU was a subsequent event, disclosure below regarding results of operations will focus on the financial results of Aspen University, except where we refer to USU.~~

Founded in 1987, Aspen University’s mission is to offer any motivated college-worthy student the opportunity to receive a high quality, responsibly priced distance-learning education for the purpose of achieving sustainable economic and social benefits for themselves and their families. Aspen is dedicated to providing the highest quality education experiences taught by top-tier professors - 54% of our adjunct professors hold doctorate degrees. We intend to apply this same philosophy to USU.

Because we believe higher education should be a catalyst to our students’ long-term economic success, we exert financial prudence by offering affordable tuition that is one of the greatest values in online higher education. In March 2014, Aspen University unveiled a monthly payment plan aimed at reversing the college-debt sentence plaguing working-class Americans. The monthly payment plan offers bachelor students (except RN to BSN) the opportunity to pay their tuition at $250/month for 72 months ($18,000), nursing bachelor students (RN to BSN) $250/month for 39 months ($9,750), master students $325/month for 36 months ($11,700) and doctoral students $375/month for 72 months ($27,000), interest free, thereby giving students a monthly payment tuition payment ~~plan~~ option versus taking out a federal financial aid loan.

~~One~~United States University (USU) began offering monthly payment plans in the summer of 2017. Today, monthly payment plans are available for the ~~key differences between Aspen~~RN to BSN program ($250/month), MBA/M.A.Ed/MSN programs ($325/month), and ~~other publicly-traded, exclusively online, for-profit universities is~~ the ~~fact that the majority of our active degree-seeking students (72% as of October 31, 2017) were enrolled in Aspen University’s School of Nursing.~~MSN-FNP program ($375/month).

Since 1993, Aspen University has been nationally accredited by the Distance Education and Accrediting Council (“DEAC”), a national accrediting agency recognized by the U.S. Department of Education (the “DOE”). On February 25, 2015, the DEAC informed Aspen University that it had renewed its accreditation for five years to January, 2019.

Since 2009, USU has been regionally accredited by WASC Senior College and University Commission. (“WSCUC”).

Both universities are qualified to participate under the Higher Education Act of 1965, as amended (HEA) and the Federal student financial assistance programs (Title IV, HEA programs).

~~Aspen’s~~Aspen University’s active degree-seeking student body increased year-over-year by ~~51%~~49% during the fiscal quarter ended ~~October~~January 31, 2018, from 4,064 to 6,066 students. United States University’s (USU’s) active degree-seeking student body grew from 212 to 446 students or an increase of 110% from May, 2017 ~~from 3,726~~ to ~~5,641 students.~~January, 2018, highlighted by the College of Nursing growing to 326 students which now represents 73% of USU’s total active student body.

~~Our~~Aspen University’s most popular school is ~~our School of Nursing. Aspen’s~~also its School of Nursing, ~~has grown from 68%~~which represents 73% of ~~our~~Aspen’s total active ~~degree-seeking~~ student body, ~~at October 31, 2016,~~similar to ~~72% at October 31, 2017.~~USU. Aspen’s School of Nursing grew from ~~2,538~~2,899 to ~~4,068~~4,401 student’s year-over-year, which represented ~~80%~~75% of Aspen’s active degree-seeking student body growth. At ~~October~~January 31, ~~2017,~~2018, Aspen’s School of Nursing included ~~2,639~~2,869 active students in the RN to BSN program ~~1,401~~and 1,532 active students in the MSN program, ~~or the~~ RN to MSN Bridge program, ~~and 28 active students in the Doctor of Nursing Practice~~or DNP program.

Note: “Active Degree-Seeking Students” are defined as degree-seeking students who were enrolled in a course during the quarter reported, or are registered for an upcoming course.

Enrollment results for the two month period from December 1, 2017 – January 31, 2018.

Aspen University New Student Enrollment and Active Degree Seeking Student Body Growth

Since the launch of the BSN marketing campaign ~~approximately three years ago, Aspen’s~~in November, 2014, Aspen University’s growth rate of new student enrollments has accelerated significantly. Below is a quarterly analysis of the growth of ~~Aspen’s~~Aspen University’s new student enrollments, as well as the growth of the active degree seeking student body over the past ~~eight~~seven quarters, including the recent quarter ending ~~October~~January 31, ~~2017.~~2018.

Aspen’s School of Nursing is responsible for the vast majority of the new student enrollment and overall active student body growth. Specifically, Aspen’s School of Nursing is projecting to continue to grow on an annualized basis by approximately 1,500 Active Nursing students – net of student graduations and withdrawals (or ~125/month). Aspen’s BSN program accounts for 72% of that growth, as that program is on pace to increase on an annualized basis by approximately 1,080 students – net (or ~90/month).

Below is a summary of the nursing active degree-seeking student body as a percentage of the total active degree-seeking student body over the past ~~eight~~six fiscal ~~quarters, as well as the Nursing degree-seeking revenue as a percentage of total revenues.~~quarters.


	Total Degree-Seeking Active Student Body		Nursing Degree- Seeking Active Student Body		Nursing Degree-Seeking Active Student Body (%)			Nursing Degree-Seeking Active Student Body – Revenue %			Total Degree-Seeking Active Student Body		Nursing Degree- Seeking Active Student Body		Nursing Degree-Seeking Active Student Body (%)
Quarter ended January 31, 2016		2,704		1,663		62	%		62	%
Quarter ended April 30, 2016		2,932		1,882		64	%		67	%
Quarter ended July 31, 2016		3,252		2,144		66	%		69	%
Quarter ended October 31, 2016		3,726		2,538		68	%		71	%		3,726		2,538		68	%
Quarter ended January 31, 2017		4,064		2,899		71	%		71	%		4,064		2,899		71	%
Quarter ended April 30, 2017		4,681		3,363		72	%		74	%		4,681		3,363		72	%
Quarter ended July 31, 2017		5,015		3,569		71	%		73	%		5,015		3,569		71	%
Quarter ended October 31, 2017		5,641		4,068		72	%		74	%		5,641		4,068		72	%
Quarter ended January 31, 2018											6,066		4,401		73	%

Since the March 2014 monthly payment plan announcement, ~~66%~~69% of ~~Aspen’s~~Aspen University’s courses are now paid through monthly payment methods (based on courses started over the last 90 days). Aspen offers two monthly payment programs, a monthly payment plan in which students make payments every month over a fixed period (36, 39 or 72 months depending on the degree program), and a monthly installment plan in which students pay three monthly installments (day 1, day 31 and day 61 after the start of each course).

