WASHINGTON,
þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| ☑ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number: 001-38175
Aspen Group, Inc.
(Exact name of registrant as specified in its charter)
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| For the transition period from ___________ to ___________ | |||||
| Delaware | 27-1933597 | |||||||||||||
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| I.R.S. Employer Identification No. | ||||||||||||
| 276 Fifth Avenue, Suite
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| 10001 | |||||||||||
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Registrants
number, including area code)
Large accelerated filer ¨ | Accelerated filer | ||||||||
| Non-accelerated filer |
| Smaller reporting company | |||||||
| Emerging growth company | ||||||||
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Class | Outstanding as of | |||||||
Common Stock, $0.001 par value per share |
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January 31, April 30, 2018 2017 (Unaudited) Assets Current assets: 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 288,640 133,531 Promissory note receivable — 900,000 Other receivables 233,862 81,464 Accrued interest receivable — 8,000 Total current assets 13,109,046 8,314,074 Property and equipment: Call center equipment 96,305 53,748 Computer and office equipment 130,137 103,649 Furniture and fixtures 712,209 255,984 Software 2,590,297 2,131,344 3,528,948 2,544,725 Less accumulated depreciation and amortization (1,161,030 ) (1,090,010 ) Total property and equipment, net 2,367,918 1,454,715 Goodwill 5,011,432 — Intangible assets, net 9,916,667 — Courseware, net 137,557 145,477 Accounts receivable, secured - related party, net of allowance of $625,963, and $625,963, respectively 45,329 45,329 Long term contractual receivable 935,878 657,542 Other assets 585,206 56,417 Total assets $ 32,109,033 $ 10,673,554 January 31, April 30, 2018 2017 (Unaudited) Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 1,273,990 $ 756,701 Accrued expenses 596,633 262,911 Deferred revenue 4,156,550 1,354,989 Refunds due students 730,722 310,576 Deferred rent, current portion 7,429 11,200 Convertible notes payable- related party, current portion 1,000,000 — Convertible notes payable, current portion 50,000 50,000 Other current liabilities 186,134 — Total current liabilities 8,001,458 2,746,377 Convertible note payable - related party 1,000,000 — Senior secured term loan, net of discount 6,769,932 — Warrant Liability — 52,500 Deferred rent 60,295 34,437 Total liabilities 15,831,685 2,833,314 Commitments and contingencies - See Note 7 — — Stockholders’ equity: 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 45,439,538 33,607,423 Treasury stock (16,667 shares) (70,000 ) (70,000 ) Accumulated deficit (29,107,262 ) (25,710,687 ) Total stockholders’ equity 16,277,348 7,840,240 Total liabilities and stockholders’ equity $ 32,109,033 $ 10,673,554 For the For the Three Months Ended Nine Months Ended January 31, January 31, 2018 2017 2018 2017 Revenues $ 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) 2,665,664 1,359,131 6,282,814 3,490,046 General and administrative 4,677,359 2,133,074 10,975,085 6,228,554 Program review settlement expense — 25,000 — 25,000 Depreciation and amortization 347,894 132,727 631,969 422,782 Total operating expenses 7,690,917 3,649,932 17,889,868 10,166,382 Operating (loss) income (1,988,959 ) 85,694 (3,093,385 ) (208,915 ) Other income (expense): Other income 46,179 1,684 88,067 3,047 Gain on extinguishment of warrant liability 52,500 — 52,500 — Interest expense (257,665 ) (80,001 ) (443,757 ) (175,662 ) Total other expense, net (158,986 ) (78,317 ) (303,190 ) (172,615 ) (Loss) income before income taxes (2,147,945 ) 7,377 (3,396,575 ) (381,530 ) Income tax expense (benefit) — — — — Net (loss) income $ (2,147,945 ) $ 7,377 $ (3,396,575 ) $ (381,530 ) Net (loss) income per share allocable to common stockholders - basic $ (0.15 ) $ 0.00 $ (0.25 ) $ (0.03 ) Net (loss) income per share allocable to common stockholders - diluted $ (0.15 ) $ 0.00 $ (0.25 ) $ (0.03 ) Weighted average number of common shares outstanding: basic 14,491,634 11,467,345 13,862,992 11,419,270 Weighted average number of common shares outstanding: diluted 14,491,634 13,040,970 13,862,992 11,419,270 2023 and 2022 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 — — (14,033 ) — — (14,033 ) Restricted stock issued for services 10,000 10 88,690 — — 88,700 Stock-based compensation — — 466,468 — — 466,468 Common stock issued for acquisition 1,203,209 1,203 10,214,041 — — 10,215,244 Common stock issued for cashless warrant exercises 162,072 162 (162 ) — — — Common stock issued for warrants exercised for cash 79,442 79 143,410 — — 143,489 Common stock issued for stock options exercised 113,597 114 455,273 — — 455,387 Warrants issued with senior secured term loan — — 478,428 — — 478,428 Net loss, for the Nine months ended January 31, 2018 — — — — (3,396,575 ) (3,396,575 ) Balance at January 31, 2018 15,072,332 $ 15,072 $ 45,439,538 $ (70,000 ) $ (29,107,262 ) $ 16,277,348 CONSOLIDATED BALANCE SHEETSJanuary 31, 2023 April 30, 2022 (Unaudited) Assets Current assets: Cash and cash equivalents $ 1,603,501 $ 6,482,750 Restricted cash 4,923,525 6,433,397 Accounts receivable, net of allowance of $3,622,365 and $3,460,288, respectively 22,517,343 24,359,241 Prepaid expenses 925,890 1,358,635 Other current assets 1,050,307 748,568 Total current assets 31,020,566 39,382,591 Property and equipment: Computer equipment and hardware 1,584,826 1,516,475 Furniture and fixtures 2,219,245 2,193,261 Leasehold improvements 8,046,844 7,179,896 Instructional equipment 756,568 715,652 Software 11,306,700 10,285,096 Construction in progress — 2,100 23,914,183 21,892,480 Less: accumulated depreciation and amortization (11,102,309) (8,395,001) Total property and equipment, net 12,811,874 13,497,479 Goodwill 5,011,432 5,011,432 Intangible assets, net 7,900,000 7,900,000 Courseware, net 288,024 274,047 Long-term contractual accounts receivable 16,280,621 11,406,525 Deferred financing costs 155,041 369,902 Operating lease right-of-use assets, net 13,865,872 12,645,950 Deposits and other assets 501,190 578,125 Total assets $ 87,834,620 $ 91,066,051 (Continued)The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.1ASPEN GROUP, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS (CONTINUED)January 31, 2023 April 30, 2022 (Unaudited) Liabilities and Stockholders’ Equity Liabilities: Current liabilities: Accounts payable $ 2,247,043 $ 1,893,287 Accrued expenses 3,118,533 2,821,432 Deferred revenue 8,075,063 5,889,911 Due to students 2,977,365 4,063,811 Current portion of long-term debt 5,000,000 — Operating lease obligations, current portion 2,346,766 2,036,570 Other current liabilities 306,484 130,262 Total current liabilities 24,071,254 16,835,273 Long-term debt, net 9,957,328 14,875,735 Operating lease obligations, less current portion 17,869,754 16,809,319 Total liabilities 51,898,336 48,520,327 Commitments and contingencies – see Note 10 Stockholders’ equity: Preferred stock, $0.001 par value; 1,000,000 shares authorized, 0 issued and 0 outstanding at January 31, 2023 and April 30, 2022 — — Common stock, $0.001 par value; 60,000,000 shares authorized, 25,586,837 issued and 25,431,351 outstanding at January 31, 2023 25,357,764 issued and 25,202,278 outstanding at April 30, 2022 25,587 25,358 Additional paid-in capital 113,035,546 112,081,564 Treasury stock (155,486 at both January 31, 2023 and April 30, 2022) (1,817,414) (1,817,414) Accumulated deficit (75,307,435) (67,743,784) Total stockholders’ equity 35,936,284 42,545,724 Total liabilities and stockholders’ equity $ 87,834,620 $ 91,066,051 The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.2CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)Three Months Ended January 31, Nine Months Ended January 31, 2023 2022 2023 2022 Revenue $ 15,574,042 $ 18,944,798 $ 51,542,502 $ 57,316,004 Operating expenses: Cost of revenue (exclusive of depreciation and amortization shown separately below) 5,394,155 9,275,419 21,946,714 26,658,188 General and administrative 9,624,528 11,771,487 31,039,666 34,359,276 Bad debt expense 450,000 350,000 1,250,000 1,050,000 Depreciation and amortization 919,152 883,536 2,775,330 2,480,179 Total operating expenses 16,387,835 22,280,442 57,011,710 64,547,643 Operating loss (813,793) (3,335,644) (5,469,208) (7,231,639) Other income (expense): Interest expense (716,845) (180,697) (2,008,510) (353,738) Other income, net 12,847 13,954 28,138 516,754 Total other (expense) income, net (703,998) (166,743) (1,980,372) 163,016 Loss before income taxes (1,517,791) (3,502,387) (7,449,580) (7,068,623) Income tax expense 37,249 231,610 114,071 388,520 Net loss $ (1,555,040) $ (3,733,997) $ (7,563,651) $ (7,457,143) Net loss per share - basic and diluted $ (0.06) $ (0.15) $ (0.30) $ (0.30) Weighted average number of common stock outstanding - basic and diluted 25,381,500 25,041,733 25,289,224 24,971,056 The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.3CONSOLIDATED STATEMENTSTATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITYFOR THE NINE MONTHS ENDED JANUARYThree Months Ended January 31, 2018(Unaudited)Common Stock Additional
Paid-In
CapitalTreasury
StockAccumulated
DeficitTotal
Stockholders’
EquityShares Amount Balance at October 31, 2022 25,460,849 $ 25,461 $ 112,634,162 $ (1,817,414) $ (73,752,395) $ 37,089,814 Stock-based compensation — — 394,510 — — 394,510 Common stock issued for vested restricted stock units 125,988 126 (126) — — — Amortization of warrant-based cost issued for services — — 7,000 — — 7,000 Net loss — — — — (1,555,040) (1,555,040) Balance at January 31, 2023 25,586,837 $ 25,587 $ 113,035,546 $ (1,817,414) $ (75,307,435) $ 35,936,284 Common Stock Additional
Paid-In
CapitalTreasury
StockAccumulated
DeficitTotal
Stockholders’
EquityShares Amount Balance at October 31, 2021 25,148,194 $ 25,149 $ 110,526,729 $ (1,817,414) $ (61,881,149) $ 46,853,315 Stock-based compensation — — 700,697 — — 700,697 Common stock issued for stock options exercised for cash 41,667 41 134,959 — — 135,000 Common stock issued for vested restricted stock units 38,719 39 (39) — — — Amortization of warrant based cost — — 16,125 — — 16,125 Net loss — — — — (3,733,997) (3,733,997) Balance at January 31, 2022 25,228,580 $ 25,229 $ 111,378,471 $ (1,817,414) $ (65,615,146) $ 43,971,140 The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.
