Exhibit 99.1
ZOVIO INC REPORTS UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL INFORMATION
On July 31, 2022, Zovio Inc, a Delaware corporation (“Zovio” or the “Company”), entered into and simultaneously closed a new asset purchase agreement (the “New Asset Purchase Agreement”), pursuant to which Zovio sold to UAGC all of the remaining assets of Zovio related to the UAGC Services Business (the “Transaction”). In connection with the Transaction, the parties terminated the UAGC/Zovio Agreements. In addition, UAGC (and, where applicable, UofA) (a) paid to Zovio cash in the amount of $1.00, (b) assumed all obligations under Zovio’s business contracts associated with the UAGC Services Businesses, including the lease for the facilities occupied by the UAGC Services Business located in Chandler, Arizona, which has a remaining term of eight years and approximately $20.0 million in rent obligations, (c) released Zovio from all remaining obligations under the UAGC/Zovio Agreements, including from all indemnification obligations under the Original Asset Purchase Agreement and all minimum payment guarantees under the UAGC Services Agreement, and (d) granted Zovio a general release of all claims. In addition, UAGC hired substantially all of the UAGC Services Business employees (as determined by UAGC). In turn, Zovio (i) paid to UAGC cash in the amount of $5.5 million, reflecting the allocated minimum payment owed by Zovio to UAGC for the month of July 2022, (ii) paid to UAGC cash in the amount of $5.0 million, and assigned to UAGC the right to a security deposit in the amount of $2.7 million, for assumption of Zovio’s obligations under the Chandler lease, (iii) granted UAGC the right to any refund achieved by Zovio after the closing of the Transaction from the State of California as a result of its appeal of that certain judgment set forth in the Statement of Decision issued by the Superior Court of the State of California, County of San Diego on March 3, 2022, (iv) released UAGC from all remaining obligations under the UAGC/Zovio Agreements, and (v) granted UAGC and UofA a general release of all claims.
The Company’s accounting and financial reporting in these unaudited pro forma financial statements is based on its preliminary assessment of the appropriate application of Generally Accepted Accounting Principles (“GAAP”). The final application of GAAP to the New Asset Purchase Agreement may differ from what is presented in these unaudited pro forma financial statements.
The unaudited pro forma condensed consolidated financial statements of the Company presented in this Exhibit 99.1 were derived from the Company’s historical consolidated financial statements and are being presented to give effect to the Transaction. The presentation of the unaudited pro forma financial information is prepared in conformity with Article 11 of Regulation S-X rules effective January 1, 2021.
The unaudited pro forma condensed consolidated balance sheet assumes that the Transaction had occurred on June 30, 2022. The unaudited pro forma condensed consolidated income statements are presented as if the Transaction had occurred on January 1, 2021. The unaudited combined consolidated pro forma financial statements presented in this Form 8-K should be read in conjunction with the accompanying notes. The following unaudited pro forma condensed consolidated financial statements were based on and should be read in conjunction with the Company’s historical consolidated financial statements:
•Zovio audited consolidated financial statements and related notes thereto as of December 31, 2021 and for the year ended December 31, 2021 as reported on Form 10-K;
•Zovio unaudited condensed consolidated financial statements and related notes thereto as of June 30, 2022 and for the six months ended June 30, 2022 as reported on Form 10-Q.
The pro forma adjustments are based on the best information available and assumptions that management believes are (a) directly attributable to the New Asset Purchase Agreement, (b) directly attributable to the previous disposition of TutorMe on May 23, 2022 and (c) are factually supportable. See Current Report on Form 8-K filed on May 23, 2022 for further information on the TutorMe disposition. The pro forma adjustments are described in the accompanying notes to the unaudited pro forma condensed consolidated financial information.
The Company has determined that the Transaction does not meet the definition of discontinued operations in accordance with Financial Accounting Standards Board Accounting Standards Codification 205, Presentation of Financial Statements (“ASC 205”). Therefore, pro forma adjustments included within the unaudited pro forma consolidated statements of operations for the years ended December 31, 2021 and period ended June 30, 2022 are reflected in Zovio’s pro forma income (loss) from continuing operations.
The unaudited pro forma condensed consolidated financial information is provided herein for illustrative purposes only and is not necessarily indicative of the results of operations that would have occurred had the Transaction occurred on January 1, 2021. The unaudited pro forma condensed consolidated financial information does not reflect future events that may occur after the Transaction.
