UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

~~WASHINGTON,~~

Washington, D.C. 20549

FORM 10-Q

þ ~~QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended~~January~~July 31, ~~2018~~

o ~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

~~For the transition period from ________ to ________~~

~~Commission file number: 001-38175~~

~~Aspen Group, Inc.~~

~~(Exact name of registrant as specified in its charter)~~

2020


~~Delaware~~ ☐			~~27-1933597~~ 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~~Other Jurisdiction of ~~incorporation~~Incorporation or ~~organization)~~

Organization

(

I.R.S. Employer Identification No.)

~~1660 S Albion Street,~~

276 Fifth Avenue, Suite ~~525~~

~~Denver, CO~~

505, New York, New York

~~80222~~

10001

(

Address of ~~principal executive offices)~~

Principal Executive Offices

(

Zip ~~Code)~~

Code

~~Registrants~~

(480) 407-7365

(Registrant’s telephone ~~number: (303) 333-4224~~

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~~days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ such files). Yes þ No o

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 þ ¨
Non-accelerated filer ¨ ☑	~~(Do not check if a smaller~~	Smaller reporting company þ ☑
~~reporting company)~~	Emerging growth company ¨ ☐

If an emerging growth company, indicate by ~~checkmark~~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 ~~Exchange~~ Act). Yes o☐ No þ


Class						Outstanding as of ~~March 15, 2018~~ September 10, 2020
Common Stock, $0.001 par value per share						~~15,072,332~~ 22,496,502 shares

~~INDEX~~

Table of Contents

TABLE OF CONTENTS


SIGNATURES			28			47

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ASPEN GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

January 31,

April 30,

2018

2017

(Unaudited)

Assets

Current assets:

Cash and cash equivalents

$
3,803,080

$
2,756,217

Restricted cash

190,506

—

Accounts receivable, net of allowance of $544,492 and $328,864, respectively

8,592,958

4,434,862

Prepaid expenses

288,640

133,531

Promissory note receivable

—

900,000

Other receivables

233,862

81,464

Accrued interest receivable

—

8,000

Total current assets

13,109,046

8,314,074

Property and equipment:

Call center equipment

96,305

53,748

Computer and office equipment

130,137

103,649

Furniture and fixtures

712,209

255,984

Software

2,590,297

2,131,344

3,528,948

2,544,725

Less accumulated depreciation and amortization

(1,161,030
)

(1,090,010
)
Total property and equipment, net

2,367,918

1,454,715

Goodwill

5,011,432

—

Intangible assets, net

9,916,667

—

Courseware, net

137,557

145,477

Accounts receivable, secured - related party, net of allowance of $625,963, and $625,963, respectively

45,329

45,329

Long term contractual receivable

935,878

657,542

Other assets

585,206

56,417

Total assets

$
32,109,033

$
10,673,554


	July 31, 2020		April 30, 2020
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	15,899,293	$	14,350,554
Restricted cash	3,060,269		3,556,211
Accounts receivable, net of allowance of $2,156,645 and $1,758,920, respectively	14,662,231		14,326,791
Prepaid expenses	993,541		941,671
Other receivables	0		23,097
Other current assets	113,123		173,090
Total current assets	34,728,457		33,371,414

Property and equipment:
Computer equipment and hardware	690,114		649,927
Furniture and fixtures	1,007,099		1,007,099
Leasehold improvements	892,279		867,024
Instructional equipment	301,842		301,842
Software	6,792,594		6,162,770
	9,683,928		8,988,662
Less accumulated depreciation and amortization	(3,314,448)		(2,841,019)
Total property and equipment, net	6,369,480		6,147,643
Goodwill	5,011,432		5,011,432
Intangible assets, net	7,900,000		7,900,000
Courseware, net	102,560		111,457
Accounts receivable, net of allowance of $625,963 and $625,963, respectively	45,329		45,329
Long term contractual accounts receivable	8,713,018		6,701,136
Debt issue cost, net	43,056		182,418
Operating lease right of use asset, net	7,264,584		6,412,851
Deposits and other assets	150,406		355,831

Total assets	$	70,328,322	$	66,239,511

(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)

January 31,

April 30,

2018

2017

(Unaudited)

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

$
1,273,990

$
756,701

Accrued expenses

596,633

262,911

Deferred revenue

4,156,550

1,354,989

Refunds due students

730,722

310,576

Deferred rent, current portion

7,429

11,200

Convertible notes payable- related party, current portion

1,000,000

—

Convertible notes payable, current portion

50,000

50,000

Other current liabilities

186,134

—

Total current liabilities

8,001,458

2,746,377

Convertible note payable - related party

1,000,000

—

Senior secured term loan, net of discount

6,769,932

—

Warrant Liability

—

52,500

Deferred rent

60,295

34,437

Total liabilities

15,831,685

2,833,314

Commitments and contingencies - See Note 7

—

—

Stockholders’ equity:

Common stock, $0.001 par value; 250,000,000 shares authorized,

15,072,332 issued and 15,055,665 outstanding at January 31, 2018

13,504,012 issued and 13,487,345 outstanding at April 30, 2017

15,072

13,504

Additional paid-in capital

45,439,538

33,607,423

Treasury stock (16,667 shares)

(70,000
)

(70,000
)
Accumulated deficit

(29,107,262
)

(25,710,687
)
Total stockholders’ equity

16,277,348

7,840,240

Total liabilities and stockholders’ equity

$
32,109,033

$
10,673,554


	July 31, 2020		April 30, 2020
	(Unaudited)
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,764,714	$	1,505,859
Accrued expenses	1,127,992		537,413
Deferred revenue	4,766,853		3,712,994
Due to students	1,891,502		2,371,844
Operating lease obligations, current portion	1,542,754		1,683,252
Other current liabilities	288,033		545,711
Total current liabilities	11,381,848		10,357,073

Convertible notes, net of discount of $1,409,828 and $1,550,854, respectively	8,590,172		8,449,146
Operating lease obligations, less current portion	6,677,566		5,685,335
Total liabilities	26,649,586		24,491,554

Commitments and contingencies – see Note 10

Stockholders’ equity:
Preferred stock, $0.001 par value; 1,000,000 shares authorized,
0 issued and 0 outstanding at July 31, 2020 and April 30, 2020	0		0
Common stock, $0.001 par value; 40,000,000 shares authorized
22,377,744 issued and 22,361,077 outstanding at July 31, 2020
21,770,520 issued and 21,753,853 outstanding at April 30, 2020	22,378		21,771
Additional paid-in capital	92,378,584		89,505,216
Treasury stock (16,667 shares)	(70,000)		(70,000)
Accumulated deficit	(48,652,226)		(47,709,030)
Total stockholders’ equity	43,678,736		41,747,957

Total liabilities and stockholders’ equity	$	70,328,322	$	66,239,511

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)

For the

For the

Three Months Ended

Nine Months Ended

January 31,

January 31,

2018

2017

2018

2017













Revenues

$
5,701,958

$
3,735,626

$
14,796,483

$
9,957,467

Operating expenses

Cost of revenues (exclusive of depreciation and amortization shown separately below)

2,665,664

1,359,131

6,282,814

3,490,046

General and administrative

4,677,359

2,133,074

10,975,085

6,228,554

Program review settlement expense

—

25,000

—

25,000

Depreciation and amortization

347,894

132,727

631,969

422,782

Total operating expenses

7,690,917

3,649,932

17,889,868

10,166,382

Operating (loss) income

(1,988,959
)

85,694

(3,093,385
)

(208,915
)

Other income (expense):

Other income

46,179

1,684

88,067

3,047

Gain on extinguishment of warrant liability

52,500

—

52,500

—

Interest expense

(257,665
)

(80,001
)

(443,757
)

(175,662
)
Total other expense, net

(158,986
)

(78,317
)

(303,190
)

(172,615
)

(Loss) income before income taxes

(2,147,945
)

7,377

(3,396,575
)

(381,530
)

Income tax expense (benefit)

—

—

—

—

Net (loss) income

$
(2,147,945
)

$
7,377

$
(3,396,575
)

$
(381,530
)

Net (loss) income per share allocable to common stockholders - basic

$
(0.15
)

$
0.00

$
(0.25
)

$
(0.03
)

Net (loss) income per share allocable to common stockholders - diluted

$
(0.15
)

$
0.00

$
(0.25
)

$
(0.03
)

Weighted average number of common shares outstanding: basic

14,491,634

11,467,345

13,862,992

11,419,270

Weighted average number of common shares outstanding: diluted

14,491,634

13,040,970

13,862,992

11,419,270


	Three Months Ended July 31,
	2020		2019
Revenues	$	15,165,562	$	10,357,982

Operating expenses:
Cost of revenues (exclusive of depreciation and amortization shown separately below)	5,847,523		4,353,058
General and administrative	8,793,756		6,796,251
Bad debt expense	400,000		240,899
Depreciation and amortization	490,624		606,574
Total operating expenses	15,531,903		11,996,782

Operating loss	(366,341)		(1,638,800)

Other income (expense):
Other (expense) income, net	(123,298)		22,802
Interest expense	(455,457)		(423,689)
Total other expense, net	(578,755)		(400,887)

Loss before income taxes	(945,096)		(2,039,687)

Income tax (benefit) expense	(1,900)		35,595

Net loss	$	(943,196)	$	(2,075,282)

Net loss per share - basic and diluted	$	(0.04)	$	(0.11)

Weighted average number of common stock outstanding - basic and diluted	22,094,409		18,733,317

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

Table of Contents

ASPEN GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED ~~STATEMENT~~STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

~~FOR THE NINE MONTHS ENDED JANUARY~~

Three Months Ended July 31, ~~2018~~

2020 and 2019

(Unaudited)

Additional

Total

Common Stock

Paid-In

Treasury

Accumulated

Stockholders'

Shares

Amount

Capital

Stock

Deficit

Equity

Balance at April 30, 2017

13,504,012

$
13,504

$
33,607,423

$
(70,000
)

$
(25,710,687
)

$
7,840,240

Fees associated with equity raise

—

—

(14,033
)

—

—

(14,033
)
Restricted stock issued for services

10,000

10

88,690

—

—

88,700

Stock-based compensation

—

—

466,468

—

—

466,468

Common stock issued for acquisition

1,203,209

1,203

10,214,041

—

—

10,215,244

Common stock issued for cashless warrant exercises

162,072

162

(162
)

—

—

—

Common stock issued for warrants exercised for cash

79,442

79

143,410

—

—

143,489

Common stock issued for stock options exercised

113,597

114

455,273

—

—

455,387

Warrants issued with senior secured term loan

—

—

478,428

—

—

478,428

Net loss, for the Nine months ended January 31, 2018

—

—

—

—

(3,396,575
)

(3,396,575
)
Balance at January 31, 2018

15,072,332

$
15,072

$
45,439,538

$
(70,000
)

$
(29,107,262
)

$
16,277,348


	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	—	—		487,110		—		—		487,110
Common stock issued for stock options exercised for cash	415,175	415		1,269,567		—		—		1,269,982
Common stock issued for warrants exercised for cash	192,049	192		1,081,600		—		—		1,081,792
Modification charge for warrants exercised	—	—		25,966		—		—		25,966
Amortization of warrant based cost	—	—		9,125		—		—		9,125
Net loss	—	—		—		—		(943,196)		(943,196)
Balance at July 31, 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 April 30, 2019	18,665,551	$	18,666	$	68,562,727	$	(70,000)	$	(42,049,965)	$	26,461,428
Stock-based compensation	—	—		498,417		—		—		498,417
Common stock issued for cashless stock options exercised	101,894	102		(102)		—		—		0
Common stock issued for stock options exercised for cash	21,876	22		45,168		—		—		45,190
Common stock issued for cashless warrant exercise	19,403	19		(19)		—		—		0
Amortization of warrant based cost	—	—		9,440		—		—		9,440
Amortization of restricted stock issued for service	—	—		30,597		—		—		30,597
Restricted Stock Issued for Services, subject to vesting	104,803	105		(105)		—		—		0
Cumulative effect of Adoption of ASC 842	—	—		—		—		(136,745)		(136,745)
Net loss	—	—		—		—		(2,075,282)		(2,075,282)
Balance at July 31, 2019	18,913,527	$	18,914	$	69,146,123	$	(70,000)	$	(44,261,992)	$	24,833,045

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 CASH FLOWS

(Unaudited)

For the

Nine months ended

January 31,

2018

2017

Cash flows from operating activities:






Net loss

$
(3,396,575
)

$
(381,530
)
Adjustments to reconcile net loss to net cash used in operating activities:

Bad debt expense (recovery)

298,144

(25,680
)
Gain on extinguishment of warrant liability

(52,500
)

—

Depreciation and amortization

631,969

422,782

Loss on asset disposal

27,590

—

Stock-based compensation

466,468

253,833

Amortization of debt discounts

99,726

15,625

Amortization of prepaid shares for services

37,039

52,500

Warrant buyback expense

—

206,000

Changes in operating assets and liabilities:



Accounts receivable

(4,534,118
)

(2,331,140
)
Prepaid expenses

(59,451
)

28,715

Accrued interest receivable

(45,400
)

—

Other receivables

(152,398
)

—

Other assets

(528,789
)

(25,241
)
Accounts payable

366,044

875,110

Accrued expenses

218,476

105,111

Deferred rent

22,087

17,318

Refunds due students

420,146

124,912

Deferred revenue

2,340,461

562,643

Other liabilities

186,134

—

Net cash used in operating activities

(3,654,947
)

(99,042
)

Cash flows from investing activities:

Cash paid in asset acquisition

(2,589,719
)

—

Proceeds from promissory note interest receivable

53,400

—

Increase in restricted cash

(190,506
)

—

Purchases of courseware

(33,369
)

(6,550
)
Purchases of property and equipment

(1,171,473
)

(565,306
)
Proceeds from promissory note receivable

900,000

—

Net cash used in investing activities

(3,031,667
)

(571,856
)

Cash flows from financing activities:

Warrant Buyback

—

(400,000
)
Borrowing of bank line of credit

—

247,000

Payments for bank line of credit

—

(248,783
)
Borrowing of third party line of credit

—

1,250,000

Third party line of credit financing costs

—

(60,000
)
Proceeds of warrant and stock options exercised

598,876

—

Offering costs paid on debt financing

(351,366
)

—

Disbursements for equity offering costs

(14,033
)

(4,017
)
Proceeds from senior secured term loan

7,500,000

—

Net cash provided by financing activities

7,733,477

784,200

Net increase in cash

1,046,863

113,302

Cash at beginning of period

2,756,217

783,796

Cash at end of period

$
3,803,080

$
897,098


	Three Months Ended July 31,
	2020		2019
Cash flows from operating activities:
Net loss	$	(943,196)	$	(2,075,282)
Adjustments to reconcile net loss to net cash used in operating activities:
Bad debt expense	400,000		240,899
Depreciation and amortization	490,624		606,574
Stock-based compensation	487,110		498,417
Warrants issued for services	9,125		9,440
Loss on asset disposition	0		20,240
Amortization of debt discounts	141,026		65,702
Amortization of debt issue costs	139,362		29,662
Modification charge for warrants exercised	(25,966)		0
Non-cash payments to investor relations firm	0		30,597
Other adjustments, net	10,587		0
Changes in operating assets and liabilities:
Accounts receivable	(2,747,322)		(1,535,420)
Prepaid expenses	(51,870)		(136,022)
Other receivables	23,097		710
Other current assets	59,966		0
Deposits and other assets	205,425		67,032
Accounts payable	258,855		(110,890)
Accrued expenses	590,579		(73,663)
Lease liabilities, net of right of use assets	0		26,993
Due to students	(480,342)		417,131
Deferred revenue	1,053,859		224,172
Other current liabilities	(257,678)		8,625
Net cash used in operating activities	(636,759)		(1,685,083)
Cash flows from investing activities:
Purchases of courseware and accreditation	(3,050)		(2,275)
Purchases of property and equipment	(659,168)		(629,983)
Net cash used in investing activities	(662,218)		(632,258)
Cash flows from financing activities:
Proceeds from stock options exercised and warrants exercised	2,351,774		45,190
Net cash provided by financing activities	2,351,774		45,190

(Continued)

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 CASH FLOWS (CONTINUED)

(Unaudited)

For the

Nine months ended

January 31,

2018

2017

Supplemental disclosure of cash flow information:

Cash paid for interest

$
316,781

$
145,105

Cash paid for income taxes

$
—

$
—

Supplemental disclosure of non-cash investing and financing activities

Warrants issued as part of senior secured loan

$
478,428

$
—

Assets acquired net of liabilities assumed for non-cash consideration

$
12,215,244

$
—

Common stock issued for services

$
—

$
62,002

Warrant derivative liability

$
—

$
52,500


	Three Months Ended July 31,
	2020		2019
Net increase (decrease) in cash and cash equivalents	$	1,052,797	$	(2,272,151)
Cash, restricted cash, and cash equivalents at beginning of period	17,906,765		9,967,752
Cash, restricted cash, and cash equivalents at end of period	$	18,959,562	$	7,695,601

Supplemental disclosure cash flow information
Cash paid for interest	$	199,178	$	324,861
Cash paid for income taxes	$	1,600	$	0

Supplemental disclosure of non-cash investing and financing activities
Common stock issued for services	$	0	$	178,447
Right-of-use lease asset offset against operating lease obligations	$	851,733	$	8,196,106

The following table provides a reconciliation of cash and restricted cash reported within the unaudited consolidated balance sheets that sum to the same such amounts shown in the unaudited consolidated statements of cash flows:


	July 31, 2020		July 31, 2019
Cash and cash equivalents	$	15,899,293	$	7,243,580
Restricted cash	3,060,269		452,021
Total cash and restricted cash	$	18,959,562	$	7,695,601

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

Table of Contents

ASPEN GROUP, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~JANUARY~~

July 31, ~~2018~~

2020

(Unaudited)

Note 1. Nature of Operations and Liquidity

Overview

Aspen Group, Inc. ~~(together with its subsidiaries, the “Company” or “AGI”~~("AGI") is aan educational technology holding ~~company, which~~company. AGI has ~~two subsidiaries.~~5 subsidiaries, Aspen University Inc. (“("Aspen ~~University”~~University" or AUI") ~~was~~ organized in 1987, Aspen Nursing of Arizona, Inc. ("ANAI"), Aspen Nursing of Florida, Inc. ("ANFI"), Aspen Nursing of Texas, Inc. ("ANTI"), and United States University Inc. ~~(“USU”~~("United States University" or "USU") ~~was formed May 2017~~. ANAI, ANFI and ~~certain assets were acquired~~ANTI are subsidiaries of Aspen University.

All references to the “Company”, “AGI”, “Aspen Group”, “we”, “our” and ~~liabilities assumed~~“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 ~~December 1, 2017. (See Note 10)~~

~~Aspen Group’s~~the vision ~~is to make~~of making college affordable ~~again in America.~~again. Because we believe higher education should be a catalyst to our students’ long-term economic success, we exert financial prudence by offering affordable tuition that is one of the greatest values in ~~online~~ higher education. ~~In March 2014, Aspen University unveiled a monthly payment plan aimed at reversing~~AGI’s primary focus relative to future growth is to target the ~~college-debt sentence plaguing working-class Americans. The monthly payment plan offers bachelor~~high growth nursing profession. As of July 31, 2020, 10,422 of 12,128 or 86% of all students ~~(except RN to BSN) the opportunity to pay their tuition at $250/month for 72 months ($18,000),~~across both universities are degree-seeking nursing bachelor students (RN to BSN) $250/month for 39 months ($9,750), master students $325/month for 36 months ($11,700) and doctoral students $375/month for 72 months ($27,000), interest free, thereby giving students a monthly payment tuition payment option versus taking out a federal financial aid loan.

United States University (USU) began offering monthly payment plans in the summer of 2017. Today, monthly payment plans are available for the RN to BSN program ($250/month), MBA/M.A.Ed/MSN programs ($325/month), and the MSN-FNP program ($375/month).

students.

Since 1993, Aspen University has been nationally accredited by the Distance Education and Accrediting Council (“DEAC”), a national accrediting agency recognized by the ~~U.S.~~United States Department of Education (the “DOE”) and Council for Higher Education Accreditation ("CHEA"). On February 25, ~~2015,~~2019, the DEAC informed Aspen University that it had renewed its accreditation for five years tothrough January ~~2019.~~

2024.

Since 2009, USU has been regionally accredited by WASC Senior College and University Commission. (“WSCUC”).

Both universities are qualified to participate under the Higher Education Act of 1965, as amended (HEA) and the Federal student financial assistance programs (Title IV, HEA programs). USU has a provisional ~~certification.~~

certification resulting from the ownership change of control in connection with the acquisition by AGI on December 1, 2017.

Basis of Presentation

Interim Financial Statements

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 nine~~ months ended ~~January~~July 31, ~~2018~~2020 and ~~2017,~~2019, our cash flows for the ~~nine~~three months ended ~~January~~July 31, ~~2018~~2020 and ~~2017,~~2019, and our financial position as of ~~January~~July 31, ~~2018~~2020 have been made. The results of operations for such interim periods are not necessarily indicative of the operating results to be expected for the full year.

Certain information and disclosures normally included in the notes to the annual consolidated financial statements have been condensed or omitted from these interim consolidated financial statements. Accordingly, these interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the ~~period~~fiscal year ended April 30, ~~2017~~2020 as filed with the SEC on July ~~25, 2017.~~7, 2020. The April 30, ~~2017~~2020 balance sheet is derived from those statements.