CHANGES IN STOCKHOLDERS’ EQUITY For the Nine months ended January 31, 2018 2017 Cash flows from operating activities: Net loss $ (3,396,575 ) $ (381,530 ) Adjustments to reconcile net loss to net cash used in operating activities: Bad debt expense (recovery) 298,144 (25,680 ) Gain on extinguishment of warrant liability (52,500 ) — Depreciation and amortization 631,969 422,782 Loss on asset disposal 27,590 — Stock-based compensation 466,468 253,833 Amortization of debt discounts 99,726 15,625 Amortization of prepaid shares for services 37,039 52,500 Warrant buyback expense — 206,000 Changes in operating assets and liabilities: Accounts receivable (4,534,118 ) (2,331,140 ) Prepaid expenses (59,451 ) 28,715 Accrued interest receivable (45,400 ) — Other receivables (152,398 ) — Other assets (528,789 ) (25,241 ) Accounts payable 366,044 875,110 Accrued expenses 218,476 105,111 Deferred rent 22,087 17,318 Refunds due students 420,146 124,912 Deferred revenue 2,340,461 562,643 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 (1,171,473 ) (565,306 ) Proceeds from promissory note receivable 900,000 — Net cash used in investing activities (3,031,667 ) (571,856 ) Cash flows from financing activities: Warrant Buyback — (400,000 ) 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 ) Proceeds of warrant and stock options exercised 598,876 — Offering costs paid on debt financing (351,366 ) — Disbursements for equity offering costs (14,033 ) (4,017 ) Proceeds from senior secured term loan 7,500,000 — Net cash provided by financing activities 7,733,477 784,200 Net increase in cash 1,046,863 113,302 Cash at beginning of period 2,756,217 783,796 Cash at end of period $ 3,803,080 $ 897,098 For the Nine months ended January 31, 2018 2017 Supplemental disclosure of cash flow information: Cash paid for interest $ 316,781 $ 145,105 Cash paid for income taxes $ — $ — Supplemental disclosure of non-cash investing and financing activities Warrants issued as part of senior secured loan $ 478,428 $ — Assets acquired net of liabilities assumed for non-cash consideration $ 12,215,244 $ — Common stock issued for services $ — $ 62,002 Warrant derivative liability $ — $ 52,500 4CONSOLIDATED STATEMENTS OF CASH FLOWSNine Months Ended January 31, 2023 and 2022(Unaudited)(Continued)Common Stock Additional
Paid-In
CapitalTreasury
StockAccumulated
DeficitTotal
Stockholders’
EquityShares Amount Balance at April 30, 2022 25,357,764 $ 25,358 $ 112,081,564 $ (1,817,414) $ (67,743,784) $ 42,545,724 Stock-based compensation — — 899,176 — — 899,176 Common stock issued for vested restricted stock units 192,233 192 (192) — — — Common stock issued for services 25,000 25 24,475 — — 24,500 Common stock issued for equity raise, net of underwriter costs 11,840 12 9,523 — — 9,535 Amortization of warrant-based cost issued for services — — 21,000 — — 21,000 Net loss — — — — (7,563,651) (7,563,651) Balance at January 31, 2023 25,586,837 $ 25,587 $ 113,035,546 $ (1,817,414) $ (75,307,435) $ 35,936,284 Common Stock Additional
Paid-In
CapitalTreasury
StockAccumulated
DeficitTotal
Stockholders’
EquityShares Amount Balance at April 30, 2021 25,066,297 $ 25,067 $ 109,040,824 $ (1,817,414) $ (58,158,003) $ 49,090,474 Stock-based compensation — — 1,965,567 — — 1,965,567 Common stock issued for stock options exercised for cash 58,419 58 190,976 — — 191,034 Common stock issued for cashless stock options exercised 30,156 30 (30) — — — Common stock issued for vested restricted stock units 73,708 74 (74) — — — Amortization of warrant based cost — — 43,708 — — 43,708 Warrants issued for deferred financing costs related to Credit Facility — — 137,500 — — 137,500 Net loss — — — — (7,457,143) (7,457,143) Balance at January 31, 2022 25,228,580 $ 25,229 $ 111,378,471 $ (1,817,414) $ (65,615,146) $ 43,971,140 The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.5ASPEN GROUP, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)(Unaudited)Nine Months Ended January 31, 2023 2022 Cash flows from operating activities: Net loss $ (7,563,651) $ (7,457,143) Adjustments to reconcile net loss to net cash used in operating activities: Bad debt expense 1,250,000 1,050,000 Depreciation and amortization 2,775,330 2,480,179 Stock-based compensation 899,176 1,965,567 Amortization of warrant-based cost 21,000 43,708 Amortization of deferred financing costs 468,787 49,107 Amortization of debt discounts 88,500 18,056 Common stock issued for services 24,500 — Loss on asset disposition — 36,445 Non-cash lease benefit (267,290) (96,450) Tenant improvement allowances received from landlords 418,000 816,591 Changes in operating assets and liabilities: Accounts receivable (4,282,195) (6,412,590) Prepaid expenses 432,745 (297,797) Other current assets (301,738) 37,498 Accounts receivable, other — 45,329 Deposits and other assets 76,934 (44,686) Accounts payable (68,244) 340,168 Accrued expenses 297,101 38,353 Due to students (1,086,446) 482,032 Deferred revenue 2,185,152 (642,233) Other current liabilities 176,222 (171,894) Net cash used in operating activities (4,456,117) (7,719,760) Cash flows from investing activities: Purchases of courseware and accreditation (82,000) (161,262) Disbursements for reimbursable leasehold improvements (418,000) (816,591) Purchases of property and equipment (1,181,706) (2,756,817) Net cash used in investing activities (1,681,706) (3,734,670) Cash flows from financing activities: Proceeds from sale of common stock, net of underwriter costs 9,535 — Payment of commitment fee for 2022 Credit Facility (200,000) — Payments of deferred financing costs (60,833) — Borrowings under the 2018 Credit Facility — 5,000,000 Proceeds from stock options exercised — 191,034 Net cash (used in) provided by financing activities (251,298) 5,191,034 (Continued)The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.
2023 profession. 2024. , an accrediting agency recognized by the DOE, through 2030. certification for a two-year timeframe, and set a subsequent program participation reapplication date of September 30, 2023.6ASPEN GROUP, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)(Unaudited)Nine Months Ended January 31, 2023 2022 Net decrease in cash, cash equivalents and restricted cash $ (6,389,121) $ (6,263,396) Cash, cash equivalents and restricted cash at beginning of period 12,916,147 13,666,079 Cash, cash equivalents and restricted cash at end of period $ 6,527,026 $ 7,402,683 Supplemental disclosure cash flow information: Cash paid for interest $ 1,446,728 $ 258,630 Cash paid for income taxes $ 25,253 $ 13,520 Supplemental disclosure of non-cash investing and financing activities: Warrants issued as part of the 2018 Credit Facility amendment $ — $ 137,500 The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the accompanying consolidated balance sheet to the total amounts shown in the accompanying unaudited consolidated statements of cash flows:January 31, 2023 2022 Cash and cash equivalents $ 1,603,501 $ 5,969,286 Restricted cash 4,923,525 1,433,397 Total cash, cash equivalents and restricted cash $ 6,527,026 $ 7,402,683 The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.7ASPEN GROUP, INC. AND SUBSIDIARIESCONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTSJANUARYJanuary 31, 2018(Unaudited)Note 1. Nature of Operations and LiquidityOverviewAspen Group, Inc. (together with its subsidiaries, the “Company” or “AGI”("AGI") is aan education technology holding company, whichcompany. AGI has two subsidiaries.subsidiaries, Aspen University Inc. (“("Aspen University”University" or "AU") was organized in 1987, and United States University Inc. (“USU”("United States University" or "USU") was formed May 2017.All references to the “Company”, “AGI”, “Aspen Group”, “we”, “our” and certain assets were acquired“us” refer to Aspen Group, Inc., unless the context otherwise indicates.AGI leverages its education technology infrastructure and liabilities assumedexpertise to allow its two universities, Aspen University and United States University, to deliver on December 1, 2017. (See Note 10)Aspen Group’sthe vision is to makeof making college affordable again in America.again. 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 reversingAGI’s primary focus relative to future growth is to target 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),high growth 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 option versus taking out a federal financial aid loan.United States University (USU) began offering monthly payment plans in the summer of 2017. Today, monthly payment plans are available for the RN to BSN program ($250/month), MBA/M.A.Ed/MSN programs ($325/month), and the MSN-FNP program ($375/month).Since 1993, Aspen University has been nationallyinstitutionally accredited by the Distance Education and Accrediting Council (“DEAC”), a nationalan accrediting agency recognized by the U.S.United States Department of Education (the “DOE”). On February 25, 2015, the DEAC informed Aspen University that it had renewed its accreditation for five years to, through January 2019.Since 2009, USU has been regionallyinstitutionally accredited by WASC Senior College and University Commission.Commission (“WSCUC”).Both universities are qualified to participate under the Higher Education Act of 1965, as amended (HEA)("HEA") and the Federal student financial assistance programs (Title IV, HEA programs). USU hashad provisional certification resulting from the ownership change of control in connection with the acquisition by AGI on December 1, 2017. The provisional certification expired on December 31, 2020. The institution submitted its recertification application timely in October 2020, and received full certification on May 6, 2022, and a new Program Participation Agreement ("PPA") was issued with an effective period until December 31, 2025. On August 22, 2017, the DOE informed Aspen University of its determination that the institution had 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. On April 16, 2021, the DOE granted provisional certification.Basis of PresentationA. Interim Financial StatementsThe interim unaudited 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 nine months ended January 31, 20182023 and 2017,2022, our cash flows for the nine months ended January 31, 20182023 and 2017,2022, and our consolidated financial position as of January 31, 20182023 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 unaudited 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 Annual Report on Form 10-K for the periodfiscal year ended April 30, 20172022 as filed with the SEC on July 25, 2017.29, 2022. The April 30, 20172022 consolidated balance sheet is derived from those statements.7ASPEN GROUP, INC. AND SUBSIDIARIESCONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTSJANUARY 31, 2018(Unaudited)B. LiquidityAt January 31, 2018, the Company had a cash balance of $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 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 10).
Principles
Use
The
and Restricted Cash
| January 31, 2023 | April 30, 2022 | ||||||||||
| Cash and cash equivalents | $ | 1,603,501 | $ | 6,482,750 | |||||||
| Restricted cash: | |||||||||||
| Letter of credit for level of Title IV funding at USU | — | 9,872 | |||||||||
| Collateral for corporate credit card at AGI | 250,000 | 250,000 | |||||||||
| Letters of credit for operating leases at AU and USU | 1,173,525 | 1,173,525 | |||||||||
| Collateral for surety bond at AU | 3,500,000 | 5,000,000 | |||||||||
| Total restricted cash | 4,923,525 | 6,433,397 | |||||||||
| Total cash and cash equivalents and restricted cash as shown on the statement of cash flows | $ | 6,527,026 | $ | 12,916,147 | |||||||
Goodwill and Intangibles
Goodwill representsprinciple that revenue is recognized to depict the excesstransfer of purchase price overgoods or services to customers in an amount that reflects the fair market valueconsideration to which the entity expects to be entitled in exchange for those goods or services. This ASC also requires additional disclosure about the
JANUARY
2023
Fair Value Measurements
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
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 cashrevenue 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.
Refunds Due Students
The Company receives Title IV fundsflows arising from the 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.
customer purchase orders, including significant judgments.
Revenues consistconsists primarily of tuition and course fees derived from courses taught by the Company online and in-person as well as from related educational resources and services that the Company provides to its students, such as access to our online materialsstudents. Under ASC 606, tuition and learning management system. Tuitioncourse fee revenue is recognized pro-rata over the applicable period of instruction. The Company maintains an institutional tuition refund policy,instruction and are not considered separate performance obligations. Non-tuition related revenue and fees are recognized as services are provided or when the goods are received by the student. Students may receive discounts, scholarships, or refunds, which provides for allgives rise to variable consideration. Discounts or a portion of tuitionscholarships are applied to be refunded if aindividual 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 timeaccounts when a portion or none ofsuch amounts are awarded. Therefore, 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 thanreduced directly by these discounts or scholarships from 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. standard tuition rate charged.
The Company has revenues from students outside the United States representing 2.1% of the revenues for the quarter ended January 31, 2018.
Accounting for Derivatives
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 other extinguishment (transaction) of a derivative instrument, the instrument is marked to fair value at the transaction date and then that fair value is 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.
9
ASPEN GROUP, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2018
(Unaudited)
Business Combinations
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.
| January 31, 2023 | April 30, 2022 | |||||||||||||
| Options to purchase common shares | 614,458 | 860,182 | ||||||||||||
| Restricted stock units | — | — | ||||||||||||
| Warrants to purchase common shares | 425,000 | 649,174 | ||||||||||||
| Unvested restricted stock | 523,056 | 929,928 | ||||||||||||
| Convertible Notes | 10,000,000 | 10,000,000 | ||||||||||||
As required to be disclosed for quarters with net income, basiccurriculum and diluted income per share foreducational delivery needs of its online and campus students regardless of geography. The Company's chief operating decision makers, its Chief Executive Officer, Chief Operating Officer and Chief Academic Officer, manage the three months ended January 31, 2017, were calculatedCompany's operations as follows:
|
| 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 |
|
a whole.
Pronouncement Not Yet Adopted
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 FebruaryJune 2016, the Financial Accounting Standards Board ("FASB") issued Accounting StandardsStandard Update ("ASU") No. 2016-02: “Leases2016-13,
statements when adopted on the effective date of May 1, 2023.
JANUARY
2023
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
|
| January 31, |
|
| April 30, |
| ||
|
| 2018 |
|
| 2017 |
| ||
Call center hardware |
| $ | 96,305 |
|
| $ | 53,748 |
|
Computer and office equipment |
|
| 130,137 |
|
|
| 103,649 |
|
Furniture and fixtures |
|
| 712,209 |
|
|
| 255,984 |
|
Software |
|
| 2,590,297 |
|
|
| 2,131,344 |
|
|
|
| 3,528,948 |
|
|
| 2,544,725 |
|
Accumulated depreciation and amortization |
|
| (1,161,030 | ) |
|
| (1,090,010 | ) |
Property and equipment, net |
| $ | 2,367,918 |
|
| $ | 1,454,715 |
|
Software consisted of the following at January 31, 2018 and April 30, 2017:
|
| January 31, |
|
| April 30, |
| ||
|
| 2018 |
|
| 2017 |
| ||
Software |
| $ | 2,590,297 |
|
| $ | 2,131,344 |
|
Accumulated amortization |
|
| (1,012,655 | ) |
|
| (994,017 | ) |
Software, net |
| $ | 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 nine months ended January 31, 2018 and 2017:
|
| 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 |
|
The following is a schedule of estimated future amortization expense of software at January 31, 2018:
Year Ending April 30, |
|
|
| |
2018 |
| $ | 127,811 |
|
2019 |
|
| 456,038 |
|
2020 |
|
| 386,196 |
|
2021 |
|
| 313,749 |
|
2022 |
|
| 293,848 |
|
Total |
| $ | 1,577,642 |
|
11
ASPEN GROUP, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2018
(Unaudited)
Note 4. Courseware
Courseware costs capitalized were $33,369 for the nine months ended January 31, 2018. Fully expired courseware is written off against the accumulated amortization. There is no expense impact for such write-offs.
