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 OctoberJuly 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 DecemberSeptember 10, 20202021
Common Stock, $0.001 par value per share24,422,11824,931,565 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
October 31, 2020April 30, 2020July 31, 2021April 30, 2021
(Unaudited)(Unaudited)
AssetsAssetsAssets
Current assets:Current assets:Current assets:
Cash and cash equivalentsCash and cash equivalents$12,237,710 $14,350,554 Cash and cash equivalents$6,554,423 $8,513,290 
Restricted cashRestricted cash4,644,618 3,556,211 Restricted cash3,722,831 5,152,789 
Accounts receivable, net of allowance of $2,523,293 and $1,758,920, respectively17,995,485 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 expenses1,595,939 941,671 Prepaid expenses914,216 1,077,831 
Other receivables0 23,097 
Other current assetsOther current assets446,857 173,090 Other current assets13,890 68,529 
Total current assetsTotal current assets36,920,609 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 hardware755,972 649,927 Computer equipment and hardware1,193,278 956,463 
Furniture and fixturesFurniture and fixtures1,013,103 1,007,099 Furniture and fixtures1,793,686 1,705,101 
Leasehold improvementsLeasehold improvements920,736 867,024 Leasehold improvements6,182,239 5,729,324 
Instructional equipmentInstructional equipment315,993 301,842 Instructional equipment491,597 421,039 
SoftwareSoftware7,373,655 6,162,770 Software8,951,241 8,488,635 
Construction in progressConstruction in progress878,263 0 Construction in progress88,367 247,767 
11,257,722 8,988,662 18,700,408 17,548,329 
Less accumulated depreciation and amortization(3,830,290)(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, net7,427,432 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, net100,369 111,457 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 receivable10,246,622 6,701,136 Long term contractual accounts receivable11,313,657 10,249,833 
Debt issue cost, netDebt issue cost, net34,722 182,418 Debt issue cost, net9,722 18,056 
Operating lease right of use assets, netOperating lease right of use assets, net7,809,489 6,412,851 Operating lease right of use assets, net12,242,456 12,714,863 
Deposits and other assetsDeposits and other assets486,176 355,831 Deposits and other assets468,361 479,212 
Total assetsTotal assets$75,982,180 $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)
October 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$2,344,280 $1,505,859 Accounts payable$1,627,731 $1,466,488 
Accrued expensesAccrued expenses1,820,396 537,413 Accrued expenses2,361,271 2,040,896 
Deferred revenueDeferred revenue8,628,498 3,712,994 Deferred revenue4,691,087 6,825,014 
Due to studentsDue to students2,070,225 2,371,844 Due to students2,905,192 2,747,484 
Operating lease obligations, current portionOperating lease obligations, current portion1,670,277 1,683,252 Operating lease obligations, current portion2,086,076 2,029,821 
Other current liabilitiesOther current liabilities259,339 545,711 Other current liabilities57,847 307,921 
Total current liabilitiesTotal current liabilities16,793,015 10,357,073 Total current liabilities13,729,204 15,417,624 
Convertible notes, net of discount of $0 and $1,550,854, respectively0 8,449,146 
Operating lease obligations, less current portionOperating lease obligations, less current portion7,094,948 5,685,335 Operating lease obligations, less current portion15,865,044 16,298,808 
Total liabilitiesTotal liabilities23,887,963 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 October 31, 2020 and April 30, 20200 0 
Common stock, $0.001 par value; 40,000,000 shares authorized
24,416,539 issued and outstanding at October 31, 2020
21,770,520 issued and 21,753,853 outstanding at April 30, 202024,417 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 capital105,092,551 89,505,216 Additional paid-in capital109,617,521 109,040,824 
Treasury stock (0 and 16,667 shares at October 31, 2020 and April 30, 2020, respectively)0 (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(53,022,751)(47,709,030)Accumulated deficit(59,028,891)(58,158,003)
Total stockholders’ equityTotal stockholders’ equity52,094,217 41,747,957 Total stockholders’ equity48,796,304 49,090,474 
Total liabilities and stockholders’ equityTotal liabilities and stockholders’ equity$75,982,180 $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 October 31,Six Months Ended October 31,Three Months Ended July 31,
202020192020201920212020
Revenues$16,971,045 $12,085,965 $32,136,607 $22,443,947 
RevenueRevenue$19,430,995 $15,165,562 
Operating expenses:Operating expenses:Operating expenses:
Cost of revenues (exclusive of depreciation and amortization shown separately below)7,324,780 4,188,056 13,172,303 8,541,114 
Cost of revenue (exclusive of depreciation and amortization shown separately below) Cost of revenue (exclusive of depreciation and amortization shown separately below)8,593,568 5,847,523 
General and administrative General and administrative11,285,155 7,193,700 20,078,911 13,989,951  General and administrative10,946,477 8,793,756 
Bad debt expense Bad debt expense632,000 407,759 1,032,000 648,658  Bad debt expense350,000 400,000 
Depreciation and amortization Depreciation and amortization526,357 628,225 1,016,981 1,234,799  Depreciation and amortization779,409 490,624 
Total operating expenses Total operating expenses19,768,292 12,417,740 35,300,195 24,414,522  Total operating expenses20,669,454 15,531,903 
Operating lossOperating loss(2,797,247)(331,775)(3,163,588)(1,970,575)Operating loss(1,238,459)(366,341)
Other income (expense):Other income (expense):Other income (expense):
Other (expense) income, net(7,080)132,567 (130,378)155,369 
Interest expense Interest expense(1,529,668)(428,960)(1,985,125)(852,649) Interest expense(33,539)(455,457)
Total other expense, net(1,536,748)(296,393)(2,115,503)(697,280)
Other income (expense), net Other income (expense), net552,120 (123,298)
Total other income (expense), net Total other income (expense), net518,581 (578,755)
Loss before income taxesLoss before income taxes(4,333,995)(628,168)(5,279,091)(2,667,855)Loss before income taxes(719,878)(945,096)
Income tax expense36,530 10,000 34,630 45,595 
Income tax expense (benefit)Income tax expense (benefit)151,010 (1,900)
Net lossNet loss$(4,370,525)$(638,168)$(5,313,721)$(2,713,450)Net loss$(870,888)$(943,196)
Net loss per share - basic and dilutedNet loss per share - basic and diluted$(0.19)$(0.03)$(0.23)$(0.14)Net loss per share - basic and diluted$(0.03)$(0.04)
Weighted average number of common stock outstanding - basic and dilutedWeighted average number of common stock outstanding - basic and diluted22,791,503 18,985,371 22,763,235 18,859,344 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 OctoberJuly 31, 20202021 and 20192020
(Unaudited)


Common StockAdditional
Paid-In
Capital		Treasury
Stock		Accumulated
Deficit		Total
Stockholders’
Equity
SharesAmount
Balance at Balance at July 31, 202022,377,744 $22,378 $92,378,584 $(70,000)$(48,652,226)$43,678,736 
Stock-based compensation— — 1,831,548 — — 1,831,548 
Common stock issued for stock options exercised for cash502,412 502 944,830 — — 945,332 
Common stock issued for cashless stock options exercised22,339 22 (22)— — 0 
Common stock issued for conversion of Convertible Notes1,398,602 1,399 9,998,601 — — 10,000,000 
Common stock issued for vested restricted stock units132,109 132 (132)— — 0 
Amortization of warrant based cost— — 9,125 — — 9,125 
Cancellation of Treasury Stock(16,667)(17)(69,983)70,000 — 0 
Net loss— — — — (4,370,525)(4,370,525)
Balance at October 31, 202024,416,539 $24,417 $105,092,551 $0 $(53,022,751)$52,094,217 
Common StockAdditional
Paid-In
Capital		Treasury
Stock		Accumulated
Deficit		Total
Stockholders’
Equity
SharesAmount
Balance at July 31, 201918,913,527 $18,914 $69,146,123 $(70,000)$(44,125,247)$24,969,790 
Stock-based compensation— — 391,067 — — 391,067 
Common stock issued for stock options exercised for cash90,950 90 192,432 — — 192,522 
Common stock issued for cashless stock options exercised80,313 80 (80)— — 0 
Common stock issued for cashless warrant exercise57,526 58 (58)— — 0 
Amortization of warrant based cost— — 9,125 — — 9,125 
Amortization of restricted stock issued for services— — 42,754 — — 42,754 
Net loss— — — — (638,168)(638,168)
Balance at October 31, 201919,142,316 $19,142 $69,781,363 $(70,000)$(44,763,415)$24,967,090 

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



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 



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ASPEN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (CONTINUED)
Six Months Ended October 31, 2020 and 2019
(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— — 2,318,658 — — 2,318,658 
Common stock issued for stock options exercised for cash917,587 918 2,214,397 — — 2,215,315 
Common stock issued for cashless stock options exercised22,339 22 (22)— — 0 
Common stock issued for conversion of Convertible Notes1,398,602 1,399 9,998,601 — — 10,000,000 
Common stock issued for vested restricted stock units132,109 132 (132)— — 0 
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— — 18,250 — — 18,250 
Cancellation of Treasury Stock(16,667)(17)(69,983)70,000 — 0 
Net loss— — — — (5,313,721)(5,313,721)
Balance at October 31, 202024,416,539 $24,417 $105,092,551 $0 (53,022,751)$52,094,217 
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— — 889,484 — — 889,484 
Common stock issued for stock options exercised for cash112,826 113 237,600 — — 237,713 
Common stock issued for cashless stock options exercised182,207 182 (182)— — 0 
Common stock issued for cashless warrant exercise76,929 77 (77)— — 0 
Amortization of warrant based cost— — 18,565 — — 18,565 
Amortization of restricted stock issued for services— — 73,350 — — 73,350 
Restricted Stock Issued for Services, subject to vesting104,803 104 (104)— — 0 
Net loss— — — — (2,713,450)(2,713,450)
Balance at October 31, 201919,142,316 $19,142 $69,781,363 $(70,000)$(44,763,415)$24,967,090 

