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 ~~October~~January 31, ~~2021~~2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the transition period from ___________ to ___________

Commission file number 001-38175

ASPEN GROUP, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware

27-1933597

State or Other Jurisdiction of Incorporation or Organization

I.R.S. Employer Identification No.

276 Fifth Avenue, Suite 505, New York, New York

10001

Address of Principal Executive Offices

Zip Code

(646) 448-5144

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001	ASPU	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


Class						Outstanding as of ~~December 10, 2021~~March 11, 2022
Common Stock, $0.001 par value per share						~~25,034,375~~25,190,410 shares

Table of Contents

TABLE OF CONTENTS


		Page Number
	PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements.	1
	Consolidated Balance Sheets	1
	Consolidated Statements of Operations (Unaudited)	3
	Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)	4
	Consolidated Statements of Cash Flows (Unaudited)	56
	Condensed Notes to Consolidated Financial Statements (Unaudited)	8
	Note 1. Nature of Operations	8
	Note 2. Significant Accounting Policies	9
	Note 3. Property and Equipment	11
	Note 4. Courseware and Accreditation	11
	Note 5. Secured Note and Accounts Receivable	12
	Note 6. ~~Long-term~~ Debt	12
	Note 7. Stockholders' Equity	1312
	Note 8. Revenue	17
	Note 9. Leases	1819
	Note 10. ~~Income~~ Taxes	20
	Note 11. Commitments and Contingencies	20
	Note 12. Subsequent Events	22

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	2324

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	3840

Item 4.	Controls and Procedures.	3840

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings.	3942

Item 1A.	Risk Factors.	3942

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	3942

Item 3.	Defaults Upon Senior Securities.	3942

Item 4.	Mine Safety Disclosures.	3942

Item 5.	Other Information.	3942

Item 6.	Exhibits.	3943

	SIGNATURES	4145

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ASPEN GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


		October 31, 2021		April 30, 2021			January 31, 2022		April 30, 2021
		(Unaudited)					(Unaudited)
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	10,985,131	$	12,472,082	Cash and cash equivalents	$	5,969,286	$	12,472,082
Restricted cash	Restricted cash	1,433,397		1,193,997		Restricted cash	1,433,397		1,193,997
Accounts receivable, net of allowance of $3,345,182 and $3,289,816, respectively		21,309,982		16,724,744
Accounts receivable, net of allowance of $3,381,204 and $3,289,816, respectively						Accounts receivable, net of allowance of $3,381,204 and $3,289,816, respectively	19,635,715		16,724,744
Prepaid expenses	Prepaid expenses	1,577,516		1,077,831		Prepaid expenses	1,375,628		1,077,831
Other current assets	Other current assets	20,631		68,529		Other current assets	31,032		68,529
Total current assets	Total current assets	35,326,657		31,537,183		Total current assets	28,445,058		31,537,183

Property and equipment:	Property and equipment:					Property and equipment:
Computer equipment and hardware	Computer equipment and hardware	1,402,006		956,463		Computer equipment and hardware	1,486,201		956,463
Furniture and fixtures	Furniture and fixtures	1,976,342		1,705,101		Furniture and fixtures	2,153,124		1,705,101
Leasehold improvements	Leasehold improvements	7,057,859		5,729,324		Leasehold improvements	7,179,896		5,729,324
Instructional equipment	Instructional equipment	608,894		421,039		Instructional equipment	656,409		421,039
Software	Software	9,386,352		8,488,635		Software	9,829,329		8,488,635
Construction in progress	Construction in progress	900		247,767		Construction in progress	900		247,767
		20,432,353		17,548,329			21,305,859		17,548,329
Less: accumulated depreciation and amortization	Less: accumulated depreciation and amortization	(6,672,208)		(4,892,987)		Less: accumulated depreciation and amortization	(7,533,571)		(4,892,987)
Total property and equipment, net	Total property and equipment, net	13,760,145		12,655,342		Total property and equipment, net	13,772,288		12,655,342
Goodwill	Goodwill	5,011,432		5,011,432		Goodwill	5,011,432		5,011,432
Intangible assets, net	Intangible assets, net	7,907,503		7,908,360		Intangible assets, net	7,907,075		7,908,360
Courseware, net	Courseware, net	299,914		187,296		Courseware, net	289,680		187,296
Accounts receivable, net of allowance of $— and $625,963, respectively	Accounts receivable, net of allowance of $— and $625,963, respectively	—		45,329		Accounts receivable, net of allowance of $— and $625,963, respectively	—		45,329
Long-term contractual accounts receivable	Long-term contractual accounts receivable	12,663,815		10,249,833		Long-term contractual accounts receivable	12,701,452		10,249,833
Deferred financing costs	Deferred financing costs	117,857		18,056		Deferred financing costs	88,393		18,056
Operating lease right of use assets, net	Operating lease right of use assets, net	13,510,656		12,714,863		Operating lease right of use assets, net	13,090,470		12,714,863
Deposits and other assets	Deposits and other assets	515,569		479,212		Deposits and other assets	523,898		479,212
Total assets	Total assets	$	89,113,548	$	80,806,906	Total assets	$	81,829,746	$	80,806,906

(Continued)

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

Table of Contents

ASPEN GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (CONTINUED)


		October 31, 2021		April 30, 2021			January 31, 2022		April 30, 2021
		(Unaudited)					(Unaudited)
Liabilities and Stockholders’ Equity	Liabilities and Stockholders’ Equity					Liabilities and Stockholders’ Equity
Liabilities:	Liabilities:					Liabilities:
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	2,102,624	$	1,466,488	Accounts payable	$	1,806,656	$	1,466,488
Accrued expenses	Accrued expenses	1,772,808		2,040,896		Accrued expenses	2,079,249		2,040,896
Deferred revenue	Deferred revenue	10,191,241		6,825,014		Deferred revenue	6,182,781		6,825,014
Due to students	Due to students	3,219,643		2,747,484		Due to students	3,229,516		2,747,484
Operating lease obligations, current portion	Operating lease obligations, current portion	2,145,431		2,029,821		Operating lease obligations, current portion	2,106,981		2,029,821
Credit Facility						Credit Facility	5,000,000		—
Other current liabilities	Other current liabilities	96,003		307,921		Other current liabilities	136,027		307,921
Total current liabilities	Total current liabilities	19,527,750		15,417,624		Total current liabilities	20,541,210		15,417,624

Long-term debt		5,000,000		—
Operating lease obligations, less current portion	Operating lease obligations, less current portion	17,732,483		16,298,808		Operating lease obligations, less current portion	17,317,396		16,298,808
Total liabilities	Total liabilities	42,260,233		31,716,432		Total liabilities	37,858,606		31,716,432

Commitments and contingencies – see Note 11	Commitments and contingencies – see Note 11	0		0		Commitments and contingencies – see Note 11	0		0

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, 2021 and April 30, 2021		—		—
0 issued and 0 outstanding at January 31, 2022 and April 30, 2021						0 issued and 0 outstanding at January 31, 2022 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,					Common stock, $0.001 par value; 40,000,000 shares authorized,
25,148,194 issued and 24,992,708 outstanding at October 31, 2021
25,228,580 issued and 25,073,094 outstanding at January 31, 2022						25,228,580 issued and 25,073,094 outstanding at January 31, 2022
25,066,297 issued and 24,910,811 outstanding at April 30, 2021	25,066,297 issued and 24,910,811 outstanding at April 30, 2021	25,149		25,067		25,066,297 issued and 24,910,811 outstanding at April 30, 2021	25,229		25,067
Additional paid-in capital	Additional paid-in capital	110,526,729		109,040,824		Additional paid-in capital	111,378,471		109,040,824
Treasury stock (155,486 at both October 31, 2021 and April 30, 2021)		(1,817,414)		(1,817,414)
Treasury stock (155,486 at both January 31, 2022 and April 30, 2021)						Treasury stock (155,486 at both January 31, 2022 and April 30, 2021)	(1,817,414)		(1,817,414)
Accumulated deficit	Accumulated deficit	(61,881,149)		(58,158,003)		Accumulated deficit	(65,615,146)		(58,158,003)
Total stockholders’ equity	Total stockholders’ equity	46,853,315		49,090,474		Total stockholders’ equity	43,971,140		49,090,474
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	89,113,548	$	80,806,906	Total liabilities and stockholders’ equity	$	81,829,746	$	80,806,906

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

Table of Contents

ASPEN GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


		Three Months Ended October 31,				Six Months Ended October 31,					Three Months Ended January 31,				Nine Months Ended January 31,
		2021		2020		2021		2020			2022		2021		2022		2021
Revenue	Revenue	$	18,940,211	$	16,971,045	$	38,371,206	$	32,136,607	Revenue	$	18,944,798	$	16,624,837	$	57,316,004	$	48,761,444

Operating expenses:	Operating expenses:									Operating expenses:
Cost of revenue (exclusive of depreciation and amortization shown separately below)	Cost of revenue (exclusive of depreciation and amortization shown separately below)	8,789,201		7,324,780		17,382,769		13,172,303		Cost of revenue (exclusive of depreciation and amortization shown separately below)	9,275,419		7,559,951		26,658,188		20,732,254
General and administrative	General and administrative	11,641,312		11,285,155		22,587,789		20,078,911		General and administrative	11,771,487		10,644,438		34,359,276		30,723,349
Bad debt expense	Bad debt expense	350,000		632,000		700,000		1,032,000		Bad debt expense	350,000		670,000		1,050,000		1,702,000
Depreciation and amortization	Depreciation and amortization	817,234		526,357		1,596,643		1,016,981		Depreciation and amortization	883,536		535,273		2,480,179		1,552,254
Total operating expenses	Total operating expenses	21,597,747		19,768,292		42,267,201		35,300,195		Total operating expenses	22,280,442		19,409,662		64,547,643		54,709,857

Operating loss	Operating loss	(2,657,536)		(2,797,247)		(3,895,995)		(3,163,588)		Operating loss	(3,335,644)		(2,784,825)		(7,231,639)		(5,948,413)

Other income (expense):	Other income (expense):									Other income (expense):
Interest expense	Interest expense	(139,502)		(1,529,668)		(173,041)		(1,985,125)		Interest expense	(180,697)		(33,539)		(353,738)		(2,018,664)
Other (expense) income, net		(49,320)		(7,080)		502,800		(130,378)
Other income (expense), net										Other income (expense), net	13,954		13,558		516,754		(116,820)
Total other (expense) income, net	Total other (expense) income, net	(188,822)		(1,536,748)		329,759		(2,115,503)		Total other (expense) income, net	(166,743)		(19,981)		163,016		(2,135,484)

Loss before income taxes	Loss before income taxes	(2,846,358)		(4,333,995)		(3,566,236)		(5,279,091)		Loss before income taxes	(3,502,387)		(2,804,806)		(7,068,623)		(8,083,897)

Income tax expense	Income tax expense	5,900		36,530		156,910		34,630		Income tax expense	231,610		10,460		388,520		45,090

Net loss	Net loss	$	(2,852,258)	$	(4,370,525)	$	(3,723,146)	$	(5,313,721)	Net loss	$	(3,733,997)	$	(2,815,266)	$	(7,457,143)	$	(8,128,987)

Net loss per share - basic and diluted	Net loss per share - basic and diluted	$	(0.11)	$	(0.19)	$	(0.15)	$	(0.23)	Net loss per share - basic and diluted	$	(0.15)	$	(0.11)	$	(0.30)	$	(0.35)

Weighted average number of common stock outstanding - basic and diluted	Weighted average number of common stock outstanding - basic and diluted	24,957,046		22,791,503		24,935,793		22,763,235		Weighted average number of common stock outstanding - basic and diluted	25,041,733		24,544,334		24,971,056		23,354,036

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

Table of Contents

ASPEN GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Three Months Ended ~~October~~January 31, ~~2021~~2022 and ~~2020~~2021

(Unaudited)


		Common Stock			Additional Paid-In Capital				Treasury Stock			Accumulated Deficit					Total Stockholders’ Equity				Common Stock								Additional Paid-In Capital					Treasury Stock			Accumulated Deficit			Total Stockholders’ Equity
		Shares	Amount								Shares									Amount
Balance at July 31, 2021		25,087,051	$	25,088			$	109,617,521						$	(1,817,414)				$	(59,028,891)				$	48,796,304
Balance at October 31, 2021																				Balance at October 31, 2021	25,148,194					$	25,149			$	110,526,729				$	(1,817,414)		$	(61,881,149)		$	46,853,315
Stock-based compensation	Stock-based compensation	—	—		722,158				—			—					722,158			Stock-based compensation	—					—			700,697					—			—			700,697
Common stock issued for stock options exercised for cash	Common stock issued for stock options exercised for cash	11,655	12		33,474				—			—					33,486			Common stock issued for stock options exercised for cash	41,667					41			134,959					—			—			135,000
Common stock issued for cashless stock options exercised		30,156	30		(30)				—			—					—
Common stock issued for vested restricted stock units	Common stock issued for vested restricted stock units	19,332	19		(19)				—			—					—			Common stock issued for vested restricted stock units	38,719					39			(39)					—			—			—
Amortization of warrant based cost	Amortization of warrant based cost	—	—		16,125				—			—					16,125			Amortization of warrant based cost	—					—			16,125					—			—			16,125
Warrants issued for deferred financing costs related to Credit Facility		—	—		137,500				—			—					137,500
Net loss	Net loss	—	—		—				—			(2,852,258)					(2,852,258)			Net loss	—					—			—					—			(3,733,997)			(3,733,997)
Balance at October 31, 2021		25,148,194	$	25,149	$	110,526,729			$	(1,817,414)		$	(61,881,149)				$	46,853,315
Balance at January 31, 2022																				Balance at January 31, 2022	25,228,580					$	25,229		$	111,378,471				$	(1,817,414)		$	(65,615,146)		$	43,971,140

		Common Stock			Additional Paid-In Capital				Treasury Stock			Accumulated Deficit					Total Stockholders’ Equity
		Shares	Amount
Balance at July 31, 2020		22,377,744	$	22,378			$	92,378,584							$	(70,000)						$	(48,652,226)				$	43,678,736

																					Common Stock								Additional Paid-In Capital					Treasury Stock			Accumulated Deficit			Total Stockholders’ Equity
																					Shares					Amount
Balance at October 31, 2020																				Balance at October 31, 2020	24,416,539					$	24,417					$	105,092,551				$	—		$	(53,022,751)		$	52,094,217
Stock-based compensation	Stock-based compensation	—	—		1,831,548				—			—					1,831,548			Stock-based compensation	—					—			701,170					—			—			701,170
Common stock issued for stock options exercised for cash	Common stock issued for stock options exercised for cash	502,412	502		944,830				—			—					945,332			Common stock issued for stock options exercised for cash	447,134					447			2,180,352					(1,817,414)			—			363,385
Common stock issued for cashless stock options exercised		22,339	22		(22)				—			—					—
Common stock issued for conversion of Convertible Notes		1,398,602	1,399		9,998,601				—			—					10,000,000
Common stock issued for vested restricted stock units	Common stock issued for vested restricted stock units	132,109	132		(132)				—			—					—			Common stock issued for vested restricted stock units	74,000					74			(74)					—			—			—
Common stock issued for services																				Common stock issued for services	2,000					2			19,898					—			—			19,900
Amortization of warrant based cost	Amortization of warrant based cost	—	—		9,125				—			—					9,125			Amortization of warrant based cost	—					—			9,125					—			—			9,125
Cancellation of Treasury Stock		(16,667)	(17)		(69,983)				70,000			—					—
Net loss	Net loss	—	—		—				—			(4,370,525)					(4,370,525)			Net loss	—					—			—					—			(2,815,266)			(2,815,266)
Balance at October 31, 2020		24,416,539	$	24,416	$	105,092,551			$	—		$	(53,022,751)				$	52,094,216
Balance at January 31, 2021																				Balance at January 31, 2021	24,939,673					$	24,940		$	108,003,022				$	(1,817,414)		$	(55,838,017)		$	50,372,531

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

Table of Contents

ASPEN GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (CONTINUED)

~~Six~~Nine Months Ended ~~October~~January 31, ~~2021~~2022 and ~~2020~~2021

(Unaudited)

Common Stock Additional
Paid-In
Capital Treasury
Stock Accumulated
Deficit Total
Stockholders’
Equity
Shares Amount
Balance at April 30, 2021 25,066,297 $ 25,067 $ 109,040,824 $ (1,817,414) $ (58,158,003) $ 49,090,474
Stock-based compensation — — 1,264,870 — — 1,264,870
Common stock issued for stock options exercised for cash 16,752 17 56,017 — — 56,034
Common stock issued for cashless stock options exercised 30,156 30 (30) — — —
Common stock issued for vested restricted stock units 34,989 35 (35) — — —
Amortization of warrant based cost — — 27,583 — — 27,583
Warrants issued for deferred financing costs related to Credit Facility — — 137,500 — — 137,500
Net loss — — — — (3,723,146) (3,723,146)
Balance at October 31, 2021 25,148,194 $ 25,149 $ 110,526,729 $ (1,817,414) $ (61,881,149) $ 46,853,315
Common Stock Additional
Paid-In
Capital Treasury
Stock Accumulated
Deficit Total
Stockholders’
Equity
Shares Amount
Balance at April 30, 2020 21,770,520 $ 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 cash 917,587 918 2,214,397 — — 2,215,315
Common stock issued for cashless stock options exercised 22,339 22 (22) — — —
Common stock issued for conversion of Convertible Notes 1,398,602 1,399 9,998,601 — — 10,000,000
Common stock issued for vested restricted stock units 132,109 132 (132) — — —
Common stock issued for warrants exercised for cash 192,049 191 1,081,600 — — 1,081,791
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 — —
Net loss — — — — (5,313,721) (5,313,721)
Balance at October 31, 2020 24,416,539 $ 24,416 $ 105,092,551 $ — $ (53,022,751) $ 52,094,216