Courseware consisted of the following at January 31, 2018 and April 30, 2017:
|
| January 31, |
|
| April 30, |
| ||
|
| 2018 |
|
| 2017 |
| ||
Courseware |
| $ | 283,046 |
|
| $ | 271,777 |
|
Accumulated amortization |
|
| (145,489 | ) |
|
| (126,300 | ) |
Courseware, net |
| $ | 137,557 |
|
| $ | 145,477 |
|
Amortization expense of coursewarewrite-offs for the three and nine months ended January 31, 20182023 and 2017:
|
| For the |
|
| For the |
| ||||||||||
|
| Three Months Ended January 31, |
|
| Nine Months Ended January 31, |
| ||||||||||
|
| 2018 |
|
| 2017 |
|
| 2018 |
|
| 2017 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Amortization expense |
| $ | 13,966 |
|
| $ | 13,663 |
|
| $ | 41,289 |
|
| $ | 44,664 |
|
The following is a schedule2022.
| January 31, 2023 | April 30, 2022 | ||||||||||
| Software | $ | 11,306,700 | $ | 10,285,096 | |||||||
| Accumulated amortization | (6,596,730) | (5,170,943) | |||||||||
| Software, net | $ | 4,709,970 | $ | 5,114,153 | |||||||
| Three Months Ended January 31, | Nine Months Ended January 31, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Depreciation and amortization expense: | |||||||||||||||||||||||
| Property and equipment, excluding software | $ | 417,044 | $ | 418,081 | $ | 1,281,521 | $ | 1,136,929 | |||||||||||||||
| Software | $ | 478,455 | $ | 443,284 | $ | 1,425,787 | $ | 1,283,088 | |||||||||||||||
Year Ending April 30, |
|
|
| |
2018 |
| $ | 14,152 |
|
2019 |
|
| 56,143 |
|
2020 |
|
| 42,301 |
|
2021 |
|
| 15,336 |
|
2022 |
|
| 9,625 |
|
Total |
| $ | 137,557 |
|
2023 and 2022.
| January 31, 2023 | April 30, 2022 | ||||||||||
| Courseware | $ | 657,282 | $ | 575,283 | |||||||
| Accreditation | 59,350 | 59,350 | |||||||||
| 716,632 | 634,633 | ||||||||||
| Accumulated amortization | (428,608) | (360,586) | |||||||||
| Courseware and accreditation, net | $ | 288,024 | $ | 274,047 | |||||||
| Three Months Ended January 31, | Nine Months Ended January 31, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Courseware and accreditation amortization expense | $ | 23,653 | $ | 21,744 | $ | 68,022 | $ | 58,877 | |||||||||||||||
Debt
| January 31, 2023 | April 30, 2022 | |||||||||||||
| Credit Facility due March 14, 2023 (the "2022 Revolving Credit Facility") | $ | — | $ | — | ||||||||||
| Credit Facility due November 4, 2023 (the "2018 Credit Facility"); interest payable monthly in arrears | 5,000,000 | 5,000,000 | ||||||||||||
| 12% Convertible Notes due March 14, 2027 (the "2022 Convertible Notes"); interest payable monthly in arrears | 10,000,000 | 10,000,000 | ||||||||||||
| Total long-term debt | 15,000,000 | 15,000,000 | ||||||||||||
| Less: current portion of long-term debt | (5,000,000) | — | ||||||||||||
| Less: unamortized debt discount | (42,672) | (124,265) | ||||||||||||
| Total long-term debt, net | $ | 9,957,328 | $ | 14,875,735 | ||||||||||
TheLenders, at all times prior to the delivery of the Termination Certificate (as defined below), excluding funding as directed by the surety bond as described more fully below, (i) the Company willshall not be permitted to make any draw request or borrow any funds under the 2022 Revolver Agreements and (ii) the Lenders shall not be required to begin making principal repayments uponfund any loan or advance any funds under the 24-month anniversary2022 Revolver Agreements. Upon that certain surety bond ceasing to be outstanding, the Company shall deliver to the lenders a certificate (such certificate, the “Termination Certificate”), certifying that the surety bond is no longer outstanding and that there are no further obligations in respect of the initial closing (July 24, 2019), and each month thereafter will repay 1/24thsurety bond owing by the Company to the Insurance Company. Prior to issuance of the total loan amount outstanding. ShouldTermination Certificate and during the time the surety bond is in effect, the Insurance Company may cause the Company achieve both annualized revenue growthto draw on funds for the express purposes of at least 30% and operating margin of at least 7.5% for any 12-month trailing period, then atresolving claims filed under the quarter-end of that 12-month trailing period,surety bond. In addition to the draw restriction on the 2022 Revolver Agreements, the Insurance Company required the Company may elect to extend the interest only periodrestrict $5 million of cash. As consideration for the quarter immediately followingLenders agreeing to enter into the 12-month trailing period throughout the duration of the loan.
Additionally,Amendment, the Company paid a 0.25% origination fee on the initial $5 million draw and paid another 0.25% origination fee upon the second $2.5 million draw, will be subjectagreed to a final payment fee of 3.25% of the principal lent, and issued 224,174 5-yearissue each Lender 100,000 five-year warrants exercisable at an exercise price of $6.87.$1.00 per share. The relative fair value of the warrants was $478,428is $118,000 and was recorded as debt discount along with other direct costsis being amortized over the remaining term of the debt. The fair value of the warrants are treated as deferred financing costs, a non-current asset, in the accompanying consolidated balance sheets at April 30, 2022. Total unamortized costs at January 31, 2023 were $29,500. See Note 6. Stockholders’ Equity for additional information related to these warrants.
12
JANUARY
2023
Note 6. Convertible Notes – Related Party
Note 7. Commitments15% Senior Secured Debentures on May 12, 2023.
Employment Agreements
From timeApril 30, 2022, there were no unvested shares of restricted common stock outstanding. During the nine months ended January 31, 2023 and 2022, there were 10,000 and zero restricted stock expirations. There is no unrecognized compensation expense related 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. Asrestricted stock as of January 31, 2023.
Legal Matters
From time to time, we may be involved in litigation relating to claims arising out of our operations inEquity Incentive Plans, during the normal course of business. As ofnine months ended January 31, 2018, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results2023 is presented below:
| Restricted Stock Units | Number of Shares | Weighted Average Grant Date Fair Value | ||||||||||||
| Unvested balance outstanding, April 30, 2022 | 929,928 | $ | 6.12 | |||||||||||
| Granted | 15,000 | 0.35 | ||||||||||||
| Forfeits | (185,059) | 7.65 | ||||||||||||
| Vested | (236,813) | 0.70 | ||||||||||||
| Expired | — | — | ||||||||||||
| Unvested balance outstanding, January 31, 2023 | 523,056 | $ | 7.87 | |||||||||||
An institution participatinghis employment agreement. The grant has a grant date fair value of $725,000 based on a closing stock price of $5.80 per share. On August 12, 2021, the Compensation Committee approved individual grants of 80,000 RSUs to the Company’s Chief Operating Officer and Chief Academic Officer. The grants have a total grant date fair value of $1.0 million based on a closing stock price of $6.48 per share.
| Warrants | Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value | ||||||||||||||||||||||
| Balance Outstanding, April 30, 2022 | 649,174 | $ | 4.70 | 1.96 | $ | — | ||||||||||||||||||||
| Granted | — | $ | — | — | — | |||||||||||||||||||||
| Exercised | — | $ | — | — | — | |||||||||||||||||||||
| Surrendered | — | $ | — | — | — | |||||||||||||||||||||
| Expired | (224,174) | $ | 6.87 | — | — | |||||||||||||||||||||
| Balance Outstanding, January 31, 2023 | 425,000 | $ | 3.56 | 3.02 | $ | — | ||||||||||||||||||||
| Unvested | (16,667) | |||||||||||||||||||||||||
| Exercisable, January 31, 2023 | 408,333 | $ | 3.42 | 3.00 | $ | — | ||||||||||||||||||||
| OUTSTANDING WARRANTS | EXERCISABLE WARRANTS | |||||||||||||||||||||||||||||||
| Exercise Price | Weighted Average Exercise Price | Outstanding Number of Warrants | Weighted Average Exercise Price | Weighted Average Remaining Life In Years | Exercisable Number of Warrants | |||||||||||||||||||||||||||
| $ | 1.00 | 1.00 | 200,000 | $ | 1.00 | 4.23 | 200,000 | |||||||||||||||||||||||||
| $ | 4.89 | $ | 4.89 | 50,000 | $ | 4.89 | 1.19 | 50,000 | ||||||||||||||||||||||||
| $ | 5.85 | $ | 5.85 | 50,000 | $ | 5.85 | 3.58 | 50,000 | ||||||||||||||||||||||||
| $ | 6.00 | $ | 6.00 | 100,000 | $ | 6.00 | 1.09 | 100,000 | ||||||||||||||||||||||||
| $ | 6.99 | $ | 6.99 | 25,000 | $ | 6.99 | 3.47 | 8,333 | ||||||||||||||||||||||||
| 425,000 | 408,333 | |||||||||||||||||||||||||||||||
| Options | Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value | ||||||||||||||||||||||
| Balance Outstanding, April 30, 2022 | 860,182 | $ | 7.03 | 1.25 | $ | — | ||||||||||||||||||||
| Granted | — | — | — | — | ||||||||||||||||||||||
| Exercised | — | — | — | — | ||||||||||||||||||||||
| Forfeited | (36,634) | 8.89 | — | — | ||||||||||||||||||||||
| Expired | (209,090) | 7.42 | — | — | ||||||||||||||||||||||
| Balance Outstanding, January 31, 2023 | 614,458 | $ | 6.79 | 0.73 | $ | — | ||||||||||||||||||||
| Exercisable, January 31, 2023 | 614,458 | $ | 6.79 | 0.73 | $ | — | ||||||||||||||||||||
| OUTSTANDING OPTIONS | EXERCISABLE OPTIONS | |||||||||||||||||||||||||||||||
| Exercise Price | Weighted Average Exercise Price | Outstanding Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Life In Years | Exercisable Number of Options | |||||||||||||||||||||||||||
| $3.24 to $4.38 | $ | 4.00 | 31,665 | $ | 4.00 | 1.50 | 31,665 | |||||||||||||||||||||||||
| $4.50 to $5.20 | $ | 4.97 | 119,876 | $ | 4.97 | 1.03 | 119,876 | |||||||||||||||||||||||||
| $7.17 to $7.55 | $ | 7.45 | 462,917 | $ | 7.45 | 0.60 | 462,917 | |||||||||||||||||||||||||
| 614,458 | 614,458 | |||||||||||||||||||||||||||||||
| Three Months Ended January 31, | Nine Months Ended January 31, | |||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||
| RSUs | $ | 394,510 | $ | 397,241 | $ | 893,769 | $ | 1,532,147 | ||||||||||||||||||
| Restricted Stock | — | 286,231 | — | 307,283 | ||||||||||||||||||||||
| Stock options | — | 17,225 | 5,407 | 126,137 | ||||||||||||||||||||||
| Total stock-based compensation expense | $ | 394,510 | $ | 700,697 | $ | 899,176 | $ | 1,965,567 | ||||||||||||||||||
| Three Months Ended January 31, | Nine Months Ended January 31, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
Tuition - recognized over period of instruction | $ | 13,301,292 | $ | 16,550,586 | $ | 44,264,750 | $ | 50,304,380 | |||||||||||||||
Course fees - recognized over period of instruction | 1,745,950 | 1,981,470 | 5,760,009 | 5,967,581 | |||||||||||||||||||
Book fees - recognized at a point in time | — | — | — | 42,777 | |||||||||||||||||||
Exam fees - recognized at a point in time | 219,869 | 199,924 | 690,395 | 590,337 | |||||||||||||||||||
Service fees - recognized at a point in time | 306,931 | 212,818 | 827,348 | 410,929 | |||||||||||||||||||
| Revenue | $ | 15,574,042 | $ | 18,944,798 | $ | 51,542,502 | $ | 57,316,004 | |||||||||||||||
Subsequent 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 findingsummarized below:
| January 31, 2023 | April 30, 2022 | |||||||||||||
| ROU assets - Operating facility leases | $ | 18,548,616 | $ | 15,958,721 | ||||||||||
| Less: accumulated amortization | (4,682,744) | (3,312,771) | ||||||||||||
| Total ROU assets | $ | 13,865,872 | $ | 12,645,950 | ||||||||||
| January 31, 2023 | April 30, 2022 | |||||||||||||
| Total lease liabilities | $ | 25,634,092 | $ | 22,517,355 | ||||||||||
| Reduction of lease liabilities | (5,417,572) | (3,671,466) | ||||||||||||
| Total operating lease obligations | $ | 20,216,520 | $ | 18,845,889 | ||||||||||
| Maturity of Lease Obligations | Lease Payments | |||||||
| 2023 (remaining) | $ | 1,151,111 | ||||||
| 2024 | 4,739,252 | |||||||
| 2025 | 4,547,151 | |||||||
| 2026 | 4,677,144 | |||||||
| 2027 | 4,782,909 | |||||||
| Thereafter | 9,727,292 | |||||||
| Total future minimum lease payments | 29,624,859 | |||||||
| Less: imputed interest | (9,408,339) | |||||||
| Present value of operating lease liabilities | $ | 20,216,520 | ||||||
| Balance Sheet Classification | January 31, 2023 | April 30, 2022 | ||||||||||||
| Operating lease obligations, current portion | $ | 2,346,766 | $ | 2,036,570 | ||||||||||
| Operating lease obligations, less current portion | 17,869,754 | 16,809,319 | ||||||||||||
| Total operating lease obligations | $ | 20,216,520 | $ | 18,845,889 | ||||||||||
| Other Information | January 31, 2023 | April 30, 2022 | ||||||||||||
| Weighted average remaining lease term (in years) | 6.2 | 6.8 | ||||||||||||
| Weighted average discount rate | 12 | % | 12 | % | ||||||||||
Delaware Approvalthe Canada foreign income tax liability which covers the 2013 through 2021 tax years during which a permanent establishment was in place in Canada. This amount has not yet been remitted to Confer Degrees
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.