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)
Six Months Ended October 31,
 20202019
Cash flows from operating activities:
Net loss$(5,313,721)$(2,713,450)
Adjustments to reconcile net loss to net cash used in operating activities:
Bad debt expense1,032,000 648,658 
Depreciation and amortization1,016,981 1,234,799 
Stock-based compensation2,318,658 889,484 
Amortization of warrant based cost18,250 18,565 
Loss on asset disposition0 3,918 
Amortization of debt discounts1,550,854 135,298 
Amortization of debt issue costs147,695 50,255 
Modification charge for warrants exercised25,966 0 
Non-cash payments to investor relations firm0 73,350 
Changes in operating assets and liabilities:
Accounts receivable(8,246,180)(5,211,195)
Prepaid expenses(654,268)(378,184)
Other receivables23,097 1,833 
Other current assets(273,767)(172,507)
Deposits and other assets(171,303)304,676 
Accounts payable838,421 (511,473)
Accrued expenses1,282,983 88,243 
Deferred Rent0 (25,902)
Due to students(301,619)727,710 
Deferred revenue4,915,504 3,052,996 
Other current liabilities(286,372)(242,181)
Net cash used in operating activities(2,076,821)(2,025,107)
Cash flows from investing activities:
Purchases of courseware and accreditation(11,375)(9,575)
Purchases of property and equipment(2,233,348)(1,244,078)
Net cash used in investing activities(2,244,723)(1,253,653)
Cash flows from financing activities:
Proceeds from warrants exercised1,081,792 0 
Proceeds from stock options exercised2,215,315 237,713 
Net cash provided by financing activities3,297,107 237,713 
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)
Six Months Ended October 31,
20202019
Net decrease in cash, cash equivalents and restricted cash$(1,024,437)$(3,041,047)
Cash, cash equivalents and restricted cash at beginning of period17,906,765 9,967,752 
Cash, cash equivalents and restricted cash at end of period$16,882,328 $6,926,705 
Supplemental disclosure cash flow information
Cash paid for interest$285,749 $652,121 
Cash paid for income taxes$38,608 $49,595 
Supplemental disclosure of non-cash investing and financing activities
Common stock issued for conversion of Convertible Notes$10,000,000 $0 
Right-of-use lease asset offset against operating lease obligations$851,733 $7,469,167 
Common stock issued for services$0 $178,447 
Three Months Ended July 31,
20212020
Net (decrease) increase in cash, cash equivalents and restricted cash$(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:
October 31, 2020October 31, 2019
Cash and cash equivalents$12,237,710 $6,472,417 
Restricted cash4,644,618 454,288 
Total cash, cash equivalents and restricted cash$16,882,328 $6,926,705 
July 31, 2021July 31, 2020
Cash and cash equivalents$6,554,423 $15,899,293 
Restricted cash3,722,831 3,060,269 
Total 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
OctoberJuly 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"), 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 Inc.
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 October 31, 2020, 11,442 of 13,238 or 86% of all active 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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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 and six months ended OctoberJuly 31, 20202021 and 2019,2020, our cash flows for the sixthree months ended OctoberJuly 31, 20202021 and 2019,2020, and our financial position as of OctoberJuly 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 consolidated financial results for the second quarter of fiscal year 2021, as evidenced by our record revenues of $17.0 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-19. RN’s, looking to attain their nurse practitioner license to broaden their career options, drove MSN-FNP enrollment. Additionally,
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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.

In our current, third fiscal quarter ending January 31, 2021, which has been historically a seasonally slower quarter given it falls during the holiday months of November and December, Aspen University is seeing slightly lower course registrations than seasonally expected in our Aspen Nursing + Other unit. We believe COVID-19 ‘Wave Two’ is partly a factor given that all the states in the country are now affected – not just some of the major metros. Our predominant student demographic of RNs has been especially overwhelmed over the past few months, so this isn’t unexpected.
Liquidity
At October 31, 2020, the Company had a cash and cash equivalents balance of $12,237,710 and $4,644,618 of 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. On September 14, 2020, the Convertible Notes automatically converted into shares of the Company’s common stock. (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 six months ended October 31, 2020 the Company's net cash and restricted cash decreased by $1,024,437, which included using $2,076,821 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 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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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 OctoberJuly 31, 2020, restricted cash2021 of $4,644,618$3,722,831 primarily consists of $934,125 which is collateral for letters of credit for the Aspen University and USU facility operating leases, $379,345$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 and $49,021 for employee payroll taxes to be remitted.line. Also included are funds held for students for unbilled educational services that were received from Title IV and non-Title IV programs totaling $3,032,127.$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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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 OctoberJuly 31, 2020.2021. As of OctoberJuly 31, 20202021 and April 30, 2020,2021, the Company maintained deposits exceeding federally insured limits by approximately $17,377,904$9,732,634 and $16,242,603,$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 the 2017 acquisition of USU. 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 October 31, 2020, the monthly payment plan represents approximately 62% 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 October 31, 2020 and April 30, 2020, those balances were $10,246,622 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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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.
The Company has construction in progress which includes property and equipment amounts for new campuses. These assets are not yet being depreciated as of October 31, 2020.
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.
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Leases
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.
The Company canceled the remaining 16,667 treasury shares on October 16, 2020. See Note 7.
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)
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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
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. For the three months ended October 31, 2020 and 2019 total marketing and promotional costs were $3,598,532 and $2,006,989, respectively, and are included in cost of revenue. For the six months ended October 31, 2020 and 2019, total marketing and promotional costs were $6,389,342 and $4,216,228, respectively.
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
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The Company evaluates its convertible instruments, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under ASC Topic 815, “Derivatives and Hedging”. The result of this accounting treatment is that the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income (expense). Upon conversion, exercise, or other extinguishment (transaction) of a derivative instrument, the instrument is marked to fair value at the transaction date and then that fair value is recognized as an extinguishment gain or loss. Equity instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815 are reclassified to liability at the fair value of the instrument on the reclassification date.
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, which is included in general and administrative expense in the consolidated statement of operations. 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.
RSUs are awards in the form of shares denominated in the equivalent number of shares of ASPU common stock and with the value of each RSU being equal to the fair value of ASPU common stock at the date of grant. RSU awards are subject to service-based vesting, where a specific period of continued employment must pass before an award vests as well as other vesting restrictions based on the nature and recipient of the award. For RSU awards, the expense is measured at the grant date as the fair value of ASPU common stock and expensed as stock-based compensation over the vesting term, which is included in general and administrative expense in the consolidated statement of operations.
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 1,744,3541,141,396 and 3,021,1311,032,411 shares 669,800of common stock, 653,937 and 0549,972 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 69,6728,224 were outstanding at OctoberJuly 31, 20202021 and October 31, 2019, respectively. Additionally, $10,000,000 of convertible debt (convertible into 1,398,602 shares of common stock) was outstanding at April 30, 2020. 2021, 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
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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 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.
Bad debt expense, which was previously included in general and administrative expense for the three and six months ended October 31, 2019 of $407,759 and $648,658, respectively, is now reported separately as a component of operating expenses for all periods presented. See Statements of operations for additional information.
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 October 31, 2020 and April 30, 2020:
October 31,
2020		April 30,
2020
Computer equipment and hardware$755,972 $649,927 
Furniture and fixtures1,013,103 1,007,099 
Leasehold improvements920,736 867,024 
Instructional equipment315,993 301,842 
Software7,373,655 6,162,770 
Construction in Progress878,263 0 
11,257,722 8,988,662 
Accumulated depreciation and amortization(3,830,290)(2,841,019)
Property and equipment, net$7,427,432 $6,147,643 
Software consisted of the following at October 31, 2020 and April 30, 2020:
October 31,
2020		April 30,
2020
Software$7,373,655 $6,162,770 
Accumulated amortization(2,711,305)(2,049,809)
Software, net$4,662,350 $4,112,961 
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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2020
(Unaudited)
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 

Depreciation and amortization expense for property and equipment as well as the portion for justand software amortization is presented below for the three and six months ended October 31, 2020 and 2019:
Three Months Ended
October 31,		Six Months Ended
October 31,
2020201920202019
Depreciation and amortization expense$515,841 $332,212 $994,518 $648,740 
Software amortization expense$346,653 $242,797 $661,760 $463,250 
The following is a schedule of estimated future amortization expense of software at October 31, 2020 (by fiscal year):
Future Expense
2021 (remaining)$698,932 
20221,338,300 
20231,177,419 
2024889,634 
2025479,929 
Thereafter78,136 
Total$4,662,350 

summarized below:
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 October 31, 2020 and 2019 were $0 and $275,000, respectively. Amortization expense for the six months ended October 31, 2020 and 2019 were $0 and $550,000, respectively.
Intangible assets consisted of the following at October 31, 2020 and April 30, 2020:
October 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 sixthree months ended OctoberJuly 31, 2021 and 2020, additional courseware and accreditation costs capitalized were $11,375.$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.write-offs for the three months ended July 31, 2021 and 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 
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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(Unaudited)

CoursewareAmortization expense is included in "Depreciation and accreditation consistedamortization" 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 related party and principal stockholder of the following:
October 31,
2020		April 30,
2020
Courseware$299,188 $287,813 
Accreditation59,350 59,350 
Accumulated amortization(258,169)(235,706)
Courseware and accreditation, net$100,369 $111,457 
Amortization expenseCompany. 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 accreditation is as follows:
Three Months Ended
October 31,		Six Months Ended
October 31,
2020201920202019
Amortization expense$10,516 $16,917 $22,463 $36,059 
The following is a scheduleApril 30, 2021, the balance of estimated future amortization expensethe account receivable, net of courseware and accreditation at October 31, 2020 (by fiscal year):
Future Expense
2021 (remaining)$18,629 
202233,805 
202328,280 
202414,733 
20253,645 
Thereafter1,277 
Total$100,369 
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, 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 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 Company recorded a beneficial conversion feature on these Convertible Notes of $1,692,309. The Convertible Notes have been automatically converted into common stock as explained below.
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 were as follows:

•After six months from the issuance date, the lenders had 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 were due January 22, 2023 or approximately three years from the closing;
•The interest rate of the Convertible Notes was 7% per annum (payable monthly in arrears); and
•The Convertible Notes were secured.

The former term notes under the Senior Secured Term Loans were due in September 2020, as noted below, 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), which was not required to be paid since the Senior Secured Term Loans were not extended. The Company also paid each lender $40,400 at closing of
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(Unaudited)

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, which is included in general and administrative expense in the consolidated statement of operations.

The Company’s obligations under the Convertible Notes were 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.
On September 14, 2020,after the closing price of our common stock was at least $10.725 over a 20 consecutive trading day period the Convertible Notes automatically converted into 1,398,602 shares of the Company’s common stock at a conversion price of $7.15 per share. (See Note 7.) The accelerated amortization charge related to unamortized debt discounts as a result of the debt extinguishment in the second quarter of fiscal year 2021 was approximately $1.4 million, which was included in interest expense in the consolidated statement of operations. The Company did not recognize any gains or losses as a result of this conversion.
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 October 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 OctoberJuly 31, 20202021 and April 30, 20202021 were $34,722$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
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“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 included in interest expense on the consolidated statements of operations as the transaction qualified as a debt extinguishment.USU.
Note 7. Stockholders’ Equity
Preferred Stock
The Company is authorized to issue 1,000,000 shares of “blank check” preferred stock with designations, rights and preferences as may be determined from time to time by our Board of Directors. As of October 31, 2020 and April 30, 2020, we had 0 shares of preferred stock issued and outstanding.
Common Stock
The Company is authorized to issue 40,000,000 shares of common stock.
On August 31, 2020,AGI maintains 2 stock-based incentive plans: the Company entered into an Equity Distribution Agreement (the “Agreement”) with Canaccord Genuity LLC (“Canaccord”), pursuant to which the Company may issue and sell from time to time, through Canaccord, up to $12,309,750 of shares of the Company’s common stock (the “Shares”). The Shares are being offered and sold pursuant to a prospectus supplement filed with the Securities and Exchange Commission on August 31, 2020. The purpose of this Agreement is to allow the Company to sell common stock that has been surrendered from executive officers and director vesting events to pay their portion of withholding taxes as well as to pay the Company the strike price of options upon cashless exercise. As of the date of this filing, 292,000 shares have been sold under the Agreement.