COVID-19 Update

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

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ASPEN GROUP, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~JANUARY~~

July 31, ~~2018~~

2020

(Unaudited)

become RNs, enrolled in the BSN Pre-Licensure program in Phoenix in record numbers, given that many have been furloughed or laid off since the pandemic first started.

COVID-19 has focused a spotlight on the shortage of nurses in the U.S. and, in particular, the need for nurses with four-year and advanced degrees such as USU’s MSN-FNP and Aspen University’s DNP programs. We believe we will be operating in a tailwind environment for many years relative to the planned expansion of our Pre-Licensure BSN hybrid campus business.

Liquidity

At ~~January~~July 31, ~~2018,~~2020, the Company had a cash and cash equivalents balance of ~~$3,803,080 plus $190,506~~$15,899,293 with an additional $3,060,269 in restricted cash.

~~On July 25, 2017,~~

In March 2019, the Company ~~signed~~entered into 2 loan agreements for a principal amount of $5 million each and received total proceeds of $10 ~~million~~million. In connection with the loan agreements, the Company issued 18 month senior secured promissory term ~~loan~~notes, with ~~Runway Growth Capital Fund (formerly known as GSV Growth Capital Fund). The~~the Company ~~drew $5 million under~~having the ~~facility at closing, with~~right to extend the term of the loans for an additional ~~$2.5 million drawn following~~12 months by paying a 1% one-time extension fee. On January 22, 2020, the term notes were exchanged for convertible notes maturing January 22, 2023. (See Note 6)

On January 22, 2020, the Company closed on an underwritten public offering of common stock for net proceeds of approximately $16 million. The public offering was a condition precedent to the closing of the ~~Company’s acquisition~~above refinancing. (See Note 6)

On November 5, 2018 the Company entered into a three year, $5,000,000 senior revolving credit facility. There is currently 0 outstanding balance under that facility. (See Note 6)

During the three months ended July 31, 2020 the Company's net cash increased by $1,052,797, which included using $636,759 in operating activities.

The Company has analyzed its liquidity position and believes its current resources are adequate to meet anticipated liquidity needs for the next 12 months from the issuance date of substantially all the assets of United States University, including receipt of all required regulatory approvals, among other conditions to funding. Terms of the 4-year senior loan include a 10% over 3-month LIBOR per annum interest rate. (See Notes 5 and 10).

this report.

Note 2. Significant Accounting Policies

~~Principles~~

Basis of Presentation and Consolidation

The ~~unaudited~~Company prepares its consolidated financial statements in accordance with U.S. generally accepted accounting principles ("GAAP").

The consolidated financial statements include the accounts of ~~Aspen Group, Inc.~~AGI and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

~~Use~~

Accounting Estimates

Management of ~~Estimates~~

~~The~~the Company is required to make certain estimates, judgments and assumptions during the preparation of ~~the unaudited~~its consolidated financial statements in ~~conformity~~accordance with ~~accounting principles generally accepted in the United States of America (“GAAP”) requires management to make~~GAAP. These estimates, judgments and assumptions ~~that affect~~impact the reported amounts inof assets, liabilities, revenue and expenses and the ~~unaudited consolidated financial statements.~~related disclosure of contingent assets and liabilities. Actual results could differ from those estimates.

Significant estimates in the accompanying ~~unaudited~~ consolidated financial statements include the allowance for doubtful accounts and other receivables, the valuation of ~~collateral on certain receivables,~~lease liabilities and the carrying value of the related right-of-use ("ROU") assets, depreciable lives of property and equipment, amortization periods and valuation of courseware, intangibles and software development costs, valuation of beneficial conversion features in convertible debt, valuation of goodwill, valuation of loss contingencies, valuation of stock-based compensation and the valuation allowance on deferred tax assets.

Cash, ~~and~~ Cash Equivalents,

and Restricted Cash

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

July 31, 2020

(Unaudited)

For the purposes of the ~~unaudited~~ 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. ~~There~~

As of July 31, 2020, restricted cash of $3,060,269 consists of $1,365,384 which is collateral for letters of credit for the Aspen University and USU facility operating leases and $255,708, which is collateral for a letter of credit issued by the bank. Also included are funds held for students for unbilled educational services that were ~~no cash equivalents at January 31, 2018~~received from Title IV and non-Title IV programs totaling $1,439,177. As an administrator of these Title IV program funds, the Company is required to maintain and restrict these funds pursuant to the terms of the program participation agreement with the U.S. Department of Education.

As of April 30, ~~2017.~~ 2020, restricted cash of $3,556,211 consists of $692,293 which is collateral for letters of credit for the Aspen University and USU facility operating leases and $255,708, which is collateral for a letter of credit issued by the bank and $71,828 which is related to USU’s receipt of Title IV funds and is required by the Department of Education ("DOE") in connection with the change of control of USU. Also included are funds held for students for unbilled educational services that were received from Title IV and non-Title IV programs totaling $2,536,382. As an administrator of these Title IV program funds, the Company is required to maintain and restrict these funds pursuant to the terms of the program participation agreement with the U.S. Department of Education.

Concentration of Credit Risk

The Company maintains its cash in bank and financial institution deposits that at times may exceed federally insured limits of $250,000 per financial institution. The Company has not experienced any losses in such accounts from inception through ~~January~~July 31, ~~2018.~~2020. As of ~~January~~July 31, ~~2018~~2020 and April 30, ~~2017, there were~~2020, the Company maintained deposits totaling ~~$3,594,104~~$18,075,181 and ~~$2,687,461~~$16,742,603, respectively, held in two separate ~~institutions greaterthan the federally insured limits.~~

institutions.

Goodwill and Intangibles

Goodwill currently represents the excess of purchase price over the fair market value of assets acquired and liabilities assumed from Educacion Significativa, LLC. Goodwill has an indefinite life and is not amortized. Goodwill is tested annually for ~~impairment.~~

~~Intangibles~~impairment or if indicators are present.

Intangible assets represent both indefinite lived and definite lived assets. Accreditation and regulatory approvals, ~~and Trade~~trade name and trademarks are deemed to have indefinite useful lives and accordingly are not amortized but are tested annually for impairment. Student relationships and curriculums are deemed to have definite lives and are amortized accordingly.

~~ASPEN GROUP, INC. AND SUBSIDIARIES~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~JANUARY 31, 2018~~

~~(Unaudited)~~

Fair Value Measurements

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. The Company classifies assets and liabilities recorded at fair value under the fair value hierarchy based upon the observability of inputs used in valuation techniques. Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed market assumptions. The fair value measurements are classified under the following hierarchy:

Level 1—Observable inputs that reflect quoted market prices (unadjusted) for identical assets and liabilities in active markets;

Level 2—Observable inputs, other than quoted market prices, that are either directly or indirectly observable in the marketplace for identical or similar assets and liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets and liabilities; and

Level 3—Unobservable inputs that are supported by little or no market activity that are significant to the fair value of assets or liabilities.

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(Unaudited)

The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.

~~Refunds~~

Accounts Receivable and Allowance for Doubtful Accounts Receivable

All students are required to select both a primary and secondary payment option with respect to amounts due to AGI for tuition, fees and other expenses. As of July 31, 2020, the monthly payment plan represents approximately 64% of the payments that are made by active students, making it the most common payment type. In instances where a student selects financial aid as the primary payment option, he or she often selects personal cash as the secondary option. If a student who has selected financial aid as his or her primary payment option withdraws prior to the end of a course but after the date that AGI’s institutional refund period has expired, the student will have incurred the obligation to pay the full cost of the course. If the withdrawal occurs before the date at which the student has earned 100% of his or her financial aid, AGI may have to return all or a portion of the Title IV funds to the DOE and the student will owe AGI all amounts incurred that are in excess of the amount of financial aid that the student earned, and that AGI is entitled to retain. In this case, AGI must collect the receivable using the student’s second payment option.

For accounts receivable from students, AGI records an allowance for doubtful accounts for estimated losses resulting from the inability, failure or refusal of its students to make required payments, which includes the recovery of financial aid funds advanced to a student for amounts in excess of the student’s cost of tuition and related fees. AGI determines the adequacy of its allowance for doubtful accounts using an allowance method based on an analysis of its historical bad debt experience, current economic trends, aging of the accounts receivable and each student’s status. AGI estimates the amounts to increase the allowance based upon the risk presented by the age of the receivables and student status. AGI writes off accounts receivable balances at the time the balances are deemed uncollectible. AGI continues to reflect accounts receivable with an offsetting allowance as long as management believes there is a reasonable possibility of collection.

For accounts receivable from primary payors other than students, AGI estimates its allowance for doubtful accounts by evaluating specific accounts where information indicates the primary payors may have an inability to meet financial obligations, such as bankruptcy proceedings and receivable amounts outstanding for an extended period beyond contractual terms. In these cases, AGI uses assumptions and judgment, based on the best available facts and circumstances, to record a specific allowance for those primary payors against amounts due to reduce the receivable to the amount expected to be collected. These specific allowances are re-evaluated and adjusted as additional information is received. The amounts calculated are analyzed to determine the total amount of the allowance. AGI may also record a general allowance as necessary.

Direct write-offs are taken in the period when AGI has exhausted its efforts to collect overdue and unpaid receivables or otherwise evaluate other circumstances that indicate that AGI should abandon such efforts. (See Note 8)

When a student signs up for the monthly payment plan, there is a contractual amount that the Company can expect to earn over the life of the student’s program. This contractual amount cannot be recorded as an accounts receivable because, the student does have the option to stop attending. As a student takes a class, revenue is earned over the class term. Some students accelerate their program, taking two or more classes every eight week period, which increases the student’s accounts receivable balance. If any portion of that balance will be paid in a period greater than 12 months, that portion is reflected as long-term accounts receivable. At July 31, 2020 and April 30, 2020, those balances were $8,713,018 and $6,701,136, respectively, which amounts are evaluated and included in the allowance analysis as discussed above. The Company has determined that the long term accounts receivable do not constitute a significant financing component as the list price, cash selling price and promised consideration are equal. Further, the interest free financing portion of the monthly payment plans are not considered significant to the contract.

Property and Equipment

Property and equipment are recorded at cost less accumulated depreciation and amortization. Depreciation and amortization is computed using the straight-line method over the estimated useful lives of the related assets per the following table.

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

July 31, 2020

(Unaudited)


Category						Useful Life
Computer equipment and hardware						3 years
Software						5 years
Instructional equipment						5 years
Furniture and fixtures						7 years
Leasehold improvements						The lesser of 8 years or lease term

Costs incurred to develop internal-use software during the preliminary project stage are expensed as incurred. Internal-use software development costs are capitalized during the application development stage, which is after: (i) the preliminary project stage is completed; and (ii) management authorizes and commits to funding the project and it is probable the project will be completed and used to perform the function intended. Capitalization ceases at the point the software project is substantially complete and ready for its intended use, and after all substantial testing is completed. Upgrades and enhancements are capitalized if it is probable that those expenditures will result in additional functionality. Amortization is provided for on a straight-line basis over the expected useful life of five years of the internal-use software development costs and related upgrades and enhancements. When existing software is replaced with new software, the unamortized costs of the old software are expensed when the new software is ready for its intended use.

Leasehold improvements are amortized using the straight-line method over the lesser of eight years or lease term.

Upon the retirement or disposition of property and equipment, the related cost and accumulated depreciation or amortization are removed and a gain or loss is recorded in the consolidated statements of operations. Repairs and maintenance costs are expensed in the period incurred.

Courseware and Accreditation

The Company records the costs of courseware and accreditation in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 350 “Intangibles - Goodwill and Other”.

Generally, costs of courseware creation and enhancement are capitalized. Accreditation renewal or extension costs related to intangible assets are capitalized as incurred. Courseware is stated at cost less accumulated amortization. Amortization is provided for on a straight-line basis over the expected useful life of five years.

Long-Lived Assets

The Company assesses potential impairment to its long-lived assets when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Events and circumstances considered by the Company in determining whether the carrying value of identifiable intangible assets and other long-lived assets may not be recoverable include, but are not limited to: significant changes in performance relative to expected operating results, significant changes in the use of the assets, significant negative industry or economic trends, a significant decline in the Company’s stock price for a sustained period of time, and changes in the Company’s business strategy. An impairment loss is recorded when the carrying amount of the long-lived asset is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Any required impairment loss is measured as the amount by which the carrying amount of a long-lived asset exceeds fair value and is recorded as a reduction in the carrying value of the related asset and an expense to operating results.

Due to Students

The Company receives Title IV funds from the Department of Education to cover tuition and living expenses. After deducting tuition and fees, the Company sends checks for the remaining balances to the students.

Leases

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

July 31, 2020

(Unaudited)

The Company enters into various lease agreements in conducting its business. At the inception of each lease, the Company evaluates the lease agreement to determine whether the lease is an operating or financing lease. Leases may contain initial periods of free rent and/or periodic escalations. When such items are included in a lease agreement, the Company records rent expense on a straight-line basis over the initial term of a lease. The difference between the rent payment and the straight-line rent expense is recorded as additional amortization. The Company expenses any additional payments under its operating leases for taxes, insurance or other operating expenses as incurred.

In February 2016, the FASB issued Accounting Standards Update ("ASU") No. 2016-2, Leases (Topic 842). This standard requires entities to recognize most operating leases on their balance sheets as right-of-use assets with a corresponding lease liability, along with disclosing certain key information about leasing arrangements. The Company adopted the standard effective May 1, 2019 using the cumulative effect adjustment transition method, which applies the provisions of the standard at the effective date without adjusting the comparative periods presented. The Company adopted the following practical expedients and elected the following accounting policies related to this standard:

•Carry forward of historical lease classification;

•Short-term lease accounting policy election allowing lessees to not recognize right-of-use assets and lease liabilities for leases with a term of 12 months or less; and

•Not separate lease and non-lease components for office space and campus leases.

The adoption of this standard resulted in the recognition of an initial operating lease right-of-use assets (“ROU’s”) and corresponding lease liabilities of approximately $8 million, on the unaudited consolidated balance sheet as of May 1, 2019. There was no impact to the Company’s net income or liquidity as a result of the adoption of this ASU. Additionally, the standard did not materially impact the Company's unaudited consolidated statements of cash flows.

Disclosures related to the amount, timing, and uncertainty of cash flows arising from leases are included in Note 9.

Treasury Stock

Purchases and sales of treasury stock are accounted for using the cost method. Under this method, shares acquired are recorded at the acquisition price directly to the treasury stock account. Upon sale, the treasury stock account is reduced by the original acquisition price of the shares and any difference is recorded in equity. This method does not allow the company to recognize a gain or loss to income from the purchase and sale of treasury stock.

Revenue Recognition and Deferred Revenue

The Company follows Accounting Standards Codification 606 (ASC 606). ASC 606 is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASC also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer purchase orders, including significant judgments. Our adoption of this ASC resulted in no change to our consolidated results of operations or our consolidated balance sheet and there was no cumulative effect adjustment.

Revenues consist primarily of tuition and course fees derived from courses taught by the Company online as well as from related educational resources and services that the Company provides to its ~~students, such as access to our online materials and learning management system. Tuition~~students. Under ASC 606, tuition fee revenue is recognized pro-rata over the applicable period of instruction. The Company maintains an institutional tuition refund policy, which provides for all or a portion of tuition to be refunded if a student withdraws during stated refund periods. Certain states in which students reside imposeinstruction and are not considered 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 itsperformance obligations. Non-tuition related 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’s educational programs have starting and ending dates that differ from its fiscal quarters. Therefore, at the end of each fiscal quarter, a portion of revenue from these programs is not yet earned and is therefore deferred. The Company also charges students annual fees ~~for library, technology and other services, which~~ are recognized ~~over~~as services are provided or when the ~~related service period.~~ goods are received by the student. (See Note 8)

Deferred revenue represents the amount of tuition, fees, and other student payments received in excess of the portion recognized as revenue and it is included in current liabilities in the accompanying consolidated balance sheets. Other ~~revenues~~revenue may be recognized as sales occur or services are performed.

Cost of Revenues

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

July 31, 2020

(Unaudited)

Cost of revenues consists of two categories of cost, instructional costs and services, and marketing and promotional costs.

Instructional Costs and Services

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

Marketing and Promotional Costs

Marketing and promotional costs include costs associated with producing marketing materials and advertising. Such costs are generally affected by the cost of advertising media, the efficiency of the Company's marketing and recruiting efforts, and expenditures on advertising initiatives for new and existing academic programs. Non-direct response advertising activities are expensed as incurred, or the first time the advertising takes place, depending on the type of advertising activity. Total marketing and promotional costs was $2,790,810 and $2,209,239, for the three months ended July 31, 2020 and 2019, respectively, and are included in cost of revenue.

General and Administrative

General and administrative expenses include compensation of employees engaged in corporate management, finance, human resources, information technology, academic operations, compliance and other corporate functions. General and administrative expenses also include professional services fees, financial aid processing costs, non-capitalizable courseware and software costs, travel and entertainment expenses and facility costs.

Legal Expenses

All legal costs for litigation are charged to expense as incurred.

Income Tax

The Company uses the asset and liability method to compute the differences between the tax basis of assets and liabilities and the related financial statement amounts. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount that more likely than not will be realized. The Company has ~~revenues from students outside~~deferred tax assets and liabilities that reflect the ~~United States representing 2.1%~~net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets are subject to periodic recoverability assessments. Realization of the ~~revenues~~deferred tax assets, net of deferred tax liabilities, is principally dependent upon achievement of projected future taxable income.

The Company records a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. The Company accounts for uncertainty in income taxes using a two-step approach for evaluating tax positions. Step one, recognition, occurs when the ~~quarter ended January 31, 2018.~~

Company concludes that a tax position, based solely on its technical merits, is more likely than not to be sustained upon examination. Step two, measurement, is only addressed if the position is more likely than not to be sustained. Under step two, the tax benefit is measured as the largest amount of benefit, determined on a cumulative probability basis, which is more likely than not to be realized upon ultimate settlement. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense.

Accounting for Derivatives

The Company evaluates its convertible instruments, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under ASC Topic 815, “Derivatives and Hedging”. The result of this accounting treatment is that the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income (expense). Upon conversion, exercise, or other extinguishment (transaction) of a derivative instrument, the instrument is marked to fair value at the transaction date and then that fair value is

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(Unaudited)

recognized as an extinguishment gain or loss. Equity instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815 are reclassified to liability at the fair value of the instrument on the reclassification date.

~~ASPEN GROUP, INC. AND SUBSIDIARIES~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~JANUARY 31, 2018~~

~~(Unaudited)~~

The Company follows FASB ASU 2017-11, which simplifies the accounting for certain equity-linked financial instruments and embedded features with down round features that reduce the exercise price when the pricing of a future round of financing is lower. This allows the company to treat such instruments or their embedded features as equity instead of considering them as a derivative. If such a feature is triggered in a stand-alone instrument treated as equity, the value is measured pre-trigger and post-trigger. The difference in these two measurements is treated as a dividend, reducing income. The value recognized as a dividend is not subsequently remeasured, but in instances where the feature is triggered multiple times each instance is recognized.

Stock-Based Compensation

Stock-based compensation expense is measured at the grant date fair value of the award and is expensed over the requisite service period. For employee stock-based awards, the Company calculates the fair value of the award on the date of grant using the Black-Scholes option pricing model. Determining the fair value of stock-based awards at the grant date under this model requires judgment, including estimating volatility, employee stock option exercise behaviors and forfeiture rates. The assumptions used in calculating the fair value of stock-based awards represent the Company's best estimates, but these estimates involve inherent uncertainties and the application of management judgment. For non-employee stock-based awards, the Company follows ASU 2018-7, which substantially aligns share based compensation for employees and non-employees.

Business Combinations

We include the results of operations of businesses we acquire from the date of the respective acquisition. We allocate the purchase price of acquisitions to the assets acquired and liabilities assumed at fair value. The excess of the purchase price of an acquired business over the amount assigned to the assets acquired and liabilities assumed is recorded as goodwill. We expense transaction costs associated with business combinations as incurred.

Net ~~Income (Loss)~~Loss Per Share

Net ~~income (loss)~~loss per ~~common~~ share is based on the weighted average number of shares of common ~~shares~~stock outstanding during each period. Options to purchase ~~2,872,546~~2,314,036 and ~~1,963,481 common~~2,734,899 shares, 801,468 and 643,175 restricted stock units ("RSUs"), warrants to purchase ~~743,773~~374,174 and ~~934,555 common~~566,223 shares, unvested restricted stock of 16,448 and ~~$50,000~~24,672, and ~~$350,000~~$10,000,000 of ~~convertible debt~~Convertible Debt (convertible into ~~4,167 and 75,596~~1,398,602 common shares) were outstanding at ~~January~~July 31, ~~2018~~2020 and ~~2017,~~April 30, 2020, respectively, but were not included in the computation of diluted net loss per share because the effects would have been anti-dilutive. The options, warrants and convertible debt are considered to be common stock equivalents and are only included in the calculation of diluted earnings per share of common ~~share~~stock when their effect is ~~dilutive,~~dilutive.