Common Stock
Effective May 24, 2017,Leases)
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 $88,700Unjust Enrichment, based on the trading priceclass representative’s claims that Aspen University misstated the quality of $8.87 onits pre-licensure nursing program. This complaint was likely in response to the grant date and recordedArizona State Board of Nursing actions against Aspen University relating to the program, as a prepaid asset being amortized overoutlined below. At this time, the six month termonly action taken by
JANUARY
2023
Warrants
A summary
|
|
|
|
|
|
|
| Weighted |
|
|
|
| ||||
|
|
|
|
| Weighted |
|
| Average |
|
|
|
| ||||
|
|
|
|
| Average |
|
| Remaining |
|
| Aggregate |
| ||||
|
| Number of |
|
| Exercise |
|
| Contractual |
|
| Intrinsic |
| ||||
Warrants |
| Shares |
|
| Price |
|
| Term |
|
| Value |
| ||||
Balance outstanding, April 30, 2017 |
|
| 914,123 |
|
| $ | 2.82 |
|
|
| 1.6 |
|
| $ | 1,100,203 |
|
Granted |
|
| 224,174 |
|
|
| 6.87 |
|
|
| 5.0 |
|
|
| 307,118 |
|
Exercised |
|
| (356,267 | ) |
|
| 0.55 |
|
|
| — |
|
|
| — |
|
Forfeited |
|
| — |
|
|
| — |
|
|
| — |
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|
| — |
|
Expired |
|
| (38,257 | ) |
|
| — |
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|
| — |
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| — |
|
Balance outstanding, January 31, 2018 |
|
| 743,773 |
|
| $ | 4.08 |
|
|
| 2.1 |
|
| $ | 3,095,502 |
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|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
Exercisable, January 31, 2018 |
|
| 743,773 |
|
| $ | 4.08 |
|
|
| 2.1 |
|
| $ | 3,095,502 |
|
In connectionCompany, certain senior management members and our directors in state court in New York seeking damages arising principally from (i) allegedly false and misleading statements in the filings with the Senior Secured Term Loan that was finalized on July 25, 2017,SEC and the DOE where the Company issued 224,174 5-year warrants atdisclosed that HEMG and Mr. Spada borrowed $2.2 million without board authority, (ii) the alleged breach of an exercise price of $6.87. (See Note 5)
TheApril 2012 agreement whereby the Company issued 241,514had agreed, subject to numerous conditions and time limitations, to purchase certain shares of Common Stock in conjunction with the cash and cashless exercise of 356,267 warrants. The Company received $143,489 in conjunction with the cash exercises.
Stock Incentive Plan and Stock Option Grants to Employees and Directors
On March 13, 2012, the Company adoptedfrom HEMG, and (iii) alleged diminution to the 2012 Equity Incentive Plan (the “Plan”) that provides forvalue of HEMG’s shares of the grantCompany due to Mr. Spada’s disagreement with certain business transactions the Company engaged in, all with Board approval.
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The Company utilizedminimum 80% standard set by 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 averageArizona State Board of Nursing (“AZ BON”). As a result of the expected volatilities from the most recent audited financial statements available for comparative public companies that are deemed to be similardecline in nature to the Company. The risk-free interest rate is based on the U.S. Treasury yields with terms equivalent to the expected lifeNCLEX pass rates and other
JANUARY
2023
A summary
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| Weighted |
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| Average |
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| ||||
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|
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|
| Average |
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| Remaining |
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| Aggregate |
| ||||
|
| Number of |
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| Exercise |
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| Contractual |
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| Intrinsic |
| ||||
Options |
| Shares |
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| Price |
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| Term |
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| Value |
| ||||
Balance outstanding, April 30, 2017 |
|
| 2,097,384 |
|
| $ | 1.86 |
|
|
| 2.7 |
|
| $ | 12,489,871 |
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Granted |
|
| 844,000 |
|
| $ | 3.53 |
|
|
| 3.4 |
|
|
| 1,867,740 |
|
Exercised |
|
| (63,838 | ) |
| $ | 3.13 |
|
|
| — |
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|
| — |
|
Forfeited |
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| — |
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| — |
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| — |
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| — |
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Expired |
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| — |
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| — |
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| — |
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|
| — |
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Balance outstanding, January 31, 2018 |
|
| 2,877,546 |
|
| $ | 3.52 |
|
|
| 3.24 |
|
| $ | 17,658,268 |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, January 31, 2018 |
|
| 1,083,484 |
|
| $ | 2.22 |
|
|
| 2.07 |
|
| $ | 8,727,757 |
|
On May 13, 2017,AZ BON-required 80% NCLEX pass rate for the Calendar Year 2022 annual reporting cycle. If this benchmark was not achieved, the AZ BON could lift the stay and initiate the revocation. If Phase I was completed successfully, Phase II will commence with Aspen University on Probation (regular or “stayed revocation” probation, depending on the outcome of Phase I). Aspen University was permitted to begin enrollments into the core component of its pre-licensure nursing program in Arizona once four consecutive quarters of 80% NCLEX first-time pass rates occur. However, once achieved, if the NCLEX pass rate fell below 80% for any quarter, the AZ BON could limit enrollments, and repeated failures may result in a required cessation of enrollments and teach-out of the program. The terms of the Consent Agreement also include requirements that the Company grantedprovide the AZ BON with monthly reports, provide that our faculty and administrators undergo additional training, retain an approved consultant to prepare and submit evaluations to the AZ BON, and hire a minimum of 35% full-time qualified faculty by September 30, 2022.
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 withNursing signed an exercise price of $5.95 per share and a fair value of $90,630.
On January 4, 2018, 180,000 options were issuedAmendment to the boardSeptember 2022 Consent Agreement that permits the teach-out of directorsthe program to continue with an exercise priceheightened
JANUARY
2023
Note
the eligibility loss to the Colorado SARA State Portal Entity. Aspen University sought a return to the prior provisional status while the appeal was pending or until the completion of the existing SARA term to February 2023 or until there was approval by the Arizona SARA Council. On December 1, 2017 certain assetsApril 12, 2022, Aspen University was restored to Provisional Status by the Colorado SARA State Portal Entity according to the terms of the February 23, 2022 letter. On May 17, 2022, Aspen University was informed that its appeal was denied and on June 10, 2022, Aspen University received a letter from the Colorado SARA State Portal Entry indicating that students currently enrolled in academic terms in progress as of May 17, 2022, were acquiredcovered under SARA for 16 weeks, until September 6, 2022.
Title IV, HEA programs in which it participates, covering the 2021-2022 and 2022-2023 award years. The acquisition was accounted for by AGIUniversity is cooperating fully in accordance with the acquisition method of accounting pursuant to ASC 805 “Business Combinations” and pushdown accounting was applied to recordreview. Required university administrators from the fair valueoffices of the assets acquiredpresident, provost, financial aid, finance, enrollment, registrar, institutional research, and liabilities assumed on United States University, Inc. Under this method, the purchase price is allocatedstudent accounts have participated in requested meetings. They have provided requested documentation in a timely manner in a variety of areas, especially related to the identifiable assets acquired and liabilities assumed based on their estimated fair values at the dateBachelor of acquisition.Science in Nursing (Pre-Licensure) degree program. The excessreview is ongoing.
The expected benefitsDOE. When students seek funding from the business acquisition will allow USU, Inc.federal government, they receive loans and grants to achieve its vision of making college affordable again on a much broader scale along with providing various accreditations.
The Company is infund their education under the process of completing its accountingfollowing Title IV Programs: (1) the Federal Direct Loan program, or Direct Loan; (2) the Federal Pell Grant program, or Pell; (3) Federal Work Study and 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 approximately $1,050,000, of which approximately $200,000 was incurred in(4) Federal Supplemental Opportunity Grants. For the fiscal yearyears ended April 30, 20172022, 36.37% of Aspen University’s and $850,00028.06% for United States University's cash-basis revenue for eligible tuition and fees was incurredderived from Title IV Programs.
The resultsamount of operationsunearned 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 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 assumesthe school determines that the acquisitions had occurred asstudent has withdrawn. Under the DOE regulations, failure to make timely returns of the beginningTitle IV Program funds for 5% or more of each period present:
|
| For the Year Ended |
|
| For the Nine Months Ended |
| ||
|
| (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 | ) |
The pro forma financial information is not necessarily indicative of the results that would have occurred if these acquisitions had occurredstudents sampled on the dates indicated or thatinstitution's annual compliance audit in either of its two most recently completed fiscal years can result in the future.
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 core Nursing courses and clinical experiences.
Related to that announcement, Aspen University has entered into a 92 month lease3
2024. that it had renewed its accreditation for eight years to Spring 2030. USU had a provisional certification resulting from the ownership change of control in connection with the acquisition by AGI on December 1, 2017. The provisional certification expired on December 31, 2020. The institution submitted its recertification application timely in October 2020, and received full certification on May 6, 2022, and a new Program Participation Agreement ("PPA") was issued with an effective period until December 31, 2025. On August 22, 2017, the DOE informed Aspen University of its determination that the institution had 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. On April 16, 2021, the DOE granted provisional certification for a two-year timeframe, and set a subsequent program participation reapplication date of September 30, 2023. 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 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 Total Degree-Seeking Active Student Body Nursing Degree- Seeking Active Student Body Nursing Degree-Seeking Active Student Body (%) Quarter ended October 31, 2016 3,726 2,538 68 % Quarter ended January 31, 2017 4,064 2,899 71 % Quarter ended April 30, 2017 4,681 3,363 72 % Quarter ended July 31, 2017 5,015 3,569 71 % Quarter ended October 31, 2017 5,641 4,068 72 % Quarter ended January 31, 2018 6,066 4,401 73 % CPE/RPE Analysis * 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 Average RPE $1,974 $3,078 $4,630 $5,684 $7,000 RPE % earned 28% 44% 66% 81% 100% Marketing efficiency ratio** 2.3x 3.5x 5.3x 6.5x 8.0x * Projection ** Based on current $876 CPE (six month rolling CPE average) $250,000 at USU, offset by a decrease of $50,000 at AU. You should read the following discussion in conjunction with our unaudited consolidated financial statements, which are included elsewhere in this Form 10-Q. Management’s Discussion and Analysis of Financial Condition and Results of Operations containThis Quarterly Report on Form 10-Q contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. FactorsSee "Cautionary Note Regarding Forward Looking Statements" for more information.Key TermsIn connection with the management of our businesses, we identify, measure and assess a variety of operating metrics. The principal metrics we use in managing our businesses are set forth below:Operating Metrics•Lifetime Value ("LTV") - is the weighted average total amount of tuition and fees paid by every new student that could cause or contribute to these differences include those discussedenrolls in the Risk Factors containedCompany’s universities, after giving effect to attrition.•Bookings - defined by multiplying LTV by new student enrollments for each operating unit.•Average Revenue per Enrollment ("ARPU") - defined by dividing total bookings by total enrollments for each operating unit.Operating costs and expenses•Cost of revenue - consists of instructional costs and services and marketing and promotional costs.◦Instructional costs - consist primarily of costs related to the administration and delivery of the Company's educational programs. This expense category includes compensation costs associated with online faculty, technology license costs and costs associated with other support groups that provide services directly to the students and are included in cost of revenue.◦Marketing and promotional costs - include costs associated with producing marketing materials and advertising, and outside sales costs. Such costs are generally affected by the Annual Reportcost of advertising media, the efficiency of the Company's marketing efforts, and expenditures on Form 10-K filed on July 25, 2017 with the Securitiesadvertising initiatives for new and Exchange Commission,existing academic programs. We engage non-direct response advertising activities, which are expensed as incurred, or the SEC.All referencesfirst time the advertising takes place, depending on the type of advertising activity. These costs are included in cost of revenue.•General and administrative expense - consists primarily of compensation expense (including stock-based compensation expense) and other employee-related costs for personnel engaged in executive and academic management and operations, finance, legal, tax, information technology, human resources, recruiting, fees for professional services, financial aid processing costs, non-capitalizable courseware and software costs, corporate taxes and facilities costs.Non-GAAP financial measures:•Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") - is a non-GAAP financial measure. See "Non-GAAP Financial Measures" for a reconciliation of net loss to “we,” “our,” “us,” “AGI,”EBITDA for the three and “Aspen” refernine months ended January 31, 2023 and 2022.•Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA")- is a non-GAAP financial measure. See "Non-GAAP Financial Measures" for a reconciliation of net loss to Adjusted EBITDA for the three and nine months ended January 31, 2023 and 2022.Company OverviewAspen Group, Inc. and its subsidiaries,is an education technology holding company. It operates two universities, Aspen University Inc. (“("Aspen University”University" or "AU") and United States University Inc. (“USU”("United States University" or "USU").29All references to the “Company”, “AGI”, “Aspen Group”, “we”, “our” and “us” refer to Aspen Group, Inc., unless the context otherwise indicates.Company OverviewAspen Group, Inc. (together withAGI leverages its subsidiaries, the “Company” or “AGI”) is a holding company. AGI haseducation technology infrastructure and expertise to allow its two subsidiaries,universities, Aspen University Inc. (“Aspen University”) organized in 1987 and United States University, Inc. (“USU”). On March 13, 2012,to deliver on the Company was recapitalized in a reverse merger.Aspen Group’s vision is to makeof making college affordable again in America.again. 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,AGI’s primary focus relative to future growth is to target the high-growth nursing profession. As of January 31, 2023, 8,349 of 9,956 or 84% of all active students across both universities are degree-seeking nursing students. Of the students seeking nursing degrees, 7,744 are RNs studying to earn an advanced degree, including 5,294 at Aspen University unveiledand 2,450 at USU. In contrast, the remaining 605 nursing students are enrolled in Aspen University’s BSN Pre-Licensure program in the Phoenix, Austin, Tampa, Nashville and Atlanta metros. The year-over-year decrease in the nursing student body resulted principally from the enrollment stoppage in all locations of the pre-licensure program and the reduction in marketing spend by $4.2 million.Aspen University has been offering a monthly payment plan aimed at reversingthat is available to all students across every online degree program offered, since March 2014. The monthly payment plan is designed so that students will make one fixed payment per month, and that monthly payment is applied towards the college-debt sentence plaguing working-class Americans.total cost of attendance (tuition and fees, excluding textbooks). The monthly payment plan offers bacheloronline undergraduate students (except RN to BSN) the opportunity to pay their tuition and fees at $250/month, for 72 months ($18,000), nursing bachelor students (RN to BSN) $250/month for 39 months ($9,750), masteronline master's students $325/month, for 36 months ($11,700) and online doctoral students $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.United States University (USU) beganUSU has been offering monthly payment plans insince the summer of 2017. Today, USU monthly payment plans are available for the online RN to BSN program ($250/month), online MBA/M.A.Ed/MAEd/MSN programs ($325/month), online hybrid Bachelor of Arts in Liberal Studies, Teacher Credentialing tracks approved by the California Commission on Teacher Credentialing ($350/month), and the MSN-FNPonline hybrid Master of Science in Nursing-Family Nurse Practitioner ("FNP") program ($375/month).Since 1993, Aspen University has been nationallyinstitutionally accredited by the Distance Education and Accrediting Council (“DEAC”), a nationalDEAC, an institutional accrediting agency recognized by the U.S. Department of Education (the “DOE”).and the Council for Higher Education Accreditation. On February 25, 2015,2019, the DEAC informed Aspen University that it had renewed its accreditation for five years to January 2019.Since 2009, USUUnited States University has been regionallyinstitutionally accredited by WASC Senior CollegeWSCUC, an institutional accrediting agency recognized by the Department of Education and the Council for Higher Education Accreditation. On July 11, 2022, WSCUC informed United States University Commission. (“WSCUC”).Both universities are qualified to participate under the Higher Education Act of 1965, as amended (HEA)("HEA") and the Federal student financial assistance programs (Title IV, HEA programs).AGI Student Population Overview*Aspen University’sOverviewAGI’s active degree-seeking student body, increasedincluding AU and USU, declined 27% year-over-year by 49% during the fiscal quarter endedto 9,956 at January 31, 2018,2023 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 to13,724 at January 2018, highlighted by the College of Nursing growing to 326 students which now represents 73% of USU’s total active student body.Aspen University’s most popular school is also its School of Nursing, which represents 73% of Aspen’s31, 2022. AU's total active student body similardecreased by 33% year-over-year to 7,232 at January 31, 2023 from 10,736 at January 31, 2022. On a year-over-year basis, USU's total active student body decreased by 9% to 2,724 at January 31, 2023 from 2,988 at January 31, 2022.Total active student body for the past five quarters is shown below:30Q3'22 Q4'22 Q1'23 Q2'23 Q3'23 Aspen University 10,736 10,225 9,133 7,973 7,232 USU 2,988 3,109 2,915 2,984 2,724 Total 13,724 13,334 12,048 10,957 9,956 AGI Nursing Student PopulationStudents seeking nursing degrees were 8,349, or 84% of total active students at both universities. Of the students seeking nursing degrees, 7,744 are RNs studying to earn an advanced degree, including 5,294 at Aspen University and 2,450 at USU. In contrast, the remaining 605 nursing students are enrolled in Aspen University’s BSN Pre-Licensure program in the Phoenix, Austin, Tampa and Nashville metros. The majority of the year-over-year Aspen University nursing student body decrease is a result of the enrollment stoppage and teach out of the pre-licensure program and the $4.2 million reduction in marketing spend in the third quarter of fiscal 2023 as compared to the same quarter of fiscal 2022.Nursing student body for the past five quarters are shown below:Q3'22 Q4'22 Q1'23 Q2'23 Q3'23 Aspen University 9,116 8,632 7,686 6,640 5,899 USU 2,773 2,890 2,708 2,752 2,450 Total 11,889 11,522 10,394 9,392 8,349 AGI New Student EnrollmentsOn a Company-wide basis, new student enrollments were down 40% year-over-year. New student enrollments at AU decreased 47% year-over-year and at USU by 22% year-over-year. New student enrollments were primarily impacted by the enrollment stoppage at our pre-licensure campuses, and the reduction in marketing spend.New student enrollments for the past five quarters are shown below:Q3'22 Q4'22 Q1'23 Q2'23 Q3'23 Aspen University 1,301 1,010 868 784 695 USU 481 525 447 506 374 Total 1,782 1,535 1,315 1,290 1,069 Bookings Analysis and ARPUOn a year-over-year basis, Q3 Fiscal 2023 Bookings decreased 52%, to $12.6 million from $26.3 million in the prior year. As previously discussed, the pre-licensure enrollment stoppage and the reduction in marketing spend by $4.2 million caused Bookings to decrease year-over-year.On a year-over-year basis, Q3 Fiscal 2023 ARPU decreased 20% from the prior year period due primarily to a decrease in Bookings at Aspen University in the pre-licensure program.Third Quarter Bookings1 and Average Revenue Per Enrollment (ARPU)1Q3'22 Enrollments Q3'22 Bookings 1Q3'23 Enrollments Q3'23 Bookings 1Percent Change Total Bookings & ARPU 1Aspen University 1,301 $ 17,776,050 695 $ 5,901,000 USU 481 $ 8,571,420 374 $ 6,664,680 Total 1,782 $ 26,347,470 1,069 $ 12,565,680 (52) % ARPU $ 14,785 $ 11,755 (20) % _____________________1 “Bookings” are defined by multiplying Lifetime Value (LTV) by new student enrollments for each operating unit. “Average Revenue Per Enrollment” (ARPU) is defined by dividing total Bookings by total new student enrollments for each operating unit.31Set forth below is the description of the Company's two licensure degree programs.Bachelor of Science in Nursing (BSN) Pre-Licensure ProgramAspen’s BSN Pre-licensure program provides students with opportunities to become a BSN-educated nurse and learn the essential skills needed to practice as a professional registered nurse (RN). Skills lab, clinical simulation, seminars and community-based clinical experiences anchor the curriculum. Upon completion of their studies, including for those involved in the current teach-out of the program, students are eligible to take the National Council Licensure Examination (NCLEX) in the state or territory in which they choose to practice (the NCLEX is the national registered nurse examination used by all states for potential registered nursing licensure). Students provide their state board of nursing applicable forms to the School of Nursing grewand Health Sciences, which completes them on behalf of the individual student, and take the exam in the state in which they choose to practice. Upon passing the NCLEX, students then work with their state Board of Nursing to finalize their professional licensure. As of May 12, 2023, the Arizona State Board of Nursing has licensed 444 Aspen University graduates; 2 of our graduates were licensed by their respective boards of nursing in Oregon, 4 in California, 2 in Montana, 1 in North Carolina, 1 in Illinois, and 2 in Texas.We designed this program for students who do not currently hold a state registered nurse license and have little to no prior nursing experience. For students with no prior college credits, the total cost of attendance is $52,175 ($41,445 Tuition, $10,730 Fees), not including textbooks.In September 2022, Aspen University suspended new enrollments in its BSN pre-licensure program in Arizona pursuant to a revised Consent Agreement with the Arizona State Board of Nursing, and it also suspended new enrollments in its BSN pre-licensure program in Florida, Georgia, Tennessee and Texas in connection with the Arizona developments. The teach-out of all remaining students is estimated to be completed in the Phoenix metro area by January 2024 (Q3 Fiscal Year 2024), Nashville-based students as of May 2024 (Q1 Fiscal Year 2025), and Texas- and Florida-based students through September 2024 (Q2 Fiscal Year 2025). A more detailed discussion of the pre-licensure program regulatory environment is included in the regulatory environment section below.For the three and nine months ended January 31, 2023, 19% and 22% of total consolidated AGI revenue was earned from 2,899its pre-licensure nursing program. For the three and nine months ended January 31, 2022, 24% and 23% of total consolidated AGI revenue was earned from this program.USU Master of Science in Nursing-Family Nurse Practitioner (MSN-FNP)USU offers a number of nursing degree programs and other degree programs in health sciences, business & technology and education. Its primary enrollment program is its MSN-FNP which is designed for BSN-prepared registered nurses who are seeking a Nurse Practitioner license. The MSN-FNP is an online-hybrid 48-credit degree program with 100% of the curriculum online, including the curricular component to 4,401 student’s year-over-year,complete 540 clinical and 32 lab hours.While MSN-FNP lab hours have been done at USU’s San Diego facility through the end of calendar year 2020, the rapid growth of the MSN-FNP program has caused AGI to open an additional immersion location in 2021. Specifically, the Company built-out additional suites at our main facility in Phoenix (by the airport).Regulatory EnvironmentOn February 1, 2023, AGI received notification that Aspen University had been issued a Show Cause Directive by DEAC requiring Aspen University to prove why its current accreditation should not be withdrawn and to require Aspen University to undergo a special visit by a team of DEAC evaluators. Show Cause is an enforcement action focused on specific areas of perceived non-compliance to which represented 75%Aspen must respond through narrative, documentation, and other evidence within the specific remediation timeframe.DEAC informed Aspen University that certain areas of concern raise serious questions as to Aspen University’s ongoing compliance with DEAC Accreditation Standards III.D., V.A., X.B., XI.E., and DEAC Procedures under Part Two, Section XVII.E, including curricula and instructional materials; student achievement; reputation; operations; and notifications. These call into question Aspen University’s organizational integrity, administrative capacity, and ability to serve students in a manner that complies with DEAC standards. The letter also requires the University to submit certain information to DEAC prior to February 16, 2023, and to constituents within seven business days, and permits continuance of DEAC’s monitoring of monthly financial reports.32To date, Aspen University has provided multiple regulatory bodies with requested records and data and Aspen University will willingly comply with the DEAC’s continued oversight through the show cause period.The maximum length of the show cause remediation period is up to two years or 150% of the length of the Institution’s longest program. DEAC expects to schedule its review of Aspen University's response to the show cause directive and the associated record within the next six to nine months. During the show cause remediation period, Aspen University remains fully accredited.On February 8, 2023, Aspen University received notification from the DOE that effective February 7, 2023 the DOE had placed Aspen University on Heightened Cash Management 2 (“HCM2”). Under the HCM2 method of payment, Aspen University may continue to obligate funds under the federal student financial assistance programs authorized by Title IV of HEA.Heightened Cash Monitoring is a step that the DOE can take with institutions to provide additional oversight for a number of financial or federal compliance issues. A school placed on HCM2 no longer receives funds under the Advance Payment Method. After a school on HCM2 makes disbursements to students from its own institutional funds, a Reimbursement Payment Request must be submitted for those funds to the DOE. Consequently, Aspen University is estimating the next financial aid reimbursement received from the DOE will be delayed until late March 2023 at the earliest. Subsequent to the receipt of the first financial aid payment under HCM2, Aspen University will be able to submit for financial aid reimbursement once every 30 days. Reimbursement payments could be delayed if the DOE has findings upon review of each of our reimbursement files.The letter from the DOE stated that the DOE acted in response to the Show Cause Directive from DEAC.On February 20, 2023, Aspen University entered into a 3rd revised Stipulated Agreement with the Arizona State Board for Private Postsecondary Education which requested transcripts from 1985-2019 and an institutional teach-out plan as well as increased monthly financial reporting requirements. Other requirements from the October 2022 Stipulated Agreement were carried forward to this revised agreement. The revised agreement was in response to the Show Cause Directive from the Distance Education Accrediting Commission on February 1, 2023, discussed above.In March 2022, Aspen University agreed to a disciplinary