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MarketScreener Homepage  >  Equities  >  Nasdaq  >  Aspen Group, Inc.    ASPU

ASPEN GROUP, INC.

(ASPU)
  Report
Delayed Quote. Delayed Nasdaq - 10/22 04:00:00 pm
11.38 USD   +0.18%
09/19ASPEN : Investor Presentation
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09/18ASPEN GROUP, INC. : Change in Directors or Principal Officers (form 8-K)
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09/16ASPEN : Conference Call Transcript Q1 2021
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ASPEN : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (form 10-Q)

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09/14/2020 | 04:43pm EDT
You should read the following discussion in conjunction with our consolidated
financial statements, which are included elsewhere in this Form 10-Q. This
Quarterly Report on Form 10-Q contains forward-looking statements that reflect
our plans, estimates, and beliefs. Our actual results could differ materially
from those discussed in the forward-looking statements. See "Cautionary Note
Regarding Forward Looking Statements" for more information.
Key Terms
In connection with the management of our businesses, we identify, measure and
assess a variety of operating metrics. The principal metrics we use in managing
our businesses are set forth below:
Operating Metrics
•Lifetime Value ("LTV") - Lifetime Value as the weighted average total amount of
tuition and fees paid by every new student that enrolls in the Company's
universities, after giving effect to attrition.
•Bookings - defined by multiplying LTV by new student enrollments for each
operating unit.
•Average Revenue per Enrollment ("ARPU") - defined by dividing total bookings by
total enrollments for each operating unit.
•Marketing Efficiency Ratio ("MER") - is defined as revenue per enrollment
divided by cost per enrollment.
Operating costs and expenses
•Cost of 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 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.
•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%.
[[Image Removed: aspu-20200731_g2.jpg]]
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 the "Company", "AGI", "Aspen Group", "we", "our" and "us"
refer to Aspen Group, Inc., unless the context otherwise indicates.
AGI leverages its education technology infrastructure and expertise to allow its
two universities, Aspen University and United States University, to deliver on
the vision of making college affordable again. Because we believe higher
education should be a catalyst to our students' long-term economic success, we
exert financial prudence by offering affordable tuition that is one of the
greatest values in higher education. AGI's primary focus relative to future
growth is to target the high growth nursing profession. As of July 31, 2020,
10,422 of 12,128 or 86% of all students across both universities are
degree-seeking nursing students.
In March 2014, Aspen University unveiled a monthly payment plan available to all
students across every online degree program offered by the 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 the opportunity to pay
their tuition and fees at $250/month, online master students $325/month, and
online doctoral students $375/month, interest free, thereby giving students a
monthly payment option versus taking out a federal financial aid loan.
USU began offering monthly payment plans in the summer of 2017. Today, monthly
payment plans are available for the online RN to BSN program ($250/month),
online MBA/M.A. Ed/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 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 DEAC, a
national accrediting agency recognized by the DOE and CHEA. On February 25,
2019, the DEAC informed Aspen University that it had renewed its accreditation
for five years to January 2024.
Since 2009, USU has been regionally accredited by WSCUC.
Both universities are qualified to participate under the Higher Education Act
and the Federal student financial assistance programs (Title IV, HEA programs).
AGI New Student Enrollments
For the first quarter of fiscal year 2021, the Company delivered a quarterly
record of 2,351 new student enrollments, a sequential increase of 32%, and 22%
year-over-year. Aspen University 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 table reflecting new student enrollments for the past 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
AGI has developed a marketing efficiency ratio to continually monitor the
performance of its business model.
Marketing Efficiency Ratio (MER) =                  Revenue per Enrollment (RPE)
                                                                                           Cost per Enrollment (CPE)

Cost per Enrollment (CPE)

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

                                                                                                                                                  Percent Change
                                                                                                                                                 Total Bookings &
                                       Q1'20 Enrollments         Q1'20 Bookings 1           Q1'21 Enrollments           Q1'21 Bookings 1              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 2019Aspen 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'sGulf 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
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 performance of our student
receivable portfolio.

