Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 20202021
or
☐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
aspu-20210731_g1.jpg
ASPEN GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware27-1933597
State or Other Jurisdiction of Incorporation or OrganizationI.R.S. Employer Identification No.
276 Fifth Avenue, Suite 505, New York, New York
10001
Address of Principal Executive OfficesZip Code
(480) 407-7365(646) 448-5144
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.001ASPU
The Nasdaq Stock Market
(The Nasdaq Global Market)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ     No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes þ    No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer ☑Smaller reporting company ☑
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes ☐    No þ 
ClassOutstanding as of September 10, 20202021
Common Stock, $0.001 par value per share22,496,50224,931,565 shares


Table of Contents
TABLE OF CONTENTS
Page Number
PART I – FINANCIAL INFORMATION
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PART II – OTHER INFORMATION
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Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

ASPEN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
July 31, 2020April 30, 2020July 31, 2021April 30, 2021
(Unaudited)(Unaudited)
AssetsAssetsAssets
Current assets:Current assets:Current assets:
Cash and cash equivalentsCash and cash equivalents$15,899,293 $14,350,554 Cash and cash equivalents$6,554,423 $8,513,290 
Restricted cashRestricted cash3,060,269 3,556,211 Restricted cash3,722,831 5,152,789 
Accounts receivable, net of allowance of $2,156,645 and $1,758,920, respectively14,662,231 14,326,791 
Accounts receivable, net of allowance of $3,272,977 and $3,289,816, respectivelyAccounts receivable, net of allowance of $3,272,977 and $3,289,816, respectively17,190,238 16,724,744 
Prepaid expensesPrepaid expenses993,541 941,671 Prepaid expenses914,216 1,077,831 
Other receivables0 23,097 
Other current assetsOther current assets113,123 173,090 Other current assets13,890 68,529 
Total current assetsTotal current assets34,728,457 33,371,414 Total current assets28,395,598 31,537,183 
Property and equipment:Property and equipment:Property and equipment:
Computer equipment and hardwareComputer equipment and hardware690,114 649,927 Computer equipment and hardware1,193,278 956,463 
Furniture and fixturesFurniture and fixtures1,007,099 1,007,099 Furniture and fixtures1,793,686 1,705,101 
Leasehold improvementsLeasehold improvements892,279 867,024 Leasehold improvements6,182,239 5,729,324 
Instructional equipmentInstructional equipment301,842 301,842 Instructional equipment491,597 421,039 
SoftwareSoftware6,792,594 6,162,770 Software8,951,241 8,488,635 
Construction in progressConstruction in progress88,367 247,767 
9,683,928 8,988,662 18,700,408 17,548,329 
Less accumulated depreciation and amortization(3,314,448)(2,841,019)
Less: accumulated depreciation and amortizationLess: accumulated depreciation and amortization(5,962,034)(4,892,987)
Total property and equipment, netTotal property and equipment, net6,369,480 6,147,643 Total property and equipment, net12,738,374 12,655,342 
GoodwillGoodwill5,011,432 5,011,432 Goodwill5,011,432 5,011,432 
Intangible assets, netIntangible assets, net7,900,000 7,900,000 Intangible assets, net7,907,932 7,908,360 
Courseware, netCourseware, net102,560 111,457 Courseware, net303,020 187,296 
Accounts receivable, net of allowance of $625,963 and $625,963, respectively45,329 45,329 
Accounts receivable, net of allowance of $— and $625,963, respectivelyAccounts receivable, net of allowance of $— and $625,963, respectively— 45,329 
Long term contractual accounts receivableLong term contractual accounts receivable8,713,018 6,701,136 Long term contractual accounts receivable11,313,657 10,249,833 
Debt issue cost, netDebt issue cost, net43,056 182,418 Debt issue cost, net9,722 18,056 
Operating lease right of use asset, net7,264,584 6,412,851 
Operating lease right of use assets, netOperating lease right of use assets, net12,242,456 12,714,863 
Deposits and other assetsDeposits and other assets150,406 355,831 Deposits and other assets468,361 479,212 
Total assetsTotal assets$70,328,322 $66,239,511 Total assets$78,390,552 $80,806,906 
(Continued)
The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.
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ASPEN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
July 31, 2020April 30, 2020July 31, 2021April 30, 2021
(Unaudited)(Unaudited)
Liabilities and Stockholders’ EquityLiabilities and Stockholders’ EquityLiabilities and Stockholders’ Equity
Current liabilities:Current liabilities:Current liabilities:
Accounts payableAccounts payable$1,764,714 $1,505,859 Accounts payable$1,627,731 $1,466,488 
Accrued expensesAccrued expenses1,127,992 537,413 Accrued expenses2,361,271 2,040,896 
Deferred revenueDeferred revenue4,766,853 3,712,994 Deferred revenue4,691,087 6,825,014 
Due to studentsDue to students1,891,502 2,371,844 Due to students2,905,192 2,747,484 
Operating lease obligations, current portionOperating lease obligations, current portion1,542,754 1,683,252 Operating lease obligations, current portion2,086,076 2,029,821 
Other current liabilitiesOther current liabilities288,033 545,711 Other current liabilities57,847 307,921 
Total current liabilitiesTotal current liabilities11,381,848 10,357,073 Total current liabilities13,729,204 15,417,624 
Convertible notes, net of discount of $1,409,828 and $1,550,854, respectively8,590,172 8,449,146 
Operating lease obligations, less current portionOperating lease obligations, less current portion6,677,566 5,685,335 Operating lease obligations, less current portion15,865,044 16,298,808 
Total liabilitiesTotal liabilities26,649,586 24,491,554 Total liabilities29,594,248 31,716,432 
Commitments and contingencies – see Note 10
Commitments and contingencies – see Note 11Commitments and contingencies – see Note 1100
Stockholders’ equity:Stockholders’ equity:Stockholders’ equity:
Preferred stock, $0.001 par value; 1,000,000 shares authorized,Preferred stock, $0.001 par value; 1,000,000 shares authorized,Preferred stock, $0.001 par value; 1,000,000 shares authorized,
0 issued and 0 outstanding at July 31, 2020 and April 30, 20200 0 
Common stock, $0.001 par value; 40,000,000 shares authorized
22,377,744 issued and 22,361,077 outstanding at July 31, 2020
21,770,520 issued and 21,753,853 outstanding at April 30, 202022,378 21,771 
0 issued and 0 outstanding at July 31, 2021 and April 30, 20210 issued and 0 outstanding at July 31, 2021 and April 30, 2021— — 
Common stock, $0.001 par value; 40,000,000 shares authorized,Common stock, $0.001 par value; 40,000,000 shares authorized,
25,087,051 issued and 24,931,565 outstanding at July 31, 202125,087,051 issued and 24,931,565 outstanding at July 31, 2021
25,066,297 issued and 24,910,811 outstanding at April 30, 202125,066,297 issued and 24,910,811 outstanding at April 30, 202125,088 25,067 
Additional paid-in capitalAdditional paid-in capital92,378,584 89,505,216 Additional paid-in capital109,617,521 109,040,824 
Treasury stock (16,667 shares)(70,000)(70,000)
Treasury stock (155,486 at both July 31, 2021 and April 30, 2021)Treasury stock (155,486 at both July 31, 2021 and April 30, 2021)(1,817,414)(1,817,414)
Accumulated deficitAccumulated deficit(48,652,226)(47,709,030)Accumulated deficit(59,028,891)(58,158,003)
Total stockholders’ equityTotal stockholders’ equity43,678,736 41,747,957 Total stockholders’ equity48,796,304 49,090,474 
Total liabilities and stockholders’ equityTotal liabilities and stockholders’ equity$70,328,322 $66,239,511 Total liabilities and stockholders’ equity$78,390,552 $80,806,906 

The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.
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ASPEN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

Three Months Ended July 31,Three Months Ended July 31,
2020201920212020
Revenues$15,165,562 $10,357,982 
RevenueRevenue$19,430,995 $15,165,562 
Operating expenses:Operating expenses:Operating expenses:
Cost of revenues (exclusive of depreciation and amortization shown separately below)5,847,523 4,353,058 
Cost of revenue (exclusive of depreciation and amortization shown separately below) Cost of revenue (exclusive of depreciation and amortization shown separately below)8,593,568 5,847,523 
General and administrative General and administrative8,793,756 6,796,251  General and administrative10,946,477 8,793,756 
Bad debt expense Bad debt expense400,000 240,899  Bad debt expense350,000 400,000 
Depreciation and amortization Depreciation and amortization490,624 606,574  Depreciation and amortization779,409 490,624 
Total operating expenses Total operating expenses15,531,903 11,996,782  Total operating expenses20,669,454 15,531,903 
Operating lossOperating loss(366,341)(1,638,800)Operating loss(1,238,459)(366,341)
Other income (expense):Other income (expense):Other income (expense):
Other (expense) income, net(123,298)22,802 
Interest expense Interest expense(455,457)(423,689) Interest expense(33,539)(455,457)
Total other expense, net(578,755)(400,887)
Other income (expense), net Other income (expense), net552,120 (123,298)
Total other income (expense), net Total other income (expense), net518,581 (578,755)
Loss before income taxesLoss before income taxes(945,096)(2,039,687)Loss before income taxes(719,878)(945,096)
Income tax (benefit) expense(1,900)35,595 
Income tax expense (benefit)Income tax expense (benefit)151,010 (1,900)
Net lossNet loss$(943,196)$(2,075,282)Net loss$(870,888)$(943,196)
Net loss per share - basic and dilutedNet loss per share - basic and diluted$(0.04)$(0.11)Net loss per share - basic and diluted$(0.03)$(0.04)
Weighted average number of common stock outstanding - basic and dilutedWeighted average number of common stock outstanding - basic and diluted22,094,409 18,733,317 Weighted average number of common stock outstanding - basic and diluted25,070,072 22,094,409 


The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.
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ASPEN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
Three Months Ended July 31, 20202021 and 20192020
(Unaudited)


Common StockAdditional
Paid-In
Capital		Treasury
Stock		Accumulated
Deficit		Total
Stockholders’
Equity
SharesAmount
Balance at April 30, 202021,770,520 $21,771 $89,505,216 $(70,000)$(47,709,030)$41,747,957 
Stock-based compensation— — 487,110 — — 487,110 
Common stock issued for stock options exercised for cash415,175 415 1,269,567 — — 1,269,982 
Common stock issued for warrants exercised for cash192,049 192 1,081,600 — — 1,081,792 
Modification charge for warrants exercised— — 25,966 — — 25,966 
Amortization of warrant based cost— — 9,125 — — 9,125 
Net loss— — — — (943,196)(943,196)
Balance at July 31, 202022,377,744 $22,378 $92,378,584 $(70,000)$(48,652,226)$43,678,736 
Common StockAdditional
Paid-In
Capital		Treasury
Stock		Accumulated
Deficit		Total
Stockholders’
Equity
SharesAmount
Balance at April 30, 201918,665,551 $18,666 $68,562,727 $(70,000)$(42,049,965)$26,461,428 
Stock-based compensation— — 498,417 — — 498,417 
Common stock issued for cashless stock options exercised101,894 102 (102)— — 0 
Common stock issued for stock options exercised for cash21,876 22 45,168 — — 45,190 
Common stock issued for cashless warrant exercise19,403 19 (19)— — 0 
Amortization of warrant based cost— — 9,440 — — 9,440 
Amortization of restricted stock issued for service— — 30,597 — — 30,597 
Restricted Stock Issued for Services, subject to vesting104,803 105 (105)— — 0 
Cumulative effect of Adoption of ASC 842— — — — (136,745)(136,745)
Net loss— — — — (2,075,282)(2,075,282)
Balance at July 31, 201918,913,527 $18,914 $69,146,123 $(70,000)$(44,261,992)$24,833,045 

Common StockAdditional
Paid-In
Capital		Treasury
Stock		Accumulated
Deficit		Total
Stockholders’
Equity
SharesAmount
Balance at April 30, 202125,066,297 $25,067 $109,040,824 $(1,817,414)$(58,158,003)$49,090,474 
Stock-based compensation— — 542,712 — — 542,712 
Common stock issued for stock options exercised for cash5,097 5 22,543 — — 22,548 
Common stock issued for vested restricted stock units15,657 16 (16)— — — 
Amortization of warrant based cost— — 11,458 — — 11,458 
Net loss— — — — (870,888)(870,888)
Balance at July 31, 202125,087,051 $25,088 $109,617,521 $(1,817,414)$(59,028,891)$48,796,304 
Common StockAdditional
Paid-In
Capital		Treasury
Stock		Accumulated
Deficit		Total
Stockholders’
Equity
SharesAmount
Balance at April 30, 202021,770,520 $21,771 $89,505,216 $(70,000)$(47,709,030)$41,747,957 
Stock-based compensation— — 487,110 — — 487,110 
Common stock issued for stock options exercised for cash415,175 415 1,269,567 — — 1,269,982 
Common stock issued for warrants exercised for cash192,049 192 1,081,600 — — 1,081,792 
Modification charge for warrants exercised— — 25,966 — — 25,966 
Amortization of warrant based cost— — 9,125 — — 9,125 
Net loss— — — — (943,196)(943,196)
Balance at July 31, 202022,377,744 $22,378 $92,378,584 $(70,000)$(48,652,226)$43,678,736 




The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.
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ASPEN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended July 31,
 20202019
Cash flows from operating activities:
Net loss$(943,196)$(2,075,282)
Adjustments to reconcile net loss to net cash used in operating activities:
Bad debt expense400,000 240,899 
Depreciation and amortization490,624 606,574 
Stock-based compensation487,110 498,417 
Warrants issued for services9,125 9,440 
Loss on asset disposition0 20,240 
Amortization of debt discounts141,026 65,702 
Amortization of debt issue costs139,362 29,662 
Modification charge for warrants exercised(25,966)0 
Non-cash payments to investor relations firm0 30,597 
Other adjustments, net10,587 0 
Changes in operating assets and liabilities:
Accounts receivable(2,747,322)(1,535,420)
Prepaid expenses(51,870)(136,022)
Other receivables23,097 710 
Other current assets59,966 0 
Deposits and other assets205,425 67,032 
Accounts payable258,855 (110,890)
Accrued expenses590,579 (73,663)
Lease liabilities, net of right of use assets0 26,993 
Due to students(480,342)417,131 
Deferred revenue1,053,859 224,172 
Other current liabilities(257,678)8,625 
Net cash used in operating activities(636,759)(1,685,083)
Cash flows from investing activities:
Purchases of courseware and accreditation(3,050)(2,275)
Purchases of property and equipment(659,168)(629,983)
Net cash used in investing activities(662,218)(632,258)
Cash flows from financing activities:
Proceeds from stock options exercised and warrants exercised2,351,774 45,190 
Net cash provided by financing activities2,351,774 45,190 
Three Months Ended July 31,
 20212020
Cash flows from operating activities:
Net loss$(870,888)$(943,196)
Adjustments to reconcile net loss to net cash used in operating activities:
Bad debt expense350,000 400,000 
Depreciation and amortization779,409 490,624 
Stock-based compensation542,712 487,110 
Amortization of warrant based cost11,458 9,125 
Amortization of debt discounts— 141,026 
Amortization of debt issue costs8,334 139,362 
Modification charge for warrants exercised— (25,966)
Loss on asset disposition1,144 — 
Lease expense8,307 — 
Tenant improvement allowances received from landlords86,591 — 
Other adjustments, net— 10,587 
Changes in operating assets and liabilities:
Accounts receivable(1,879,318)(2,747,322)
Prepaid expenses163,615 (51,870)
Other receivables— 23,097 
Other current assets54,639 59,966 
Accounts receivable, other45,329 — 
Deposits and other assets10,852 205,425 
Accounts payable161,243 258,855 
Accrued expenses320,375 590,579 
Due to students157,708 (480,342)
Deferred revenue(2,133,927)1,053,859 
Other current liabilities(250,074)(257,678)
Net cash used in operating activities(2,432,491)(636,759)
Cash flows from investing activities:
Purchases of courseware and accreditation(131,669)(3,050)
Purchases of property and equipment(847,213)(659,168)
Net cash used in investing activities(978,882)(662,218)
Cash flows from financing activities:
Proceeds from stock options exercised22,548 1,269,982 
Proceeds from warrants exercised— 1,081,792 
Net cash provided by financing activities22,548 2,351,774 
(Continued)
The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.






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ASPEN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
Three Months Ended July 31,
20202019
Net increase (decrease) in cash and cash equivalents$1,052,797 $(2,272,151)
Cash, restricted cash, and cash equivalents at beginning of period17,906,765 9,967,752 
Cash, restricted cash, and cash equivalents at end of period$18,959,562 $7,695,601 
Supplemental disclosure cash flow information
Cash paid for interest$199,178 $324,861 
Cash paid for income taxes$1,600 $0 
Supplemental disclosure of non-cash investing and financing activities
Common stock issued for services$0 $178,447 
Right-of-use lease asset offset against operating lease obligations$851,733 $8,196,106 
Three Months Ended July 31,
20212020
Net (decrease) increase in cash, cash equivalents and restricted cash$(3,388,825)$1,052,797 
Cash, cash equivalents and restricted cash at beginning of period13,666,079 17,906,765 
Cash, cash equivalents and restricted cash at end of period$10,277,254 $18,959,562 
Supplemental disclosure cash flow information
Cash paid for interest$24,384 $199,178 
Cash paid for income taxes$98,105 $1,600 

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the unauditedaccompanying consolidated balance sheets that sumsheet to the same suchtotal amounts shown in the accompanying unaudited consolidated statements of cash flows:

July 31, 2020July 31, 2019July 31, 2021July 31, 2020
Cash and cash equivalentsCash and cash equivalents$15,899,293 $7,243,580 Cash and cash equivalents$6,554,423 $15,899,293 
Restricted cashRestricted cash3,060,269 452,021 Restricted cash3,722,831 3,060,269 
Total cash and restricted cash$18,959,562 $7,695,601 
Total cash, cash equivalents and restricted cashTotal cash, cash equivalents and restricted cash$10,277,254 $18,959,562 


The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.
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ASPEN GROUP, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 20202021
(Unaudited)


Note 1. Nature of Operations and Liquidity
Overview
Aspen Group, Inc. ("AGI") is an educationaleducation technology holding company. AGI has 52 subsidiaries, Aspen University Inc. ("Aspen University" or AUI"), organized in 1987, Aspen Nursing of Arizona, Inc. ("ANAI"), Aspen Nursing of Florida, Inc. ("ANFI"), Aspen Nursing of Texas, Inc. ("ANTI"), and United States University Inc. ("United States University" or "USU"). ANAI, ANFI and ANTI are subsidiaries of Aspen University.
All references to the “Company”, “AGI”, “Aspen Group”, “we”, “our” and “us” refer to Aspen Group, Inc., unless the context otherwise indicates.
AGI leverages its education technology infrastructure and expertise to allow its two universities, Aspen University and United States University, to deliver on the vision of making college affordable 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 higher education.  AGI’s primary focus relative to future growth is to target the high growth nursing profession. As of July 31, 2020, 10,422 of 12,128 or 86% of all students across both universities are degree-seeking nursing students.
Since 1993, Aspen University has been nationally accredited by the Distance Education and Accrediting Council (“DEAC”), a national accrediting agency recognized by the United States Department of Education (the “DOE”) and Council for Higher Education Accreditation ("CHEA"). On February 25, 2019, the DEAC informed Aspen University that it had renewed its accreditation for five years, through January 2024.
Since 2009, USU has been regionally accredited by WASC Senior College and University Commission. (“WSCUC”).
Both universities are qualified to participate under the Higher Education Act of 1965, as amended (HEA) and the Federal student financial assistance programs (Title IV, HEA programs). USU has a provisional certification resulting from the ownership change of control in connection with the acquisition by AGI on December 1, 2017.
COVID-19 Update
Nursing students represented 87% or 12,058 of the Company’s total student body of 13,879 students at the end of the first quarter of fiscal 2022. Of the 12,058 nursing students, 2,364 are BSN Pre-Licensure students located across our 4 metro locations (Phoenix, Austin, Tampa and Nashville). The remaining 9,694 nursing students are licensed registered nurses (RNs) studying to earn an advanced degree (RN to BSN, MSN or DNP degree programs).These 9,694 post-licensure nursing students therefore represent 70% of the Company’s total student body and are the population of AGI students that have been primarily affected by the COVID-19 pandemic. Given that AGI has the highest student body concentration of RNs among publicly-traded higher education companies in the U.S., the COVID-19 pandemic has necessitated the need to track RN behaviors and attitudes carefully for the past 18 months. Below are the effects the Company has seen to date relative to class starts among our RN active student body.
The Company previously reported that RN course starts at both universities were approximately 4% lower than historically expected during the months of September, 2020 – January, 2021, which resulted in approximately $520,000 less revenue in the fiscal 2021 third quarter. However, beginning in late February 2021, RN course starts returned to historically normal levels throughout the remainder of the fourth fiscal quarter which resulted in revenue of $19.1 million for the quarter, approximately $500,000 higher than the midpoint of our forecast.
Starting in the second half of the month of June and continuing throughout the month of July 2021, the Company saw lower course starts than seasonally expected among our RN student body. For example, at Aspen University, course starts among RNs in June were flat year-over-year and July was slightly down year-over-year which was not surprising given the rise of the Delta variant and the spike in hospitalizations. Revenue for the first quarter was relatively unaffected given that the lower RN class starts occurred in the second half of the fiscal quarter. We cannot be certain what impact the Delta variant and other variants will have on the Company’s results as we progress through the second and future quarters in fiscal 2022.