As of ~~October~~January 31, ~~2017,~~2018, Aspen University had a total of ~~3,752~~4,194 active students paying tuition through a monthly payment method of which ~~3,480~~3,901 active students are paying through a monthly payment plan, and ~~272~~293 students are paying through a monthly installment plan. Additionally, Aspen University is currently projecting to add approximately 120 active students/month net to its monthly payment programs through fiscal year 2018. The total contractual value of ~~Aspen’s~~Aspen University’s monthly payment plan students now exceeds ~~$30~~$35 million which currently delivers monthly recurring tuition cash payments of approximately ~~$880,000.~~$1,000,000.

Finally, as a consequence of monthly payment programs becoming the payment method of choice among the majority of Aspen’s degree-seeking student body, our HEA, Title IV Program revenue dropped from 25% of total cash receipts in fiscal year 2016 to 21% for fiscal year 2017.

Aspen has developed a marketing efficiency ratio to continually monitor the performance of its business model.

The Cost per Enrollment measures the marketing investment spent in a given quarter, divided by the number of new student enrollments achieved in that given quarter, in order to obtain an average CPE for the quarter measured.

The Revenue per Enrollment takes each quarterly cohort of new degree-seeking student enrollments, and measures the amount of earned revenue including tuition and fees to determine the average RPE for the cohort measured. For the later periods of a cohort, in particular students four years or older, we have used reasonable projections based off of historical results to determine the amount of revenue we will earn in later periods of the cohort.

We created the reporting to track the CPE and RPE starting in 2012 and can accurately predict the CPE and RPE for each new student cohort. Our current CPE/RPE Marketing Efficiency Ratio is reflected in the below table.


CPE/RPE Analysis *	6 Months Out	12 Months Out	2 Years Out	3 Years Out	4+ Years Out	6 Months Out	12 Months Out	2 Years Out	3 Years Out	4+ Years Out

Courses completed	2.24	3.52	5.28	6.48	8	2.24	3.52	5.28	6.48	8

Average RPE	$1,974	$3,078	$4,630	$5,684	$7,000	$1,974	$3,078	$4,630	$5,684	$7,000

RPE % earned	28%	44%	66%	81%	100%	28%	44%	66%	81%	100%

Marketing efficiency ratio**	2.54x	3.9x	5.9x	7.2x	8.9x	2.3x	3.5x	5.3x	6.5x	8.0x
* Projection ** Based on current $787 CPE (six month rolling CPE average)
* Projection ** Based on current $876 CPE (six month rolling CPE average)						* Projection ** Based on current $876 CPE (six month rolling CPE average)

The ~~Average~~average RPE is approximately $7,000. Of the $7,000, $6,400 of the RPE is earned through tuition, with the remaining $600 on average earned through miscellaneous fees (includes annual technology fee, withdrawal fees, graduation fees, proctored exams, course specific fees, etc.)

Aspen is projecting to average a Marketing Efficiency Ratio of ~~8.9x,~~8.0x, in other words an ~~8.9x~~8.0x return on our marketing investment. Third-party companies in the higher education industry that manage the Enrollment and Marketing functions on behalf of Universities (also referred to as Managed Services companies) reportedly average 3-4x return on their marketing investments, meaning that Aspen’s business model is currently performing at ~~more than~~approximately double the efficiency level of that sector.

Since the inception of the monthly payment plan in the spring of 2014, the accounts receivable balance, both short-term and long-term, has grown from a net number of $868,298 at April 30, 2014 to a net number of $7,143,959 at October 31, 2017. This growth could be portrayed as the engine of the monthly payment plan. The attractive aspect of being able to pay for a degree over a fixed period of time has fueled the growth of this plan and, as a result, the increase of the accounts receivable balance.

Each student's receivable account is different depending on how many classes a student takes each period. If a student takes two classes each eight-week period while paying $250, $325 or $375 a month, that student's account receivable balance will rise accordingly. The converse is true also. A student who takes courses at a slower pace, even taking time off between 8-week terms, could have a balance due to them. It is much more likely however that a student participating in the monthly payment plan will have an accounts receivable balance, as the majority of students complete their degree program of study prior to the completion of the fixed monthly payment plan.

The common thread is the actual monthly payment, which is a private loan commitment with no interest that each student commits to pay over a fixed number of months. If a student stops paying, that person can no longer register for a class. If a student decides to withdraw from Aspen, their account will be settled, either through collection of their balance or disbursement of the amount owed them. At October 31, 2017, there were approximately 3,480 students on a monthly payment plan, which represented 62% of Aspen’s active student body at October 31, 2017.

~~The gross accounts receivable balance for any period is the net effect of the following three factors:~~

All three factors equally determine the gross accounts receivable. If one quarter experiences particularly high cash receipts, the gross accounts receivable will go down. The same effect if cash receipts are lower or if there are significant changes in either of the other factors.

Simply looking at the change in revenue does not translate into an equally similar change in gross accounts receivable. The relative change in cash and the deferral must also be considered. For net accounts receivable, the changes in the reserve must also be considered. Any additional reserve or write-offs will influence the balance.