	Common Stock			Additional Paid-In Capital		Treasury Stock		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance at April 30, 2021	25,066,297	$	25,067	$	109,040,824	$	(1,817,414)	$	(58,158,003)	$	49,090,474
Stock-based compensation	—	—		1,965,567		—		—		1,965,567
Common stock issued for stock options exercised for cash	58,419	58		190,976		—		—		191,034
Common stock issued for cashless stock options exercised	30,156	30		(30)		—		—		—
Common stock issued for vested restricted stock units	73,708	74		(74)		—		—		—
Amortization of warrant based cost	—	—		43,708		—		—		43,708
Warrants issued for deferred financing costs related to Credit Facility	—	—		137,500		—		—		137,500
Net loss	—	—		—		—		(7,457,143)		(7,457,143)
Balance at January 31, 2022	25,228,580	$	25,229	$	111,378,471	$	(1,817,414)	$	(65,615,146)	$	43,971,140


	Common Stock			Additional Paid-In Capital		Treasury Stock		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance at April 30, 2020	21,770,520	$	21,771	$	89,505,216	$	(70,000)	$	(47,709,030)	$	41,747,957
Stock-based compensation	—	—		3,019,828		—		—		3,019,828
Common stock issued for stock options exercised for cash	1,364,721	1,365		4,394,749		(1,817,414)		—		2,578,700
Common stock issued for cashless stock options exercised	22,339	22		(22)		—		—		—
Common stock issued for conversion of Convertible Notes	1,398,602	1,399		9,998,601		—		—		10,000,000
Common stock issued for vested restricted stock units	206,109	206		(206)		—		—		—
Common stock issued for warrants exercised for cash	192,049	192		1,081,600		—		—		1,081,792
Common stock issued for services	2,000	2		19,898		—		—		19,900
Modification charge for warrants exercised	—	—		25,966		—		—		25,966
Amortization of warrant based cost	—	—		27,375		—		—		27,375
Cancellation of Treasury Stock	(16,667)	(17)		(69,983)		70,000		—		—
Net loss	—	—		—		—		(8,128,987)		(8,128,987)
Balance at January 31, 2021	24,939,673	$	24,940	$	108,003,022	$	(1,817,414)	$	(55,838,017)	$	50,372,531

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,					Nine Months Ended January 31,
		2021		2020			2022		2021
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net loss	Net loss	$	(3,723,146)	$	(5,313,721)	Net loss	$	(7,457,143)	$	(8,128,987)
Adjustments to reconcile net loss to net cash used in operating activities:	Adjustments to reconcile net loss to net cash used in operating activities:					Adjustments to reconcile net loss to net cash used in operating activities:
Bad debt expense	Bad debt expense	700,000		1,032,000		Bad debt expense	1,050,000		1,702,000
Depreciation and amortization	Depreciation and amortization	1,596,643		1,016,981		Depreciation and amortization	2,480,179		1,552,254
Stock-based compensation	Stock-based compensation	1,264,870		2,318,658		Stock-based compensation	1,965,567		3,019,828
Amortization of warrant based cost	Amortization of warrant based cost	27,583		18,250		Amortization of warrant based cost	43,708		27,375
Amortization of debt discounts	Amortization of debt discounts	—		1,550,854		Amortization of debt discounts	—		1,550,854
Amortization of debt issue costs	Amortization of debt issue costs	18,056		147,695		Amortization of debt issue costs	18,056		156,029
Amortization of deferred financing costs	Amortization of deferred financing costs	19,643		—		Amortization of deferred financing costs	49,107		—
Modification charge for warrants exercised	Modification charge for warrants exercised	—		25,966		Modification charge for warrants exercised	—		25,966
Loss on asset disposition	Loss on asset disposition	36,442		—		Loss on asset disposition	36,445		—
Lease benefit	Lease benefit	(63,099)		—		Lease benefit	(96,450)		—
Tenant improvement allowances received from landlords	Tenant improvement allowances received from landlords	816,591		—		Tenant improvement allowances received from landlords	816,591		—
Common stock issued for services						Common stock issued for services	—		19,900
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Accounts receivable	Accounts receivable	(7,699,220)		(8,246,180)		Accounts receivable	(6,412,590)		(6,493,238)
Prepaid expenses	Prepaid expenses	(520,685)		(654,268)		Prepaid expenses	(297,797)		(267,526)
Other receivables	Other receivables	—		23,097		Other receivables	—		23,097
Other current assets	Other current assets	47,901		(273,767)		Other current assets	37,498		(1,205,083)
Accounts receivable, other	Accounts receivable, other	45,329		—		Accounts receivable, other	45,329		—
Deposits and other assets	Deposits and other assets	(15,357)		(171,303)		Deposits and other assets	(44,686)		(185,599)
Accounts payable	Accounts payable	636,136		838,421		Accounts payable	340,168		(349,882)
Accrued expenses	Accrued expenses	(268,088)		1,282,983		Accrued expenses	38,353		1,756,102
Due to students	Due to students	472,159		(301,619)		Due to students	482,032		(128,154)
Deferred revenue	Deferred revenue	3,366,227		4,915,504		Deferred revenue	(642,233)		1,887,377
Other current liabilities	Other current liabilities	(211,918)		(286,372)		Other current liabilities	(171,894)		(238,032)
Net cash used in operating activities	Net cash used in operating activities	(3,453,933)		(2,076,821)		Net cash used in operating activities	(7,719,760)		(5,275,719)
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Purchases of courseware and accreditation	Purchases of courseware and accreditation	(149,751)		(11,375)		Purchases of courseware and accreditation	(161,262)		(31,330)
Purchases of property and equipment	Purchases of property and equipment	(2,699,901)		(2,233,348)		Purchases of property and equipment	(3,573,408)		(2,877,758)
Net cash used in investing activities	Net cash used in investing activities	(2,849,652)		(2,244,723)		Net cash used in investing activities	(3,734,670)		(2,909,088)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Borrowings under the Credit Facility	Borrowings under the Credit Facility	5,000,000		—		Borrowings under the Credit Facility	5,000,000		—
Proceeds from stock options exercised	Proceeds from stock options exercised	56,034		2,215,315		Proceeds from stock options exercised	191,034		2,578,700
Proceeds from warrants exercised	Proceeds from warrants exercised	—		1,081,792		Proceeds from warrants exercised	—		1,081,792
Net cash provided by financing activities	Net cash provided by financing activities	5,056,034		3,297,107		Net cash provided by financing activities	5,191,034		3,660,492

(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,					Nine Months Ended January 31,
		2021		2020			2022		2021
Net decrease in cash, cash equivalents and restricted cash	Net decrease in cash, cash equivalents and restricted cash	$	(1,247,551)	$	(1,024,437)	Net decrease in cash, cash equivalents and restricted cash	$	(6,263,396)	$	(4,524,315)
Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	13,666,079		17,906,765		Cash, cash equivalents and restricted cash at beginning of period	13,666,079		17,906,765
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	12,418,528	$	16,882,328	Cash, cash equivalents and restricted cash at end of period	$	7,402,683	$	13,382,450

Supplemental disclosure cash flow information:	Supplemental disclosure cash flow information:					Supplemental disclosure cash flow information:
Cash paid for interest	Cash paid for interest	$	98,904	$	285,749	Cash paid for interest	$	258,630	$	310,958
Cash paid for income taxes	Cash paid for income taxes	$	157,552	$	38,608	Cash paid for income taxes	$	13,520	$	49,008

Supplemental disclosure of non-cash investing and financing activities:	Supplemental disclosure of non-cash investing and financing activities:					Supplemental disclosure of non-cash investing and financing activities:
Common stock issued for conversion of Convertible Notes	Common stock issued for conversion of Convertible Notes	$	—	$	10,000,000	Common stock issued for conversion of Convertible Notes	$	—	$	10,000,000
Warrants issued as part of Credit Facility	Warrants issued as part of Credit Facility	$	137,500	$	—	Warrants issued as part of Credit Facility	$	137,500	$	—

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the accompanying consolidated balance sheet to the total amounts shown in the accompanying unaudited consolidated statements of cash flows:


		October 31, 2021		April 30, 2021			January 31, 2022		April 30, 2021
Cash and cash equivalents	Cash and cash equivalents	$	10,985,131	$	12,472,082	Cash and cash equivalents	$	5,969,286	$	12,472,082
Restricted cash	Restricted cash	1,433,397		1,193,997		Restricted cash	1,433,397		1,193,997
Total cash, cash equivalents and restricted cash	Total cash, cash equivalents and restricted cash	$	12,418,528	$	13,666,079	Total cash, cash equivalents and restricted cash	$	7,402,683	$	13,666,079

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

~~October~~January 31, ~~2021~~2022

(Unaudited)

Note 1. Nature of Operations

Overview

Aspen Group, Inc. ("AGI") is an education technology holding company. AGI has 2 subsidiaries, Aspen University Inc. ("Aspen University"), organized in 1987, 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.

Since 1993, Aspen University has been nationally accredited by the Distance Education Accrediting Council (“DEAC”), an institutional accrediting agency recognized by the United States Department of Education (the “DOE”), through January 2024.

Since 2009, USU has been institutionally 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 ~~12,442~~11,889 of the Company’s total student body of ~~14,318~~13,724 students at the end of the ~~second~~third quarter of fiscal 2022. Of the ~~12,442~~11,889 nursing students, ~~2,500~~2,277 are BSN Pre-Licensure students located across our 4 metro locations (Phoenix, Austin, Tampa and Nashville). The remaining ~~9,942~~9,612 nursing students are licensed registered nurses (RNs) studying to earn an advanced degree (RN to BSN, MSN, MSN-FNP or DNP degree programs). Therefore, these ~~9,942~~9,612 post-licensure nursing students represent ~~69%~~70% of the Company’s total student body at the end of the third quarter and are the ~~population of~~ AGI students primarily affected by the COVID-19 pandemic.

Starting in the second half of June 2021 and continuing through ~~October 2021,~~January 2022, the Company saw lower course starts than seasonally expected among our RN student body. For example, at Aspen University, course starts among RNs from June through ~~October~~January 2022 increased by approximately 3% year-over-year. By comparison, over the previous two full fiscal years (Fiscal Year 2021 and Fiscal Year 2020), course starts among RNs at Aspen University increased by an average of approximately 10% year-over-year.

In terms of new student enrollments, the Company saw enrollment growth on a quarterly sequential basis in all BSN Pre-Licensure metros as these prospective students continue to communicate a strong desire to enter the nursing profession. However, aggregate enrollments among RNs at both Aspen University and United States University were relatively flat on a quarterly sequential basis.

We cannot be certain what impact ~~the Delta variant and other~~future COVID-19 variants will have on the Company’s results as we progress through the ~~second half~~remainder of fiscal 2022.

Basis of Presentation

Interim Financial Statements

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~~ASPEN GROUP, INC. AND SUBSIDIARIES~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~October 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~~nine months ended ~~October~~January 31, ~~2021~~2022 and ~~2020,~~2021, our cash flows for the ~~six~~nine months ended ~~October~~January 31, ~~2021~~2022 and ~~2020,~~2021, and our financial position as of ~~October~~January 31, ~~2021~~2022 have been made.

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ASPEN GROUP, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2022

(Unaudited)

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, 2021 as filed with the SEC on July 13, 2021. The April 30, 2021 consolidated balance sheet is derived from those statements.

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~~2. Summary of Significant Accounting ~~Policies”~~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

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.

Restricted cash as of ~~October~~January 31, ~~2021~~2022 of $1,433,397 consists of $1,173,525 which is collateral for letters of credit for the Aspen University and USU facility operating leases, $9,872 which is collateral for a letter of credit for USU required to be posted based on the 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.

Restricted cash as of April 30, 2021 of $1,193,997 consisted of $934,125 which is collateral for letters of credit for the Aspen University and USU facility operating leases, $9,872 which is collateral for a letter of credit for USU required to be posted based on the 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.

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~~ASPEN GROUP, INC. AND SUBSIDIARIES~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~October 31, 2021~~

~~(Unaudited)~~

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 ~~October~~

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ASPEN GROUP, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, ~~2021.~~2022

(Unaudited)

January 31, 2022. As of ~~October~~January 31, ~~2021~~2022 and April 30, 2021, the Company maintained deposits exceeding federally insured limits by approximately ~~$11,765,690~~$7,549,724 and $13,005,537, respectively, held in two separate institutions.

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.

Revenue 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)8. Revenue) Students may receive discounts, scholarships, or refunds, which gives rise to variable consideration. The amounts of discounts or scholarships are applied to individual student accounts when such amounts are awarded. Therefore, the tuition is reduced directly by these discounts or scholarships from the amount of the standard tuition rate charged.

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.

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 992,050 and 1,214,473 shares of common stock, 899,103 and 549,972~~warrants, restricted stock units ("RSUs")~~, warrants to purchase 449,174 and 374,174 shares of common stock,~~ and unvested restricted stock ~~of 8,224 and 8,224 were outstanding at October 31, 2021 and April 30, 2021, respectively.~~

~~All shares mentioned above were~~are not included in the computation of diluted net loss per share because the effects would have been anti-dilutive. ~~The options, warrants, RSUs and unvested restricted stock are considered to be~~These common stock equivalents ~~and~~ are only included in the calculation of diluted earnings per share of common stock when their effect is dilutive. See Note 7. Stockholders’ Equity.

Segment Information

The Company operates in 1 reportable segment as a single educational delivery operation using a core infrastructure that serves the curriculum and educational delivery needs of its online and campus students regardless of geography. The Company's chief operating decision makers, its Chief Executive Officer, Chief Operating Officer and Chief Academic Officer, manage the Company's operations as a whole.

Recent Accounting Pronouncement Not Yet Adopted

ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments

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

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~~ASPEN GROUP, INC. AND SUBSIDIARIES~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~October 31, 2021~~

~~(Unaudited)~~

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.

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ASPEN GROUP, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2022

(Unaudited)

The Company has concluded that based on industry practices, the preferred presentation for cash received in advance for unearned tuition and stipends should be reclassified from "restricted cash" to "cash and cash equivalents." The cash balance of $3,958,793 for funds held for students for unbilled educational services that were received from Title IV and non-Title IV programs at April 30, 2021, which was previously included in "restricted cash" in the accompanying consolidated balance sheet, was reclassified to "cash and cash equivalents" to align with the current year presentation. There is no impact to total current assets included in accompanying consolidated balance sheet at April 30, 2021. The restricted cash balance at April 30, 2021, now includes letters of credit and a compensating balance under a secured credit line of $1,193,997.

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 and amortization.

When assets are disposed of before reaching the end of their useful lives both the recorded cost of the fixed asset and the corresponding amount of accumulated depreciation is reversed. Any remaining difference between the two is recognized as either other income or expense.

Software consisted of the following:


		October 31, 2021		April 30, 2021			January 31, 2022		April 30, 2021
Software	Software	$	9,386,352	$	8,488,635	Software	$	9,829,329	$	8,488,635
Accumulated amortization	Accumulated amortization	(4,284,129)		(3,444,325)		Accumulated amortization	(4,727,413)		(3,444,325)
Software, net	Software, net	$	5,102,223	$	5,044,310	Software, net	$	5,101,916	$	5,044,310

Depreciation and amortization expense for property and equipment and software is summarized below:


		Three Months Ended October 31,				Six Months Ended October 31,					Three Months Ended January 31,				Nine Months Ended January 31,
		2021		2020		2021		2020			2022		2021		2022		2021
Depreciation and amortization expense:	Depreciation and amortization expense:									Depreciation and amortization expense:
Property and equipment, excluding software	Property and equipment, excluding software	$	367,475	$	164,204	$	718,848	$	327,774	Property and equipment, excluding software	$	418,081	$	158,110	$	1,136,929	$	490,868
Software	Software	$	428,143	$	346,653	$	839,804	$	661,760	Software	$	443,284	$	366,908	$	1,283,088	$	1,028,668

Note 4. Courseware and Accreditation

As courseware and accreditation reach the end of their useful life, they are written off against the accumulated amortization. There was no expense impact for such write-offs for the three and ~~six~~nine months ended ~~October~~January 31, ~~2021~~2022 and ~~2020.~~2021.

Courseware and accreditation consisted of the following:


	January 31, 2022		April 30, 2021
Courseware	$	569,483	$	408,222
Accreditation	59,350		59,350
	628,833		467,572
Accumulated amortization	(339,153)		(280,276)
Courseware and accreditation, net	$	289,680	$	187,296

Amortization expense for courseware and accreditation is summarized below:


	Three Months Ended January 31,				Nine Months Ended January 31,
	2022		2021		2022		2021
Amortization expense	$	21,744	$	10,255	$	58,877	$	32,718

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ASPEN GROUP, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~October~~January 31, ~~2021~~2022

(Unaudited)

~~Courseware and accreditation consisted of the following:~~
October 31,
2021 April 30,
2021
Courseware $ 557,973 $ 408,222
Accreditation 59,350 59,350
617,323 467,572
Accumulated amortization (317,409) (280,276)
Courseware and accreditation, net $ 299,914 $ 187,296

~~Amortization expense for courseware and accreditation is summarized below:~~
Three Months Ended October 31, Six Months Ended October 31,
2021 2020 2021 2020
Amortization expense $ 21,185 $ 10,516 $ 37,133 $ 22,463

Amortization expense is included in "Depreciation and amortization" in the unaudited consolidated statements of operations.

Note 5. Secured Note and Accounts Receivable

On March 30, 2008 and December 1, 2008, Aspen University sold courseware pursuant to marketing agreements to Higher Education Management Group, Inc. (“HEMG”), which was then a related party and principal stockholder of the Company. As discussed in Note ~~11,~~11. Commitments and Contingencies, the Company and Aspen University sued HEMG seeking to recover sums due under the agreements. Ultimately, the Company and Aspen University obtained a favorable default judgment, and as a result received a distribution from the bankruptcy trustee court of $498,120, which iswas included in "other (expense) income, net" in the ~~accompanying~~ unaudited consolidated statements of operations ~~for~~during the ~~six~~nine months ended ~~October~~January 31, ~~2021.~~2022. Due to the bankruptcy of HEMG, the Company also wrote off a net receivable of $45,329 in the same period.

Note 6. ~~Long-term~~ Debt

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 ~~provided~~provides for a $5,000,000 revolving credit facility (the “Credit Facility”) evidenced by a revolving promissory note (the “Revolving Note”). Borrowings under the Credit Facility Agreement bear interest at 12% per annum. Interest payments are due monthly through the term of the Credit Facility.