Sales of the Shares may be made by any method permitted by law deemed to be an “at-the-market” offering as defined in Rule 415 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 is 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. Total expenses for the offering, excluding compensation and reimbursement payable to Canaccord under the terms of the Agreement, was approximately $50,000, which is included in general and administrative expense in the consolidated statement of operations.
During the three months ended October 31, 2020, the Company issued 502,412 shares of common stock upon the exercise of stock options for cash and received proceeds of $945,332. As of October 31, 2020, approximately 36,000 shares of common stock were surrendered to the Company by the executive officers to pay their portion of withholding taxes for stock options exercised, and to pay the Company the strike price of options upon cashless exercise for a director; but were not yet sold through Canaccord. The Company did remit the withholding taxes on behalf of the executive officers for their stock option
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exercises from the Company's operating bank account. As a result, upon sale of these shares through the Agreement approximately $350,000 will be received by the Company and credited to additional paid in capital.
During the three months ended October 31, 2020, the Company issued 22,339 shares of common stock upon the cashless exercise of 36,111 stock options.
During the three months ended October 31, 2020, the Company issued 132,109 shares of common stock upon the vesting of Restricted Stock Units (“RSUs”).
On September 14, 2020,after the closing price of our common stock was at least $10.725 over a 20 consecutive trading day period, the $10 million Convertible Notes (see Note 6) automatically converted into 1,398,602 shares of the Company’s common stock at a conversion price of $7.15 per share.
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.

Restricted Stock
As of October 31, 2020 and 2019, there were 16,448 and 69,672 unvested shares of restricted common stock outstanding, respectively. Total unrecognized compensation expense related to the unvested shares as of October 31, 2020 and 2019 amounted to $49,125 and $249,000 respectively.

Restricted Stock Units
A summary of the Company’s RSU activity which were granted under the 2012 and 2018 Equity Incentive Plans during the six months ended October 31, 2020 is presented below:
Restricted Stock UnitsNumber of SharesWeighted Average Grant Price
Unvested Balance Outstanding, April 30,2020643,175 $5.64 
Granted169,043 9.33 
Exercised0 0 
Forfeits(4,250)7.49 
Vested(138,168)12.83 
Expired0 0 
Unvested Balance Outstanding, October 31,2020669,800 $6.16 
In connection with 169,043 RSU grants, the grant date fair value of these awards range from $6.95 to $12.78 per share and the awards vest annually over three years.
There were approximately 669,800 unvested RSUs as of October 31, 2020. Total unrecognized compensation expense related to the unvested RSUs is approximately $4.5 million which will be amortized over the remaining vesting periods. Included in this amount is approximately $1.8 million of total unrecognized compensation expense related to the $12 tranche of the executive RSU grant discussed below.
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 the RSUs vest four years from the grant date, if the executives are 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
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trading days, all of the unvested RSUs will vest immediately. On the grant date, the closing price of the Company’s common stock on The Nasdaq Global Market was $9.49 per share. The Company determined that because the terms of the grant include both a market condition and a service condition that must be achieved simultaneously, the appropriate treatment under ASC 718 Stock-based Compensation is to amortize the fair market value over the longer of the explicit service period of four years and not the shorter of the derived service period of .64 years.
On August 31, 2020, the closing price of the Company’s common stock was at least $9 for 20 consecutive trading days, resulting in 10% or 37,500 of 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. On the grant date, the closing price of the Company's common stock on The Nasdaq Global Market was $9.49 per share. The accelerated amortization expense related to these transactions in the second quarter of fiscal year 2021 was approximately $1.2 million, for the vesting of these 131,250 RSUs, which is included in general and administrative expense in the consolidated statements of operations.
Warrants
A summary of the Company’s warrant activity during the six months ended October 31, 2020 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, October 31, 2020374,174 $6.37 2.39$1,125,177 
Exercisable, October 31, 2020374,174 $6.37 2.39$1,125,177 

OUTSTANDING WARRANTSEXERCISABLE 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 3.35100,000 
$6.87 $6.87 224,174 $6.87 1.73224,174 
 374,174   374,174 
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, 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 transaction in the first quarter of fiscal year 2021 was approximately $26,000.
Stock Incentive Plan and Stock Option Grants to Employees and Directors
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On March 13, 2012, the Company adopted the Aspen Group, Inc. 2012 Equity Incentive Plan (the “2012 Plan”) and 2018 Equity Incentive Plan (the “2018 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
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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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On December 30, 2019,2020, 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 500,0001,100,000 to 1,100,0001,600,000 shares.

As of OctoberJuly 31, 20202021 and 2019,April 30, 2021 there were 27,560431,869 and 194,286549,739 shares remaining available for future issuance under the 2012 Plan and the 2018 Plan.Plans, respectively.

Restricted Stock
As of July 31, 2021 and 2020, there were 8,224 and 16,448 unvested shares of restricted common stock outstanding, respectively. Total unrecognized compensation expense related to the unvested shares as of July 31, 2021 was $17,545, and is expected to be recognized over a weighted-average period of approximately 0.42 years.

Restricted Stock Units
A summary of the Company’s RSU activity during the three months ended July 31, 2021 is presented below:
Restricted Stock UnitsNumber of SharesWeighted Average Grant Price
Unvested balance outstanding, April 30, 2021549,972 $6.58 
Granted127,542 6.97 
Forfeits(7,920)9.37 
Vested(15,657)6.26 
Expired— — 
Unvested balance outstanding, July 31, 2021653,937 $6.07 
Of 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 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 $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 the July 21, 2021 effective date, they will expire and automatically be forfeited. The amortization expense related to this 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, or a total of $14,943, vesting annually over three years.
Of the 653,937 unvested RSUs outstanding at July 31, 2021, there are 195,000 RSUs remaining from the February 4, 2020 executive 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 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's common stock on The Nasdaq Global Market was $9.49 per share. The amortization expense related to these transactions for the three months ended July 31, 2021 and 2020, was 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 unvested RSUs is $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 February 4, 2020 executive RSU grant, discussed above, is $1,121,555.
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July 31, 2021
(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, 2021 is presented below:
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 WARRANTSEXERCISABLE 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 
$6.99 $6.99 25,000 $— 0.00— 
 399,174   374,174 

On July 21, 2021, the Compensation 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 exercise price of $6.99 per share. The warrants have an exercise period of five years from the July 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 will 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 the exercise of 192,049 warrants by the Leon and Toby Cooperman Family Foundation, which was included in “other income (expense), net” in the consolidated statement of operations.
Stock Option Grants to Employees and Directors

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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(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.

There were 0 options granted to employees during the three and six months ended October 31, 2020. The following table summarizes the assumptions the Company utilized to record compensation expense for stock options granted to employees during the period ended:
October 31,
2020
Expected life (years)n/a
Expected volatilityn/a
Risk-free interest raten/a
Dividend yieldn/a
Expected forfeiture raten/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, 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 

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

A summary ofFor the Company’s stock option activity for employees and directors during the sixthree months ended OctoberJuly 31, 2020,2021, 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 presented below:
OptionsNumber of
Shares		Weighted
Average
Exercise
Price		Weighted
Average
Remaining
Contractual
Term		Aggregate
Intrinsic
Value
Balance Outstanding, April 30, 20202,740,539 $4.62 1.97$9,146,198 
Granted0 $0 — — 
Exercised(989,767)$10.78 — — 
Forfeited(6,418)$6.51 — — 
Expired0 $0 — — 
Balance Outstanding, October 31, 20201,744,354 $5.66 1.99$6,482,286 
Exercisable, October 31, 20201,439,330 $5.66 1.79$5,495,787 
included in “general and administrative” expense in the unaudited consolidated statements of operations.

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$1.86 35,141 $1.86 0.4435,141 
$2.28 to $2.76$2.34 96,573 $2.34 0.2596,573 
$3.24 to $4.38$3.90 262,658 $3.87 0.95220,657 
$4.50 to $5.20$4.93 650,808 $4.91 1.75540,896 
$5.95 to $6.28$6.10 67,000 $6.10 1.7267,000 
$7.17 to $7.55$7.45 474,425 $7.43 2.87329,175 
$8.57 to $9.07$8.98 157,749 $9.00 2.18149,888 
Options only1,744,354 1,439,330 

For the three months ended OctoberJuly 31, 2020, the Company recorded compensation expense of $142,397, $1,678,622$487,110 which consisted of: $168,734, $307,852 and $10,529,$10,524, respectively, in connection with stock option, restricted stock unitsoptions, RSUs and restricted stock grants.
Forgrants, which is included in “general and administrative” expense in the six months ended October 31, 2020, the Company recorded compensation expenseunaudited consolidated statements of $311,131, $1,986,474 and $21,053, respectively, in connection with stock option, RSU and restricted stock grants.
As of October 31, 2020, there was approximately $400,000 of unrecognized compensation costs related to non-vested share-based option arrangements. That cost is expected to be recognized over a weighted-average period of approximately 1.1 years.
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October 31, 2020
(Unaudited)

As of October 31, 2020, there was approximately $4.5 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 1.8 years.
As of October 31, 2020, there was approximately $49,000 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 1.1 years.

Treasury Stock

On October 16, 2020 the Company retired all 16,667As of both July 31, 2021 and April 30, 2021, 155,486 shares of itscommon stock were held in treasury representing shares of common stock valued at $70,000.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 $1.8 million and represents the fair market value of shares surrendered as of the date of 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:
Three Months Ended
October 31,		Six Months Ended
October 31,
 2020201920202019
Tuition - recognized over period of instruction
$14,979,083 $10,807,131 $28,341,990 $20,098,083 
Course fees - recognized over period of instruction
1,782,022 1,119,259 3,386,057 2,045,213 
Book fees - recognized at a point in time
46,037 20,631 85,175 41,416 
Exam fees - recognized at a point in time
78,900 55,415 149,555 115,515 
Service fees - recognized at a point in time
85,003 83,529 173,830 143,720 
 $16,971,045 $12,085,965 $32,136,607 $22,443,947 
Three Months Ended
July 31,
 20212020
Tuition - recognized over period of instruction
$17,121,680 $13,367,308 
Course fees - recognized over period of instruction
2,003,340 1,599,693 
Book fees - recognized at a point in time
27,759 39,138 
Exam fees - recognized at a point in time
196,042 70,655 
Service fees - recognized at a point in time
82,174 88,768 
 $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 October 31, 2020 was $8,628,498 which is future revenue that has not yet been earned for courses in progress. The Company has $2,070,225 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 and six months ended OctoberJuly 31, 2021 and 2020, approximately $4.8$6.8 million and $3.7 million came from revenuesrevenue which were deferred at July 31, 2020 and April 30, 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
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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2020
(Unaudited)

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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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2021
(Unaudited)

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 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 1.22% and 1.32%totaling approximately 1% of revenuesconsolidated revenue for each of the sixthree months ended OctoberJuly 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 103,000154,528 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 OctoberJuly 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 months ended July 31, 2021 and six month period ended October 31, 2020 was $664,415was $936,737 and $1,061,653,$397,238, respectively, which is included in general and administrative expenses in the consolidated statements of operations, respectively.
ROU assets is summarized below:operations.
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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OctoberJuly 31, 20202021
(Unaudited)