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

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

Reserving for Allowance for Doubtful Accounts and Charges to the Allowance


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

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

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

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

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

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

As a result of the growing acceptance of our monthly payment plans, our
long-term accounts receivable balance has grown from $6,701,136 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 student
completes their academic program in 30 months, therefore most of the Company's
accounts receivable are short-term. However, when students graduate earlier than
the 30 month average completion duration, 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 a graphic of both short-term and long-term receivables, as well as
contractual value:
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                  A                                      B                                      C

Payments owed for classes taken where Payments owed for classes taken where

             Expected classes

payment plans for classes are less payment plans are greater than

              to be taken over
than 12 months, less monthly payments                12 months                         balance of program.
               received
              Short-Term                             Long-term                           Not recorded in
         Accounts Receivable                    Accounts Receivable                    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 Company, as an inducement to exercise, reduced by 5% the
exercise price of the common stock purchase warrants issued to The Leon and Toby
Cooperman Family Foundation (the "Foundation"), of which Mr. Leon Cooperman, a
stockholder of the Company, is the trustee. The warrants were issued on November
5, 2018 (the "2018 Cooperman Warrants") and on March 5, 2020 (the "2019
Cooperman Warrants"). The 2018 Cooperman Warrants exercise price was reduced
from $5.85 to $5.56 per share. The 2019 Cooperman Warrants exercise price was
reduced from $6.00 to $5.70 per share. On June 8, 2020, the Foundation
immediately exercised the 2018 and 2019 Cooperman Warrants paying the Company
$1,081,792 and the Company issued 192,049 shares of common stock to the
Foundation.

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

COVID-19 Update


The COVID-19 crisis did not have a material impact on the Company's consolidated
financial results for the first quarter of fiscal year 2021, as evidenced by our
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 BSN
Pre-Licensure program in Phoenix in record numbers, given that many were
furloughed or laid off since the pandemic first started.

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



Revenue from operations for Q1 Fiscal 2021 increased to $15,165,562 from
$10,357,982 for Q1 Fiscal 2020, an increase of $4,807,580 or 46%. The increase
was primarily due to enrollment and student body growth in the degree programs
with the highest lifetime value (LTV). By focusing our marketing spend on
delivering enrollment growth in the degree programs with the highest LTV, we
increased our average revenue per enrollment (or ARPU) by 10%. 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 revenue (exclusive of 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
Instructional costs and services for Q1 Fiscal 2021 increased to $3,056,713 or
20% of revenues from $2,143,819 or 21% of revenues for Q1 Fiscal 2020, an
increase of $912,894 or 43%. 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 Q1 Fiscal 2021, while USU instructional costs and
services was 22% of 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 $2,209,239 or 21% of revenues for Q1 Fiscal 2020, an
increase of $581,571 or 26%. Compared to revenue growth of 46%, this reflects
the efficiency of our business model including; 1) focus the majority of our
marketing growth spend on our highest LTV programs, 2) reflects the fact that
our lead costs and conversion rates remain in the same range as the previous
year, and 3) the Company has seen an enrollment tailwind relative to COVID-19 as
discussed above.
Aspen University marketing and promotional costs represented 18% 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
$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 compensation 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
above amount represented 33% of Aspen University revenues for Q1 Fiscal 2021,
while USU general and administrative costs equaled 40% of USU revenues for Q1
Fiscal 2021.
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AGI's general and administrative costs for Q1 Fiscal 2021 and Q1 Fiscal 2020
which are included in the above amounts equaled $3.5 million and $2.0 million,
respectively, and include corporate employees in the NY corporate office, IT,
rent, non-cash AGI stock-based compensation, incentive compensation programs and
professional fees (legal, accounting, and IR), as well as one-time expense items
in the quarter.

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

Depreciation and amortization

                                                      Three Months Ended 

July 31,

                                           2020              $ Change       % 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 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 an incorrect earned fee calculation deemed immaterial to our Fiscal
2019 revenue; (ii) $123,947 of 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 the Convertible Notes which occurred on September 14, 2020.

Other expense in Q1 Fiscal 2020 includes: interest expense of $423,689 on the
Term Loans issued in March 2019.
Income tax (benefit) expense
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                                                       Three Months Ended July 31,
                                       2020              $ Change             % Change        2019
Income tax (benefit) expense         $(1,900)$(37,495)               NM         $35,595


________________
NM - Not meaningful

Income tax benefit for Q1 Fiscal 2021 was $(1,900) compared to income tax
expense of $35,595 in Q1 Fiscal 2020. Aspen Group experienced operating losses
in both periods.
Net loss
                                   Three Months Ended July 31,
                      2020             $ Change        % 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
Q1 Fiscal 2021 as compared to $(2,075,282), or net loss per share of $(0.11) for
Q1 Fiscal 2020, or a decrease in the loss of $1,132,086, or 55% improvement.