As it is a straight mathematical formula for both gross accounts receivable and net accounts receivable, and most of the information is public, one can reasonably calculate the two non-public pieces of information, namely the cash receipts in gross accounts receivable and the write-offs in net accounts receivable.

For revenue, the quarterly change is primarily billings and the net impact of deferred revenue. The deferral from the prior quarter or year is added to the billings and the deferral at the end of the period is subtracted from the amount billed. The total deferred revenue at the end of every period is reflected in the liability section of the balance sheet. Deferred revenue can vary for many reasons, but seasonality and the timing of the class starts in relation to the end of the quarter will cause changes in the balance.

As mentioned in the accounts receivable section, the change in revenue cannot be compared to the change in accounts receivable. Revenue does not have the impact of cash received whereas accounts receivable does. Depending on the month and the amount of cash received, it is likely that revenue or accounts receivable will increase at a rate different from the other. The impact of cash is easy to substantiate as it agrees to deposits in our bank accounts.

~~At October 31, 2017, the Allowance for Doubtful Accounts was $414,364 which represents 5.8% of the Gross Accounts Receivable balance, both short-term and long-term.~~

When a student signs up for the monthly payment plan, there is a contractual amount that Aspen can expect to earn over the life of the student’s program. This contractual amount cannot be recorded as the student does have the option to stop attending. As a student takes a class, revenue is earned over that eight week class. Some students accelerate their program, taking two classes every eight week period, and as we discussed, that increases the student’s accounts receivable balance. If any portion of that balance will be paid in a period greater than 12 months, that portion is reflected as long-term accounts receivable. At October 31, 2017 and April 30, 2017 those balances are $753,326 and $657,542, respectively.

~~Here is a graphic of both short-term and long-term receivables, as well as contractual value:~~

As Aspen University continues to scale its student body, seasonality has become more pronounced. During fiscal year 2016, we explained that its first fiscal quarter (May – July) is the seasonal low point because it falls during the summer months and therefore students tend to take less courses during that quarter relative to the other three fiscal quarters. Conversely, the second fiscal quarter (August – October) is the seasonal high point given students’ ingrained ‘start of the school year’ mentality.

For the Quarter Ended ~~October~~January 31, ~~2017~~2018 Compared with the Quarter Ended ~~October~~January 31, ~~2016~~2017

Revenue from operations for the quarter ended ~~October~~January 31, 2018 (“2018 Quarter”) increased to $5,701,958 from $3,735,626 for the quarter ended January 31, 2017 (“2017 Quarter”) ~~increased to $4,851,639 from $3,465,026 for the quarter ended October 31, 2016 (“2016 Quarter”)~~, an increase of ~~$1,386,613~~$1,966,332 or ~~40%~~53%. ~~Aspen’s School of Nursing accounted for 74% of the revenues for the 2017 Quarter.~~

~~Aspen’s~~The Company’s cost of revenues consists of instructional costs and services and ~~marketing~~sales and ~~promotional~~marketing costs.

Instructional costs and services for the ~~2017~~2018 Quarter rose to ~~$843,811~~$1,196,949 from ~~$547,863~~$694,884 for the ~~2016~~2017 Quarter, an increase of ~~$295,948~~$502,065 or ~~54%~~72%. Instructional costs and services for the ~~2017~~2018 Quarter as a percentage of revenue was ~~17%~~21% as compared to ~~16%~~19% for the ~~2016~~2017 Quarter. ~~As previously projected, Instructional costs~~

Sales and ~~services as a percentage of revenue declined sequentially from 20% to 17%.~~Marketing

~~Marketing and promotional~~marketing costs for the 2018 Quarter were $1,468,715 compared to $664,247 for the 2017 Quarter, ~~were $1,020,848 compared to $686,993 for the 2016 Quarter,~~ an increase of ~~$333,855~~$804,468 or ~~49%~~121%. ~~We expect~~The Company expects marketing and promotional costs to rise in future periods, given we expect to increase monthly marketing spend to over $600,000 during the ~~planned spend rate~~next fiscal year. In addition, this increase is partially attributed to the addition of an ~~average~~outside sales force of ~~$475,000 per month beginning~~9 representatives and those salaries and benefits are included in ~~December 2017 (spending projection includes advertising expenditure planned for both Aspen University and United States University).~~the 2018 Quarter numbers.

Gross ~~profit~~Profit was ~~59%~~51% of revenues or ~~$2,860,772~~$2,900,633 for the ~~2017~~2018 Quarter as compared to ~~61%~~60% of revenues or ~~$2,102,183~~$2,256,918 for the ~~2016~~2017 Quarter. The reasons for the change are reflected in the individual expense items described above.

General and ~~administrative~~Administrative costs for the ~~2017~~2018 Quarter were ~~$3,166,391~~$4,677,359 compared to ~~$1,913,403~~$2,133,074 during the ~~2016~~2017 Quarter, an increase of ~~$1,525,988~~$2,544,285 or ~~65%~~119%. ~~In preparation~~General and Administrative costs as a percentage of revenue for the 2018 Quarter was 82% compared to ~~support a second institution~~57% during the 2017 quarter.

The Company incurred $610,219 of ~~higher learning (pending regulatory approval),~~one-time costs directly related to the USU acquisition. Excluding the $610,219 one-time USU acquisition expenses, G&A increased sequentially by $900,750. The acquisition of United States University accounted for over three-quarters of the ~~past 6 months Aspen Group has increased its~~G&A increase, as the company’s non-faculty full-time staff ~~not including faculty,~~rose from 81110 to ~~140~~142 employees. The majority of the remaining increase was a one-time expense of legal fees related to the HEMG NJ bankruptcy proceeding in which the company is a creditor.

Aspen ~~Group now employs 62 Enrollment Advisors, 15 Academic Advisors, 17 software developers,~~University also recorded $100,000 as a bad debt reserve, an increase reflective of the increase in revenue and ~~37 employees in academic operations and 9 in corporate/marketing.~~students paying by monthly plans.