Basis of Presentation
Interim Financial Statements
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ASPEN GROUP, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2021
(Unaudited)

The interim consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). In the opinion of the Company’s management, all adjustments (consisting of normal recurring adjustments and reclassifications and non-recurring adjustments) necessary to present fairly our results of operations for the three months ended July 31, 20202021 and 2019,2020, our cash flows for the three months ended July 31, 20202021 and 2019,2020, and our financial position as of July 31, 20202021 have been made. The results of operations for such interim periods are not necessarily indicative of the operating results to be expected for the full year.
Certain information and disclosures normally included in the notes to the annual consolidated financial statements have been condensed or omitted from these interim consolidated financial statements. Accordingly, these interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended April 30, 20202021 as filed with the SEC on July 7, 2020.13, 2021. The April 30, 20202021 consolidated balance sheet is derived from those statements.
COVID-19 Update

The COVID-19 crisis did not have a material impact on the Company’s financial results for the first quarter of fiscal year 2021, as evidenced by our increased revenues to $15.2 million. In fact, the Company’s two highest LTV programs, USU’s MSN-FNP and Aspen’s BSN Pre-Licensure program, saw enrollment tailwinds this quarter related to COVID. RN’s, looking to attain their nurse practitioner license to broaden their career options, drove MSN-FNP enrollment. Additionally, millennials, aspiring to
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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2020
(Unaudited)

become RNs, enrolled in the BSN Pre-Licensure program in Phoenix in record numbers, given that many have been furloughed or laid off since the pandemic first started.
COVID-19 has focused a spotlight on the shortage of nurses in the U.S. and, in particular, the need for nurses with four-year and advanced degrees such as USU’s MSN-FNP and Aspen University’s DNP programs. We believe we will be operating in a tailwind environment for many years relative to the planned expansion of our Pre-Licensure BSN hybrid campus business.
Liquidity
At July 31, 2020, the Company had a cash and cash equivalents balance of $15,899,293 with an additional $3,060,269 in restricted cash.
In March 2019, the Company entered into 2 loan agreements for a principal amount of $5 million each and received total proceeds of $10 million.  In connection with the loan agreements, the Company issued 18 month senior secured promissory term notes, with the Company having the right to extend the term of the loans for an additional 12 months by paying a 1% one-time extension fee. On January 22, 2020, the term notes were exchanged for convertible notes maturing January 22, 2023. (See Note 6)
On January 22, 2020, the Company closed on an underwritten public offering of common stock for net proceeds of approximately $16 million. The public offering was a condition precedent to the closing of the above refinancing. (See Note 6)
On November 5, 2018 the Company entered into a three year, $5,000,000 senior revolving credit facility. There is currently 0 outstanding balance under that facility. (See Note 6)
During the three months ended July 31, 2020 the Company's net cash increased by $1,052,797, which included using $636,759 in operating activities.
The Company has analyzed its liquidity position and believes its current resources are adequate to meet anticipated liquidity needs for the next 12 months from the issuance date of this report.
Note 2. Significant Accounting Policies
Basis of Presentation and Consolidation

The Company prepares its consolidated financial statements in accordance with U.S. generally accepted accounting principles ("GAAP").
The consolidated financial statements include the accounts of AGI and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
A full listing of our significant accounting policies is described in Note 2 “Summary of Significant Accounting Policies” of our Annual Report on Form 10-K for the fiscal year ended April 30, 2021 as filed with the SEC on July 13, 2021.
Accounting Estimates
Management of the Company is required to make certain estimates, judgments and assumptions during the preparation of its consolidated financial statements in accordance with GAAP. These estimates, judgments and assumptions impact the reported amounts of assets, liabilities, revenue and expenses and the related disclosure of contingent assets and liabilities. Actual results could differ from those estimates.
Significant estimates in the accompanying consolidated financial statements include the allowance for doubtful accounts and other receivables, the valuation of lease liabilities and the carrying value of the related right-of-use ("ROU") assets, depreciable lives of property and equipment, amortization periods and valuation of courseware, intangibles and software development costs, valuation of beneficial conversion features in convertible debt, valuation of goodwill, valuation of loss contingencies, valuation of stock-based compensation and the valuation allowance on deferred tax assets.
Cash, Cash Equivalents, and Restricted Cash
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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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For the purposes of the consolidated statements of cash flows, the Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.
AsRestricted cash as of July 31, 2020, restricted cash2021 of $3,060,269$3,722,831 primarily consists of $1,365,384$934,125 which is collateral for letters of credit for the Aspen University and USU facility operating leases, and $255,708,$9,872 which is collateral for a letter of credit issued byfor USU required to be posted based on the bank.level of Title IV funding in connection with USU's most recent Compliance Audit, and a $250,000 compensating balance under a secured credit line. Also included are funds held for students for unbilled educational services that were received from Title IV and non-Title IV programs totaling $1,439,177.$2,528,834. As an administrator of these Title IV program funds, the Company is required to maintain and restrict these funds pursuant to the terms of the program participation agreement with the U.S. Department of Education.
AsRestricted cash as of April 30, 2020, restricted cash2021 of $3,556,211 consists$5,152,789 primarily consisted of $692,293$934,125 which is collateral for letters of credit for the Aspen University and USU facility operating leases, and $255,708,$9,872 which is collateral for a letter of credit issued byfor USU required to be
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(Unaudited)

posted based on the bank and $71,828 which is related to USU’s receiptlevel of Title IV funds and is required by the Department of Education ("DOE")funding in connection with the change of control of USU.USU's most recent Compliance Audit, and a $250,000 compensating balance under a secured credit line. Also included are funds held for students for unbilled educational services that were received from Title IV and non-Title IV programs totaling $2,536,382.$3,958,792. As an administrator of these Title IV program funds, the Company is required to maintain and restrict these funds pursuant to the terms of the program participation agreement with the U.S. Department of Education.
Concentration of Credit Risk
The Company maintains its cash in bank and financial institution deposits that at times may exceed federally insured limits of $250,000 per financial institution. The Company has not experienced any losses in such accounts from inception through July 31, 2020.2021. As of July 31, 20202021 and April 30, 2020,2021, the Company maintained deposits totaling $18,075,181exceeding federally insured limits by approximately $9,732,634 and $16,742,603,$13,005,537, respectively, held in two separate institutions.
Goodwill and Intangibles
Goodwill currently represents the excess of purchase price over the fair market value of assets acquired and liabilities assumed from Educacion Significativa, LLC. Goodwill has an indefinite life and is not amortized. Goodwill is tested annually for impairment or if indicators are present.
Intangible assets represent both indefinite lived and definite lived assets. Accreditation and regulatory approvals, trade name and trademarks are deemed to have indefinite useful lives and accordingly are not amortized but are tested annually for impairment. Student relationships and curriculums are deemed to have definite lives and are amortized accordingly.
Fair Value 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 and liabilities recorded at fair value under the fair value hierarchy based upon the observability of inputs used in valuation techniques. Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed market assumptions. The fair value measurements are classified under the following hierarchy:
Level 1—Observable inputs that reflect quoted market prices (unadjusted) for identical assets and liabilities in active markets;
Level 2—Observable inputs, other than quoted market prices, that are either directly or indirectly observable in the marketplace for identical or similar assets and liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets and liabilities; and
Level 3—Unobservable inputs that are supported by little or no market activity that are significant to the fair value of assets or liabilities.
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The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.
Accounts Receivable and Allowance for Doubtful Accounts Receivable
All students are required to select both a primary and secondary payment option with respect to amounts due to AGI for tuition, fees and other expenses. As of July 31, 2020, the monthly payment plan represents approximately 64% of the payments that are made by active students, making it the most common payment type. In instances where a student selects financial aid as the primary payment option, he or she often selects personal cash as the secondary option. If a student who has selected financial aid as his or her primary payment option withdraws prior to the end of a course but after the date that AGI’s institutional refund period has expired, the student will have incurred the obligation to pay the full cost of the course. If the withdrawal occurs before the date at which the student has earned 100% of his or her financial aid, AGI may have to return all or a portion of the Title IV funds to the DOE and the student will owe AGI all amounts incurred that are in excess of the amount of financial aid that the student earned, and that AGI is entitled to retain. In this case, AGI must collect the receivable using the student’s second payment option.
For accounts receivable from students, AGI records an allowance for doubtful accounts for estimated losses resulting from the inability, failure or refusal of its students to make required payments, which includes the recovery of financial aid funds advanced to a student for amounts in excess of the student’s cost of tuition and related fees. AGI determines the adequacy of its allowance for doubtful accounts using an allowance method based on an analysis of its historical bad debt experience, current economic trends, aging of the accounts receivable and each student’s status. AGI estimates the amounts to increase the allowance based upon the risk presented by the age of the receivables and student status. AGI writes off accounts receivable balances at the time the balances are deemed uncollectible. AGI continues to reflect accounts receivable with an offsetting allowance as long as management believes there is a reasonable possibility of collection.
For accounts receivable from primary payors other than students, AGI estimates its allowance for doubtful accounts by evaluating specific accounts where information indicates the primary payors may have an inability to meet financial obligations, such as bankruptcy proceedings and receivable amounts outstanding for an extended period beyond contractual terms. In these cases, AGI uses assumptions and judgment, based on the best available facts and circumstances, to record a specific allowance for those primary payors against amounts due to reduce the receivable to the amount expected to be collected. These specific allowances are re-evaluated and adjusted as additional information is received. The amounts calculated are analyzed to determine the total amount of the allowance. AGI may also record a general allowance as necessary.
Direct write-offs are taken in the period when AGI has exhausted its efforts to collect overdue and unpaid receivables or otherwise evaluate other circumstances that indicate that AGI should abandon such efforts. (See Note 8)
When a student signs up for the monthly payment plan, there is a contractual amount that the Company can expect to earn over the life of the student’s program. This contractual amount cannot be recorded as an accounts receivable because, the student does have the option to stop attending. As a student takes a class, revenue is earned over the class term. Some students accelerate their program, taking two or more classes every eight week period, which increases the student’s accounts receivable balance. If any portion of that balance will be paid in a period greater than 12 months, that portion is reflected as long-term accounts receivable. At July 31, 2020 and April 30, 2020, those balances were $8,713,018 and $6,701,136, respectively, which amounts are evaluated and included in the allowance analysis as discussed above. The Company has determined that the long term accounts receivable do not constitute a significant financing component as the list price, cash selling price and promised consideration are equal.  Further, the interest free financing portion of the monthly payment plans are not considered significant to the contract.
Property and Equipment
Property and equipment are recorded at cost less accumulated depreciation and amortization. Depreciation and amortization is computed using the straight-line method over the estimated useful lives of the related assets per the following table.
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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2020
(Unaudited)

CategoryUseful Life
Computer equipment and hardware3 years
Software5 years
Instructional equipment5 years
Furniture and fixtures7 years
Leasehold improvementsThe lesser of 8 years or lease term
Costs incurred to develop internal-use software during the preliminary project stage are expensed as incurred. Internal-use software development costs are capitalized during the application development stage, which is after: (i) the preliminary project stage is completed; and (ii) management authorizes and commits to funding the project and it is probable the project will be completed and used to perform the function intended. Capitalization ceases at the point the software project is substantially complete and ready for its intended use, and after all substantial testing is completed. Upgrades and enhancements are capitalized if it is probable that those expenditures will result in additional functionality. Amortization is provided for on a straight-line basis over the expected useful life of five years of the internal-use software development costs and related upgrades and enhancements. When existing software is replaced with new software, the unamortized costs of the old software are expensed when the new software is ready for its intended use.
Leasehold improvements are amortized using the straight-line method over the lesser of eight years or lease term.
Upon the retirement or disposition of property and equipment, the related cost and accumulated depreciation or amortization are removed and a gain or loss is recorded in the consolidated statements of operations. Repairs and maintenance costs are expensed in the period incurred.
Courseware and Accreditation
The Company records the costs of courseware and accreditation in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 350 “Intangibles - Goodwill and Other”.
Generally, costs of courseware creation and enhancement are capitalized. Accreditation renewal or extension costs related to intangible assets are capitalized as incurred. Courseware is stated at cost less accumulated amortization. Amortization is provided for on a straight-line basis over the expected useful life of five years.
Long-Lived Assets
The Company assesses potential impairment to its long-lived assets when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Events and circumstances considered by the Company in determining whether the carrying value of identifiable intangible assets and other long-lived assets may not be recoverable include, but are not limited to: significant changes in performance relative to expected operating results, significant changes in the use of the assets, significant negative industry or economic trends, a significant decline in the Company’s stock price for a sustained period of time, and changes in the Company’s business strategy. An impairment loss is recorded when the carrying amount of the long-lived asset is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Any required impairment loss is measured as the amount by which the carrying amount of a long-lived asset exceeds fair value and is recorded as a reduction in the carrying value of the related asset and an expense to operating results.
Due to Students
The Company receives Title IV funds 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.
Leases
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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2020
(Unaudited)

The Company enters into various lease agreements in conducting its business. At the inception of each lease, the Company evaluates the lease agreement to determine whether the lease is an operating or financing lease. Leases may contain initial periods of free rent and/or periodic escalations. When such items are included in a lease agreement, the Company records rent expense on a straight-line basis over the initial term of a lease. The difference between the rent payment and the straight-line rent expense is recorded as additional amortization. The Company expenses any additional payments under its operating leases for taxes, insurance or other operating expenses as incurred.
In February 2016, the FASB issued Accounting Standards Update ("ASU") No. 2016-2, Leases (Topic 842).  This standard requires entities to recognize most operating leases on their balance sheets as right-of-use assets with a corresponding lease liability, along with disclosing certain key information about leasing arrangements. The Company adopted the standard effective May 1, 2019 using the cumulative effect adjustment transition method, which applies the provisions of the standard at the effective date without adjusting the comparative periods presented. The Company adopted the following practical expedients and elected the following accounting policies related to this standard:
•Carry forward of historical lease classification;
•Short-term lease accounting policy election allowing lessees to not recognize right-of-use assets and lease liabilities for leases with a term of 12 months or less; and
•Not separate lease and non-lease components for office space and campus leases.
The adoption of this standard resulted in the recognition of an initial operating lease right-of-use assets (“ROU’s”) and corresponding lease liabilities of approximately $8 million, on the unaudited consolidated balance sheet as of May 1, 2019. There was no impact to the Company’s net income or liquidity as a result of the adoption of this ASU. Additionally, the standard did not materially impact the Company's unaudited consolidated statements of cash flows.
Disclosures related to the amount, timing, and uncertainty of cash flows arising from leases are included in Note 9.
Treasury Stock
Purchases and sales of treasury stock are accounted for using the cost method. Under this method, shares acquired are recorded at the acquisition price directly to the treasury stock account. Upon sale, the treasury stock account is reduced by the original acquisition price of the shares and any difference is recorded in equity. This method does not allow the company to recognize a gain or loss to income from the purchase and sale of treasury stock.
Revenue Recognition and Deferred Revenue
The Company follows Accounting Standards Codification 606 (ASC 606). ASC 606 is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASC also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer purchase orders, including significant judgments. Our adoption of this ASC resulted in no change to our consolidated results of operations or our consolidated balance sheet and there was no cumulative effect adjustment.
Revenues consistRevenue consists 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. Under ASC 606, tuition and course fee revenue is recognized pro-rata over the applicable period of 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. (See Note 8)
Deferred revenue represents the amount of tuition, fees, and other student payments received in excess of the portion recognized as revenue and it is included in current liabilities in the accompanying consolidated balance sheets. Other revenue may be recognized as sales occur or services are performed.
Cost of Revenues
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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2020
(Unaudited)

Cost of revenues consists of two categories of cost, instructional costs and services, and marketing and promotional costs.
Instructional Costs and Services
Instructional costs and services 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 revenues.
Marketing and Promotional Costs
Marketing and promotional costs include costs associated with producing marketing materials and advertising. Such costs are generally affected by the cost of advertising media, the efficiency of the Company's marketing and recruiting efforts, and expenditures on advertising initiatives for new and existing academic programs. Non-direct response advertising activities are expensed as incurred, or the first time the advertising takes place, depending on the type of advertising activity. Total marketing and promotional costs was $2,790,810 and $2,209,239, for the three months ended July 31, 2020 and 2019, respectively, and are included in cost of revenue.
General and Administrative
General and administrative expenses include compensation of employees engaged in corporate management, finance, human resources, information technology, academic operations, compliance and other corporate functions. General and administrative expenses also include professional services fees, financial aid processing costs, non-capitalizable courseware and software costs, travel and entertainment expenses and facility costs.
Legal Expenses
All legal costs for litigation are charged to expense as incurred.
Income Tax
The Company uses the asset and liability method to compute the differences between the tax basis of assets and liabilities and the related financial statement amounts. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount that more likely than not will be realized. The Company has deferred tax assets and liabilities that reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets are subject to periodic recoverability assessments. Realization of the deferred tax assets, net of deferred tax liabilities, is principally dependent upon achievement of projected future taxable income.
The Company records a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. The Company accounts for uncertainty in income taxes using a two-step approach for evaluating tax positions. Step one, recognition, occurs when the Company concludes that a tax position, based solely on its technical merits, is more likely than not to be sustained upon examination. Step two, measurement, is only addressed if the position is more likely than not to be sustained. Under step two, the tax benefit is measured as the largest amount of benefit, determined on a cumulative probability basis, which is more likely than not to be realized upon ultimate settlement. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense.
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
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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.
The Company follows FASB ASU 2017-11, which simplifies the accounting for certain equity-linked financial instruments and embedded features with down round features that reduce the exercise price when the pricing of a future round of financing is lower. This allows the company to treat such instruments or their embedded features as equity instead of considering them as a derivative. If such a feature is triggered in a stand-alone instrument treated as equity, the value is measured pre-trigger and post-trigger. The difference in these two measurements is treated as a dividend, reducing income. The value recognized as a dividend is not subsequently remeasured, but in instances where the feature is triggered multiple times each instance is recognized.
Stock-Based Compensation
Stock-based compensation expense is measured at the grant date fair value of the award and is expensed over the requisite service period. For employee stock-based awards, the Company calculates the fair value of the award on the date of grant using the Black-Scholes option pricing model. Determining the fair value of stock-based awards at the grant date under this model requires judgment, including estimating volatility, employee stock option exercise behaviors and forfeiture rates. The assumptions used in calculating the fair value of stock-based awards represent the Company's best estimates, but these estimates involve inherent uncertainties and the application of management judgment. For non-employee stock-based awards, the Company follows ASU 2018-7, which substantially aligns share based compensation for employees and non-employees.
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.
Net Loss Per Share
Net loss per share is based on the weighted average number of shares of common stock outstanding during each period. Options to purchase 2,314,0361,141,396 and 2,734,8991,032,411 shares 801,468of common stock, 653,937 and 643,175549,972 restricted stock units ("RSUs"), warrants to purchase 374,174 and 566,223374,174 shares of common stock, and unvested restricted stock of 16,4488,224 and 24,672, and $10,000,000 of Convertible Debt (convertible into 1,398,602 common shares)8,224 were outstanding at July 31, 20202021 and April 30, 2020, respectively, but2021, respectively.
All shares mentioned above were not included in the computation of diluted net loss per share because the effects would have been anti-dilutive. The options, warrants, RSUs, unvested restricted stock and convertible debtConvertible Notes are considered to be common stock equivalents and are only included in the calculation of diluted earnings per share of common stock when their effect is dilutive.
Segment Information
The Company operates in 1 reportable segment as a single educational delivery operation using a core infrastructure that serves the curriculum and educational 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 Company's operations as a whole.
Recent Accounting Pronouncement notNot Yet Adopted
ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments
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In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which significantly changes how entities will measure credit losses for most financial assets, including accounts receivable. ASU No. 2016-13 will replace today’s “incurred loss” approach with an “expected loss” model, under which companies will recognize allowances based on expected rather than incurred losses. On November 15, 2019, the FASB delayed the effective date of Topic 326 for certain small public companies and other private companies until fiscal years beginning after December 15, 2022 for SEC filers that are eligible to be smaller reporting companies under the SEC’s
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definition, as well as private companies and not-for-profit entities. The Company is currently evaluating the new guidance and has not yet determined whether the adoption of the new standard will have a material impact on its consolidated financial statements or the method of adoption.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation.
Note 3. Property and Equipment
As property and equipment reach the end of their useful lives, the fully expired assets are written off against the associated accumulated depreciation.depreciation and amortization. There is no expense impact for such write offs.
Property and equipment consisted of the following at July 31, 2020 and April 30, 2020:
July 31,
2020		April 30,
2020
Computer equipment and hardware$690,114 $649,927 
Furniture and fixtures1,007,099 1,007,099 
Leasehold improvements892,279 867,024 
Instructional equipment301,842 301,842 
Software6,792,594 6,162,770 
9,683,928 8,988,662 
Accumulated depreciation and amortization(3,314,448)(2,841,019)
Property and equipment, net$6,369,480 $6,147,643 
Software consisted of the following at July 31, 2020 and April 30, 2020:following:
July 31,
2021		April 30,
2021
Software$8,951,241 $8,488,635 
Accumulated amortization(3,855,985)(3,444,325)
Software, net$5,095,256 $5,044,310 
July 31,
2020		April 30,
2020
Software$6,792,594 $6,162,770 
Accumulated amortization(2,365,847)(2,049,809)
Software, net$4,426,747 $4,112,961 
Depreciation and amortization expense for property and equipment as well as the portion for justand software amortization is presented below for the three months ended July 31, 2020 and 2019:
Three Months Ended
July 31,
20202019
Depreciation and amortization expense$478,677 $312,432 
Software amortization expense$315,107 $170,189 
The following is a schedule of estimated future amortization expense of software at July 31, 2020 (by fiscal year):
Future Expense
2021 (remaining)$977,172 
20221,223,745 
20231,062,864 
2024775,078 
2025363,858 
Thereafter24,030 
Total$4,426,747 
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ASPEN GROUP, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2020
(Unaudited)


Three Months Ended
July 31,
20212020
Depreciation and amortization expense:
Property and equipment, excluding software$351,373 $163,570 
Software$411,661 $315,107 
Note 4. USU Goodwill and Intangibles
In connection with the acquisition of the USU business on December 1, 2017, the amount paid over the estimated fair values of the identifiable net assets was $5,011,432, which has been reflected in the consolidated balance sheet as goodwill.
The goodwill resulting from the acquisition may become deductible for tax purposes in the future. The goodwill resulting from the acquisition is principally attributable to the future earnings potential associated with enrollment growth and other intangibles that do not qualify for separate recognition such as the assembled workforce.
We assigned an indefinite useful life to the accreditation and regulatory approvals and the trade name and trademarks as we believe they have the ability to generate cash flows indefinitely. In addition, there are no legal, regulatory, contractual, economic or other factors to limit the intangibles’ useful life and the Company intends to renew the intangibles, as applicable, and renewal can be accomplished at little cost. We determined all other acquired intangibles are finite-lived and we are amortizing them on either a straight-line basis or using an accelerated method to reflect the pattern in which the economic benefits of the assets are expected to be consumed. The finite-lived assets became fully amortized during fiscal 2020. Amortization expense for the three months ended July 31, 2020 and 2019 were $0 and $275,000, respectively.
Intangible assets consisted of the following at July 31, 2020 and April 30, 2020:
July 31,
2020		April 30,
2020
Intangible assets$10,100,000 $10,100,000 
Accumulated amortization(2,200,000)(2,200,000)
Net intangible assets$7,900,000 $7,900,000 

Note 5.4. Courseware and Accreditation
For the three months ended July 31, 2021 and 2020, additional courseware and accreditation costs capitalized were $131,669 and $3,050. As courseware and accreditation reach the end of their useful life, they are written off against the accumulated amortization. There iswas no expense impact for such write-offs.
Courseware and accreditation consisted of the following:
July 31,
2020		April 30,
2020
Courseware$290,863 $287,813 
Accreditation59,350 59,350 
Accumulated amortization(247,653)(235,706)
Courseware and accreditation, net$102,560 $111,457 
Amortization expense of courseware and accreditationwrite-offs for the three months ended July 31, 20202021 and 2019 are as follows:2020.