October 31, 2020
Operating office leases$13,124,796 
Less accumulated reduction(5,315,307)
Balance of ROU assets as of October 31, 2020$7,809,489 
ROU assets are 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 

Operating lease obligations, related to the ROU assets isare summarized below:
October 31, 2020
Operating office leases$14,108,820 
Total lease liabilities14,108,820 
Reduction of lease liabilities(5,343,595)
Total as of October 31, 2020$8,765,225 

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 OctoberJuly 31, 20202021 (a)(by fiscal year).
Maturity of Lease ObligationsMaturity of Lease ObligationsLease PaymentsMaturity of Lease ObligationsLease Payments
2021 (remaining)$1,311,675 
20222,488,590 
2022 (remaining)2022 (remaining)$3,076,200 
202320231,862,992 20233,647,737 
202420241,631,102 20243,514,179 
202520251,303,970 20253,288,066 
2026 and beyond4,075,303 
202620263,383,530 
ThereafterThereafter10,417,592 
Total future minimum lease paymentsTotal future minimum lease payments12,673,632 Total future minimum lease payments27,327,304 
Less imputed interest(3,908,407)
Present value of operating lease obligations$8,765,225 
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 leaseslocation in Nashville, Tennessee lease signed but not yet commenced for the following locations: $10.2 million in Tampa, Florida, $3.9 million in Phoenix, Arizona, and $4.3 million in Austin, Texas. 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 $18,328,629 
Balance Sheet Classification
Operating lease obligations, currentOther Information$July 31, 20211,670,277 
Operating lease obligations, long-term7,094,948 
Total operating lease obligations$8,765,225 

Other Information
Weighted average remaining lease term (in years)6.297.29
Weighted average discount rate12.0012 %

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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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2021
(Unaudited)

the CRA has not yet responded 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 2022 and future taxation years.
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
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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2020
(Unaudited)

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 OctoberJuly 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.
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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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2021
(Unaudited)

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.
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The provisional certification expired on December 31, 2020. While the institution submitted its recertification application timely in October 31, 2020,
(Unaudited)

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 revenuesrevenue from financial aid received by its students under programs authorized by Title IV of the Higher Education Act ("HEA"),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 andLoan; (2) the Federal Pell Grant program, or Pell. USU students are eligible for the same, plusPell; (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 revenuesrevenue 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.

On September 28, 2020, the DOE notified USU that the 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 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 willwas 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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ASPEN GROUP, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2021
(Unaudited)

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 released thereduced USU's existing USU letter of credit of $379,345,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 is now required to maintaincurrently maintains a letter of credit of approximately $10,000.$9,872 at July 31, 2021.

Approval to Confer Degrees
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.

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Table United States University is authorized by the California Bureau of Contents
ASPEN GROUP, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2020
(Unaudited)


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 EventEvents
On August 31, 2021, the Company 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 December 2020,conjunction with the DOE releasedextension of the existing USU letterFacility, the Company drew down $5,000,000 of creditfunds from the Facility at 12% interest per annum due November 4, 2022. Additionally, on August 31, 2021 the Company issued to the Foundation warrants to purchase 50,000 shares of $379,345, whichthe Company’s common stock exercisable for five years from the date of issuance at the exercise price of $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 for a period of four years, subject to an 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 Employment Agreement, and will be eligible to participate in the Company’s executive performance bonus plan. Additionally, on August 16, 2021, Mr. LaVay received a grant of 125,000 RSUs, pursuant to his Employment Agreement. The RSUs will vest in 3 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 right to receive 1 share of the Company’s common stock. The RSUs were granted under the Aspen Group, Inc. 2018 Plan. On the grant date, the closing price of the Company's common stock on The Nasdaq Global Market was required$5.80 per share. The amortization expense related to this transaction over the three year vesting term will be posted based on the level of Title IV funding. In connection with USU's most recent Compliance Audit, USU is now required to maintain a letter of credit of approximately $10,000,$725,000, which will be included as restricted cash onin general and administrative expense in the consolidated balance sheets.statements of operations.

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 3 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 1 share of the Company’s common stock. The RSUs were granted under the Aspen Group, Inc. 2018 Plan and were approved by the Compensation Committee of the Board of Directors of the 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" in "Item 1. Financial Statements"):
•Convertible Notes - On September 14, 2020, the $10 million secured Convertible Notes, which were issued by the Company on January 22, 2020 automatically converted into shares of the Company’s common stock 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. The accelerated non-cash amortization charge related to unamortized debt discounts as a result of the debt extinguishment in the second quarter of fiscal year 2021 was approximately $1.4 million, which is included in interest expense.
•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 October 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 three and six months ended October 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 three and six months ended OctoberJuly 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 three and six months ended OctoberJuly 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 10,718 to 13,238 as
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Table of October 31, 2020 and students seeking nursing degrees were 11,442 or 86% of total active students at both universities. Active student body is comprised of active degree-seeking students, enrolled in a course at the end of the second 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 9,016 to 10,779. USU's total active degree-seeking student body grew year-over-year from 1,702 to 2,459 or 44%.
aspu-20201031_g2.jpg
Company Overview
AGIAspen Group, Inc. is an education technology holding company. It operates two universities, Aspen University Inc. ("Aspen University" 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 October 31, 2020, 11,442 of 13,238 or 86% of all active 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 plan offers online associate and most bachelorundergraduate students the opportunity to pay their tuition and fees at $250/month, online
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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
InAGI’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 second12,058 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 2,659 new student enrollments, a sequential increase of 13%, and 20% year-over-year. Aspen University accounted2022 or are registered for 2,010 new student enrollments, a sequential increase of 13% and 10% 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 second quarter given that many have been furloughed or laid off since the pandemic first began.
USU delivered 649 new student enrollments in the quarter driven primarily by FNP enrollments, a 65% increase year-over-year.
Below is a table reflecting new student enrollments for the past five quarters:
New Student Enrollments
Q2'20Q3'20Q4'20Q1'21Q2'21
Aspen University1,823 1,371 1,344 1,779 2,010 
USU394 375 432 572 649 
Total2,217 1,746 1,776 2,351 2,659 

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 (CAC)
Cost per Enrollment (CAC) (previously referred to as CPE)
The Cost per Enrollment measures the advertising investment spent in a given six month period, divided by the number of new student enrollments achieved in that given six month period, in order to obtain an average CAC.
Revenue per Enrollment (RPE)upcoming course.
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The Revenue per Enrollment takes each quarterly cohort of new degree-seekingaspu-20210731_g2.jpg
AGI New Student Enrollments

New student enrollments at USU grew by 15% sequentially and measures18% 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 amount of earned revenue onpreviously 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 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 periodsresult of the cohort.
Inplanned 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 of fiscal year 2021 the Marketing Efficiency Ratio (MER) for our universities remained above 13X, representing revenue-per-enrollment (LTV) over cost-per-enrollment (CAC), which was a decline of 10% for Aspen Universityas well, and 30% for USU, as shownthen beginning in the table below:
Second Quarter Marketing Efficiency Ratio
Enrollments
CAC1
LTV2
Q2 '21 MERQ2 '20 MERMER % Change
Aspen University2,010 $1,112 $15,181 313.7X15.2X(10)%
USU649 $1,240 $17,820 414.4X20.7X(30)%
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1 Based on 6-month rolling weighted average CAC for each university’s enrollments
2 Weighted Lifetime Value (LTV) of a new studentthird quarter the Company expects to deliver material aggregate enrollment
3 Weighted average LTV for all Aspen University enrollments increases year-over-year in the quarter
4 LTV for USU’s MSN-FNP ProgramBSN Pre-Licensure unit.

ComparedOn a Company-wide basis, new student enrollments increased sequentially from 2,182 to 2,276 or 4%. On a year-over-year basis, new student enrollments for the prior year period, AGI’s weighted average cost ofCompany were down 3%, however, excluding the 232 planned enrollment (CAC) increased 31%, from $875 to $1,143, as shownreduction in the table below. On a sequential basis, AGI's CAC declined 5%, from $1,203 to $1,143.Phoenix pre-licensure metro, Company-wide enrollments would have been up year-over-year by 7%.

Second Quarter Weighted Average Cost of Enrollment
Q2 '20 Enrollments
Q2'20 CAC1
Q2'21 Enrollments
Q2'21 CAC1
CAC % Change
Aspen University1,823 $879 2,010 $1,112 27 %
USU394 $862 649 $1,240 44 %
Weighted Average$875 $1,143 31 %
New student enrollments for the past five quarters are shown 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 

_
1Based on 6-month rolling average
Bookings Analysis and ARPU
On a year-over-year basis, fiscal second quarter 2021Q1 Fiscal 2022 Bookings increased 34%decreased 2%, to $42,079,380, delivering a company-wide average revenue per enrollment (ARPU) increase of 12% to $15,825, reflecting a shift$35.2 million from $36.1 million in the revenue mix toward higher LTV nursing licensure degree programs.prior year. As previously discussed, the proactive Phoenix pre-licensure enrollment reduction in Q1 Fiscal 2022 from 490 to 258 (or a reduction of 232) enrollments year-over-year, caused Bookings in the Phoenix metro to decrease by $7 million year-over-year. Excluding the Phoenix pre-licensure metro, Company-wide Bookings would have increased by 17% year-over-year.
Second Quarter Bookings and Average Revenue Per Enrollment (ARPU)
Q2'20 Enrollments
Q2'20 Bookings 1
Q2'21 Enrollments
Q2'21 Bookings 1
Percent Change Total Bookings & ARPU 1
Aspen University1,823 $24,294,600 2,010 $30,514,200 26 %
USU394 $7,021,080 649 $11,565,180 65 %
Total2,217 $31,315,680 2,659 $42,079,380 34 %
ARPU$14,125 $15,825 12 %

First Quarter Bookings1 and Average Revenue Per Enrollment (ARPU)1
Q1'21 Enrollments
Q1'21 Bookings 1
Q1'22 Enrollments
Q1'22 Bookings 1
Percent Change Total Bookings & ARPU 1
Aspen University1,779 $25,880,400 1,601 $23,150,850 
USU572 $10,193,040 675 $12,028,500 
Total2,351 $36,073,440 2,276 $35,179,350 (2)%
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 new student enrollments for each operating unit.
ASPEN UNIVERSITY’S PRE-LICENSURE BSN HYBRID (ONLINE/ON-CAMPUS) DEGREE PROGRAM 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.
In July 2018, Aspen University through Aspen Nursing of Arizona, 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, Aspen University opened a second campus in the Phoenix metropolitan area in partnership with HonorHealth.
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
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$325/$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 that is specifically designed for students who do not currently hold a state nursing license and have no prior nursing experience. Aspen University is admitting students into one of two program components: (1) a pre-professional nursing (PPN) 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 participatebased in the competitive evaluation process for entry (Years 2-3).
As of the end of the second fiscal quarter, Aspen University had nearly 500 active studentsFrontera Crossing office building located at 101 W. Louis Henna Boulevard in the final two-year core program which drives revenuessuburb of approximately $20,000 per year, per student in those final two years compared to approximately $7,000 per year, per student in yearRound Rock. The building is situated at the junction of Interstate 35 and State Highway 45, one of the program. In addition, Aspen University currently has approximately 1,800 active studentsmost heavily trafficked freeway exchanges in the first-yearmetropolitan area with visibility to approximately 143,362 cars per day. Aspen University's initial PPN program innursing student enrollments began on the Phoenix metro. In order to ensure these students have very short wait times to begin in the core program, Aspen University will be moving to double cohorts in the main Phoenix campus by the airport starting this coming February, 2021. So rather than starting 30 students into the core program eachSeptember 29, 2020 semester Aspen University will increase that capacity by approximately 50% to a total of approximately 45 students each semester start. This will increase Aspen University’s annual revenue run rate at the main Phoenix campus by approximately $1.8 million starting in the fiscal fourth quarter.start date.