Depreciation and amortization costs for the ~~2017~~2018 Quarter ~~increased~~rose to ~~$145,355~~$347,894 from ~~$139,005~~$132,727 for the ~~2016~~2017 Quarter, an increase of ~~$6,350~~$215,167 or 5%162%. This increase is substantially due to the amortization of intangible assets from the purchase of USU.

Other ~~income~~expense, net for the ~~2017~~2018 Quarter increased to ~~$23,111~~$158,986 from ~~$1,307~~$78,317 in the ~~2016~~2017 Quarter, an increase of ~~$21,804, reflecting the interest earned on the receivable from USU. Interest expense increased to $179,896 from $62,528, an increase of $117,368~~$80,669 or ~~188%~~103%. This increase ~~reflects increased~~is due to interest ~~expense after taking on the credit facility.~~

Net loss for the 2017 Quarter was ($481,551) as compared to income of $116,541 for the 2016 Quarter, an increase in the loss of $598,092. Although revenues in the 2017 Quarter grew at a higher rate than the increase of recurring operating costs, the higher non-recurring costs related to the USU acquisition resulted in an increased loss for the 2017 Quarter.

~~For the Six Months Ended October 31, 2017 Compared with the Six Months Ended October 31, 2016~~

Revenue from operations for the six months ended October 31, 2017 (“2017 Period”) increased to $9,094,525 from $6,221,841 for the six months ended October 31, 2016 (“2016 Period”), an increase of $2,872,684 or 46%. Aspen’s School of Nursing accounted for 74% of the revenues for the 2017 Period.

~~Aspen’s cost of revenues consists of instructional costs and services and marketing and promotional costs.~~

Instructional costs and services for the 2017 Period rose to $1,696,869 from $1,007,062 for the 2016 Period, an increase of $689,807 or 68%. Instructional costs and services for the 2017 Period as a percentage of revenue was 19% as compared to 16% for the 2016 Period.

Marketing and promotional costs for the 2017 Period were $1,920,281 compared to $1,123,853 for the 2016 Period, an increase of $769,428 or 49%. We expect marketing and promotional costs to rise in future periods given the planned spend rate increase to an average of $475,000 per month beginning in December 2017 (spending projection includes advertising expenditure planned for both Aspen University and United States University).

~~Gross profit was 58% of revenues or $5,229,922 for the 2017 Period as compared to 61% of revenues or $3,822,857 for the 2016 Period.~~

General and administrative costs for the 2017 Period were $6,297,725 compared to $4,095,481 during the 2016 Period, an increase of $2,024,244 or 54%. During the six months ended October 31, 2017, we incurred three non-recurring charges totaling $320,000 that were unrelated to the ongoing operations; Nasdaq uplist fees, expenses related to the asset purchase agreement with USU, and fees associated with the waiver of registration rights granted in the April 2017 equity raise. In preparation to support a second institution of higher learning (pending regulatory approval), over the past 6 months Aspen Group has increased its full-time staff, not including faculty, from 81 to 140 employees. Aspen now employs 62 Enrollment Advisors, 15 Academic Advisors, 17 software developers, and 37 employees in academic operations and 9 in corporate/marketing.

~~Depreciation and amortization costs for the 2017 Period decreased to $284,074 from $290,055 for the 2016 Period, a decrease of $5,981 or 2%.~~

Other income for the 2017 Period increased to $41,888 from $1,364 in the 2016 Period, an increase of $40,524, reflecting the interest earned on the receivable from USU. Interest expense increased to $186,093 from $95,661, an increase of $90,432 or 95%. This increase reflects increased interest expense after takingpaid on the credit facility.

Income taxes expense (benefit) for the comparable years was $0 as Aspen Group experienced operating losses in both periods. As management made a full valuation allowance against the deferred tax assets stemming from these losses, there was no tax benefit recorded in the statement of operations in both periods.

Net loss for 2018 Quarter was ($2,147,945) as compared to income of $7,377 for the 2017 Quarter, a decrease of $2,155,322. In the 2018 Quarter, the results for USU have been included as well as all of the costs associated with the acquisition.

For the Nine Months Ended January 31, 2018 Compared with the Nine Months Ended January 31, 2017

Revenue from operations for the nine months ended January 31, 2018 (“2018 Period”) increased to $14,796,483 from $9,957,467 for the nine months ended January 31, 2017 (“2017 Period”), an increase of $4,839,016 or 49%.

The Company’s cost of revenues consists of instructional costs and services and sales and marketing costs.

Instructional costs and services for the 2018 Period rose to $2,893,818 from $1,701,945 for the 2017 Period, an increase of $1,191,873 or 70%.

Sales and marketing for the 2018 Period were $3,388,996 from $1,788,101 for the 2017 Period, an increase of $1,600,895 or 90%. The Company expects sales and marketing to rise in future periods, given we expect to increase monthly marketing spend to over $600,000 during the 2019 fiscal year.

Gross Profit rose to $8,513,669 for the 2018 Period from $6,467,421 for the 2017 Period. The reasons for the change are reflected in the individual expense items described above.

General and administrative costs for the 2018 Period were $10,975,085 compared to $6,228,554 during the 2017 Period, an increase of $4,746,531 or 76%.

Depreciation and amortization costs for the 2018 Period increased to $631,969 from $422,782 for the 2017 Period, an increase of $209,187 or 49%.

Other expense increased to ($303,190) from ($172,615), an increase of $130,575 or 76%. This increase is primarily due to interest paid on the credit facility. Other income increased to $140,567 from $1,684, primarily due to the interest income earned on the $900,000 promissory note from USU and from the release of the warrant derivative liability of $52,500.

Income taxes expense (benefit) for the 2018 Period and 2017 Period was $0 as Aspen Group experienced operating losses in both periods. As management made a full valuation allowance against the deferred tax assets stemming from these losses, there was no tax benefit recorded in the statement of operations in both periods.