Courseware and accreditation consisted of the following:
July 31,
2021		April 30,
2021
Courseware$539,893 $408,222 
Accreditation59,350 59,350 
599,243 467,572 
Accumulated amortization(296,223)(280,276)
Courseware and accreditation, net$303,020 $187,296 
Three Months Ended
July 31,
20202019
Amortization expense$11,947 $19,142 
Amortization expense for courseware and accreditation is summarized below:
Three Months Ended July 31,
20212020
Amortization expense$15,948 $11,947 
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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 20202021
(Unaudited)

The followingAmortization expense is included in "Depreciation and amortization" in the unaudited consolidated statements of operations.
Note 5. Secured Note and Accounts Receivable
On March 30, 2008 and December 1, 2008, Aspen University sold courseware pursuant to marketing agreements to Higher Education Management Group, Inc. (“HEMG”), which was then a schedulerelated party and principal stockholder of estimated future amortization expensethe Company. Ultimately, the sum due to Aspen University was reduced to $772,793, and Aspen Universityobtained a judgment for that amount. HEMG thenfiled a bankruptcy petition in 2015. As of courseware and accreditationApril 30, 2021, the balance of the account receivable, net of allowance, was $45,329.

On July 21, 2021, the Company received its distribution from thebankruptcy trustee court of $498,120, which is included in "other income (expense), net" in the accompanying unaudited consolidated statements of operations. As a result, the Company wrote off the net receivable of $45,329, described above, at July 31, 2020 (by fiscal year):
Future Expense
2021 (remaining)$28,050 
202232,140 
202326,615 
202413,068 
20251,980 
Thereafter707 
Total$102,560 
2021. No further assets are available for distribution.
See Note 11 for additional information.
Note 6. Debt
Convertible Notes
On January 22, 2020, the Company issued $5 million in the principal amount convertible notes (“Convertible Notes”) to each of 2 lenders in exchange for the 2 $5 million notes issued under senior secured term loans entered into in March 2019 as discussed below (the “Term Loans”). The Convertible Notes automatically converted on September 14, 2020. See Note 11. “Subsequent Events.” The Company recorded a beneficial conversion feature on these Convertible Notes of $1,692,309.
The closing of the refinancing was conditioned upon the Company conducting an equity financing resulting in gross proceeds to the Company of at least $10 million. On January 22, 2020, the Company closed on an underwritten public offering for net proceeds of approximately $16 million and the condition precedent to the closing of the refinancing was satisfied. The key terms of the Convertible Notes are as follows:

•After six months from the issuance date, the lenders have the right to convert the principal into our shares of the Company’s common stock at a conversion price of $7.15 per share;
•The Convertible Notes automatically convert into shares of the Company’s common stock if the average closing price of our common stock is at least $10.725 over a 20 consecutive trading day period;
•The Convertible Notes are due January 22, 2023 or approximately three years from the closing;
•The interest rate of the Convertible Notes is 7% per annum (payable monthly in arrears); and
•The Convertible Notes are secured.

The former notes under the Senior Secured Term Loans were due in September 2020 and were subject to a one-year extension and the payment of an extension fee for each note of $50,000 (total of $100,000). The Company also paid each lender $40,400 at closing of the Convertible Notes offering to cover taxes they would incur as part of the note exchange and paid their legal fees arising from the re-financing. In connection with refinancing of the Term Loans, on January 22, 2020, the Company also entered into an Investors/Registration Rights Agreement with the lenders whereby, upon request of the lenders on or after June 22, 2020, the Company must file and obtain and maintain the effectiveness of a registration statement registering the shares of common stock issued or issuable upon conversion of the Convertible Notes.

The Company’s obligations under the Convertible Notes are secured by a first priority lien in certain deposit accounts of the Company, all current and future accounts receivable of Aspen University and USU, certain of the deposit accounts of Aspen University and USU, and all of the outstanding capital stock of Aspen University and USU (the “Collateral”).

On March 6, 2019, in connection with entering into the Term Loan Agreements, the Company also entered into an intercreditor agreement (the “Intercreditor Agreement”) among the Company, the Lenders and the Foundation, individually. The Intercreditor Agreement provides among other things that the Company’s obligations under this agreement, and the security interests in the Collateral granted pursuant to the Term Loan Agreements and the Amended and Restated Facility Agreement shall rankpari passu to one another. The Security Agreement was amended onJanuary 22, 2020 to give effect to the Convertible Note issuances.
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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2020
(Unaudited)

Revolving Credit Facility
On November 5, 2018, the Company entered into a loan agreement (the “Credit Facility Agreement”) with the Leon and Toby Cooperman Family Foundation (the “Foundation”). The Credit Facility Agreement provides for a $5,000,000 revolving credit facility (the “Facility”) evidenced by a revolving promissory note (the “Revolving Note”). Borrowings under the Credit Facility Agreement bear interest at 12% per annum. The Facility matures on November 4, 2021. At July 31, 2021 and April 30, 2021, there was no outstanding borrowings under the Revolving Credit Facility.
Pursuant to the terms of the Credit Facility Agreement, the Company agreed to pay to the Foundation a $100,000 one-time upfront Facility fee. The Company also agreed to pay the Foundation a commitment fee, payable quarterly at the rate of 2% per annum on the undrawn portion of the Facility. At July 31, 2020 and April 30, 2020, there were no outstanding borrowings under the Revolving Credit Facility.
The Credit Facility Agreement contains customary representations and warranties and events of default and covenants.default. Pursuant to the Loan Agreement and the Revolving Note, all future or contemporaneous indebtedness incurred by the Company, other than indebtedness expressly permitted by the Credit Facility Agreement and the Revolving Note, will be subordinated to the Facility.
On August 31, 2021, the Company extended the Facility maturity one-year to November 4, 2022 and drew down $5,000,000 on the Facility. See Note 12 for additional information.
Pursuant to the Credit Facility Agreement, on November 5, 2018 the Company issued to the Foundation warrants to purchase 92,049 shares of the Company’s common stock exercisable for five years from the date of issuance at the exercise price of $5.85 per share which were deemed to have a relative fair value of $255,071 (the "2018 Cooperman Warrants"). These warrants were exercised on June 8, 2020, see Note 7.2020. The relative fair value of the warrants along with the upfront Facility fee were treated as debt issue costs, as the facility has not been drawn on,cost assets to be amortized over the term of the loan.loan, as the facility has not been drawn on. Total unamortized costs at July 31, 20202021 and April 30,202030, 2021 were $43,056$9,722 and $182,418,$18,056, respectively.
On March 6, 2019, in connection with entering into the Senior Secured Term Loans, the Company amended and restated the Credit Facility Agreement (the “Amended and Restated Facility Agreement”) and the Revolving Note. The Amended and Restated Facility Agreement provides among other things that the Company’s obligations thereunder are secured by a first priority lien in the Collateral, on a pari passu basis with the Lenders.
Term Loans
On March 6, 2019, the Company entered into 2 loan agreements (each a “Loan Agreement” and together, the “Loan Agreements”) with the Foundation, of which Mr. Leon Cooperman, a stockholdercertain deposit accounts of the Company, is the trustee,all current and another stockholderfuture accounts receivable of Aspen University and USU, certain of the Company (each a “Lender”deposit accounts of Aspen University and together, the “Lenders”). Each Loan Agreement provides for a $5,000,000 term loan (each a “Loan”USU and together, the “Loans”), evidenced by a term promissory note and security agreement (each a “Term Note” and together, the “Term Notes”), for combined total proceeds of $10,000,000 million. The Company borrowed $5,000,000 from each Lender that day. The Term Notes bear interest at 12% per annum and were to mature on September 6, 2020, subject to one 12-month extension upon the Company’s option, and upon payment of a 1% one-time extension fee.
Pursuant to the Loan Agreements and the Term Notes, all future or contemporaneous indebtedness incurred by the Company, other than indebtedness expressly permitted by the Loan Agreements and the Term Notes, will be subordinated to the Loans.
Pursuant to the Loan Agreements, on March 6, 2019 the Company issued to each Lender warrants to purchase 100,000 shares of the Company’s commonoutstanding capital stock exercisable for five years from the date of issuance at the exercise price of $6.00 per share. The 2 warrants were deemed to have a combined relative fair value of $360,516. The relative fair value along with closing costs of $33,693 were treated as debt discounts to be amortized over the term of the Loans. One Lender exercised 100,000 of these warrants (the "2019 Cooperman Warrants") on June 5, 2020, see Note 7.
On January 22, 2020, the Senior Secured Term Loans were cancelledAspen University and exchanged for convertible notes as discussed above. In connection with this transaction, the Company wrote off approximately $182,000 of unamortized debt issuance costs as the transaction qualified as a debt extinguishment.USU.
Note 7. Stockholders’ Equity
Preferred StockAGI maintains 2 stock-based incentive plans: the 2012 Equity Incentive Plan (the “2012 Plan”) and 2018 Equity Incentive Plan (the “2018 Plan”) that provides for the grant of shares in the form of incentive stock options, non-qualified stock options, restricted shares, stock appreciation rights and RSUs to employees, consultants, officers and directors.
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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 20202021
(Unaudited)

The
On December 30, 2020, the Company is authorizedheld its Annual Meeting of Shareholders at which the shareholders voted to issue 1,000,000amend the 2018 Plan to increase the number of shares of “blank check” preferredcommon stock with designations, rights and preferences as may be determinedavailable for issuance under the 2018 Plan from time1,100,000 to time by our Board of Directors. 1,600,000 shares.

As of July 31, 20202021 and April 30, 2020, we had 02021 there were 431,869 and 549,739 shares of preferred stock issuedremaining available for future issuance under the 2012 and outstanding.
Common Stock
The Company is authorized to issue 40,000,000 shares of common stock.
During the three months ended July 31, 2020, the Company issued 415,175 shares of common stock upon the exercise of stock options for cash and received proceeds of $1,269,982.
During the three months ended July 31, 2020, the Company issued 192,049 shares of common stock upon the exercise of warrants for cash and received proceeds of $1,081,792.2018 Plans, respectively.

Restricted Stock
As of July 31, 20202021 and 2019,2020, there were 16,4488,224 and 49,67216,448 unvested shares of restricted common stock outstanding, respectively. Total unrecognized compensation expense related to the unvested shares as of July 31, 20202021 was $17,545, and 2019 amountedis expected to $59,651 and $225,129 respectively.be recognized over a weighted-average period of approximately 0.42 years.

Restricted Stock Units "RSUs"
A summary of the Company’s Restricted Stock UnitRSU activity which were granted under the 2012 and 2018 equity incentive plans during the three months ended July 31, 20202021 is presented below:
Restricted Stock UnitsRestricted Stock UnitsNumber of SharesWeighted Average Grant PriceRestricted Stock UnitsNumber of SharesWeighted Average Grant Price
Unvested Balance Outstanding, April 30,2020643,175 $5.64 
Unvested balance outstanding, April 30, 2021Unvested balance outstanding, April 30, 2021549,972 $6.58 
GrantedGranted158,793 9.12 Granted127,542 6.97 
Exercised— — 
ForfeitsForfeits(500)6.09 Forfeits(7,920)9.37 
VestedVested— — Vested(15,657)6.26 
ExpiredExpired— — Expired— — 
Unvested Balance Outstanding, July 31,2020801,468 $6.33 
Unvested balance outstanding, July 31, 2021Unvested balance outstanding, July 31, 2021653,937 $6.07 
In connection with 158,793Of the 127,542 RSUs granted in the three months ended July 31, 2021, 125,000 RSUs correspond to the Chief Executive Officer grant. On July 21, 2021, as part of a new employment agreement, the Compensation Committee approved a 125,000 RSU grants,grant to the Company's Chief Executive Officer under the Company's 2018 Equity Incentive Plan. The grant has a grant date fair value of these awards range$873,750 based on a closing stock price of $6.99 per share. As stipulated in the grant, vesting is subject to continued employment with the Company and will occur in full on the date the Company files with the SEC a quarterly or annual report on Forms 10-Q or 10-K, as applicable, which reflects the Company reported net income on a GAAP basis. The Company is amortizing the expense over one year through July 2022 (the filing date of the Form 10-K for Fiscal Year 2022). At each reporting period of Fiscal Year 2022, the Company will re-assess the likelihood of the performance condition to be met in the fourth quarter of 2022. If the RSUs do not vest within three years from $6.95the July 21, 2021 effective date, they will expire and automatically be forfeited. The amortization expense related to $10.62this grant for the three months ended July 31, 2021 was $72,813, which is included in general and administrative expense in the consolidated statements of operations. The remaining 2,542 RSUs were granted to employees and have a grant date fair value that ranges from $4.92 to $6.50 per share, and the awards vestor a total of $14,943, vesting annually over three years.
There were approximately 800,000Of the 653,937 unvested RSUs as ofRSUs outstanding at July 31, 2020 including 375,0002021, there are 195,000 RSUs described below. Total unrecognized compensation expense related toremaining from the unvested RSUs as of July 31, 2020 is approximately $4.4 million which will be amortized over the remaining vesting periods.
On February 4, 2020 the Compensation Committee approved a 375,000 RSU grant to executives under the Company’s 2018 Equity Incentive Plan. As modified on June 18, 2020, one-half of theexecutive grant. These RSUs vest four years from the grant date, if each applicable executive is still employed by the Company on the vesting date and subject to accelerated vesting for all RSUs as follows: (i) if the closing price of the Company’s common stock is at least $9 for 20 consecutive trading days, 10% of the RSUs will vest immediately; (ii) if the closing price of the Company’s common stock is at least $10 for 20 consecutive trading days, 25% of the RSUs will vest immediately; and (iii) if the closing price of the Company’s common stock is at least $12 for 20 consecutive trading days, all of the unvested RSUs will vest immediately. On the grant date, the closing price of the Company’sCompany's common stock on The Nasdaq Global Market was $9.49 per share. The grants have a four year vesting period. Formortization expense related to these transactions for the three months ended July 31, 2021 and 2020, amortizationwas approximately $112,155 and $111,211, respectively, which is included in general and administrative expense in the consolidated statements of operations.
At July 31, 2021, total unrecognized compensation expense related to theseunvested RSUs was $111,211. See "Subsequent Events" Note for additional information onis $3,972,803 and is expected to be recognized over a weighted-average period of approximately 1.49 years. The total unrecognized compensation expense related to the accelerated vesting of 35% of the RSUs.
February 4, 2020 executive RSU grant, discussed above, is
$1,121,555
Warrants.
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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 20202021
(Unaudited)

Warrants
The Company estimates the fair value of warrants utilizing the Black-Scholes pricing model, which is dependent upon several variables such as the expected term, expected volatility of the Company’s stock price over the expected term, expected risk-free interest rate over the expected term and expected dividend yield rate over the expected term. The Company believes this valuation methodology is appropriate for estimating the fair value of warrants issued to directors which are subject to ASC Topic 718 requirements. These amounts are estimates and thus may not be reflective of actual future results, nor amounts ultimately realized by recipients of these grants. The Company recognizes expense on a straight-line basis over the vesting period of each warrant issued.
A summary of the Company’s warrant activity during the three months ended July 31, 20202021 is presented below:
WarrantsNumber of
Shares		Weighted
Average
Exercise
Price		Weighted
Average
Remaining
Contractual
Term		Aggregate
Intrinsic
Value
Balance Outstanding, April 30, 2020566,223 $6.22 3.17$950,100 
Granted0 $0 — — 
Exercised(192,049)$5.60 — — 
Surrendered0 $0 — — 
Expired0 $0 — — 
Balance Outstanding, July 31, 2020374,174 $6.37 2.64$908,156 
Exercisable, July 31, 2020374,174 $6.37 2.64$908,156 
WarrantsNumber of
Shares		Weighted
Average
Exercise
Price		Weighted
Average
Remaining
Contractual
Term		Aggregate
Intrinsic
Value
Balance Outstanding, April 30, 2021374,174 $6.37 1.90$— 
Granted25,000 $6.99 4.98— 
Exercised— $— — — 
Surrendered— $— — — 
Expired— $— — — 
Balance Outstanding, July 31, 2021399,174 $6.41 1.85$144,000 
Exercisable, July 31, 2021374,174 $6.37 1.54$144,000 

OUTSTANDING WARRANTSOUTSTANDING WARRANTSEXERCISABLE WARRANTSOUTSTANDING WARRANTSEXERCISABLE WARRANTS
Exercise
Price		Exercise
Price		Weighted
Average
Exercise
Price		Outstanding
No. of
Warrants		Weighted
Average
Exercise
Price		Weighted
Average
Remaining Life
In Years		Exercisable
No. of
Warrants		Exercise
Price		Weighted
Average
Exercise
Price		Outstanding
No. of
Warrants		Weighted
Average
Exercise
Price		Weighted
Average
Remaining Life
In Years		Exercisable
No. of
Warrants
$4.89 $4.89 50,000 $4.89 3.4450,000 
$6.00 $6.00 100,000 $6.00 3.09100,000 
$6.87 $6.87 224,174 $6.87 1.48224,174 
$4.89 $4.89 50,000 $4.89 3.7050,000 6.99 $6.99 25,000 $— 0.00— 
399,174   374,174 
$6.00 $6.00 100,000 $6.00 3.60100,000 
$6.87 $6.87 224,174 $6.87 1.98224,174 
374,174   374,174 

On June 5, 2020,July 21, 2021, the Company, asCompensation Committee approved warrants to a former member of the Board of Directors for the purchase of 25,000 shares of the Company's common stock with an inducement to exercise, reduced by 5% the exercise price of $6.99 per share. The warrants have an exercise period of five years from the common stock purchaseJuly 21, 2021 issuance date and vest annually over a three year period subject to continued service on the Company's Advisory Board on each applicable vesting date. The warrants issuedwill terminate automatically and immediately upon the expiration of the exercise period. The relative fair value of the warrants is $84,000 and is being amortized over the three year vesting period. The Company has recognized $2,333 of amortization expense in connection with the fair value of the warrants for the three months ending July 31, 2021, which is included in “general and administrative” expense in the consolidated statement of operations.
During the three months ended July 31, 2020, there was a warrant modification and acceleration charge of $25,966 related to Thethe exercise of 192,049 warrants by the Leon and Toby Cooperman Family Foundation, (the “Foundation”)which was included in “other income (expense), of which Mr. Leon Cooperman, a stockholder of the Company, is the trustee. The warrants were issued on November 5, 2018 (the “2018 Cooperman Warrants”) and on March 5, 2019 (the “2019 Cooperman Warrants”). The 2018 Cooperman Warrants exercise price was reduced from $5.85 to $5.56 per share. The 2019 Cooperman Warrants exercise price was reduced from $6.00 to $5.70 per share. On June 8, 2020, the Foundation immediately exercised the 2018 and 2019 Cooperman Warrants paying the Company $1,081,792 and the Company issued 192,049 shares of common stock to the Foundation. The warrant modification and acceleration charge related to this transactionnet” in the first quarterconsolidated statement of fiscal year 2021 was approximately $26,000.operations.
Stock Incentive Plan and Stock Option Grants to Employees and Directors
On March 13, 2012, the Company adopted the Aspen Group, Inc. 2012 Equity Incentive Plan (the “2012 Plan”) that provides for the grant of 3,500,000 shares in the form of incentive stock options, non-qualified stock options, restricted shares, stock appreciation rights and RSUs to employees, consultants, officers and directors.
On December 13, 2018, the stockholders of the Company approved the Aspen Group, Inc. 2018 Equity Incentive Plan (the “2018 Plan”) that provides for the grant of 500,000 shares in the form of incentive stock options, non-qualified stock options, restricted shares, stock appreciation rights and RSUs to employees, consultants, officers and directors.

On December 30, 2019, the Company held its Annual Meeting of Shareholders at which the shareholders voted to amend the 2018 Plan to increase the number of shares of common stock available for issuance under the 2018 Plan from 500,000 to 1,100,000 shares.

As of July 31, 2020 and 2019, there were 74,032 and 10,852 shares remaining available for future issuance under the 2012 Plan and the 2018 Plan.