Pre-Licensure BSN Program - Campus Expansion

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 in the Tampa metropolitan area. Aspen University enrolledUniversity's initial PPN nursing students for itsstudent enrollments began on the December 8, 2020 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 enrolled PPN and core nursing students for its September 29, 2020 semester start date.

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 bothat three different metro locations: San Diego, Phoenix and Phoenix. We expect this additional clinical facility in Phoenix, as well as the Tampa campus clinical facility to be open at the end of this calendar year, for a total of three clinical facilities available for MSN-FNP weekend immersions scheduled to start early in 2021.

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 material delays to their projected graduation dates.

Tampa.
ACCOUNTS RECEIVABLE AND MONTHLY PAYMENT PLANAccounts Receivable - Monthly Payment Plan ("MPP")
Since the beginning of fiscal year 2021, theThe Company offers several payment options to its students including monthly payment plan (MPP), installment plans and financial aid. Our growth in accounts receivable balance,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, 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 short-termAspen University and long-term, has increased by approximately $6.3 million.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 5,927 to 6,638, representing 62% of Aspen University’s total active student body.

USU students paying tuition and fees through a monthly payment method grew from 1,427 to 1,609 students sequentially. Those 1,609 students paying through a monthly payment method represent 65% of USU’s total active student body.

Change in Business Mix and Relationship to Accounts Receivable

During the second quarter of fiscal year 2021, revenue from students using the Monthly Payment Plan increased by approximately 34.9% year over year, but declined as a percentage of total revenue for the second year in a row down from approximately 2.2% in Q2 Fiscal 2020 to 52.4% in Q2 Fiscal 2021, while total revenue increased 40% 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 50% 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 prior to the start of each term.This means that approximately 90% of all revenue from these two programs will be paid in
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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 half of fiscal year 2021, no changes to the methodology were made and $232,000 of 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 $572,000 for Aspen University and by $60,000 for USU in the second quarter of fiscal year 2021. Note that the AGI's bad debt allowance started the quarter at $2.16 million and ended the quarter at $2.52 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 happens 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 discussion above, the change in revenue cannot be compared to the change in accounts receivable. Revenue does not have the impact of cash received whereas accounts receivable does. Depending on the month and the amount of cash received, it is likely that revenue or accounts receivable will increase at a rate different from the other. The impact of cash is easy to substantiate as it agrees to deposits in our bank accounts.
At October 31, 2020, the allowance for doubtful accounts was $2,523,293 which represents approximately 8% of the gross accounts receivable balance of $30,765,400, 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 $10,246,622$11,313,657 at OctoberJuly 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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Fiscal 2021 Developments
On September 14, 2020,after the closing price of our common stock was at least $10.725 over a 20 consecutive trading day period the $10 million Convertible Notes automatically converted into 1,398,602 shares of the Company’s common stock at a conversion price of $7.15 per share. The accelerated amortization charge related to unamortized debt discounts as a result of the debt extinguishment in the second quarter of fiscal year 2021 was approximately $1.4 million, which was included in interest expense in the consolidated statement of operations.
On August 31, 2020, the closing price of the Company’s common stock was at least $9 for 20 consecutive trading days, resulting in, 10% or 37,500 of 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. On the grant date, the closing price of the Company's common stock on The Nasdaq Global Market was $9.49 per share. See Note 7. "Stockholders' Equity" in "Item 1. Financial Statements" for additional information on the vesting terms for these RSUs. The accelerated amortization expense related to this transaction in the second quarter of fiscal year 2021 was approximately $1.2 million for the vesting of these 131,250 RSUs, which is included in general and administrative expense in the consolidated statement of operations.
On August 31, 2020, the Company entered into an Equity Distribution Agreement (the “Agreement”) with Canaccord Genuity LLC (“Canaccord”), pursuant to which the Company may issue and sell from time to time, through Canaccord, up to $12,309,750 of shares of the Company’s common stock. The purpose of this Agreement is to allow the Company to sell common stock that has been surrendered from executive officers and director vesting events to pay their portion of withholding taxes as well as to pay the Company the strike price of options upon cashless exercise. As of the date of this filing, 292,000 shares have been sold under the Agreement.
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.

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 four 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 crisis didpandemic. 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 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 a material impact on the Company’s consolidated financial results foras we progress through the second quarter ofand future quarters in fiscal year 2021, as evidenced by our record revenues of approximately $17.0 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-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.
2022.
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.

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In our current, third fiscal quarter ending January 31, 2021, which has been historically a seasonally slower quarter given it falls during the holiday months of November and December, Aspen University is seeing slightly lower course registrations than seasonally expected in our Aspen Nursing + Other unit. We believe COVID-19 ‘Wave Two’ is partly a factor given that all the states in the country are now affected – not just some of the major metros. Our predominant student demographic of RNs has been especially overwhelmed over the past few months, so this isn’t unexpected. Given the rollout of COVID-19 vaccines, we are anticipating a full recovery in expected course registrations in our fourth quarter.

Results of Operations
Set forth below is the discussion of the results of operations of the Company for the three months ended OctoberJuly 31, 20202021 (“Q2Q1 Fiscal 2021”2022”) compared to the three months ended October 31, 2019 (“Q2 Fiscal 2020”), and for the first six months ended OctoberJuly 31, 2020 (“1HQ1 Fiscal 2021”) compared to the six months ended October 31, 2019 (“1H Fiscal 2020”).
Revenue
Three Months Ended July 31,
2021$ Change% Change2020
Revenue$19,430,995$4,265,43328%$15,165,562
Three Months Ended October 31,Six Months Ended October 31,
2020$ Change% Change20192020$ Change% Change2019
Revenue$16,971,045 $4,885,080 40%$12,085,965 $32,136,607 $9,692,660 43%$22,443,947 

Q2 Fiscal 2021 compared to Q2 Fiscal 2020

Revenue from operations for Q2 Fiscal 2021 increased to $16,971,045 from $12,085,965 for Q2 Fiscal 2020, an increase of $4,885,080 or 40%. The increase was primarily due to enrollment and student bodyrevenue growth in USU’s MSN-FNP and Aspen’s BSN Pre-Licensure program, 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 (ARPU) from $14,125 to $15,825 or 12%.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 Q2 Fiscal 2021 increased 36% year-over-year, while USU's revenues in Q2 Fiscal 2021 increased 53% year-over-year.
Aspen University's traditional post-licensure online nursing + other business unit and doctoral unit contributed 50%45% of total Company revenue in Q2Q1 Fiscal 2021,2022, while Aspen University’s BSN Pre-Licensure BSN program delivered 21%23% of the Company’s revenuesrevenue in Q2Q1 Fiscal 2021.2022. Finally, USU contributed 29%32% of the total revenuesrevenue for Q2Q1 Fiscal 2021.
1H Fiscal 2021 compared to 1H Fiscal 2020
Revenue from operations for 1H Fiscal 2021 increased to $32,136,607 from $22,443,947 for 1H Fiscal 2020, an increase of $9,692,660 or 43%. The increase was primarily due to enrollment and student body growth in the degree programs with the highest lifetime value (LTV). The Company expects revenue growth to continue in future periods as we continue prioritizing our highest LTV degree programs to achieve our long-term growth plans.2022.
Aspen University’s revenuesrevenue in 1HQ1 Fiscal 20212022 increased 38%24% year-over-year, while USU's revenues in 1H Fiscal 2021 increased 59% year-over-year.
Aspen University's traditional post-licensure online nursing + other business unit and doctoral unit contributed 51% of total Company revenue in 1HQ1 Fiscal 2021, while Aspen University’s Pre-Licensure BSN program delivered 20% of the Company’s revenues in 1H Fiscal 2021. Finally, USU contributed 29% of the total revenues for 1H Fiscal 2021.
The Company now expects annual revenue growth to meet or exceed 38% or $67.7 million for the full fiscal year 2021.2022 increased 39% year-over-year.
Cost of revenue (exclusive of depreciation and amortization shown separately below)
Three Months Ended July 31,
2021$ Change% Change2020
Cost of Revenue (exclusive of depreciation and amortization shown separately below)$8,593,568$2,746,04547%$5,847,523
As a percentage of revenue44%39%
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Three Months Ended October 31,Six Months Ended October 31,
2020$ Change% Change20192020$ Change% Change2019
Cost of Revenues (exclusive of depreciation and amortization shown separately below)$7,324,780 $3,136,724 75%$4,188,056 $13,172,303 $4,631,189 54%$8,541,114 
As a percentage of revenue43%35%41%38%
Q2 Fiscal 2021 comparedrevenue increased, including as a percentage of revenue, due primarily to Q2 Fiscal 2020
Instructional costs and services
Instructional costs and services for Q2 Fiscal 2021 increased to $3,726,248 or 22% of revenues from $2,181,067 or 18% of revenues for Q2 Fiscal 2020, an increase of $1,545,181 or 71%. 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 pre-licensure BSN campusesPre-Licensure campus locations in Phoenix, Austin and Tampa.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 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 20%23% of Aspen University revenuesrevenue for Q2Q1 Fiscal 2021, while USU instructional costs and services was 26% of USU revenues during Q2 Fiscal 2021.
Marketing and promotional
Marketing and promotional costs for Q2 Fiscal 2021 were $3,598,532 or 21% of revenues compared to $2,006,989 or 17% of revenues for Q2 Fiscal 2020, an increase of $1,591,543 or 79%. The increase of marketing as a percentage of revenues from 17% to 21% year-over-year in Fiscal Q2 is a result of a planned advertising spending increase throughout Fiscal Year 2021, targeted primarily to our highest LTV programs, which has resulted in record new student enrollments the past two quarters. In addition, pre-revenue marketing spend commenced this quarter in our two new pre-licensure metros; Austin and Tampa.
Aspen University marketing and promotional costs represented 20% of Aspen University revenues for Q2 Fiscal 2021, while USU marketing and promotional costs was 18% of USU revenues for Q2 Fiscal 2021.
AGI corporate marketing expenses was $274,552 for Q2 Fiscal 2021 compared to $247,904 for Q2 Fiscal 2020, an increase of $26,647 or 11%.
1H Fiscal 2021 compared to 1H Fiscal 2020
Instructional costs and services
Instructional costs and services for 1H Fiscal 2021 increased to $6,782,961 or 21% of revenues from $4,324,886 or 19% of revenues for 1H Fiscal 2020, an increase of $2,458,075 or 57%. The increase was primarily due to more class starts year-over-year and additional full-time faculty staffing in the USU MSN-FNP program and the pre-licensure BSN campuses in Phoenix, Austin and Tampa.
Aspen University instructional costs and services represented 20% of Aspen University revenues for 1H Fiscal 2021,2022, while USU instructional costs and services was 24% of USU revenuesrevenue during 1HQ1 Fiscal 2021.2022.
Marketing and promotionalPromotional
Marketing and promotional costs for 1HQ1 Fiscal 20212022 were $6,389,342$4,093,555 or 20%21% of revenuesrevenue compared to $4,216,228$2,790,810 or 19%18% of revenuesrevenue for 1HQ1 Fiscal 2020,2021, an increase of $2,173,114$1,302,745 or 52%47%. The increase of marketing as a percentage of revenues from 19% to 20% year-over-year in 1H Fiscal 2021 is a result of a planned advertising spending increase throughout Fiscal Year 2021, targeted primarily to our highest LTV programs, which has resulted in record new student enrollments the past two quarters. In addition, pre-revenue marketing spend commenced in the second quarter in our two new pre-licensure metros; Austin and Tampa.
Aspen University marketing and promotional costs represented 19%21% of Aspen University revenuesrevenue for 1HQ1 Fiscal 2021,2022, while USU marketing and promotional costs was 16% of USU revenuesrevenue for 1HQ1 Fiscal 2021.
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2022.
AGI corporate marketing expenses was $507,403were $324,265 for 1HQ1 Fiscal 20212022 compared to $476,135$232,851 for 1HQ1 Fiscal 2020,2021, an increase of $31,268$91,414 or 7%39%.
General and administrative
Three Months Ended October 31,Six Months Ended October 31,
2020$ Change% Change20192020$ Change% Change2019
General and administrative$11,285,155 $4,091,455 57%$7,193,700 $20,078,911 $6,088,960 44%$13,989,951 
As a percentage of revenue66%60%62%62%