Net loss for the ~~2017~~2018 Period was ($~~1,248,629)~~3,396,575) as compared to ($~~388,907)~~381,530) for the ~~2016~~2017 Period, an increase in the loss of $859,722. Although revenues in the 2017 Period grew at a higher rate than the increase of recurring operating costs, the higher non-recurring costs related to the USU acquisition, the Nasdaq uplist and the fee associated with the waiver of registration rights during the April 2017 equity raise, resulted in an increased loss for the 2017 Period.$3,015,045.

The following discussion and analysis includes both financial measures in accordance with Generally Accepted Accounting Principles, or GAAP, as well as non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position or cash flows that either excludes or includes amounts that are not normally included or excluded in the most directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP financial measures should be viewed as supplemental to, and should not be considered as alternatives to net income, operating income, and cash flow from operating activities, liquidity or any other financial measures. They may not be indicative of the historical operating results of ~~Aspen Group~~AGI nor are they intended to be predictive of potential future results. Investors should not consider non-GAAP financial measures in isolation or as substitutes for performance measures calculated in accordance with GAAP.

Our management uses and relies on EBITDA and Adjusted EBITDA, which are non-GAAP financial measures. We believe that both management and shareholders benefit from referring to the following non-GAAP financial measures in planning, forecasting and analyzing future periods. Our management uses these non-GAAP financial measures in evaluating its financial and operational decision making and as a means to evaluate period-to-period comparison. Our management recognizes that the non-GAAP financial measures have inherent limitations because of the described excluded items.

~~Aspen Group~~AGI defines Adjusted EBITDA as earnings (or loss) from ~~continuing~~ operations before the items in the table below including non-recurring charges of ~~$236,782.~~$85,853. Adjusted EBITDA is an important measure of our operating performance because it allows management, investors and analysts to evaluate and assess our core operating results from period-to-period after removing the impact of items of a non-operational nature that affect comparability.

We have included a reconciliation of our non-GAAP financial measures to the most comparable financial measure calculated in accordance with GAAP. We believe that providing the non-GAAP financial measures, together with the reconciliation to GAAP, helps investors make comparisons between Aspen Group and other companies. In making any comparisons to other companies, investors need to be aware that companies use different non-GAAP measures to evaluate their financial performance. Investors should pay close attention to the specific definition being used and to the reconciliation between such measure and the corresponding GAAP measure provided by each company under applicable SEC rules.

The following table presents a reconciliation of EBITDA and Adjusted EBITDA to ~~Net loss~~net income (loss) allocable to common shareholders, a GAAP financial measure:


								For the
	For the							Nine Months Ended
	Six Months Ended							January 31,
	October 31,							2018				2017
	2017			2016
Net cash used in operating activities	$	(1,673,058	)	$	26,323			$	(3,654,947	)		$	(99,042	)
Net cash used in investing activities		(565,973	)		(389,040	)			(3,031,667	)			(571,856	)
Net cash provided by financing activities		4,862,508			286,300				7,733,477				784,200
Net increase (decrease) in cash and cash equivalents	$	2,623,477		$	(76,417	)
Net increase in cash and cash equivalents							$	1,046,863			$	113,302

Net cash used in operating activities during the ~~2017~~2018 Period totaled ($~~1,673,058)~~3,654,947) and resulted primarily from a net loss of operations of ($1,248,629) and a net change in operating assets and liabilities of ($1,097,927), both offset by non-cash items of $673,498. The most significant change in operating assets and liabilities was an increase of $2,137,055 in accounts receivable, reflecting the expansion of the monthly payment plan. The most significant non-cash item was $303,927 for stock compensation expense.

Net cash provided in operating activities during the 2016 Period totaled $26,323 and resulted primarily by non-cash items of $692,905 and a net change in operating assets and liabilities of $277,674, reduced by the net loss of ~~$388,907.~~($3,396,575), offset by approximately $1,200,000 in non-cash items and approximately $1,100,000 decrease in operating assets and liabilities. The most significant item change operating assets and liabilities was an increase in accounts receivable of ~~$1,304,754~~$4,534,118 which is primarily attributed to the growth in revenues from students paying through the monthly payment plan. The most significant non-cash items were depreciation and amortization expense of ~~$290,055~~$631,969 and ~~the warrant buyback~~stock compensation expense of ~~$206,000.~~$466,468.

Net cash used in operating activities during the 2017 Period totaled ($99,042) and resulted primarily by non-cash items of $925,740 and a net change in operating assets and liabilities of ($668,252), reduced by the net loss of $381,530. The most significant item change operating assets and liabilities was an increase in accounts receivable of $2,331,140 which is primarily attributed to the growth in revenues from students paying through the monthly payment plan. The most significant non-cash items were depreciation and amortization expense of $422,782 and stock compensation expense of $253,833.

Net cash used in ~~Investing Activities~~investing activities during the 2018 Period totaled ($3,031,667) mostly attributed to cash paid in the USU acquisition and the purchase of property and equipment.

Net cash used in investing activities during the 2017 Period totaled ($~~565,973), reflecting primarily fixed asset and courseware purchases.~~

~~Net cash used in investing activities during the 2016 Period totaled ($389,040)~~571,856) mostly attributed to the increase in software.

Net cash provided by financing activities during the 2018 Period totaled $7,733,477 which reflects primarily the cash provided by the senior secured term loan.

Net cash provided by financing activities during the 2017 Period totaled ~~$4,862,508 reflecting the net proceeds of $4,780,572 from the senior secured term loan.~~

~~Net cash used by financing activities during the 2016 Period totaled $286,300~~$784,200 which reflects the increase due to the new $3,000,000 line of credit, of which ~~$750,000 had~~$1,250,000 has been drawn, offset by the buyback of warrants for $400,000.