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 20202021
(Unaudited)

The Company estimates the fair value of share-based compensation utilizing the Black-Scholes option pricing model, which is dependent upon several variables such as the expected option term, expected volatility of the Company’s stock price over the expected term, expected risk-free interest rate over the expected option term and expected dividend yield rate over the expected option term. The Company believes this valuation methodology is appropriate for estimating the fair value of stock options granted to employees and directors which are subject to ASC Topic 718 requirements. These amounts are estimates and thus may not be reflective of actual future results, nor amounts ultimately realized by recipients of these grants. The Company recognizes compensation on a straight-line basis over the requisite service period for each award. The following table summarizes the assumptions the Company utilized to record compensation expense for stock options granted to employees during the three months ended April 30, 2020. There were 0 options granted to employees during the three months ended July 31, 2020.
July 31,
2020		April 30,
2020
Expected life (years)n/a3.5
Expected volatilityn/a57.0%
Risk-free interest raten/a0.24%
Dividend yieldn/a0.00%
Expected forfeiture raten/an/a
The Company utilizedutilizes 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 historical volatility. The risk-free interest rate is based on the U.S. Treasury yields with terms equivalent to the expected life of the related option at the time of the grant. Dividend yield is based on historical trends. While the Company believes these estimates are reasonable, the compensation expense recorded would increase if the expected life was increased, a higher expected volatility was used, or if the expected dividend yield increased.

A summary of the Company’s stock option activity for employees and directors during the three months ended July 31, 2020,2021, is presented below:
OptionsNumber of
Shares		Weighted
Average
Exercise
Price		Weighted
Average
Remaining
Contractual
Term		Aggregate
Intrinsic
Value
Balance Outstanding, April 30, 20211,214,473 $6.24 1.88$204,719 
Granted— — — — 
Exercised(5,097)6.16 — — 
Forfeited(1,752)4.68 — — 
Expired— — — — 
Balance Outstanding, July 31, 20211,207,624 $6.29 1.65$1,150,849 
Exercisable, July 31, 20211,141,396 $6.36 1.60$1,044,364 
OptionsNumber of
Shares		Weighted
Average
Exercise
Price		Weighted
Average
Remaining
Contractual
Term		Aggregate
Intrinsic
Value
Balance Outstanding, April 30, 20202,732,899 $4.62 1.97$9,146,198 
Granted0 0 — — 
Exercised(415,175)9.18 — — 
Forfeited(3,688)6.94 — — 
Expired0 0 — — 
Balance Outstanding, July 31, 20202,314,036 $4.89 1.89$9,073,489 
Exercisable, July 31, 20201,884,793 $4.68 1.65$7,797,166 

During the three months ended July 31, 2021 and 2020, the Company received proceeds from the exercise of stock options for cash of $22,548 and $1,269,982, respectively.

OUTSTANDING OPTIONSEXERCISABLE 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
$2.28 to $2.76$2.76 10,423 $2.76 0.1710,423 
$3.24 to $4.38$3.82 183,249 $3.80 1.03168,914 
$4.50 to $5.20$4.94 354,778 $4.93 1.39310,885 
$5.95 to $6.28$5.95 28,000 $5.95 1.0628,000 
$7.17 to $7.55$7.45 473,425 $7.46 2.07465,425 
$8.57 to $9.07$8.98 157,749 $8.98 1.44157,749 
1,207,624 1,141,396 
As of July 31, 2021, there was approximately $55,007 of unrecognized compensation costs related to unvested stock options. That cost is expected to be recognized over a weighted-average period of approximately 1.00 year.

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OUTSTANDING OPTIONSEXERCISABLE OPTIONS
Exercise
Price		Weighted
Average
Exercise
Price		Outstanding
No. of
Options		Weighted
Average
Exercise
Price		Weighted
Average
Remaining Life
In Years		Exercisable
No. of
Options
$1.57 to $2.10$2.02 306,166 $2.02 0.56261,771 
$2.28 to $2.76$2.30 307,779 $2.30 0.27307,779 
$3.24 to $4.38$3.90 318,174 $3.87 1.32262,507 
$4.50 to $5.20$4.93 665,195 $4.91 1.98536,597 
$5.95 to $6.28$6.08 75,751 $6.11 1.9661,195 
$7.17 to $7.55$7.44 481,639 $7.41 3.16342,056 
$8.57 to $9.07$8.98 159,332 $8.98 2.44112,888 
Options only2,314,036 1,884,793 
For the three months ended July 31, 2021, the Company recorded compensation expense of $542,712 which consisted of: $85,408, $446,777 and $10,527, respectively, in connection with stock options, RSUs and restricted stock grants, which is included in “general and administrative” expense in the unaudited consolidated statements of operations.

For the three months ended July 31, 2020, the Company recorded compensation expense of $487,110 which consisted of: $168,734, $307,852 and $10,524, respectively, in connection with stock option, restricted stock unitsoptions, RSUs and restricted stock grants.grants, which is included in “general and administrative” expense in the unaudited consolidated statements of operations.

Treasury Stock

As of both July 31, 2020, there was2021 and April 30, 2021, 155,486 shares of common stock were held in treasury representing shares of common stock surrendered upon the exercise of stock options in payment of the exercise prices and the taxes and similar amounts due arising from the option exercises. The value of these shares is approximately $550,000$1.8 million and represents the fair market value of unrecognized compensation costs related to non-vested share-based option arrangements. That cost is expected to be recognized over a weighted-average periodshares surrendered as of approximately 2.0 years.
Asthe date of July 31, 2020, there was approximately $4.4 million of unrecognized compensation costs related to non-vested RSU grants. That cost is expected to be recognized over a weighted-average period of approximately 4.0 years.
As of July 31, 2020, there was approximately $60,000 of unrecognized compensation costs related to non-vested share-based common and restricted stock arrangements. That cost is expected to be recognized over a weighted-average period of approximately 1.5 years.each applicable exercise date.
Note 8. RevenuesRevenue
Revenues consist
Revenue consists primarily of tuition and fees derived from courses taught by the Company online as well as from related educational resources that the Company provides to its students, such as access to our online materials and learning management system. 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 fees for library and technology costs, which are recognized over the related service period and are not considered separate performance obligations. Other services, books, and exam fees are recognized as services are provided or when goods are received by the student. The Company’s contract liabilities are reported as deferred revenue and due to students. Deferred revenue represents the amount of tuition, fees, and other student invoicespayments received in excess of the portion recognized as revenue and it is included in current liabilities in the accompanying unaudited consolidated balance sheets.
The following table represents our revenuesrevenue disaggregated by the nature and timing of services:
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Three Months Ended
July 31,		Three Months Ended
July 31,
20202019 20212020
Tuition - recognized over period of instruction
Tuition - recognized over period of instruction
$13,367,308 $9,290,952 
Tuition - recognized over period of instruction
$17,121,680 $13,367,308 
Course fees - recognized over period of instruction
Course fees - recognized over period of instruction
1,599,693 925,954 
Course fees - recognized over period of instruction
2,003,340 1,599,693 
Book fees - recognized at a point in time
Book fees - recognized at a point in time
39,138 20,785 
Book fees - recognized at a point in time
27,759 39,138 
Exam fees - recognized at a point in time
Exam fees - recognized at a point in time
70,655 60,100 
Exam fees - recognized at a point in time
196,042 70,655 
Service fees - recognized at a point in time
Service fees - recognized at a point in time
88,768 60,191 
Service fees - recognized at a point in time
82,174 88,768 
$15,165,562 $10,357,982  $19,430,995 $15,165,562 
Contract Balances and Performance Obligations
The Company recognizes deferred revenue as a student participates in a course which continues past the consolidated balance sheet date. Deferred revenue at July 31, 2020 was $4,766,853 which is future revenue that has not yet been earned for courses in progress. The Company has $1,891,502 of funds due to students, which mainly represents Title IV funds due to students after deducting their tuition payments.
Of the total revenue earned during the three months ended July 31, 2021 and 2020, approximately $6.8 million and $3.7 million came from revenuesrevenue which were deferred at April 30, 2020.2021 and 2020, respectively.
When the Company begins providing the performance obligation by beginning instruction in a course, a contract receivable is created, resulting in accounts receivable. The Company accounts for receivables in accordance with ASC 310, Receivables. The Company uses the portfolio approach, as discussed below.
AGI records an allowance for doubtful accounts for estimated losses resulting from the inability, failure or refusal of its students to make required payments, which includes the recovery of financial aid funds advanced to a student for amounts in excess of the student’s cost of tuition and related fees. AGI determines the adequacy of its allowance for doubtful accounts using an allowance method based on an analysis of its historical bad debt experience, current economic trends, and the aging of the accounts receivable and student status. AGI applies reserves to its receivables based upon an estimate of the risk presented by the age of the receivables and student status. AGI writes off accounts receivable balances at the time the balances are deemed uncollectible. AGI continues to reflect accounts receivable with an offsetting allowance as long as management believes there is a reasonable possibility of collection.approach.
Cash Receipts
Our students finance costs through a variety of funding sources, including, among others, monthly payment plans, installment plans, federal loan and grant programs (Title IV), employer reimbursement, and various veterans and military funding and
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grants, and cash payments. Most students elect to use our monthly payment plan. This plan allows them to make continuous monthly payments during the length of their program and through the length of their payment plan. Title IV and military funding typically arrives during the period of instruction. Students who receive reimbursement from employers typically do so after completion of a course. Students who choose to pay cash for a class typically do so before beginning the class.
Significant Judgments
We analyze revenue recognition on a portfolio approach under ASC 606-10-10-4. Significant judgment is utilized in determining the appropriate portfolios to assess for meeting the criteria to recognize revenue under ASC Topic 606. We have determined that all of our students can be grouped into one portfolio. Students behave similarly, regardless of their payment method. Enrollment agreements and refund policies are similar for all of our students. We do not expect that revenue earned for the portfolio is significantly different as compared to revenue that would be earned if we were to assess each student contract separately.
The Company maintains institutional tuition refund policies, which provides for all or a portion of tuition to be refunded if a student withdraws during stated refund periods. Certain states in which students reside impose separate, mandatory refund
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policies, which override the Company’s policy to the extent in conflict. If a student withdraws at a time when a portion or none of the tuition is refundable, then in accordance with its revenue recognition policy, the Company recognizes as revenue the tuition that was not refunded. Since the Company recognizes revenue pro-rata over the term of the course and because, under its institutional refund policy, the amount subject to refund is never greater than the amount of the revenue that has been deferred, under the Company’s accounting policies revenue is not recognized with respect to amounts that could potentially be refunded.
The Company had revenuesrevenue from students outside the United States representing 1.27% and 1.48%totaling approximately 1% of revenuesconsolidated revenue for each of the three months ended July 31, 20202021 and 2019, respectively.2020.
Note 9. Leases
We determine if a contract contains a lease at inception. We have entered into operating leases totaling approximately 88,600154,528 square feet of office and classroom space in the Phoenix, (metropolitan area), San Diego, New York City, Denver, Austin, Tampa and Moncton, New Brunswick Province in Canada. These leases expire at various dates through April 2031, the majority contain annual base rent escalation clauses. Most of these leases include options to terminate for a fee or extend for additional five-year periods. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company does not have any financing leases.

As of July 31, 2021, our longer term operating leases are located in Tampa, Austin and Phoenix and set to expire in ten, eight, and seven years, respectively. These leases make up 94% of the total future minimum lease payments.
Operating lease assets are right of use assets ("ROU assets"), which represent the right to use an underlying asset for the lease term. Operating lease liabilities represent the obligation to make lease payments arising from the lease. Operating leases are included in "Operating lease right of use asset,assets, net", "Operating lease obligations, current portion" and "Operating lease obligations"obligations, less current portion" in the consolidated balance sheet at July 31, 2020.2021 and April 30, 2021. These assets and lease liabilities are recognized based on the present value of remaining lease payments over the lease term. When the lease does not provide an implicit interest rate, the Company uses an incremental borrowing rate of 12% to determine the present value of the lease payments. The right-of-use asset includes all
Lease incentives are deducted from the right of use assets. Incentives such as tenant improvement allowances are amortized as leasehold-improvements, separately, over the life of the lease payments madeterm. For the three months ended July 31, 2021 and excludes lease incentives. 2020, the amortization expense for these tenant improvement allowances was $150,387 and $0, respectively.
Lease expense for operating leases is recognized on a straight-line basis over the lease term. There are no variable lease payments. Lease expense for the three month periodmonths ended July 31, 2021 and 2020 was $397,238. These costs are primarily related to long-term operating leases, but also include amounts for short-term leases with terms greater than 30 days that are not material.was $936,737 and $397,238, respectively, which is included in general and administrative expenses in the consolidated statements of operations.
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ROU assets isare summarized below:
July 31, 2021April 30, 2021
ROU assets - Operating facility leases$14,308,296 $14,308,296 
Less: accumulated reduction(2,065,840)(1,593,433)
Total ROU assets$12,242,456 $12,714,863 
July 31, 2020
Operating office leases$12,356,837
Less accumulated reduction(5,092,253)
Balance of ROU assets as of July 31, 2020$7,264,584
Operating lease obligations, related to the ROU assets isare summarized below:
July 31, 2020
Operating office leases$13,312,573
Total lease liabilities13,312,573
Reduction of lease liabilities(5,092,253)
Total as of July 31, 2020$8,220,320
July 31, 2021April 30, 2021
Total lease liabilities$19,946,229 $19,946,229 
Reduction of lease liabilities(1,995,109)(1,617,600)
Total operating lease obligations$17,951,120 $18,328,629 
The following is a schedule by fiscal years of future minimum lease payments required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year as of July 31, 20202021 (a)(by fiscal year).
Maturity of Lease ObligationsMaturity of Lease ObligationsLease PaymentsMaturity of Lease ObligationsLease Payments
2021 (remaining)$1,809,774 
20222,253,619 
2022 (remaining)2022 (remaining)$3,076,200 
202320231,703,419 20233,647,737 
202420241,466,758 20243,514,179 
202520251,134,718 20253,288,066 
2026 and beyond3,536,443 
202620263,383,530 
ThereafterThereafter10,417,592 
Total future minimum lease paymentsTotal future minimum lease payments11,904,731 Total future minimum lease payments27,327,304 
Less imputed interest(3,684,411)
Present value of operating lease obligations$8,220,320 
Less: imputed interest Less: imputed interest(9,376,184)
Present value of operating lease liabilitiesPresent value of operating lease liabilities$17,951,120 
_____________________
(a) Lease payments exclude $3.5 million of legally binding minimum lease payments for the new BSN Pre-Licensure campus location in Nashville, Tennessee lease signed but not yet commenced.

Balance Sheet ClassificationJuly 31, 2021April 30, 2021
Operating lease obligations, current portion$2,086,076 $2,029,821 
Operating lease obligations, less current portion15,865,044 16,298,808 
Total operating lease liabilities$17,951,120 $18,328,629 
Other InformationJuly 31, 2021
Weighted average remaining lease term (in years)7.29
Weighted average discount rate12 %

Note 10. Income Taxes
The Company determined that it has a permanent establishment in Canada, as defined by article V(2)(c) of the Convention between Canada and the United States of America with Respect to Taxes on Income and on Capital (the “Treaty”), which would be subject to Canadian taxation as levied under the Income Tax Act. The Company has filed Canadian T2 Corporation Income Tax Returns and related information returns under the Voluntary Disclosure Program with the Canada Revenue Agency ("CRA") to cover the 2013 through 2021 tax years during which a permanent establishment was in place. As of July 31, 2021,
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_____________________
(a) Lease payments exclude legally binding minimum lease payments for campus leases signed butthe CRA has not yet commencedresponded to the voluntary disclosure. The Company will also file an annual Canadian T2 Corporation Income Tax return to report the ongoing activity of the permanent establishment for the following locations: $10.2 million in Tampa, Florida, $5.2 million in Phoenix, Arizona,2022 and $4.3 million in Austin, Texas. future taxation years.

Balance Sheet Classification
Operating lease obligations, current$1,542,754
Operating lease obligations, long-term6,677,566
Total operating lease obligations$8,220,320

Other Information
Weighted average remaining lease term (in years)6.36
Weighted average discount rate12.00%

As of July 31, 2021, the Company recorded a reserve of approximately $150,000 for the estimate of a multi-year foreign income tax liability.
Note 10.11. Commitments and Contingencies
Employment Agreements
From time to time, the Company enters into employment agreements with certain of its employees. These agreements typically include bonuses, some of which may or may not be performance-based in nature.
Legal Matters
From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of July 31, 2020,2021, except as discussed below, there were no other pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our consolidated operations and there are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.
On February 11, 2013, Higher Education Management Group, Inc., (“HEMG”)HEMG, and its Chairman, Mr. Patrick Spada, sued the Company, 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 Securities and Exchange Commission (the “SEC”)SEC and the DOE where the Company disclosed that HEMG and Mr. Spada borrowed $2.2 million without board authority, (ii) the alleged breach of an April 2012 agreement whereby the Company had agreed, subject to numerous conditions and time limitations, to purchase certain shares of the Company from HEMG, and (iii) alleged diminution to the value of HEMG’s shares of the Company due to Mr. Spada’s disagreement with certain business transactions the Company engaged in, all with Board approval.
On December 10, 2013, the Company filed a series of counterclaims against HEMG and Mr. Spada in the same state court of New York. By order dated August 4, 2014, the New York court denied HEMG and Spada’s motion to dismiss the fraud counterclaim the Company asserted against them.
While the Company has been advised by its counsel that HEMG’s and Spada’s claims in the New York lawsuit is baseless, the Company cannot provide any assurance as to the ultimate outcome of the case. Defending the lawsuit maybe expensive and will require the expenditure of time which could otherwise be spent on the Company’s business. While unlikely, if Mr. Spada’s and HEMG’s claims in the New York litigation were to be successful, the damages the Company could pay could potentially be material.
In November 2014, the Company and Aspen University sued HEMG seeking to recover sums due under two 2008 Agreements where Aspen University sold course materials to HEMG in exchange for long-term future payments. On September 29, 2015, the Company and Aspen University obtained a default judgment in the amount of $772,793. This default judgment precipitated the bankruptcy petition discussed in the next paragraph.
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On October 15, 2015, HEMG filed bankruptcy pursuant to Chapter 7. As a result, the remaining claims and Aspen’s counterclaims in the New York lawsuit are currently stayed. The bankrupt estate’s sole asset consisted of 208,000 shares of AGI common stock, plus a claim filed by the bankruptcy trustee against Spada’s brother and a third party to recover approximately 167,000 shares. On February 8, 2019, the bankruptcy court issued an order reducing AGI’s claim to $888,638 which consisted of the judgment and a $200,000 claim for failure to disclose certain liabilities. Subsequently,On July 21, 2021, the bankruptcy trustee soldpaid the AGI common stock and has $924,486Company $498,120, which is included in "other income (expense), net" in the accompanying consolidated statements of operations. As a result, the Company wrote off the net receivable of $45,329, described in Note 5, at July 31, 2021. No further assets are available for distribution. However, priorities are an unknown amount of income taxes due from the sale of the common stock, and as of June 2, 2020 $346,480 in fees due the trustee and his counsel and $574,145 due arising from settlements with the secured creditor and Spada’s brother and the third party. While we do not know how much the Company will receive, it will be substantially less than the judgement due.

Regulatory Matters
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The Company’s subsidiaries, Aspen University and United States University, are subject to extensive regulation by Federal and State governmental agencies and accrediting bodies. In particular, the Higher Education Act (the “HEA”) and the regulations promulgated thereunder by the DOE subject the subsidiaries to significant regulatory scrutiny on the basis of numerous standards that schools must satisfy to participate in the various types of federal student financial assistance programs authorized under Title IV of the HEA.
On August 22, 2017, the DOE informed Aspen University of its determination that the institution has qualified to participate under the HEA and the Federal student financial assistance programs (Title IV, HEA programs) and set a subsequent program participation agreement reapplication date of March 31, 2021. 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.
USU currently has provisional certification to participate in the Title IV Programs due to its acquisition by the Company. The provisional certification allows the school to continue to receive Title IV funding as it did prior to the change of ownership. The provisional certification expired on December 31, 2020. While the institution submitted its recertification application timely in October 2020, the DOE has not issued its final certification. The institution is able to continue operating under its current participation agreement until the DOE issues its recertification.
The HEA requires accrediting agencies to review many aspects of an institution's operations in order to ensure that the education offered is of sufficiently high quality to achieve satisfactory outcomes and that the institution is complying with accrediting standards. Failure to demonstrate compliance with accrediting standards may result in the imposition of probation, the requirements to provide periodic reports, the loss of accreditation or other penalties if deficiencies are not remediated.
Because our subsidiaries operate in a highly regulated industry, each may be subject from time to time to audits, investigations, claims of noncompliance or lawsuits by governmental agencies or third parties, which allege statutory violations, regulatory infractions or common law causes of action.
Title IV Funding
Aspen University and United States University derive a portion of their revenue from financial aid received by its students under programs authorized by Title IV of the HEA, which are administered by the US Department of Education. When Aspen University students seek funding from the federal government, they receive loans and grants to fund their education under the following 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 (4) Federal Supplemental Opportunity Grants. For the fiscal year ended April 30, 2020, approximately 31% of Aspen University’s and 33% for United States University's cash-basis revenue for eligible tuition and fees were derived from Title IV Programs.
Return of Title IV Funds
An institution participating in Title IV Programs must correctly calculate the amount of unearned Title IV Program funds that have been disbursed to students who withdraw from their educational programs before completion and must return those unearned funds in a timely manner, no later than 45 days of the date the school determines that the student has withdrawn. Under the DOE regulations, failure to make timely returns of Title IV Program funds for 5% or more of students sampled on the institution's annual compliance audit in either of its two most recently completed fiscal years can result in the institution having to post a letter of credit in an amount equal to 25% of its required Title IV returns during its most recently completed fiscal year. If unearned funds are not properly calculated and returned in a timely manner, an institution is also subject to monetary liabilities or an action to impose a fine or to limit, suspend or terminate its participation in Title IV Programs.