Non-GAAP Financial Measures
This discussion and analysis includes both financial measures in accordance with
Generally Accepted Accounting Principles, or GAAP, as well as non-GAAP financial
measures. Generally, a non-GAAP financial measure is a numerical measure of a
company's performance, financial position or cash flows that either excludes or
includes amounts that are not normally included or excluded in the most directly
comparable measure calculated and presented in accordance with GAAP. Non-GAAP
financial measures should be viewed as supplemental to, and should not be
considered as alternatives to net income (loss), operating income (loss), and
cash flow from operating activities, liquidity or any other financial measures.
They may not be indicative of the historical operating results of AGI nor are
they intended to be predictive of potential future results. Investors should not
consider non-GAAP financial measures in isolation or as substitutes for
performance measures calculated in accordance with GAAP.
Our management uses and relies on Adjusted Net Income (Loss), Adjusted Earnings
(Loss) Per Share, EBITDA and Adjusted EBITDA, which are non-GAAP financial
measures. We believe that management, analysts and shareholders benefit from
referring to the following non-GAAP financial measures to evaluate and assess
our core operating results from period-to-period after removing the impact of
items that affect comparability. Our management recognizes that the non-GAAP
financial measures have inherent limitations because of the excluded items
described below.
We have included a reconciliation of our non-GAAP financial measures to the most
comparable financial measures calculated in accordance with GAAP. We believe
that providing the non-GAAP financial measures, together with the reconciliation
to GAAP, helps investors make comparisons between AGI and other companies. In
making any comparisons to other companies, investors need to be aware that
companies use different non-GAAP measures to evaluate their financial
performance. Investors should pay close attention to the specific definition
being used and to the reconciliation between such measure and the corresponding
GAAP measure provided by each company under applicable SEC rules.
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 of $0.9 million and
$1.5 million of Adjusted EBITDA for Q1 Fiscal 2020.
USU generated net income of $1.0 million and $1.1 million of Adjusted EBITDA for
Q1 Fiscal 2021 as compared to a net loss of $(0.4) million and Adjusted EBITDA
of $(10,000) during Q1 Fiscal 2020.
Aspen Group corporate incurred Adjusted EBITDA of ($3.0) million during Q1
Fiscal 2021, which reflects $0.5 million of non-recurring expense items, as
compared to Adjusted EBITDA of ($1.6) million during the Q1 Fiscal 2020, which
reflected $0.1 million of non-recurring expense items.
The following table presents a reconciliation of GAAP 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 the Company's cash flows is as follows:
                                                  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 Used in Operating Activities
Net cash used in operating activities for the three months ended July 31, 2020
totaled $(636,759) and resulted primarily from the net loss of $(943,196) and a
net change in operating assets and 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 changes in operating assets and liabilities was an
increase in accounts receivable (both short and long term accounts receivable)
of 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 approximately $0.6 million and stock-based compensation
expense of approximately $0.5 million.

Net Cash Used in Investing Activities
Net cash used in investing activities for the three months ended July 31, 2020
totaled $(662,218) mostly attributed to investments in the purchase of property
and equipment as we build out our campuses.
Net cash used in investing activities for the three months ended July 31, 2019
totaled $(632,258) mostly attributed to investments in Company developed
software, instructional and computer equipment.
Net Cash Provided By Financing Activities
Net cash provided by financing activities for the three months ended July 31,
2020 totaled $2,351,774 which reflects $1,269,982 of proceeds from stock option
exercises and $1,081,792 received from the cash exercise of warrants associated
with the Term Loans and Revolving Credit Facility.
Net cash provided by financing activities for the three months ended July 31,
2019 totaled $45,190 which reflects proceeds from the exercise of stock options
and warrants.