Exhibit 99.1
ZOVIO INC
Unaudited Pro Forma Condensed Consolidated Balance Sheet
(Unaudited)
(In thousands)
As of June 30, 2022 | |||||||||||||||||
Historical | Transaction Accounting Adjustments | Pro Forma | |||||||||||||||
ASSETS | |||||||||||||||||
Current assets: | |||||||||||||||||
Cash and cash equivalents | $ | 20,812 | $ | (10,500) | [A] | $ | 10,312 | ||||||||||
Restricted cash | 6,079 | (2,680) | [A] | 3,399 | |||||||||||||
Investments | 227 | — | 227 | ||||||||||||||
Accounts receivable, net | 4,951 | — | 4,951 | ||||||||||||||
Prepaid expenses and other current assets | 8,633 | (4,409) | [A] | 4,224 | |||||||||||||
Total current assets | 40,702 | (17,589) | 23,113 | ||||||||||||||
Property and equipment, net | 1,100 | — | 1,100 | ||||||||||||||
Operating lease assets | 17,358 | — | 17,358 | ||||||||||||||
Goodwill and intangibles, net | 23,915 | — | 23,915 | ||||||||||||||
Other long-term assets | 2,358 | (265) | [A] | 2,093 | |||||||||||||
Total assets | $ | 85,433 | $ | (17,854) | $ | 67,579 | |||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||||||||
Current liabilities: | |||||||||||||||||
Accounts payable and accrued liabilities | $ | 35,523 | $ | (5,046) | [B] | $ | 30,477 | ||||||||||
Deferred revenue and student deposits | 7,405 | — | 7,405 | ||||||||||||||
Total current liabilities | 42,928 | (5,046) | 37,882 | ||||||||||||||
Rent liability | 32,864 | (14,375) | [B] | 18,489 | |||||||||||||
Other long-term liabilities | 3,036 | (165) | [B] | 2,871 | |||||||||||||
Total liabilities | 78,828 | (19,586) | 59,242 | ||||||||||||||
Total stockholders’ equity | 6,605 | 1,732 | 8,337 | ||||||||||||||
Total liabilities and stockholders’ equity | $ | 85,433 | $ | (17,854) | $ | 67,579 |
Exhibit 99.1
ZOVIO INC
Unaudited Pro Forma Condensed Consolidated Statement of Income (Loss)
(Unaudited)
(In thousands, except per share amounts)
Six Months Ended June 30, 2022 | |||||||||||||||||||||||||||||||||||
Historical | UAGC Transaction Adjustments | TutorMe Sale Adjustments | Pro Forma | ||||||||||||||||||||||||||||||||
Revenue | $ | 109,282 | $ | (91,386) | $ | (4,548) | [C] | $ | 13,348 | ||||||||||||||||||||||||||
Other revenue | 3,731 | (3,731) | — | [C] | — | ||||||||||||||||||||||||||||||
Revenue and other revenue | $ | 113,013 | $ | (95,117) | $ | (4,548) | $ | 13,348 | |||||||||||||||||||||||||||
Costs and expenses: | |||||||||||||||||||||||||||||||||||
Technology and academic services | 35,788 | (22,368) | (2,495) | [D] | 10,925 | ||||||||||||||||||||||||||||||
Counseling services and support | 39,036 | (37,493) | — | [D] | 1,543 | ||||||||||||||||||||||||||||||
Marketing and communication | 40,186 | (33,840) | (1,109) | [D] | 5,237 | ||||||||||||||||||||||||||||||
General and administrative | 14,958 | (4,628) | (1,335) | [D] | 8,995 | ||||||||||||||||||||||||||||||
Legal expense | 920 | — | — | 920 | |||||||||||||||||||||||||||||||
Restructuring and impairment expense | 35,887 | (35,887) | — | [E] | — | ||||||||||||||||||||||||||||||
Gain on transactions, net | (45,689) | (5,814) | 51,503 | [F] | — | ||||||||||||||||||||||||||||||
Total costs and expenses | 121,086 | (140,030) | 46,564 | 27,620 | |||||||||||||||||||||||||||||||
Operating loss | (8,073) | 44,913 | (51,112) | (14,272) | |||||||||||||||||||||||||||||||
Other expense, net | (3,951) | — | — | (3,951) | |||||||||||||||||||||||||||||||
Loss before income taxes | (12,024) | 44,913 | (51,112) | (18,223) | |||||||||||||||||||||||||||||||
Income tax expense | 86 | — | — | 86 | |||||||||||||||||||||||||||||||
Net loss | $ | (12,110) | $ | 44,913 | $ | (51,112) | $ | (18,309) | |||||||||||||||||||||||||||
Loss per share: | |||||||||||||||||||||||||||||||||||
Basic | $ | (0.36) | $ | (0.54) | |||||||||||||||||||||||||||||||
Diluted | $ | (0.36) | $ | (0.54) | |||||||||||||||||||||||||||||||
Weighted average number of common shares outstanding used in computing loss per share: | |||||||||||||||||||||||||||||||||||
Basic | 33,844 | — | — | 33,844 | |||||||||||||||||||||||||||||||
Diluted | 33,844 | — | — | 33,844 |
Exhibit 99.1
ZOVIO INC