Q2 Fiscal 2021 compared to Q2 Fiscal 2020
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 Q2 Fiscal 2021 were $11.3 million or 66% of revenues compared to $7,193,700 or 60% of revenues during Q2 Fiscal 2020, an increase of $4,091,455 or 57%. The increase was primarily due to higher headcount and related increase in compensation and benefits expense to support the growth of the business, accelerated stock-based compensation amortization expense related to the $9 and $10 tranche RSU price vesting of $1.2 million at AGI and new campus expansion costs of approximately $0.2 million at Aspen University.

The remaining $12 tranche related to the Executive RSU grant has approximately $1.8 million of total unrecognized compensation expense at October 31, 2020, that could accelerate during the next three years.
Growth of the business includes the element of growth opex. Growth opex represents our investment in key infrastructure projects to support our expansion strategy. In Q2 Fiscal 2021, our growth opex investment of $0.24 million is specifically defined as personnel and related costs to expand our enrollment center, academic and financial aid advisors, and clinical operations personnel. In our enrollment center specifically, we decided to grow our enrollment advisors ("EAs") staff from 96 EAs to 118 EAs, adding EAs across every unit of the Company. We are now fully staffed for the fiscal year to accomplish our enrollment goals for the remainder of the fiscal year.
Aspen University general and administrative costs which are included in the above amount represented 32% of Aspen University revenues for Q2 Fiscal 2021. The increase was primarily due to new campus expansion costs of approximately $0.2 million for investment in faculty and campus leadership positions to launch and support the new Tampa and Austin markets; and approximately $0.1 million in growth opex.
USU general and administrative costs equaled 43% of USU revenues for Q2 Fiscal 2021. The increase was primarily due to higher headcount and related increase in compensation and benefits expense to support the growth of the business, which includes growth opex of $0.14 million.

AGI’s general and administrative costs for Q2 Fiscal 2021 and Q2 Fiscal 2020 which are included in the above amounts equaled $5.3 million and $1.9 million, respectively. The increase was primarily due to higher headcount and related increase in compensation and benefits expense to support the growth of the business and accelerated non-cash stock-based compensation amortization expense related to the $9 and $10 tranche RSU price vesting of $1.2 million.
1H Fiscal 2021 compared to 1H Fiscal 2020
General and administrative costs for 1H Fiscal 2021 was $20,078,911 or 62% of revenues compared to $13,989,951 or 62% of revenues for 1H Fiscal 2020, an increase of $6,088,960 or 44%. The increase wasincreased primarily due to higher headcount and related increase in compensation and benefits expense to support the growth of the business and other-employee related costs, acceleratedincluding stock-based compensation, amortization expenseand increases in facilities and technology costs across both universities.

The remaining $12 tranche related to the $9 and $10 trancheFebruary 2020 Executive RSU price vesting ofgrant has approximately $1.2 million of total unrecognized compensation expense at AGI and new campus expansion costs of approximately $0.2 million at Aspen University.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.

Aspen University general and administrative costs, which are included in the above amount, represented 32%34% and 33% of Aspen University revenuesrevenue for 1HQ1 Fiscal 2021. The increase was primarily due to new campus expansion costs of approximately $0.2 million for investment in faculty2022 and campus leadership positions to launch and support the new Tampa and Austin markets; and approximately $0.1 million in growth opex.Q1 Fiscal 2021, respectively.
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USU general and administrative costs equaled 42%represented 39% and 40% of USU revenuesrevenue for 1HQ1 Fiscal 2021. The increase was primarily due to higher headcount2022 and related increase in compensation and benefits expense to support the growth of the business, which includes growth opex of $0.14 million.Q1 Fiscal 2021, respectively.

AGI corporate general and administrative costs for 1HQ1 Fiscal 20212022 and 1HQ1 Fiscal 20202021, which are included in the above amounts, was $8.8were $4.1 million and $3.9$3.5 million, respectively. The increase was primarily due to higher headcount and related increaseincreases in compensation and benefitsother employee-related costs, insurance expense, to supportwhich includes the growth of the businessannual renewal period, and accelerated stock-based compensation amortization expense related to the $9 and $10 tranche RSU price vesting of $1.2 million.
Bad debt expense
Three Months Ended October 31,Six Months Ended October 31,
2020$ Change% Change20192020$ Change% Change2019
Bad debt expense$632,000$224,241 55%$407,759$1,032,000 $383,342 59%$648,658 
As a percentage of revenue4%3%3%3%

Q2 Fiscal 2021 compared to Q2 Fiscal 2020technology costs.
Bad debt expense for Q2 Fiscal 2021 increased to $632,000 from $407,759 for Q2 Fiscal 2020, an increase of $224,241, or 55%. Based on revenue growth trends and review of accounts receivable, the Company evaluated its reserve methodology and increased reserves for Aspen and USU accordingly, as well as $232,000 of Aspen University student accounts were written off.
1H Fiscal 2021 compared to 1H Fiscal 2020
Bad debt expense for 1H Fiscal 2021 increased to $1,032,000 from $648,658 for 1H Fiscal 2020, an increase of $383,342, or 59%. Based on revenue growth trends and review of accounts receivable, the Company evaluated its reserve methodology and increased reserves for Aspen and USU accordingly, as well as $232,000 of Aspen University student accounts were written off in Q2 Fiscal 2021.
Three Months Ended July 31,
2021$ Change% Change2020
Bad debt expense$350,000$(50,000)(13)%$400,000
As a percentage of revenue2%3%

Depreciation and amortization
Three Months Ended October 31,Six Months Ended October 31,
2020$ Change% Change20192020$ Change% Change2019
Depreciation and amortization$526,357$(101,868)(16)%$628,225$1,016,981 $(217,818)(18)%$1,234,799 
As a percentage of revenue3%5%3%6%

Q2 Fiscal 2021 compared to Q2 Fiscal 2020

Depreciation and amortizationBad debt expense decreased as a percentage of total revenue as the prior year reflected the need for Q2 Fiscal 2021 decreased to $526,357 from $628,225 for Q2 Fiscal 2020, a decrease of $101,868, or 16%. The decrease in depreciation and amortization expense is due primarily to intangible assets becoming fully amortized at USU, partially offset by investments in developed capitalized software to supporthigher reserves based on the Company's services.
1H Fiscal 2021 compared to 1H Fiscal 2020
Depreciation and amortization for 1H Fiscal 2021 decreased to $1,016,981 from $1,234,799 for 1H Fiscal 2020, a decreasereview of $217,818, or 18%. The decrease in depreciation and amortization expense is due primarily to intangible assets becoming fully amortized at USU, partially offset by investments in developed capitalized software to support the Company's services.
Other expense, net
Three Months Ended October 31,Six Months Ended October 31,
2020$ Change% Change20192020$ Change% Change2019
Other expense, net$1,536,748$1,240,355 418%$296,393$2,115,503$1,418,223 203%$697,280

aged accounts receivable.
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Q2
Depreciation and amortization
Three Months Ended July 31,
2021$ Change% Change2020
Depreciation and amortization$779,409$288,78559%$490,624
As a percentage of revenue4%3%

The 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 Company's services, partially offset by a decrease of fully 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, comparedpartially offset by interest expense related to Q2 Fiscal 2020the 2% commitment fee on the undrawn portion of the $5 million Revolving Credit Facility payable quarterly.

Other expense, net in Q2Q1 Fiscal 2021 of $1,536,748$578,755 primarily includesincludes: an adjustment of $296,471 related to the previously reported earned revenue fee calculation deemed immaterial to our Fiscal 2019 revenue; interest expense of (i) $1.4 million related to the accelerated amortization expense related to the conversion of the Convertible Notes which occurred on September 14, 2020 and (ii) $111,507$331,510 on the Convertible Notes issued on January 22, 2020 as well as the commitment fee on the Revolving Credit Facility.

Other expense, net in Q2 Fiscal 2020 of $296,393 includes: interest expense of $428,960 primarily related to the Term Loans issued in March 2019Facility; and the commitment fees on the Revolving Credit Facility; partially offset by $132,567 of other income.
1H Fiscal 2021 compared to 1H Fiscal 2020
Other expense, net in 1H Fiscal 2021 of $2,115,503 primarily includes: interest expense of (i) a non-cash charge of $1.4 million of accelerated amortization expense related to the conversion of the Convertible Notes which occurred on September 14, 2020; (ii) $0.5 million for the Convertible Notes issued on January 22, 2020 as well as the commitment fee on the Revolving Credit Facility; (iii) an adjustment of $0.3 million related to the previously reported earned revenue fee calculation deemed immaterial to our Fiscal 2019 revenue; (iv) a non-cash modification and accelerated amortization charges of $0.2 million$149,913 related to the exercise of the 2018 and 2019 Cooperman Warrants on June 5, 2020; partially offset by $0.3 million$198,000 of other income.
Other expense, net in 1H Fiscal 2020 of $697,280 includes: interest expense of $0.8 million on the Term Loans issued in March 2019 and the commitment fees on the Revolving Credit Facility; partially offset by $0.1 million of other income.
Net loss
Three Months Ended October 31,Six Months Ended October 31,
2020$ Change% Change20192020$ Change% Change2019
Net loss$(4,370,525)$(3,732,357)(585)%$(638,168)$(5,313,721)$(2,600,271)(96)%$(2,713,450)
immaterial adjustments.