Segment Information

The Company operates in 1 reportable segment as ~~noted in~~a single educational delivery operation using a core infrastructure that serves the ~~chart below.~~

~~As required to be disclosed for quarters with net income, basic~~curriculum and ~~diluted income per share for~~educational delivery needs of its online and campus students regardless of geography. The Company's chief operating decision makers, its Chief Executive Officer and Chief Academic Officer, manage the ~~three months ended January 31, 2017, were calculated~~Company's operations as ~~follows:~~

Basic

Diluted

Numerator

Net income applicable to common stock

$
7,377

$
7,377

Convertible debt interest

—

4,010

$
7,377

$
11,387

Denominator

Weighted average common shares outstanding

11,467,345

11,467,345

Convertible debt

—

75,596

Warrants and options

—

1,498,029

11,467,345

13,040,970

Net income per share

$
0.00

$
0.00

a whole.

Recent Accounting ~~Pronouncements~~

Pronouncement not Yet Adopted

ASU ~~2017-01~~ - No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments

In ~~January 2017,~~June 2016, the FASB issued ASU No. 2016-13, Financial ~~Accounting Standards Board issued Accounting Standards Update~~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. ~~2017-01:~~ ~~"Business Combinations (Topic 805)~~- ~~to clarify~~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 ~~definition~~FASB delayed the effective date of ~~a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted~~Topic 326 for ~~as acquisitions (or disposals) of assets or businesses. This guidance is effective for interim~~certain small public companies and ~~annual reporting periods~~other private companies until fiscal years beginning after December 15, ~~2017. The Company will implement this guidance effective February 1, 2018.~~

~~ASU 2017-04~~ ~~- In January 2017,~~2022 for SEC filers that are eligible to be smaller reporting companies under the ~~Financial Accounting Standards Board issued Accounting Standards Update No. 2017-04:~~ ~~"Intangibles - Goodwill and Other (Topic 350)” -~~ to simplify how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair valueSEC’s

Table of a reporting unit’s goodwill with the carrying amount of that goodwill. This guidance is effective for interim and annual reporting periods beginning after December 15, 2019. The Company is evaluating the effects of this standard on its consolidated financial statements.

~~ASU 2016-02~~- In February 2016, the Financial Accounting Standards Board issued Accounting Standards Update No. 2016-02: “Leases (Topic 842)”whereby lessees will need to recognize almost all leases on their balance sheet as a right of use asset and a lease liability. This guidance is effective for interim and annual reporting periods beginning after December 15, 2018. The Company expects this ASU will increase its assets and liabilities, but have no net material impact on its consolidated financial statements.

Contents

ASPEN GROUP, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~JANUARY~~

July 31, ~~2018~~

2020

(Unaudited)

~~ASU 2014-09~~ - In May 2014, the Financial Accounting Standards Board issued Update No. 2014-09: “Revenue from Contracts with Customers (Topic 606)” which requires that an entity recognize revenue to depict the transfer of promised goods

definition, as well as private companies and services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. Since the issuance of the original standard, the FASB has issued several updates to the standard which i) clarify the application of the principal versus agent guidance; ii) clarify the guidance relating to performance obligations and licensing; iii) clarify assessment of the collectability criterion, presentation of sales taxes, measurement date for non-cash consideration and completed contracts at transaction; and iv) clarify narrow aspects of ASC 606 or corrects unintended application of the guidance. The new revenue recognition standard, amended by the updates, becomes effective in the first quarter of fiscal 2019 and is to be applied retrospectively using one of two prescribed methods. Early adoption is permitted.not-for-profit entities. The Company is currently ~~plans to adopt~~evaluating the new ~~standard effective May 1, 2018~~guidance and ~~does~~has not ~~believe~~yet determined whether the adoption of ~~this~~the new standard will have a material impact on its consolidated financial statements or the ~~amount or timing~~method of ~~its revenues.~~

adoption.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation.

Note 3. Property and Equipment

As property and equipment ~~become fully expired,~~reach the end of their useful lives, the fully expired ~~asset is~~assets are written off against the associated accumulated depreciation. There is no expense impact for such write offs.

Property and equipment consisted of the following at ~~January~~July 31, ~~2018~~2020 and April 30, ~~2017:~~

January 31,

April 30,

2018

2017

Call center hardware

$
96,305

$
53,748

Computer and office equipment

130,137

103,649

Furniture and fixtures

712,209

255,984

Software

2,590,297

2,131,344

3,528,948

2,544,725

Accumulated depreciation and amortization

(1,161,030
)

(1,090,010
)
Property and equipment, net

$
2,367,918

$
1,454,715

2020:


	July 31, 2020		April 30, 2020
Computer equipment and hardware	$	690,114	$	649,927
Furniture and fixtures	1,007,099		1,007,099
Leasehold improvements	892,279		867,024
Instructional equipment	301,842		301,842
Software	6,792,594		6,162,770
	9,683,928		8,988,662
Accumulated depreciation and amortization	(3,314,448)		(2,841,019)
Property and equipment, net	$	6,369,480	$	6,147,643

Software consisted of the following at ~~January~~July 31, ~~2018~~2020 and April 30, ~~2017:~~

January 31,

April 30,

2018

2017

Software

$
2,590,297

$
2,131,344

Accumulated amortization

(1,012,655
)

(994,017
)
Software, net

$
1,577,642

$
1,137,327

2020:


	July 31, 2020		April 30, 2020
Software	$	6,792,594	$	6,162,770
Accumulated amortization	(2,365,847)		(2,049,809)
Software, net	$	4,426,747	$	4,112,961

Depreciation and ~~Amortization~~amortization expense for ~~all Property~~property and ~~Equipment~~equipment as well as the portion for just software amortization is presented below for the three ~~and nine~~ months ended ~~January~~July 31, ~~2018~~2020 and ~~2017:~~

For the

For the

Three Months Ended
January 31,

Nine Months Ended
January 31,

2018

2017

2018

2017

Depreciation and amortization Expense

$
150,596

$
119,064

$
407,346

$
378,118

Software amortization Expense

$
121,695

$
105,914

$
341,825

$
342,938

2019:


	Three Months Ended July 31,
	2020		2019
Depreciation and amortization expense	$	478,677	$	312,432

Software amortization expense	$	315,107	$	170,189

The following is a schedule of estimated future amortization expense of software at ~~January~~July 31, ~~2018:~~

Year Ending April 30,

2018

$
127,811

2019

456,038

2020

386,196

2021

313,749

2022

293,848

Total

$
1,577,642

2020 (by fiscal year):


	Future Expense
2021 (remaining)	$	977,172
2022	1,223,745
2023	1,062,864
2024	775,078
2025	363,858
Thereafter	24,030
Total	$	4,426,747

Table of Contents

ASPEN GROUP, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~JANUARY~~

July 31, ~~2018~~

2020

(Unaudited)

Note 4. USU Goodwill and Intangibles

In connection with the acquisition of the USU business on December 1, 2017, the amount paid over the estimated fair values of the identifiable net assets was $5,011,432, which has been reflected in the consolidated balance sheet as goodwill.

The goodwill resulting from the acquisition may become deductible for tax purposes in the future. The goodwill resulting from the acquisition is principally attributable to the future earnings potential associated with enrollment growth and other intangibles that do not qualify for separate recognition such as the assembled workforce.

We assigned an indefinite useful life to the accreditation and regulatory approvals and the trade name and trademarks as we believe they have the ability to generate cash flows indefinitely. In addition, there are no legal, regulatory, contractual, economic or other factors to limit the intangibles’ useful life and the Company intends to renew the intangibles, as applicable, and renewal can be accomplished at little cost. We determined all other acquired intangibles are finite-lived and we are amortizing them on either a straight-line basis or using an accelerated method to reflect the pattern in which the economic benefits of the assets are expected to be consumed. The finite-lived assets became fully amortized during fiscal 2020. Amortization expense for the three months ended July 31, 2020 and 2019 were $0 and $275,000, respectively.

Intangible assets consisted of the following at July 31, 2020 and April 30, 2020:


	July 31, 2020		April 30, 2020
Intangible assets	$	10,100,000	$	10,100,000
Accumulated amortization	(2,200,000)		(2,200,000)
Net intangible assets	$	7,900,000	$	7,900,000

Note 5. Courseware

~~Courseware~~ and Accreditation

For the three months ended July 31, 2020, additional courseware and accreditation costs capitalized were ~~$33,369 for~~$3,050. As courseware and accreditation reach the ~~nine months ended January 31, 2018. Fully expired courseware is~~end of their useful life, they are written off against the accumulated amortization. There is no expense impact for such write-offs.

Courseware and accreditation consisted of the ~~following at January 31, 2018 and April 30, 2017:~~

January 31,

April 30,

2018

2017

Courseware

$
283,046

$
271,777

Accumulated amortization

(145,489
)

(126,300
)
Courseware, net

$
137,557

$
145,477

following:


	July 31, 2020		April 30, 2020
Courseware	$	290,863	$	287,813
Accreditation	59,350		59,350
Accumulated amortization	(247,653)		(235,706)
Courseware and accreditation, net	$	102,560	$	111,457

Amortization expense of courseware and accreditation for the three ~~and nine~~ months ended ~~January~~July 31, ~~2018~~2020 and ~~2017:~~

For the

For the

Three Months Ended
January 31,

Nine Months Ended
January 31,

2018

2017

2018

2017

Amortization expense

$
13,966

$
13,663

$
41,289

$
44,664

2019 are as follows:


	Three Months Ended July 31,
	2020		2019
Amortization expense	$	11,947	$	19,142

Table of Contents

ASPEN GROUP, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

July 31, 2020

(Unaudited)

The following is a schedule of estimated future amortization expense of courseware and accreditation at July 31, 2020 (by fiscal year):


	Future Expense
2021 (remaining)	$	28,050
2022	32,140
2023	26,615
2024	13,068
2025	1,980
Thereafter	707
Total	$	102,560

Note 6. Debt

Convertible Notes

On January ~~31, 2018:~~

Year Ending April 30,

2018

$
14,152

2019

56,143

2020

42,301

2021

15,336

2022

9,625

Total

$
137,557

~~Note 5. Senior Secured Term Loan~~

~~On July 25, 2017,~~22, 2020, the Company ~~signed a $10~~issued $5 million in the principal amount convertible notes (“Convertible Notes”) to each of 2 lenders in exchange for the 2 $5 million notes issued under senior secured term ~~loan with Runway Growth Capital Fund (formerly known~~loans entered into in March 2019 as ~~GSV Growth Capital Fund)~~discussed below (the “Term Loans”). The Convertible Notes automatically converted on September 14, 2020. See Note 11. “Subsequent Events.” The Company ~~drew $5~~recorded a beneficial conversion feature on these Convertible Notes of $1,692,309.

The closing of the refinancing was conditioned upon the Company conducting an equity financing resulting in gross proceeds to the Company of at least $10 million. On January 22, 2020, the Company closed on an underwritten public offering for net proceeds of approximately $16 million ~~under~~and the ~~facility at closing, then subsequently drew $2.5 million following~~condition precedent to the closing of the ~~Company’s acquisition of substantially all the assets~~refinancing was satisfied. The key terms of the ~~United States University, including receipt of all required regulatory approvals, among other conditions~~Convertible Notes are as follows:

•After six months from the issuance date, the lenders have the right to ~~funding. Terms~~convert the principal into our shares of the ~~4-year senior loan include~~Company’s common stock at a ~~10%~~conversion price of $7.15 per share;

•The Convertible Notes automatically convert into shares of the Company’s common stock if the average closing price of our common stock is at least $10.725 over ~~3-month LIBOR~~a 20 consecutive trading day period;

•The Convertible Notes are due January 22, 2023 or approximately three years from the closing;

•The interest rate of the Convertible Notes is 7% per annum ~~interest rate.~~

(payable monthly in arrears); and

•The ~~Company will be required to begin making principal repayments upon~~Convertible Notes are secured.

The former notes under the ~~24-month anniversary of the initial closing (July 24, 2019),~~Senior Secured Term Loans were due in September 2020 and each month thereafter will repay 1/24th of the total loan amount outstanding. Should the Company achieve both annualized revenue growth of at least 30% and operating margin of at least 7.5% for any 12-month trailing period, then at the quarter-end of that 12-month trailing period, the Company may elect to extend the interest only period for the quarter immediately following the 12-month trailing period throughout the duration of the loan.

~~Additionally, the Company paid a 0.25% origination fee on the initial $5 million draw and paid another 0.25% origination fee upon the second $2.5 million draw, will be~~were subject to a ~~final~~one-year extension and the payment of an extension fee for each note of ~~3.25%~~$50,000 (total of $100,000). The Company also paid each lender $40,400 at closing of the ~~principal lent,~~Convertible Notes offering to cover taxes they would incur as part of the note exchange and paid their legal fees arising from the re-financing. In connection with refinancing of the Term Loans, on January 22, 2020, the Company also entered into an Investors/Registration Rights Agreement with the lenders whereby, upon request of the lenders on or after June 22, 2020, the Company must file and obtain and maintain the effectiveness of a registration statement registering the shares of common stock issued ~~224,174 5-year~~or issuable upon conversion of the Convertible Notes.

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

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

Table of Contents

ASPEN GROUP, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

July 31, 2020

(Unaudited)

Revolving Credit Facility

On November 5, 2018, the Company entered into a loan agreement (the “Credit Facility Agreement”) with the Leon and Toby Cooperman Family Foundation (the “Foundation”). The Credit Facility Agreement provides for a $5,000,000 revolving credit facility (the “Facility”) evidenced by a revolving promissory note (the “Revolving Note”). Borrowings under the Credit Facility Agreement bear interest at 12% per annum. The Facility matures on November 4, 2021.

Pursuant to the terms of the Credit Facility Agreement, the Company agreed to pay to the Foundation a $100,000 one-time upfront Facility fee. The Company also agreed to pay the Foundation a commitment fee, payable quarterly at the rate of 2% per annum on the undrawn portion of the Facility. At July 31, 2020 and April 30, 2020, there were no outstanding borrowings under the Revolving Credit Facility.

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

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 anthe exercise price of ~~$6.87.~~$5.85 per share which were deemed to have a relative fair value of $255,071 (the "2018 Cooperman Warrants"). These warrants were exercised on June 8, 2020, see Note 7. The relative fair value of the warrants ~~was $478,428 and was recorded~~along with the upfront Facility fee were treated as debt ~~discount along with other direct~~issue costs, ofas the ~~term loan and is being~~facility has not been drawn on, assets to be amortized ~~to interest expense~~ over the term of the loan.

~~ASPEN GROUP, INC. AND SUBSIDIARIES~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~JANUARY~~ Total unamortized costs at July 31, ~~2018~~

~~(Unaudited)~~

~~Note 6. Convertible Notes – Related Party~~

2020 and April 30,2020 were $43,056 and $182,418, respectively.

On ~~December 1, 2017,~~March 6, 2019, in connection with entering into the Senior Secured Term Loans, the Company ~~completed~~amended and restated the ~~acquisition~~Credit Facility Agreement (the “Amended and Restated Facility Agreement”) and the Revolving Note. The Amended and Restated Facility Agreement provides among other things that the Company’s obligations thereunder are secured by a first priority lien in the Collateral, on a pari passu basis with the Lenders.

Term Loans

On March 6, 2019, the Company entered into 2 loan agreements (each a “Loan Agreement” and together, the “Loan Agreements”) with the Foundation, of ~~USU and, as part~~which Mr. Leon Cooperman, a stockholder of the ~~consideration, a $2.0 million convertible note (the “Note”) was issued, bearing 8% annual interest that matures over a two-year period after~~Company, is the ~~closing. (See Note 10) At the option~~trustee, and another stockholder of the ~~Note holder,~~Company (each a “Lender” and together, the “Lenders”). Each Loan Agreement provides for a $5,000,000 term loan (each a “Loan” and together, the “Loans”), evidenced by a term promissory note and security agreement (each a “Term Note” and together, the “Term Notes”), for combined total proceeds of $10,000,000 million. The Company borrowed $5,000,000 from each Lender that day. The Term Notes bear interest at 12% per annum and were to mature on ~~each~~September 6, 2020, subject to one 12-month extension upon the Company’s option, and upon payment of a 1% one-time extension fee.

Pursuant to the ~~first~~Loan Agreements and ~~second anniversaries of~~ the ~~closing date, $1,000,000 of principal~~Term Notes, all future or contemporaneous indebtedness incurred by the Company, other than indebtedness expressly permitted by the Loan Agreements and ~~accrued interest under~~ the ~~Note~~Term Notes, will be ~~convertible into~~subordinated to the Loans.

Pursuant to the Loan Agreements, on March 6, 2019 the Company issued to each Lender warrants to purchase 100,000 shares of the Company’s common stock ~~based on~~exercisable for five years from the ~~volume weighted average~~date of issuance at the exercise price of $6.00 per share for the ten preceding trading days (subject to a floor of $2.00 per share) or become payable in cash. There was no beneficial conversion feature on the note date and the conversion terms of the note exempt it from derivative accounting.

~~Note 7. 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 are performance-based in nature. As of January 31, 2018, no performance bonuses have been earned.

~~Legal Matters~~

~~From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of January 31, 2018, there~~share. The 2 warrants were ~~no pending or threatened lawsuits that could reasonably be expected~~deemed to have a ~~material effect on~~combined relative fair value of $360,516. The relative fair value along with closing costs of $33,693 were treated as debt discounts to be amortized over the ~~results of our operations.~~

~~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 IVterm of the ~~HEA.~~

Loans. One Lender exercised 100,000 of these warrants (the "2019 Cooperman Warrants") on June 5, 2020, see Note 7.

On ~~August~~January 22, ~~2017,~~2020, the ~~DOE informed Aspen University~~Senior Secured Term Loans were cancelled and exchanged for convertible notes as discussed above. In connection with this transaction, the Company wrote off approximately $182,000 of ~~its determination that~~unamortized debt issuance costs as the ~~institution has~~transaction qualified ~~to participate under the HEA and the Federal student financial assistance programs (Title IV, HEA programs), and set~~as a ~~subsequent program participation agreement reapplication date~~debt extinguishment.

Note 7. Stockholders’ Equity

Preferred Stock

Table of ~~March 31, 2021.~~

USU currently has provisional certification to participate in the Title IV Programs due to the business combination. The provisional certification allows the school to continue to receive Title IV funding as it did prior to the change of ownership.

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 Aspen University and USU operate in a highly regulated industry, it 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.

Contents

ASPEN GROUP, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~JANUARY~~

July 31, ~~2018~~

2020

(Unaudited)

~~Return~~

The Company is authorized to issue 1,000,000 shares of ~~Title IV Funds~~

~~An institution participating~~“blank check” preferred stock with designations, rights and preferences as may be determined from time to time by our Board of Directors. As of July 31, 2020 and April 30, 2020, we had 0 shares of preferred stock issued and outstanding.

Common Stock

The Company is authorized to issue 40,000,000 shares of common stock.

During the three months ended July 31, 2020, the Company issued 415,175 shares of common stock upon the exercise of stock options for cash and received proceeds of $1,269,982.

During the three months ended July 31, 2020, the Company issued 192,049 shares of common stock upon the exercise of warrants for cash and received proceeds of $1,081,792.

Restricted Stock

As of July 31, 2020 and 2019, there were 16,448 and 49,672 unvested shares of restricted common stock outstanding, respectively. Total unrecognized compensation expense related to the unvested shares as of July 31, 2020 and 2019 amounted to $59,651 and $225,129 respectively.

Restricted Stock Units "RSUs"

A summary of the Company’s Restricted Stock Unit activity which were granted under the 2012 and 2018 equity incentive plans during the three months ended July 31, 2020 is presented below:


Restricted Stock Units	Number of Shares	Weighted Average Grant Price
Unvested Balance Outstanding, April 30,2020	643,175	$	5.64
Granted	158,793	9.12
Exercised	—	—
Forfeits	(500)	6.09
Vested	—	—
Expired	—	—
Unvested Balance Outstanding, July 31,2020	801,468	$	6.33

In connection with 158,793 RSU grants, the grant date fair value of these awards range from $6.95 to $10.62 per share and the awards vest annually over three years.

There were approximately 800,000 unvested RSUs as of July 31, 2020 including 375,000 RSUs described below. Total unrecognized compensation expense related to the unvested RSUs as of July 31, 2020 is approximately $4.4 million which will be amortized over the remaining vesting periods.

On February 4, 2020, the Compensation Committee approved a 375,000 RSU grant to executives under the Company’s 2018 Equity Incentive Plan. As modified on June 18, 2020, one-half of the RSUs vest four years from the grant date, subject to accelerated vesting for all RSUs as follows: (i) if the closing price of the Company’s common stock is at least $9 for 20 consecutive trading days, 10% of the RSUs will vest immediately; (ii) if the closing price of the Company’s common stock is at least $10 for 20 consecutive trading days, 25% of the RSUs will vest immediately; and (iii) if the closing price of the Company’s common stock is at least $12 for 20 consecutive trading days, all of the unvested RSUs will vest immediately. On the grant date, the closing price of the Company’s common stock on The Nasdaq Global Market was $9.49 per share. The grants have a four year vesting period. For the three months ended July 31, 2020, amortization expense related to these RSUs was $111,211. See "Subsequent Events" Note for additional information on the accelerated vesting of 35% of the RSUs.