Unaudited Pro Forma Condensed Consolidated Statement of Income (Loss)
(Unaudited)
(In thousands, except per share amounts)
Year Ended December 31, 2021 | |||||||||||||||||||||||||||||||||||
Historical | UAGC Transaction Adjustments | TutorMe Sale Adjustments | Pro Forma | ||||||||||||||||||||||||||||||||
Revenue | $ | 253,099 | $ | (222,859) | $ | (7,827) | [C] | $ | 22,413 | ||||||||||||||||||||||||||
Other revenue | 9,934 | (9,934) | — | [C] | — | ||||||||||||||||||||||||||||||
Revenue and other revenue | $ | 263,033 | $ | (232,793) | $ | (7,827) | $ | 22,413 | |||||||||||||||||||||||||||
Costs and expenses: | |||||||||||||||||||||||||||||||||||
Technology and academic services | 70,663 | (47,727) | (3,652) | [D] | 19,284 | ||||||||||||||||||||||||||||||
Counseling services and support | 89,514 | (87,220) | — | [D] | 2,294 | ||||||||||||||||||||||||||||||
Marketing and communication | 85,328 | (76,768) | (2,159) | [D] | 6,401 | ||||||||||||||||||||||||||||||
General and administrative | 43,160 | (10,085) | (3,280) | [D] | 29,795 | ||||||||||||||||||||||||||||||
Legal expense | 14,335 | — | — | 14,335 | |||||||||||||||||||||||||||||||
Restructuring and impairment expense | 2,641 | 33,246 | — | [E] | 35,887 | ||||||||||||||||||||||||||||||
Gain on transactions, net | — | 7,814 | (51,503) | [F] | (43,689) | ||||||||||||||||||||||||||||||
Total costs and expenses | 305,641 | (180,740) | (60,594) | 64,307 | |||||||||||||||||||||||||||||||
Operating loss | (42,608) | (52,053) | 52,767 | (41,894) | |||||||||||||||||||||||||||||||
Other income, net | 130 | — | — | 130 | |||||||||||||||||||||||||||||||
Loss before income taxes | (42,478) | (52,053) | 52,767 | (41,764) | |||||||||||||||||||||||||||||||
Income tax benefit | (129) | — | — | (129) | |||||||||||||||||||||||||||||||
Net loss | $ | (42,349) | $ | (52,053) | $ | 52,767 | $ | (41,635) | |||||||||||||||||||||||||||
Loss per share: | |||||||||||||||||||||||||||||||||||
Basic | $ | (1.27) | $ | (1.25) | |||||||||||||||||||||||||||||||
Diluted | $ | (1.27) | $ | (1.25) | |||||||||||||||||||||||||||||||
Weighted average number of common shares outstanding used in computing loss per share: | |||||||||||||||||||||||||||||||||||
Basic | 33,256 | — | — | 33,256 | |||||||||||||||||||||||||||||||
Diluted | 33,256 | — | — | 33,256 |
Exhibit 99.1
ZOVIO INC
Notes to Unaudited Pro Forma Condensed Consolidated Financial Information
The following estimated pro forma adjustments are included in the unaudited pro forma condensed consolidated balance sheet and or the unaudited pro forma consolidated income statements:
A.Reflects the estimated assets transferred in accordance with the transaction with UAGC, dated as of July 31, 2022. Zovio paid to UAGC cash in the amount of $5.5 million, reflecting the allocated minimum payment owed by Zovio to UAGC for the month of July 2022, as well as other cash in the amount of $5.0 million. Zovio also assigned to UAGC the right to a security deposit in the amount of $2.7 million, for assumption of Zovio’s obligations under the Chandler lease.
B.Reflects the estimated liabilities transferred in accordance with the transaction with UAGC, dated as of July 31, 2022. UAGC assumed all obligations under Zovio’s business contracts associated with the UAGC Services Businesses, including the lease for the facilities located in Chandler, Arizona, which has a remaining approximately $20.0 million in rent obligations (both current and long-term).
C.Reflects the elimination of historical UAGC revenues or the TutorMe revenues from operations for each period noted.
D.Reflects the elimination of historical UAGC operational expenses or the TutorMe operation expenses for each period noted.
E.Reflects the impairment expenses relating to the long-lived assets impaired due to the transfer of assets in relation to the transaction with UAGC, dated as of July 31, 2022.
F.Represents the gain on the sale of TutorMe, dated May 23, 2022, partially offset by the loss on transaction with UAGC, dated as of July 31, 2022, including the write-off of the net asset adjustment