TheOn September 28, 2020, the DOE informednotified USU that it is required to postthe funds held for a letter of credit in the amount of $255,708, based on the audited same day balance sheet requirements that apply in a change of control, which was funded by AGI.the University’s sole shareholder, AGI, were released. In August 2020, the DOE informed USU that it is required to post a new letter of credit in the amount of $379,345, based on the current level of Title IV funding. This irrevocable letter of credit was to expire on August 25, 2021. Pursuant to USU’s provisional Program Participation Agreement ("PPA"), the DOE indicated that USU must agree to participate in Title IV under the HCM1 funding process; however, the DOE does retain discretion on whether or not to implement that term of the agreement. Although DOE has not, to date, notified USU that it has been placed in the HCM1
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funding process, nor does the DOE’s public disclosure website identify USU as being on HCM1, it is possible that prior to the end of the PPA term, the DOE may notify USU that it must begin funding under the HCM1 procedure. If this occurs, the Company believes this will not have a material impact on the consolidated financial statements. In December 2020, the DOE reduced USU's existing letter of credit by $369,473, which was required to be posted based on the level of Title IV funding. In connection with USU's most recent Compliance Audit, USU currently maintains a letter of credit of $9,872 at July 31, 2021.

Approval to Confer Degrees
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Aspen University is a Delaware corporation and is approved to operate in the State of Delaware. Aspen University is authorized by the Colorado Commission on Education in the State of Colorado and the Arizona State Board for Private Post-Secondary Education in the State of Arizona to operate as a degree granting institution for all degrees. Aspen University is authorized to operate as a degree granting institution for bachelor degrees only by the Texas Higher Education Coordinating Board in the State of Texas. Aspen University has been granted Optional Expedited Authorization as a postsecondary educational institution in Tennessee for its Bachelor of Science in Nursing (Pre-Licensure) degree program. Aspen University has received a Provisional License for its Bachelor of Science in Nursing (Pre-Licensure) degree program to operate in the state of Florida by the Commission for Independent Education of the Florida Department of Education and is in the process for full licensure.
USU is also a Delaware corporation and received initial approval from the Delaware DOE to confer degrees through June 2023. United States University is authorized by the California Bureau of Private Postsecondary Education and the Arizona State Board for Private Post-Secondary Education to operate as degree granting institutions for all degrees.
Note 11.12. Subsequent Events
On September 14, 2020,afterAugust 31, 2021, the closing priceCompany extended the Credit Facility Agreement with the Foundation discussed in Note 6 by one year to November 4, 2022. The Credit Facility Agreement provides for a $5,000,000 Facility evidenced by the Revolving Note. Borrowings under the Credit Facility Agreement bear interest at 12% per annum. In conjunction with the extension of our common stock wasthe Facility, the Company drew down $5,000,000 of funds from the Facility at least $10.725 over a 20 consecutive trading day period12% interest per annum due November 4, 2022. Additionally, on August 31, 2021 the Convertible Notes automatically converted into 1,398,602Company issued to the Foundation warrants to purchase 50,000 shares of the Company’s common stock exercisable for five years from the date of issuance at a conversionthe exercise price of $7.15$5.89 per share.
Effective August 16, 2021, the Company entered into an Employment Agreement with Matthew LaVay, who had been appointed as the Chief Financial Officer of the Company on July 8, 2021 with the effective date of August 16, 2021. The Employment Agreement provides that Mr. LaVay will serve as the Chief Financial Officer of the Company expects the accelerated amortization charge relatedfor a period of four years, subject to this transactionan automatic renewal for successive one-year terms unless prior notice of non-renewal is given by either party. Pursuant to his Employment Agreement, Mr. LaVay will receive annual base salary of $325,000, such other compensation and benefits as set forth in the second quarter of fiscal year 2021Employment Agreement, and will be approximately $1.4 million, which will be included in interest expenseeligible to participate in the consolidated statementCompany’s executive performance bonus plan. Additionally, on August 16, 2021, Mr. LaVay received a grant of operations.
On125,000 RSUs, pursuant to his Employment Agreement. The RSUs will vest in 3 approximately equal annual increments with the first increment vesting on August 31, 2020, the closing price16, 2022, subject to continued employment on each applicable vesting date. Each RSU represents a right to receive 1 share of the Company’s common stock was at least $9 for 20 consecutive trading days, resulting in, 10% or 37,500 ofstock. The RSUs were granted under the February 4, 2020 RSU grants to executives vesting immediately. Additionally, on September 2, 2020, the Company’s common stock was at least $10 for 20 consecutive trading days and 25% or 93,750 of the RSUs granted vested immediately.Aspen Group, Inc. 2018 Plan. On the grant date, the closing price of the Company's common stock on The Nasdaq Global Market was $9.49$5.80 per share. See "Stockholders' Equity" Note for additional information on the vesting terms for these RSUs. The accelerated amortizationamortization expense related to this transaction inover the second quarter of fiscalthree year 2021vesting term will be approximately $1.6 million for the vesting of these 131,250 RSUs,$725,000, which will be included in Generalgeneral and Administrativeadministrative expense in the consolidated statementstatements of operations.
On August 31, 2020,12, 2021, Mr. Gerard Wendolowski, the Chief Operating Officer of the Company, entered intoand Dr. Cheri St. Arnauld, the Company’s Chief Academic Officer, received a grant of 80,000 RSUs each. The RSUs will vest in 3 nearly equal annual increments with the first increment vesting on August 12, 2022, subject to continued service as an Equity Distribution Agreement (the “Agreement”) with Canaccord Genuity LLC (“Canaccord”), pursuant to whichofficer of the Company may issue and sell from timeon each applicable vesting date. Each RSU represents a contingent right to time, through Canaccord, up to $12,309,750 of sharesreceive 1 share of the Company’s common stock (the “Shares”).

Salesstock. The RSUs were granted under the Aspen Group, Inc. 2018 Plan and were approved by the Compensation Committee of the Shares, if any, may be made by any method permitted by law deemed to be an “at-the-market” offering as defined in Rule 415Board of Directors of the Securities Act of 1933, including without limitation sales made directly on or through The Nasdaq Global Market, the trading market for the Company’s common stock, on any other existing trading market in the United States for the Company’s common stock, or to or through a market maker. Canaccord may also sell the Shares by any other method permitted by law, including in privately negotiated transactions. Canaccord will use commercially reasonable efforts to sell on the Company’s behalf all of the Shares requested to be sold by the Company, consistent with its normal trading and sales practices, subject to the terms of the Agreement. Under the Agreement, Canaccord will be entitled to compensation of 3% of the gross proceeds from the sales of the Shares sold under the Agreement. The Company also reimbursed Canaccord for certain specified expenses, including the fees and disbursements of its legal counsel, in an amount of $50,000. The Company estimates that the total expenses for the offering, excluding compensation and reimbursement payable to Canaccord under the terms of the Agreement, will be approximately $35,000. As of the date of this filing, approximately 130,000 shares have been sold under the agreement.
The Shares are being offered and sold pursuant to a prospectus supplement filed with the Securities and Exchange Commission on August 31, 2020.

On August 27, 2020, the Company announced that it had received the final required state regulatory approvals for their new Pre-Licensure Bachelor of Science in Nursing (BSN) campuses in Austin, Texas and Tampa, Florida, giving Aspen University the go ahead to commence marketing and begin to enroll students immediately.

In August 2020, former employees exercised 4,666 stock options. Total proceeds received by the Company were approximately $11,000 upon the issuance of 3,296 shares.


Company.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
You should read the following discussion in conjunction with our unaudited consolidated financial statements, which are included elsewhere in this Form 10-Q. This 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. See "Cautionary Note Regarding Forward Looking Statements" for more information.
Key Terms
In 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") - Lifetime Value as the weighted average total amount of tuition and fees paid by every new student that enrolls in the Company’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.
•Marketing Efficiency Ratio ("MER") - is defined as revenue per enrollment divided by cost per enrollment.
Operating costs and expenses
•Cost of revenuesrevenue - 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 revenues.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 cost of advertising media, the efficiency of the Company's marketing and recruiting efforts, and expenditures on advertising initiatives for new and existing academic programs. Non-direct response advertising activities are expensed as incurred, or the first time the advertising takes place, depending on the type of advertising activity.activity and 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 and human resources, fees for professional services, financial aid processing costs, non-capitalizable courseware and software costs, corporate taxes and facilities costs.
Long-term debt (for additional information see Note 6. "Debt" and Note 11. "Subsequent Events" to the consolidated financial statements included in Item 1. "Financial Statements"):
•Convertible Notes - The $10 million secured Convertible Notes due January 22, 2023; with an annual interest rate of 7% payable monthly. The Convertible Notes automatically converted into shares of the Company’s common stock on September 14, 2020 when the closing price of our common stock was at least $10.725 over a 20 consecutive trading day period at a conversion price of $7.15 per share. We expect that the accelerated amortization charge related to this transaction will be approximately $1.4 million.
•Revolving Credit Facility - The $5 million revolving credit facility matures on November 4, 2021; with a 2% Commitment Fee on the undrawn portion payable quarterly. At July 31, 2020 and April 30, 2020, there were no outstanding borrowings under the Revolving Credit Facility. With the conversion of the Convertible Notes, the Company does not intend to borrow under this facility.
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•Term Loans - On January 22, 2020, the Senior Secured Term Loans were cancelled and exchanged for the Convertible Notes discussed above. The $10 million Senior Secured Term Loans were entered into on March 6, 2019; with an annual interest rate of 12% payable monthly.
Non-GAAP financial measures:
•Adjusted Net Income (Loss) and Adjusted Earnings (Loss) per Share - are non-GAAP financial measures that the Company is providing beginning in first quarter of fiscal year 2021. See "Non-GAAP – Financial Measures" for a reconciliation of net earnings (loss) and earnings (loss) per share to Adjusted Net Income (Loss) and Adjusted Earnings (Loss) per Share for the fiscal quarters ended July 31, 2020 and 2019.
•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 EBITDA for the first quarter of fiscal year 2021 (threethree months ended July 31, 20202021 and 2019).2020.
•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 fiscal quartersthree months ended July 31, 20202021 and 2019.2020.
•Adjusted EBITDA Margin - is a non-GAAP financial measure. See "Non-GAAP Financial Measures" for a reconciliation of net loss to Adjusted EBITDA for the three months ended July 31, 2021 and 2020.
AGI Student Population Overview
AGI’s overall active student body (includes both Aspen University and USU) grew 24% year-over-year from 9,752 to 12,128 as
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Table of July 31, 2020 and students seeking nursing degrees were 10,422 or 86% of total students at both universities. Active student body is comprised of active degree-seeking students, enrolled in a course at the end of the first quarter of fiscal year 2021 or are registered for an upcoming course.Contents
Aspen University’s total active degree-seeking student body grew 21% year-over-year from 8,261 to 9,975. USU's total active degree-seeking student body grew year-over-year from 1,491 to 2,153 or 44%.
aspu-20200731_g2.jpg
Company Overview
AGIAspen Group, Inc. is an educationaleducation technology holding company. It operates two universities, Aspen University Inc. ("Aspen University" or "AUI" or "Aspen") and United States University Inc. ("United States University" or "USU").
All references to the “Company”, “AGI”, “Aspen Group”, “we”, “our” and “us” refer to Aspen Group, Inc., unless the context otherwise indicates.
AGI leverages its education technology infrastructure and expertise to allow its two universities, Aspen University and United States University, to deliver on the vision of making college affordable 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 higher education. AGI’s primary focus relative to future growth is to target the high growth nursing profession.
In the fourth quarter of fiscal 2021, the Company announced its Aspen 2.0 business plan to decrease advertising spend on our lower efficiency unit and shift that spend to the higher efficiency business units. Aspen 2.0 is anticipated to reduce our advertising spend as a percentage of revenue for the fiscal year while supporting growth in our new pre-licensure metros and the USU Masters of Nursing-Family Nurse Practitioner (“FNP”) program. As we advance through fiscal year 2022, we expect profitability gains from Aspen 2.0 to have the most significant impact in the second half of July 31, 2020, 10,422 of 12,128 or 86% of all students across both universities are degree-seeking nursing students.the fiscal year given the expected growth in our highest efficiency businesses. As we move through the year, Aspen 2.0 is designed to generate profitability by our fourth fiscal quarter, setting the Company up for consistent, sustained profitable growth in the coming years.
In March 2014, Aspen University unveiled abegan offering monthly payment planplans available to all students across every online degree program offered by the university.Aspen University. The monthly payment plan is designed so that students will make one payment per month, and that monthly payment is applied towards the total cost of attendance (tuition and fees, excluding textbooks). The monthly payment
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plan offers online associate and most bachelorundergraduate students the opportunity to pay their tuition and fees at $250/month, online master students $325/month, and online doctoral students $375/month, interest free, thereby giving students a monthly payment option versus taking out a federal financial aid loan.
USU began offering monthly payment plans in the summer of 2017. Today, 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 online hybrid Masters of Nursing-Family Nurse Practitioner (“FNP”)FNP program ($375/month). Since August 1, 2019, new student enrollments for USU’s FNP monthly payment plan have been offered a $9,000 two-year payment plan ($375/month x 24 months) designed to pay for the first year’s pre-clinical courses only (approximate cost of $9,000). The second academic year of the two-year FNP program in which students complete their clinical courses (approximate cost of $18,000) is required to be funded through conventional payment methods (either cash, private loans, corporate tuition reimbursement or federal financial aid).
Since 1993, Aspen University has been nationally accredited by the DEAC, a national accrediting agency recognized by the DOE and CHEA. On February 25, 2019, the DEAC informed Aspen University that it had renewed its accreditation for five years to January 2024.
Since 2009, USU has been regionally accredited by WSCUC.
Both universities are qualified to participate under the Higher Education Act and the Federal student financial assistance programs (Title IV, HEA programs).
AGI New Student EnrollmentsPopulation Overview
ForAGI’s overall active degree-seeking student body (includes both Aspen University and USU) grew 14% year-over-year to 13,879 as of July 31, 2021 from 12,128 as of July 31, 2020 and students seeking nursing degrees were 12,058 or 87% of total active students at both universities. Of the 12,058 students seeking nursing degrees, 9,694 are Registered Nurses (RNs) studying to earn an advanced degree, including 6,905 at Aspen University and 2,789 at USU, while the remaining 2,364 nursing students are enrolled in Aspen University’s BSN Pre-Licensure program in the Phoenix, Austin, Tampa and Nashville metros.
AU's total active student body increased by 9% year-over-year to 10,911 in Q1 Fiscal 2022 from 9,975 in Q1 Fiscal 2021. On a year-over-year basis, USU’s total active student body grew by 38% to 2,968 from 2,153. The chart below shows five quarters of active student body results. Active student body is comprised of active degree-seeking students, enrolled in a course at the end of the first quarter of fiscal year 2021, the Company delivered a quarterly record of 2,351 new student enrollments, a sequential increase of 32%, and 22% year-over-year. Aspen University accounted2022 or are registered for 1,779 new student enrollments delivering overall enrollment growth at Aspen University of 26% year-over-year.The strong enrollment growth at Aspen University was a result of record quarterly enrollments in its Doctoral and BSN Pre-Licensure units. Millennials that aspire to become RNs enrolled in the BSN Pre-Licensure program in Phoenix in record numbers in the first quarter given that many have been furloughed or laid off since the pandemic first began.
USU accounted for 572 new student enrollments in the quarter driven primarily by FNP enrollments, a 32% sequential increase and an 11% increase year-over-year. Note that USU announced the termination of its 72-month payment plan for FNP students as of July 31, 2019, which caused a historic enrollment month for the university (nearly 250 enrollments in the month of July 2019). Consequently the 11% enrollment increase and the 15% decline in USU’s marketing efficiency ratio (see MER analysis below) year-over-year are favorable results when understanding the context of the one-time event a year ago in the month of July.
Below is a table reflecting new student enrollments for the past five quarters:
New Student Enrollments
Q1'20Q2'20Q3'20Q4'20Q1'21
Aspen University1,415 1,823 1,371 1,344 1,779 
USU514 394 375 432 572 
Total1,929 2,217 1,746 1,776 2,351 

Marketing Efficiency Ratio (MER) Analysis
AGI has developed a marketing efficiency ratio to continually monitor the performance of its business model.
Marketing Efficiency Ratio (MER) =Revenue per Enrollment (RPE)
Cost per Enrollment (CPE)
Cost per Enrollment (CPE)upcoming course.
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The Cost per Enrollment measuresaspu-20210731_g2.jpg
AGI New Student Enrollments

New student enrollments at USU grew by 15% sequentially and 18% year-over-year, from 572 a year ago to a quarterly record of 675. Aspen’s Online Nursing + Other unit declined by 3% sequentially and 7% year-over-year as expected, given the advertising investment spentpreviously announced ‘Aspen 2.0’ plan to reduce spending in the legacy business by $1.3 million in the 2022 fiscal year.

BSN Pre-Licensure enrollments grew by 21% sequentially and were down 17% year-over-year as a given three month period, divided byresult of the numberplanned reduction of enrollments in the Phoenix metro year-over-year, from 490 to 258 (a decrease of 232 enrollments). This planned decrease in enrollments in the Phoenix metro is expected to cause a year-over-year aggregate decrease in the second quarter as well, and then beginning in the third quarter the Company expects to deliver material aggregate enrollment increases year-over-year in the BSN Pre-Licensure unit.

On a Company-wide basis, new student enrollments achieved in that given three month period, in orderincreased sequentially from 2,182 to obtain an average CPE (or CAC outside of the education sector)2,276 or 4%. On a year-over-year basis, new student enrollments for the period measured.
Revenue per Enrollment (RPE)
The Revenue per Enrollment takes each quarterly cohort of new degree-seeking student enrollments, and measuresCompany were down 3%, however, excluding the amount of earned revenue on a weighted average basis, including tuition and fees to determine the weighted average RPE for the cohort measured. For the later periods of a cohort, 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.
In the first quarter of fiscal year 2021 the Marketing Efficiency Ratio (MER) for our universities, representing revenue-per-enrollment (LTV) over cost-per-enrollment (CPE), improved 16% for Aspen University and declined 15% for USU, as shown232 planned enrollment reduction in the table below:
First Quarter Marketing Efficiency Ratio
Enrollments
CAC1
LTV2
Q1 '21 MERQ1 '20 MERMER % Change
Aspen University1,779 1,181
14,5483
12.3X10.6X16%
USU572 1,272
17,8204
14.0X16.5X(15)%
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1Based on 6-month rolling weighted average CPE for each university’sPhoenix pre-licensure metro, Company-wide enrollments
2Weighted Lifetime Value (LTV) of a new student enrollment
3Weighted average LTV for all Aspen University enrollments in the quarter
4LTV for USU’s MSN-FNP Program would have been up year-over-year by 7%.


Compared toNew student enrollments for the prior year period, AGI’s weighted average cost of enrollment increased 4%, from $1,153 to $1,203, aspast five quarters are shown in the table below:
New Student Quarterly Enrollments
Q1'21Q2'21Q3'21Q4'21Q1'22
Aspen University1,779 2,010 1,593 1,593 1,601 
USU572 649 536 589 675 
Total2,351 2,659 2,129 2,182 2,276 

First Quarter Weighted Average Cost of Enrollment
Q1 '20 Enrollments
Q1'20 CAC1
Q1'21 Enrollments
Q1'21 CAC1
CAC % Change
Aspen University1,415 $1,177 1,779 $1,181 — %
USU514 $1,078 572 $1,272 18 %
Weighted Average$1,153 $1,203 4 %

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1Based on 6-month rolling average
Bookings Analysis and ARPU
On a year-over-year basis, Q1 Fiscal 20212022 Bookings increased 34%decreased 2%, to $35.2 million from $36.1 million deliveringin the prior year. As previously discussed, the proactive Phoenix pre-licensure enrollment reduction in Q1 Fiscal 2022 from 490 to 258 (or a company-wide average revenue per enrollment (APRU) increasereduction of 10%232) enrollments year-over-year, caused Bookings in the Phoenix metro to $15,344.decrease by $7 million year-over-year. Excluding the Phoenix pre-licensure metro, Company-wide Bookings would have increased by 17% year-over-year.

First Quarter Bookings and Average Revenue Per Enrollment (ARPU)
First Quarter Bookings1 and Average Revenue Per Enrollment (ARPU)1
Q1'20 Enrollments
Q1'20 Bookings 1
Q1'21 Enrollments
Q1'21 Bookings 1
Percent Change Total Bookings & ARPU 1
Q1'21 Enrollments
Q1'21 Bookings 1
Q1'22 Enrollments
Q1'22 Bookings 1
Percent Change Total Bookings & ARPU 1
Aspen UniversityAspen University1,415$17,691,150 1,779$25,880,40046 %Aspen University1,779 $25,880,400 1,601 $23,150,850 
USUUSU514$9,159,480 572$10,193,04011 %USU572 $10,193,040 675 $12,028,500 
TotalTotal1,929$26,850,630 2,351$36,073,440 34 %Total2,351 $36,073,440 2,276 $35,179,350 (2)%
ARPUARPU$13,919 $15,34410 %ARPU$15,344 $15,457 1 %
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1 “Bookings” are defined by multiplying Lifetime Value (LTV) per enrollment by new student enrollments for each operating unit. “Average Revenue Per Enrollment” (ARPU) is defined by dividing total Bookings by total enrollment.new student enrollments for each operating unit.