Historically, our primary source of liquidity is cash receipts from tuition and the issuances of debt and equity securities. More recently, we were able to secure traditional ~~debt financing not convertible into shares of common stock.~~non-convertible debt. The primary uses of cash are payroll related expenses, professional expenses, and instructional and marketing expenses. ~~On April 7, 2017,~~We did issue a convertible note as part of the ~~Company raised $7,500,000 through~~USU purchase price since the ~~issuance~~seller wanted the potential for capital appreciation and required part of ~~2,000,000 shares of common stock. The net proceeds of $6,996,000 were partially used to terminate~~ the ~~third party line of credit with an outstanding balance of approximately $2,150,000 and the repayment of approximately $1,300,000 under notes held~~purchase price evidenced by ~~the Company’s CEO. Accrued interest was paid on all retirements. In addition, on~~a convertible note. On July 25, 2017, the Company finalized a $10 million senior secured term loan, $5 million of which was funded at the close and $2.5 million with the closing of the ~~acquisition of USU.~~USU acquisition.

As of ~~December 13, 2017,~~March 15, 2018, the Company had a cash balance of approximately ~~$5.9~~$3.7 million. With the cash from the Company’s ~~$7.5 million equity raise, the~~ senior secured term loan of $10 million in total (of which $7.5 million has been funded), and the growth in the Company revenues, ~~and improving operating margins,~~ the Company believes that it has sufficient cash to allow the Company to meet its operational expenditures for at least the next 12 months.

Our cash balances are kept liquid to support our growing infrastructure needs. The majority of our cash is concentrated in large financial institutions.

In response to financial reporting release FR-60, Cautionary Advice Regarding Disclosure About Critical Accounting Policies, from the SEC, we have selected our more subjective accounting estimation processes for purposes of explaining the methodology used in calculating the estimate, in addition to the inherent uncertainties pertaining to the estimate and the possible effects on our financial condition. There were no material changes to our principal accounting estimates during the period covered by this report.

Revenue consisting primarily of tuition and fees derived from courses taught by Aspen online as well as from related educational resources that Aspen provides to its students, such as access to our online materials and learning management system. Tuition revenue is recognized pro-rata over the applicable period of instruction. Aspen maintains an institutional tuition refund policy, which provides for all or a portion of tuition to be refunded if a student withdraws during stated refund periods. Certain states in which students reside impose separate, mandatory refund policies, which override Aspen’s policySee Note 9 to the ~~extent in conflict. If~~unaudited consolidated financial statements included herein for additional description of related party transactions that had a student withdraws at a time when a portion or none of the tuition is refundable, then in accordance with its revenue recognition policy, Aspen recognizes as revenue the tuition that was not refunded. Since Aspen recognizes revenue pro-rata over the term of the course and because, under its institutional refund policy, the amount subject to refund is never greater than the amount of the revenue that has been deferred, under Aspen’s accounting policies revenue is not recognized with respect to amounts that could potentially be refunded. Aspen’s educational programs have starting and ending dates that differ from its fiscal quarters. Therefore, at the end of each fiscal quarter, a portion of revenue from these programs is not yet earned and is therefore deferred. Aspen also charges students annual fees for library, technology and other services, which are recognized over the related service period. Deferred revenue represents the amount of tuition, fees, and other student payments received in excess of the portion recognized as revenue and it is included in current liabilities in the accompanyingmaterial effect on our unaudited consolidated ~~balance sheets. Other revenue may be recognized as sales occur or services are performed.~~

All students are required to select both a primary and secondary payment option with respect to amounts due to Aspen for tuition, fees and other expenses. The most common payment option for Aspen’s students is personal funds or payment made on their behalf by an employer. The monthly payment plan represents 60% of the payments that are made by students. In instances where a student selects financial aid as the primary payment option, he or she often selects personal cash as the secondary option. If a student who has selected financial aid as his or her primary payment option withdraws prior to the end of a course but after the date that Aspen’s institutional refund period has expired, the student will have incurred the obligation to pay the full cost of the course. If the withdrawal occurs before the date at which the student has earned 100% of his or her financial aid, Aspen will have to return all or a portion of the Title IV funds to the DOE and the student will owe Aspen all amounts incurred that are in excess of the amount of financial aid that the student earned and that Aspen is entitled to retain. In this case, Aspen must collect the receivable using the student’s second payment option.

For accounts receivable from students, both short term and long term, Aspen records an allowance for doubtful accounts for estimated losses resulting from the inability, failure or refusal of its students to make required payments, which includes the recovery of financial aid funds advanced to a student for amounts in excess of the student’s cost of tuition and related fees. Aspen determines the adequacy of its allowance for doubtful accounts using a general reserve method based on an analysis of its historical bad debt experience, current economic trends, and the aging of the accounts receivable and student status. Aspen applies reserves to its receivables based upon an estimate of the risk presented by the age of the receivables and student status. Aspen writes off accounts receivable balances at the time the balances are deemed uncollectible. Aspen continues to reflect accounts receivable with an offsetting allowance as long as management believes there is a reasonable possibility of collection. Any receivable of a student on a monthly payment plan that exceeds 12 months, the portion that exceeds 12 months is reflected in long term accounts receivable.

For accounts receivable from primary payors other than students, Aspen estimates its allowance for doubtful accounts by evaluating specific accounts where information indicates the customers may have an inability to meet financial obligations, such as bankruptcy proceedings and receivable amounts outstanding for an extended period beyond contractual terms. In these cases, Aspen uses assumptions and judgment, based on the best available facts and circumstances, to record a specific allowance for those customers against amounts due to reduce the receivable to the amount expected to be collected. These specific allowances are re-evaluated and adjusted as additional information is received. The amounts calculated are analyzed to determine the total amount of the allowance. Aspen may also record a general allowance as necessary.