On August 31, 2021, the Company extended the Credit Facility Agreement with the Foundation by one year from November 4, 2021 to November 4, 2022. In conjunction with the extension of the Credit Facility, the Company drew down ~~$5,000,000~~funds of ~~funds from the Facility at 12% interest per annum due November 4, 2022.~~$5,000,000.

Additionally, on August 31, 2021, the Company issued to the Foundation warrants, as an extension fee, 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~~$5.85 per share. The fair value of the warrants is $137,500 and is being amortized to interest expense over the 14-month line of credit period. The fair value of the warrants are treated as deferred financing costs in the accompanying consolidated balance sheets at ~~October~~January 31, ~~2021~~2022 to be amortized over the term of the Credit Facility. Total unamortized costs at ~~October~~January 31, ~~2021~~2022 were ~~$117,857.~~$88,393. See Note 77. Stockholders’ Equity for additional information related to these warrants.

At ~~October~~January 31, ~~2021~~2022 and April 30, 2021, there were $5,000,000 and no outstanding borrowings, respectively, under the Credit Facility. For information on a recent amendment to the Credit Facility and related financings, see Note 12. Subsequent Events.

The Credit Facility Agreement contains customary representations and warranties and events of 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.

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~~ASPEN GROUP, INC. AND SUBSIDIARIES~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~October 31, 2021~~

~~(Unaudited)~~

On March 6, 2019, 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 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.

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. The fair value of the warrants along with the upfront Facility fee were treated as debt issue cost assets to be amortized over the term of the ~~loan, as the facility has not been drawn on.~~loan. As a result of the aforementioned note extension, the remainder of the unamortized costs of $9,722 were written off during the quarter ended October 31, 2021. Total unamortized costs at ~~October~~January 31, ~~2021~~2022 and April 30, 2021 were $0 and $18,056, respectively.

Note 7. Stockholders’ Equity

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2022

(Unaudited)

AGI maintains 2 stock-based incentive plans: the 2012 Equity Incentive Plan (the “2012 Plan”) and 2018 Equity Incentive Plan (the “2018 Plan”) that ~~provides~~provide for the grant of shares in the form of incentive stock options, non-qualified stock options, restricted shares, stock appreciation rights and RSUs to employees, consultants, officers and directors. The 2012 Plan expired March 15, 2022 and remains in effect for outstanding grants only, and is no longer available for new grants. On March 8, 2022 we transferred the 129,009 unused shares under the 2012 Plan to the 2018 Plan.

On December ~~30, 2020,~~22, 2021, 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 ~~1,100,000~~1,600,000 to ~~1,600,000~~2,350,000 shares.

As of ~~October~~January 31, ~~2021~~2022 and April 30, 2021 there were ~~171,459~~732,013 and 549,739 shares remaining available for future issuance under the 2012 and the 2018 Plans, respectively. Following the increase to the 2018 Plan by shareholder approval and by virtue of the transfer of the former 2012 Plan shares to the 2018 Plan shares described above, there are now a total of 732,013 shares under the 2018 Plan of which zero shares are available for new grants. Because we reserved 12 million shares of common stock which covers the 10 million shares issuable upon the conversion of the new convertible notes (plus an extra 2 million shares required by the lenders), we cannot issue all of the awards available under the 2018 Plan unless our stockholders approve an increase in our authorized capital.

Common Stock

On January 3, 2022, the Compensation Committee approved a 117,316 common stock grant to the members of the Board of Directors for services in the 2021 calendar year. The grant had a grant date fair value of $279,212 based on a closing stock price of $2.38 per share. The grant was under the Company’s 2018 Plan and was fully vested and amortized as of January 31, 2022. These shares will be issued in the fourth quarter of fiscal year 2022. The amortization expense is included within stock-based compensation in general and administrative expense in the accompanying consolidated statement of operations.

Restricted Stock

As of ~~October~~January 31, ~~2021,~~2022, there were ~~8,224~~no unvested shares of restricted common stock outstanding. During the ~~six~~nine months ended ~~October~~January 31, ~~2021,~~2022, there were no new restricted stock grants, forfeitures, ~~vested stock~~ or expirations. ~~Total~~There is no unrecognized compensation expense related to ~~the unvested shares~~restricted stock as of ~~October~~January 31, ~~2021 was $7,018, and is expected to be recognized over a weighted-average period of approximately 0.17 years.~~2022.

Restricted Stock Units

A summary of the Company’s RSU activity during the ~~six~~nine months ended ~~October~~January 31, ~~2021~~2022 is presented below:


Restricted Stock Units	Restricted Stock Units	Number of Shares	Weighted Average Grant Price		Restricted Stock Units	Number of Shares		Weighted Average Grant Price
Unvested balance outstanding, April 30, 2021	Unvested balance outstanding, April 30, 2021	549,972	$	6.58	Unvested balance outstanding, April 30, 2021	549,972		$	6.58
Granted	Granted	412,792	6.16		Granted	514,142		5.62
Forfeits	Forfeits	(28,841)	9.80		Forfeits	(36,353)		9.67
Vested	Vested	(34,820)	6.15		Vested	(75,124)	(1)	4.54
Expired	Expired	—	—		Expired	—		—
Unvested balance outstanding, October 31, 2021		899,103	$	5.38
Unvested balance outstanding, January 31, 2022					Unvested balance outstanding, January 31, 2022	952,637		$	4.84

(1) Includes 1,416 RSUs that will be issued in the fourth quarter of fiscal year 2022.

Of the ~~412,792~~514,142 RSUs granted during the ~~six~~nine months ended ~~October~~January 31, ~~2021~~2022, 410,000 RSUs correspond to executive compensation grants summarized below.

On August 16 2021, the Compensation Committee approved a 125,000 RSU grant to the Company’s newly hired Chief Financial Officer as part of ~~the~~his employment agreement. The grant has a grant date fair value of $725,000 based on a closing stock price of $5.80 per share. On August 12, 2021, the Compensation Committee approved individual grants of 80,000 RSUs

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ASPEN GROUP, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~October~~January 31, ~~2021~~2022

(Unaudited)

to the Company’s Chief Operating Officer and Chief Academic Officer. The grants have a total grant date fair value of $1.0 million based on a closing stock price of $6.48 per share.

The three executive grants discussed above are under the Company’s 2018 ~~Equity Incentive~~ Plan and are set to vest annually over a period of three years and are subject to continued employment as an officer of the Company on each applicable vesting date. The amortization expense related to these grants for the three and nine months ended ~~October~~January 31, ~~2021~~2022 was $146,817 and $293,633, respectively and is included in "general and administrative expense" in the accompanying consolidated statement of operations.

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's reported net income on a GAAP basis. ~~The~~At January 31, 2022, the Company ~~expects this condition to be met in the fourth quarter of Fiscal 2022 and~~ is amortizing the expense over ~~one year~~three years through July ~~2022~~2024 (the filing date of the Form 10-K for Fiscal Year ~~2022)~~2024). The Company will continue to assess the performance condition at each reporting period. If the RSUs do not vest within three years from the July 21, 2021 effective date, they will be forfeited. The amortization expense related to this grant for the three and ~~six~~nine months ended ~~October~~January 31, ~~2021~~2022 was ~~$72,813~~$(121,354) and ~~$218,438~~,$169,896, respectively, which is included in general and administrative expense in the consolidated statements of operations.

The remaining ~~2,792 RSU grants~~104,142 RSUs granted during the ~~six~~nine months ended ~~October~~January 31, ~~2021~~2022 were granted to employees and have a grant date fair value that ~~ranges~~ranges from ~~$4.92~~$2.09 to $6.50 per share, or a total of ~~$16,456,~~$253,738, vesting annually over three years and subject to continued employment on each applicable vesting ~~date~~.date.

Of the ~~899,103~~ 952,637 unvested ~~RSU~~sRSUs outstanding at ~~October~~ January 31, ~~2021, there are~~2022, 195,000 ~~RSUs remaining~~remain 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. On the grant date, the closing price of the Company's common stock on The Nasdaq Global Market was $9.49 per share. The a~~mortization~~amortization expense related to ~~these~~ ~~transactions~~this grant for the three and ~~six~~nine months ended ~~October~~January 31, ~~2021~~2022 and ~~2020,~~2021, was approximately $112,155 and ~~$224,311,~~$336,466, and ~~$111,211~~$149,855 and ~~$1.5~~$1.6 million, re~~spectively,~~respectively, which is included in general and administrative expense in the consolidated statements of operations.

At ~~October~~January 31, ~~2021,~~2022, total unrecognized compensation expense related to unvested RSUs is ~~$4,839,604~~$4,612,404 and is expected to be recognized over a weighted-average period of approximately ~~1.57~~1.59 years.

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.

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ASPEN GROUP, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~October~~January 31, ~~2021~~2022

(Unaudited)

A summary of the Company’s warrant activity during the ~~six~~nine months ended ~~October~~January 31, ~~2021~~2022 is presented below:


Warrants	Warrants	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value		Warrants	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Balance Outstanding, April 30, 2021	Balance Outstanding, April 30, 2021	374,174	$	6.37	1.90	$	—	Balance Outstanding, April 30, 2021	374,174	$	6.37	1.90	$	—
Granted	Granted	75,000	$	6.23	4.80	—		Granted	75,000	$	6.23	4.55	—
Exercised	Exercised	—	$	—	—	—		Exercised	—	$	—	—	—
Surrendered	Surrendered	—	$	—	—	—		Surrendered	—	$	—	—	—
Expired	Expired	—	$	—	—	—		Expired	—	$	—	—	—
Balance Outstanding, October 31, 2021		449,174	$	6.35	1.96	$	—
Balance Outstanding, January 31, 2022								Balance Outstanding, January 31, 2022	449,174	$	6.35	1.71	$	—

Exercisable, October 31, 2021		424,174	$	6.31	1.80	$	—
Exercisable, January 31, 2022								Exercisable, January 31, 2022	424,174	$	6.31	1.55	$	—


OUTSTANDING WARRANTS	OUTSTANDING WARRANTS				EXERCISABLE WARRANTS				OUTSTANDING WARRANTS				EXERCISABLE WARRANTS
Exercise Price	Exercise Price	Weighted Average Exercise Price		Outstanding No. of Warrants	Weighted Average Exercise Price		Weighted Average Remaining Life In Years	Exercisable No. of Warrants	Exercise Price	Weighted Average Exercise Price		Outstanding No. of Warrants	Weighted Average Exercise Price		Weighted Average Remaining Life In Years	Exercisable No. of Warrants
$	4.89	$	4.89	50,000	$	4.89	2.44	50,000	4.89	$	4.89	50,000	$	4.89	2.19	50,000
$	5.85	$	5.85	50,000	$	5.85	4.84	50,000	5.85	$	5.85	50,000	$	5.85	4.58	50,000
$	6.00	$	6.00	100,000	$	6.00	2.35	100,000	6.00	$	6.00	100,000	$	6.00	2.09	100,000
$	6.87	$	6.87	224,174	$	6.87	0.73	224,174	6.87	$	6.87	224,174	$	6.87	0.48	224,174
$	6.99	$	6.99	25,000					6.99	$	6.99	25,000
				449,174				424,174				449,174				424,174

On August 31, 2021, the Compensation Committee approved the issuance of warrants to the Leon and Toby Cooperman Family Foundation as an extension fee in connection with the ~~$5 million revolving line~~extension of ~~credit.~~the Credit Facility Agreement. The warrants allow for the purchase of 50,000 shares of the Company’s common stock and have an exercise price of $5.85. The warrants have an exercise period of five years from the August 31, 2021 issuance date and will terminate automatically and immediately upon the expiration of the exercise period. The fair value of the warrants is $137,500 and is being amortized over the 14-month line of credit period. The Company has recognized ~~$19,643~~$29,464 and $49,107 of amortization expense in connection with the fair value of the warrants for the three and nine months ending ~~October~~January 31, ~~2021,~~2022, respectively, which is included in "interest expense" in the accompanying consolidated statement of operations.

On July 21, 2021, the ~~Compensation~~Executive Committee approved the issuance of 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~~The fair value of the warrants is $84,000 and is being amortized over the three year vesting period. TheThe Company has recognized ~~$7,000~~$7,000 and ~~$9,333~~$16,333 of amortization expense in connection with the fair value of the warrants for the three and ~~six~~nine months ending ~~October~~January 31, ~~2021,~~2022, respectively, which is included in ~~“general~~general and ~~administrative”~~administrative expense in the accompanying 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 (expense) income, net” in the accompanying consolidated statement of operations.

On April 10, 2019, the Company issued warrants to an ~~advisory board~~Advisory Board member for services to purchase 50,000 shares of the Company's common stock with an exercise price of $4.89 per share. The warrants have an exercise period of five years from the April 10, 2019 issuance date and vest annually over a three year period. The warrants will terminate automatically and ~~immediately upon the expiration of~~ ~~the exercise period. The fair value of the warrants is $109,500 and is being amortized over~~

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ASPEN GROUP, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~October~~January 31, ~~2021~~2022

(Unaudited)

immediately upon the expiration of the exercise period. The fair value of the warrants is $109,500 and is being amortized over the three year vesting period. The Company has recognized $9,125~~$9,125~~ and ~~$18,250~~$27,375 of amortization expense in connection with the fair value of the warrants for the three and ~~six~~nine months ending ~~October~~January 31, ~~2021~~2022 and ~~2020,~~2021, respectively, which is included in ~~“general~~general and ~~administrative”~~administrative expense in the accompanying consolidated statement of operations.

Stock Option Grants to Employees and Directors

The Company estimates the fair value of share-based compensation utilizing the Black-Scholes option pricing model, which is dependent upon several variables such as the expected option term, expected volatility of the Company’s stock price over the expected term, expected risk-free interest rate over the expected option term and expected dividend yield rate over the expected option term. The Company believes this valuation methodology is appropriate for estimating the fair value of stock options granted to employees and directors which are subject to ASC Topic 718 requirements. These amounts are estimates and thus may not be reflective of actual future results, nor amounts ultimately realized by recipients of these grants. The Company recognizes compensation on a straight-line basis over the requisite service period for each award.

The Company utilizes 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 ~~six~~nine months ended ~~October~~January 31, ~~2021,~~2022, is presented below:


Options	Options	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value		Options	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Balance Outstanding, April 30, 2021	Balance Outstanding, April 30, 2021	1,214,473	$	6.24	1.88	$	204,719	Balance Outstanding, April 30, 2021	1,214,473	$	6.24	1.88	$	204,719
Granted	Granted	—	—		—	—		Granted	—	—		—	—
Exercised	Exercised	(216,752)	5.77		—	—		Exercised	(258,419)	5.60		—	—
Forfeited	Forfeited	(4,419)	4.61		—	—		Forfeited	(4,586)	4.59		—	—
Expired	Expired	(1,252)	2.76		—	—		Expired	(22,793)	3.21		—	—
Balance Outstanding, October 31, 2021		992,050	$	6.61	1.56	$	172,313
Balance Outstanding, January 31, 2022								Balance Outstanding, January 31, 2022	928,675	$	6.84	1.41	$	—

Exercisable, October 31, 2021		928,457	$	6.72	1.51	$	161,584
Exercisable, January 31, 2022								Exercisable, January 31, 2022	891,264	$	6.92	1.38	$	—

Of the ~~216,752~~258,419 options exercised, ~~for 46,908 common shares during~~200,000 options were exercised via the ~~six months ended October 31, 2021, 200,000 were~~ cashless ~~options exercised~~method by the Company’s Chief Operating Officer in September 2021. As part of this cashless ~~transactions,~~ transaction, 30,156 net shares were issued and 169,844 were retained by the Company. The remainder of the 58,419 options were exercised for cash.

During the three and ~~six~~nine months ended ~~October~~January 31, ~~2021~~2022 and ~~2020,~~2021, the Company received proceeds from the exercise of stock options for cash ~~of $33,486~~of $135,000 and ~~$56,034~~ $191,034,and ~~$945,332~~$363,385 and ~~$2,215,315,~~$2,578,700, respectively.

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ASPEN GROUP, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~October~~January 31, ~~2021~~2022

(Unaudited)


OUTSTANDING OPTIONS	OUTSTANDING OPTIONS				EXERCISABLE OPTIONS				OUTSTANDING OPTIONS				EXERCISABLE OPTIONS
Exercise Price	Exercise Price	Weighted Average Exercise Price		Outstanding Number of Options	Weighted Average Exercise Price		Weighted Average Remaining Life In Years	Exercisable Number of Options	Exercise Price	Weighted Average Exercise Price		Outstanding Number of Options	Weighted Average Exercise Price		Weighted Average Remaining Life In Years	Exercisable Number of Options
$3.24 to $4.38	$3.24 to $4.38	$	3.82	179,264	$	3.81	0.78	166,597	$3.24 to $4.38	$	4.14	115,890	$	4.15	0.94	103,389
$4.50 to $5.20	$4.50 to $5.20	$	4.94	153,944	$	5.00	1.99	111,019	$4.50 to $5.20	$	4.99	153,944	$	5.03	1.77	137,394
$5.95 to $6.28	$5.95 to $6.28	$	5.95	28,000	$	5.95	0.81	28,000	$5.95 to $6.28	$	5.95	28,000	$	5.95	0.55	28,000
$7.17 to $7.55	$7.17 to $7.55	$	7.45	473,093	$	7.46	1.82	465,092	$7.17 to $7.55	$	7.45	473,092	$	7.46	1.57	465,092
$8.57 to $9.07	$8.57 to $9.07	$	8.98	157,749	$	8.98	1.18	157,749	$8.57 to $9.07	$	8.98	157,749	$	8.98	0.93	157,749
				992,050				928,457				928,675				891,624

As of ~~October~~January 31, ~~2021,~~2022, there was approximately ~~$28,670~~$11,263 of unrecognized compensation costs related to unvested stock options. That cost is expected to be recognized over a weighted-average period of approximately ~~0.92 year.~~0.67 years.

Stock-based compensation related stock options, RSUs and restricted stock

For the three and ~~six~~nine months ended ~~October~~January 31, ~~2021,~~2022, the Company recorded stock-based compensation expense of ~~$722,158~~$700,697 and ~~$1,264,870,~~$1,965,567, respectively, which consisted of: ~~$23,504~~$17,225, $397,241 and ~~$108,912, $688,129~~$286,231 and ~~$1,134,906~~$126,137, $1,532,147 and ~~$10,525 and $21,052,~~$307,283, respectively, in connection with stock options, RSUs and restricted stock, which is included in “general and administrative” expense in the unaudited consolidated statements of operations.