During the Q1 Fiscal 2022, the Company continued to focus its growth capital almost exclusively on its two licensure degree programs which have higher lifetime values. Set forth below is the description of these two key licensure degree programs.
ASPEN UNIVERSITY’S PRE-LICENSURE BSN HYBRID (ONLINE/ON-CAMPUS) DEGREE PROGRAM 
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In July 2018, Aspen University through Aspen Nursing, Inc. began its Pre-Licensure Bachelor of Science in Nursing (BSN) Pre-Licensure Program
Aspen University offers a Bachelor of Science in Nursing Pre-Licensure degree program at its initial campus in Phoenix, Arizona. As a result of overwhelming demand in the Phoenix metropolitan area, in January 2019 Aspen University began offering both day (July, November, March semesters) and evening/weekend (January, May, September semesters) programs, equaling six semester starts per year. Moreover, in September 2018, AGI entered into a memorandum of understanding to open a second campus in the Phoenix metropolitan area in partnership with HonorHealth. The initial semester at HonorHealth began in September 2019.
Aspen University’s(the “BSN Pre-Licensure Program”).This innovative hybrid (online/on-campus) program allows most of the credits to be completed online (83 of 120 credits or 69%), with pricing offered at current low tuition rates of $150/credit hour for online general education courses, and $325/credit hour for online core nursing courses, and $495 for core clinical courses. For students with no prior college credits, the total cost of attendance is less than $50,000.
Phoenix, AZ Campus Locations
Aspen University began offering the BSN Pre-Licensure program in July 2018 at its initial campus in Phoenix, Arizona.As a result of overwhelming demand in the Phoenix metropolitan area, in January 2019 Aspen University began offering both day (July, November, March) and evening/weekend (January, May, September) terms, equaling six term starts per year. In September 2019, Aspen University opened a second campus in the Phoenix metropolitan area in partnership with HonorHealth.
Due to the significant demand in the Phoenix metro, on February 2, 2021, the Company began implementing its first double cohort enrollment at its main campus in Phoenix.
BSN Pre-Licensure Campus Locations Opened in Fiscal Year 2021
Austin, TX
Aspen University’s BSN Pre-Licensure BSN program in Austin is offered as a full-time, three-year (nine semester) program thatbased in the Frontera Crossing office building located at 101 W. Louis Henna Boulevard in the suburb of Round Rock. The building is specifically designed for students who do not currently hold a state nursing licensesituated at the junction of Interstate 35 and have no prior nursing experience. Aspen University is admitting students intoState Highway 45, one of two program components: (1) a pre-professional nursing component for students that have less than the required 41 general education credits completed (Year 1), and (2) the nursing core component for students that are ready to participatemost heavily trafficked freeway exchanges in the competitive evaluation process for entry (Years 2-3).
Pre-Licensure BSN Program - Campus Expansionmetropolitan area with visibility to approximately 143,362 cars per day. Aspen University's initial PPN nursing student enrollments began on the September 29, 2020 semester start date.

Tampa, Florida Campus

Aspen University has executed a definitive leaseclinical affiliation agreement for ten years to occupy approximately 30,000 square feet (Suites 150with Baylor Scott & White Health – Central division, the largest not-for-profit healthcare system in Texas and 450)one of the largest in the United States. Baylor Scott & White Health includes 48 hospitals, more than 800 patient care sites, more than 7,800 active physicians, over 47,000 employees and the Scott & White Health Plan.
Tampa, Oaks I propertyFL
Aspen University’s BSN Pre-Licensure program in Tampa is located at 12802 Tampa Oaks Boulevard. The building is visible from the intersection of Interstate 75 and East Fletcher Avenue, near the University of South Florida, providing visibility to approximately 126,500 cars per day. Regulatory approvals were completed in August 2020 and marketing has begun inAspen University's initial PPN nursing student enrollments began on the Tampa metropolitan area. Aspen expects to begin its first core nursing (Years 2-3) semester at Tampa Oaks I on December 8, 2020 in campus space formerly occupied by the University of Phoenix.

semester start date.
Aspen University has executed ana clinical affiliation agreement with Bayfront Health, a regional network of seven hospitals and over 1,900 staff medical professionals on staff serving the residents of Florida’s Gulf Coastthe Tampa Bay area to provide required clinical placements for Aspen’sits nursing students. In addition, clinical affiliation agreements have been signed in the Tampa metropolitan area with John Hopkins All Children’s Hospital, Inc., Care Connections at Home, Global Nurse Network, LLC and The American National Red Cross.

Expected Near Term BSN Pre-Licensure Campus Opening
Austin, Texas CampusNashville, TN

On March 8, 2021, the Company announced that Aspen University has executed a definitive lease agreementreceived the final required state and board of registered nursing regulatory approvals for eight yearstheir new BSN Pre-Licensure campus location in Nashville, Tennessee, with permission to occupy approximately 22,000 square feet in a portion of the first floor of the Frontera Crossing office building located at 101 W. Louis Henna Boulevard in the Austin suburb of Round Rock. The building is situated at the junction of Interstate 35 and State Highway 45, one of the most heavily trafficked freeway exchanges in the metropolitan area with visibility to approximately 143,000 cars per day. Regulatory approvals were completed in July 2020 and marketing has begun in the Austin metropolitan area.

Aspen has executed a clinical affiliation agreement with Baylor Scott & White Health – Central division, the largest not-for-profit healthcare system in Texas and one of the largest in the United States. Baylor Scott & White includes 48 hospitals, more than 800 patient care sites, more than 7,800 active physicians, over 47,000 employees and the Scott & White Health Plan.

In addition to the Round Rock campus, effective August 1, 2020, Aspen University executed a sublease to take over the remaining 20-month lease held by sublandlord National American University (NAU) to occupy approximately 7,200 square feet of their campus in the suburb of Georgetown, Texas, which is approximately 10 miles north of Aspen’s future Frontera Crossing campus in the suburb of Round Rock. In exchange, Aspen as subtenant, at no additional cost, shall have the right to utilize all the existing furniture, fixtures and equipment owned by sublandlord and will convey all such furniture, fixtures and equipment to subtenant via a bill of sale for $10.00. Aspen University expects to commence its first core nursing (Years 2-3) semester on September 29, 2020 and will share the campus with NAU until January 2021 when NAU will have completed the teach-out of their remaining 12 nursing students.

AGI’s Plan for United States University (USU) to Implement MSN-FNP Weekend Immersions in Every Campus Metropolitan Area:
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commence marketing and begin to enroll first-year PPN students effective immediately. Aspen University is targeting to begin its initial (years 2-3) core program semester in Nashville in October 2021.
The Nashville campus will be located at 1809 Dabbs Avenue, which is situated right on Interstate 40 east of downtown Nashville, four miles west of the Nashville airport. Clinical affiliation agreements have been executed with NorthCrest Medical Center, Trust Point Hospital, and Nashville General Hospital, among others.
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 50-credit degree program with 100% of the curriculum online, including the curricular component to complete 540 clinical and 32 lab hours.
While MSN-FNP lab hours to date have been done at USU’s San Diego facility through the end of calendar 2020, the rapid growth of the MSN-FNP program has caused AGI to plan to expand the lab immersionsopen two additional immersion locations in multiple locations across the United States. For example,2021. Specifically, the Company has leasedbuilt-out an additional suite on the ground floor of our main campus facility in Phoenix (by the airport) and recently opened the Tampa clinical facility. Consequently, students now have the option to begin offeringattend their weekend immersions for MSN-FNP students in both San Diego and Phoenix. We expect this additional clinical facility in Phoenix to be open later this calendar year.
Moreover, AGI's future plans call for the build-out of, on average, 10 exam rooms that will occupy approximately 3,000 square feet in each of its pre-licensure metropolitan areas for USU to implement immersions for its MSN-FNP program. As a result, following regulatory approvals, lab immersions are planned to be conducted in four metropolitan areas for USU MSN-FNP students:at three different metro locations: San Diego, Phoenix Austin and Tampa.

AGI’s Tele-Health Affiliation Partnership with American-Advanced Practice Network (A-APN)

On July 7, 2020, the Company announced an affiliation partnership with American-Advanced Practice Network (A-APN), a national clinical network for advanced practice nurses that provides comprehensive health care and nursing services at its outpatient centers and clinical facilities throughout the U.S.

A-APN offers independent nurse practitioners (NPs) a unique, multi-state network or "group practice without walls" with best-in-class technology and business support. A-APN was created for and by NPs. Rural and remote members of the network have nationwide, trusted peer cross-coverage for patients. A-APN members deliver clinical care using CareSpan's Digital Care Delivery platform, facilitating care delivery in-person, or at a distance. The platform includes diagnostics, EMR, e-prescribing, remote monitoring, and dynamic documentation.

Through this affiliation, A-APN will appoint an Educational Coordinator to work with USU’s Office of Field Experience to place USU MSN-FNP students with qualified, experienced NP preceptors. We expect that this telehealth partnership will enable MSN-FNP students to complete their required direct care clinical hours with A-APN throughout the COVID-19 crisis and thereafter. As a benefit, the Company doesn't anticipate any delays to their projected graduation dates.

ACCOUNTS RECEIVABLE AND MONTHLY PAYMENT PLANAccounts Receivable - Monthly Payment Plan ("MPP")
The accounts receivable balance, both short-term and long-term, for theCompany offers several payment options to its students including monthly payment plan was $23,375,249(MPP), installment plans and financial aid. Our 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 July 31, 2020.2021, Gross MPP accounts receivable was 90% of total gross accounts receivable. Of the Gross MPP accounts receivable, 53% and 47% was generated at AU and USU, respectively.
The Monthly Payment Plan, offered by both Aspen University and United State University, is a private education loan with a 0% fixed rate of interest (0% APR) and no down payment. Each month the student will make one payment of $250, $325, $350 or $375 (depending on the program) until the program is paid for. The attractive aspect of being able to pay for a degree over a fixed period of time has fueled the growth of this plan. MPP is designed so students can build the cost of their degree into their monthly budget.

Each student’s receivable account is different depending on how many classes a student takes each period. If a student takes two classes each eight-week period while paying $250, $325 or $375 a month, that student’s account receivable balance will rise accordingly.
The common thread is the actual monthly payment, which functions as a retail installment contract with no interest that each student commits to pay over a fixed number of months. Aspen University students paying tuition and fees through a monthly payment method grew by 12% year-over-year, from 5,580 to 6,276, representing 63% of Aspen University’s total active student body.

USU students paying tuition and fees through a monthly payment method grew from 1,273 to 1,427 students sequentially. Those 1,427 students paying through a monthly payment method represent 66% of USU’s total active student body.

Change in Business Mix and Relationship to Accounts Receivable

During the first quarter of fiscal year 2021, revenue from students using the Monthly Payment Plan increased by 32% year over year, but declined as a percentage of total revenue for the second year in a row down from 61% in Q1 Fiscal 2020 to 55% in Q1 Fiscal 2021, while total revenue increased 46% year over year.

Our two highest lifetime value programs are Aspen University’s Pre-Licensure BSN Program and USU’s MSN-Family Nurse Practitioner Program.These programs are our fastest growing programs and now represent 47% of total annual revenue.We expect the revenue from these programs to continue to grow as a percentage of our total revenue as we continue to expand our campus footprint from 2 to over 10 campuses over the next 3-4 years.

This change in our business mix is expected to have a meaningful impact on our accounts receivable and our allowance for doubtful accounts.The BSN Pre-Licensure program and the second academic year of the MSN-FNP program require payment
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prior to the start of each term.This means that approximately 90% of all revenue from these two programs will be paid in advance; meaningfully reducing our accounts receivable and the allowance for doubtful accounts as a percentage of our total revenue.

As revenue from these programs continues to grow as a percentage of overall revenue, we expect that we will see a corresponding increase in our cash flows from operations that in turn will allow AGI to turn cash flow positive and generate positive free cash flow over time.

In addition to this change in our business mix, we have built upon the existing analysis of our accounts receivable and expanded our analysis to include evaluation of all payment types, student status, and aging within programs.Previously our evaluation was focused primarily on students using the Monthly Payment Plan.As we upgrade our financial systems we expect to gain greater ability to track discrete data faster and easier to support more proactive student engagement that we believe will improve the performance of our student receivable portfolio.

As we identify program and student status specific trends, we will strive to create ways to isolate program specific revenue and accounts receivable activity to gather, analyze and report program specific data and trends.Over time we will use this knowledge to enhance our allowance reserving policies going forward.

By improving visibility into trends earlier we expect to see improvement in overall student performance and a reduction of account delinquencies.

Reserving for Allowance for Doubtful Accounts and Charges to the Allowance

During the fourth quarter of fiscal 2020, we built upon the existing analysis of our accounts receivable and evaluated several segments of our older dated student files.During this analysis we made the determination that receivables for approximately 656 students, amounting to $686,000 for Aspen University and $81,000 of receivables for approximately 39 students for USU were deemed uncollectible based on the payment detail and student status.These amounts were charged against the allowance for doubtful accounts in the fourth quarter of fiscal year 2020.
As part of the account receivable analysis discussed earlier, we evaluated our long-term MPP student receivables. The analysis evaluated students in two categories: nursing and non-nursing.Based on our analysis of the payment details and student performance, in the fourth quarter of fiscal 2020, we elected to charge $152,000 of MPP receivables against the reserve for doubtful accounts. The MPP receivables will be evaluated in conjunction with our updated recovery and collection process and we expect results to be positive. In the first quarter of fiscal year 2021, no changes to the methodology were made and no student accounts were written off.

Our accounts receivable remaining for former students are from 2018 or more recent with the exception of certain alumni from our nursing programs. We believe our analysis is appropriate and reasonable. We further believe that we are positioned to focus our enhanced recovery and collections efforts on delinquencies and past due amounts from recent graduates and current enrolled students.

Based on our review of accounts receivable, overall revenue growth trends and changes in our mix of business, we evaluated our reserve methodology and increased our reserve by $340,000 for Aspen University and by $60,000 for USU also in the first quarter of fiscal year 2021. Note that the AGI's bad debt allowance started the quarter at $1.76 million and ended the quarter at $2.16 million.

As part of the process of evaluating our reserving methodology we also evaluated our processes in student accounts, our accounts receivable recovery and collections processes.We have designed an enhanced recovery and collections process that is expected to begin recovery of student late payments earlier and manage these students more proactively during their course of study and post-graduation for MPP students

We will continue to reserve against our receivables based on revenue growth trends, mix of business and specific trends we identify on a program by program basis. We believe we currently have sufficient reserves against our current student portfolio but we intend to stay vigilant to become aware of external changes that could affect our students ability to meet their obligations such as the continuation of the COVID-19 economic slowdown or other exogenous events and circumstances that could give us reason to make a material change to our current methodology and reserve policy.

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Overtime we expect the change in our mix of business together with process improvements and collection enhancements to result in a better managed portfolio of student receivables and improving cash flow from operations.
Relationship Between Accounts Receivable and Revenue
The gross accounts receivable balance for any period is the net effect of the following three factors:
1.Revenue;
2.Cash Receipts; and
3.The net change in deferred revenue.
All three factors equally determine the gross accounts receivable. If one quarter experiences particularly high cash receipts, the gross accounts receivable will go down. The same effect if cash receipts are lower or if there are significant changes in either of the other factors.
Simply looking at the change in revenue does not translate into an equally similar change in gross accounts receivable. The relative change in cash and the deferral must also be considered. For net accounts receivable, the changes in the reserve must also be considered. Any additional reserve or write-offs will influence the balance.
As it is a straight mathematical formula for both gross accounts receivable and net accounts receivable, and most of the information is public, one can reasonably calculate the two non-public pieces of information, namely the cash receipts in gross accounts receivable and the write-offs in net accounts receivable.
For revenue, the quarterly change is primarily billings and the net impact of deferred revenue. The deferral from the prior quarter or year is added to the billings and the deferral at the end of the period is subtracted from the amount billed. The total deferred revenue at the end of every period is reflected in the liability section of the consolidated balance sheet. Deferred revenue can vary for many reasons, but seasonality and the timing of the class starts in relation to the end of the quarter will cause changes in the balance.
As mentioned in the accounts receivable section, the change in revenue cannot be compared to the change in accounts receivable. Revenue does not have the impact of cash received whereas accounts receivable does. Depending on the month and the amount of cash received, it is likely that revenue or accounts receivable will increase at a rate different from the other. The impact of cash is easy to substantiate as it agrees to deposits in our bank accounts.
At July 31, 2020, the allowance for doubtful accounts was $2,156,645 which represents 8% of the gross accounts receivable balance of $25,531,894, the sum of both short-term and long-term receivables.
The Introduction of Long-Term Accounts Receivable
When a student signs up for the monthly payment plan, there is a contractual amount that the Company can expect to earn over the life of the student’s program. This full contractual amount cannot be recorded as an account receivable as the student does have the option to stop attending.upon enrollment. As a student takes a class, revenue is earned over that eight-week class. Some students accelerate their program, taking two classes every eight-week period, and as we discussed, that increases the student’s accounts receivable balance. If any portion of that balance will be paid in a period greater than 12 months, that portion is reflected as long-term accounts receivable.

As a result of the growing acceptance of our monthly payment plans, our long-term accounts receivable balance has grown from $6,701,136$10,249,833 at April 30, 20202021 to $8,713,018$11,313,657 at July 31, 2020. The primary components of2021. These are MPP are students who make monthly payments over 36, 39 and 72 months. The average student completes their academic program in 30 months,months; therefore, most of the Company’s accounts receivable are short-term. However, when students graduate earlier than the 30 month average completion duration, and as students enter academic year two of USU’s MSN-FNP legacy 72 month payment plan, they transition to long-term accounts receivable when their liability increases to over $4,500. Those arereceivable. This is the two primary factorsfactor that havehas driven an increase in long-term accounts receivable.
Here is a graphic of both short-term and long-term receivables, as well as contractual value:
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ABC
Payments owed for classes taken where payment plans for classes are less than 12 months, less monthly payments receivedPayments owed for classes taken where payment plans are greater than 12 monthsExpected classes
to be taken over
balance of program.
Short-Term
Accounts Receivable		Long-term
Accounts Receivable		Not recorded in
financial statements
The Sum of A, B and C will equal the total cost of the program.
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Q1 Fiscal 2021 Developments

On June 5, 2020, the Company, as an inducement to exercise, reduced by 5% the exercise price of the common stock purchase warrants issued to The Leon and Toby Cooperman Family Foundation (the “Foundation”), of which Mr. Leon Cooperman, a stockholder of the Company, is the trustee. The warrants were issued on November 5, 2018 (the “2018 Cooperman Warrants”) and on March 5, 2020 (the “2019 Cooperman Warrants”). The 2018 Cooperman Warrants exercise price was reduced from $5.85 to $5.56 per share. The 2019 Cooperman Warrants exercise price was reduced from $6.00 to $5.70 per share. On June 8, 2020, the Foundation immediately exercised the 2018 and 2019 Cooperman Warrants paying the Company $1,081,792 and the Company issued 192,049 shares of common stock to the Foundation.

In consideration of the amendment, the Foundation in addition to its immediate exercise executed a lock-up agreement agreeing not to request registration of or sell the underlying shares of common stock for at least six months.

COVID-19 Update

The COVID-19 crisis did not have a material impact onNursing students represented 87% or 12,058 of the Company’s consolidated financial results fortotal student body of 13,879 students at the end of the first quarter of fiscal year 2021, as evidenced by2022. Of the 12,058 nursing students, 2,364 are BSN Pre-Licensure students located across our record revenuesfour metro locations (Phoenix, Austin, Tampa and Nashville). The remaining 9,694 nursing students are licensed registered nurses (RNs) studying to earn an advanced degree (RN to BSN, MSN or DNP degree programs).These 9,694 post-licensure nursing students therefore represent 70% of $15.2 million. In fact, the Company’s twototal student body and are the population of AGI students that have been primarily affected by the COVID-19 pandemic. Given that AGI has the highest LTV programs,student body concentration of RNs among publicly-traded higher education companies in the U.S., the COVID-19 pandemic has necessitated the need to track RN behaviors and attitudes carefully for the past 18 months. Below are the effects the Company has seen to date relative to class starts and enrollments.

The Company previously reported that RN course starts at both universities were approximately 4% lower than historically expected during the months of September, 2020 – January, 2021, which resulted in approximately $520,000 less revenue in the fiscal 2021 third quarter. However, beginning in late February 2021, RN course starts returned to historically normal levels throughout the remainder of the fourth fiscal quarter which resulted in revenue of $19.1 million for the quarter, approximately $500,000 higher than the midpoint of our forecast.

Starting in the second half of the month of June and continuing throughout the month of July 2021, the Company saw lower course starts than seasonally expected among our RN student body. For example, at Aspen University, course starts among RNs in June were flat year-over-year and July was slightly down year-over-year which was not surprising given the rise of the Delta variant and the spike in hospitalizations. Revenue for the first quarter was relatively unaffected given that the lower RN class starts occurred in the second half of the fiscal quarter. We cannot be certain what impact the Delta variant and other variants will have on the Company’s results as we progress through the second and future quarters in fiscal 2022.
Results of Operations
Set forth below is the discussion of the results of operations of the Company for the three months ended July 31, 2021 (“Q1 Fiscal 2022”) compared to the three months ended July 31, 2020 (“Q1 Fiscal 2021”).
Revenue
Three Months Ended July 31,
2021$ Change% Change2020
Revenue$19,430,995$4,265,43328%$15,165,562
The increase was primarily due to revenue growth in USU’s MSN-FNP and Aspen’s BSN Pre-Licensure program, saw enrollment tailwinds this quarter related to COVID-19. RN’s, looking to attain their nurse practitioner license to broaden their career options, drove MSN-FNP enrollment. Additionally, millennials, aspiring to become RNs, enrolled in the BSN Pre-Licensure program in Phoenix in record numbers, given that many were furloughed or laid off since the pandemic first started.