Warrants

Table of Contents

ASPEN GROUP, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

July 31, 2020

(Unaudited)

A summary of the Company’s warrant activity during the three months ended July 31, 2020 is presented below:


Warrants	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Balance Outstanding, April 30, 2020	566,223	$	6.22	3.17	$	950,100
Granted	0	$	0	—	—
Exercised	(192,049)	$	5.60	—	—
Surrendered	0	$	0	—	—
Expired	0	$	0	—	—
Balance Outstanding, July 31, 2020	374,174	$	6.37	2.64	$	908,156

Exercisable, July 31, 2020	374,174	$	6.37	2.64	$	908,156


OUTSTANDING WARRANTS								EXERCISABLE WARRANTS
Exercise Price		Weighted Average Exercise Price		Outstanding No. of Warrants	Weighted Average Exercise Price		Weighted Average Remaining Life In Years	Exercisable No. of Warrants


$	4.89	$	4.89	50,000	$	4.89	3.70	50,000



$	6.00	$	6.00	100,000	$	6.00	3.60	100,000

$	6.87	$	6.87	224,174	$	6.87	1.98	224,174

				374,174				374,174

On June 5, 2020, the Company, as an inducement to exercise, reduced by 5% the exercise price of the common stock purchase warrants issued to The Leon and Toby Cooperman Family Foundation (the “Foundation”), of which Mr. Leon Cooperman, a stockholder of the Company, is the trustee. The warrants were issued on November 5, 2018 (the “2018 Cooperman Warrants”) and on March 5, 2019 (the “2019 Cooperman Warrants”). The 2018 Cooperman Warrants exercise price was reduced from $5.85 to $5.56 per share. The 2019 Cooperman Warrants exercise price was reduced from $6.00 to $5.70 per share. On June 8, 2020, the Foundation immediately exercised the 2018 and 2019 Cooperman Warrants paying the Company $1,081,792 and the Company issued 192,049 shares of common stock to the Foundation. The warrant modification and acceleration charge related to this transaction in ~~Title IV Programs must correctly calculate~~the first quarter of fiscal year 2021 was approximately $26,000.

Stock Incentive Plan and Stock Option Grants to Employees and Directors

On March 13, 2012, the Company adopted the Aspen Group, Inc. 2012 Equity Incentive Plan (the “2012 Plan”) that provides for the grant of 3,500,000 shares in the form of incentive stock options, non-qualified stock options, restricted shares, stock appreciation rights and RSUs to employees, consultants, officers and directors.

On December 13, 2018, the stockholders of the Company approved the Aspen Group, Inc. 2018 Equity Incentive Plan (the “2018 Plan”) that provides for the grant of 500,000 shares in the form of incentive stock options, non-qualified stock options, restricted shares, stock appreciation rights and RSUs to employees, consultants, officers and directors.

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

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

Table of Contents

ASPEN GROUP, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

July 31, 2020

(Unaudited)

The Company estimates the fair value of share-based compensation utilizing the Black-Scholes option pricing model, which is dependent upon several variables such as the expected option term, expected volatility of the Company’s stock price over the expected term, expected risk-free interest rate over the expected option term and expected dividend yield rate over the expected option term. The Company believes this valuation methodology is appropriate for estimating the fair value of stock options granted to employees and directors which are subject to ASC Topic 718 requirements. These amounts are estimates and thus may not be reflective of actual future results, nor amounts ultimately realized by recipients of these grants. The Company recognizes compensation on a straight-line basis over the requisite service period for each award. The following table summarizes the assumptions the Company utilized to record compensation expense for stock options granted to employees during the three months ended April 30, 2020. There were 0 options granted to employees during the three months ended July 31, 2020.


	July 31, 2020	April 30, 2020
Expected life (years)	n/a	3.5
Expected volatility	n/a	57.0	%
Risk-free interest rate	n/a	0.24	%
Dividend yield	n/a	0.00	%
Expected forfeiture rate	n/a	n/a

The Company utilized the simplified method to estimate the expected life for stock options granted to employees. The simplified method was used as the Company does not have sufficient historical data regarding stock option exercises. The expected volatility is based on historical volatility. The risk-free interest rate is based on the U.S. Treasury yields with terms equivalent to the expected life of the related option at the time of the grant. Dividend yield is based on historical trends. While the Company believes these estimates are reasonable, the compensation expense recorded would increase if the expected life was increased, a higher expected volatility was used, or if the expected dividend yield increased.

A summary of the Company’s stock option activity for employees and directors during the three months ended July 31, 2020, is presented below:


Options	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Balance Outstanding, April 30, 2020	2,732,899	$	4.62	1.97	$	9,146,198
Granted	0	0		—	—
Exercised	(415,175)	9.18		—	—
Forfeited	(3,688)	6.94		—	—
Expired	0	0		—	—
Balance Outstanding, July 31, 2020	2,314,036	$	4.89	1.89	$	9,073,489

Exercisable, July 31, 2020	1,884,793	$	4.68	1.65	$	7,797,166

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ASPEN GROUP, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

July 31, 2020

(Unaudited)


OUTSTANDING OPTIONS							EXERCISABLE OPTIONS
Exercise Price	Weighted Average Exercise Price		Outstanding No. of Options	Weighted Average Exercise Price		Weighted Average Remaining Life In Years	Exercisable No. of Options

$1.57 to $2.10	$	2.02	306,166	$	2.02	0.56	261,771

$2.28 to $2.76	$	2.30	307,779	$	2.30	0.27	307,779

$3.24 to $4.38	$	3.90	318,174	$	3.87	1.32	262,507

$4.50 to $5.20	$	4.93	665,195	$	4.91	1.98	536,597

$5.95 to $6.28	$	6.08	75,751	$	6.11	1.96	61,195

$7.17 to $7.55	$	7.44	481,639	$	7.41	3.16	342,056

$8.57 to $9.07	$	8.98	159,332	$	8.98	2.44	112,888

Options only			2,314,036				1,884,793

For the three months ended July 31, 2020, the Company recorded compensation expense of $168,734, $307,852 and $10,524, respectively, in connection with stock option, restricted stock units and restricted stock grants.

As of July 31, 2020, there was approximately $550,000 of unrecognized compensation costs related to non-vested share-based option arrangements. That cost is expected to be recognized over a weighted-average period of approximately 2.0 years.

As of July 31, 2020, there was approximately $4.4 million of unrecognized compensation costs related to non-vested RSU grants. That cost is expected to be recognized over a weighted-average period of approximately 4.0 years.

As of July 31, 2020, there was approximately $60,000 of unrecognized compensation costs related to non-vested share-based common and restricted stock arrangements. That cost is expected to be recognized over a weighted-average period of approximately 1.5 years.

Note 8. Revenues

Revenues consist 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 ~~unearned Title IV Program~~tuition, fees, and other student invoices in excess of the portion recognized as revenue and it is included in current liabilities in the accompanying unaudited consolidated balance sheets.

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

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ASPEN GROUP, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

July 31, 2020

(Unaudited)


	Three Months Ended July 31,
	2020		2019
Tuition - recognized over period of instruction	$	13,367,308	$	9,290,952
Course fees - recognized over period of instruction	1,599,693		925,954
Book fees - recognized at a point in time	39,138		20,785
Exam fees - recognized at a point in time	70,655		60,100
Service fees - recognized at a point in time	88,768		60,191
	$	15,165,562	$	10,357,982

Contract Balances and Performance Obligations

The Company recognizes deferred revenue as a student participates in a course which continues past the consolidated balance sheet date. Deferred revenue at July 31, 2020 was $4,766,853 which is future revenue that has not yet been earned for courses in progress. The Company has $1,891,502 of funds ~~that have been disbursed~~due 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 Department 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.

~~Subsequent to a compliance audit, USU recognized that it had not fully complied with all requirements for calculating and making timely returns of~~which mainly represents Title IV funds ~~(R2T4). In 2016, USU~~due to students after deducting their tuition payments.

Of the total revenue earned during the three months ended July 31, 2020, approximately $3.7 million came from revenues which were deferred at April 30, 2020.

When the Company begins providing the performance obligation by beginning instruction in a course, a contract receivable is created, resulting in accounts receivable. The Company accounts for receivables in accordance with ASC 310, Receivables. The Company uses the portfolio approach, as discussed below.

AGI records an allowance for doubtful accounts for estimated losses resulting from the inability, failure or refusal of its students to make required payments, which includes the recovery of financial aid funds advanced to a student for amounts in excess of the student’s cost of tuition and related fees. AGI determines the adequacy of its allowance for doubtful accounts using an allowance method based on an analysis of its historical bad debt experience, current economic trends, and the aging of the accounts receivable and student status. AGI applies reserves to its receivables based upon an estimate of the risk presented by the age of the receivables and student status. AGI writes off accounts receivable balances at the time the balances are deemed uncollectible. AGI continues to reflect accounts receivable with an offsetting allowance as long as management believes there is a reasonable possibility of collection.

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

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ASPEN GROUP, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

July 31, 2020

(Unaudited)

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 revenues from students outside the United States representing 1.27% and 1.48% of revenues for the three months ended July 31, 2020 and 2019, respectively.

Note 9. Leases

We lease approximately 88,600 square feet of office and classroom space in the Phoenix (metropolitan area), San Diego, New York City, Denver, Austin and Moncton, New Brunswick Canada.

Operating lease assets are right of use assets ("ROU assets"), which represent the right to use an underlying asset for the lease term. Operating lease liabilities represent the obligation to make lease payments arising from the lease. Operating leases are included in "Operating lease right of use asset, net", "Operating lease obligations, current portion" and "Operating lease obligations" in the consolidated balance sheet at July 31, 2020. These assets and lease liabilities are recognized based on the present value of remaining lease payments over the lease term. When the lease does not provide an implicit interest rate, the Company uses an incremental borrowing rate of 12% to determine the present value of the lease payments. The right-of-use asset includes all lease payments made and excludes lease incentives. Lease expense for operating leases is recognized on a ~~material finding~~straight-line basis over the lease term. There are no variable lease payments. Lease expense for the three month period ended July 31, 2020 was $397,238. These costs are primarily related to long-term operating leases, but also include amounts for short-term leases with terms greater than 30 days that are not material.

ROU assets is summarized below:


	July 31, 2020
Operating office leases	$	12,356,837
Less accumulated reduction	(5,092,253)
Balance of ROU assets as of July 31, 2020	$	7,264,584

Operating lease obligations, related to the ~~same issue and~~ROU assets is ~~required to maintain a letter of credit in the amount of $71,634 as a result of this finding.~~ summarized below:


	July 31, 2020
Operating office leases	$	13,312,573
Total lease liabilities	13,312,573
Reduction of lease liabilities	(5,092,253)
Total as of July 31, 2020	$	8,220,320

The ~~letter of credit has been provided to the Department of Education by AGI.~~

~~Delaware Approval to Confer Degrees~~

~~Aspen University~~following is a ~~Delaware corporation. Delaware law requires an institution to obtain approval from~~schedule by fiscal years of future minimum lease payments required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year as of July 31, 2020 ^(a).



Maturity of Lease Obligations	Lease Payments
2021 (remaining)	$	1,809,774
2022	2,253,619
2023	1,703,419
2024	1,466,758
2025	1,134,718
2026 and beyond	3,536,443
Total future minimum lease payments	11,904,731
Less imputed interest	(3,684,411)
Present value of operating lease obligations	$	8,220,320

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ASPEN GROUP, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

July 31, 2020

(Unaudited)

_____________________

^(a)_{Lease payments exclude legally binding minimum lease payments for campus leases signed but not yet commenced for the Delaware Department of Education (“Delaware DOE”) before it may incorporate with the power to confer degrees. In July 2012, Aspen received notice from the Delaware DOE that it was granted provisional approval status effective until June 30, 2015. On April 25, 2016 the Delaware DOE informed Aspen University it was granted full approval to operate with degree-granting authorityfollowing locations: $10.2 million in the State of Delaware until July 1, 2020. Aspen University is authorized by the Colorado Commission on Education to operateTampa, Florida, $5.2 million in Colorado as a degree granting institution.

USU is also a Delaware corporationPhoenix, Arizona, and is$4.3 million in the process of obtaining Delaware approval.
Austin, Texas.}


Balance Sheet Classification
Operating lease obligations, current	$	1,542,754
Operating lease obligations, long-term	6,677,566
Total operating lease obligations	$	8,220,320


Other Information
Weighted average remaining lease term (in years)	6.36
Weighted average discount rate	12.00	%

Note ~~8. Stockholders’ Equity~~

~~Common Stock~~

~~Effective May 24, 2017,~~10. Commitments and Contingencies

Employment Agreements

From time to time, the Company ~~entered~~enters into ~~waiver~~employment agreements with ~~all~~certain of its ~~investors~~employees. These agreements typically include bonuses, some of which may or may not be performance-based in nature.

Legal Matters

From time to time, we may be involved in litigation relating to claims arising out of our operations in the ~~April 2017 common stock offering. In consideration for waiving their registration rights,~~normal course of business. As of July 31, 2020, except as discussed below, there were no other pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our consolidated operations and there are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

On February 11, 2013, Higher Education Management Group, Inc., (“HEMG”) and its Chairman, Mr. Patrick Spada, sued the Company, ~~paid~~certain senior management members and our directors in state court in New York seeking damages arising principally from (i) allegedly false and misleading statements in the filings with the Securities and Exchange Commission (the “SEC”) 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 ~~each~~numerous conditions and time limitations, to purchase certain shares of the ~~investors 1.5%~~Company from HEMG, and (iii) alleged diminution to the value of ~~their investment amount~~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 ~~offering. The total amount paid was $112,500~~same state court of New York. By order dated August 4, 2014, the New York court denied HEMG and ~~was recorded~~Spada’s motion to dismiss the fraud counterclaim the Company asserted against them.

While the Company has been advised by its counsel that HEMG’s and Spada’s claims in ~~general~~the New York lawsuit is baseless, the Company cannot provide any assurance as to the ultimate outcome of the case. Defending the lawsuit maybe expensive and ~~administrative expenses during~~will require the ~~quarter ended July 31, 2017.~~

expenditure of time which could otherwise be spent on the Company’s business. While unlikely, if Mr. Spada’s and HEMG’s claims in the New York litigation were to be successful, the damages the Company could pay could potentially be material.

In November ~~2017,~~2014, the ~~company issued 5,000 restricted shares each~~Company and Aspen University sued HEMG seeking to recover sums due under two ~~consultants assisting with establishing~~2008 Agreements where Aspen University sold course materials to HEMG in exchange for long-term future payments. On September 29, 2015, the ~~new campus. The shares were valued at $88,700 based on~~Company and Aspen University obtained a default judgment in the ~~trading price~~amount of ~~$8.87 on~~$772,793. This default judgment precipitated the ~~grant date and recorded as a prepaid asset being amortized over~~bankruptcy petition discussed in the ~~six month term~~next paragraph.

Table of ~~the agreement. (See Note 11)~~

Contents

ASPEN GROUP, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~JANUARY~~

July 31, ~~2018~~

2020

(Unaudited)

~~Warrants~~

~~A summary~~

On October 15, 2015, HEMG filed bankruptcy pursuant to Chapter 7. As a result, the remaining claims and Aspen’s counterclaims in the New York lawsuit are currently stayed. The bankrupt estate’s sole asset consisted of 208,000 shares of AGI common stock, plus a claim filed by the bankruptcy trustee against Spada’s brother and a third party to recover approximately 167,000 shares. On February 8, 2019, the bankruptcy court issued an order reducing AGI’s claim to $888,638 which consisted of the ~~Company’s warrant activity during~~judgment and a $200,000 claim for failure to disclose certain liabilities. Subsequently, the ~~nine months ended January 31, 2017 is presented below:~~

Weighted

Weighted

Average

Average

Remaining

Aggregate

Number of

Exercise

Contractual

Intrinsic

Warrants

Shares

Price

Term

Value

Balance outstanding, April 30, 2017

914,123

$
2.82

1.6

$
1,100,203

Granted

224,174

6.87

5.0

307,118

Exercised

(356,267
)

0.55

—

—

Forfeited

—

—

—

—

Expired

(38,257
)

—

—

—

Balance outstanding, January 31, 2018

743,773

$
4.08

2.1

$
3,095,502

Exercisable, January 31, 2018

743,773

$
4.08

2.1

$
3,095,502

~~In connection~~trustee sold the AGI common stock and has $924,486 available for distribution. However, priorities are an unknown amount of income taxes due from the sale of the common stock, and as of June 2, 2020 $346,480 in fees due the trustee and his counsel and $574,145 due arising from settlements with the ~~Senior Secured Term Loan~~secured creditor and Spada’s brother and the third party. While we do not know how much the Company will receive, it will be substantially less than the judgement due.

Regulatory Matters

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 ~~was finalized on July 25,~~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 ~~Company issued 224,174 5-year warrants at an exercise price~~DOE informed Aspen University of ~~$6.87. (See Note 5)~~

~~The Company issued 241,514 shares~~its determination that the institution has qualified to participate under the HEA and the Federal student financial assistance programs (Title IV, HEA programs) and set a subsequent program participation agreement reapplication date of ~~Common Stock in conjunction with the cash and cashless exercise of 356,267 warrants. The Company received $143,489 in conjunction with the cash exercises.~~

~~Stock Incentive Plan and Stock Option Grants~~March 31, 2021.

USU currently has provisional certification to ~~Employees and Directors~~

On March 13, 2012, the Company adopted the 2012 Equity Incentive Plan (the “Plan”) that provides for the grant of 1,691,667 shares effective November 2015, 2,108,333 shares effective June 2016 and 3,500,000 shares effective July 2017,participate in the ~~form~~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 ~~incentive stock options, non-qualified stock options, restricted shares, stock appreciation rights~~ownership.

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 ~~restricted stock units~~that the institution is complying with accrediting standards. Failure to ~~employees, consultants, officers~~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.

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 ~~directors. As~~must return those unearned funds in a timely manner, no later than 45 days of ~~January 31, 2018, there were 622,454 shares remaining~~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.

The DOE informed USU that it is required to post a letter of credit in the amount of $255,708 based on the audited same day balance sheet requirements that apply in a change of control, which was funded by AGI. Pursuant to USU’s provisional Program Participation Agreement ("PPA"), DOE indicated that USU must agree to participate in Title IV under the Plan for future issuance. 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 optionHCM1 funding process; however, DOE does retain discretion on whether or not to implement that term ~~expected volatility~~ of the ~~Company’s stock price over~~agreement. Although DOE has not, to date, notified USU that it has been placed in the ~~expected~~HCM1 funding process, nor does DOE’s public disclosure website identify USU as being on HCM1, it is possible that prior to the end of the PPA term, ~~expected risk-free interest rate over~~DOE may notify USU that it must begin funding under the ~~expected option term, expected dividend yield rate over~~HCM1 procedure. If this occurs, the ~~expected option term, and an estimate of expected forfeiture rates. The~~ Company believes this valuation methodology is appropriate for estimating the fair value of stock options granted to employees and directors which are subject to ASC Topic 718 requirements. These amounts are estimates and thus may not be reflective of actual future results, nor amounts ultimately realized by recipients of these grants. The Company recognizes compensation on a straight-line basis over the requisite service period for each award. The following table summarizes the assumptions the Company utilized to record compensation expense for stock options granted to employees during the nine months ended January 31, 2018.


	~~January 31,~~
	~~2018~~
~~Expected life (years)~~		~~4-6.5~~
~~Expected volatility~~		~~40-43~~	%
~~Risk-free interest rate~~		~~0.00~~	%
~~Dividend yield~~		~~n/a~~

~~The Company utilized the simplified method to estimate the expected life for stock options granted to employees. The simplified method was used as the Company does~~will not have ~~sufficient historical data regarding stock option exercises. The expected volatility is based~~a material impact on the ~~average~~consolidated financial statements.

Approval to Confer Degrees

Table of the expected volatilities from the most recent audited financial statements available for comparative public companies that are deemed to be similar in nature to the Company. 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.

Contents

ASPEN GROUP, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~JANUARY~~

July 31, ~~2018~~

2020

(Unaudited)

~~A summary~~

Aspen University is a Delaware corporation and is approved to operate in the State of Delaware. Aspen University is authorized by the ~~Company’s stock option activity for employees and directors during~~Colorado Commission on Education in the ~~nine months ended January 31, 2018, is presented below:~~

Weighted

Average

Average

Remaining

Aggregate

Number of

Exercise

Contractual

Intrinsic

Options

Shares

Price

Term

Value

Balance outstanding, April 30, 2017

2,097,384

$
1.86

2.7

$
12,489,871

Granted

844,000

$
3.53

3.4

1,867,740

Exercised

(63,838
)

$
3.13

—

—

Forfeited

—

—

—

—

Expired

—

—

—

—

Balance outstanding, January 31, 2018

2,877,546

$
3.52

3.24

$
17,658,268

Exercisable, January 31, 2018

1,083,484

$
2.22

2.07

$
8,727,757

~~On May 13, 2017, the Company granted its executive officers a total~~State of 500,000 five-year options to purchase shares of the Company’s common stock under the Plan. The options vest annually over three years, subject to continued employment at each applicable vesting date, and are exercisable at $4.90 per share. The Chairman and Chief Executive Officer received 200,000 options with a fair value of $282,000, the Chief Operating Officer received 200,000 options with a fair value of $282,000, the Chief Academic Officer received 70,000 options with a fair value of $98,700Colorado and the ~~Chief Financial Officer received 30,000 options with a fair value of $42,300.~~

~~In May 2017, the Company issued 5,500 stock options to various employees at exercise prices ranging from $4.95 to $5.10 per share.~~

Effective June 11, 2017, the Company granted the Chief Academic Officer 30,000 five-year options. The options vest quarterly over a three-year period in 12 equal quarterly increments with the first vesting date being September 11, 2017, subject to continued employment on each applicable vesting date. The options are exercisable at $6.28 per share and the fair value is $54,000.