For the three and ~~six~~nine months ended ~~October~~January 31, ~~2020,~~2021, the Company recorded stock-based compensation expense of ~~$1,831,548~~$721,067 and ~~$2,318,658,~~$3,039,729, respectively, which consisted of: ~~$142,397~~$123,401, $567,239 and ~~$311,131, $1,678,622~~$30,427, and ~~$1,986,474~~$434,532, $2,553,717 and ~~$10,529 and $21,053,~~$51,480, respectively, in connection with stock options, RSUs and restricted stock, which is included in “general and administrative” expense in the unaudited consolidated statements of operations.

Treasury Stock

As of both ~~October~~January 31, ~~2021~~2022 and April 30, 2021, 155,486 shares of common stock were held in treasury representing shares of common stock surrendered upon the exercise of stock options in payment of the exercise prices and the taxes and similar amounts due arising from the option exercises. The value of these shares is approximately $1.8 million and represents the fair market value of shares surrendered as of the date of each applicable exercise date.

Note 8. Revenue

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 payments received in excess of the portion recognized as revenue and it is included in current liabilities in the accompanying consolidated balance sheets.

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ASPEN GROUP, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~October~~January 31, ~~2021~~2022

(Unaudited)

The following table represents our revenue disaggregated by the nature and timing of services:


		Three Months Ended October 31,				Six Months Ended October 31,					Three Months Ended January 31,				Nine Months Ended January 31,
		2021		2020		2021		2020			2022		2021		2022		2021
Tuition - recognized over period of instruction	Tuition - recognized over period of instruction	$	16,632,114	$	14,974,682	$	33,753,794	$	28,341,990	Tuition - recognized over period of instruction	$	16,550,586	$	14,580,439	$	50,304,380	$	42,922,429
Course fees - recognized over period of instruction	Course fees - recognized over period of instruction	1,982,771		1,786,364		3,986,111		3,386,057		Course fees - recognized over period of instruction	1,981,470		1,834,251		5,967,581		5,220,308
Book fees - recognized at a point in time	Book fees - recognized at a point in time	15,018		46,037		42,777		85,175		Book fees - recognized at a point in time	—		44,468		42,777		129,643
Exam fees - recognized at a point in time	Exam fees - recognized at a point in time	194,371		78,900		390,413		149,555		Exam fees - recognized at a point in time	199,924		69,500		590,337		219,055
Service fees - recognized at a point in time	Service fees - recognized at a point in time	115,937		85,062		198,111		173,830		Service fees - recognized at a point in time	212,818		96,179		410,929		270,009
		$	18,940,211	$	16,971,045	$	38,371,206	$	32,136,607		$	18,944,798	$	16,624,837	$	57,316,004	$	48,761,444

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.

The deferred revenue balance as of January 31, 2022 and April 30, 2021, was ~~$6,825,014.~~$6,182,781 and $6,825,014, respectively. During the ~~six~~nine months ended ~~October~~January 31, ~~2021,~~2022, the Company recognized ~~$5,407,735~~$5,424,788 of revenue that was included in the deferred revenue balance as of April 30, 2021. The Company's classifies deferred revenue as current when the remaining term of the course, including affect to the refund policy, is one year or less.

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.

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 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 revenue from students outside the United States totaling approximately 1% of consolidated revenue for each of the three and ~~six~~nine months ended ~~October~~January 31, ~~2021~~2022 and ~~2020.~~

2021.

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ASPEN GROUP, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~October~~January 31, ~~2021~~2022

(Unaudited)

Note 9. Leases

We determine if a contract contains a lease at inception. We have entered into operating leases totaling approximately ~~174,528~~191,328 square feet of office and classroom space in Phoenix, San Diego, New York City, Denver, Austin, Tampa, Nashville, Atlanta and 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 ~~October~~January 31, ~~2021,~~2022, our longer term operating leases are located in Tampa, Phoenix, Austin and Nashville and are set to expire in ~~seven~~six to ~~ten~~eight years. These leases make up ~~95%~~approximately 96% 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 assets, net", "Operating lease obligations, current portion" and "Operating lease obligations, less current portion" in the consolidated balance sheet at ~~October~~January 31, ~~2021~~2022 and April 30, 2021. These assets and lease liabilities are recognized based on the present value of remaining lease payments over the lease term. Variable lease costs such as common area maintenance, property taxes and insurance are expensed as incurred. 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.

Lease incentives are deducted from the ~~right of use~~ROU assets. Incentives such as tenant improvement allowances are amortized as ~~leasehold-improvements,~~leasehold improvements, separately, over the life of the lease term. For the three and ~~six~~nine months ended ~~October~~January 31, ~~2021~~2022 and ~~2020,~~2021, the amortization expense for these tenant improvement ~~allowances~~allowances was ~~$152,499~~$177,259 and $0 and ~~$302,887~~$483,872 and $0, respectively.

Lease expense for operating leases is recognized on a straight-line basis over the lease term. Lease expense for the three and ~~six~~nine months ended ~~October~~January 31, 2022 and 2021 was $1,008,704 and ~~2020 was $916,435~~$717,664 and ~~$664,415~~$2,861,876 and ~~$1,853,172 and $1,061,653,~~$1,779,317, respectively, which is included in general and administrative expenses in the consolidated statements of operations.

ROU assets are summarized below:


		October 31, 2021		April 30, 2021			January 31, 2022		April 30, 2021
ROU assets - Operating facility leases	ROU assets - Operating facility leases	$	15,958,721	$	14,308,296	ROU assets - Operating facility leases	$	15,958,721	$	14,308,296
Less: accumulated reduction		(2,448,065)		(1,593,433)
Less: accumulated amortization						Less: accumulated amortization	(2,868,251)		(1,593,433)
Total ROU assets	Total ROU assets	$	13,510,656	$	12,714,863	Total ROU assets	$	13,090,470	$	12,714,863

Operating lease obligations, related to the ROU assets are summarized below:


		October 31, 2021		April 30, 2021			January 31, 2022		April 30, 2021
Total lease liabilities	Total lease liabilities	$	22,436,658	$	19,946,229	Total lease liabilities	$	22,509,568	$	19,946,229
Reduction of lease liabilities	Reduction of lease liabilities	(2,558,744)		(1,617,600)		Reduction of lease liabilities	(3,085,191)		(1,617,600)
Total operating lease obligations	Total operating lease obligations	$	19,877,914	$	18,328,629	Total operating lease obligations	$	19,424,377	$	18,328,629

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ASPEN GROUP, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~October~~January 31, ~~2021~~2022

(Unaudited)

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 ~~October~~January 31, ~~2021~~2022 (a) (by fiscal year).


Maturity of Lease Obligations	Maturity of Lease Obligations	Lease Payments		Maturity of Lease Obligations	Lease Payments
2022 (remaining)	2022 (remaining)	$	2,179,605	2022 (remaining)	$	1,139,587
2023	2023	4,142,637		2023	4,142,637
2024	2024	4,018,977		2024	4,018,977
2025	2025	3,802,959		2025	3,802,960
2026	2026	3,908,722		2026	3,908,722
Thereafter	Thereafter	11,963,225		Thereafter	11,963,226
Total future minimum lease payments	Total future minimum lease payments	30,016,125		Total future minimum lease payments	28,976,109
Less: imputed interest	Less: imputed interest	(10,138,211)		Less: imputed interest	(9,551,732)
Present value of operating lease liabilities	Present value of operating lease liabilities	$	19,877,914	Present value of operating lease liabilities	$	19,424,377

_____________________

(a) Lease payments exclude $3.7 million of legally binding minimum lease payments for the new BSN Pre-Licensure campus location in ~~a Tier 1 metropolitan area~~Atlanta, Georgia for the lease signed but not yet commenced.


Balance Sheet Classification	Balance Sheet Classification	October 31, 2021		April 30, 2021		Balance Sheet Classification	January 31, 2022		April 30, 2021
Operating lease obligations, current portion	Operating lease obligations, current portion	$	2,145,431	$	2,029,821	Operating lease obligations, current portion	$	2,106,981	$	2,029,821
Operating lease obligations, less current portion	Operating lease obligations, less current portion	17,732,483		16,298,808		Operating lease obligations, less current portion	17,317,396		16,298,808
Total operating lease liabilities	Total operating lease liabilities	$	19,877,914	$	18,328,629	Total operating lease liabilities	$	19,424,377	$	18,328,629


Other Information	~~October~~January 31, ~~2021~~2022
Weighted average remaining lease term (in years)	~~7.29~~6.97
Weighted average discount rate	12	%

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~~is preparing to file 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 ~~may have been~~was in place. ~~As of October 31, 2021, 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 ~~October~~January 31, ~~2021,~~2022, the Company recorded a reserve of approximately ~~$150,000~~$300,000 for the estimate of the 2013 through 2021 tax year foreign income tax liability. Additionally, for the 2022 tax year, the Company recorded a ~~multi-year~~reserve of approximately $75,000 for the related foreign income tax liability.

Note 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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ASPEN GROUP, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~October~~January 31, ~~2021~~2022

(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 ~~October~~January 31, ~~2021,~~2022, 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, 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 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.

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 July 21, 2021, the bankruptcy trustee paid the Company $498,120 based on assets available in the trust, 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 5,5. Secured Note and Accounts Receivable, at July 31, 2021. No further assets are available for distribution. At some point, the New York state court litigation may resume.

Regulatory Matters

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~~qualifies to participate under the HEA and the Federal student financial assistance programs (Title IV, HEA programs) and set a subsequent program participation agreement reapplication date of March 31, 2021. On April 16, 2021, the DOE granted provisional certification for a two-year timeframe, and set a subsequent program participation reapplication date of September 30, 2023.

USU currently has provisional certification to participate in the Title IV Programs due to its acquisition by the Company. The provisional certification allows the school to continue to receive Title IV funding as it did prior to the change of ownership. The provisional certification expired on December 31, 2020. While the institution submitted its recertification application timely in October 2020, the DOE has not issued its final certification. The institution is able to continue operating under its current participation agreement until the DOE issues its recertification.

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

Because our subsidiaries operate in a highly regulated industry, each may be subject from time to time to audits, investigations, claims of noncompliance or lawsuits by governmental agencies or third parties, which allege statutory violations, regulatory infractions or common law causes of action.

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ASPEN GROUP, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~October~~January 31, ~~2021~~2022

(Unaudited)

The Company is also subject to regulation by self-regulatory bodies such as accreditors and by state regulators in certain states including states where the Company has a physical presence. For certain recent information, see Note 12. Subsequent Events.

Title IV Funding

Aspen University and United States University derive a portion of their revenue from financial aid received by its students under programs authorized by Title IV of the HEA, which are administered by the US Department of Education. When students seek funding from the federal government, they receive loans and grants to fund their education under the following Title IV Programs: (1) the Federal Direct Loan program, or Direct Loan; (2) the Federal Pell Grant program, or Pell; (3) Federal Work Study and (4) Federal Supplemental Opportunity Grants. For the fiscal year ended April 30, 2021, 44.72% of Aspen University’s and 33.81% for United States University's cash-basis revenue for eligible tuition and fees were derived from Title IV Programs.

Return of Title IV Funds

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

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 was to expire on August 25, 2021. Pursuant to USU’s provisional Program Participation Agreement ("PPA"), the DOE indicated that USU must agree to participate in Title IV under the HCM1 funding process; however, the DOE does retain discretion on whether or not to implement that term of the agreement. Although DOE has not, to date, notified USU that it has been placed in the HCM1 funding process, nor does the DOE’s public disclosure website identify USU as being on HCM1, it is possible that prior to the end of the PPA term, the DOE may notify USU that it must begin funding under the HCM1 procedure. If this occurs, the Company believes this will not have a material impact on the consolidated financial statements. In December 2020, the DOE reduced USU's existing letter of credit by $369,473, which was required to be posted based on the level of Title IV funding. In connection with USU's most recent Compliance Audit, USU currently maintains a letter of credit of $9,872 at ~~October~~January 31, ~~2021.~~2022.

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 by the Texas Higher Education Coordinating Board in the State of Texas. Aspen University has been granted Optional Expedited Authorization as a postsecondary educational institution in Tennessee for its Bachelor of Science in Nursing (Pre-Licensure) degree program. Aspen University has received a Provisional License for its Bachelor of Science in Nursing (Pre-Licensure) degree program to operate in the state of Florida by the Commission for Independent Education of the Florida Department of Education and is in the process for full licensure.

USU is also a Delaware corporation and received initial approval from the Delaware DOE to confer degrees through June 2023. United States University is authorized by the California Bureau of Private Postsecondary Education and the Arizona State Board for Private Post-Secondary Education to operate as degree granting institutions for all degrees.

Note 12. Subsequent Events

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ASPEN GROUP, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2022

(Unaudited)

On March 14, 2022, the Company closed an offering of $10 million convertible notes and a $20 million revolving credit facility. Proceeds from the $10 million convertible note received at closing will be used for general corporate purposes, including funding the Company’s expansion of its BSN Pre-Licensure nursing degree program.

The $10 million of convertible notes mature five years from the issuance date and pay interest monthly at the rate of 12% per annum. These notes are convertible into shares of the Company’s common stock at the lender’s option at a conversion price of $1.00 per share any time after the issuance date. In addition, the notes are mandatorily convertible into shares of common stock, should the closing price of the common stock be at least $2.00 per share for 30 consecutive trading days and certain other conditions be met. This mandatory conversion is subject to each lender’s 9.9% beneficial ownership limitation and is also subject to the Nasdaq combined 19.99% requirement which generally provides that a listed issuer may not issue 20% or more of its outstanding common stock or voting power in a non-public offering at below a minimum price unless the Company’s stockholders first approve such issuance.

The balance of the financing is a one-year, $20 million secured revolving line of credit that will require monthly interest payments on sums borrowed at the rate of 12% per annum. No sums have been borrowed under this revolving credit line as of this date. Currently, the Company does not anticipate making drawdowns on the revolving credit line. The Company paid a 1% commitment fee ($200,000) at closing and if the revolving credit facility has not been replaced in six months of the closing date, it must pay another 1% commitment fee.

Additionally, the Company extended its existing $5 million Credit Facility by one year to November 4, 2023 at an increased interest rate from 12% to 14% per annum.

These financings will provide capital for Aspen Group to continue expanding its national footprint of BSN Pre-Licensure campuses in states with rapidly growing populations and to pursue a marketing strategy to support growth of its post-licensure nursing degree programs.

Aspen University’s first-time pass rates for our BSN pre-licensure students taking the NCLEX-RN test in Arizona fell from 80% in 2020 to 58% in 2021, which is below the minimum 80% standard set by the Arizona Board of Nursing. As a result of the decline in NCLEX pass rates and other issues, and in alignment with a recommendation from the Arizona Board of Nursing, we voluntarily suspended BSN pre-licensure enrollments and the formation of new cohorts at our 2 Phoenix pre-licensure campuses, effective February 2022. We’re continuing discussions with the Arizona Board of Nursing regarding our future status, and until we have a formal agreement in place we won’t be publicly commenting on the matter.

Aspen University has also entered into a Stipulated Agreement with the Arizona State Board for Private Post-secondary Education which includes a requirement to post a letter of credit or surety bond for $18.3 million within 45 days (in the fourth quarter of fiscal year 2022).

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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.

Operating costs and expenses

•Cost of revenue - consists of instructional costs and services and marketing and promotional costs.

◦Instructional costs - consist primarily of costs related to the administration and delivery of the Company's educational programs. This expense category includes compensation costs associated with online faculty, technology license costs and costs associated with other support groups that provide services directly to the students and are included in cost of revenue.

◦Marketing and promotional costs - include costs associated with producing marketing materials and advertising, and outside sales costs. Such costs are generally affected by the 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 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.

Non-GAAP financial measures:

•Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") - is a non-GAAP financial measure. See "Non-GAAP Financial Measures" for a reconciliation of net loss to EBITDA for the three and ~~six~~nine months ended ~~October~~January 31, ~~2021~~2022 and ~~2020.~~2021.

•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~~nine months ended ~~October~~January 31, ~~2021~~2022 and ~~2020.~~2021.

•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 and ~~six~~nine months ended ~~October~~January 31, ~~2021~~2022 and ~~2020.~~2021.

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Company Overview

Aspen Group, Inc. is an education technology holding company. It operates two universities, Aspen University Inc. ("Aspen University") 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.

In March 2014, Aspen University began offering monthly payment plans available to all students across every online degree program offered by 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 undergraduate students the opportunity to pay their tuition and fees at $250/month, online master students $325/month, and online doctoral students $375/month, interest free, thereby giving students a monthly payment option versus taking out a federal financial aid loan.

USU began offering monthly payment plans in the summer of 2017. Today, monthly payment plans are available for the online RN to BSN program ($250/month), online MBA/MAEd/MSN programs ($325/month), online hybrid Bachelor of Arts in Liberal Studies, Teacher Credentialing tracks approved by the California Commission on Teacher Credentialing ($350/month), and the MSN-FNP program ($375/month).

Since 1993, Aspen University has been nationally accredited by the DEAC, a national accrediting agency recognized by the Department of Education and the Council for Higher Education Accreditation. 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 Student Population Overview

AGI’s overall active degree-seeking student body (includes both Aspen University and USU) grew 8%2% year-over-year to ~~14,318~~13,724 as of ~~October~~January 31, ~~2021~~2022 from ~~13,238~~13,407 as of ~~October~~January 31, ~~2020~~2021 and students seeking nursing degrees were ~~12,442~~11,889 or 87% of total active students at both universities. Of the ~~12,442~~11,889 students seeking nursing degrees, ~~9,942~~9,612 are Registered Nurses (RNs) studying to earn an advanced degree, including ~~7,031~~6,839 at Aspen University and ~~2,911~~2,773 at USU, while the remaining ~~2,500~~2,277 nursing students are enrolled in Aspen University’s BSN Pre-Licensure program in the Phoenix, Austin, Tampa, Nashville and ~~Nashville~~Atlanta metros.

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 ~~second~~third quarter of fiscal year 2022 or are registered for an upcoming course.