probation of its pre-licensure nursing program, including suspension of new student admissions and a requirement to meet the Arizona State Board of Nursing’s 80% minimum NCLEX-RN first-time pass rate in 2022. By September 2022, the University recognized it would not be able to meet the 80% pass rate and signed a Revised Consent Agreement with the Arizona State Board of Nursing that provided the program with two years to complete a "teach out" of existing students, meaning that the existing students would be able to complete the program. The agreement also contained an option for the Board to terminate the agreement early if the program "fails to provide minimum instruction and learning opportunities, including clinical opportunities, to meet basic standards of educational practice and legal requirements." If the Arizona State Board of Nursing found that to be the case, it could provide a minimum 10-day notice to the University, after which it could determine that the voluntary surrender is immediately in effect.On February 23, 2023, the Arizona State Board of Nursing informed the University of its intent to lift the stay of voluntary surrender. Board members expressed concerns regarding public safety and student safeness to practice on exit from the program, including concerns that the program was failing to provide minimum instruction as students were continuing to struggle with passing their NCLEX-RN exam the first time, failing to meet basic standards of educational practice by inadequately ensuring the integrity and proctoring of exams, and improperly using students' work hours to count as clinical hours and counting clinical hours when the students were not in the facilities. Aspen disputed all of these concerns except the one related to the NCLEX-RN first-time pass rate.It was Aspen’s active degree-seeking student body growth.position that a decision by the Board to conduct such a vote to lift the stay at its scheduled March 2023 meeting would be a breach of the September 2022 Consent Agreement, a breach of the covenant of good faith and fair dealing, and cause Aspen irreparable harm. The lifting of the stay would have closed the program immediately and affected almost 400 students across four states. On March 23, 2023, Aspen University and the Arizona State Board of Nursing signed an Amendment to the September 2022 Consent Agreement that permits the teach-out of the program to continue with heightened oversight and reporting. The University will again hire a Consultant and additionally an Ombudsperson to oversee critical aspects of the program in Arizona including testing and clinical practices. The signed Amendment means that the Arizona-based students are permitted to be taught out through January 2024, Nashville-based students through May 2024, and Texas- and Florida-based students through September 2024.The Company continues to work with internal and external personnel to cooperate and advocate with regulatory agencies in an effort to resolve the foregoing and other regulatory developments affecting its business.Accounts Receivable - Monthly Payment Plan ("MPP")33The Company offers several payment options to its students including a monthly payment plan (MPP), installment plans and financial aid. The growth in accounts receivable over the last several years has predominantly been a result of students taking advantage of our groundbreaking monthly payment plan, which we introduced in 2014 at Aspen University and subsequently in Fiscal Year 2018 at USU. At January 31, 2018, Aspen’s School2023, Gross MPP accounts receivable was 86% of Nursing included 2,869 active students intotal gross accounts receivable. Of the RNGross accounts receivable, approximately 49% and 37% relates to BSN programAU and 1,532 active students in the MSN program, RN to MSN Bridge program, or DNP program.*Note: “Active Degree-Seeking Students” are defined as degree-seeking students who were enrolled inUSU MPP accounts receivable, respectively.The Monthly Payment Plan is 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 GrowthSince the launch of the BSN marketing campaign in November, 2014, Aspen University’s growthprivate education loan with a 0% fixed rate of newinterest (0% APR) and no down payment. Each month the student enrollments has accelerated significantly. Belowwill make one payment of $250, $325, $350 or $375 (depending on the program) until the program tuition is paid in full. The attractive aspect of being able to pay for a quarterly analysisdegree over a fixed period of the growth of Aspen University’s new student enrollments, as well astime fueled the growth of the active degree seeking student body over the past seven quarters, including the recent quarter ending January 31, 2018.Aspen University Revenue SummaryBelow is a summary of the nursing active degree-seeking student bodyMPP plan and as a percentageresult our short-term and long-term accounts receivable. The MPP is designed so students can build the cost of their degree into their monthly budget.In Q4 Fiscal 2023, AU and USU offered a one-time opportunity for graduates/alumni still making payments under the MPP, and all other payment types including financial aid, to reduce their outstanding balance by 25% if the balance is paid in full within 30 days of receiving the offer. The program ended on March 1, 2023. Approximately $3.6 million was collected under the program. Of the total active degree-seekingcollected, approximately $1.2 million and $2.4 million was collected at AU and USU, respectively.Long-Term Accounts ReceivableWhen a student body oversigns up for the past six fiscal quarters.Monthly Payment Programs OverviewSince the March 2014 monthly payment plan, announcement, 69%there is a contractual amount that the Company can expect to earn over the life of Aspen University’s courses are nowthe student’s program. This full contractual amount cannot be recorded as accounts receivable upon enrollment. As a student takes a class, revenue and the associated accounts receivable is earned over that eight-week class. Some students accelerate their program, taking two classes every eight-week period, and that increases the student’s accounts receivable balance. If any portion of the accounts receivable balance will be paid throughin a period of greater than 12 months, that portion is classified as long-term accounts receivable.As a result of the growing acceptance of our monthly payment methods (based on courses startedplans, our long-term accounts receivable balance has grown from $11,406,525 at April 30, 2022 to $16,280,621 at January 31, 2023. Generally, students in the USU MSN-FNP program make payments over the last 90 days). Aspen offers two monthly payment programs, a monthly72-month period, and as a result, a portion of USU's 72-month payment plan becomes long-term accounts receivable.Accounts receivable is considered short-term to the extent the remaining payments are 12 months or less. Payments due in which students make payments every month overgreater than 12 months are considered long-term. Here is a fixed period (36, 39 or 72 months depending ongraphic of both short-term and long-term receivables, as well as contractual value:A B C The portion of remaining payments owed for classes taken under a monthly payment plan due in 12 months or less The portion of remaining payments owed for classes taken under a monthly payment plan due in greater than 12 months Expected future classes
to be taken over
balance of program.Short-Term
Accounts ReceivableLong-term
Accounts ReceivableNot recorded in
financial statementsThe Sum of A, B and C will equal the total cost of the program. Results of OperationsSet forth below is the degree program), and a monthly installment plan in which students pay three monthly installments (day 1, day 31 and day 61 afterdiscussion of the startresults of each course).Asoperations of January 31, 2018, Aspen University had a total of 4,194 active students paying tuition through a monthly payment method of which 3,901 active students are paying through a monthly payment plan, and 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 University’s monthly payment plan students now exceeds $35 million which currently delivers monthly recurring tuition cash payments of approximately $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.Marketing Efficiency AnalysisAspen has developed a marketing efficiency ratio to continually monitor the performance of its business model.Revenue per Enrollment (RPE)Marketing Efficiency Ratio =—————————————Cost per Enrollment (CPE)Cost per Enrollment (CPE)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 CPECompany for the quarter measured.Revenue per Enrollment (RPE)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.Quarterly New Student Cohort Actuals Data:The 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 8.0x, in other words an 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 approximately double the efficiency level of that sector.Results of OperationsFor the Quarter Ended January 31, 2018 Compared with the Quarter Ended January 31, 2017RevenueRevenue from operations for the quarterthree months ended January 31, 20182023 (“2018 Quarter”Q3 Fiscal 2023”) increasedcompared to $5,701,958 from $3,735,626 for the quarterthree months ended January 31, 20172022 (“2017 Quarter”Q3 Fiscal 2022”), an increase of $1,966,332 or 53%.Cost of Revenues (exclusive of amortization)The Company’s cost of revenues consists of instructional costs and services and sales and marketing costs.Instructional Costs and ServicesInstructional costs and services for the 2018 Quarter rosenine months endedJanuary 31, 2023 (“9M Fiscal 2023”) compared to $1,196,949 from $694,884 for the 2017 Quarter, an increasenine months ended January 31, 2022 (“9M Fiscal 2022”).RevenueThe following table presents selected consolidated statement of $502,065 or 72%. Instructional costs and services for the 2018 Quarteroperations as a percentage of revenue was 21% as(differences due to rounding):34Three Months Ended January 31, Nine Months Ended January 31, 2023 2022 2023 2022 Revenue 100 % 100 % 100 % 100 % Operating expenses: Cost of revenue (exclusive of depreciation and amortization shown separately below) Instructional costs and services 34 % 26 % 32 % 25 % Marketing and promotional costs 1 % 23 % 11 % 22 % Total cost of revenue (exclusive of depreciation and amortization shown separately below) 35 % 49 % 43 % 47 % General and administrative 62 % 62 % 60 % 60 % Bad debt expense 3 % 2 % 2 % 2 % Depreciation and amortization 6 % 5 % 5 % 4 % Total operating expenses 105 % 118 % 111 % 113 % Operating loss (5) % (18) % (11) % (13) % Other income (expense): Interest expense (5) % (1) % (4) % (1) % Other income, net — % — % — % 1 % Total other (expense) income, net (5) % (1) % (4) % — % Loss before income taxes (10) % (18) % (14) % (12) % Income tax expense — % 1 % — % 1 % Net loss (10) % (20) % (15) % (13) % The following tables present our revenue, both per-subsidiary and total:Three Months Ended January 31, Nine Months Ended January 31, 2023 $ Change % Change 2022 2023 $ Change % Change 2022 AU $ 9,535,419 $ (3,491,919) (27)% $ 13,027,338 $ 31,825,415 $ (7,210,426) (18)% $ 39,035,841 USU 6,038,623 121,163 2% 5,917,460 19,717,087 1,436,924 8% 18,280,163 Revenue $ 15,574,042 $ (3,370,756) (18)% $ 18,944,798 $ 51,542,502 $ (5,773,502) (10)% $ 57,316,004 Q3 Fiscal 2023 compared to 19%Q3 Fiscal 2022AU and USU combined revenue decreased 18% in Q3 Fiscal 2023 compared to Q3 Fiscal 2022.The AU revenue decline year-over-year reflects lower post-licensure enrollments attributed to lower marketing spend initiated in late Q1 Fiscal 2023 and the stoppage of enrollments at our pre-licensure campuses. The active student body at AU decreased from 10,736 at January 31, 2022 to 7,232 at January 31, 2023. This AU revenue decrease was offset by the USU revenue increase due primarily to USU's MSN-FNP program, the USU post-licensure degree program with the highest concentration of students and the highest LTV.9M Fiscal 2023 compared to 9M Fiscal 2022AU and USU combined revenue decreased 10% in 9M Fiscal 2023 compared to 9M Fiscal 2022. The AU revenue decline year-over-year reflects the enrollment stoppage at the pre-licensure program campuses and the effect of decreased marketing spend initiated late in Q1 Fiscal 2023. This AU revenue decrease was offset by the USU revenue increase due primarily to USU's35MSN-FNP program. The trend of decreased revenue is expected to continue for the 2017 Quarter. Salesremainder of Fiscal Year 2023 given the Company’s recent suspension of new enrollment in its pre-licensure program, which accounted for 22% of its consolidated revenue in 9M Fiscal 2023, and MarketingSalesthe effect of the decrease in marketing spend.Cost of revenue (exclusive of depreciation and marketing costs for the 2018 Quarter were $1,468,715amortization shown separately below)Three Months Ended January 31, Nine Months Ended January 31, 2023 $ Change % Change 2022 2023 $ Change % Change 2022 Instructional costs and services $ 5,264,542 $ 341,394 7% $ 4,923,148 $ 16,489,725 $ 2,230,103 16% $ 14,259,622 Marketing and promotional 129,613 (4,222,658) (97)% 4,352,271 5,456,989 (6,941,577) (56)% 12,398,566 Cost of Revenue (exclusive of depreciation and amortization shown separately below) $ 5,394,155 $ (3,881,264) (42)% $ 9,275,419 $ 21,946,714 $ (4,711,474) (18)% $ 26,658,188 Q3 Fiscal 2023 compared to $664,247Q3 Fiscal 2022Instructional Costs and ServicesConsolidated instructional costs and services for Q3 Fiscal 2023 increased to 34% of revenue from 26% of revenue for Q3 Fiscal 2022, related to the 2017 Quarter,factors described below.AU instructional costs and services were 36% and 25% of AU revenue for Q3 Fiscal 2023 and Q3 Fiscal 2022, respectively. As a percentage of revenue, instructional costs and services increased due primarily to the inflationary impact on faculty compensation and the need for more instructors in the BSN Pre-Licensure program, which is the result of more students entering the core curriculum. The core curriculum requires an increase in the ratio of $804,468 or 121%. The Company expectsinstructors to students, especially as students enter the clinical portion of the program.USU instructional costs and services were 30% and 28% of USU revenue for Q3 Fiscal 2023 and Q3 Fiscal 2022, respectively. As a percentage of revenue, instructional costs and services increased due primarily to the growth in the USU MSN-FNP program, which resulted in higher USU clinical immersion-related instructional costs, and the inflationary impact on faculty compensation. We believe our efforts to restructure our marketing and general and administrative operations which began during fiscal 2023 will result in positive annual operating cash flows starting in Fiscal 2024.In Fiscal 2024, the generation of positive operating cash flows will permit the resumption of marketing spend at a level that will renew growth in our post licensure student body.Marketing and PromotionalConsolidated marketing and promotional costs for Q3 Fiscal 2023 were 1% of revenue compared to rise23% of revenue for Q3 Fiscal 2022. The decrease is primarily the result of is follows the $7.4 million year-over-year reduction in future periods, given