~~On August 21, 2017, 53,000 options were issued to 26 employees with an exercise price of $5.95 per share and a fair value of $90,630.~~

~~On January 4, 2018, 180,000 options were issued to the board of directors with an exercise price of $9.07 per share and a fair value of $421,200.~~

~~On January 14, 2018, 75,500 options were issued to employees with an exercise price of $8.57 per share and a fair value of $152,510.~~

During the nine months ended January 31, 2018, the company issued 113,597 shares of common stock in conjunction with the exercise of 63,838 stock options. The company received $455,387 related to these exercises.

As of January 31, 2018, there was $1,474,855 of unrecognized compensation costs related to nonvested share-based compensation arrangements. That cost is expected to be recognized over a weighted-average period of 2.0 years.

~~The Company recorded compensation expense of $466,468 and $253,833~~Arizona State Board for ~~the nine months ended January 31, 2018 and 2017, respectively, in connection with stock options.~~

~~Note 9. Related Party Transactions~~

~~See Note 6 for discussion of convertible notes payable to a related party.~~

~~ASPEN GROUP, INC. AND SUBSIDIARIES~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~JANUARY 31, 2018~~

~~(Unaudited)~~

~~Note 10 – Acquisition of USU~~

On December 1, 2017 certain assets were acquired and certain liabilities assumed from Educacion Significativa, LLC (dba United States University) by United States University, Inc. United States University, Inc. is a wholly owned subsidiary of Aspen Group Inc. (“AGI”) and was set up for purposes of finalizing the asset purchase transaction. For purposes of purchase accounting, Aspen Group, Inc. is referred to as the acquirer. Aspen Group, Inc. acquired the assets and assumed the liabilities of Educacion Significativa, LLC (dba United States University) for a purchase price of approximately $14.8 million. The purchase consideration consisted of a cash payment of $2,500,000 less an adjustment for working capital of approximately $110,000 plus approximately $200,000 of additional costs paid to/on behalf of and for the benefit of the seller, a convertible note of $2,000,000 and 1,203,209 shares of AGI stock valued at the quoted closing price of $8.49 per share as of November 30, 2017. The stock consideration represents $10,215,244 of the purchase consideration.

The acquisition was accounted for by AGI in accordance with the acquisition method of accounting pursuant to ASC 805 “Business Combinations” and pushdown accounting was applied to record the fair value of the assets acquired and liabilities assumed on United States University, Inc. Under this method, the purchase price is allocated to the identifiable assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The excess of the amount paid over the estimated fair values of the identifiable net assets was $5,011,432 which has been reflectedPrivate Post-Secondary Education in the ~~balance sheet~~State of Arizona to operate as ~~goodwill.~~

~~The following~~a degree granting institution for all degrees. Aspen University is authorized to operate as a ~~summary~~degree granting institution for bachelor degrees only by the Texas Higher Education Coordinating Board in the State of ~~the estimated fair value of the assets acquired~~Texas.

USU is also a Delaware corporation and ~~liabilities assumed at the date of acquisition:~~

Purchase Price Allocation

Useful Life

Cash and cash equivalents

$
—

Current assets acquired

244,465

Other assets acquired

176,667

Intangible assets

Accreditation and regulatory approvals

6,200,000

Trade name and trademarks

1,700,000

Student relationships

2,000,000

2 years

Curriculum

200,000

1 year

Goodwill

5,011,432

Less: Current liabilities assumed

(727,601
)

Total purchase price

$
14,804,963

We determined the fair value of assets acquired and liabilities assumed based on assumptions that reasonable market participants would use while employing the concept of highest and best use of the respective items. We used the following assumptions, the majority of which include significant unobservable inputs (Level 3), and valuation methodologies to determine fair value:

Intangibles - We used the multiple period excess earnings method to value the Accreditation and regulatory approvals. The Trade name and trademarks were valued using the relief-from-royalty method, which represents the benefit of owning these intangible assets rather than paying royalties for their use. The Student relationships were valued using the excess earnings method. The curriculum was valued using the replacement cost approach.

~~Other assets and liabilities - The carrying value of all other assets and liabilities approximated fair value at the time of acquisition.~~

~~The goodwill resulting~~received initial approval from the ~~acquisition may become deductible for tax purposes in the future. The goodwill resulting from the acquisition is principally attributable~~Delaware DOE to ~~the future earnings potential associated with enrollment growth and other intangibles that do not qualify for separate recognition such as the assembled workforce.~~

~~We have selected an April 30~~^th ~~annual goodwill impairment test date.~~

~~ASPEN GROUP, INC. AND SUBSIDIARIES~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~JANUARY 31, 2018~~

~~(Unaudited)~~

We assigned an indefinite useful life to the accreditation and regulatory approvals and the trade name and trademarks as we believe they have the ability to generate cash flows indefinitely. In addition, there are no legal, regulatory, contractual, economic or other factors to limit the intangibles’ useful life and we intend to renew the intangibles, as applicable, and renewal can be accomplished at little cost. We determined all other acquired intangibles are finite-lived and we are amortizing them on either a straight-line basis or using an accelerated method to reflect the pattern in which the economic benefits of the assets are expected to be consumed. Amortization for the period of inceptionconfer degrees through ~~January 31, 2018 was $183,333.~~

~~The expected benefits from the business acquisition will allow USU, Inc. to achieve its vision of making college affordable again on a much broader scale along with providing various accreditations.~~

The Company is in the process of completing its accounting and valuations of USU, Inc. and accordingly, the estimated fair values and allocation of purchase price noted above is provisional pending the final valuation of the assets acquired and liabilities assumed which will not exceed one-year in accordance with ASC 805.

The total acquisition costs that AGI incurred was approximately $1,050,000, of which approximately $200,000 was incurred in the fiscal year ended April 30, 2017 and $850,000 was incurred in the current year.

The results of operations of USU are included in the Company’s consolidated statement of operations from the date of acquisition of December 1, 2017. The following supplemental unaudited pro forma combined information assumes that the acquisitions had occurred as of the beginning of each period present:

For the Year Ended
April 30,
2017

For the Nine Months Ended
October 31,
2017

(unaudited)

(unaudited)

Revenue

$
18,038,474

$
10,719,546

Net Loss

$
(5,444,205
)

$
(3,521,086
)
Loss per common share- basic and diluted

$
(0.47
)

$(0.26
)

~~The pro forma financial information is not necessarily indicative of the results that would have occurred if these acquisitions had occurred on the dates indicated or that result in the future.~~

June 2023.

Note 11. Subsequent Events

On September 14, 2020,after the closing price of our common stock was at least $10.725 over a 20 consecutive trading day period the Convertible Notes automatically converted into 1,398,602 shares of the Company’s common stock at a conversion price of $7.15 per share. The Company expects the accelerated amortization charge related to this transaction in the second quarter of fiscal year 2021 will be approximately $1.4 million, which will be included in interest expense in the consolidated statement of operations.

On August 31, 2020, the closing price of the Company’s common stock was at least $9 for 20 consecutive trading days, resulting in, 10% or 37,500 of the February 4, 2020 RSU grants to executives vesting immediately. Additionally, on September 2, 2020, the Company’s common stock was at least $10 for 20 ~~2018, AGI~~consecutive trading days and 25% or 93,750 of the RSUs granted vested immediately. On the grant date, the closing price of the Company's common stock on The Nasdaq Global Market was $9.49 per share. See "Stockholders' Equity" Note for additional information on the vesting terms for these RSUs. The accelerated amortization expense related to this transaction in the second quarter of fiscal year 2021 will be approximately $1.6 million for the vesting of these 131,250 RSUs, which will be included in General and Administrative expense in the consolidated statement of operations.

On August 31, 2020, the Company entered into an Equity Distribution Agreement (the “Agreement”) with Canaccord Genuity LLC (“Canaccord”), pursuant to which the Company may issue and sell from time to time, through Canaccord, up to $12,309,750 of shares of the Company’s common stock (the “Shares”).

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

The Shares are being offered and sold pursuant to a prospectus supplement filed with the Securities and Exchange Commission on August 31, 2020.

On August 27, 2020, the Company announced that ~~Aspen University is entering~~it had received the ~~pre-licensure~~final required state regulatory approvals for their new Pre-Licensure Bachelor of Science in Nursing (BSN) ~~degree program business. Aspen’s first campus will be located~~campuses in ~~Phoenix, Arizona~~Austin, Texas and ~~the university is targeting to begin enrolling students for the upcoming summer semester.~~

Aspen’s pre-licensure BSN program is offered as a full-time, three-year (nine semester) program that is specifically designed for students who do not currently hold a state nursing license and have no prior nursing experience. Aspen will admit students into three tracks; 1) High school graduates with no prior college credits, 2) students that have less than 48 general education prerequisites completed, and 3) students that have completed all 48 general education prerequisite credits and are ready to enter the core Nursing courses and clinical experiences.

~~Related to that announcement,~~Tampa, Florida, giving Aspen University ~~has entered into a 92 month lease for a total of 38,014 rentable square feet in a building complex in Phoenix for both~~ the ~~pre-licensure program~~go ahead to commence marketing and ~~the enrollment center. The lease commencement date is expected~~begin to ~~be in the spring of 2018 and upon commencement, the monthly payments will be approximately $67,000 per month subject to escalation terms. During the quarter ended 1-31-18,~~enroll students immediately.

In August 2020, former employees exercised 4,666 stock options. Total proceeds received by the Company ~~paid a deposit~~were approximately $11,000 upon the issuance of ~~$519,000.~~

3,296 shares.

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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 consolidated financial statements, which are included elsewhere in this Form 10-Q. ~~Management’s Discussion and Analysis of Financial Condition and Results of Operations contain~~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. ~~Factors~~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 ~~could cause or contribute to these differences include those discussed~~enrolls in the ~~Risk Factors contained~~Company’s universities, after giving effect to attrition.

•Bookings - defined by multiplying LTV by new student enrollments for each operating unit.

•Average Revenue per Enrollment ("ARPU") - defined by dividing total bookings by total enrollments for each operating unit.

•Marketing Efficiency Ratio ("MER") - is defined as revenue per enrollment divided by cost per enrollment.

Operating costs and expenses

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

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

◦Marketing and promotional costs - include costs associated with producing marketing materials and advertising, and outside sales costs. Such costs are generally affected by the ~~Annual Report~~cost of advertising media, the efficiency of the Company's marketing and recruiting efforts, and expenditures on ~~Form 10-K filed on July 25, 2017 with the Securities~~advertising initiatives for new and ~~Exchange Commission,~~existing academic programs. Non-direct response advertising activities are expensed as incurred, or the ~~SEC.~~

first time the advertising takes place, depending on the type of advertising activity.

•General and administrative expense - consists primarily of compensation expense (including stock-based compensation expense) and other employee-related costs for personnel engaged in executive and academic management and operations, finance, legal, tax, information technology and human resources, fees for professional services, financial aid processing costs, non-capitalizable courseware and software costs, corporate taxes and facilities costs.

Long-term debt (for additional information see Note 6. "Debt" and Note 11. "Subsequent Events" to the consolidated financial statements included in Item 1. "Financial Statements"):

•Convertible Notes - The $10 million secured Convertible Notes due January 22, 2023; with an annual interest rate of 7% payable monthly. The Convertible Notes automatically converted into shares of the Company’s common stock on September 14, 2020 when the closing price of our common stock was at least $10.725 over a 20 consecutive trading day period at a conversion price of $7.15 per share. We expect that the accelerated amortization charge related to this transaction will be approximately $1.4 million.

•Revolving Credit Facility - The $5 million revolving credit facility matures on November 4, 2021; with a 2% Commitment Fee on the undrawn portion payable quarterly. At July 31, 2020 and April 30, 2020, there were no outstanding borrowings under the Revolving Credit Facility. With the conversion of the Convertible Notes, the Company does not intend to borrow under this facility.

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•Term Loans - On January 22, 2020, the Senior Secured Term Loans were cancelled and exchanged for the Convertible Notes discussed above. The $10 million Senior Secured Term Loans were entered into on March 6, 2019; with an annual interest rate of 12% payable monthly.

Non-GAAP financial measures:

•Adjusted Net Income (Loss) and Adjusted Earnings (Loss) per Share - are non-GAAP financial measures that the Company is providing beginning in first quarter of fiscal year 2021. See "Non-GAAP – Financial Measures" for a reconciliation of net earnings (loss) and earnings (loss) per share to Adjusted Net Income (Loss) and Adjusted Earnings (Loss) per Share for the fiscal quarters ended July 31, 2020 and 2019.

•Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") - is a non-GAAP financial measure. See "Non-GAAP – Financial Measures" for a reconciliation of net loss to EBITDA for the first quarter of fiscal year 2021 (three months ended July 31, 2020 and 2019).

•Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA")- is a non-GAAP financial measure. See "Non-GAAP – Financial Measures" for a reconciliation of net loss to Adjusted EBITDA for the fiscal quarters ended July 31, 2020 and 2019.

AGI Student Population Overview

AGI’s overall active student body (includes both Aspen University and USU) grew 24% year-over-year from 9,752 to 12,128 as of July 31, 2020 and students seeking nursing degrees were 10,422 or 86% of total students at both universities. Active student body is comprised of active degree-seeking students, enrolled in a course at the end of the first quarter of fiscal year 2021 or are registered for an upcoming course.

Aspen University’s total active degree-seeking student body grew 21% year-over-year from 8,261 to 9,975. USU's total active degree-seeking student body grew year-over-year from 1,491 to 2,153 or 44%.

Company Overview

AGI is an educational technology holding company. It operates two universities, Aspen University ("Aspen University" or "AUI" or "Aspen") and United States University ("United States University" or "USU").

All references to ~~“we,” “our,” “us,” “AGI,”~~the “Company”, “AGI”, “Aspen Group”, “we”, “our” and ~~“Aspen”~~“us” refer to Aspen Group, Inc. ~~and its subsidiaries, Aspen University Inc. (“Aspen University”) and United States University Inc. (“USU”)~~, unless the context otherwise indicates.

~~Company Overview~~

~~Aspen Group, Inc. (together with~~

AGI leverages its ~~subsidiaries, the “Company” or “AGI”) is a holding company. AGI has~~education technology infrastructure and expertise to allow its two ~~subsidiaries,~~universities, Aspen University ~~Inc. (“Aspen University”) organized in 1987~~ and United States University, ~~Inc. (“USU”). On March 13, 2012,~~to deliver on the ~~Company was recapitalized in a reverse merger.~~

~~Aspen Group’s~~ vision ~~is to make~~of making college affordable ~~again in America.~~again. Because we believe higher education should be a catalyst to our students’ long-term economic success, we exert financial prudence by offering affordable tuition that is one of the greatest values in ~~online~~ higher education. AGI’s primary focus relative to future growth is to target the high growth nursing profession. As of July 31, 2020, 10,422 of 12,128 or 86% of all students across both universities are degree-seeking nursing students.

In March 2014, Aspen University unveiled a monthly payment plan ~~aimed at reversing~~available to all students across every online degree program offered by the ~~college-debt sentence plaguing working-class Americans.~~university. The monthly payment plan is designed so that students will make one payment per month, and that monthly payment is applied towards the total cost of attendance (tuition and fees, excluding textbooks). The monthly payment

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plan offers online associate and most bachelor students ~~(except RN to BSN)~~ the opportunity to pay their tuition and fees at $250/month, ~~for 72 months ($18,000), nursing bachelor students (RN to BSN) $250/month for 39 months ($9,750),~~online master students $325/month, ~~for 36 months ($11,700)~~ and online doctoral students $375/month, ~~for 72 months ($27,000),~~ interest free, thereby giving students a monthly ~~payment tuition~~ payment option versus taking out a federal financial aid loan.

~~United States University (USU)~~

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

Since August 1, 2019, new student enrollments for USU’s FNP monthly payment plan have been offered a $9,000 two-year payment plan ($375/month x 24 months) designed to pay for the first year’s pre-clinical courses only (approximate cost of $9,000). The second academic year of the two-year FNP program in which students complete their clinical courses (approximate cost of $18,000) is required to be funded through conventional payment methods (either cash, private loans, corporate tuition reimbursement or federal financial aid).

Since 1993, Aspen University has been nationally accredited by the ~~Distance Education and Accrediting Council (“DEAC”),~~DEAC, a national accrediting agency recognized by the ~~U.S. Department of Education (the “DOE”).~~DOE and CHEA. On February 25, ~~2015,~~2019, the DEAC informed Aspen University that it had renewed its accreditation for five years to January ~~2019.~~

2024.

Since 2009, USU has been regionally accredited by ~~WASC Senior College and University Commission. (“WSCUC”).~~

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).

AGI Student Population Overview*

Aspen University’s active degree-seeking student body increased year-over-year by 49% during the fiscal quarter ended January 31, 2018, from 4,064 to 6,066 students. United States University’s (USU’s) active degree-seeking student body grew from 212 to 446 students or an increase of 110% from May, 2017 to January, 2018, highlighted by the College of Nursing growing to 326 students which now represents 73% of USU’s total active student body.

Aspen University’s most popular school is also its School of Nursing, which represents 73% of Aspen’s total active student body, similar to USU. Aspen’s School of Nursing grew from 2,899 to 4,401 student’s year-over-year, which represented 75% of Aspen’s active degree-seeking student body growth. At January 31, 2018, Aspen’s School of Nursing included 2,869 active students in the RN to BSN program and 1,532 active students in the MSN program, RN to MSN Bridge program, or DNP program.

Aspen University

United States University

Q3 FY’2018

Q3 FY’2018

New Student Enrollments

1,164

103
**
Active Student Body

6,066

446

-College of Nursing Students

4,401

326

Monthly Payment Method Students

4,194

204

~~Note: “Active Degree-Seeking Students” are defined as degree-seeking students who were enrolled in a course during the quarter reported, or are registered for an upcoming course.~~

~~Enrollment results for the two month period from December 1, 2017 – January 31, 2018.~~

~~Aspen University~~ New Student ~~Enrollment and Active Degree Seeking Student Body Growth~~

~~Since~~Enrollments

For the ~~launch~~first quarter of fiscal year 2021, the ~~BSN marketing campaign in November, 2014, Aspen University’s growth rate~~Company delivered a quarterly record of 2,351 new student enrollments, ~~has accelerated significantly.~~ a sequential increase of 32%, and 22% year-over-year. Aspen University accounted for 1,779 new student enrollments delivering overall enrollment growth at Aspen University of 26% year-over-year.The strong enrollment growth at Aspen University was a result of record quarterly enrollments in its Doctoral and BSN Pre-Licensure units. Millennials that aspire to become RNs enrolled in the BSN Pre-Licensure program in Phoenix in record numbers in the first quarter given that many have been furloughed or laid off since the pandemic first began.

USU accounted for 572 new student enrollments in the quarter driven primarily by FNP enrollments, a 32% sequential increase and an 11% increase year-over-year. Note that USU announced the termination of its 72-month payment plan for FNP students as of July 31, 2019, which caused a historic enrollment month for the university (nearly 250 enrollments in the month of July 2019). Consequently the 11% enrollment increase and the 15% decline in USU’s marketing efficiency ratio (see MER analysis below) year-over-year are favorable results when understanding the context of the one-time event a year ago in the month of July.

Below is a ~~quarterly analysis of the growth of Aspen University’s~~table reflecting new student enrollments ~~as well as the growth of the active degree seeking student body over~~for the past ~~seven quarters, including the recent quarter ending January 31, 2018.~~

New Student Enrollments

Active Degree Seeking Student Body*
Fiscal quarter end July 31, 2016

621

3,252
Fiscal quarter end October 31, 2016

811

3,726
Fiscal quarter end January 31, 2017

825

4,064
Fiscal quarter end April 30, 2017

986

4,681
Fiscal quarter end July 31, 2017

1,025

5,015
Fiscal quarter end October 31, 2017

1,255

5,641
Fiscal quarter end January 31, 2018

1,164

6,066

~~Aspen University Revenue Summary~~

~~Below is a summary of the nursing active degree-seeking student body as a percentage of the total active degree-seeking student body over the past six fiscal quarters.~~

Total Degree-Seeking Active Student Body

Nursing Degree- Seeking Active Student Body

Nursing Degree-Seeking Active Student Body (%)

Quarter ended October 31, 2016

3,726

2,538

68
%

Quarter ended January 31, 2017

4,064

2,899

71
%

Quarter ended April 30, 2017

4,681

3,363

72
%

Quarter ended July 31, 2017

5,015

3,569

71
%

Quarter ended October 31, 2017

5,641

4,068

72
%

Quarter ended January 31, 2018

6,066

4,401

73
%

~~Monthly Payment Programs Overview~~

Since the March 2014 monthly payment plan announcement, 69% of Aspen University’s courses are now paid through monthly payment methods (based on courses started over the last 90 days). Aspen offers two monthly payment programs, a monthly payment plan in which students make payments every month over a fixed period (36, 39 or 72 months depending on the degree program), and a monthly installment plan in which students pay three monthly installments (day 1, day 31 and day 61 after the start of each course).