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AGI New Student Enrollments

New student enrollments at AU grew sequentially by 9% primarily as a result of rising enrollments in the three new pre-licensure metros (Austin, Nashville and Tampa). AU year-over-year new enrollments were down 13% as a result of the planned reduction of BSN Pre-Licensure enrollments in the Phoenix metro year-over-year and the impact of COVID-19 (specifically the effect the Delta variant surge has had among prospective RN students starting in June 2021). New student enrollments at USU decreased by 7% sequentially and 3% year-over-year, from 649 a year ago to 630. New RN student enrollments at USU were similarly impacted by COVID-19.

On a Company-wide basis, new student enrollments ~~increased sequentially from 2,276 to 2,380 or 5%,~~were down 16% year-over-year, primarily as a result of ~~sequential enrollment growth~~three factors.

First, as previously announced, Aspen University dropped advertising spend in the ~~three new~~BSN pre-licensure ~~metros. On~~program in the Phoenix metro down to a maintenance spend through January 2022, causing enrollments in that metro to drop by 51% year-over-year.*

Second, enrollments at USU were down 10% year-over-year given the impact of the ongoing COVID-19 pandemic as prospective nursing post-licensure students continue to delay their education goals on a short-term basis ~~new student~~as they continued to care for COVID patients.

Third, in addition to Aspen University also seeing a COVID effect among prospective nursing post-licensure students, Aspen’s 2.0 business plan called for a $1.3 million annual reduction of ad spend in fiscal 2022 in Aspen’s post-licensure Nursing + Other unit which in the third quarter equated to a 14% drop in ad spend year-over-year. Consequently, given the drop in ad spend and the COVID effect, enrollments in the Aspen Nursing + Other unit dropped by 18% year-over-year.

In summary, and to provide additional context, excluding the 51% drop in enrollments in the Phoenix metro (BSN pre-licensure program) and the 18% drop in enrollments in Aspen University's Nursing + Other unit, total enrollments for the Company ~~were~~would have been down ~~10% due to~~by approximately 1% year-over-year.

*Note: Beginning in the month of February 2022, Aspen University ~~planned enrollment reduction~~has temporarily suspended advertising spend and new pre-licensure student enrollments in the Phoenix ~~pre-licensure metro and the COVID-19 impact.~~metro.

New student enrollments for the past five quarters are shown below:

Q2'21 Q3'21 Q4'21 Q1'22 Q2'22
Aspen University 2,010 1,593 1,593 1,601 1,750
USU 649 536 589 675 630
Total 2,659 2,129 2,182 2,276 2,380


	Q3'21	Q4'21	Q1'22	Q2'22	Q3'22
Aspen University	1,593	1,593	1,601	1,750	1,301
USU	536	589	675	630	481
Total	2,129	2,182	2,276	2,380	1,782

Bookings Analysis and ARPU

On a year-over-year basis, Q2Q3 Fiscal 2022 Bookings decreased ~~11%~~20%, to ~~$37.4~~$26.3 million from ~~$42.1~~$33.0 million in the prior year. As previously discussed, the proactive Phoenix pre-licensure enrollment reduction, planned post licensure marketing reductions and the recent COVID surge caused Bookings to decrease year-over-year.

On a year-over-year basis, Q3 Fiscal 2022 ARPU decreased 5% from the prior year period due primarily to a decrease in new enrollments at Aspen University in the pre-licensure program and Nursing + Other.

Second Quarter Bookings1 and Average Revenue Per Enrollment (ARPU)1
Q2'21 Enrollments
Q2'21 Bookings 1
Q2'22 Enrollments
Q2'22 Bookings 1
Percent Change Total Bookings & ARPU 1
Aspen University 2,010 $ 30,514,200 1,750 $ 26,134,500
USU 649 $ 11,565,180 630 $ 11,226,600
Total 2,659 $ 42,079,380 2,380 $ 37,361,100 (11) %
ARPU $ 15,825 $ 15,698 (1) %

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	Third Quarter Bookings1 and Average Revenue Per Enrollment (ARPU)1
	Q3'21 Enrollments	Q3'21 Bookings 1		Q3'22 Enrollments	Q3'22 Bookings 1		Percent Change Total Bookings & ARPU 1
Aspen University	1,593	$	23,476,050	1,301	$	17,776,050
USU	536	$	9,551,520	481	$	8,571,420
Total	2,129	$	33,027,570	1,782	$	26,347,470	(20)	%
ARPU		$	15,513		$	14,785	(5)	%

_____________________

1 “Bookings” are defined by multiplying Lifetime Value (LTV) by new student enrollments for each operating unit. “Average Revenue Per Enrollment” (ARPU) is defined by dividing total Bookings by total new student enrollments for each operating unit.

~~Table of Contents~~

During the Q2Q3 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.

Bachelor of Science in Nursing (BSN) Pre-Licensure Program

~~Aspen University offers~~Aspen’s Pre-licensure BSN program provides students with opportunities to become a ~~Bachelor~~BSN-educated nurse and learn the essential skills needed to practice as a professional registered nurse (RN). Skills lab, clinical simulation, seminars and community-based clinical experiences anchor the curriculum. Upon completion of ~~Science~~their studies, students are eligible to take the National Council Licensure Examination (NCLEX) in the state or territory in which they choose to practice (the NCLEX is the national registered nurse examination used by all states for potential registered nursing licensure). Students provide their state board of nursing applicable forms to the School of Nursing, ~~Pre-Licensure degree program (the “BSN Pre-Licensure Program”).This innovative hybrid (online/on-campus) program allows most~~which completes them on behalf of the ~~credits~~individual student, and take the exam in the state in which they choose to ~~be completed online (83~~practice. Upon passing the NCLEX, students then work with their state Board of ~~120 credits or 69%), with pricing offered at current low tuition rates of $150/credit hour~~Nursing to finalize their professional licensure.

We designed this program for ~~online general education courses, $325/credit hour for online core~~students who do not currently hold a state registered nurse license and have little to no prior nursing ~~courses, and $495 for core clinical and clinical lab courses.~~experience. For students with no prior college credits, the total cost of attendance is ~~less than $50,000.~~$52,175 ($41,445 Tuition, $10,730 Fees), not including textbooks.

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~~Note that Aspen University previously announced that it has voluntarily suspended new student enrollments and the ~~significant demand~~formation of new cohorts immediately (starting with February 2022 cohort) after receiving guidance from the Arizona State Board of Nursing at its January 28, 2022 meeting. We will not form any additional nursing cohorts in the Phoenix ~~metro, on February 2, 2021,~~metropolitan without prior approval from the Board of Nursing.

Atlanta, GA

On January 20, 2022, the Company ~~began implementing its first double cohort enrollment at its main campus in Phoenix.~~

announced that Aspen University received the final required state and board of registered nursing regulatory approvals for their new BSN Pre-Licensure ~~Campus Locations Opened~~campus location in ~~Fiscal Year 2021~~Atlanta, Georgia. The Atlanta site was occupied by the University of Phoenix, located at 859 Mt. Vernon Highway NE, Suite 100, which is situated just off Interstate 285 in the Sandy Springs suburb in the inner ring of Atlanta. Aspen University will begin enrolling first-year Pre-Professional Nursing (“PPN”) students in Atlanta starting in February 2022 and Nursing Core students (Years 2-3) in September 2022.

Austin, TX

Aspen University’s BSN Pre-Licensure program in Austin is based in the Frontera Crossing office building located at 101 W. Louis Henna Boulevard in the 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 143,362 cars per day. Aspen University's initial PPN nursing student enrollments began on the September 29, 2020 semester start date.

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Tampa, FL

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. Aspen University's initial PPN nursing student enrollments began on the December 8, 2020 semester start date.

Nashville, TN

On March 8, 2021, the Company announced that Aspen University received the final required state and board of registered nursing regulatory approvals for their new BSN Pre-Licensure campus location in Nashville, Tennessee, with permission to commence marketing and begin to enroll first-year PPN students effective immediately. Aspen University's initial PPN nursing student enrollments began on the April 27, 2021 semester start date.

USU Master of Science in Nursing-Family Nurse Practitioner (MSN-FNP)

USU offers a number of nursing degree programs and other degree programs in health sciences, business & technology and education. Its primary enrollment program is its MSN-FNP which is designed for BSN-prepared registered nurses who are seeking a Nurse Practitioner license. The MSN-FNP is an online-hybrid 48-credit degree program with 100% of the curriculum online, including the curricular component to complete 540 clinical and 32 lab hours.

While MSN-FNP lab hours have been done at USU’s San Diego facility through the end of calendar 2020, the rapid growth of the MSN-FNP program has caused AGI to open two additional immersion locations in 2021. Specifically, the Company built-out an additional suite on the ground floor of our main facility in Phoenix (by the airport). Consequently, students now have the option to attend their weekend immersions at three different metro locations: San Diego, Phoenix and Tampa.

Accounts Receivable - Monthly Payment Plan ("MPP")

~~Table of Contents~~

The Company offers several payment options to its students including a monthly payment plan (MPP), installment plans and financial aid. Our growth in accounts receivable over the last several years has predominantly been a result of students taking advantage of our groundbreaking monthly payment plan which we introduced in 2014 at Aspen University and subsequently in Fiscal Year 2018 at USU. At ~~October~~January 31, ~~2021,~~2022, Gross MPP accounts receivable was ~~86%~~89% of total gross accounts receivable. Of the Gross MPP accounts receivable, approximately 50% was generated at each AU and USU.

The Monthly Payment Plan, offered by both Aspen University and United State University, is a private education loan with a 0% fixed rate of interest (0% APR) and no down payment. Each month the student will make one payment of $250, $325, $350 or $375 (depending on the program) until the program is paid for. The attractive aspect of being able to pay for a degree over a fixed period of time has fueled the growth of this plan. MPP is designed so students can build the cost of their degree into their monthly budget.

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 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 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 $10,249,833 at April 30, 2021 to ~~$12,663,815~~$12,701,452 at ~~October~~January 31, ~~2021.~~2022. These are MPP students who make monthly payments over 36, 39 and 72 months. The average student completes their academic program in 30 months; therefore, most of the Company’s accounts receivable are short-term. However, when students graduate earlier than the 30 month average completion duration, they transition to long-term accounts receivable. ~~This is~~Also, long-term account receivable includes the impact of USU's 72-month payment plan. These are the primary ~~factor~~factors that ~~has~~have driven an increase in long-term accounts receivable.

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


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

COVID-19 Update

Nursing students represented 87% or ~~12,442~~11,889 of the Company’s total student body of ~~14,318~~13,724 students at the end of the ~~second~~third quarter of fiscal 2022. Of the ~~12,442~~11,889 nursing students, ~~2,500~~2,277 are BSN Pre-Licensure students located across our four metro locations (Phoenix, Austin, Tampa and Nashville). The remaining ~~9,942~~9,612 nursing students are licensed registered nurses (RNs) studying to earn an advanced degree (RN to BSN, MSN, MSN-FNP or DNP degree programs). ~~Therefore.~~Therefore, these ~~9,942~~9,612 post-licensure nursing students represent ~~69%~~70% of the Company’s total student body at the end of the third quarter and are the ~~population of~~ AGI students primarily affected by the COVID-19 pandemic.

Starting in the second half of June 2021 and continuing through ~~October 2021,~~January 2022, the Company saw lower course starts than seasonally expected among our RN student body. For example, at Aspen University, course starts among RNs from June through ~~October~~January 2022 increased by approximately 3% year-over-year. By comparison, over the previous two full fiscal years (Fiscal ~~year~~Year 2021 and Fiscal Year 2020), course starts among RNs at Aspen University increased by an average of approximately 10% year-over-year.

~~Table of Contents~~

We cannot be certain what impact ~~the Delta variant and other~~future COVID-19 variants will have on the Company’s results as we progress through the ~~second half~~remainder of ~~fiscal~~Fiscal Year 2022.

Although COVID has had an impact on the Company’s short-term growth rate, we continue to execute the Aspen 2.0 business plan, which decreases advertising spend on our lower efficiency unit and shifts that spend to the higher efficiency business units. Aspen 2.0 is designed to support growth in our new pre-licensure metros and the USU Master of Nursing-Family Nurse Practitioner (“FNP”) program and was intended to allow us to achieve profitability by the end of fiscal 2022. Notwithstanding the impact of Covid headwinds in the current quarter, the Company continues to pursue its goal of break even on a GAAP basis for the fourth quarter.

Results of Operations

Set forth below is the discussion of the results of operations of the Company for the three months ended ~~October~~January 31, ~~2021~~2022 (“Q2Q3 Fiscal 2022”) compared to the three months ended ~~October~~January 31, ~~2020~~2021 (“Q2Q3 Fiscal 2021”), and for the ~~six~~nine months ended ~~October~~January 31, ~~2021~~2022 (“1H9M Fiscal 2022”) compared to the ~~six~~nine months ended ~~October~~January 31, ~~2020~~2021 (“1H9M Fiscal 2021”)

The following table presents selected consolidated statement of operations as a percentage of revenue (differences due to rounding):

Three Months Ended October 31, Six Months Ended October 31,
2021 2020 2021 2020
Revenue 100 % 100 % 100 % 100 %
Operating expenses:
   Cost of revenue (exclusive of depreciation and amortization shown separately below)
         Instructional costs and services 26 % 22 % 24 % 21 %
         Marketing and promotional costs 21 % 21 % 21 % 20 %
Total cost of revenue (exclusive of depreciation and amortization shown separately below) 46 % 43 % 45 % 41 %
   General and administrative 61 % 66 % 59 % 62 %
   Bad debt expense 2 % 4 % 2 % 3 %
   Depreciation and amortization 4 % 3 % 4 % 3 %
Total operating expenses 114 % 116 % 110 % 110 %
   Operating loss (14) % (16) % (10) % (10) %
Other income (expense):
   Interest expense (1) % (9) % — % (6) %
   Other (expense) income, net — % — % 1 % — %
Total other (expense) income, net (1) % (9) % 1 % (7) %
Loss before income taxes (15) % (26) % (9) % (16) %
Income tax expense — % — % — % — %
Net loss (15) % (26) % (10) % (17) %

2829

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	Three Months Ended January 31,				Nine Months Ended January 31,
	2022		2021		2022		2021
Revenue	100	%	100	%	100	%	100	%

Operating expenses:
Cost of revenue (exclusive of depreciation and amortization shown separately below)
Instructional costs and services	26	%	24	%	25	%	22	%
Marketing and promotional costs	23	%	22	%	22	%	21	%
Total cost of revenue (exclusive of depreciation and amortization shown separately below)	49	%	45	%	47	%	43	%
General and administrative	62	%	64	%	60	%	63	%
Bad debt expense	2	%	4	%	2	%	3	%
Depreciation and amortization	5	%	3	%	4	%	3	%
Total operating expenses	118	%	117	%	113	%	112	%

Operating loss	(18)	%	(17)	%	(13)	%	(12)	%

Other income (expense):
Interest expense	(1)	%	—	%	(1)	%	(4)	%
Other income (expense), net	—	%	—	%	1	%	—	%
Total other (expense) income, net	(1)	%	—	%	—	%	(4)	%

Loss before income taxes	(18)	%	(17)	%	(12)	%	(17)	%

Income tax expense	1	%	—	%	1	%	—	%

Net loss	(20)	%	(17)	%	(13)	%	(17)	%

Revenue


		Three Months Ended October 31,							Six Months Ended October 31,								Three Months Ended January 31,							Nine Months Ended January 31,
		2021		$ Change		% Change	2020		2021		$ Change		% Change	2020			2022		$ Change		% Change	2021		2022		$ Change		% Change	2021
AU	AU	$	12,758,851	$	705,141	6%	$	12,053,710	$	26,008,502	$	3,234,150	14%	$	22,774,352	AU	$	13,027,338	$	1,167,164	10%	$	11,860,174	$	39,035,841	$	4,401,315	13%	$	34,634,526
USU	USU	6,181,360		1,264,025		26%	4,917,335		12,362,704		3,000,449		32%	9,362,255		USU	5,917,460		1,152,797		24%	4,764,663		18,280,163		4,153,245		29%	14,126,918
Revenue	Revenue	$	18,940,211	$	1,969,166	12%	$	16,971,045	$	38,371,206	$	6,234,599	19%	$	32,136,607	Revenue	$	18,944,798	$	2,319,961	14%	$	16,624,837	$	57,316,004	$	8,554,560	18%	$	48,761,444

Q2Q3 Fiscal 2022 compared to Q2Q3 Fiscal 2021

AU revenue increased 6%10% in Q2Q3 Fiscal 2022 compared to Q2Q3 Fiscal 2021 due primarily to Aspen’s BSN Pre-Licensure program, the AU degree program with the highest LTV.

USU revenue increased ~~26%~~24% in Q2Q3 Fiscal 2022 compared to Q2Q3 Fiscal 2021 due primarily to USU's MSN-FNP program, the USU degree program with the highest concentration of students and the highest LTV.

The Company expects the majority of its revenue growth in future periods to be derived from these two degree programs as we continue prioritizing our highest LTV degree programs to achieve our long-term growth plans.

1H9M Fiscal 2022 compared to 1H9M Fiscal 2021

AU and USU revenue increased ~~14%~~13% and ~~32%~~29% in 1H9M Fiscal 2022 compared to 1H9M Fiscal 2021, respectively, primarily due to the factors described above in the three month discussion.

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Cost of revenue (exclusive of depreciation and amortization shown separately below)
Three Months Ended October 31, Six Months Ended October 31,
2021 $ Change % Change 2020 2021 $ Change % Change 2020
Cost of Revenue (exclusive of depreciation and amortization shown separately below) $8,789,201 $1,464,421 20% $7,324,780 $17,382,769 $4,210,466 32% $13,172,303


	Three Months Ended January 31,				Nine Months Ended January 31,
	2022	$ Change	% Change	2021	2022	$ Change	% Change	2021
Cost of Revenue (exclusive of depreciation and amortization shown separately below)	$9,275,419	$1,715,468	23%	$7,559,951	$26,658,188	$5,925,934	29%	$20,732,254

Q2Q3 Fiscal 2022 compared to Q2Q3 Fiscal 2021

Instructional Costs and Services

Consolidated instructional costs and services for Q2Q3 Fiscal 2022 increased to ~~$4,836,461~~$4,923,148 or 26% of revenue from ~~$3,726,248~~$3,915,095 or ~~22%~~24% of revenue for Q2Q3 Fiscal 2021, an increase of ~~$1,110,213~~$1,008,053 or ~~30%~~26%.