we expect to increase monthly marketing spend in associated with the Fiscal 2023 restructuring plan. The restructuring program decreased marketing advertising spend across all programs to over $600,000 during the next fiscal year. In addition, this increasemaintenance levels.A break-down of marketing expense by unit is partially attributed to the additionas follows:AU marketing and promotional costs represented 1% and 22% of an outside sales forceAU revenue for Q3 Fiscal 2023 and Q3 Fiscal 2022, respectively.USU marketing and promotional costs represented 2% and 20% of 9 representativesUSU revenue for each Q3 Fiscal 2023 and those salariesQ3 Fiscal 2022, respectively.Corporate marketing and benefits are includedpromotional costs were $328,941 in the 2018 Quarter numbers.Gross Profit was 51% of revenues or $2,900,633 for the 2018 Quarter asQ3 Fiscal 2023 compared to 60% of revenues or $2,256,918 for the 2017 Quarter. The reasons for the change are reflected$327,697 in the individual expense items described above.Costs and ExpensesGeneral and AdministrativeGeneral and Administrative costs for the 2018 Quarter were $4,677,359 compared to $2,133,074 during the 2017 Quarter,Q3 Fiscal 2022, an increase of $2,544,285$1,244 or 119%less than 1%. General9M Fiscal 2023 compared to 9M Fiscal 2022Instructional Costs and AdministrativeServices36Consolidated instructional costs asand services for 9M Fiscal 2023 increased to 32% of revenue from 25% of revenue for 9M Fiscal 2022, related to the factors described below.AU instructional costs and services were 34% and 25% of AU revenue for 9M Fiscal 2023 and 9M Fiscal 2022, respectively. As a percentage of revenue, for the 2018 Quarter was 82% compared to 57% during the 2017 quarter. The Company incurred $610,219 of 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 G&A increase, as the company’s non-faculty full-time staff rose from 110 to 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 University also recorded $100,000 as a bad debt reserve, an increase reflective of the increase in revenue and students paying by monthly plans.Depreciation and AmortizationDepreciation and amortization costs for the 2018 Quarter rose to $347,894 from $132,727 for the 2017 Quarter, an increase of $215,167 or 162%. This increase is substantially due to the amortization of intangible assets from the purchase of USU.Other Expense, netOther expense, net for the 2018 Quarter increased to $158,986 from $78,317 in the 2017 Quarter, an increase of $80,669 or 103%. This increase is due to interest paid on the credit facility.Income TaxesIncome 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 Income (Loss)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, 2017RevenueRevenue 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%.Cost of Revenues (exclusive of amortization)The Company’s cost of revenues consists of instructional costs and services increased due primarily to the inflationary impact on faculty compensation and sales and marketing costs.Instructional Costs and ServicesInstructionalthe need for more instructors in the BSN Pre-Licensure program, which is the result of more students entering the core curriculum. The core curriculum requires an increase in the ratio of instructors to students, especially as students enter the clinical portion of the program.USU instructional costs and services were 29% and 25% of USU revenue for 9M Fiscal 2023 and 9M Fiscal 2022, respectively. As a percentage of revenue, instructional costs and services increased due primarily to the 2018 Period rosegrowth in the USU MSN-FNP program, which resulted in increased immersions at additional campuses, and the inflationary impact on faculty compensation.Marketing and PromotionalConsolidated marketing and promotional costs for 9M Fiscal 2023 were 11% of revenue compared to $2,893,818 from $1,701,94522% of revenue for 9M Fiscal 2022. This follows the 2017 Period,$1 million reduction in marketing spend in Q1 Fiscal 2022 to ensure sufficient collateral for a surety bond required by the Arizona State Board for Private Postsecondary Education and the $1.1 million quarterly year-over-year reduction in marketing spend in Q3 Fiscal 2023 as part of the restructuring plan. The restructuring program decreased marketing advertising spend across all programs to maintenance levels. A break-down of marketing expense by unit is as follows:AU marketing and promotional costs represented 10% and 21% of AU revenue for 9M Fiscal 2023 and 9M Fiscal 2022, respectively.USU marketing and promotional costs represented 6% and 17% of USU revenue for each 9M Fiscal 2023 and 9M Fiscal 2022, respectively.Corporate marketing and promotional costs were $1,098,288 in 9M Fiscal 2023 compared to $994,681 in 9M Fiscal 2022, an increase of $1,191,873$103,607 or 70%10%.SalesGeneral and MarketingSalesadministrativeThree Months Ended January 31, Nine Months Ended January 31, 2023 $ Change % Change 2022 2023 $ Change % Change 2022 General and administrative $ 9,624,528 $ (2,146,959) (18)% $ 11,771,487 $ 31,039,666 $ (3,319,610) (10)% $ 34,359,276 Q3 Fiscal 2023 compared to Q3 Fiscal 2022Consolidated general and marketingadministrative expense for Q3 Fiscal 2023 was $9,624,528 or 62% of revenue compared to $11,771,487 or 62% of revenue for Q3 Fiscal 2022, a decrease of $2,146,959 or 18%. As part of the Company's recent restructuring plan, which was initiated late Q1 Fiscal 2023, the company eliminated approximately 70 positions within AU and Corporate in Q2 Fiscal 2023, resulting in compensation-related savings of approximately $1.0 million in Q3 Fiscal 2023 as compared to Q3 Fiscal 2022. A break-down of general and administrative expense by unit is as follows:AU general and administrative expense decreased by $1,086,811 year-over-year and was 38% and 36% of AU revenue for Q3 Fiscal 2023 and Q3 Fiscal 2022, respectively. The decrease in employee-related compensation due to the restructuring program and other cost controls implemented by management, were partially offset by a fee for the 2018 Periodsurety bond required by the Arizona State Board for Private Postsecondary Education, which is being amortized over one year.USU general and administrative expense decreased by $320,630 year-over-year and was 37% and 43% of USU revenue for Q3 Fiscal 2023 and Q3 Fiscal 2022, respectively. The decrease was primarily due to lower employee-related compensation due to cost controls implemented by management and decreased facilities costs related to the move to the new campus at the end of Q2 Fiscal 2023.Corporate general and administrative expense was $3.7 million and $4.5 million in Q3 Fiscal 2023 and Q3 Fiscal 2022, respectively. The decrease was primarily due to the impact of the restructuring and planned corporate cost control.37As part of the Company's recent restructuring initiatives, general and administrative compensation savings are expected to be $1.0 million in Q4 Fiscal 2023.9M Fiscal 2023 compared to 9M Fiscal 2022Consolidated general and administrative expense for 9M Fiscal 2023 was $31,039,666 or 60% of revenue compared to $34,359,276 or 60% of revenue for 9M Fiscal 2022, a decrease of $3,319,610 or 10%. As part of the Company's recent restructuring plan, which was initiated late Q1 Fiscal 2023, the Company eliminated approximately 70 positions within AU and Corporate, resulting in on-going quarterly compensation-related savings of approximately $1.0 million. Additionally, the Company initiated additional cost controls within the general and administrative functions in Fiscal 2022, which also resulted on 9M Fiscal 2023 savings. A break-down of general and administrative expense by unit is as follows:AU general and administrative expense decreased $1,305,975 year-over-year and was 39% and 35% of AU revenue for 9M Fiscal 2023 and 9M Fiscal 2022, respectively. The decreases in employee-related compensation due to cost controls implemented by management, were $3,388,996 from $1,788,101partially offset by higher professional fees related to regulatory matters, fee for the 2017 Period, an increasesurety bond required by the Arizona State Board for Private Postsecondary Education, which is being amortized over one year and increases in fixed expenses related to new campus openings in the pre-licensure program.USU general and administrative expense decreased by $505,570 year-over-year and was 36% and 41% of $1,600,895 or 90%.USU revenue for 9M Fiscal 2023 and 9M Fiscal 2022, respectively. The decrease in employee-related compensation due to cost controls implemented by management and decreased facilities costs related to the move to the new campus at the end of Q2 Fiscal 2023 was partially offset by increases in fixed expenses related to expansion of the USU MSN-FNP program.Corporate general and administrative expense was $11.6 million and $13.1 million in 9M Fiscal 2023 and 9M Fiscal 2022, respectively. The decrease was primarily due to planned corporate cost control, a reduction in Delaware Franchise Corporate Tax payments and the reversal of stock-based compensation expense for (i) $0.2 million related to a performance award that the Company assessed its performance condition will not be met and (ii) $0.1 million related to a grant forfeited by the resignation of the Chief Nursing Officer, on July 15, 2022, partially offset by higher professional and consultant fees of $0.7 million and a non-recurring severance expense related to the resignation of the Chief Nursing Officer.Bad debt expenseThree Months Ended January 31, Nine Months Ended January 31, 2023 $ Change % Change 2022 2023 $ Change % Change 2022 Bad debt expense $450,000 $100,000 29% $350,000 $1,250,000 $200,000 19% $1,050,000 Based on our review of additional student accounts associated with current period revenue and previously existing student accounts receivable and historical write-off trends, the Company evaluated its reserve methodology and adjusted reserves for AU and USU accordingly.At AU and USU, $0.4 million and $0.1 million, respectively, of student accounts receivable were written off against the accounts receivable allowance during Q3 Fiscal 2023. The Company expects salesrecorded additional bad debt expense of $100,000 at USU.At AU and marketing to rise in future periods, given we expect to increase monthly marketing spend to over $600,000USU, $1.0 million and $0.2 million, respectively, of student accounts receivable were written off against the accounts receivable allowance during the 2019 fiscal year.Gross Profit rose to $8,513,669 for the 2018 Period from $6,467,421 for the 2017 Period.9M Fiscal 2023. The reasons for the change are reflected in the individualCompany recorded additional bad debt expense items described above.Costs and ExpensesGeneral and AdministrativeGeneral 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 AmortizationDepreciation and amortization costs forThree Months Ended January 31, Nine Months Ended January 31, 2023 $ Change % Change 2022 2023 $ Change % Change 2022 Depreciation and amortization $919,152 $35,616 4% $883,536 $2,775,330 $295,151 12% $2,480,179 For both periods, the 2018 Period increased to $631,969 from $422,782 for the 2017 Period, an increase of $209,187 or 49%.Other Income (Expense)Other expense increased to ($303,190) from ($172,615), an increase of $130,575 or 76%. This increaseincludes depreciation which is primarily due to the Q2 Fiscal 2023 commencement of the lease for the Atlanta campus and move to the new USU campus. Related capital expenditures include leasehold improvements and computer equipment. The increase also includes amortization related to internally developed capitalized software placed into service to support the Company's instructional services and the opening of the new campus locations.38Interest expenseThree Months Ended January 31, Nine Months Ended January 31, 2023 $ Change % Change 2022 2023 $ Change % Change 2022 Interest expense $716,845 $536,148 297% $180,697 $2,008,510 $1,654,772 468% $353,738 For both periods, interest expense increased due principally to the borrowings under the 2022 Convertible Notes, amortization expense related to the commitment fees paid on the credit facility. undrawn portion of the 2022 Revolving Credit Facility, which are amortized over the one-year term of the loan, and the drawdown and extension of the maturity of the 2018 Credit Facility on August 31, 2021. The commitment fees relate to a 1% fee of $200,000 on the undrawn portion of the 2022 Revolving Credit Facility paid at closing, or March 14, 2022, and another 1% fee of $200,000, which was paid six months from the closing date, or September 14, 2022.Other (expense) income, netThree Months Ended January 31, Nine Months Ended January 31, 2023 $ Change % Change 2022 2023 $ Change % Change 2022 Other income, net $12,847 $(1,107) NM $13,954 $28,138 $(488,616) (95)% $516,754 Other income, increasednet in 9M Fiscal 2022 primarily includes $498,120 related to $140,567 from $1,684, primarily duea litigation settlement on July 21, 2021 offset by the write-off of a related net receivable of $45,329 with the party in this litigation; partially offset by a $36,445 write off of fixed assets.Income tax expenseThree Months Ended January 31, Nine Months Ended January 31, 2023 $ Change % Change 2022 2023 $ Change % Change 2022 Income tax expense $37,249 $(194,361) (84)% $231,610 $114,071 $(274,449) (71)% $388,520 Income tax expense in Q3 Fiscal 2023 and 9M Fiscal 2023 includes a reserve of approximately $25,000 and $75,000, respectively, for the estimated Fiscal Year 2023 Canada foreign income tax liability which covers the 2023 tax year for which a permanent establishment is in place in Canada. The Company will file an annual Canadian T2 Corporation Income Tax return and related information returns under the Voluntary Disclosure Program with the Canada Revenue Agency ("CRA") to report the ongoing activity of the permanent establishment.Income tax expense in Q3 Fiscal 2022 and 9M Fiscal 2022 includes a reserve of approximately of approximately $227,000 and $375,000, respectively, related to the interestforeign income earned ontax liability. These reserves are included in "Accrued expenses" in the $900,000 promissory note from USU and from the releaseconsolidated balance sheets. In 9M Fiscal 2022, approximately $300,000 of the warrant derivativereserve relates to the estimate of the Canada foreign income tax liability of $52,500.Income TaxesIncome taxes expense (benefit) forwhich covers the 2018 Period and 2017 Period2013 through 2021 tax years during which a permanent establishment was $0 as Aspen Group experienced operating losses in both periods. As management made a full valuation allowance againstplace in Canada. This amount has not yet been remitted to the deferred tax assets stemming from these losses, there was no tax benefit recorded in the statement of operations in both periods.Net LossNet loss for the 2018 Period was ($3,396,575) as compared to ($381,530) for the 2017 Period, an increase in the loss of $3,015,045.
The following
AGI defines Adjusted EBITDA as earnings (or loss) from operations before the items in the table below including non-recurring charges of $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.
below.
rules of the Securities and Exchange Commission.