As of January 31, 2018, Aspen University had a total of 4,194 active students paying tuition through a monthly payment method of which 3,901 active students are paying through a monthly payment plan, and 293 students are paying through a monthly installment plan. Additionally, Aspen University is currently projecting to add approximately 120 active students/month net to its monthly payment programs through fiscal year 2018. The total contractual value of Aspen University’s monthly payment plan students now exceeds $35 million which currently delivers monthly recurring tuition cash payments of approximately $1,000,000.

Finally, as a consequence of monthly payment programs becoming the payment method of choice among the majority of Aspen’s degree-seeking student body, our HEA, Title IV Program revenue dropped from 25% of total cash receipts in fiscal year 2016 to 21% for fiscal year 2017.

five quarters:


	New Student Enrollments
	Q1'20	Q2'20	Q3'20	Q4'20	Q1'21
Aspen University	1,415	1,823	1,371	1,344	1,779
USU	514	394	375	432	572
Total	1,929	2,217	1,746	1,776	2,351

Marketing Efficiency Ratio (MER) Analysis

~~Aspen~~

AGI has developed a marketing efficiency ratio to continually monitor the performance of its business model.

~~Revenue per Enrollment (RPE)~~

~~Marketing Efficiency Ratio =~~

~~—————————————~~


Marketing Efficiency Ratio (MER) =	Revenue per Enrollment (RPE)
		Cost per Enrollment (CPE)

Cost per Enrollment (CPE)

~~Cost per Enrollment (CPE)~~

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The Cost per Enrollment measures the ~~marketing~~advertising investment spent in a given ~~quarter,~~three month period, divided by the number of new student enrollments achieved in that given ~~quarter,~~three month period, in order to obtain an average CPE (or CAC outside of the education sector) for the ~~quarter~~period measured.

Revenue per Enrollment (RPE)

The Revenue per Enrollment takes each quarterly cohort of new degree-seeking student enrollments, and measures the amount of earned revenue on a weighted average basis, including tuition and fees to determine the weighted average RPE for the cohort measured. For the later periods of a cohort, ~~in particular students four years or older,~~ we have used reasonable projections based off of historical results to determine the amount of revenue we will earn in later periods of the cohort.

In the first quarter of fiscal year 2021 the Marketing Efficiency Ratio (MER) for our universities, representing revenue-per-enrollment (LTV) over cost-per-enrollment (CPE), improved 16% for Aspen University and declined 15% for USU, as shown in the table below:

First Quarter Marketing Efficiency Ratio

Enrollments

CAC¹

LTV²

Q1 '21 MER

Q1 '20 MER

MER % Change

Aspen University

1,779

1,181

14,548³

12.3X

10.6X

16%

USU

572

1,272

17,820⁴

14.0X

16.5X

(15)%

_____________________

¹Based on 6-month rolling weighted average CPE for each university’s enrollments

²Weighted Lifetime Value (LTV) of a new student enrollment

³Weighted average LTV for all Aspen University enrollments in the quarter

⁴LTV for USU’s MSN-FNP Program

Compared to the prior year period, AGI’s weighted average cost of enrollment increased 4%, from $1,153 to $1,203, as shown in the table below:


	First Quarter Weighted Average Cost of Enrollment
	Q1 '20 Enrollments	Q1'20 CAC¹		Q1'21 Enrollments	Q1'21 CAC¹		CAC % Change
Aspen University	1,415	$	1,177	1,779	$	1,181	—	%
USU	514	$	1,078	572	$	1,272	18	%
Weighted Average		$	1,153		$	1,203	4	%

_____________________

¹Based on 6-month rolling average

Bookings Analysis

On a year-over-year basis, Q1 Fiscal 2021 Bookings increased 34% to $36.1 million, delivering a company-wide average revenue per enrollment (APRU) increase of 10% to $15,344.


	First Quarter Bookings and Average Revenue Per Enrollment (ARPU)
	Q1'20 Enrollments	Q1'20 Bookings ¹		Q1'21 Enrollments	Q1'21 Bookings ¹		Percent Change Total Bookings & ARPU ¹
Aspen University	1,415	$	17,691,150	1,779	$25,880,400		46	%
USU	514	$	9,159,480	572	$10,193,040		11	%
Total	1,929	$	26,850,630	2,351	$	36,073,440	34	%
ARPU		$	13,919		$15,344		10	%

_____________________

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

ASPEN UNIVERSITY’S PRE-LICENSURE BSN HYBRID (ONLINE/ON-CAMPUS) DEGREE PROGRAM

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In July 2018, Aspen University through Aspen Nursing, Inc. began its Pre-Licensure Bachelor of Science in Nursing degree program at its initial campus in Phoenix, Arizona. As a result of overwhelming demand in the Phoenix metropolitan area, in January 2019 Aspen University began offering both day (July, November, March semesters) and evening/weekend (January, May, September semesters) programs, equaling six semester starts per year. Moreover, in September 2018, AGI entered into a memorandum of understanding to open a second campus in the Phoenix metropolitan area in partnership with HonorHealth. The initial semester at HonorHealth began in September 2019.

Aspen University’s innovative hybrid (online/on-campus) program allows most of the credits to be completed online (83 of 120 credits or 69%), with pricing offered at current low tuition rates of $150/credit hour for online general education courses and $325/credit hour for online core nursing courses. For students with no prior college credits, the total cost of attendance is less than $50,000.

Aspen University’s Pre-Licensure BSN program is offered as a full-time, three-year (nine semester) program that is specifically designed for students who do not currently hold a state nursing license and have no prior nursing experience. Aspen University is admitting students into one of two program components: (1) a pre-professional nursing component for students that have less than the required 41 general education credits completed (Year 1), and (2) the nursing core component for students that are ready to participate in the competitive evaluation process for entry (Years 2-3).

Pre-Licensure BSN Program - Campus Expansion

Tampa, Florida Campus

Aspen University has executed a definitive lease agreement for ten years to occupy approximately 30,000 square feet (Suites 150 and 450) of the Tampa Oaks I property located at 12802 Tampa Oaks Boulevard. The building is visible from the intersection of Interstate 75 and East Fletcher Avenue, near the University of South Florida, providing visibility to approximately 126,500 cars per day. Regulatory approvals were completed in August 2020 and marketing has begun in the Tampa metropolitan area. Aspen expects to begin its first core nursing (Years 2-3) semester at Tampa Oaks I on December 8, 2020 in campus space formerly occupied by the University of Phoenix.

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

Austin, Texas Campus

Aspen University has executed a definitive lease agreement for eight years to occupy approximately 22,000 square feet in a portion of the first floor of the Frontera Crossing office building located at 101 W. Louis Henna Boulevard in the Austin suburb of Round Rock. The building is situated at the junction of Interstate 35 and State Highway 45, one of the most heavily trafficked freeway exchanges in the metropolitan area with visibility to approximately 143,000 cars per day. Regulatory approvals were completed in July 2020 and marketing has begun in the Austin metropolitan area.

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

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

AGI’s Plan for United States University (USU) to Implement MSN-FNP Weekend Immersions in Every Campus Metropolitan Area:

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While lab hours to date have been done at USU’s San Diego facility, the rapid growth of the MSN-FNP program has caused AGI to plan to expand the lab immersions in multiple locations across the United States. For example, the Company has leased an additional suite on the ground floor of our main campus facility in Phoenix (by the airport) to begin offering weekend immersions for MSN-FNP students in both San Diego and Phoenix. We expect this additional clinical facility in Phoenix to be open later this calendar year.

Moreover, AGI's future plans call for the build-out of, on average, 10 exam rooms that will occupy approximately 3,000 square feet in each of its pre-licensure metropolitan areas for USU to implement immersions for its MSN-FNP program. As a result, following regulatory approvals, lab immersions are planned to be conducted in four metropolitan areas for USU MSN-FNP students: San Diego, Phoenix, Austin and Tampa.

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

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

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

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

ACCOUNTS RECEIVABLE AND MONTHLY PAYMENT PLAN

The accounts receivable balance, both short-term and long-term, for the monthly payment plan was $23,375,249 at July 31, 2020. The attractive aspect of being able to pay for a degree over a fixed period of time has fueled the growth of this plan.

Each student’s receivable account is different depending on how many classes a student takes each period. If a student takes two classes each eight-week period while paying $250, $325 or $375 a month, that student’s account receivable balance will rise accordingly.

The common thread is the actual monthly payment, which functions as a retail installment contract with no interest that each student commits to pay over a fixed number of months. Aspen University students paying tuition and fees through a monthly payment method grew by 12% year-over-year, from 5,580 to 6,276, representing 63% of Aspen University’s total active student body.

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

Change in Business Mix and Relationship to Accounts Receivable

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

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

This change in our business mix is expected to have a meaningful impact on our accounts receivable and our allowance for doubtful accounts.The BSN Pre-Licensure program and the second academic year of the MSN-FNP program require payment

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prior to the start of each term.This means that approximately 90% of all revenue from these two programs will be paid in advance; meaningfully reducing our accounts receivable and the allowance for doubtful accounts as a percentage of our total revenue.

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

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

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

By improving visibility into trends earlier we expect to see improvement in ~~2012~~overall student performance and a reduction of account delinquencies.

Reserving for Allowance for Doubtful Accounts and Charges to the Allowance

During the fourth quarter of fiscal 2020, we built upon the existing analysis of our accounts receivable and evaluated several segments of our older dated student files.During this analysis we made the determination that receivables for approximately 656 students, amounting to $686,000 for Aspen University and $81,000 of receivables for approximately 39 students for USU were deemed uncollectible based on the payment detail and student status.These amounts were charged against the allowance for doubtful accounts in the fourth quarter of fiscal year 2020.

As part of the account receivable analysis discussed earlier, we evaluated our long-term MPP student receivables. The analysis evaluated students in two categories: nursing and non-nursing.Based on our analysis of the payment details and student performance, in the fourth quarter of fiscal 2020, we elected to charge $152,000 of MPP receivables against the reserve for doubtful accounts. The MPP receivables will be evaluated in conjunction with our updated recovery and collection process and we expect results to be positive. In the first quarter of fiscal year 2021, no changes to the methodology were made and no student accounts were written off.

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

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

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

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

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Overtime we expect the change in our mix of business together with process improvements and collection enhancements to result in a better managed portfolio of student receivables and improving cash flow from operations.

Relationship Between Accounts Receivable and Revenue

The gross accounts receivable balance for any period is the net effect of the following three factors:

1.Revenue;

2.Cash Receipts; and

3.The net change in deferred revenue.

All three factors equally determine the gross accounts receivable. If one quarter experiences particularly high cash receipts, the gross accounts receivable will go down. The same effect if cash receipts are lower or if there are significant changes in either of the other factors.

Simply looking at the change in revenue does not translate into an equally similar change in gross accounts receivable. The relative change in cash and the deferral must also be considered. For net accounts receivable, the changes in the reserve must also be considered. Any additional reserve or write-offs will influence the balance.

As it is a straight mathematical formula for both gross accounts receivable and net accounts receivable, and most of the information is public, one can ~~accurately predict~~reasonably calculate the ~~CPE~~two non-public pieces of information, namely the cash receipts in gross accounts receivable and ~~RPE for each new student cohort. Our current CPE/RPE Marketing Efficiency Ratio~~the write-offs in net accounts receivable.

For revenue, the quarterly change is primarily billings and the net impact of deferred revenue. The deferral from the prior quarter or year is added to the billings and the deferral at the end of the period is subtracted from the amount billed. The total deferred revenue at the end of every period is reflected in the ~~below table.~~

~~Quarterly New Student Cohort Actuals Data~~:

CPE/RPE Analysis *
6 Months Out
12 Months Out
2 Years Out
3 Years Out
4+ Years Out

Courses completed
2.24
3.52
5.28
6.48
8

Average RPE
$1,974
$3,078
$4,630
$5,684
$7,000

RPE % earned
28%
44%
66%
81%
100%

Marketing efficiency ratio**
2.3x
3.5x
5.3x
6.5x
8.0x

*
Projection
**
Based on current $876 CPE (six month rolling CPE average)

liability section of the consolidated balance sheet. Deferred revenue can vary for many reasons, but seasonality and the timing of the class starts in relation to the end of the quarter will cause changes in the balance.

As mentioned in the accounts receivable section, the change in revenue cannot be compared to the change in accounts receivable. Revenue does not have the impact of cash received whereas accounts receivable does. Depending on the month and the amount of cash received, it is likely that revenue or accounts receivable will increase at a rate different from the other. The impact of cash is easy to substantiate as it agrees to deposits in our bank accounts.

At July 31, 2020, the allowance for doubtful accounts was $2,156,645 which represents 8% of the gross accounts receivable balance of $25,531,894, the sum of both short-term and long-term receivables.

The Introduction of Long-Term Accounts Receivable

As a result of the growing acceptance of our monthly payment plans, our long-term accounts receivable balance has grown from $6,701,136 at April 30, 2020 to $8,713,018 at July 31, 2020. The primary components of MPP are students who make monthly payments over 36, 39 and 72 months. The average ~~RPE is approximately $7,000. Of the $7,000, $6,400~~student completes their academic program in 30 months, therefore most of the ~~RPE~~Company’s accounts receivable are short-term. However, when students graduate earlier than the 30 month average completion duration, and as students enter academic year two of USU’s MSN-FNP legacy 72 month payment plan, they transition to long-term accounts receivable when their liability increases to over $4,500. Those are the two primary factors that have driven an increase in long-term accounts receivable.

Here is ~~earned through tuition, with~~a graphic of both short-term and long-term receivables, as well as contractual value:

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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.

Q1 Fiscal 2021 Developments

On June 5, 2020, the ~~remaining $600~~Company, as an inducement to exercise, reduced by 5% the exercise price of the common stock purchase warrants issued to The Leon and Toby Cooperman Family Foundation (the “Foundation”), of which Mr. Leon Cooperman, a stockholder of the Company, is the trustee. The warrants were issued on ~~average earned through miscellaneous fees (includes annual technology fee, withdrawal fees, graduation fees, proctored exams, course specific fees, etc.~~November 5, 2018 (the “2018 Cooperman Warrants”)

~~Aspen is projecting~~ and on March 5, 2020 (the “2019 Cooperman Warrants”). The 2018 Cooperman Warrants exercise price was reduced from $5.85 to ~~average~~$5.56 per share. The 2019 Cooperman Warrants exercise price was reduced from $6.00 to $5.70 per share. On June 8, 2020, the Foundation immediately exercised the 2018 and 2019 Cooperman Warrants paying the Company $1,081,792 and the Company issued 192,049 shares of common stock to the Foundation.

In consideration of the amendment, the Foundation in addition to its immediate exercise executed a ~~Marketing Efficiency Ratio~~lock-up agreement agreeing not to request registration of ~~8.0x, in other words an 8.0x return~~or sell the underlying shares of common stock for at least six months.

COVID-19 Update

The COVID-19 crisis did not have a material impact on the Company’s consolidated financial results for the first quarter of fiscal year 2021, as evidenced by our ~~marketing investment. Third-party companies~~record revenues of $15.2 million. In fact, the Company’s two highest LTV programs, USU’s MSN-FNP and Aspen’s BSN Pre-Licensure program, saw enrollment tailwinds this quarter related to COVID-19. RN’s, looking to attain their nurse practitioner license to broaden their career options, drove MSN-FNP enrollment. Additionally, millennials, aspiring to become RNs, enrolled in the ~~higher education industry~~BSN Pre-Licensure program in Phoenix in record numbers, given that ~~manage~~many were furloughed or laid off since the ~~Enrollment~~pandemic first started.

COVID-19 has focused a spotlight on the shortage of nurses in the U.S. and, ~~Marketing functions on behalf~~in particular, the need for nurses with four-year and advanced degrees such as USU’s MSN-FNP and Aspen University’s DNP programs. We believe we will be operating in a tailwind environment for many years relative to the planned expansion of Universities (also referred to as Managed Services companies) reportedly average 3-4x return on their marketing investments, meaning that Aspen’s business model is currently performing at approximately double the efficiency level of that sector.

our Pre-Licensure BSN hybrid campus business.

Results of Operations

For the ~~Quarter~~Three Months Ended ~~January~~July 31, ~~2018~~2020 (Q1 Fiscal 2021) Compared ~~with~~to the ~~Quarter~~Three Months Ended ~~January~~July 31, ~~2017~~

2019 (Q1 Fiscal 2020)

Revenue


	Three Months Ended July 31,
	2020		$ Change		% Change	2019
Revenue	$	15,165,562	$	4,807,580	46%	$	10,357,982

Revenue from operations for ~~the quarter ended January 31, 2018 (“2018 Quarter”)~~Q1 Fiscal 2021 increased to ~~$5,701,958~~$15,165,562 from ~~$3,735,626~~$10,357,982 for ~~the quarter ended January 31, 2017 (“2017 Quarter”),~~Q1 Fiscal 2020, an increase of ~~$1,966,332~~$4,807,580 or 46%. The increase was primarily due to enrollment and student body growth in the degree programs with the highest lifetime value (LTV). By focusing our marketing spend on delivering enrollment growth in the degree programs with the highest LTV, we increased our average revenue per enrollment (or ARPU) by 10%. The Company expects revenue growth to continue in future periods as we continue prioritizing our highest LTV degree programs to achieve our long-term growth plans.

Aspen University’s revenues in Q1 Fiscal 2021 increased 40% year-over-year, while USU's revenues in Q1 Fiscal 2021 increased 65% year-over-year.

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Aspen University's traditional post-licensure online nursing + other business unit contributed 53%.

of total Company revenue in Q1 Fiscal 2021, while Aspen University’s Pre-Licensure BSN program delivered 18% of the Company’s revenues in Q1 Fiscal 2021. Finally, USU contributed 29% of the total revenues for Q1 Fiscal 2021.

The Company now expects annual revenue growth to meet or exceed 35% or $66 million for the full fiscal year 2021.

Cost of ~~Revenues~~revenue (exclusive of ~~amortization)~~

~~The Company’s cost of revenues consists of instructional~~depreciation and amortization shown separately below)


	Three Months Ended July 31,
	2020		$ Change		% Change	2019
Cost of Revenues (exclusive of depreciation and amortization shown separately below)	$	5,847,523	$	1,494,465	34%	$	4,353,058
As a percentage of revenue	39%					42%

Instructional costs and services ~~and sales and marketing costs.~~

~~Instructional Costs and Services~~

Instructional costs and services for ~~the 2018 Quarter rose~~Q1 Fiscal 2021 increased to ~~$1,196,949~~$3,056,713 or 20% of revenues from ~~$694,884~~$2,143,819 or 21% of revenues for ~~the 2017 Quarter,~~Q1 Fiscal 2020, an increase of ~~$502,065~~$912,894 or ~~72%~~43%. ~~Instructional~~The increase was primarily due to more class starts year-over-year and additional full-time faculty staffing in the USU MSN-FNP program and the pre-licensure BSN campuses in Phoenix.

Aspen University instructional costs and services represented 19% of Aspen University revenues for ~~the 2018 Quarter as a percentage~~Q1 Fiscal 2021, while USU instructional costs and services was 22% of ~~revenue was 21% as~~USU revenues during Q1 Fiscal 2021.

Marketing and promotional

Marketing and promotional costs for Q1 Fiscal 2021 were $2,790,810 or 18% of revenues compared to ~~19%~~$2,209,239 or 21% of revenues for ~~the 2017 Quarter.~~

~~Sales and Marketing~~

~~Sales and marketing costs for the 2018 Quarter were $1,468,715 compared to $664,247 for the 2017 Quarter,~~Q1 Fiscal 2020, an increase of ~~$804,468~~$581,571 or ~~121%~~26%. ~~The~~Compared to revenue growth of 46%, this reflects the efficiency of our business model including; 1) focus the majority of our marketing growth spend on our highest LTV programs, 2) reflects the fact that our lead costs and conversion rates remain in the same range as the previous year, and 3) the Company ~~expects~~has seen an enrollment tailwind relative to COVID-19 as discussed above.

Aspen University marketing and promotional costs represented 18% of Aspen University revenues for Q1 Fiscal 2021, while USU marketing and promotional costs was 14% of USU revenues for Q1 Fiscal 2021.

AGI corporate marketing expenses was $232,851 for Q1 Fiscal 2021 compared to ~~rise~~$228,231 for Q1 Fiscal 2020, an increase of $4,620 or 2%.

General and administrative


	Three Months Ended July 31,
	2020		$ Change		% Change	2019
General and administrative	$	8,793,756	$	1,997,505	29%	$	6,796,251
As a percentage of revenue	58%					66%

General and administrative costs for Q1 Fiscal 2021 was $8,793,756 or 58% of revenues compared to $6,796,251 or 66% of revenues during Q1 Fiscal 2020, an increase of $1,997,505 or 29%. The increase was primarily due to higher headcount and related increase in future periods, given we expect to increase monthly marketing spend to over $600,000 during the next fiscal year. In addition, this increase is partially attributed to the addition of an outside sales force of 9 representatives and those salariescompensation and benefits expense to support the growth of the business, and increased compensation accruals related to new incentive compensation programs, IT, other non-cash stock-based compensation, insurance, and professional fees (legal, IR and accounting).

General and administrative expense in Q1 Fiscal 2021 includes $97,000 of non-recurring expense items.

Aspen University general and administrative costs which are included in the ~~2018 Quarter numbers.~~

~~Gross Profit was 51%~~above amount represented 33% of Aspen University revenues ~~or $2,900,633~~ for ~~the 2018 Quarter as compared to 60%~~Q1 Fiscal 2021, while USU general and administrative costs equaled 40% of USU revenues ~~or $2,256,918~~ for ~~the 2017 Quarter. The reasons~~Q1 Fiscal 2021.