AU instructional costs and services was ~~26%~~25% and ~~20%~~22% of AU revenue for Q2Q3 Fiscal 2022 and Q2Q3 Fiscal 2021, respectively. As a percentage of revenue, instructional costs and services increased due primarily to an increase in faculty compensation costs related to the faculty hiring in the BSN Pre-Licensure campus locations in Phoenix, Austin, Tampa and Nashville, and increases in ~~books and other educational materials.~~student technology license costs.

USU instructional costs and services was ~~25%~~28% and ~~26%~~27% of USU revenue for Q2Q3 Fiscal 2022 and Q2Q3 Fiscal 2021, respectively. As a percentage of revenue, instructional costs and services have increased due to the increased number of immersions with associated faculty and supplies cost.

Marketing and Promotional

Consolidated marketing and promotional costs for Q2Q3 Fiscal 2022 were ~~$3,952,740~~$4,352,271 or ~~21%~~23% of revenue compared to ~~$3,598,532~~$3,644,856 or ~~21%~~22% of revenue for Q2Q3 Fiscal 2021, an increase of ~~$354,208~~$707,415 or ~~10%~~19%. ~~Consolidated marketing and promotional costs remained at 21% of revenue in Q2 Fiscal 2022 and Q2 Fiscal 2021.~~

AU marketing and promotional costs represented 22% and 20% of AU revenue for ~~both Q2~~Q3 Fiscal 2022 and Q2Q3 Fiscal 2021, respectively. As a percentage of revenue, marketing and promotional costs have increased due primarily to the advertising spending increase directed to the new pre-licensure metropolitan locations.

USU marketing and promotional costs was ~~16%~~20% and ~~18%~~21% of USU revenue for Q2Q3 Fiscal 2022 and Q2Q3 Fiscal 2021, respectively.

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Corporate marketing costs were ~~$342,719~~$327,697 for Q2Q3 Fiscal 2022 compared to ~~$274,552~~$250,474 for Q2Q3 Fiscal 2021, an increase of ~~$68,167~~$77,223 or ~~25%~~31%.

1H9M Fiscal 2022 compared to 1H9M Fiscal 2021

Instructional Costs and Services

Consolidated instructional costs and services for 1H9M Fiscal 2022 increased to ~~$9,336,474~~$14,259,622 or ~~24%~~25% of revenue from ~~$6,782,961~~$10,698,056 or ~~21%~~22% of revenue for 1H9M Fiscal 2021, an increase of ~~$2,553,513~~$3,561,566 or ~~38%~~33%.

AU instructional costs and services were ~~24%~~25% and ~~20%~~21% of AU revenue for 1H9M Fiscal 2022 and 1H9M Fiscal 2021, respectively. As a percentage of revenue, instructional costs and services increased primarily due to the factors described above in the three month discussion.

USU instructional costs and services was ~~24%~~25% of USU revenue for both 1H9M Fiscal 2022 and 1H9M Fiscal ~~2021.~~2021, respectively.

Marketing and Promotional

Consolidated marketing and promotional costs for 1H9M Fiscal 2022 were ~~$8,046,295~~$12,398,566 or 22% of revenue compared to $10,034,198 or 21% of revenue ~~compared to $6,389,342 or 20% of revenue~~ for 1H9M Fiscal 2021, an increase of ~~$1,656,953~~$2,364,368 or ~~26%~~24%.

AU marketing and promotional represented 21% and ~~19%~~20% of AU revenue for 1H9M Fiscal 2022 and 1H9M Fiscal 2021, respectively. As a percentage of revenue, marketing and promotional costs increased due primarily to the planned advertising spending

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increase throughout Fiscal Year 2022, targeted primarily to our highest LTV program. The majority of the year-over-year advertising spending increase is directed to the new pre-licensure metro locations: Austin, Nashville and Tampa.

USU marketing and promotional costs was ~~16%~~17% and 18% of USU revenue for ~~both 1H~~9M Fiscal 2022 and 1H9M Fiscal ~~2021.~~2021, respectively.

Corporate marketing and promotional costs was ~~$666,984~~$994,681 in 1H9M Fiscal 2022 compared to ~~$507,403~~$757,877 in 1H9M Fiscal 2021, an increase of ~~$159,581or~~$236,804 or 31%,. The increase in marketing and promotional costs is primarily due ~~primarily~~ to graduation production costs for the ~~factor described above in the three month discussion.~~October 2021 ceremony.

General and administrative
Three Months Ended October 31, Six Months Ended October 31,
2021 $ Change % Change 2020 2021 $ Change % Change 2020
General and administrative $11,641,312 $356,157 3% $11,285,155 $22,587,789 $2,508,878 12% $20,078,911


	Three Months Ended January 31,				Nine Months Ended January 31,
	2022	$ Change	% Change	2021	2022	$ Change	% Change	2021
General and administrative	$11,771,487	$1,127,049	11%	$10,644,438	$34,359,276	$3,635,927	12%	$30,723,349

Q2Q3 Fiscal 2022 compared to Q2Q3 Fiscal 2021

AU general and administrative expense was 36% and ~~32%~~36% of AU revenue for Q2Q3 Fiscal 2022 and Q2Q3 Fiscal 2021, respectively. As a percentage of revenue, general and administrative expense ~~increased due primarily to increases in compensation, facilities and professional fees related to new campus openings, partially offset by a decrease in merchant fees.~~remained flat.

USU general and administrative costs was ~~41%~~43% and ~~43%~~44% of USU revenue for Q2Q3 Fiscal 2022 and Q2Q3 Fiscal 2021, respectively. As a percentage of revenue, general and administrative expense decreased due primarily to a decrease in compensation ~~partially offset by an increase in~~and facilities costs.

Corporate general and administrative costs was $4.5 million in Q2Q3 Fiscal 2022 and ~~$5.3~~$4.2 million in Q2Q3 Fiscal 2021, ~~a decrease~~an increase of ~~$0.8~~$0.2 million, or ~~15%~~5%. The ~~decrease~~increase was primarily due to ~~decreases in compensation and other employee-related costs, merchant fees and taxes, partially offset by~~ increases in professional fees, facilities costs and ~~travel expense.~~insurance expense, partially offset by a decrease in merchant fees.

1H9M Fiscal 2022 compared to 1H9M Fiscal 2021

AU general and administrative expense was 35% and ~~32%~~34% of Aspen University revenue for 1H9M Fiscal 2022 and 1H9M Fiscal 2021, respectively. As a percentage of revenue, general and administrative expense increased due primarily to ~~the factors described above~~increases in ~~the three month discussion.~~compensation and other employee-related costs, facilities costs, professional fees and merchant fees.

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USU general and administrative expense was ~~40%~~41% and 42% of USU revenue for 1H9M Fiscal 2022 and 1H9M Fiscal 2021, respectively. As a percentage of revenue, general and administrative expense decreased due primarily to ~~the factor described above~~higher revenue for 9M Fiscal 2022 and a decreases in ~~the three month discussion.~~merchant fees, partially offset by increases in compensation and other employee-related costs, facilities costs, professional fees and technology costs.

Corporate general and administrative expense was ~~$8.6~~$13.1 million in 1Hboth 9M Fiscal 2022 and ~~$8.8 million 1H~~9M Fiscal 2021, ~~a decrease of $0.2 million, or 2%. The decrease was primarily~~respectively. General and administrative expense remained flat year-over-year due to ~~the factors described above in the three month discussion, and increases in insurance expense, which includes the annual renewal period.~~planned Corporate cost control.

Bad debt expense
Three Months Ended October 31, Six Months Ended October 31,
2021 $ Change % Change 2020 2021 $ Change % Change 2020
Bad debt expense $350,000 $(282,000) (45)% $632,000 $700,000 $(332,000) (32)% $1,032,000


	Three Months Ended January 31,				Nine Months Ended January 31,
	2022	$ Change	% Change	2021	2022	$ Change	% Change	2021
Bad debt expense	$350,000	$(320,000)	(48)%	$670,000	$1,050,000	$(652,000)	(38)%	$1,702,000

For both the three and ~~six~~nine months ended ~~October~~January 31, ~~2021~~2022 compared to the three and ~~six~~nine months ended ~~October~~January 31 2020, bad debt expense decreased as a percentage of total revenue. Based on our review of accounts receivable and historical write-off trends, the Company evaluated its reserve methodology and adjusted reserves for AU and USU accordingly. At AU and USU, approximately ~~$230,000~~$766,000 and ~~$30,000~~$146,000 of student accounts receivable were written off against the accounts receivable allowance during 1H9M Fiscal 2022.

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Depreciation and amortization
Three Months Ended October 31, Six Months Ended October 31,
2021 $ Change % Change 2020 2021 $ Change % Change 2020
Depreciation and amortization $817,234 $290,877 55% $526,357 $1,596,643 $579,662 57% $1,016,981


	Three Months Ended January 31,				Nine Months Ended January 31,
	2022	$ Change	% Change	2021	2022	$ Change	% Change	2021
Depreciation and amortization	$883,536	$348,263	65%	$535,273	$2,480,179	$927,925	60%	$1,552,254

For both the three and ~~six~~nine months ended ~~October~~January 31, 2022 compared to the three and nine months ended January 31 2021, 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 and the opening of new campuses, partially offset by a decrease of fully depreciated assets.

Other (expense) income, net
Three Months Ended October 31, Six Months Ended October 31,
2021 $ Change % Change 2020 2021 $ Change % Change 2020
Other (expense) income, net $(188,822) $1,347,926 (88)% $(1,536,748) $329,759 $2,445,262 NM $(2,115,503)


	Three Months Ended January 31,				Nine Months Ended January 31,
	2022	$ Change	% Change	2021	2022	$ Change	% Change	2021
Other (expense) income, net	$(166,743)	$(146,762)	735%	$(19,981)	$163,016	$2,298,500	NM	$(2,135,484)

NM - Not meaningful

Q2Q3 Fiscal 2022 compared to Q2Q3 Fiscal 2021

Other expense, net in Q2Q3 Fiscal 2022 of ~~$188,822 primarily~~$166,743 includes $150,000 of interest expense related to the $5 million Credit Facility borrowings on August 31, ~~2021.~~2021 and $30,000 of amortization expense in connection with the fair value of the warrants issued to the Leon and Toby Cooperman Family Foundation as an extension fee in connection with the $5 million revolving line of credit.

Other expense, net in Q2Q3 Fiscal 2021 of ~~$1,536,748~~$19,981 primarily includes 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~~commitment fees on the ~~Convertible Notes issued~~undrawn $5 million Revolving Credit Facility which was then scheduled to mature on ~~January 22, 2020~~November 4, 2021 and as ~~well as the~~amended matures on November 4, 2023; with a 2% annual commitment fee on the ~~Credit Facility.~~undrawn portion payable quarterly.

1H9M Fiscal 2022 compared to 1H9M Fiscal 2021

Other income, net in 1H9M Fiscal 2022 of ~~$329,759~~$163,016 primarily includes $498,120 of a litigation settlement amount received on July 21, 2021 offset by the write-off of a related net receivable of $45,329 with the party in this litigation; partially offset by interest expense of approximately $233,000 related to the $5 million Credit Facility borrowings on August 31, 2021, interest expense of $25,000 related to the 2% annual commitment fee on the undrawn portion of the $5 million Revolving Credit Facility payable quarterly through August 31, 2021 and ~~interest expense related to the $5 million Credit Facility borrowings on August 31, 2021.~~

~~Table~~a $36,000 write off of ~~Contents~~

fixed assets.

Other expense, net in 1H9M Fiscal Q3 2021 of ~~$2,115,503~~$2,135,484 primarily includes: interest expense of (i) a non-cash charge of $1.4 million of accelerated amortization expense related to the conversion of the $10 million Convertible Notes which occurred on September 14, ~~2020 and~~2020; (ii) $0.5 million for the $10 million Convertible Notes issued on January 22, 2020 as well as the commitment fee on the $5 million Revolving Credit Facility; ~~as well as~~(iii) an adjustment of $0.3 million related to the previously reported earned revenue fee calculation deemed immaterial to our Fiscal 2019 ~~revenue and~~revenue; (iv) a non-cash modification and accelerated amortization charges of $0.2 million related to the exercise of the 2018 and 2019 Cooperman Warrants on June 5, 2020; partially offset by $0.3 million of other income.

Income tax expense
Three Months Ended October 31, Six Months Ended October 31,
2021 $ Change % Change 2020 2021 $ Change % Change 2020
Income tax expense $5,900 $(30,630) (84)% $36,530 $156,910 $122,280 353% $34,630


	Three Months Ended January 31,				Nine Months Ended January 31,
	2022	$ Change	% Change	2021	2022	$ Change	% Change	2021
Income tax expense	$231,610	$221,150	2114%	$10,460	$388,520	$343,430	762%	$45,090

Q3 Fiscal 2022 compared to Q3 Fiscal 2021

Table of Contents

Income tax expense in 1HQ3 Fiscal 2022 includes a reserve of approximately $150,000 for the estimate of the Canada foreign income tax liability which covers the 2013 through 2021 tax years during which a permanent establishment was in place in Canada. ~~In Q1 Fiscal 2022,~~Additionally, the Company ~~filed multi-year~~recorded a reserve of $75,000 for the estimated Fiscal Year 2022 Canada foreign income tax liability. The Company is preparing to file 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. The Company will also file an annual Canadian T2 Corporation Income Tax return to report the ongoing activity of the permanent establishment for 2022 and future taxation years.

9M Fiscal 2022 compared to 9M Fiscal 2021

Income tax expense in 9M Fiscal 2022 includes a reserve of approximately $300,000 for the estimate of the 2013 through 2021 tax year foreign income tax liability. Additionally, for the 2022 tax year, the Company recorded a reserve of approximately $75,000.

Non-GAAP Financial Measures

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

Our management uses and relies on EBITDA, Adjusted EBITDA, Adjusted EBITDA margin and Adjusted Gross Profit, which are non-GAAP financial measures. We believe that management, analysts and shareholders benefit from referring to the following non-GAAP financial measures to evaluate and assess our core operating results from period-to-period after removing the impact of items that affect comparability. Our management recognizes that the non-GAAP financial measures have inherent limitations because of the excluded items described below.

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

EBITDA and Adjusted EBITDA

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

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		Three Months Ended October 31,				Six Months Ended October 31,					Three Months Ended January 31,				Nine Months Ended January 31,
		2021		2020		2021		2020			2022		2021		2022		2021
Net loss	Net loss	$	(2,852,258)	$	(4,370,525)	$	(3,723,146)	$	(5,313,721)	Net loss	$	(3,733,997)	$	(2,815,266)	$	(7,457,143)	$	(8,128,987)
Interest expense, net	Interest expense, net	138,064		1,529,517		170,196		1,984,740		Interest expense, net	180,642		33,436		350,838		2,018,176
Taxes	Taxes	5,900		36,530		156,910		34,630		Taxes	231,610		10,460		388,520		45,090
Depreciation and amortization	Depreciation and amortization	817,234		526,357		1,596,643		1,016,981		Depreciation and amortization	883,536		535,273		2,480,179		1,552,254
EBITDA	EBITDA	(1,891,060)		(2,278,121)		(1,799,397)		(2,277,370)		EBITDA	(2,438,209)		(2,236,097)		(4,237,606)		(4,513,467)
Bad debt expense	Bad debt expense	350,000		632,000		700,000		1,032,000		Bad debt expense	350,000		670,000		1,050,000		1,702,000
Stock-based compensation	Stock-based compensation	722,158		1,831,548		1,264,870		2,318,658		Stock-based compensation	700,697		701,170		1,965,567		3,019,828
Non-recurring charges - Severance	Non-recurring charges - Severance	—		—		19,665		44,000		Non-recurring charges - Severance	—		—		19,665		44,000
Non-recurring (income) charges - Other	Non-recurring (income) charges - Other	103,754		—		(394,366)		375,437		Non-recurring (income) charges - Other	49,310		—		(345,056)		375,437
Adjusted EBITDA	Adjusted EBITDA	$	(715,148)	$	185,427	$	(209,228)	$	1,492,725	Adjusted EBITDA	$	(1,338,202)	$	(864,927)	$	(1,547,430)	$	627,798
Net loss Margin	Net loss Margin	(15)%		(26)%		(10)%		(17)%		Net loss Margin	(20)%		(17)%		(13)%		(17)%
Adjusted EBITDA Margin	Adjusted EBITDA Margin	(4)%		1%		(1)%		5%		Adjusted EBITDA Margin	(7)%		(5)%		(3)%		1%

In 1H9M Fiscal 2022, non-recurring income of ~~$394,366~~$345,056 primarily includes $498,120 of a litigation settlement amount received on July 21, 2021 offset by the write-off of a related net receivable of $45,329 with the party in this litigation, which isare included in "other (expense) income, net."