Direct write-offs are taken in the period when Aspen has exhausted its efforts to collect overdue and unpaid receivables or otherwise evaluate other circumstances that indicate that Aspen should abandon such efforts.statements.

We do not engage in any activities involving variable interest entities or off-balance sheet arrangements.

See Note 2 to our unaudited consolidated financial statements included herein for discussion of recent accounting pronouncements.

This report contains forward-looking statements ~~within the meaning of the Private Securities Litigation Reform Act of 1995,~~ including statements regarding ~~nursing and active~~ student growth, ~~expected~~projected Marketing Efficiency Ratio, ~~increase in marketing and promotional costs,~~overall growth and liquidity. All statements other than statements of historical facts contained in this report, including statements regarding our future financial position, liquidity, business strategy and plans and objectives of management for future operations, are forward-looking statements. The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “could,” “target,” “potential,” “is likely,” “will,” “expect” and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs.

The results anticipated by any or all of these forward-looking statements might not occur. Important factors that could cause actual results to differ from those in the forward-looking statements include ~~unexpected difficulties integrating USU, a change in the effectiveness of our marketing, changes in the economy,~~ the failure to maintain regulatory approvals, ~~changes in the nursing industry which make having a degree less attractive, increased~~regulatory issues, competition, ineffective media and/or marketing, failure to maintain growth in degree seeking students ~~errors in our estimates with respect to our accounts receivable,~~ and the ~~failure to generate sufficient revenue.~~integration of USU. Further information on our risk factors is contained in our filings with the SEC, including the Form 10-K ~~for the year ended April 30,~~filed on July 25, 2017. Any forward-looking statement made by us in this report speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update or revise any forward-looking statements, whether as the result of new information, future events or otherwise.

Evaluation of Disclosure Controls and Procedures. Our management carried out an evaluation, with the participation of our Principal Executive Officer and Principal Financial Officer, required by Rule 13a-15 or 15d-15 of the Securities Exchange Act of 1934 (the “Exchange Act”) of the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) or 15d-15(e) under the Exchange Act. Based on their evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures are effective as of the end of the period covered by this report to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting. There were no changes in our internal control over financial reporting as defined in Rule 13a-15(f) or 15d-15(f) under the Exchange Act that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. There were no material changes to our legal proceedings as described in the Company’s Form 10-K during the period covered by this report.

~~In addition~~From November 1, 2017, to ~~those unregistered securities previously disclosed~~January 31, 2018, 87,470 shares were issued in ~~reports filed~~connection with the ~~Securities and Exchange Commission, we have sold~~cashless exercise of 178,917 warrants with exercise prices ranging from 3.99 to 6.00 per share. These securities were issued without registration under the Securities Act of 1933 ~~(the “Securities Act”) as described below. Unless stated otherwise, all securities~~in reliance upon the exemption provided in Section 3(a)(9) thereunder.

From November 1, 2017 to January 31, 2018, 64,584 shares were issued ~~are~~in connection with the exercise of warrants with exercise prices ranging from $2.40 to $6.00 per share. The Company received $162,504 from these cash exercises. During the quarter ended January 31, 2018, 5,000 shares of common ~~stock.~~stock were issued to each of two consultants working on the Arizona campus initiative. These securities were issued without registration under the Securities Act of 1933 in reliance upon the exemption provided in Section 4(a)(2) and Rule 506(b) thereunder.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

This exhibit is being furnished rather than filed and shall not be deemed incorporated by reference into any filing, in accordance with Item 601 of Regulation S-K.

Certain schedules, appendices and exhibits to this agreement have been omitted in accordance with Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished supplementally to the Securities and Exchange Commission staff upon request.

Copies of this report (including the financial statements) and any of the exhibits referred to above will be furnished at no cost to our shareholders who make a written request to Aspen Group, Inc., at the address on the cover page of this report, Attention: Corporate Secretary.


Delaware	27-1933597
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1660 S Albion Street, Suite 525 Denver, CO	80222
(Address of principal executive offices)	(Zip Code)


Large accelerated filer ¨		Accelerated filer ¨þ
Non-accelerated filer ¨	(Do not check if a smaller	Smaller reporting company þ
	reporting company)	Emerging growth company ¨


Class		Outstanding as of ~~December 12, 2017~~March 15, 2018
Common Stock, $0.001 par value per share		~~14,816,205 shares~~15,072,332


	PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements.	1

	Consolidated Balance Sheets	1

	Consolidated Statements of Operations (Unaudited)	3

	Consolidated Statement of Changes in Stockholders’ Equity (Unaudited)	4

	Consolidated Statements of Cash Flows (Unaudited)	5

	Condensed Notes to Consolidated Financial Statements (Unaudited)	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	1619

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	26

Item 4.	Controls and Procedures.	26

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings.	27

Item 1A.	Risk Factors.	27

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	27

Item 3.	Defaults Upon Senior Securities.	27

Item 4.	Mine Safety Disclosures.	27

Item 5.	Other Information.	27

Item 6.	Exhibits.	27


	For the				For the
	Three Months Ended October 31,				Six Months Ended October 31,
	2017		2016		2017		2016

Depreciation and Amortization Expense	$	131,669	$	123,906	$	256,751	$	259,054

Software Amortization Expense	$	112,522	$	112,888	$	220,129	$	237,067


					Additional									Total
	Common Stock				Paid-In			Treasury			Accumulated			Stockholders'
	Shares		Amount		Capital			Stock			Deficit			Equity
Balance at April 30, 2017		13,504,012	$	13,504	$	33,607,423		$	(70,000	)	$	(25,710,687	)	$	7,840,240