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AGI’s general and administrative costs for ~~the change~~Q1 Fiscal 2021 and Q1 Fiscal 2020 which are ~~reflected~~included in the ~~individual~~above amounts equaled $3.5 million and $2.0 million, respectively, and include corporate employees in the NY corporate office, IT, rent, non-cash AGI stock-based compensation, incentive compensation programs and professional fees (legal, accounting, and IR), as well as one-time expense items ~~described above.~~

~~Costs and Expenses~~

~~General and Administrative~~

~~General and Administrative costs~~in the quarter.

In the second quarter of fiscal year 2021, the Company will recognize approximately $1.6 million of accelerated amortization expense related to the immediate vesting of RSUs granted to executives on February 4, 2020.

Bad debt expense


	Three Months Ended July 31,
	2020	$ Change		% Change	2019
Bad debt expense	$400,000	$	159,101	66%	$240,899
As a percentage of revenue	3%				2%

Bad debt expense for ~~the 2018 Quarter were $4,677,359 compared~~Q1 Fiscal 2021 increased to ~~$2,133,074 during the 2017 Quarter,~~$400,000 from $240,899 for Q1 Fiscal 2020, an increase of ~~$2,544,285~~$159,101, or ~~119%~~66%. ~~General~~Based on revenue growth trends and ~~Administrative costs as a percentage~~review of ~~revenue~~accounts receivable, the Company evaluated its reserve methodology and increased reserves for ~~the 2018 Quarter was 82% compared to 57% during the 2017 quarter.~~

~~The Company incurred $610,219 of one-time costs directly related to the~~Aspen and USU acquisition. Excluding the $610,219 one-time USU acquisition expenses, G&A increased sequentially by $900,750. The acquisition of United States University accounted for over three-quarters of the G&A increase, as the company’s non-faculty full-time staff rose from 110 to 142 employees. The majority of the remaining increase was a one-time expense of legal fees related to the HEMG NJ bankruptcy proceeding in which the company is a creditor.

~~Aspen University also recorded $100,000 as a bad debt reserve, an increase reflective of the increase in revenue and students paying by monthly plans.~~

accordingly.

Depreciation and ~~Amortization~~

amortization


	Three Months Ended July 31,
	2020	$ Change		% Change	2019
Depreciation and amortization	$490,624	$	(115,950)	(19)%	$606,574
As a percentage of revenue	3%				6%

Depreciation and amortization costs for Q1 Fiscal 2021 decreased to $490,624 from $606,574 for Q1 Fiscal 2020, a decrease of $115,950, or 19%. The decrease in depreciation and amortization expense is due primarily to intangible assets becoming fully amortized at USU, partially offset by an increase in depreciation expense at Aspen University due primarily to the development of capitalized software to support its services.

Other expense


	Three Months Ended July 31,
	2020	$ Change		% Change	2019
Other expense, net	$578,755	$	177,868	44%	$400,887

Other expense in Q1 Fiscal 2021 of $578,755 primarily includes: an adjustment of $296,471 related to the previously reported earned revenue fee calculation deemed immaterial to our Fiscal 2019 revenue; interest expense of $331,510 on the Convertible Notes issued on January 22, 2020 as well as the commitment fee on the Revolving Credit Facility; and modification and accelerated amortization charges of $149,913 related to the exercise of the 2018 ~~Quarter rose~~and 2019 Cooperman Warrants on June 5, 2020; partially offset by $198,000 of other immaterial adjustments.

Total other expense in Q1 Fiscal 2021 of $578,755 includes $446,384 of non-recurring expense items which is comprised of: (i) an adjustment of $296,471 related to ~~$347,894 from $132,727 for the 2017 Quarter,~~ an ~~increase~~incorrect earned fee calculation deemed immaterial to our Fiscal 2019 revenue; (ii) $123,947 of ~~$215,167 or 162%. This increase is substantially due~~accelerated amortization expense related to the exercise of the 2018 Cooperman Warrants; and (iii) $25,966 of expense related to the 2018 and 2019 Cooperman Warrants modification and acceleration charges on June 5, 2020.

In the second quarter of fiscal year 2021, the Company expects to recognize approximately $1.4 million of accelerated amortization expense related to the conversion of ~~intangible assets from~~ the ~~purchase of USU.~~

~~Other Expense, net~~

Convertible Notes which occurred on September 14, 2020.

Other expense ~~net for the 2018 Quarter increased to $158,986 from $78,317~~ in ~~the 2017 Quarter, an increase~~Q1 Fiscal 2020 includes: interest expense of ~~$80,669 or 103%. This increase is due to interest paid~~$423,689 on the ~~credit facility.~~

Term Loans issued in March 2019.

Income ~~Taxes~~

tax (benefit) expense

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	Three Months Ended July 31,
	2020	$ Change	% Change	2019
Income tax (benefit) expense	$(1,900)	$(37,495)	NM	$35,595

________________

NM - Not meaningful

Income ~~taxes~~tax benefit for Q1 Fiscal 2021 was $(1,900) compared to income tax expense ~~(benefit) for the comparable years was $0 as~~of $35,595 in Q1 Fiscal 2020. Aspen Group experienced operating losses in both periods. ~~As management made a full valuation allowance against the deferred tax assets stemming from these losses, there was no tax benefit recorded in the statement of operations in both periods.~~

Net ~~Income (Loss)~~

loss


	Three Months Ended July 31,
	2020	$ Change		% Change	2019
Net loss	$(943,196)	$	1,132,086	55%	$(2,075,282)

Net loss was $(943,196), or net loss per basic and diluted share of $(0.04) for ~~2018 Quarter was ($2,147,945)~~Q1 Fiscal 2021 as compared to ~~income~~$(2,075,282), or net loss per share of ~~$7,377~~$(0.11) for ~~the 2017 Quarter,~~Q1 Fiscal 2020, or a decrease ~~of $2,155,322. In the 2018 Quarter, the results for USU have been included as well as all of the costs associated with the acquisition.~~

~~For the Nine Months Ended January 31, 2018 Compared with the Nine Months Ended January 31, 2017~~

~~Revenue~~

Revenue from operations for the nine months ended January 31, 2018 (“2018 Period”) increased to $14,796,483 from $9,957,467 for the nine months ended January 31, 2017 (“2017 Period”), an increase of $4,839,016 or 49%.

~~Cost of Revenues (exclusive of amortization)~~

~~The Company’s cost of revenues consists of instructional costs and services and sales and marketing costs.~~

~~Instructional Costs and Services~~

~~Instructional costs and services for the 2018 Period rose to $2,893,818 from $1,701,945 for the 2017 Period, an increase of $1,191,873 or 70%.~~

~~Sales and Marketing~~

Sales and marketing for the 2018 Period were $3,388,996 from $1,788,101 for the 2017 Period, an increase of $1,600,895 or 90%. The Company expects sales and marketing to rise in future periods, given we expect to increase monthly marketing spend to over $600,000 during the 2019 fiscal year.

~~Gross Profit rose to $8,513,669 for the 2018 Period from $6,467,421 for the 2017 Period. The reasons for the change are reflected in the individual expense items described above.~~

~~Costs and Expenses~~

~~General and Administrative~~

~~General and administrative costs for the 2018 Period were $10,975,085 compared to $6,228,554 during the 2017 Period, an increase of $4,746,531 or 76%.~~

~~Depreciation and Amortization~~

~~Depreciation and amortization costs for the 2018 Period increased to $631,969 from $422,782 for the 2017 Period, an increase of $209,187 or 49%.~~

~~Other Income (Expense)~~

Other expense increased to ($303,190) from ($172,615), an increase of $130,575 or 76%. This increase is primarily due to interest paid on the credit facility. Other income increased to $140,567 from $1,684, primarily due to the interest income earned on the $900,000 promissory note from USU and from the release of the warrant derivative liability of $52,500.

~~Income Taxes~~

Income taxes expense (benefit) for the 2018 Period and 2017 Period was $0 as Aspen Group experienced operating losses in both periods. As management made a full valuation allowance against the deferred tax assets stemming from these losses, there was no tax benefit recorded in the statement of operations in both periods.

~~Net Loss~~

~~Net loss for the 2018 Period was ($3,396,575) as compared to ($381,530) for the 2017 Period, an increase~~ in the loss of ~~$3,015,045.~~

$1,132,086, or 55% improvement.

Non-GAAP – Financial Measures

~~The following~~

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

Our management uses and relies on Adjusted Net Income (Loss), Adjusted Earnings (Loss) Per Share, EBITDA and Adjusted EBITDA, which are non-GAAP financial measures. We believe that ~~both~~ management, analysts and shareholders benefit from referring to the following non-GAAP financial measures in planning, forecasting and analyzing future periods. Our management uses these non-GAAP financial measures in evaluating its financial and operational decision making and as a means to evaluate period-to-period comparison. Our management recognizes that the non-GAAP financial measures have inherent limitations because of the described excluded items.

AGI defines Adjusted EBITDA as earnings (or loss) from operations before the items in the table below including non-recurring charges of $85,853. Adjusted EBITDA is an important measure of our operating performance because it allows management, investors and analysts to evaluate and assess our core operating results from period-to-period after removing the impact of items ~~of a non-operational nature~~ that affect comparability.

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 ~~measure~~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 ~~Aspen Group~~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.

AGI defines Adjusted Net Income (Loss) as net earnings (loss) from operations adding back non-recurring charges and stock-based compensation expense as reflected in the table below. Included are $543,384 of non-recurring charges for the first quarter of fiscal year 2021, compared to $132,949 in the first quarter of fiscal year 2020. The non-recurring charges for Q1 fiscal 2021 include $123,947 of interest expense which arose from the acceleration of amortization arising from the exercise of warrants issued to a lender.

The following table presents a reconciliation of net loss and earnings (loss) per share to Adjusted Net Income (Loss) and Adjusted Earnings (Loss) Per Share:

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	Three Months Ended July 31,
	2020		2019
Earnings (loss) per share	$	(0.04)	$	(0.11)
Weighted average number of common stock outstanding*	22,094,409		18,733,317
Net loss	$	(943,196)	$	(2,075,282)
Add back:
Non-recurring charges	543,384		132,949
Stock-based compensation	487,110		498,417
Adjusted Net Income (Loss)	$	87,298	$	(1,443,916)

Adjusted Earnings (Loss) per Share	$	0.00	$	(0.08)

________________

*Same share count used for GAAP and non-GAAP financial measures.

AGI defines Adjusted EBITDA as earnings (or loss) from operations before the items in the table below. Included are $419,437 of non-recurring charges for the first quarter of fiscal year 2021, compared to $132,949 in the first quarter of fiscal year 2020. An additional non-recurring item in Q1 2021 of $123,947 is included in interest expense, net, which arose from the acceleration of amortization arising from the exercise of warrants issued to a lender.

The following table presents a reconciliation of net income (loss) to EBITDA and Adjusted EBITDA:


	Three Months Ended July 31,
	2020		2019
Net loss	$	(943,196)	$	(2,075,282)
Interest expense, net	455,223		420,067
Taxes	(1,900)		90,277
Depreciation and amortization	490,624		606,574
EBITDA	751		(958,364)
Bad debt expense	400,000		240,899
Non-recurring charges, excluding non-recurring interest expense of $123,947	419,437		132,949
Stock-based compensation	487,110		498,417
Adjusted EBITDA	$	1,307,298	$	(86,099)

The Company reported Adjusted EBITDA of $1.3 million for Q1 Fiscal 2021 as compared to Adjusted EBITDA of $(0.1) million for Q1 Fiscal 2020, an improvement of over 100%.

Aspen University generated $2.3 million of net income and $3.2 million of Adjusted EBITDA for Q1 Fiscal 2021 as compared to net income ~~(loss) allocable~~of $0.9 million and $1.5 million of Adjusted EBITDA for Q1 Fiscal 2020.

USU generated net income of $1.0 million and $1.1 million of Adjusted EBITDA for Q1 Fiscal 2021 as compared to ~~common shareholders,~~ a net loss of $(0.4) million and Adjusted EBITDA of $(10,000) during Q1 Fiscal 2020.

Aspen Group corporate incurred Adjusted EBITDA of ($3.0) million during Q1 Fiscal 2021, which reflects $0.5 million of non-recurring expense items, as compared to Adjusted EBITDA of ($1.6) million during the Q1 Fiscal 2020, which reflected $0.1 million of non-recurring expense items.

The following table presents a reconciliation of GAAP ~~financial measure:~~

For the Quarters Ended

January 31,

2018

2017

Net income (loss)

$
(2,147,945
)

$
7,377

Interest expense, net of interest income

211,486

78,317

Depreciation & amortization

347,894

132,727

EBITDA (loss)

(1,588,565
)

218,421

Bad debt expense

132,644

(25,680
)
Acquisition expense

610,219

—

Non-recurring charges

85,853

146,809

Stock-based compensation

162,544

96,498

Adjusted EBITDA (Loss)

$
(597,305
)

$
436,048

Gross Profit to gross profit inclusive of amortization:

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	Three Months Ended July 31,
	2020			2019
GAAP Gross Profit	$	8,990,985		$	5,765,329
Add back amortization expense included in cost of revenue:
Intangible Asset Amortization	11,947			19,142
Call Center Software/Website	315,107			220,453
Total amortization included in cost of revenue	327,054			239,595
Gross Profit, exclusive of amortization	$	9,318,039		$	6,004,924

Revenue	$	15,165,562		$	10,357,982
Cost of Revenue	5,847,523			4,353,058
Gross Profit, exclusive of amortization	$	9,318,039		$	6,004,924

GAAP Gross Profit as a % of revenue	59		%	56		%
Gross Profit, exclusive of amortization expense as a % of revenue	61		%	58		%

Gross profit rose to 59% of revenues or $8,990,985 for Q1 Fiscal 2021 from $5,765,329 or 56% of revenues for Q1 Fiscal 2020, an increase of 56% year-over-year.

Aspen University gross profit represented 59% of Aspen University revenues for Q1 Fiscal 2021, while USU gross profit equaled 64% of USU revenues during Q1 Fiscal 2021.

Liquidity and Capital Resources

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

For the

Nine Months Ended

January 31,

2018

2017

Net cash used in operating activities

$
(3,654,947
)

$
(99,042
)
Net cash used in investing activities

(3,031,667
)

(571,856
)
Net cash provided by financing activities

7,733,477

784,200

Net increase in cash and cash equivalents

$
1,046,863

$
113,302


	Three Months Ended July 31,
	2020		2019
Net cash used in operating activities	$	(636,759)	$	(1,685,083)
Net cash used in investing activities	(662,218)		(632,258)
Net cash provided by financing activities	2,351,774		45,190
Net increase (decrease) in cash	$	1,052,797	$	(2,272,151)

Net Cash ~~Provided by (Used in)~~Used in Operating Activities

Net cash used in operating activities ~~during~~for the ~~2018 Period~~three months ended July 31, 2020 totaled ~~($3,654,947)~~$(636,759) and resulted primarily byfrom the net loss of ~~($3,396,575), offset by approximately $1,200,000 in non-cash items~~$(943,196) and ~~approximately $1,100,000 decrease~~a net change in operating assets and ~~liabilities.~~liabilities of $(1,345,431), partially offset by $1,651,868 in non-cash items. The net loss included $455,457 for interest expense. The most significant ~~item change~~changes in operating assets and liabilities was an increase in accounts receivable (both short and long term accounts receivable) of ~~$4,534,118~~approximately $2.7 million which is primarily attributed to the growth in revenues from students paying through the monthly payment plan and an increase in deferred revenue related to the timing of class starts. The most significant non-cash items were depreciation and amortization expense of $490,624 and stock-based compensation expense of $487,110.

Cash used in operations is also affected by changes in working capital. The Company expects a favorable trend in working capital over time, but there may be volatility from quarter to quarter. So, in aggregate the Company expects a general trend toward lower cash used in operations in future quarters; however, some quarters could have higher cash used in operations as a result of more cash used to support changes in working capital. Program start timings and the related federal financial aid drawdowns also impact cash timing.

Net cash used in operating activities during the three months ended July 31, 2019 totaled ($1,685,083) and resulted primarily from the net loss of ($2,075,282) and a net change in operating assets and liabilities of ($1,111,332), partially offset by $1,501,531 in non-cash items. The net loss included $423,689 for interest expense. The most significant change in operating assets and liabilities was an increase in gross accounts receivable (both short and long term accounts receivable, before

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allowance for doubtful accounts) of approximately $1.5 million which is primarily attributed to the growth in revenues from students paying through the monthly payment plan. The most significant non-cash items were depreciation and amortization expense of ~~$631,969~~approximately $0.6 million and ~~stock~~stock-based compensation expense of ~~$466,468.~~

Net cash used in operating activities during the 2017 Period totaled ($99,042) and resulted primarily by non-cash items of $925,740 and a net change in operating assets and liabilities of ($668,252), reduced by the net loss of $381,530. The most significant item change operating assets and liabilities was an increase in accounts receivable of $2,331,140 which is primarily attributed to the growth in revenues from students paying through the monthly payment plan. The most significant non-cash items were depreciation and amortization expense of $422,782 and stock compensation expense of $253,833.

approximately $0.5 million.

Net Cash ~~Provided by (Used in)~~Used in Investing Activities

Net cash used in investing activities ~~during~~for the ~~2018 Period~~three months ended July 31, 2020 totaled ~~($3,031,667)~~$(662,218) mostly attributed to ~~cash paid~~investments in ~~the USU acquisition and~~ the purchase of property and ~~equipment.~~

equipment as we build out our campuses.

Net cash used in investing activities ~~during~~for the ~~2017 Period~~three months ended July 31, 2019 totaled ~~($571,856)~~$(632,258) mostly attributed to ~~the increase~~investments in ~~software.~~

Company developed software, instructional and computer equipment.

Net Cash Provided By ~~(Used In)~~ Financing Activities

Net cash provided by financing activities ~~during~~for the ~~2018 Period~~three months ended July 31, 2020 totaled ~~$7,733,477~~$2,351,774 which reflects ~~primarily~~$1,269,982 of proceeds from stock option exercises and $1,081,792 received from the cash ~~provided by~~exercise of warrants associated with the ~~senior secured term loan.~~

Term Loans and Revolving Credit Facility.

Net cash provided by financing activities ~~during~~for the ~~2017 Period~~three months ended July 31, 2019 totaled ~~$784,200~~$45,190 which reflects proceeds from the ~~increase due to the new $3,000,000 line~~exercise of ~~credit, of which $1,250,000 has been drawn, offset by the buyback of warrants for $400,000.~~

stock options and warrants.

Liquidity and Capital ~~Resource Considerations~~

~~Historically, our primary source~~Resources

The Company had cash deposits of ~~liquidity is~~approximately $14.7 million on September 10, 2020 and approximately $4.5 million of restricted cash. In addition to its cash, receipts from tuition and the issuances of debt and equity securities. More recently, we were able to secure traditional non-convertible debt. The primary uses of cash are payroll related expenses, professional expenses, and instructional and marketing expenses. We did issue a convertible note as part of the USU purchase price since the seller wanted the potential for capital appreciation and required part of the purchase price evidenced by a convertible note. On July 25, 2017, the Company ~~finalized a $10 million senior secured term loan,~~also has access to the $5 million ofRevolving Credit Facility, which ~~was funded at the close and $2.5 million with the closing of the USU acquisition.~~

~~As of March 15, 2018, the~~is unused. The Company ~~had a~~expects that its cash balance of approximately $3.7 million. With the cash from the Company’s senior secured term loan of $10 million in total (of which $7.5 million has been funded) and the growth in the Company revenues, the Company believes that it hasresources will be sufficient ~~cash to allow the Company~~ to meet its ~~operational expenditures~~working capital needs for ~~at least~~ the ~~next 12 months.~~

foreseeable feature.

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

Critical Accounting Policies and Estimates

In response to financial reporting release FR-60, Cautionary Advice Regarding Disclosure About Critical Accounting Policies, from the SEC, we have selected our more subjective accounting estimation processes for purposes of explaining the methodology used in calculating the estimate, in addition to the inherent uncertainties pertaining to the estimate and the possible effects on our financial condition. There were no material changes to our principal accounting estimates during the period covered by this report.

~~Related Party Transactions~~

~~See Note 9~~

Revenue Recognition and Deferred Revenue

Revenue consisting primarily of tuition and fees derived from courses taught by Aspen online as well as from related educational resources that Aspen provides to its students, such as access to our online materials and learning management system. Tuition revenue is recognized pro-rata over the applicable period of instruction. Aspen maintains an institutional tuition refund policy, which provides for all or a portion of tuition to be refunded if a student withdraws during stated refund periods. Certain states in which students reside impose separate, mandatory refund policies, which override Aspen’s policy to the ~~unaudited~~extent in conflict. If a student withdraws at a time when a portion or none of the tuition is refundable, then in accordance with its revenue recognition policy, Aspen recognizes as revenue the tuition that was not refunded. Since Aspen recognizes revenue pro-rata over the term of the course and because, under its institutional refund policy, the amount subject to refund is never greater than the amount of the revenue that has been deferred, under Aspen’s accounting policies revenue is not recognized with respect to amounts that could potentially be refunded. Aspen’s educational programs have starting and ending dates that differ from its fiscal quarters. Therefore, at the end of each fiscal quarter, a portion of revenue from these programs is not yet earned and is therefore deferred. Aspen also charges students annual fees for library, technology and other services, which are recognized over the related service period.