In 1H9M Fiscal 2021, ~~stock based~~stock-based compensation expense ofincludes $1.2 million related to the accelerated amortization expense for the price vesting of Executive RSUs in Q2 Fiscal 2021 and ~~$375,437~~non-recurring charges of ~~non-recurring charges~~$375,437 in Q1 Fiscal 2021. 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 (included in "Interest expense, net"). An additional non-recurring item in Q1 Fiscal 2021 of $123,947 (included in "Interest expense, net"), which 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 subsidiary:

Q2Q3 Fiscal 2022 compared to Q2Q3 Fiscal 2021


		Three Months Ended October 31, 2021									Three Months Ended January 31, 2022
		Consolidated		AGI Corporate		AU		USU			Consolidated		AGI Corporate		AU		USU
Net income (loss)	Net income (loss)	$	(2,852,258)	$	(5,059,164)	$	1,329,813	$	877,093	Net income (loss)	$	(3,733,997)	$	(5,020,149)	$	941,437	$	344,715
Interest expense, net	Interest expense, net	138,064		139,239		(739)		(436)		Interest expense, net	180,642		180,682		—		(40)
Taxes	Taxes	5,900		1,249		3,400		1,251		Taxes	231,610		951		230,660		(1)
Depreciation and amortization	Depreciation and amortization	817,234		38,141		681,107		97,986		Depreciation and amortization	883,536		47,536		738,172		97,828
EBITDA	EBITDA	(1,891,060)		(4,880,535)		2,013,581		975,894		EBITDA	(2,438,209)		(4,790,980)		1,910,269		442,502
Bad debt expense	Bad debt expense	350,000		—		250,000		100,000		Bad debt expense	350,000		—		225,000		125,000
Stock-based compensation	Stock-based compensation	722,158		672,967		23,298		25,893		Stock-based compensation	700,697		616,166		56,880		27,651
Non-recurring charges - Severance	Non-recurring charges - Severance	—		—		—		—		Non-recurring charges - Severance	—		—		—		—
Non-recurring income - Other		103,754		58,325		45,429		—
Non-recurring charges - Other										Non-recurring charges - Other	49,310		49,310		—		—
Adjusted EBITDA	Adjusted EBITDA	$	(715,148)	$	(4,149,243)	$	2,332,308	$	1,101,787	Adjusted EBITDA	$	(1,338,202)	$	(4,125,504)	$	2,192,149	$	595,153
Net income (loss) Margin	Net income (loss) Margin	(15)%		NM		10%		14%		Net income (loss) Margin	(20)%		NM		7%		6%
Adjusted EBITDA Margin	Adjusted EBITDA Margin	(4)%		NM		18%		18%		Adjusted EBITDA Margin	(7)%		NM		17%		10%

NM - Not meaningful

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		Three Months Ended October 31, 2020									Three Months Ended January 31, 2021
		Consolidated		AGI Corporate		AU		USU			Consolidated		AGI Corporate		AU		USU
Net income (loss)	Net income (loss)	$	(4,370,525)	$	(7,136,251)	$	2,207,770	$	557,956	Net income (loss)	$	(2,815,266)	$	(4,537,882)	$	1,375,359	$	347,257
Interest expense, net	Interest expense, net	1,529,517		1,529,519		—		(2)		Interest expense, net	33,436		33,516		—		(80)
Taxes	Taxes	36,530		12,550		23,780		200		Taxes	10,460		3,600		6,800		60
Depreciation and amortization	Depreciation and amortization	526,357		13,391		481,673		31,293		Depreciation and amortization	535,273		15,540		492,303		27,430
EBITDA	EBITDA	(2,278,121)		(5,580,791)		2,713,223		589,447		EBITDA	(2,236,097)		(4,485,226)		1,874,462		374,667
Bad debt expense	Bad debt expense	632,000		—		572,000		60,000		Bad debt expense	670,000		—		610,000		60,000
Stock-based compensation	Stock-based compensation	1,831,548		1,684,400		86,317		60,831		Stock-based compensation	701,170		692,244		(12,468)		21,394
Non-recurring charges - Severance	Non-recurring charges - Severance	—		—		—		—		Non-recurring charges - Severance	—		—		—		—
Non-recurring charges - Other	Non-recurring charges - Other	—		—		—		—		Non-recurring charges - Other	—		—		—		—
Adjusted EBITDA	Adjusted EBITDA	$	185,427	$	(3,896,391)	$	3,371,540	$	710,278	Adjusted EBITDA	$	(864,927)	$	(3,792,982)	$	2,471,994	$	456,061
Net income (loss) Margin	Net income (loss) Margin	(26)%		NM		18%		11%		Net income (loss) Margin	(17)%		NM		12%		7%
Adjusted EBITDA Margin	Adjusted EBITDA Margin	1%		NM		28%		14%		Adjusted EBITDA Margin	(5)%		NM		21%		10%

Adjusted EBITDA margin decreased to ~~(4)~~(7)% in Q2Q3 Fiscal 2022 from 1%(5)% in Q2Q3 Fiscal 2021, due primarily to ~~an increase in~~ an increase in faculty compensation costs related to the faculty hiring in the BSN Pre-Licensure campus locations in Phoenix, Austin and Tampa, and increases in books and other educational materials and facilities costs related to the opening of new campus locations. Additionally, our strategic shift in marketing spend and the impact of COVID-19 impacted enrollments in our AU Online business unit, which contributed to the decrease in Adjusted EBITDA margin.

1H9M Fiscal 2022 compared to 1H9M Fiscal 2021


		Six Months Ended October 31, 2021									Nine Months Ended January 31, 2022
		Consolidated		AGI Corporate		AU		USU			Consolidated		AGI Corporate		AU		USU
Net income (loss)	Net income (loss)	$	(3,723,146)	$	(9,517,700)	$	3,664,270	$	2,130,284	Net income (loss)	$	(7,457,143)	$	(14,537,849)	$	4,605,707	$	2,474,999
Interest expense, net	Interest expense, net	170,196		172,511		(1,739)		(576)		Interest expense, net	350,838		353,193		(1,739)		(616)
Taxes	Taxes	156,910		2,412		153,207		1,291		Taxes	388,520		3,363		383,867		1,290
Depreciation and amortization	Depreciation and amortization	1,596,643		69,184		1,344,800		182,659		Depreciation and amortization	2,480,179		116,720		2,082,972		280,487
EBITDA	EBITDA	(1,799,397)		(9,273,593)		5,160,538		2,313,658		EBITDA	(4,237,606)		(14,064,573)		7,070,807		2,756,160
Bad debt expense	Bad debt expense	700,000		—		500,000		200,000		Bad debt expense	1,050,000		—		725,000		325,000
Stock-based compensation	Stock-based compensation	1,264,870		1,116,246		92,893		55,731		Stock-based compensation	1,965,567		1,732,412		149,773		83,382
Non-recurring charges - Severance	Non-recurring charges - Severance	19,665		—		—		19,665		Non-recurring charges - Severance	19,665		—		—		19,665
Non-recurring income - Other		(394,366)		58,325		(452,691)		—
Non-recurring (income) charges - Other										Non-recurring (income) charges - Other	(345,056)		107,635		(452,691)		—
Adjusted EBITDA	Adjusted EBITDA	$	(209,228)	$	(8,099,022)	$	5,300,740	$	2,589,054	Adjusted EBITDA	$	(1,547,430)	$	(12,224,526)	$	7,492,889	$	3,184,207
Net income (loss) Margin	Net income (loss) Margin	(10)%		NM		14%		17%		Net income (loss) Margin	(13)%		NM		12%		14%
Adjusted EBITDA Margin	Adjusted EBITDA Margin	(1)%		NM		20%		21%		Adjusted EBITDA Margin	(3)%		NM		19%		17%

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		Six Months Ended October 31, 2020									Nine Months Ended January 31, 2021
		Consolidated		AGI Corporate		AU		USU			Consolidated		AGI Corporate		AU		USU
Net income (loss)	Net income (loss)	$	(5,313,721)	$	(11,391,986)	$	4,517,533	$	1,560,732	Net income (loss)	$	(8,128,987)	$	(15,929,868)	$	5,892,892	$	1,907,989
Interest expense, net	Interest expense, net	1,984,740		1,984,742		—		(2)		Interest expense, net	2,018,176		2,018,258		—		(82)
Taxes	Taxes	34,630		10,650		23,780		200		Taxes	45,090		14,250		30,580		260
Depreciation and amortization	Depreciation and amortization	1,016,981		26,483		931,727		58,771		Depreciation and amortization	1,552,254		42,023		1,424,030		86,201
EBITDA	EBITDA	(2,277,370)		(9,370,111)		5,473,040		1,619,701		EBITDA	(4,513,467)		(13,855,337)		7,347,502		1,994,368
Bad debt expense	Bad debt expense	1,032,000		—		912,000		120,000		Bad debt expense	1,702,000		—		1,522,000		180,000
Stock-based compensation	Stock-based compensation	2,318,658		2,076,443		147,634		94,581		Stock-based compensation	3,019,828		2,768,687		135,166		115,975
Non-recurring charges - Severance	Non-recurring charges - Severance	44,000		44,000		—		—		Non-recurring charges - Severance	44,000		44,000		—		—
Non-recurring charges - Other	Non-recurring charges - Other	375,437		375,437		—		—		Non-recurring charges - Other	375,437		375,437		—		—
Adjusted EBITDA	Adjusted EBITDA	$	1,492,725	$	(6,874,231)	$	6,532,674	$	1,834,282	Adjusted EBITDA	$	627,798	$	(10,667,213)	$	9,004,668	$	2,290,343
Net income (loss) Margin	Net income (loss) Margin	(17)%		NM		20%		17%		Net income (loss) Margin	(17)%		NM		17%		14%
Adjusted EBITDA Margin	Adjusted EBITDA Margin	5%		NM		29%		20%		Adjusted EBITDA Margin	1%		NM		26%		16%

Adjusted EBITDA margin decreased to ~~(1)~~(3)% in 1H9M Fiscal 2022 from 5%1% in 1H9M Fiscal 2021, due primarily to the factors described above in the three months discussion.

Adjusted Gross Profit

GAAP Gross Profit is revenue less cost of revenue less amortization expense. The Company defines Adjusted Gross Profit as GAAP Gross Profit adjusted to exclude amortization expense. The following table presents a reconciliation of GAAP Gross Profit to Adjusted Gross Profit:


		Three Months Ended October 31,				Six Months Ended October 31,			Three Months Ended January 31,				Nine Months Ended January 31,
		2021		2020		2021	2020		2022		2021		2022	2021
Revenue	Revenue	$	18,940,211	$	16,971,045	$38,371,206	$32,136,607	Revenue	$	18,944,798	$	16,624,837	$57,316,004	$48,761,444
Cost of Revenue	Cost of Revenue	8,789,201		7,324,780		17,382,769	13,172,303	Cost of Revenue	9,275,419		7,559,951		26,658,188	20,732,254
Adjusted Gross Profit	Adjusted Gross Profit	10,151,010		9,646,265		20,988,437	18,964,304	Adjusted Gross Profit	9,669,379		9,064,886		30,657,816	28,029,190
Less amortization expense included in cost of revenue:	Less amortization expense included in cost of revenue:							Less amortization expense included in cost of revenue:
Intangible asset amortization	Intangible asset amortization	27,496		10,516		37,988	22,463	Intangible asset amortization	22,174		10,255		60,162	32,718
Call center software/website amortization	Call center software/website amortization	432,392		346,653		836,143	661,760	Call center software/website amortization	419,026		363,030		1,255,169	1,024,790
Total amortization expense included in cost of revenue	Total amortization expense included in cost of revenue	459,888		357,169		874,131	684,223	Total amortization expense included in cost of revenue	441,200		373,285		1,315,331	1,057,508
GAAP Gross Profit	GAAP Gross Profit	$	9,691,122	$	9,289,096	$20,114,306	$18,280,081	GAAP Gross Profit	$	9,228,179	$	8,691,601	$29,342,485	$26,971,682

GAAP Gross Profit as a percentage of revenue	GAAP Gross Profit as a percentage of revenue	51%		55%		52%	57%	GAAP Gross Profit as a percentage of revenue	49%		52%		51%	55%
Adjusted Gross Profit as a percentage of revenue	Adjusted Gross Profit as a percentage of revenue	54%		57%		55%	59%	Adjusted Gross Profit as a percentage of revenue	51%		55%		53%	57%

Q2Q3 Fiscal 2022 compared to Q2Q3 Fiscal 2021

Adjusted gross profit as a percentage of revenue decreased due primarily to a more than anticipated decrease in class starts year-over-year in the ~~pre-licensure program~~post-licensure programs due to the effects of the COVID surge, ~~and additional full-time faculty staffing~~higher instructional costs related to an increase in ~~the USU MSN-FNP program and~~ faculty hiring in the BSN Pre-Licensure new campus locations and higher immersion costs related to the growth in ~~Phoenix, Austin, Tampa and Nashville; and planned advertising spending increase throughout Fiscal Year 2022,~~the USU MSN-FNP program. Additionally, we incurred seasonally higher marketing costs over the third quarter holiday period, targeted primarily to our highest LTV ~~programs. The majority of the advertising spending increase is directed to the~~programs including new campus locations in our AU pre-licensure ~~metro locations: Austin, Nashville and Tampa, as well as USU's MSN-FNP~~ program.

Aspen University GAAP Gross Profit represented 50% of Aspen University revenue for Q2Q3 Fiscal Year 2022, and USU GAAP Gross Profit represented ~~58%~~52% of USU revenue for Q2Q3 Fiscal Year 2022.

1H9M Fiscal 2022 compared to 1H9M Fiscal 2021

~~Table of Contents~~

Adjusted gross profit as a percentage of revenue decreased due primarily to the factors described above in the three months discussion.

Table of Contents

Aspen University GAAP Gross Profit represented ~~52%~~51% of Aspen University revenue for 1H9M Fiscal Year 2022, and USU GAAP Gross Profit represented ~~59%~~57% of USU revenue for 1H9M Fiscal Year 2022.

Liquidity and Capital Resources

~~Long-term~~ Debt

For a detailed description of ~~long-term~~ debt, see “Note ~~6—Long-term~~6. Debt” to the consolidated financial statements included in “Item 1. Consolidated Financial Statements.”

Cash flow information

A summary of the Company's cash flows is as follows:


		Six Months Ended October 31,					Nine Months Ended January 31,
		2021		2020			2022		2021
Net cash (used in) provided by	Net cash (used in) provided by					Net cash (used in) provided by
Operating activities	Operating activities	$	(3,453,933)	$	(2,076,821)	Operating activities	$	(7,719,760)	$	(5,275,719)
Investing activities	Investing activities	(2,849,652)		(2,244,723)		Investing activities	(3,734,670)		(2,909,088)
Financing activities	Financing activities	5,056,034		3,297,107		Financing activities	5,191,034		3,660,492
Net decrease in cash	Net decrease in cash	$	(1,247,551)	$	(1,024,437)	Net decrease in cash	$	(6,263,396)	$	(4,524,315)

Net Cash Used in Operating Activities

Net cash used in operating activities for the ~~six~~nine months ended ~~October~~January 31, ~~2021 consists of net loss adjusted for non-cash items and the effect of changes in working capital. Non-cash~~2022 includes adjustments primarily include stock-based compensation, bad debt expense, depreciation and amortization expense, amortization of debt issue costs and deferred financing costs, warrants issued for services and other adjustments such as tenant improvement allowances received from landlords.

~~Adjustments~~ to net loss ~~consist~~consisting primarily of depreciation and amortization expense of ~~$1,596,643,~~$2,480,179, stock-based compensation of ~~$1,264,870,~~$1,965,567, bad debt expense of ~~$700,000,~~$1,050,000, tenant improvement allowances received from landlords of $816,591, amortization of deferred financing costs of $49,107, warrant based cost of ~~$27,583, amortization of deferred financing costs of $19,643~~$43,708 and debt issue costs of ~~$18,056.~~$18,056, partially offset by lease benefits of $96,450. The ~~increase~~decrease in cash from changes in working capital primarily consists of increases in gross accounts receivable (both short and long term accounts receivable, before allowance for doubtful accounts) of ~~$7,699,220,~~$6,412,590, prepaid expenses of ~~$520,685~~$297,797 and a decrease in ~~accrued expenses~~deferred revenue of ~~$268,088,~~$642,233, partially offset by increases in ~~deferred revenue~~accrued expenses of ~~$3.4 million,~~$38,353, accounts payable of ~~$636,136~~$340,168 and due to students of ~~$472,159.~~$482,032. The increase in accounts receivable is primarily attributed to the growth in ~~revenue from increased enrollments and~~ students paying through the monthly payment plan as well as timing of billings for class starts. Prepaid expenses increased due to the annual insurance renewal in the first quarter of the Fiscal Year 2022. The ~~increase~~decrease in deferred revenue is due primarily to timing of billings for class starts in our pre-licensure program. Accrued expenses increased due primarily to accrual of approximately $300,000 for the estimate of the 2013 through 2021 tax year foreign income tax liability and ~~higher revenue.~~an increase in accrued marketing due to timing of marketing payments. The increases in accounts payable and due to students are primarily due to timing of payments.

The Company expects ~~a favorable trend in~~ working capital and long-term student accounts receivable to trend higher over time ~~but~~as more students utilize our monthly payment plan. Additionally, there may be working capital volatility from quarter to ~~quarter. In aggregate~~quarter, especially regarding the ~~Company expects a general~~timing of financial aid payments and student course starts that impact deferred revenue and accounts receivable balances. Offsetting the trend toward ~~lower~~higher working capital and long-term student accounts receivable will be a trend toward improved adjusted EBITDA as we continue to grow our high LTV programs. We believe the adjusted EBITDA growth will result in positive operating cash ~~used~~flow in ~~operations in future quarters; however, some quarters could have higher cash used in operations as a result~~the next 2-3 years. We are actively seeking additional long-term financing arrangements to provide funds to continue the expansion of ~~more cash used to support changes in working capital. Program start timings and the related federal financial aid drawdowns also impact cash timing.~~our high LTV programs. See Financing Arrangements discussed below.

Net cash used in operations for the ~~six~~nine months ended ~~October~~January 31, ~~2020 consist~~2021 includes adjustments to net loss consisting primarily of stock-based compensation of ~~$2,318,658,~~$3,019,828, bad debt expense of $1,702,000, amortization of debt discounts of $1,550,854, ~~bad debt expense of $1,032,000~~ and depreciation and amortization expense of ~~$1,016,981.~~$1,552,254. The ~~increase~~decrease in cash from changes in working capital primarily consists of ~~an increase~~increases in gross accounts receivable (both short and long term accounts receivable, before allowance for doubtful accounts) of ~~$8,246,180,~~$6,493,238 and other current assets of $1,205,083, partially offset by an increase in deferred revenue of ~~$4,915,504~~$1,887,377 and accrued expenses of ~~$1,282,983.~~$1,756,102. The increase in accounts receivable is primarily attributed to the growth in revenues from ~~increased enrollments and~~ students paying through the monthly payment plan as well as timing of billings for class ~~start near~~starts. Other current assets increased primarily due to reimbursable tenant improvement costs of $1.3 million paid in Fiscal 2021 related to the ~~end~~build out of ~~Q2 Fiscal 2021.~~the Tampa and Austin campuses. The increase in deferred revenue is due primarily to timing of billings for class ~~start near the end~~starts. The

Table of ~~Q2 Fiscal 2021 and higher revenue. The~~ Contents

increase in accrued expenses is due primarily to accrual of executive bonus for Fiscal Year 2021, accrued payroll due to higher headcount and related

~~Table of Contents~~

increase in compensation and benefits expense to support the growth of the business and an increase in accrued marketing due to timing.