Fees associated with equity raise		—		—		(4,707	)		—			—			(4,707	)
Stock-based compensation		—		—		303,924			—			—			303,924
Common stock issued for cashless warrant exercises		78,528		79		(79	)		—			—			—
Common stock issued for warrants exercised for cash		14,858		14		33,584			—			—			33,598
Common stock issued for stock options exercised		16,598		16		53,029			—			—			53,045
Warrants issued with senior secured term loan		—		—		478,428			—			—			478,428
Net loss, for the six months ended October 31, 2017		—		—		—			—			(1,248,629	)		(1,248,629	)
Balance at October 31, 2017		13,613,996	$	13,613	$	34,471,602		$	(70,000	)	$	(26,959,316	)	$	7,455,899


	Basic		Diluted
Numerator
Net income applicable to common stock	$	7,377	$	7,377
Convertible debt interest		—		4,010
	$	7,377	$	11,387

Denominator
Weighted average common shares outstanding		11,467,345		11,467,345
Convertible debt		—		75,596
Warrants and options		—		1,498,029
		11,467,345		13,040,970

Net income per share	$	0.00	$	0.00


	For the				For the
	Three Months Ended January 31,				Nine Months Ended January 31,
	2018		2017		2018		2017

Depreciation and amortization Expense	$	150,596	$	119,064	$	407,346	$	378,118

Software amortization Expense	$	121,695	$	105,914	$	341,825	$	342,938


Year Ending April 30,
2018	$	127,811
2019		456,038
2020		386,196
2021		313,749
2022		293,848
Total	$	1,577,642


Year Ending April 30,
2018	$	229,041
2019		395,009
2020		325,167
2021		252,660
2022		192,315
Total	$	1,394,192


	Purchase Price Allocation			Useful Life
Cash and cash equivalents	$	—
Current assets acquired		244,465
Other assets acquired		176,667
Intangible assets
Accreditation and regulatory approvals		6,200,000
Trade name and trademarks		1,700,000
Student relationships		2,000,000		2 years
Curriculum		200,000		1 year
Goodwill		5,011,432
Less: Current liabilities assumed		(727,601	)
Total purchase price	$	14,804,963


	For the Year Ended April 30, 2017			For the Nine Months Ended October 31, 2017
	(unaudited)			(unaudited)
Revenue	$	18,038,474		$	10,719,546
Net Loss	$	(5,444,205	)	$	(3,521,086	)
Loss per common share- basic and diluted	$	(0.47	)		$(0.26	)


	Aspen University		United States University
	Q3 FY’2018		Q3 FY’2018
New Student Enrollments		1,164		103	**
Active Student Body		6,066		446
-College of Nursing Students		4,401		326
Monthly Payment Method Students		4,194		204


	New Student Enrollments	Active Degree Seeking Student Body*
Fiscal quarter ended January 31, 2016	550	2,704
Fiscal quarter ended April 30, 2016	572	2,932
Fiscal quarter ended July 31, 2016	621	3,252
Fiscal quarter ended October 31, 2016	811	3,726
Fiscal quarter ended January 31, 2017	825	4,064
Fiscal quarter ended April 30, 2017	986	4,681
Fiscal quarter ended July 31, 2017	1,025	5,015
Fiscal quarter ended October 31, 2017	1,255	5,641


	New Student Enrollments	Active Degree Seeking Student Body*
Fiscal quarter end July 31, 2016	621	3,252
Fiscal quarter end October 31, 2016	811	3,726
Fiscal quarter end January 31, 2017	825	4,064
Fiscal quarter end April 30, 2017	986	4,681
Fiscal quarter end July 31, 2017	1,025	5,015
Fiscal quarter end October 31, 2017	1,255	5,641
Fiscal quarter end January 31, 2018	1,164	6,066


A	B	C
~~Classes Taken~~ ~~less monthly~~ ~~payments received~~	~~Payments for classes~~ ~~taken that are greater~~ ~~than 12 months~~	~~Expected classes~~ ~~to be taken over~~ ~~balance of program.~~
~~Short-Term~~ ~~Accounts Receivable~~	~~Long-term~~ ~~Accounts Receivable~~	~~Not recorded in~~ ~~financial statements~~
~~The Sum of A, B and C will equal the total cost of the program.~~


	For the Three Months Ended
	October 31,
	2017			2016
Net (loss) income	$	(481,551	)	$	116,541
Interest Expense, net of interest income		156,785			54,971
Depreciation & amortization		145,355			139,005
EBITDA (Loss) income		(179,411	)		310,517
Bad debt expense		22,500			—
Acquisition expenses		99,065			—
Non-recurring charges		137,717			97,384
Stock-based compensation		144,624			61,728
Adjusted EBITDA	$	224,495		$	469,629


	For the Quarters Ended
	January 31,
	2018			2017
Net income (loss)	$	(2,147,945	)	$	7,377
Interest expense, net of interest income		211,486			78,317
Depreciation & amortization		347,894			132,727
EBITDA (loss)		(1,588,565	)		218,421
Bad debt expense		132,644			(25,680	)
Acquisition expense		610,219			—
Non-recurring charges		85,853			146,809
Stock-based compensation		162,544			96,498
Adjusted EBITDA (Loss)	$	(597,305	)	$	436,048


~~Name or Class of~~ ~~Investor~~	~~Date Issued~~	~~No. of Securities~~	~~Reason for Issuance~~
~~Option Holders (1)~~	~~September 15, 2017;~~ ~~October 16, 2017 and~~ ~~October 17, 2017~~	~~29,191~~	~~Cash exercise of Stock Options~~
~~Warrant Holders (2)~~	~~August 2, 2017 and September 18, 2017~~	~~3,676~~	~~Cashless exercise of Warrants~~


	Aspen Group, Inc.

~~December 13, 2017~~March 15, 2018	By:	/s/ Michael Mathews
		Michael Mathews
		Chief Executive Officer
		(Principal Executive Officer)


~~December 13, 2017~~March 15, 2018	By:	/s/ Janet Gill
		Janet Gill
		Chief Financial Officer
		(Principal Financial Officer)