Deferred revenue represents the amount of tuition, fees, and other student payments received in excess of the portion recognized as revenue and it is included in current liabilities in the accompanying consolidated balance sheets. Other revenue may be recognized as sales occur or services are performed.

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Accounts Receivable and Allowance for Doubtful Accounts Receivable

All students are required to select both a primary and secondary payment option with respect to amounts due to Aspen for tuition, fees and other expenses. The most common payment option for Aspen’s students is personal funds or payment made on their behalf by an employer. In instances where a student selects financial ~~statements included herein~~aid as the primary payment option, he or she often selects personal cash as the secondary option. If a student who has selected financial aid as his or her primary payment option withdraws prior to the end of a course but after the date that Aspen’s institutional refund period has expired, the student will have incurred the obligation to pay the full cost of the course. If the withdrawal occurs before the date at which the student has earned 100% of his or her financial aid, Aspen will have to return all or a portion of the Title IV funds to the DOE and the student will owe Aspen all amounts incurred that are in excess of the amount of financial aid that the student earned and that Aspen is entitled to retain. In this case, Aspen must collect the receivable using the student’s second payment option.

For accounts receivable from students, Aspen records an allowance for doubtful accounts for estimated losses resulting from the inability, failure or refusal of its students to make required payments, which includes the recovery of financial aid funds advanced to a student for amounts in excess of the student’s cost of tuition and related fees. Aspen determines the adequacy of its allowance for doubtful accounts using a general reserve method based on an analysis of its historical bad debt experience, current economic trends, and the aging of the accounts receivable and student status. AGI establishes reserves to its receivables based upon an estimate of the risk presented by the program within the university, student status, payment type and age of receivables. Aspen writes off accounts receivable balances at the time the balances are deemed uncollectible. Aspen continues to reflect accounts receivable with an offsetting allowance as long as management believes there is a reasonable possibility of collection.

For accounts receivable from primary payors other than students, Aspen estimates its allowance for doubtful accounts by evaluating specific accounts where information indicates the customers may have an inability to meet financial obligations, such as bankruptcy proceedings and receivable amounts outstanding for an extended period beyond contractual terms. In these cases, Aspen uses assumptions and judgment, based on the best available facts and circumstances, to record a specific allowance for those customers against amounts due to reduce the receivable to the amount expected to be collected. These specific allowances are re-evaluated and adjusted as additional ~~description~~information is received. The amounts calculated are analyzed to determine the total amount of ~~related party transactions~~the allowance. Aspen may also record a general allowance as necessary.

Direct write-offs are taken in the period when Aspen has exhausted its efforts to collect overdue and unpaid receivables or otherwise evaluate other circumstances that ~~had a material effect on our unaudited consolidated financial statements.~~

indicate that Aspen should abandon such efforts.

Business Combinations

Goodwill and Intangibles

Goodwill represents the excess of purchase price over the fair market value of assets acquired and liabilities assumed from Educacion Significativa, LLC. Goodwill has an indefinite life and is not amortized. Goodwill is tested annually for impairment.

Intangible assets represent both indefinite lived and definite lived assets. Accreditation and regulatory approvals and Trade name and trademarks are deemed to have indefinite useful lives and accordingly are not amortized but are tested annually for impairment. Student relationships and curriculums are deemed to have definite lives and are amortized accordingly.

Off Balance Sheet Arrangements

~~We do~~

The Company does not ~~engage in~~have any ~~activities involving variable interest entities or~~ off-balance sheet ~~arrangements.~~

~~New Accounting Pronouncements~~

~~See Note 2 to our unaudited consolidated financial statements included herein for discussion~~arrangements as of ~~recent accounting pronouncements.~~

July 31, 2020.

Cautionary Note Regarding Forward Looking Statements

This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding the expected start dates of the initial semester for core nursing students in Florida and Texas and the expected rate of subsequent campus openings, the expected effect of telehealth partnership with A-APN, including in relation to expected graduation dates, our planned USU lab immersion expansions, the impact of bookings, our estimates

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concerning Lifetime Value, our expected ability to cost-effectively drive prospective student leads internally, our future ability to provide lower costs per enrollment, the expected revenue growth, ~~projected Marketing Efficiency Ratio, overall~~including growth in our future revenues from the Aspen University’s Pre-Licensure BSN Program and USU’s MSN-FNP Program, the expected changes to our accounts receivable and allowance for doubtful accounts, including as a percentage of total revenue, our anticipated increase in cash flow from operations, the expected increase in future costs, including instructional costs and general and administrative costs, our expectations regarding future non-cash charges, including accelerated amortization charges related to mandatory conversion of convertible notes and charges related to RSU vesting, our expectations related to working capital, and future 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 ~~could~~may cause actual results to differ materially from ~~those in the~~these forward-looking statements include our ability to obtain the necessary regulatory approvals to launch our future campuses in a timely fashion or at all, unanticipated issues with, and delays in, launching phase two of our in-house CRM and the continued ability of the CRM to perform as expected, continued high demand for nurses, the continued effectiveness of our marketing efforts, the effectiveness of our collection efforts and process improvements, national and local economic factors including the substantial impact of the COVID-19 pandemic on the economy, the competitive impact from the trend of major non-profit universities using online education, unfavorable regulatory changes and our failure to ~~maintain regulatory approvals, regulatory issues, competition, ineffective media and/or marketing, failure to maintain growth in degree seeking students~~continue obtaining enrollments at low acquisition costs and ~~the integration of USU.~~keeping teaching costs down. Further information on the risks and uncertainties affecting our ~~risk factors~~business is contained in our filings with the SEC, including ~~the~~our Prospectus Supplement dated August 31, 2020 and our Annual Report on Form 10-K ~~filed on July 25, 2017. Any forward-looking statement made by us in this report speaks only as of~~for the ~~date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them.~~year ended April 30, 2020. 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~~

RISK.

Not applicable.

ITEM 4. CONTROLS AND ~~PROCEDURES~~

PROCEDURES.

Evaluation of Disclosure Controls and Procedures.

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

Changes in Internal Control Over Financial Reporting.

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

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From ~~time to time,~~time-to-time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. ~~There~~During the period covered by this report, there were no material changes to ~~our~~the description of legal proceedings ~~as described~~set forth in ~~the Company’s~~our Annual Report on Form 10-K ~~during~~for the ~~period covered by this report.~~

fiscal year ended April 30, 2020.

ITEM 1A. RISK FACTORS

~~Not applicable to smaller reporting companies.~~

None.

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

From November 1, 2017, to January 31, 2018, 87,470 shares were issued in connection with the cashless exercise of 178,917 warrants with exercise prices ranging from 3.99 to 6.00 per share. These securities were issued without registration under the Securities Act of 1933 in reliance upon the exemption provided in Section 3(a)(9) thereunder.

From November 1, 2017 to January 31, 2018, 64,584 shares were issued in connection with the exercise of warrants with exercise prices ranging from $2.40 to $6.00 per share. The Company received $162,504 from these cash exercises. During the quarter ended January 31, 2018, 5,000 shares of common stock were issued to each of two consultants working on the Arizona campus initiative. These securities were issued without registration under the Securities Act of 1933 in reliance upon the exemption provided in Section 4(a)(2) and Rule 506(b) thereunder.

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

~~Not applicable.~~

On September 14, 2020, the Company issued 1,398,602 shares of its common stock to the two holders of its previously issued Convertible Notes upon mandatory conversion of the Convertible Notes pursuant to their terms. The Convertible Notes were automatically convertible into the Company’s common stock if the closing price of common stock on The Nasdaq Global Market was at least $10.725 over a 20 consecutive trading-day period and certain other conditions were satisfied. This issuance was exempt from registration under the Securities Act of 1933 (the “Securities Act”) pursuant to Section 3(a)(9) of the Securities Act since the convertible Notes were issued in exchange for secured Term Notes issued on March 6, 2020.

ITEM 6. EXHIBITS

See the Exhibit Index at the end of this report.

~~SIGNATURES~~

~~Pursuant to the requirements~~Table of ~~the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.~~


	~~Aspen Group, Inc.~~

~~March 15, 2018~~	~~By:~~	~~/s/ Michael Mathews~~
		~~Michael Mathews~~
		~~Chief Executive Officer~~
		~~(Principal Executive Officer)~~


~~March 15, 2018~~	~~By:~~	~~/s/ Janet Gill~~
		~~Janet Gill~~
		~~Chief Financial Officer~~
		~~(Principal Financial Officer)~~

Contents

EXHIBIT INDEX

Incorporated by Reference

Filed or Furnished
Exhibit #

Exhibit Description

Form

Date

Number

Herewith
3.1

Certificate of Incorporation, as amended


10-Q

3/9/17


3.1


3.2

Bylaws, as amended

Filed
4.1

Form of Convertible Note

8-K

12/1/17

4.1

10.1

Employment Agreement with Michael Mathews dated November 2, 2016*

10-Q

3/9/17

10.1

10.2

Loan and Security Agreement – Runway+

8-K

7/28/17

10.1

10.3

Registration Rights Agreement – Runway

8-K

7/28/17

10.2

10.4

Warrant Agreement – Runway +

8-K

7/28/17

10.3

10.5

Form of Registration Rights Waiver

10-Q

9/14/17

10.4

10.6

Promissory Note dated March 8, 2017 – Linden Finance

10-K

7/25/17

10.1

10.7

Employment Agreement dated June 11, 2017 – St. Arnauld*

8-K

6/15/17

10.1

10.8

Asset Purchase Agreement dated May 13, 2017 +

8-K

5/18/17

10.1

10.9

Employment Agreement dated November 24, 2014 - Gerard Wendolowski*

10-K

7/28/15

10.19

10.10

Employment Agreement dated November 24, 2014 - Janet Gill*

10-K

7/28/15

10.18

10.11

2012 Equity Incentive Plan, as amended*

Filed
10.12

Form of Stock Purchase Agreement

8-K

4/10/17

10.1

10.13

Form Waiver of Registration Rights Agreement

8-K

5/30/17

10.1

10.14

Form of Registration Rights Agreement

8-K

4/10/17

10.2

10.15

Loan Agreement dated August 31, 2016 – Cooperman

8-K

9/7/16

2.1

10.16

Revolving Promissory Note dated August 31, 2016 – Cooperman

8-K

9/7/16

2.2

10.17

Warrant dated August 31, 2016 – Cooperman

8-K

9/7/16

3.1

10.18

Note Conversion Agreement dated April 16, 2016 – Mathews

10-K

7/27/16

10.4

10.19

Letter Agreement with Warrant Holders for Reduced Exercise Price and Early Exercise 2016

10-K

7/27/16

10.19

31.1

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

XBRL Instance Document

Filed
101.SCH

XBRL Taxonomy Extension Schema Document

Filed
101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

Filed
101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

Filed
101.LAB

XBRL Taxonomy Extension Label Linkbase Document

Filed
101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

Filed

~~———————~~

Incorporated by Reference

Filed or
Furnished
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 Restricted Stock Unit Agreement*

10-K

7/7/20

10.9

10.2

Form of Restricted Stock Unit Agreement – price based vesting*

10-K

7/7/20

10.10

10.3

Equity Distribution Agreement, dated August 31, 2020, between the Company and Canaccord Genuity LLC**

8-K

8/31/20

1.1

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.

Exhibits and/or Schedules have been omitted. The Company hereby agrees to furnish to the SEC upon request any omitted information.

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

Certain schedules, appendices and exhibits to this agreement have been omitted in accordance with Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished supplementally to the Securities and Exchange Commission staff 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.

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Aspen Group, Inc.

September 14, 2020

By:

/s/ Michael Mathews

Michael Mathews
Chief Executive Officer
(Principal Executive Officer)


September 14, 2020	By:	/s/ Frank J. Cotroneo
		Frank J. Cotroneo Chief Financial Officer (Principal Financial Officer)


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



				Page Number
			PART I – FINANCIAL INFORMATION

Item 1.			Financial ~~Statements~~Statements..	1

	Consolidated Balance Sheets	1

	Consolidated Statements of Operations (Unaudited)	3

	Consolidated Statement of Changes in Stockholders’ Equity (Unaudited)	4

	Consolidated Statements of Cash Flows (Unaudited)	5

	Condensed Notes to Consolidated Financial Statements (Unaudited)	7

Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations.	19 28

Item 3.			Quantitative and Qualitative Disclosures About Market Risk.	26 44

Item 4.			Controls and Procedures.	26 44

			PART II – OTHER INFORMATION

Item 1.			Legal Proceedings.	27 45

Item 1A.			Risk Factors.	27 45

Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds.	27 45

Item 3.			Defaults Upon Senior Securities.	27 45

Item 4.			Mine Safety Disclosures.	27 45

Item 5.			Other Information.	27 45

Item 6.			Exhibits.	27 45


	January 31,			April 30,
	2018			2017
	(Unaudited)
Assets

Current assets:
Cash and cash equivalents	$	3,803,080		$	2,756,217
Restricted cash		190,506			—
Accounts receivable, net of allowance of $544,492 and $328,864, respectively		8,592,958			4,434,862
Prepaid expenses		288,640			133,531
Promissory note receivable		—			900,000
Other receivables		233,862			81,464
Accrued interest receivable		—			8,000
Total current assets		13,109,046			8,314,074

Property and equipment:
Call center equipment		96,305			53,748
Computer and office equipment		130,137			103,649
Furniture and fixtures		712,209			255,984
Software		2,590,297			2,131,344
		3,528,948			2,544,725
Less accumulated depreciation and amortization		(1,161,030	)		(1,090,010	)
Total property and equipment, net		2,367,918			1,454,715
Goodwill		5,011,432			—
Intangible assets, net		9,916,667			—
Courseware, net		137,557			145,477
Accounts receivable, secured - related party, net of allowance of $625,963, and $625,963, respectively		45,329			45,329
Long term contractual receivable		935,878			657,542
Other assets		585,206			56,417

Total assets	$	32,109,033		$	10,673,554


	For the						For the
	Three Months Ended						Nine Months Ended
	January 31,						January 31,
	2018			2017			2018			2017

Revenues	$	5,701,958		$	3,735,626		$	14,796,483		$	9,957,467

Operating expenses
Cost of revenues (exclusive of depreciation and amortization shown separately below)		2,665,664			1,359,131			6,282,814			3,490,046
General and administrative		4,677,359			2,133,074			10,975,085			6,228,554
Program review settlement expense		—			25,000			—			25,000
Depreciation and amortization		347,894			132,727			631,969			422,782
Total operating expenses		7,690,917			3,649,932			17,889,868			10,166,382

Operating (loss) income		(1,988,959	)		85,694			(3,093,385	)		(208,915	)

Other income (expense):
Other income		46,179			1,684			88,067			3,047
Gain on extinguishment of warrant liability		52,500			—			52,500			—
Interest expense		(257,665	)		(80,001	)		(443,757	)		(175,662	)
Total other expense, net		(158,986	)		(78,317	)		(303,190	)		(172,615	)

(Loss) income before income taxes		(2,147,945	)		7,377			(3,396,575	)		(381,530	)

Income tax expense (benefit)		—			—			—			—

Net (loss) income	$	(2,147,945	)	$	7,377		$	(3,396,575	)	$	(381,530	)

Net (loss) income per share allocable to common stockholders - basic	$	(0.15	)	$	0.00		$	(0.25	)	$	(0.03	)

Net (loss) income per share allocable to common stockholders - diluted	$	(0.15	)	$	0.00		$	(0.25	)	$	(0.03	)

Weighted average number of common shares outstanding: basic		14,491,634			11,467,345			13,862,992			11,419,270

Weighted average number of common shares outstanding: diluted		14,491,634			13,040,970			13,862,992			11,419,270


					Additional									Total
	Common Stock				Paid-In			Treasury			Accumulated			Stockholders'
	Shares		Amount		Capital			Stock			Deficit			Equity
Balance at April 30, 2017		13,504,012	$	13,504	$	33,607,423		$	(70,000	)	$	(25,710,687	)	$	7,840,240

Fees associated with equity raise		—		—		(14,033	)		—			—			(14,033	)
Restricted stock issued for services		10,000		10		88,690			—			—			88,700
Stock-based compensation		—		—		466,468			—			—			466,468
Common stock issued for acquisition		1,203,209		1,203		10,214,041			—			—			10,215,244
Common stock issued for cashless warrant exercises		162,072		162		(162	)		—			—			—
Common stock issued for warrants exercised for cash		79,442		79		143,410			—			—			143,489
Common stock issued for stock options exercised		113,597		114		455,273			—			—			455,387
Warrants issued with senior secured term loan		—		—		478,428			—			—			478,428
Net loss, for the Nine months ended January 31, 2018		—		—		—			—			(3,396,575	)		(3,396,575	)
Balance at January 31, 2018		15,072,332	$	15,072	$	45,439,538		$	(70,000	)	$	(29,107,262	)	$	16,277,348


	Basic		Diluted
Numerator
Net income applicable to common stock	$	7,377	$	7,377
Convertible debt interest		—		4,010
	$	7,377	$	11,387

Denominator
Weighted average common shares outstanding		11,467,345		11,467,345
Convertible debt		—		75,596
Warrants and options		—		1,498,029
		11,467,345		13,040,970

Net income per share	$	0.00	$	0.00


	For the				For the
	Three Months Ended January 31,				Nine Months Ended January 31,
	2018		2017		2018		2017

Depreciation and amortization Expense	$	150,596	$	119,064	$	407,346	$	378,118

Software amortization Expense	$	121,695	$	105,914	$	341,825	$	342,938


Year Ending April 30,
2018	$	127,811
2019		456,038
2020		386,196
2021		313,749
2022		293,848
Total	$	1,577,642


Year Ending April 30,
2018	$	14,152
2019		56,143
2020		42,301
2021		15,336
2022		9,625
Total	$	137,557


						Weighted
				Weighted		Average
				Average		Remaining		Aggregate
	Number of			Exercise		Contractual		Intrinsic
Warrants	Shares			Price		Term		Value
Balance outstanding, April 30, 2017		914,123		$	2.82		1.6	$	1,100,203
Granted		224,174			6.87		5.0		307,118
Exercised		(356,267	)		0.55		—		—
Forfeited		—			—		—		—
Expired		(38,257	)		—		—		—
Balance outstanding, January 31, 2018		743,773		$	4.08		2.1	$	3,095,502

Exercisable, January 31, 2018		743,773		$	4.08		2.1	$	3,095,502


	Purchase Price Allocation			Useful Life
Cash and cash equivalents	$	—
Current assets acquired		244,465
Other assets acquired		176,667
Intangible assets
Accreditation and regulatory approvals		6,200,000
Trade name and trademarks		1,700,000
Student relationships		2,000,000		2 years
Curriculum		200,000		1 year
Goodwill		5,011,432
Less: Current liabilities assumed		(727,601	)
Total purchase price	$	14,804,963


	For the Year Ended April 30, 2017			For the Nine Months Ended October 31, 2017
	(unaudited)			(unaudited)
Revenue	$	18,038,474		$	10,719,546
Net Loss	$	(5,444,205	)	$	(3,521,086	)
Loss per common share- basic and diluted	$	(0.47	)		$(0.26	)


	Aspen University		United States University
	Q3 FY’2018		Q3 FY’2018
New Student Enrollments		1,164		103	**
Active Student Body		6,066		446
-College of Nursing Students		4,401		326
Monthly Payment Method Students		4,194		204


	New Student Enrollments	Active Degree Seeking Student Body*
Fiscal quarter end July 31, 2016	621	3,252
Fiscal quarter end October 31, 2016	811	3,726
Fiscal quarter end January 31, 2017	825	4,064
Fiscal quarter end April 30, 2017	986	4,681
Fiscal quarter end July 31, 2017	1,025	5,015
Fiscal quarter end October 31, 2017	1,255	5,641
Fiscal quarter end January 31, 2018	1,164	6,066


	Total Degree-Seeking Active Student Body		Nursing Degree- Seeking Active Student Body		Nursing Degree-Seeking Active Student Body (%)
Quarter ended October 31, 2016		3,726		2,538		68	%
Quarter ended January 31, 2017		4,064		2,899		71	%
Quarter ended April 30, 2017		4,681		3,363		72	%
Quarter ended July 31, 2017		5,015		3,569		71	%
Quarter ended October 31, 2017		5,641		4,068		72	%
Quarter ended January 31, 2018		6,066		4,401		73	%


CPE/RPE Analysis *	6 Months Out	12 Months Out	2 Years Out	3 Years Out	4+ Years Out

Courses completed	2.24	3.52	5.28	6.48	8

Average RPE	$1,974	$3,078	$4,630	$5,684	$7,000

RPE % earned	28%	44%	66%	81%	100%

Marketing efficiency ratio**	2.3x	3.5x	5.3x	6.5x	8.0x
* Projection ** Based on current $876 CPE (six month rolling CPE average)


	For the Quarters Ended
	January 31,
	2018			2017
Net income (loss)	$	(2,147,945	)	$	7,377
Interest expense, net of interest income		211,486			78,317
Depreciation & amortization		347,894			132,727
EBITDA (loss)		(1,588,565	)		218,421
Bad debt expense		132,644			(25,680	)
Acquisition expense		610,219			—
Non-recurring charges		85,853			146,809
Stock-based compensation		162,544			96,498
Adjusted EBITDA (Loss)	$	(597,305	)	$	436,048