COVID-19 has focused a spotlight on the shortage of nurses in the U.S. and, in particular, the need for nurses with four-year and advanced degrees such as USU’s MSN-FNP and Aspen University’s DNP programs. We believe we will be operating in a tailwind environment for many years relative to the planned expansion of our Pre-Licensure BSN hybrid campus business.
Results of Operations For the Three Months Ended July 31, 2020 (Q1 Fiscal 2021) Compared to the Three Months Ended July 31, 2019 (Q1 Fiscal 2020)
Revenue
Three Months Ended July 31,
2020$ Change% Change2019
Revenue$15,165,562 $4,807,580 46%$10,357,982 

Revenue from operations for Q1 Fiscal 2021 increased to $15,165,562 from $10,357,982 for Q1 Fiscal 2020, an increase of $4,807,580 or 46%. The increase was primarily due to enrollment and student body growth in the degree programs with the highest lifetime value (LTV). By focusing our marketing spend on delivering enrollment growth in the degree programs with the highest LTV, we increased our average revenue per enrollment (or ARPU) by 10%.LTV. The Company expects the majority of its revenue growth to continue in future periods to be derived from these two business units as we continue prioritizing our highest LTV degree programs to achieve our long-term growth plans.
Aspen University’s revenues in Q1 Fiscal 2021 increased 40% year-over-year, while USU's revenues in Q1 Fiscal 2021 increased 65% year-over-year.
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Aspen University's traditional post-licensure online nursing + other business unit and doctoral unit contributed 53%45% of total Company revenue in Q1 Fiscal 2021,2022, while Aspen University’s BSN Pre-Licensure BSN program delivered 18%23% of the Company’s revenuesrevenue in Q1 Fiscal 2021.2022. Finally, USU contributed 29%32% of the total revenuesrevenue for Q1 Fiscal 2021.2022.
The Company now expects annualAspen University’s revenue growth to meet or exceed 35% or $66 million for the full fiscal year 2021.in Q1 Fiscal 2022 increased 24% year-over-year, while USU's revenue in Q1 Fiscal 2022 increased 39% year-over-year.
Cost of revenue (exclusive of depreciation and amortization shown separately below)
Three Months Ended July 31,
2021$ Change% Change2020
Cost of Revenue (exclusive of depreciation and amortization shown separately below)$8,593,568$2,746,04547%$5,847,523
As a percentage of revenue44%39%
Three Months Ended July 31,
2020$ Change% Change2019
Cost of Revenues (exclusive of depreciation and amortization shown separately below)$5,847,523 $1,494,465 34%$4,353,058 
As a percentage of revenue39%42%

Instructional costs and services
Instructional costs and services for Q1 Fiscal 2021Total cost of revenue increased, to $3,056,713 or 20%including as a percentage of revenues from $2,143,819 or 21% of revenues for Q1 Fiscal 2020,revenue, due primarily to an increase of $912,894 or 43%. The increase was primarily due to morein class starts year-over-year and additional full-time faculty staffing in the USU MSN-FNP program and faculty hiring in the BSN Pre-Licensure campus locations in Phoenix, Austin and Tampa; and planned advertising spending increase throughout Fiscal Year 2022, targeted
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primarily to our highest LTV programs. Total advertising spend in Q1 Fiscal 2022 increased 46% year-over-year, however, on a sequential basis was down by 2%. The majority of the year-over-year advertising spending increase is directed to the new pre-licensure BSN campuses in Phoenix.metro locations: Austin, Nashville and Tampa, as well as USU's MSN-FNP program.
Instructional Costs and Services
Instructional costs and services for Q1 Fiscal 2022 increased to $4,500,013 or 23% of revenue from $3,056,713 or 20% of revenue for Q1 Fiscal 2021, an increase of $1,443,300 or 47%.
Aspen University instructional costs and services represented 19%23% of Aspen University revenuesrevenue for Q1 Fiscal 2021,2022, while USU instructional costs and services was 22%24% of USU revenuesrevenue during Q1 Fiscal 2021.2022.
Marketing and promotionalPromotional
Marketing and promotional costs for Q1 Fiscal 20212022 were $4,093,555 or 21% of revenue compared to $2,790,810 or 18% of revenues compared to $2,209,239 or 21% of revenuesrevenue for Q1 Fiscal 2020,2021, an increase of $581,571$1,302,745 or 26%47%. Compared to revenue growth of 46%, this reflects the efficiency of our business model including; 1) focus the majority of our marketing growth spend on our highest LTV programs, 2) reflects the fact that our lead costs and conversion rates remain in the same range as the previous year, and 3) the Company has seen an enrollment tailwind relative to COVID-19 as discussed above.
Aspen University marketing and promotional costs represented 18%21% of Aspen University revenuesrevenue for Q1 Fiscal 2021,2022, while USU marketing and promotional costs was 14%16% of USU revenuesrevenue for Q1 Fiscal 2021.2022.
AGI corporate marketing expenses waswere $324,265 for Q1 Fiscal 2022 compared to $232,851 for Q1 Fiscal 2021, compared to $228,231 for Q1 Fiscal 2020, an increase of $4,620$91,414 or 2%39%.
General and administrative
Three Months Ended July 31,
2020$ Change% Change2019
General and administrative$8,793,756 $1,997,505 29%$6,796,251 
As a percentage of revenue58%66%
Three Months Ended July 31,
2021$ Change% Change2020
General and administrative$10,946,477$2,152,72124%$8,793,756
As a percentage of revenue56%58%

General and administrative costs for Q1 Fiscal 2021 was $8,793,756 or 58% of revenues compared to $6,796,251 or 66% of revenues during Q1 Fiscal 2020, an increase of $1,997,505 or 29%. The increase wasexpense increased primarily due to higher headcount and related increase in compensation and benefits expense to support the growth of the business and increasedother-employee related costs, including stock-based compensation, accrualsand increases in facilities and technology costs across both universities.

The remaining $12 tranche related to new incentivethe February 2020 Executive RSU grant has approximately $1.2 million of total unrecognized compensation programs, IT, other non-cash stock-based compensation, insurance, and professional fees (legal, IR and accounting).expense at July 31, 2021, which is being amortized over the remaining period through February 4, 2024 when all RSUs will vest subject to continued employment, that could accelerate during the next two years. If our common stock meets the $12 price target, all remaining amortization will accelerate.
General and administrative expense in Q1 Fiscal 2021 includes $97,000 of non-recurring expense items.
Aspen University general and administrative costs, which are included in the above amount, represented 34% and 33% of Aspen University revenuesrevenue for Q1 Fiscal 2022 and Q1 Fiscal 2021, while respectively.

USU general and administrative costs equaledrepresented 39% and 40% of USU revenuesrevenue for Q1 Fiscal 2021.2022 and Q1 Fiscal 2021, respectively.

AGI corporate general and administrative costs for Q1 Fiscal 2022 and Q1 Fiscal 2021, which are included in the above amounts, were $4.1 million and $3.5 million, respectively. The increase was primarily due to increases in compensation and other employee-related costs, insurance expense, which includes the annual renewal period, and technology costs.
Bad debt expense
Three Months Ended July 31,
2021$ Change% Change2020
Bad debt expense$350,000$(50,000)(13)%$400,000
As a percentage of revenue2%3%

Bad debt expense decreased as a percentage of total revenue as the prior year reflected the need for higher reserves based on the Company's review of aged accounts receivable.
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AGI’s generalDepreciation and administrative costs for Q1 Fiscal 2021 and Q1 Fiscal 2020 which are included in the above amounts equaled $3.5 million and $2.0 million, respectively, and include corporate employees in the NY corporate office, IT, rent, non-cash AGI stock-based compensation, incentive compensation programs and professional fees (legal, accounting, and IR), as well as one-time expense items in the quarter.amortization
Three Months Ended July 31,
2021$ Change% Change2020
Depreciation and amortization$779,409$288,78559%$490,624
As a percentage of revenue4%3%

InThe increase in depreciation is primarily due to investments in new campuses, including capital expenditures of leasehold improvements and computer equipment, and an increase in amortization of internally developed capitalized software placed into service to support the second quarterCompany's services, partially offset by a decrease of fiscal yearfully depreciated assets.
Other income (expense), net
Three Months Ended July 31,
2021$ Change% Change2020
Other income (expense), net$518,581$1,097,336NM$(578,755)

NM - Not meaningful

Other income, net in Q1 Fiscal 2022 of $518,581 primarily includes $498,120 of a litigation settlement amount received on July 21, 2021, the Company will recognize approximately $1.6 million of accelerated amortizationpartially offset by interest expense related to the immediate vesting2% commitment fee on the undrawn portion of RSUs granted to executives on February 4, 2020.
Bad debt expense
Three Months Ended July 31,
2020$ Change% Change2019
Bad debt expense$400,000$159,101 66%$240,899
As a percentage of revenue3%2%

Bad debt expense for Q1 Fiscal 2021 increased to $400,000 from $240,899 for Q1 Fiscal 2020, an increase of $159,101, or 66%. Based on revenue growth trends and review of accounts receivable, the Company evaluated its reserve methodology and increased reserves for Aspen and USU accordingly.

Depreciation and amortization
Three Months Ended July 31,
2020$ Change% Change2019
Depreciation and amortization$490,624$(115,950)(19)%$606,574
As a percentage of revenue3%6%

Depreciation and amortization costs for Q1 Fiscal 2021 decreased to $490,624 from $606,574 for Q1 Fiscal 2020, a decrease of $115,950, or 19%. The decrease in depreciation and amortization expense is due primarily to intangible assets becoming fully amortized at USU, partially offset by an increase in depreciation expense at Aspen University due primarily to the development of capitalized software to support its services.
Other expense
Three Months Ended July 31,
2020$ Change% Change2019
Other expense, net$578,755$177,868 44%$400,887
$5 million Revolving Credit Facility payable quarterly.

Other expense, net in Q1 Fiscal 2021 of $578,755 primarily includes: an adjustment of $296,471 related to the previously reported earned revenue fee calculation deemed immaterial to our Fiscal 2019 revenue; interest expense of $331,510 on the Convertible Notes issued on January 22, 2020 as well as the commitment fee on the Revolving Credit Facility; and modification and accelerated amortization charges of $149,913 related to the exercise of the 2018 and 2019 Cooperman Warrants on June 5, 2020; partially offset by $198,000 of other immaterial adjustments.
Total otherIncome tax expense (benefit)
Three Months Ended July 31,
2021$ Change% Change2020
Income tax expense (benefit)$151,010NMNM$(1,900)
Income tax expense in Q1 Fiscal 20212022 includes a reserve of $578,755 includes $446,384 of non-recurring expense items which is comprised of: (i) an adjustment of $296,471 related to an incorrect earned fee calculation deemed immaterial to our Fiscal 2019 revenue; (ii) $123,947 of accelerated amortization expense related toapproximately $150,000 for the exerciseestimate of the 2018 Cooperman Warrants; and (iii) $25,966 of expense related toCanada foreign income tax liability which covers the 2018 and 2019 Cooperman Warrants modification and acceleration charges on June 5, 2020.
2013 through 2021 tax years during which a permanent establishment was in place in Canada. In the second quarter of fiscal year 2021,Q1 Fiscal 2022, the Company expects to recognize approximately $1.4 million of accelerated amortization expensefiled multi-year Canadian T2 Corporation Income Tax Returns and related toinformation returns under the conversion ofVoluntary Disclosure Program with the Convertible Notes which occurred on September 14, 2020.

Other expense in Q1 Fiscal 2020 includes: interest expense of $423,689 on the Term Loans issued in March 2019.
Income tax (benefit) expense
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Three Months Ended July 31,
2020$ Change% Change2019
Income tax (benefit) expense$(1,900)$(37,495)NM$35,595
________________
NM - Not meaningful

Income tax benefit for Q1 Fiscal 2021 was $(1,900) compared to income tax expense of $35,595 in Q1 Fiscal 2020. Aspen Group experienced operating losses in both periods.
Net loss
Three Months Ended July 31,
2020$ Change% Change2019
Net loss$(943,196)$1,132,086 55%$(2,075,282)

Net loss was $(943,196), or net loss per basic and diluted share of $(0.04) for Q1 Fiscal 2021 as compared to $(2,075,282), or net loss per share of $(0.11) for Q1 Fiscal 2020, or a decrease in the loss of $1,132,086, or 55% improvement.

Canada Revenue Agency ("CRA").
Non-GAAP Financial Measures
This discussion and analysis includes both financial measures in accordance with Generally Accepted Accounting Principles, or GAAP, as well as non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position or cash flows that either excludes or includes amounts that are not normally included or excluded in the most directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP financial measures should be viewed as supplemental to, and should not be considered as alternatives to net income (loss), operating income (loss), and cash flow from operating activities, liquidity or any other financial measures. They may not be indicative of the historical operating results of AGI nor are they intended to be predictive of potential future results. Investors should not consider non-GAAP financial measures in isolation or as substitutes for performance measures calculated in accordance with GAAP.
Our management uses and relies on EBITDA, Adjusted Net Income (Loss),EBITDA, Adjusted Earnings (Loss) Per Share, EBITDA margin and Adjusted EBITDA,Gross Profit, which are non-GAAP financial measures. We believe that management, analysts and shareholders benefit from referring to the following non-GAAP financial measures to evaluate and assess our core operating results from period-to-period after removing the impact of items that affect comparability. Our management recognizes that the non-GAAP financial measures have inherent limitations because of the excluded items described below.
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We have included a reconciliation of our non-GAAP financial measures to the most comparable financial measures calculated in accordance with GAAP. We believe that providing the non-GAAP financial measures, together with the reconciliation to GAAP, helps investors make comparisons between AGI and other companies. In making any comparisons to other companies, investors need to be aware that companies use different non-GAAP measures to evaluate their financial performance. Investors should pay close attention to the specific definition being used and to the reconciliation between such measure and the corresponding GAAP measure provided by each company under applicable SEC rules.

EBITDA and Adjusted EBITDA

AGI defines Adjusted Net Income (Loss)EBITDA as net earnings (loss) from operations adding backEBITDA excluding: (1) bad debt expense; (2) stock-based compensation; and (3) non-recurring charges or gains. The following table presents a reconciliation of net loss to EBITDA and stock-based compensation expense as reflectedAdjusted EBITDA and of net loss margin to the Adjusted EBITDA margin:
Three Months Ended July 31,
20212020
Net loss$(870,888)$(943,196)
Interest expense, net32,132 455,223 
Taxes151,010 (1,900)
Depreciation and amortization779,409 490,624 
EBITDA91,663 751 
Bad debt expense350,000 400,000 
Stock-based compensation542,712 487,110 
Non-recurring charges - Severance19,665 44,000 
Non-recurring (income) charges - Other(498,120)375,437 
Adjusted EBITDA$505,920 $1,307,298 
Net loss Margin(4)%(6)%
Adjusted EBITDA Margin3 %9 %
In Fiscal Q1 2022, the non-recurring income of $498,120 is from a litigation settlement, which is included in the table below. Included are $543,384other income (expense), net. In Q1 Fiscal 2021, there was an additional non-recurring item of non-recurring charges for the first quarter of fiscal year 2021, compared to $132,949$123,947, which is included in the first quarter of fiscal year 2020. The non-recurring charges for Q1 fiscal 2021 include $123,947 of interest expense, whichnet, that arose from the acceleration of amortization arising from the exercise of warrants issued to a lender.
The following table presentstables present a reconciliation of net loss and earnings (loss) per share to Adjusted Net Income (Loss)EBITDA and Adjusted Earnings (Loss) Per Share:EBITDA and of net loss margin to the Adjusted EBITDA margin by business unit:
Three Months Ended July 31, 2021
ConsolidatedAGI CorporateAspen BSN Pre-LicensureAU OnlineAU TotalUSU
Net income (loss)$(870,888)$(4,458,536)$889,460 $1,444,997 $2,334,457 $1,253,191 
Interest expense, net32,132 33,272 — (1,000)(1,000)(140)
Taxes151,010 1,163 — 149,807 149,807 40 
Depreciation and amortization779,409 31,043 126,068 537,625 663,693 84,673 
EBITDA91,663 (4,393,058)1,015,528 2,131,429 3,146,957 1,337,764 
Bad debt expense350,000 — — 250,000 250,000 100,000 
Stock-based compensation542,712 443,279 — 69,595 69,595 29,838 
Non-recurring charges - Severance19,665 — — — — 19,665 
Non-recurring income - Other(498,120)— — (498,120)(498,120)— 
Adjusted EBITDA$505,920 $(3,949,779)$1,015,528 $1,952,904 $2,968,432 $1,487,267 
Net income (loss) Margin(4)%NM19 %17 %18 %20 %
Adjusted EBITDA Margin3 %NM22 %22 %22 %24 %

NM - Not meaningful
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Three Months Ended July 31,
20202019
Earnings (loss) per share$(0.04)$(0.11)
Weighted average number of common stock outstanding*22,094,409 18,733,317 
Net loss$(943,196)$(2,075,282)
Add back:
   Non-recurring charges543,384 132,949 
   Stock-based compensation487,110 498,417 
Adjusted Net Income (Loss)$87,298 $(1,443,916)
Adjusted Earnings (Loss) per Share$0.00 $(0.08)
Three Months Ended July 31, 2020
ConsolidatedAGI CorporateAspen BSN Pre-LicensureAU OnlineAU TotalUSU
Net income (loss)$(943,196)$(4,255,735)$965,203 $1,344,560 $2,309,763 $1,002,776 
Interest expense, net455,223 455,223 — — — — 
Taxes(1,900)(1,900)— — — — 
Depreciation and amortization490,624 13,092 25,000 425,054 450,054 27,478 
EBITDA751 (3,789,320)990,203 1,769,614 2,759,817 1,030,254 
Bad debt expense400,000 — — 340,000 340,000 60,000 
Stock-based compensation487,110 392,043 — 61,317 61,317 33,750 
Non-recurring charges - Severance44,000 44,000 — — — — 
Non-recurring charges - Other375,437 375,437 — — — — 
Adjusted EBITDA$1,307,298 $(2,977,840)$990,203 $2,170,931 $3,161,134 $1,124,004 
Net income (loss) Margin(6)%NM36 %17 %22 %23 %
Adjusted EBITDA Margin9 %NM37 %27 %29 %25 %
________________Adjusted EBITDA margin decreased to 3% in Q1 Fiscal 2022 from 9% in Q1 Fiscal 2021, due primarily to new campus investments in the current period.
*Same share count used for GAAP and non-GAAP financial measures.

Adjusted Gross Profit
AGI defines Adjusted EBITDAGross Profit as earnings (or loss)GAAP Gross Profit including amortization expense which is excluded from operations beforecost of revenue on the items in the table below. Included are $419,437statements of non-recurring charges for the first quarter of fiscal year 2021, compared to $132,949 in the first quarter of fiscal year 2020. An additional non-recurring item in Q1 2021 of $123,947 is included in interest expense, net, which arose from the acceleration of amortization arising from the exercise of warrants issued to a lender.
The following table presents a reconciliation of net income (loss) to EBITDA and Adjusted EBITDA:
Three Months Ended July 31,
20202019
Net loss$(943,196)$(2,075,282)
Interest expense, net455,223 420,067 
Taxes(1,900)90,277 
Depreciation and amortization490,624 606,574 
EBITDA751 (958,364)
Bad debt expense400,000 240,899 
Non-recurring charges, excluding non-recurring interest expense of $123,947419,437 132,949 
Stock-based compensation487,110 498,417 
Adjusted EBITDA$1,307,298 $(86,099)

The Company reported Adjusted EBITDA of $1.3 million for Q1 Fiscal 2021 as compared to Adjusted EBITDA of $(0.1) million for Q1 Fiscal 2020, an improvement of over 100%.
Aspen University generated $2.3 million of net income and $3.2 million of Adjusted EBITDA for Q1 Fiscal 2021 as compared to net income of $0.9 million and $1.5 million of Adjusted EBITDA for Q1 Fiscal 2020.
USU generated net income of $1.0 million and $1.1 million of Adjusted EBITDA for Q1 Fiscal 2021 as compared to a net loss of $(0.4) million and Adjusted EBITDA of $(10,000) during Q1 Fiscal 2020.
Aspen Group corporate incurred Adjusted EBITDA of ($3.0) million during Q1 Fiscal 2021, which reflects $0.5 million of non-recurring expense items, as compared to Adjusted EBITDA of ($1.6) million during the Q1 Fiscal 2020, which reflected $0.1 million of non-recurring expense items.
operations. The following table presents a reconciliation of GAAP Gross Profit to gross profitAdjusted Gross Profit inclusive of amortization:
Three Months Ended July 31,
20212020
GAAP Gross Profit$10,423,184$8,990,985
Add back amortization expense included in cost of revenue:
Intangible asset amortization10,49211,947
Call center software/website amortization403,751315,107
Total amortization included in cost of revenue414,243327,054
Adjusted Gross Profit$10,837,427$9,318,039
Revenue$19,430,995$15,165,562
Cost of Revenue8,593,5685,847,523
Adjusted Gross Profit$10,837,427$9,318,039
GAAP Gross Profit as a percentage of revenue54 %59 %
Adjusted Gross Profit as a percentage of revenue56 %61 %

Adjusted gross profit as a percentage of revenue decreased due primarily to an increase in class starts year-over-year and additional full-time faculty staffing in the USU MSN-FNP program and faculty hiring in the BSN Pre-Licensure campus locations in Phoenix, Austin and Tampa; and planned advertising spending increase throughout Fiscal Year 2022, targeted primarily to our highest LTV programs. The majority of the advertising spending increase is directed to the new pre-licensure metro locations: Austin, Nashville and Tampa, as well as USU's MSN-FNP program. Additionally, capitalized call center costs increased in the current period.
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Three Months Ended July 31,
20202019
GAAP Gross Profit$8,990,985 $5,765,329 
Add back amortization expense included in cost of revenue:
   Intangible Asset Amortization11,947 19,142 
   Call Center Software/Website315,107 220,453 
   Total amortization included in cost of revenue327,054 239,595 
Gross Profit, exclusive of amortization$9,318,039 $6,004,924 
Revenue$15,165,562 $10,357,982 
Cost of Revenue5,847,523 4,353,058 
Gross Profit, exclusive of amortization$9,318,039 $6,004,924 
GAAP Gross Profit as a % of revenue59 %56 %
Gross Profit, exclusive of amortization expense as a % of revenue61 %58 %

Aspen University GAAP Gross profit rose to 59%Profit represented 53% of revenues or $8,990,985Aspen University revenue for Q1 Fiscal 2021 from $5,765,329 or 56%Year 2022, and USU GAAP Gross Profit represented 60% of revenuesUSU revenue for Q1 Fiscal 2020, an increase of 56% year-over-year.
Aspen University gross profit represented 59% of Aspen University revenues for Q1 Fiscal 2021, while USU gross profit equaled 64% of USU revenues during Q1 Fiscal 2021.Year 2022.
Liquidity and Capital Resources
A summary of the Company's cash flows is as follows:
Three Months Ended
July 31,
20202019
Net cash used in operating activities$(636,759)$(1,685,083)
Net cash used in investing activities(662,218)(632,258)
Net cash provided by financing activities2,351,774 45,190 
Net increase (decrease) in cash$1,052,797 $(2,272,151)
Three Months Ended
July 31,
20212020
Net cash (used in) provided by
   Operating activities$(2,432,491)$(636,759)
   Investing activities(978,882)(662,218)
   Financing activities22,548 2,351,774 
   Net (decrease) increase in cash$(3,388,825)$1,052,797 
Net Cash Used in Operating Activities
Net cash used in operating activities for the three months ended July 31, 2020 totaled $(636,759) and resulted primarily from the2021 consists of net loss adjusted for non-cash items and the effect of $(943,196)changes in working capital. Non-cash adjustments include stock-based compensation, bad debt expense, depreciation and a net change in operating assetsamortization expense, amortization of debt discounts and liabilities of $(1,345,431), partially offset by $1,651,868 in non-cash items.  Theissue costs, warrants issued for services, modification charge for warrants exercised, common shares issued for services and other adjustments.
Adjustments to net loss included $455,457 for interest expense.consist primarily of depreciation and amortization expense of $779,409, stock-based compensation of $542,712, bad debt expense of $350,000, tenant improvement allowances received from landlords of $86,591, and amortization of debt issue costs of $8,334. The most significantincrease from changes in operating assetsworking capital primarily consists of decreases in deferred revenue of $2.1 million and liabilities was an increaseincreases in gross accounts receivable (both short and long term accounts receivable)receivable, before allowance for doubtful accounts) of approximately $2.7 million which$1,879,318. The decrease in deferred revenue is due primarily to timing of billings for class starts. The increase in accounts receivable is primarily attributed to the growth in revenuesrevenue from increased enrollments and students paying through the monthly payment plan and an increase in deferred revenue related to theas well as timing of billings for class starts. The most significant non-cash items were depreciation and amortization expense of $490,624 and stock-based compensation expense of $487,110.