| Three Months Ended January 31, | Nine Months Ended January 31, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Net loss | $ | (1,555,040) | $ | (3,733,997) | $ | (7,563,651) | $ | (7,457,143) | |||||||||||||||
| Interest expense, net | 714,801 | 180,642 | 2,004,086 | 350,838 | |||||||||||||||||||
| Taxes | 37,249 | 231,610 | 114,071 | 388,520 | |||||||||||||||||||
| Depreciation and amortization | 919,152 | 883,536 | 2,775,330 | 2,480,179 | |||||||||||||||||||
| EBITDA | 116,162 | (2,438,209) | (2,670,164) | (4,237,606) | |||||||||||||||||||
| Bad debt expense | 450,000 | 350,000 | 1,250,000 | 1,050,000 | |||||||||||||||||||
| Stock-based compensation | 394,510 | 700,697 | 899,176 | 1,965,567 | |||||||||||||||||||
| Non-recurring charges - Severance | — | — | 125,000 | 19,665 | |||||||||||||||||||
| Non-recurring charges (income) - Other | — | 49,310 | 717,299 | (345,056) | |||||||||||||||||||
| Adjusted EBITDA | $ | 960,672 | $ | (1,338,202) | $ | 321,311 | $ | (1,547,430) | |||||||||||||||
| Net loss Margin | (10)% | (20)% | (15)% | (13)% | |||||||||||||||||||
| Adjusted EBITDA Margin | 6% | (7)% | 1% | (3)% | |||||||||||||||||||
| Three Months Ended January 31, 2023 | |||||||||||||||||||||||
| Consolidated | AGI Corporate | AU | USU | ||||||||||||||||||||
| Net income (loss) | $ | (1,555,040) | $ | (4,836,956) | $ | 1,536,456 | $ | 1,745,460 | |||||||||||||||
| Interest expense, net | 714,801 | 716,824 | (945) | (1,078) | |||||||||||||||||||
| Taxes | 37,249 | 4,058 | 22,858 | 10,333 | |||||||||||||||||||
| Depreciation and amortization | 919,152 | 64,874 | 739,563 | 114,715 | |||||||||||||||||||
| EBITDA | 116,162 | (4,051,200) | 2,297,932 | 1,869,430 | |||||||||||||||||||
| Bad debt expense | 450,000 | — | 225,000 | 225,000 | |||||||||||||||||||
| Stock-based compensation | 394,510 | 352,207 | 32,389 | 9,914 | |||||||||||||||||||
| Adjusted EBITDA | $ | 960,672 | $ | (3,698,993) | $ | 2,555,321 | $ | 2,104,344 | |||||||||||||||
| Net income (loss) Margin | (10) | % | NM | 16 | % | 29 | % | ||||||||||||||||
| Adjusted EBITDA Margin | 6 | % | NM | 27 | % | 35 | % | ||||||||||||||||
| Three Months Ended January 31, 2022 | |||||||||||||||||||||||
| Consolidated | AGI Corporate | AU | USU | ||||||||||||||||||||
| Net income (loss) | $ | (3,733,997) | $ | (5,020,149) | $ | 941,437 | $ | 344,715 | |||||||||||||||
| Interest expense, net | 180,642 | 180,682 | — | (40) | |||||||||||||||||||
| Taxes | 231,610 | 951 | 230,660 | (1) | |||||||||||||||||||
| Depreciation and amortization | 883,536 | 47,536 | 738,172 | 97,828 | |||||||||||||||||||
| EBITDA | (2,438,209) | (4,790,980) | 1,910,269 | 442,502 | |||||||||||||||||||
| Bad debt expense | 350,000 | — | 225,000 | 125,000 | |||||||||||||||||||
| Stock-based compensation | 700,697 | 616,166 | 56,880 | 27,651 | |||||||||||||||||||
| Non-recurring charges - Other | 49,310 | 49,310 | — | — | |||||||||||||||||||
| Adjusted EBITDA | $ | (1,338,202) | $ | (4,125,504) | $ | 2,192,149 | $ | 595,153 | |||||||||||||||
| Net income (loss) Margin | (20) | % | NM | 7 | % | 6 | % | ||||||||||||||||
| Adjusted EBITDA Margin | (7) | % | NM | 17 | % | 10 | % | ||||||||||||||||
| Nine Months Ended January 31, 2023 | |||||||||||||||||||||||
| Consolidated | AGI Corporate | AU | USU | ||||||||||||||||||||
| Net income (loss) | $ | (7,563,651) | $ | (14,885,752) | $ | 2,394,912 | $ | 4,927,189 | |||||||||||||||
| Interest expense, net | 2,004,086 | 2,008,340 | (2,762) | (1,492) | |||||||||||||||||||
| Taxes | 114,071 | 18,008 | 65,355 | 30,708 | |||||||||||||||||||
| Depreciation and amortization | 2,775,330 | 203,176 | 2,242,077 | 330,077 | |||||||||||||||||||
| EBITDA | (2,670,164) | (12,656,228) | 4,699,582 | 5,286,482 | |||||||||||||||||||
| Bad debt expense | 1,250,000 | — | 675,000 | 575,000 | |||||||||||||||||||
| Stock-based compensation | 899,176 | 731,268 | 121,651 | 46,257 | |||||||||||||||||||
| Non-recurring charges - Severance | 125,000 | 125,000 | — | — | |||||||||||||||||||
| Non-recurring charges - Other | 717,299 | 717,299 | — | — | |||||||||||||||||||
| Adjusted EBITDA | $ | 321,311 | $ | (11,082,661) | $ | 5,496,233 | $ | 5,907,739 | |||||||||||||||
| Net income (loss) Margin | (15) | % | NM | 8 | % | 25 | % | ||||||||||||||||
| Adjusted EBITDA Margin | 1 | % | NM | 17 | % | 30 | % | ||||||||||||||||
| Nine Months Ended January 31, 2022 | |||||||||||||||||||||||
| Consolidated | AGI Corporate | AU | USU | ||||||||||||||||||||
| Net income (loss) | $ | (7,457,143) | $ | (14,537,849) | $ | 4,605,707 | $ | 2,474,999 | |||||||||||||||
| Interest expense, net | 350,838 | 353,193 | (1,739) | (616) | |||||||||||||||||||
| Taxes | 388,520 | 3,363 | 383,867 | 1,290 | |||||||||||||||||||
| Depreciation and amortization | 2,480,179 | 116,720 | 2,082,972 | 280,487 | |||||||||||||||||||
| EBITDA | (4,237,606) | (14,064,573) | 7,070,807 | 2,756,160 | |||||||||||||||||||
| Bad debt expense | 1,050,000 | — | 725,000 | 325,000 | |||||||||||||||||||
| Stock-based compensation | 1,965,567 | 1,732,412 | 149,773 | 83,382 | |||||||||||||||||||
| Non-recurring charges - Severance | 19,665 | — | — | 19,665 | |||||||||||||||||||
| Non-recurring charges - Other | (345,056) | 107,635 | (452,691) | — | |||||||||||||||||||
| Adjusted EBITDA | $ | (1,547,430) | $ | (12,224,526) | $ | 7,492,889 | $ | 3,184,207 | |||||||||||||||
| Net income (loss) Margin | (13) | % | NM | 12 | % | 14 | % | ||||||||||||||||
| Adjusted EBITDA Margin | (3) | % | NM | 19 | % | 17 | % | ||||||||||||||||
|
| 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 |
|
| Three Months Ended January 31, | Nine Months Ended January 31, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Revenue | $ | 15,574,042 | $ | 18,944,798 | $51,542,502 | $57,316,004 | |||||||||||||||||
| Cost of Revenue | 5,394,155 | 9,275,419 | 21,946,714 | 26,658,188 | |||||||||||||||||||
| Adjusted Gross Profit | 10,179,887 | 9,669,379 | 29,595,788 | 30,657,816 | |||||||||||||||||||
| Less amortization expense included in cost of revenue: | |||||||||||||||||||||||
| Intangible asset amortization | 23,653 | 22,174 | 68,022 | 60,162 | |||||||||||||||||||
| Call center software/website amortization | 474,605 | 419,026 | 1,415,448 | 1,255,169 | |||||||||||||||||||
| Total amortization expense included in cost of revenue | 498,258 | 441,200 | 1,483,470 | 1,315,331 | |||||||||||||||||||
| GAAP Gross Profit | $ | 9,681,629 | $ | 9,228,179 | $28,112,318 | $29,342,485 | |||||||||||||||||
| GAAP Gross Profit as a percentage of revenue | 62 | % | 49 | % | 55% | 51% | |||||||||||||||||
| Adjusted Gross Profit as a percentage of revenue | 65 | % | 51 | % | 57% | 53% | |||||||||||||||||
|
| For the |
| |||||
|
| Nine Months Ended |
| |||||
|
| January 31, |
| |||||
|
| 2018 |
|
| 2017 |
| ||
|
|
|
|
|
|
| ||
Net cash used in operating activities |
| $ | (3,654,947 | ) |
| $ | (99,042 | ) |
Net cash used in investing activities |
|
| (3,031,667 | ) |
|
| (571,856 | ) |
Net cash provided by financing activities |
|
| 7,733,477 |
|
|
| 784,200 |
|
Net increase in cash and cash equivalents |
| $ | 1,046,863 |
|
| $ | 113,302 |
|
| Nine Months Ended January 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Net cash (used in) provided by | |||||||||||
| Operating activities | $ | (4,456,117) | $ | (7,719,760) | |||||||
| Investing activities | (1,681,706) | (3,734,670) | |||||||||
| Financing activities | (251,298) | 5,191,034 | |||||||||
| Net decrease in cash | $ | (6,389,121) | $ | (6,263,396) | |||||||
Net cash used in operating activities during the 2017 Period totaled ($99,042)internal use software.
accounts receivable balances.
courseware updates.
Net Cash Provided By (Used In) Financing Activities
Net cash provided bypayment of a 1% commitment fee of $200,000 on the 2022 Revolving Credit Facility, which was due six months from the closing date of March 14, 2022, or September 14, 2022, since the revolving credit facility has not been replaced; and $60,833 of deferred 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 $784,200 which reflects the increase duecosts related to the new $3,000,000 line of credit, of which $1,250,000 has been drawn,Lender's legal fees incurred during August 2022 for the 2022 Convertible Note. This was partially offset by 11,840 shares the buybackCompany sold under the Equity Distribution Agreement with Northland Securities, Inc. and received net proceeds of warrants for $400,000.
$9,535. The Equity Distribution Agreement was canceled on October 11, 2022.
Historically, our primary sourceResources
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
Related Party Transactions
See Note 9 to"Critical Accounting Policies and Estimates" of our Annual Report on Form 10-K for the unaudited consolidated financial statements included hereinfiscal year ended April 30, 2022 and listed here below:
Doubtful Accounts Receivable
We do
New Accounting Pronouncements
See Note 2 to our unaudited consolidated financial statements included herein for discussionarrangements as of recent accounting pronouncements.
January 31, 2023.
Statements.
Not applicable.
Evaluation of Disclosure Controls and Procedures. 45Our 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.46
From time to time,time-to-time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. There wereDuring the reporting period, there have been no material changes to ourthe description of legal proceedings as describedset forth in the Company’sour Annual Report on Form 10-K duringfor the period covered by this report. fiscal year ended April 30, 2022.
None.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDSFrom November 1, 2017, to January 31, 2018, 87,470 shares were issued in connection with the 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 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 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 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.None.
None.
Not applicable.
None.
See the Exhibit Index at the end of this report.47SIGNATURESPursuant to the requirementsTable 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.Aspen Group, Inc.March 15, 2018By:/s/ Michael MathewsMichael MathewsChief Executive Officer(Principal Executive Officer)March 15, 2018By:/s/ Janet GillJanet GillChief Financial Officer(Principal Financial Officer)
EXHIBIT INDEX
|
|
|
|
| Incorporated by Reference |
| Filed or Furnished | |||||
Exhibit # |
| Exhibit Description |
|
| Form |
| Date |
|
| Number |
| Herewith |
3.1 |
|
|
| 10-Q |
| 3/9/17 |
|
| 3.1 |
|
| |
3.2 |
|
|
|
|
|
|
|
|
|
| Filed | |
4.1 |
|
|
| 8-K |
| 12/1/17 |
|
| 4.1 |
|
| |
10.1 |
| Employment Agreement with Michael Mathews dated November 2, 2016* |
|
| 10-Q |
| 3/9/17 |
|
| 10.1 |
|
|
10.2 |
|
|
| 8-K |
| 7/28/17 |
|
| 10.1 |
|
| |
10.3 |
|
|
| 8-K |
| 7/28/17 |
|
| 10.2 |
|
| |
10.4 |
|
|
| 8-K |
| 7/28/17 |
|
| 10.3 |
|
| |
10.5 |
|
|
| 10-Q |
| 9/14/17 |
|
| 10.4 |
|
| |
10.6 |
|
|
| 10-K |
| 7/25/17 |
|
| 10.1 |
|
| |
10.7 |
|
|
| 8-K |
| 6/15/17 |
|
| 10.1 |
|
| |
10.8 |
|
|
| 8-K |
| 5/18/17 |
|
| 10.1 |
|
| |
10.9 |
| Employment Agreement dated November 24, 2014 - Gerard Wendolowski* |
|
| 10-K |
| 7/28/15 |
|
| 10.19 |
|
|
10.10 |
|
|
| 10-K |
| 7/28/15 |
|
| 10.18 |
|
| |
10.11 |
|
|
|
|
|
|
|
|
|
| Filed | |
10.12 |
|
|
| 8-K |
| 4/10/17 |
|
| 10.1 |
|
| |
10.13 |
|
|
| 8-K |
| 5/30/17 |
|
| 10.1 |
|
| |
10.14 |
|
|
| 8-K |
| 4/10/17 |
|
| 10.2 |
|
| |
10.15 |
|
|
| 8-K |
| 9/7/16 |
|
| 2.1 |
|
| |
10.16 |
|
|
| 8-K |
| 9/7/16 |
|
| 2.2 |
|
| |
10.17 |
|
|
| 8-K |
| 9/7/16 |
|
| 3.1 |
|
| |
10.18 |
|
|
| 10-K |
| 7/27/16 |
|
| 10.4 |
|
| |
10.19 |
| Letter Agreement with Warrant Holders for Reduced Exercise Price and Early Exercise 2016 |
|
| 10-K |
| 7/27/16 |
|
| 10.19 |
|
|
31.1 |
|
|
|
|
|
|
|
|
|
| Filed | |
31.2 |
|
|
|
|
|
|
|
|
|
| Filed | |
32.1 |
| Certification of Principal Executive and Principal Financial Officer (906) |
|
|
|
|
|
|
|
|
| Furnished** |
101.INS |
| XBRL Instance Document |
|
|
|
|
|
|
|
|
| Filed |
101.SCH |
| XBRL Taxonomy Extension Schema Document |
|
|
|
|
|
|
|
|
| Filed |
101.CAL |
| XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
|
|
|
|
|
|
| Filed |
101.DEF |
| XBRL Taxonomy Extension Definition Linkbase Document |
|
|
|
|
|
|
|
|
| Filed |
101.LAB |
| XBRL Taxonomy Extension Label Linkbase Document |
|
|
|
|
|
|
|
|
| Filed |
101.PRE |
| XBRL Taxonomy Extension Presentation Linkbase Document |
|
|
|
|
|
|
|
|
| Filed |
———————
Incorporated by Reference Filed or
Furnished
HerewithExhibit # Exhibit Description Form Date Number Certificate of Incorporation, as amended 10-K 7/9/2019 3.1 Certificate of Amendment to Articles of Incorporation - authorized shares 8-K 7/12/2022 3.1 Bylaws, as amended 10-Q 3/15/2018 3.2 Certification of Principal Executive Officer (302) Filed Certification of Principal Financial Officer (302) Filed Certification of Principal Executive and Principal Financial Officer (906) Furnished** 101.INS Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document 101.SCH Inline XBRL Taxonomy Extension Schema Document Filed 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document Filed 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document Filed 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document Filed 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document Filed 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
Management contract or compensatory plan or arrangement.
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 agreementother attachments have been omitted. The Company undertakes to furnish the omitted in accordance with Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished supplementallyschedules and attachments to the Securities and Exchange Commission staffSEC upon request.
29
| Aspen Group, Inc. | |||||||||||
| May 16, 2023 | By: | /s/ Michael Mathews | |||||||||
| Michael Mathews Chief Executive Officer (Principal Executive Officer) | |||||||||||
| May 16, 2023 | By: | /s/ Matthew LaVay | |||||||||
| Matthew LaVay Chief Financial Officer (Principal Financial Officer) | |||||||||||