Income tax expense (benefit)
Three Months Ended July 31,
2021$ Change% Change2020
Income tax expense (benefit)$151,010NMNM$(1,900)
Q2Income tax expense in Q1 Fiscal 2021 compared to Q2 Fiscal 2020

Net loss was $(4,370,525), or net loss per basic and diluted share2022 includes a reserve of $(0.19)approximately $150,000 for Q2 Fiscal 2021 as compared to $(638,168), or net loss per share of $(0.03) for Q2 Fiscal 2020, or an increase in net loss of $(3,732,357), or (585)%.

This increase in net loss of $3.7 million includes $2.6 million of non-cash items previously disclosed ($1.2 million non-cash charge related to the RSU vesting, and the $1.4 million charge related to the conversion of $10 million Convertible Notes). Without these two items, the net loss increase would have been approximately $1.2 million. This $1.2 million increase in net loss year-over-year is a resultestimate of the investmentsCanada foreign income tax liability which covers the 2013 through 2021 tax years during which a permanent establishment was in marketing (approximately $1.6 million), growth opex (approximately $0.25 million)place in Canada. In Q1 Fiscal 2022, the Company filed multi-year Canadian T2 Corporation Income Tax Returns and new campus costs (approximately $0.25 million) disclosed above.
1H Fiscal 2021 compared to 1H Fiscal 2020

Net loss was $(5,313,721), or net loss per basic and diluted share of $(0.23) for 1H Fiscal 2021 as compared to $(2,713,450), or net loss per share of $(0.14) for 1H Fiscal 2020, or an increase in net loss of $(2,600,271), or (96)%related information returns under the Voluntary Disclosure Program with the 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 Adjusted Net Income (Loss), Adjusted Earnings (Loss) Per Share, EBITDA, Adjusted EBITDA, Adjusted EBITDA margin and Adjusted Gross Profit, which are non-GAAP financial measures. We believe that management, analysts and
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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.

General and administrative

Q2 Fiscal 2021 compared to Q2 Fiscal 2020

General and administrative costs for Q2 Fiscal 2021 were $11.3 million or 66% of revenues compared to $7,193,700 or 60% of revenues during Q2 Fiscal 2020, an increase of $4,091,455 or 57%.

Growth of the business includes the element of growth opex. Growth opex represents our investment in key infrastructure projects to support our expansion strategy. In Q2 Fiscal 2021, our growth opex investment of $0.24 million is specifically defined as personnel and related costs to expand our enrollment center, academic and financial aid advisors, and clinical operations personnel. In our enrollment center specifically, we decided to grow our enrollment advisors ("EAs") staff from 96 EAs to 118 EAs, adding EAs across every unit of the Company. We are now fully staffed for the fiscal year to accomplish our enrollment goals for the remainder of the fiscal year. New campus expansion costs were approximately $0.2 million at Aspen University.

This growth spending typically happens in the first half of the fiscal year and is done in conjunction with our increased marketing spend to drive and support the increasing enrollment activity across both universities. This investment in marketing, enrollment staff and other supporting roles will strengthen our student pipeline for enrollments, which will lead to higher course registrations and revenue in Q4 and into our next fiscal year.

For Q2 Fiscal 2021, after removing non-cash stock-based compensation expense of $1.2 million related to the accelerated amortization expense for the price vesting of Executive RSUs at AGI and the growth investments, our remaining consolidated G&A was $9.6 million. This represents an increase of $2.4 million from Q2 Fiscal 2020 compared to the revenue growth of $4.9 million in the year over year quarter, which is in-line with our target to grow general and administrative expense at or below 50% of revenue growth.

1H Fiscal 2021 compared to 1H Fiscal 2020
General and administrative costs for 1H Fiscal 2021 was $20,078,911 or 62% of revenues compared to $13,989,951 or 62% of revenues for 1H Fiscal 2020, an increase of $6,088,960 or 44%.
For 1H Fiscal 2021, after removing non-cash stock-based compensation expense of $1.2 million related to the accelerated amortization expense for the price vesting of Executive RSUs at AGI and the growth investments, our remaining consolidated G&A was $18.3 million. This represents an increase of $4.5 million from 1H Fiscal 2020 compared to the revenue growth of $9.7 million in the year over year period, which is in-line with our target to grow general and administrative expense at or below 50% of revenue growth.

Adjusted Net Income (Loss) and Adjusted Earnings (Loss) Per Share

AGI defines Adjusted Net Income (Loss) as net earnings (loss) from operations adding back stock-based compensation expense and non-recurring charges as reflected in the table below.
Q2 Fiscal 2021 includes non-cash stock-based compensation expense of $1.2 million related to the accelerated amortization expense for the price vesting of Executive RSUs and non-recurring charges of $1.4 million related to the accelerated amortization expense of the original issue discount for the automatic conversion of $10 million Convertible Notes on September 14, 2020, which is included in interest expense on the statement of operations.

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1H 2021 includes non-cash stock-based compensation expense of $1.2 million and non-recurring charges of $1.9 million primarily related to items described above in the Q2 Fiscal 2021 discussion, and $123,947 of interest expense which arose from the acceleration of amortization arising from the exercise of warrants issued to a lender incurred in Q1 Fiscal 2021.
The following table presents a reconciliation of net loss and earnings (loss) per share to Adjusted Net Income (Loss) and Adjusted Earnings (Loss) Per Share:
Three Months Ended October 31,Six Months Ended October 31,
2020201920202019
Earnings (loss) per share$(0.19)$(0.03)$(0.23)$(0.14)
Weighted average number of common stock outstanding*22,791,503 18,985,371 22,763,235 18,859,344 
Net loss$(4,370,525)$(638,168)$(5,313,721)$(2,713,450)
Add back:
   Stock-based compensation1,831,548 492,130 2,318,658 990,547 
   Non-recurring charges1,362,819 — 1,906,203 132,949 
Adjusted Net (Loss)$(1,176,158)$(146,038)$(1,088,860)$(1,589,954)
Adjusted (Loss) per Share$(0.05)$(0.01)$(0.05)$(0.08)
________________
*Same share count used for GAAP and non-GAAP financial measures.

EBITDA and Adjusted EBITDA

AGI defines Adjusted EBITDA as EBITDA excluding: (1) bad debt expense; (2) stock-based compensation; and (3) non-recurring charges.charges or gains. The following table presents a reconciliation of net loss to EBITDA and Adjusted EBITDA:

Three Months Ended October 31,Six Months Ended October 31,
2020201920202019
Net loss$(4,370,525)$(638,168)$(5,313,721)$(2,713,450)
Interest expense, net1,529,517 426,694 1,984,740 846,761 
Taxes36,530 44,168 34,630 134,445 
Depreciation and amortization526,357 628,225 1,016,981 1,234,799 
EBITDA(2,278,121)460,919 (2,277,370)(497,445)
Bad debt expense632,000 407,759 1,032,000 648,658 
Stock-based compensation1,831,548 492,130 2,318,658 990,547 
Non-recurring charges— — 419,437 132,949 
Adjusted EBITDA$185,427 $1,360,808 $1,492,725 $1,274,709 

Q2 Fiscal 2021 comparedEBITDA and of net loss margin to Q2 Fiscal 2020
The Company incurred an EBITDA of $(2,278,121) for Q2 Fiscal 2021 compared to an EBITDA of $460,919 for Q2 Fiscal 2020.the Adjusted EBITDA decreased to $0.2 million for Q2margin:
Three Months Ended July 31,
20212020
Net loss$(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 2021 from Adjusted EBITDA of $1.4 million for Q2 Fiscal 2020.

Aspen University generated $2.2 million of net income, EBITDA of $2.7 million and Adjusted EBITDA of $3.4 million in Q2 Fiscal 2021 as compared to $1.8 million of net income, EBITDA of $2.1 million and Adjusted EBITDA of $2.5 million in Q2 Fiscal 2020. Aspen’s Pre-Licensure BSN program accounted for $1.1 million ofQ1 2022, the $2.7 million EBITDA generated at Aspen University in Q2 Fiscal 2021 as compared to $0.5 million of the $2.1 million EBITDA generated in Q2 Fiscal 2020.

USU generated netnon-recurring income of $0.6 million, EBITDA of $0.6 million and Adjusted EBITDA of $0.7 million$498,120 is from a litigation settlement, which is included in Q2 Fiscal 2021 as compared to netother income of $0.2 million, EBITDA of $0.5 million and Adjusted EBITDA of $0.5 million in Q2 Fiscal 2020.

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AGI corporate incurred net loss of $(7.1 million)(expense), EBITDA of ($5.6 million) and Adjusted EBITDA of ($3.9 million) in Q2 Fiscal 2021 as compared to net loss of $(2.6 million), EBITDA of ($2.1 million) and Adjusted EBITDA of ($1.6 million) in Q2 Fiscal 2020. Adjusted EBITDA in Q2 Fiscal 2021 includes non-cash stock based compensation expense of $1.2 million related to the accelerated amortization expense for the price vesting of Executive RSUs. EBITDA includes $1.4 million related to the accelerated amortization expense of the original issue discount for the automatic conversion of $10 million Convertible Notes on September 14, 2020.

1H Fiscal 2021 compared to 1H Fiscal 2020
The Company incurred an EBITDA of $(2,277,370) for 1H Fiscal 2021 compared to an EBITDA of $(497,445) for 1H Fiscal 2020. Adjusted EBITDA increased to $1,492,725 for 1H Fiscal 2021 from Adjusted EBITDA of $1,274,709 for 1H Fiscal 2020.

Aspen University generated $4.5 million of net income, EBITDA of $5.5 million and Adjusted EBITDA of $6.5 million in 1H Fiscal 2021 as compared to $2.7 million of net income, EBITDA of $3.4 million and Adjusted EBITDA of $4.1 million in 1H Fiscal 2020. Aspen’s Pre-Licensure BSN program accounted for $2.1 million of the $5.5 million EBITDA generated at Aspen University in 1H Fiscal 2021 as compared to $0.9 million of the $3.4 million EBITDA generated in 1H Fiscal 2020.

USU generated net income of $1.6 million, EBITDA of $1.6 million and Adjusted EBITDA of $1.8 million in 1H Fiscal 2021 as compared to net loss of $0.3 million, EBITDA of $0.3 million and Adjusted EBITDA of $0.5 million in 1H Fiscal 2020.