Cash used in operations is also affected by changes in working capital.  The Company expects a favorable trend in working capital over time, but there may be volatility from quarter to quarter. So, inIn aggregate the Company expects a general trend toward lower cash used in operations in future quarters; however, some quarters could have higher cash used in operations as a result of more cash used to support changes in working capital. Program start timings and the related federal financial aid drawdowns also impact cash timing.
Net cash used in operating activities duringoperations for the three months ended July 31, 2019 totaled ($1,685,083)2020 consist primarily of depreciation and resultedamortization expense of $490,624, stock-based compensation of $487,110, bad debt expense of $400,000 and amortization of debt discounts $0.1 million and amortization of debt issue costs $0.1 million. The increase from changes in working capital primarily from the net lossconsists of ($2,075,282) and a net change in operating assets and liabilities of ($1,111,332), partially offset by $1,501,531 in non-cash items. The net loss included $423,689 for interest expense. The most significant change in operating assets and liabilities was an increase in gross accounts receivable (both short and long term accounts receivable, before
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allowance for doubtful accounts) of approximately $1.5$2.7 million, whichpartially offset by increases in deferred revenue of $1.1 million. The increase in accounts receivable is primarily attributed to the growth in revenuesrevenue from increased enrollments and students paying through the monthly payment plan.plan as well as timing of billings for class starts. The most significant non-cash items were depreciation and amortization expenseincrease in deferred revenue is due primarily to timing of approximately $0.6 million and stock-based compensation expense of approximately $0.5 million.billings for class starts.

Net Cash Used in Investing Activities
Net cash used in investing activities for the three months ended July 31, 2021 includes purchases of property and equipment of $0.8 million primarily due to investments in leasehold improvements, computer equipment and hardware, Company developed software and new campuses and purchases of courseware and accreditation of $0.1 million.
Net cash used in investing activities for the three months ended July 31, 2020 totaled $(662,218)primarily includes purchases of property and equipment of $0.7 million mostly attributed to investments in the purchase of property and equipment as we build out our campuses.
Net Cash Provided By Financing Activities
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Net cash used in investingprovided by financing activities for the three months ended July 31, 2019 totaled $(632,258) mostly attributed to investments in Company developed software, instructional and computer equipment.
Net Cash Provided By Financing Activities2021 includes proceeds from stock options exercised of $22,548.
Net cash provided by financing activities for the three months ended July 31, 2020 totaled $2,351,774 which reflects $1,269,982 ofincludes proceeds from stock option exercisesoptions exercised of $1,269,982 and proceeds from warrants exercised of $1,081,792 received from the cash exercise of warrants associated with the Term Loans and Revolving Credit Facility.
Net cash provided by financing activities for the three months ended July 31, 2019 totaled $45,190 which reflects proceeds from the exercise of stock options and warrants.

Liquidity and Capital Resources
The Company had cash deposits of approximately $14.7 million on September 10, 2020 and approximately $4.5 million of restricted cash. In addition to its cash, the Company also has access to the $5 million Revolving Credit Facility, which is unused. The Company expects that its cash resources will be sufficient to meet its working capital needs for the foreseeable feature.
Our cash balances are kept liquid to support our growing infrastructure needs. The majority of our cash is concentrated in large financial institutions.
The Company also has access to a $5 million Revolving Credit Facility. At July 31, 2021 and April 30, 2021, there were no outstanding borrowings under this credit facility.
On August 31, 2021, the Company extended the Revolving Credit Facility by one year to November 4, 2022. The Credit Facility Agreement provides for a $5,000,000 revolving credit facility evidenced by a revolving promissory note. Borrowings under the Credit Facility Agreement bear interest at 12% per annum. In conjunction with the extension of the Revolving Credit Facility, the Company drew down $5,000,000 of funds from the Revolving Credit Facility at 12% interest per annum due November 4, 2022. Pursuant to this agreement, on August 31, 2021 the Company issued to the Foundation warrants to purchase 50,000 shares of the Company’s common stock exercisable for five years from the date of issuance at the exercise price of $5.89 per share. The Company expects to use these funds for general business purposes, including the roll out of the new campuses. The Company anticipates that the Aspen 2.0 business plan, with lower advertising budget that targets the highest LTV programs, will reduce the need to borrow funds in the future.
The Company anticipates that it will need to make capital and other expenditures in connection with the development and expansion of its campus operations. The Company's Fiscal year 2022 capital expenditures are expected to be lower than Fiscal Year 2021 capital expenditures by approximately $0.5 million related to new campus costs. Additionally, the Company expects additional cash commitments for letters of credit related to securing new campus locations.
The Company expects that its existing cash resources will be sufficient to fund its working capital, including capital expenditures, investing and other needs for more than the next 12 months. As disclosed in our Annual Report on Form 10-K for the fiscal year ended April 30, 2021 as filed with the SEC on July 13, 2021, the Company intends to be net income positive by Fiscal Q4 2022.
Critical Accounting Policies and Estimates
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. ThereAt July 31, 2021, there were no material changes to our principalcritical accounting policies and estimates. A full listing of our critical accounting policies and estimates duringis described in the period covered by this report."Critical Accounting Policies and Estimates" of our Annual Report on Form 10-K for the fiscal year ended April 30, 2021 and listed here below:
•Revenue Recognition and Deferred Revenue
Revenue consisting primarily of tuition and fees derived from courses taught by Aspen online as well as from related educational resources that Aspen provides to its students, such as access to our online materials and learning management system. Tuition revenue is recognized pro-rata over the applicable period of instruction. Aspen maintains an institutional tuition refund policy, which provides for all or a portion of tuition to be refunded if a student withdraws during stated refund periods. Certain states in which students reside impose separate, mandatory refund policies, which override Aspen’s policy to the extent in conflict. If a student withdraws at a time when a portion or none of the tuition is refundable, then in accordance with its revenue recognition policy, Aspen recognizes as revenue the tuition that was not refunded. Since Aspen recognizes revenue pro-rata over the term of the course and because, under its institutional refund policy, the amount subject to refund is never greater than the amount of the revenue that has been deferred, under Aspen’s accounting policies revenue is not recognized with respect to amounts that could potentially be refunded. Aspen’s educational programs have starting and ending dates that differ from its fiscal quarters. Therefore, at the end of each fiscal quarter, a portion of revenue from these programs is not yet earned and is therefore deferred. Aspen also charges students annual fees for library, technology and other services, which are recognized over the related service period.
Deferred revenue represents the amount of tuition, fees, and other student payments received in excess of the portion recognized as revenue and it is included in current liabilities in the accompanying consolidated balance sheets. Other revenue may be recognized as sales occur or services are performed.
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Accounts Receivable and Allowance for Doubtful Accounts Receivable
All students are required to select both a primary and secondary payment option with respect to amounts due to Aspen for tuition, fees and other expenses. The most common payment option for Aspen’s students is personal funds or payment made on their behalf by an employer. In instances where a student selects financial aid as the primary payment option, he or she often selects personal cash as the secondary option. If a student who has selected financial aid as his or her primary payment option withdraws prior to the end of a course but after the date that Aspen’s institutional refund period has expired, the student will have incurred the obligation to pay the full cost of the course. If the withdrawal occurs before the date at which the student has earned 100% of his or her financial aid, Aspen will have to return all or a portion of the Title IV funds to the DOE and the student will owe Aspen all amounts incurred that are in excess of the amount of financial aid that the student earned and that Aspen is entitled to retain. In this case, Aspen must collect the receivable using the student’s second payment option.
For accounts receivable from students, Aspen records an allowance for doubtful accounts for estimated losses resulting from the inability, failure or refusal of its students to make required payments, which includes the recovery of financial aid funds advanced to a student for amounts in excess of the student’s cost of tuition and related fees. Aspen determines the adequacy of its allowance for doubtful accounts using a general reserve method based on an analysis of its historical bad debt experience, current economic trends, and the aging of the accounts receivable and student status. AGI establishes reserves to its receivables based upon an estimate of the risk presented by the program within the university, student status, payment type and age of receivables. Aspen writes off accounts receivable balances at the time the balances are deemed uncollectible. Aspen continues to reflect accounts receivable with an offsetting allowance as long as management believes there is a reasonable possibility of collection.
For accounts receivable from primary payors other than students, Aspen estimates its allowance for doubtful accounts by evaluating specific accounts where information indicates the customers may have an inability to meet financial obligations, such as bankruptcy proceedings and receivable amounts outstanding for an extended period beyond contractual terms. In these cases, Aspen uses assumptions and judgment, based on the best available facts and circumstances, to record a specific allowance for those customers against amounts due to reduce the receivable to the amount expected to be collected. These specific allowances are re-evaluated and adjusted as additional information is received. The amounts calculated are analyzed to determine the total amount of the allowance. Aspen may also record a general allowance as necessary.
Direct write-offs are taken in the period when Aspen has exhausted its efforts to collect overdue and unpaid receivables or otherwise evaluate other circumstances that indicate that Aspen should abandon such efforts.
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.
•Goodwill and Intangibles
Goodwill represents the excess of purchase price over the fair market value of assets acquired and liabilities assumed from Educacion Significativa, LLC. Goodwill has an indefinite life and is not amortized. Goodwill is tested annually for impairment.
Intangible assets represent both indefinite lived and definite lived assets. Accreditation and regulatory approvals and Trade name and trademarks are deemed to have indefinite useful lives and accordingly are not amortized but are tested annually for impairment. Student relationships and curriculums are deemed to have definite lives and are amortized accordingly.•Stock-based compensation
Off Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements as of July 31, 2020.2021.
Cautionary Note Regarding Forward Looking Statements
This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding the expected start datesour goal of achieving positive GAAP net income by Q4 of the initial semester for core nursing students in Floridafiscal year 2022, our plan to decrease advertising spend on our lower efficiency unit and Texasshift that spend to the highest LTV units, the anticipated impact of this plan on our future operating results, liquidity and growth, and the expected ratetiming of such impact, the anticipated near-term changes in enrollments, the expected growth in our highest efficiency businesses, our estimates concerning LTV and ARPU, our expectations regarding accounts receivable, the expected continued revenue growth in Aspen University’s BSN Pre-Licensure and USU’s MSN-FNP programs, the expected timing of subsequent campus openings, the expected effect of telehealth partnership with A-APN, including in relation to expected graduation dates, our planned USU lab immersion expansions,Nashville, TN, the impact of bookings, our estimates
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concerning Lifetime Value,impact of bookings and ARPU, our expected abilitybeliefs with respect to cost-effectively drive prospective student leads internally,the impact of COVID-19 on class starts and enrollments, the impact of the new federal vaccination mandate on our future ability to provide lower costs per enrollment, results of operations,the expected sources of future revenue growth, including growth in our future revenuesanticipated working capital trends, the intended use of proceeds from the Aspen University’s Pre-Licensure BSN Programdrawdown under the revolving credit facility and USU’s MSN-FNP Program, the expected changes to our accounts receivable and allowance for doubtful accounts, including as a percentage of total revenue, our anticipated increase in cash flow from operations, the expected increase in future costs, including instructional costs and general and administrative costs, our expectations regarding future non-cash charges, including accelerated amortization chargescapital expenditures related to mandatory conversionnew campus openings and letters of convertible notes and charges related to RSU vesting, our expectations related to working capital, and future liquidity.credit. All statements other than statements of historical facts contained in this report, including statements regarding our future financial position, liquidity, business strategy and plans and objectives of management for future operations, are forward-looking statements. The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “could,” “target,” “potential,” “is likely,” “will,” “expect” and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs.

The results anticipated by any or all of these forward-looking statements might not occur. Important factors, uncertainties and risks that may cause actual results to differ materially from these forward-looking statements include, without limitation, our ability to obtainsuccessfully implement the necessary regulatory approvals to launch our future campusesfiscal year 2022 business plan and the accuracy of the assumptions used in a timely fashion or at all,estimating the results of such implementation, unanticipated issues with, and delays in, launching phase two of our in-house CRM and the continued ability of the CRM to perform as expected, continued high demand for nurses, the continued effectiveness of our marketing efforts, the effectiveness of our collection efforts and process improvements, our ability to obtain the necessary regulatory approvals to launch our future campuses in a timely fashion or at all, national and local economic factors including the substantial impact of the COVID-19 pandemic on the economy, competition from nursing schools in local markets, risks stemming from the new federal vaccination program, the competitive impact from the trend of major non-profit universities using online education, unfavorable regulatory changes, and our failure to continue obtaining enrollments at low acquisition costs and keeping teaching costs down.down, and potential loss of employees as a result of the COVID-19 vaccine mandate. Further information on the risks and uncertainties affecting our business is contained in our filings with the SEC, including our Prospectus Supplement dated August 31, 2020 and our Annual Report on Form 10-K for the fiscal year ended April 30, 2020.2021. We undertake no obligation to publicly update or revise any forward-looking statements, whether as the result of new information, future events or otherwise.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
Our management carried out an evaluation, with the participation of our Principal Executive Officer and Principal Financial Officer, required by Rule 13a-15 or 15d-15 of the Securities Exchange Act of 1934 (the “Exchange Act”) of the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) or 15d-15(e) under the Exchange Act. Based on their evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures are effective as of the end of the period covered by this report to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting as defined in Rule 13a-15(f) or 15d-15(f) under the Exchange Act that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS

From time-to-time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. DuringOther than the previously disclosed receipt of payment of $498,120 as a final distribution by the bankruptcy trustee in HEMG bankruptcy proceedings, during the period covered by this report, there were no material changes to the description of legal proceedings set forth in our Annual Report on Form 10-K for the fiscal year ended April 30, 2020.2021.
ITEM 1A. RISK FACTORS
The information presented below updates, and should be read in conjunction with, the risk factors and information disclosed in our Annual Report on Form 10-K for the fiscal year ended April 30, 2021.
The proposed new regulation concerning mandatory COVID-19 vaccination of employees could have a material adverse impact on our business and results of operations.
On September 9, 2021, President Biden announced a proposed new rule requiring all employers with at least 100 employees to ensure that their employees are fully vaccinated or require unvaccinated workers to get a negative test at least once a week. The Department of Labor’s Occupational Safety and Health Administration is drafting an emergency regulation to carry out this mandate, which is expected to take effect in the coming weeks. It remains unclear, among other things, if the vaccine mandate will apply to all employees or only to employees who work in the office, and how compliance will be documented.

It is currently not possible to predict with certainty the exact impact the new regulation would have on us. As a company with more than 100 employees, we would be required to mandate COVID-19 vaccination of our workforce or our unvaccinated employees would require weekly testing. This may result in employee attrition, which could be material as a substantial number of our employees are based in Arizona where vaccination rates are below the national average. If we were to lose employees, it could have an adverse effect on future revenues and costs, which could be material.Accordingly, the proposed new regulation when implemented could have a material adverse effect on our business and results of operations.
None.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS  
None.On July 21, 2021, the Company issued 25,000 common stock purchase warrants to a former member of the Board of Directors. The warrants are exercisable for a period of five years from the issuance date and vest annually over a three year period subject to continued service on the Company's Advisory Board on each applicable vesting date. The warrants will terminate automatically and immediately upon the expiration of the exercise period. The issuance of the warrants was exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933 (the “Securities Act”) and Rule 506 of Regulation D promulgated thereunder.
On July 21, 2021, as part of his new Employment Agreement, the Company granted 125,000 RSUs to Michael Mathews, the Company's Chief Executive Officer, under the 2018 Plan. Vesting is subject to continued employment with the Company and will occur in full on the date the Company files with the SEC a quarterly or annual report on Forms 10-Q or 10-K, as applicable, which reflects the Company reported net income on a GAAP basis. If the RSUs do not vest within three years from the July 21, 2021 grant date, they will expire and automatically be forfeited. The issuance of the RSUs was exempt from registration pursuant to Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder.
On August 12, 2021, Mr. Gerard Wendolowski, the Chief Operating Officer of the Company, and Dr. Cheri St. Arnauld, the Company’s Chief Academic Officer, received a grant of 80,000 RSUs each. The RSUs will vest in three nearly equal annual increments with the first increment vesting on August 12, 2022, subject to continued service as an officer of the Company on each applicable vesting date. Each RSU represents a contingent right to receive one share of the Company’s common stock. The RSUs were granted under the 2018 Plan. The issuance of the RSUs was exempt from registration pursuant to Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder.
On August 16, 2021, Mr. Matthew LaVay, the Chief Financial Officer of the Company, received a grant of 125,000 RSUs pursuant to his Employment Agreement. The RSUs will vest in three approximately equal annual increments with the first increment vesting on August 16, 2022, subject to continued employment on each applicable vesting date. Each RSU represents a contingent right to receive one share of the Company’s common stock. The RSUs were granted under the 2018 Plan. The issuance of the RSUs was exempt from registration pursuant to Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder.
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
On September 14, 2020, the Company issued 1,398,602 shares of its common stock to the two holders of its previously issued Convertible Notes upon mandatory conversion of the Convertible Notes pursuant to their terms. The Convertible Notes were automatically convertible into the Company’s common stock if the closing price of common stock on The Nasdaq Global Market was at least $10.725 over a 20 consecutive trading-day period and certain other conditions were satisfied. This issuance was exempt from registration under the Securities Act of 1933 (the “Securities Act”) pursuant to Section 3(a)(9) of the Securities Act since the convertible Notes were issued in exchange for secured Term Notes issued on March 6, 2020.
Not applicable.
ITEM 6. EXHIBITS
See the Exhibit Index at the end of this report.
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EXHIBIT INDEX
Incorporated by ReferenceFiled or
Furnished
Herewith
Exhibit #Exhibit DescriptionFormDateNumber
Certificate of Incorporation, as amended10-K7/9/193.1
Bylaws, as amended10-Q3/15/183.2
Form of Restricted Stock Unit Agreement*10-K7/7/2010.9
Form of Restricted Stock Unit Agreement – price based vesting*10-K7/7/2010.10
Equity Distribution Agreement, dated August 31, 2020, between the Company and Canaccord Genuity LLC**8-K8/31/201.1
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.INSInline 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.SCHInline XBRL Taxonomy Extension Schema DocumentFiled
101.CALInline XBRL Taxonomy Extension Calculation Linkbase DocumentFiled
101.DEFInline XBRL Taxonomy Extension Definition Linkbase DocumentFiled
101.LABInline XBRL Taxonomy Extension Label Linkbase DocumentFiled
101.PREInline XBRL Taxonomy Extension Presentation Linkbase DocumentFiled
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
Incorporated by ReferenceFiled or
Furnished
Herewith
Exhibit #Exhibit DescriptionFormDateNumber
Certificate of Incorporation, as amended10-K7/9/193.1
Bylaws, as amended10-Q3/15/183.2
Warrant dated July 21, 2021Filed
Employment Agreement, effective July 21, 2021, by the Company and Michael Mathews*8-K7/23/2110.1
Employment Agreement, effective August 16, 2021, by the Company and Matthew LaVay*8-K8/16/2110.1
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.INSInline 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.SCHInline XBRL Taxonomy Extension Schema DocumentFiled
101.CALInline XBRL Taxonomy Extension Calculation Linkbase DocumentFiled
101.DEFInline XBRL Taxonomy Extension Definition Linkbase DocumentFiled
101.LABInline XBRL Taxonomy Extension Label Linkbase DocumentFiled
101.PREInline XBRL Taxonomy Extension Presentation Linkbase DocumentFiled
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
_____________________
*    Management contract or compensatory plan or arrangement.
** Exhibits and/or Schedules have been omitted. The Company hereby agrees to furnish to the SEC upon request any omitted information.
***    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.
Copies of this report (including the financial statements) and any of the exhibits referred to above will be furnished at no cost to our shareholders who make a written request to Aspen Group, Inc., at the address on the cover page of this report, Attention: Corporate Secretary.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Aspen Group, Inc.
September 14, 20202021By:/s/ Michael Mathews
Michael Mathews
Chief Executive Officer
(Principal Executive Officer)


September 14, 20202021By:/s/ Frank J. CotroneoMatthew LaVay
Frank J. CotroneoMatthew LaVay
Chief Financial Officer
(Principal Financial Officer)


September 14, 20202021By:/s/ Robert Alessi
Robert Alessi
Chief Accounting Officer
(Principal Accounting Officer)

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