Liquidity and Capital Resources
The Company had cash deposits of approximately $14.7 million on September 10,
2020 and approximately $4.5 million of restricted cash. In addition to its cash,
the Company also has access to the $5 million Revolving Credit Facility, which
is unused. The Company expects that its cash resources will be sufficient to
meet its working capital needs for the foreseeable feature.
Our cash balances are kept liquid to support our growing infrastructure needs.
The majority of our cash is concentrated in large financial institutions.
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.
Revenue Recognition and Deferred Revenue
Revenue consisting primarily of tuition and fees derived from courses taught by
Aspen online as well as from related educational resources that Aspen provides
to its students, such as access to our online materials and learning management
system. Tuition revenue is recognized pro-rata over the applicable period of
instruction. Aspen maintains an institutional tuition refund policy, which
provides for all or a portion of tuition to be refunded if a student withdraws
during stated refund periods. Certain states in which students reside impose
separate, mandatory refund policies, which override Aspen's policy to the extent
in conflict. If a student withdraws at a time when a portion or none of the
tuition is refundable, then in accordance with its revenue recognition policy,
Aspen recognizes as revenue the tuition that was not refunded. Since Aspen
recognizes revenue pro-rata over the term of the course and because, under its
institutional refund policy, the amount subject to refund is never greater than
the amount of the revenue that has been deferred, under Aspen's accounting
policies revenue is not recognized with respect to amounts that could
potentially be refunded. Aspen's educational programs have starting and ending
dates that differ from its fiscal quarters. Therefore, at the end of each fiscal
quarter, a portion of revenue from these programs is not yet earned and is
therefore deferred. Aspen also charges students annual fees for library,
technology and other services, which are recognized over the related service
period.
Deferred revenue represents the amount of tuition, fees, and other student
payments received in excess of the portion recognized as revenue and it is
included in current liabilities in the accompanying consolidated balance sheets.
Other revenue may be recognized as sales occur or services are performed.
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Accounts Receivable and Allowance for Doubtful Accounts Receivable
All students are required to select both a primary and secondary payment option
with respect to amounts due to Aspen for tuition, fees and other expenses. The
most common payment option for Aspen's students is personal funds or payment
made on their behalf by an employer. In instances where a student selects
financial aid as the primary payment option, he or she often selects personal
cash as the secondary option. If a student who has selected financial aid as his
or her primary payment option withdraws prior to the end of a course but after
the date that Aspen's institutional refund period has expired, the student will
have incurred the obligation to pay the full cost of the course. If the
withdrawal occurs before the date at which the student has earned 100% of his or
her financial aid, Aspen will have to return all or a portion of the Title IV
funds to the DOE and the student will owe Aspen all amounts incurred that are in
excess of the amount of financial aid that the student earned and that Aspen is
entitled to retain. In this case, Aspen must collect the receivable using the
student's second payment option.
For accounts receivable from students, Aspen records an allowance for doubtful
accounts for estimated losses resulting from the inability, failure or refusal
of its students to make required payments, which includes the recovery of
financial aid funds advanced to a student for amounts in excess of the student's
cost of tuition and related fees. Aspen determines the adequacy of its allowance
for doubtful accounts using a general reserve method based on an analysis of its
historical bad debt experience, current economic trends, and the aging of the
accounts receivable and student status. AGI establishes reserves to its
receivables based upon an estimate of the risk presented by the program within
the university, student status, payment type and age of receivables. Aspen
writes off accounts receivable balances at the time the balances are deemed
uncollectible. Aspen continues to reflect accounts receivable with an offsetting
allowance as long as management believes there is a reasonable possibility of
collection.
For accounts receivable from primary payors other than students, Aspen estimates
its allowance for doubtful accounts by evaluating specific accounts where
information indicates the customers may have an inability to meet financial
obligations, such as bankruptcy proceedings and receivable amounts outstanding
for an extended period beyond contractual terms. In these cases, Aspen uses
assumptions and judgment, based on the best available facts and circumstances,
to record a specific allowance for those customers against amounts due to reduce
the receivable to the amount expected to be collected. These specific allowances
are re-evaluated and adjusted as additional information is received. The amounts
calculated are analyzed to determine the total amount of the allowance. Aspen
may also record a general allowance as necessary.
Direct write-offs are taken in the period when Aspen has exhausted its efforts
to collect overdue and unpaid receivables or otherwise evaluate other
circumstances that indicate that Aspen should abandon such efforts.
Business Combinations
We include the results of operations of businesses we acquire from the date of
the respective acquisition. We allocate the purchase price of acquisitions to
the assets acquired and liabilities assumed at fair value. The excess of the
purchase price of an acquired business over the amount assigned to the assets
acquired and liabilities assumed is recorded as goodwill. We expense transaction
costs associated with business combinations as incurred.
Goodwill and Intangibles
Goodwill represents the excess of purchase price over the fair market value of
assets acquired and liabilities assumed from Educacion Significativa, LLC.
Goodwill has an indefinite life and is not amortized. Goodwill is tested
annually for impairment.
Intangible assets represent both indefinite lived and definite lived assets.
Accreditation and regulatory approvals and Trade name and trademarks are deemed
to have indefinite useful lives and accordingly are not amortized but are tested
annually for impairment. Student relationships and curriculums are deemed to
have definite lives and are amortized accordingly.
Off Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements as of 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, 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 may cause actual
results to differ materially from 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 continue obtaining enrollments
at low acquisition costs and keeping teaching costs down. Further information on
the risks and uncertainties affecting our business is contained in our filings
with the SEC, including our Prospectus Supplement dated August 31, 2020 and our
Annual Report on Form 10-K for the 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.

© Edgar Online, source Glimpses


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