AGI corporate incurred net loss of $(11.4 million), EBITDA of ($9.4 million) and Adjusted EBITDA of ($6.9 million) in 1H Fiscal 2021 as compared to net loss of $(5.2 million), EBITDA of ($4.2 million) and Adjusted EBITDA of ($3.3 million) in 1H Fiscal 2020. Adjusted EBITDA in 1H Fiscal 2021 includes non-cash stock based compensation expense of $1.2 million related to the accelerated amortization expense for the price vesting of Executive RSUs in Q2 Fiscal 2021 and $419,437 of non-recurring charges innet. In Q1 Fiscal 2021, compared to $132,949 of non-recurring charges in Q1 Fiscal 2020. EBITDA in Q2 Fiscal 2021 includes $1.4 million related to the accelerated amortization expense of the original issue discount for the automatic conversion of $10 million Convertible Notes on September 14, 2020. Anthere was an additional non-recurring item in Q1 Fiscal 2021 of $123,947, which is included in interest expense, net, whichthat arose from the acceleration of amortization arising from the exercise of warrants issued to a lender.
The following tables present a reconciliation of net loss to EBITDA and Adjusted EBITDA and of net loss margin to the Adjusted EBITDA margin by business unit:
Three Months Ended July 31, 2021
ConsolidatedAGI CorporateAspen BSN Pre-LicensureAU OnlineAU TotalUSU
Net income (loss)$(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, 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.
Adjusted Gross Profit
AGI defines Adjusted Gross Profit as GAAP Gross Profit including amortization expense which is included inexcluded from cost of revenue on the statements of operations. The following table presents a reconciliation of GAAP Gross Profit to Adjusted 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 %


Three Months Ended October 31,Six Months Ended October 31,
2020201920202019
GAAP Gross Profit$9,289,096$7,638,195$18,280,081$13,403,524
Add back amortization expense included in cost of revenue:
Intangible Asset Amortization10,51616,91722,46336,059
Call Center Software/Website346,653242,797661,760463,250
Total amortization included in cost of revenue357,169259,714684,223499,309
Adjusted Gross Profit$9,646,265$7,897,909$18,964,304$13,902,833
Revenue$16,971,045$12,085,965$32,136,607$22,443,947
Cost of Revenue7,324,7804,188,05613,172,3038,541,114
Adjusted Gross Profit$9,646,265$7,897,909$18,964,304$13,902,833
GAAP Gross Profit as a % of revenue55 %63 %57 %60 %
Adjusted Gross Profit as a % of revenue57 %65 %59 %62 %

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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Q2 Fiscal 2021 compared to Q2 Fiscal 2020
Aspen University GAAP Gross profit increased by 22% to $9,289,096 or 55% gross margin for Q2 Fiscal 2021 from $7,638,195 or 63% gross margin in Q2 Fiscal 2020. Adjusted Gross profit increased 22% to $9,646,265 or 57% gross margin for Q2 Fiscal 2021 from $7,897,909 or 65% gross margin in Q2 Fiscal 2020.

Aspen University gross marginProfit represented 56%53% of Aspen University revenuesrevenue for Q2Q1 Fiscal 2021,Year 2022, and USU gross margin represented 56% of USU revenues for Q2 Fiscal 2021.

1H Fiscal 2021 compared to 1H Fiscal 2020
GAAP Gross profit increased by 36% to $18,280,081 or 57% gross margin for 1H Fiscal 2021 from $13,403,524 or 60% gross margin in 1H Fiscal 2020. Adjusted Gross profit increased 36% to $18,964,304 or 59% gross margin for 1H Fiscal 2021 from $13,902,833 or 62% gross margin in 1H Fiscal 2020.
Aspen University gross margin represented 58% of Aspen University revenues for 1H Fiscal 2021, and USU gross marginProfit represented 60% of USU revenuesrevenue for 1HQ1 Fiscal 2021.Year 2022.
Liquidity and Capital Resources
A summary of the Company's cash flows is as follows:
Six Months Ended
October 31,
20202019
Net cash (used in) provided by
   Operating activities$(2,076,821)$(2,025,107)
   Investing activities(2,244,723)(1,253,653)
   Financing activities3,297,107 237,713 
   Net decrease in cash$(1,024,437)$(3,041,047)
Three Months Ended
July 31,
20212020
Net cash (used in) provided by
   Operating activities$(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 sixthree months ended OctoberJuly 31, 20202021 consists of net loss adjusted for non-cash items and the effect of changes in working capital. Non-cash adjustments include stock-based compensation, bad debt expense, depreciation and amortization expense, amortization of debt discounts and issue costs, warrants issued for services, modification charge for warrants exercised, loss on asset dispositioncommon shares issued for services and other adjustments.
Adjustments to Netnet loss consist primarily of stock-based compensation of $2,318,658, amortization of debt discounts of $1,550,854, bad debt expense of $1,032,000 and depreciation and amortization expense of $1,016,981.$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 increase from changes in working capital primarily consists of an increasedecreases in deferred revenue of $2.1 million and increases in gross accounts receivable (both short and long term accounts receivable, before allowance for doubtful accounts) of $8,246,180, partially offset by an increase$1,879,318. The decrease in deferred revenue is due primarily to timing of $4,915,504 and accrued expenses of $1,282,983.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 as well as timing of billings for class start near the end of Q2 Fiscal 2021. The increase in deferred revenue is due primarily to timing of billings for class start near the end of Q2 Fiscal 2021. The increase in accrued expenses is due primarily to accrual of executive bonus for Fiscal 2021, accrued payroll due to higher headcount and related increase in compensation and benefits expense to support the growth of the business and an increase in accrued marketing due to timing.

starts.
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 operations for the sixthree months ended OctoberJuly 31, 20192020 consist primarily of depreciation and amortization expense of $1,234,799,$490,624, stock-based compensation of $889,484 and$487,110, bad debt expense of $648,658.$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 consists of an increase in gross accounts receivable (both short and long term accounts receivable, before allowance for doubtful accounts) of $5,211,195,$2.7 million, partially offset by an increaseincreases in deferred revenue of $3,052,996.$1.1 million. The
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increase in accounts receivable is primarily attributed to the growth in revenuesrevenue from increased enrollments and students paying through the monthly payment plan as well as timing of billings for class start near the end of Q2 Fiscal 2020.starts. The increase in deferred revenue is due primarily to timing of billings for class start near the end of Q2 Fiscal 2020.starts.

Net Cash Used in Investing Activities
Net cash used in investing activities for the sixthree months ended OctoberJuly 31, 20202021 includes purchases of property and equipment of $2,233,348$0.8 million primarily due to investments in leasehold improvements, computer equipment and hardware, Company developed software and new campuses;campuses and purchases of courseware and accreditation of $11,375.$0.1 million.
Net cash used in investing activities for the sixthree months ended OctoberJuly 31, 20192020 primarily includes purchases of property and equipment of $1,244,078 primarily due$0.7 million mostly attributed to investments in Company developed software, computerthe purchase of property and equipment and hardware and instructional equipment; and purchases of courseware and accreditation of $9,575.as we build out our campuses.
Net Cash Provided By Financing Activities
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Net cash provided by financing activities for the sixthree months ended OctoberJuly 31, 2021 includes proceeds from stock options exercised of $22,548.
Net cash provided by financing activities for the three months ended July 31, 2020 includes proceeds from stock options exercised of $2,215,315$1,269,982 and proceeds from warrants exercised of $1,081,792 received from the cash exercise of warrants associated with the Term LoanLoans and Revolving Credit Facility.
Net cash provided by financing activities for the six months ended October 31, 2019 includes proceeds from stock options exercised of $237,713.

Liquidity and Capital Resources
At December 10, 2020, the Company hadOur cash depositsbalances are kept liquid to support our growing infrastructure needs. The majority of approximately $15.9 million and approximately $3.2 million of restricted cash.our cash is concentrated in large financial institutions.
The Company also has access to a $5 million Revolving Credit Facility. At OctoberJuly 31, 20202021 and April 30, 2020,2021, there were no outstanding borrowings under this credit facility. With
On August 31, 2021, the conversionCompany 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 Convertible Notes on September 14, 2020,Revolving Credit Facility, the Company does not intenddrew 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 under this facility.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 FY Fiscal 2021year 2022 capital expenditures are expected to be higherlower than FY Fiscal 2020Year 2021 capital expenditures by approximately $1.0$0.5 million related to new campus costs. Additionally, the Company expects additional cash commitments for letters of creditscredit 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.
Our cash balances are kept liquid 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 support our growing infrastructure needs. The majority of our cash is concentrated in large financial institutions.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
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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.
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 the 2017 acquisition of USU. Goodwill has an indefinite life and is not amortized. Goodwill is tested annually for impairment.
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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 OctoberJuly 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 our goal of achieving positive GAAP net income by Q4 of the fiscal year 2022, our plan to decrease advertising spend on our lower efficiency unit and shift 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, including Nashville, TN, the
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impact of bookings and ARPU, our beliefs with respect to the impact of COVID-19 on class starts and enrollments, the impact of the new federal vaccination mandate on our future results of operations,the expected effectsources of telehealth partnership with A-APN, including in relation to expected graduation dates,future revenue growth, our planned USU MSN-FNP weekend lab immersion expansions,anticipated working capital trends, the anticipated impactintended use of our investment in marketing, enrollment staff and other supporting roles on our student pipeline for enrollments, course registrations and revenue in Q4 fiscal 2021 andproceeds from the next fiscal year,drawdown under the planned introduction of double cohorts in the core Pre-Licensure BSN Programrevolving credit facility and the expected effect of this increase on our revenue run rate at our main campus, the expected impact of bookings, our estimates concerning Lifetime Value and ARPU, the expected revenue growth, including growth in our future revenues from the Aspen University’s Pre-Licensure BSN Program and USU’s MSN-FNP Program as a percentage of revenue, the expected changes in our accounts receivable and allowance for doubtful accounts, including as a percentage of total revenue, our anticipated increase in cash flows from operations, the expected impact of the COVID-19 vaccines’ rollout on Q4 2021 course starts, our expectations with respect to capital expenditures related to new campus openings and cash commitments, and future liquidity.letters of 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 launchfiscal year 2022 business plan and the accuracy of the assumptions used in estimating the results of such implementation, unanticipated issues with, and delays in, launching phase two of our future campuses in a timely fashion or at all,in-house CRM and the continued ability of our in-housethe 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, any delays or other issues occurringcompetition from nursing schools in local markets, risks stemming from the manufacturing, delivery and administration of COVID-19 vaccines,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.
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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  
On August 12, 2020,July 21, 2021, the Company issued 25,000 common stock purchase warrants to a former directormember of the Company cashlessly exercised optionsBoard 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 purchase 3,333 sharescontinued service on the Company's Advisory Board on each applicable vesting date. The warrants will terminate automatically and immediately upon the expiration of common stock and received 1,963 sharesthe exercise period. The issuance of common stock. The cashless option exercisethe warrants was exempt from registration underpursuant to Section 3(a)(9)4(a)(2) of the Securities Act of 1933.1933 (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

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
2012 Equity Incentive Plan, as amended*S-89/21/2010.1
2018 Equity Incentive Plan, as amended*S-89/21/2010.2
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.
December 15, 2020September 14, 2021By:/s/ Michael Mathews
Michael Mathews
Chief Executive Officer
(Principal Executive Officer)


December 15, 2020September 14, 2021By:/s/ Frank J. CotroneoMatthew LaVay
Frank J. CotroneoMatthew LaVay
Chief Financial Officer
(Principal Financial Officer)


December 15, 2020September 14, 2021By:/s/ Robert Alessi
Robert Alessi
Chief Accounting Officer
(Principal Accounting Officer)

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