Net Cash Used in Investing Activities

Net cash used in investing activities for the ~~six~~nine months ended ~~October~~January 31, ~~2021~~2022 includes purchases of property and equipment of ~~$2.7~~$3.6 million primarily due to investments in leasehold improvements, computer equipment and hardware and Company developed software. Purchases of courseware and accreditation were ~~$0.1~~$0.2 million. A significant portion of cash used for investing activities relates to the opening of new campus locations.

Net cash used in investing activities for the ~~six~~nine months ended ~~October~~January 31, ~~2020~~2021 includes purchases of property and equipment of ~~$2,233,348~~$2,877,758 primarily due to investments in computer equipment and hardware, Company developed software and new campuses; and purchases of courseware and accreditation of ~~$11,375.~~$31,330.

Net Cash Provided By Financing Activities

Net cash provided by financing activities for the ~~six~~nine months ended ~~October~~January 31, ~~2021~~2022 includes proceeds of $5,000,000 from borrowings under the Credit Facility and proceeds from stock options exercised of ~~$56,034.~~$191,034.

Net cash provided by financing activities for the ~~six~~nine months ended ~~October~~January 31, ~~2020~~2021 includes proceeds from stock options exercised of ~~$2,215,315~~$2,578,700 and proceeds from warrants exercised of $1,081,792 received from the cash exercise of warrants associated with the Term Loan and Revolving Credit Facility.

Liquidity and Capital Resources

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

Financing Arrangements

Convertible Note and New Credit Facility

On March 14, 2022, the Company closed an offering of a $10 million convertible note and a $20 million Revolving Credit Facility (the “New Facility”). The Company received the proceeds from the convertible note of $10 million at the closing. Proceeds from the $10 million convertible note offering will be used for general corporate purposes, including funding the Company’s expansion of its BSN Pre-Licensure nursing degree program. No sums have been borrowed under this revolving credit line as of this date. Currently, the Company does not anticipate making drawdowns on the revolving credit line.

Credit Facility

On August 31, 2021, the Company extended the ~~Revolving~~ Credit Facility by one year to November 4, 2022. The Credit Facility Agreement provides for a $5,000,000 revolving credit facility evidenced by a revolving promissory note. Borrowings under the Credit Facility Agreement bear interest at 12% per annum. In conjunction with the extension of the ~~Revolving~~ Credit Facility, the Company drew down $5,000,000 of funds ~~from the Revolving Credit Facility~~ at 12% interest per annum due November 4, 2022. Pursuant to this agreement, on August 31, 2021 the Company issued to the Foundation warrants to purchase 50,000 shares of the Company’s common stock exercisable for five years from the date of issuance at the exercise price of ~~$5.89~~$5.85 per share. Additionally on March 14, 2022, the Company extended the $5 million Credit Facility by one additional year to November 4, 2023 at an increased interest rate of 14% per annum. The Company ~~expects to use~~uses these funds for general business purposes, including the roll out of the new campuses. ~~The Company anticipates that the Aspen 2.0 business plan, with lower advertising budget that targets the highest LTV programs, will reduce the need to borrow funds in the future.~~

At ~~October~~January 31, ~~2021~~2022 and April 30, 2021, there were $5,000,000 and no outstanding borrowings, respectively, under the Credit Facility.

The Company expects that its existing cash resources will be sufficient to fund its working capital, including capital

expenditures, investing and other needs for the next 12 months.

Capital and other expenditures

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The Company anticipates that it will need to make capital and other expenditures in connection with the development and expansion of its campus ~~operations.~~operations and the implementation of new on-line programs. The Company's Fiscal year 2022 capital expenditures ~~are expected to~~will be ~~lower than~~between approximately $4 million and $5 million, a decrease from Fiscal Year 2021 capital expenditures ~~by approximately $0.5 million related~~primarily due to campus costs for the opening of one new campus ~~costs. Additionally,~~in the ~~Company expects additional cash commitments for letters of credit related~~current year compared 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~~two campuses in the ~~next 12 months.~~prior year.

Critical Accounting Policies and Estimates

At ~~October~~January 31, ~~2021,~~2022, there were no material changes to our critical accounting policies and estimates. A full listing of our critical accounting policies and estimates is described in the "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

•Accounts Receivable and Allowance for Doubtful Accounts Receivable

•Goodwill and Intangibles

•Stock-based compensation

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Off Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements as of ~~October~~January 31, ~~2021.~~2022.

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~~Adjusted EBITDA growth and expectations for positive ~~GAAP net income by Q4 of~~operating cash flow in the ~~fiscal year 2022,~~next 2-3 years, our focusing of advertising spend on the highest LTV units and the expectation that a majority of our future revenue growth will be derived from those units, the anticipated impact of this plan on our future operating results, liquidity and growth, ~~the expected growth in our highest efficiency businesses, our estimates concerning LTV, bookings 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 impact of COVID-19, ~~on class starts and enrollments,~~ our anticipated working capital trends including working capital volatility from quarter to quarter, the intended use of proceeds from recent financings including towards the ~~drawdown under the revolving credit facility,~~continued expansion of our BSN Pre-Licensure campuses in states with high population growth and a growth-focused marketing strategy for our post-licensure nursing degree programs, our expected capital expenditures related to new campus openings and the implementation of new on-line programs, letters of credit and promissory notes,and our liquidity. All statements other than statements of historical facts contained in this report, including statements regarding our future financial position, liquidity, business strategy and plans and objectives of management for future operations, are forward-looking statements. The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “could,” “target,” “potential,” “is likely,” “will,” “expect” and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs.

The results anticipated by any or all of these forward-looking statements might not occur. Important factors, uncertainties and risks that may cause actual results to differ materially from these forward-looking statements include, without limitation, our ability to successfully implement the ~~fiscal year 2022~~Aspen 2.0 business plan and the accuracy of the assumptions used in estimating the results of such implementation, the continued ~~high~~ demand of nursing students 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,new programs, student attrition, national and local economic factors including the substantial impact of whether COVID-19 will continue to have an adverse effect on the ~~COVID-19~~economy, uncertainties arising from the Russian invasion of Ukraine including its effect on ~~nurses~~the U.S. economy,supply chain issues and the ~~economy,~~labor market, competition from nursing schools in local markets, the competitive impact from the trend of major non-profit universities using online education ~~unfavorable regulatory changes, rising acquisition costs~~ and ~~potential loss~~consolidation among our competitors, and the impact of ~~employees as a result~~possible actions arising from the Arizona Board of ~~COVID-19 vaccine mandate.~~Nursing investigation. Further information on the risks and uncertainties affecting our business is contained in our filings with the SEC, including this Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended April 30, 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.

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Evaluation of Disclosure Controls and Procedures

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

Changes in Internal Control Over Financial Reporting

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

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time-to-time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. Other 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, 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 OSHA directive concerning mandatory COVID-19 vaccination~~If we are unable to satisfy the probation terms following the execution of ~~employees could have~~ a ~~material adverse impact on~~mutually acceptable consent agreement with the Arizona Board of Nursing, our ~~business and~~future results of ~~operations.~~operations could be materially and adversely affected.

Our largest subsidiary, Aspen University Inc., is based in Phoenix, Arizona. Approximately 12% of its enrollments are students in its BSN Pre-Licensure nursing programs at two campus locations in Phoenix. On January 28, 2022, Aspen University voluntarily agreed to cease enrollments in the pre-nursing and core nursing programs at its Arizona Pre-licensure campuses effective immediately related to an investigation by the Arizona Board of Nursing resulting from student complaints, unacceptable NCLEX first-time pass rates in CY’2021, among other issues. Aspen University will continue the suspension of enrollments in the pre-nursing and core nursing programs at its Arizona Pre-licensure campuses at least until it has successfully negotiated a consent agreement with the Arizona Board of Nursing which will outline the terms of the impending probation. Once the probation period begins and until the probation period ends, should Aspen University not successfully satisfy the probation terms, future results of operations could be materially and adversely affected.

Aspen University has also entered into a Stipulated Agreement with the Arizona State Board for Private Postsecondary Education which includes a requirement to post a letter of credit or surety bond for $18.3 million within 45 days (approximately April 21st).

Because of the Russian invasion of Ukraine, the effect on the capital markets and the economy is uncertain, and we may have to deal with a recessionary economy and economic uncertainty including possible adverse effects upon our business.

~~On September 9, 2021, President Biden announced~~As a ~~proposed new rule requiring all employers with at least 100 employees~~result of the Russian invasion of Ukraine, certain events are beginning to ~~ensure that their employees are fully vaccinated or require unvaccinated workers to get a negative test at least once a week. Effective November 5, 2021,~~effect the ~~Occupational Health~~global and Safety Administration (OSHA) issued a COVID-19 Vaccination and Testing Emergency Temporary Standard (ETS) which would require employers with 100 or more employees, by January 4, 2022, to require their workers either to be fully vaccinated (or at least have received a final dose of a primary vaccine series) or to test weekly for COVID-19. However, a federal district court has issued a nationwide preliminary injunction prohibiting the U.S. government from enforcing the ETS mandate. It is currently not possible to predict with certainty the exact impact the ETS would have on usUnited States economy including increased inflation, substantial increases in the ~~event the injunction is lifted. As a company~~prices of oil and gas, large Western companies ceasing to do business in Russia and uncertain capital markets with ~~more than 100 employees,~~declines in ~~the event the injunction is lifted, we would be required to mandate COVID-19 vaccination~~leading market indexes. The duration of ~~our workforce or our unvaccinated employees would require weekly testing. This~~this war and its impact are at best uncertain and continuation may result in ~~employee attrition, which could be material as~~Internet access issues if Russia, for example, began illicit cyber activities. Ultimately the economy may turn into 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~~recession with uncertain and ~~costs, which could be material. Accordingly, the proposed ETS when implemented could have a material adverse effect on~~potentially severe impacts upon public companies and us. We cannot predict how this will affect our business ~~and results of operations.~~but the impact may be adverse.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~All~~Other than as set forth in "Item 5. Other Information" which is incorporated herein by reference, all recent sales of unregistered securities have been previously reported.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

~~Not applicable.~~As of March 8, 2022, the 2012 Equity Incentive Plan (the “2012 Plan”) had 129,009 shares of common stock available to be issued under the 2012 Plan. The 2012 Plan expires on March 15, 2022. On March 8, 2022 the Company increased the 2018

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Equity Incentive Plan (the “2018 Plan”) by an additional 129,009 shares of common stock available for awards under the 2018 Plan and transferred the remaining 129,009 unused awards under the 2012 Plan to the 2018 Plan.

On March 14, 2022 ,the Company issued (i) Revolving Promissory Note and Security Agreements (the “Revolver Notes”) in the principal amount of up to $20 million in the aggregate and (ii) Convertible Promissory Note and Security Agreements (the “Convertible Notes”, and together with the Revolver Notes, collectively, the “Notes”) in the principal amount of up to $10 million in the aggregate, to two unaffiliated lenders (the “Lenders”).

The Convertible Notes mature five years from the issuance date and pay interest monthly at the rate of 12% per annum. The Convertible Notes are convertible into up to 10,000,000 shares of the Company’s common stock at each lender’s option at a conversion price of $1.00 per share any time after the issuance date. In addition, the Convertible Notes are mandatorily convertible into shares of common stock if the closing price of the Company’s common stock is at least $2.00 per share for 30 consecutive trading days. This mandatory conversion is subject to each Lender’s 9.9% beneficial ownership limitation and subject to the Nasdaq combined 19.99% requirement until the Company’s stockholders approve further conversion.

The Revolver Notes will require monthly interest payments on sums borrowed at the rate of 12% per annum. No sums have been borrowed as of the date of the Quarterly Report on Form 10-Q. Currently, the Company does not anticipate making drawdowns on the revolving credit line. The Company paid a 1% commitment fee ($200,000) at closing and if the Revolver Notes have not been terminated by September 14, 2022, it must pay another 1% commitment fee.

Pursuant to the Notes, all future indebtedness incurred by the Company, other than indebtedness expressly permitted by the Notes, will be subordinated to the Notes and the Prior Credit Facility, as defined below, with an exception for acquisitions of software and equipment under purchase money agreements and capital leases.

The Company’s obligations under the Loan Agreements are secured by a first priority lien in certain deposit accounts of the Company, all current and future accounts receivable of the Company’s subsidiaries, certain of the deposit accounts of the Company and its subsidiaries and a pledge of the common stock of the Company held by its chief executive officer (the “Collateral”).

On March 14, 2022, in connection with the issuance of the Notes, the Company also entered into an intercreditor agreement (the “Intercreditor Agreement”) among the Company, the Lenders and the lender under a prior credit facility dated November 5, 2018 (as amended, the “Prior Credit Facility”). The Intercreditor Agreement provides among other things that the Company’s obligations under, and the security interests in the Collateral granted pursuant to, the Note and the Prior Credit Facility shall rank pari passu to one another.

In connection with the issuance of the Notes, the Company also entered into an Investors/Registration Rights Agreement with the Lenders (the “Registration Rights Agreement”) whereby, upon request of either Lender on or after August 15, 2022 the Company must file and obtain and maintain the effectiveness of a registration statement registering the shares of common stock issued or issuable upon conversion of the Convertible Notes.

On March 14, 2022, the Company entered into an amendment with the lender pursuant to the Prior Credit Facility (the “Amendment”) to extend the maturity date of the Prior Credit Facility by one year to November 4, 2023.

On March 14, 2022, the Company entered into a letter agreement with the Lenders (the “Letter Agreement”). Pursuant to the Letter Agreement, the Company and its subsidiaries made certain representations and warranties to the Lenders. The Letter Agreement also contained certain conditions precedent to the closing of the transactions.

The foregoing description of the terms of the Revolver Notes, the Convertible Notes, Investor Rights Agreement, the Registration Rights Agreement, the Amendment, the Letter Agreement and the transactions contemplated thereby, does not purport to be complete and is qualified in its entirety by reference to the form of the Revolver Note, the form of the Convertible Note, the form of Intercreditor Agreement, the form of Investors/Registration Rights Agreement, the form of the Amendment, and the Form of Letter Agreement, copies which are filed as Exhibits 10.1, 10.2, 10.3, 10.4, 10.5, and 10.6, respectively, to this Quarterly Report on Form 10-Q and are incorporated herein by reference.

ITEM 6. EXHIBITS

See the Exhibit Index at the end of this report.

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EXHIBIT INDEX
Incorporated by Reference Filed or
Furnished
Herewith
Exhibit # Exhibit Description Form Date Number
3.1
Certificate of Incorporation, as amended 10-K 7/9/19 3.1
3.2
Bylaws, as amended 10-Q 3/15/18 3.2
10.1
Warrant dated July 21, 2021 10-Q 9/14/21 10.1
10.2
Employment Agreement, effective August 16, 2021, by the Company and Matthew LaVay* 8-K 8/16/21 10.1
31.1
Certification of Principal Executive Officer (302) Filed
31.2
Certification of Principal Financial Officer (302) Filed
32.1
Certification of Principal Executive and Principal Financial Officer (906) Furnished**
101.INS Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH Inline XBRL Taxonomy Extension Schema Document Filed
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document Filed
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document Filed
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document Filed
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document Filed
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

Incorporated by Reference

Filed or
Furnished
Herewith

Exhibit #

Exhibit Description

Form

Date

Number

3.1

Certificate of Incorporation, as amended

10-K

7/9/19

3.1

3.2

Bylaws, as amended

10-Q

3/15/18

3.2

10.1

Form of Revolving Promissory Note and Security Agreement+

Filed

10.2

Form of Convertible Promissory Note and Security Agreement+

Filed

10.3

Form of Intercreditor Agreement

Filed

10.4

Form of Investors/Registration Rights Agreement

Filed

10.5

Form of Third Amendment to the Amended and Restated Revolving Promissory Note and Security Agreement dated as of November 5, 2018

Filed

10.6

Form of Letter Agreement+

Filed

10.7

Amendment No. 4 to the Aspen Group, Inc. 2018 Equity Incentive Plan*

Filed

10.8

Amendment No. 3 to the Aspen Group, Inc. 2018 Equity Incentive Plan*

DEF 14A

11/5/21

Annex A

10.9

Warrant dated July 21, 2021

10-Q

9/14/21

10.1

10.10

Employment Agreement, effective August 16, 2021, by the Company and Matthew LaVay*

8-K

8/16/21

10.1

31.1

Certification of Principal Executive Officer (302)

Filed

31.2

Certification of Principal Financial Officer (302)

Filed

32.1

Certification of Principal Executive and Principal Financial Officer (906)

Furnished**

101.INS

Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH

Inline XBRL Taxonomy Extension Schema Document

Filed

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

Filed

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

Filed

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

Filed

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

Filed

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

_____________________

* Management contract or compensatory plan or arrangement.

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

+ Certain schedules and other attachments have been omitted. The Company undertakes to furnish the omitted schedules and attachments to the Commission upon request.

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

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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 14, 2021~~March 15, 2022	By:	/s/ Michael Mathews
		Michael Mathews Chief Executive Officer (Principal Executive Officer)


~~December 14, 2021~~March 15, 2022	By:	/s/ Matthew LaVay
		Matthew LaVay Chief Financial Officer (Principal Financial Officer)


~~December 14, 2021~~March 15, 2022	By:	/s/ Robert Alessi
		Robert Alessi Chief Accounting Officer (Principal Accounting Officer)

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	Q2'21	Q3'21	Q4'21	Q1'22	Q2'22
Aspen University	2,010	1,593	1,593	1,601	1,750
USU	649	536	589	675	630
Total	2,659	2,129	2,182	2,276	2,380


	Second Quarter Bookings1 and Average Revenue Per Enrollment (ARPU)1
	Q2'21 Enrollments	Q2'21 Bookings 1		Q2'22 Enrollments	Q2'22 Bookings 1		Percent Change Total Bookings & ARPU 1
Aspen University	2,010	$	30,514,200	1,750	$	26,134,500
USU	649	$	11,565,180	630	$	11,226,600
Total	2,659	$	42,079,380	2,380	$	37,361,100	(11)	%
ARPU		$	15,825		$	15,698	(1)	%