The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.
The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.
The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.
The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.
The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2017
(Unaudited)
Note 1. Nature of Operations and Liquidity
Overview
Aspen Group, Inc. (together with its subsidiary, the Company or Aspen) is a holding company. Its subsidiary Aspen University Inc. was organized in 1987. On March 13, 2012, the Company was recapitalized in a reverse merger. All references to the Company or Aspen before March 13, 2012 are to Aspen University.
Aspens mission is to offer any motivated college-worthy student the opportunity to receive a high quality, responsibly priced distance-learning education for the purpose of achieving sustainable economic and social benefits for themselves and their families. Aspen is dedicated to providing the highest quality education experiences taught by top-tier professors - 54% of our adjunct professors hold doctorate degrees.
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 the college-debt sentence plaguing working-class Americans. The monthly payment plan offers bachelor students (except RN to BSN) the opportunity to pay $250/month for 72 months ($18,000), 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 per 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.
On November 10, 2014, Aspen University announced the Commission on Collegiate Nursing Education (CCNE) has granted accreditation to its Bachelor of Science in Nursing program (RN to BSN) until December 31, 2019.
Since 1993, we have been nationally accredited by the Distance Education and Accrediting Council (DEAC), a national accrediting agency recognized by the U.S. Department of Education (the DOE). On February 25, 2015, the DEAC informed Aspen University that it had renewed its accreditation for five years to January, 2019.
On August 22, 2017, the DOE informed Aspen University of its determination that the institution has qualified to participate under the Higher Education Act of 1965, as amended (HEA) and the Federal student financial assistance programs (Title IV, HEA programs), and set a subsequent program participation agreement reapplication date of March 31, 2021.
Basis of Presentation
A. 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 Companys management, all adjustments (consisting of normal recurring adjustments and reclassifications and non-recurring adjustments) necessary to present fairly our results of operations for the three months ended July 31, 2017 and 2016, our cash flows for the three months ended July 31, 2017 and 2016, and our financial position as of July 31, 2017 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 Report on Form 10-K for the period ended April 30, 2017 as filed with the SEC on July 25, 2017. The April 30, 2017 balance sheet is derived from those statements.
6
ASPEN GROUP, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2017
(Unaudited)
B. Liquidity
At July 31, 2017, the Company had a cash balance of $6,213,569.
On July 25, 2017, the Company signed a $10 million senior secured term loan with Runway Growth Capital Fund (formerly known as GSV Growth Capital Fund). The Company drew $5 million under the facility at closing, with the remaining $5 million to be drawn following the closing of the Companys acquisition of substantially all the assets of the 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 Note 5).
Note 2. Significant Accounting Policies
Principles of Consolidation
The unaudited consolidated financial statements include the accounts of Aspen Group, Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of the unaudited consolidated financial statements in conformity with generally accepted accounting principles in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts in the unaudited consolidated financial statements. 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, amortization periods and valuation of courseware and software development costs, valuation of beneficial conversion features in convertible debt, valuation of loss contingencies, valuation of stock-based compensation and the valuation allowance on deferred tax assets.
Cash and Cash Equivalents
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 were no cash equivalents at July 31, 2017 and April 30, 2017. The Company maintains its cash in bank and financial institution deposits that at times may exceed federally insured limits of $250,000 per financial institution. The Company has not experienced any losses in such accounts from inception through July 31, 2017. As of July 31, 2017 and April 30, 2017, there were deposits totaling $5,998,944 and $2,687,461, respectively, held in two separate institutions greater
than the federally insured limits.
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 1Observable inputs that reflect quoted market prices (unadjusted) for identical assets and liabilities in active markets;
Level 2Observable 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 3Unobservable inputs that are supported by little or no market activity that are significant to the fair value of assets or liabilities.
7
ASPEN GROUP, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2017
(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 Due Students
The Company receives Title IV funds from the DOE to cover tuition and living expenses. After deducting tuition and fees, the Company sends checks for the remaining balances to the students.
Revenue Recognition and Deferred Revenue
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. Tuition revenue is recognized pro-rata over the applicable period of instruction. The Company allows a student to make three monthly tuition payments during each class. 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 impose separate, mandatory refund policies, which override the Companys 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 Companys accounting policies revenue is not recognized with respect to amounts that could potentially be refunded. The Companys 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 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 revenues may be recognized as sales occur or services are performed.
The Company has revenues from students outside the United States representing 3.0% of the revenues for the quarter ended July 31, 2017.
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 or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. 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.
Net Loss Per Share
Net loss per common share is based on the weighted average number of common shares outstanding during each period. Options to purchase 2,632,884 and 1,868,425 shares of common stock, warrants to purchase 1,007,509 and 872,055 shares of common stock, and $50,000 and $350,000 of convertible debt (convertible into 4,167 and 75,596 shares of common stock, respectively) were outstanding during three months ending July 31, 2017 and 2016, respectively, but were not included in the computation of diluted 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 common share when their effect is dilutive.
8
ASPEN GROUP, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2017
(Unaudited)
Recent Accounting Pronouncements
There have been no new relevant pronouncements since those disclosed in the April 30, 2017 Consolidated Financial Statements.
Note 3. Property and Equipment
Property and equipment consisted of the following at July 31, 2017 and April 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
July 31,
|
|
|
April 30,
|
|
|
|
2017
|
|
|
2017
|
|
Call center hardware
|
|
$
|
77,269
|
|
|
$
|
53,748
|
|
Computer and office equipment
|
|
|
103,191
|
|
|
|
103,649
|
|
Furniture and fixtures
|
|
|
272,790
|
|
|
|
255,984
|
|
Software
|
|
|
2,198,473
|
|
|
|
2,131,344
|
|
|
|
|
2,651,723
|
|
|
|
2,544,725
|
|
Accumulated depreciation and amortization
|
|
|
(1,060,681
|
)
|
|
|
(1,090,010
|
)
|
Property and equipment, net
|
|
$
|
1,591,042
|
|
|
$
|
1,454,715
|
|
Software consisted of the following at July 31, 2017 and April 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
July 31,
|
|
|
April 30,
|
|
|
|
2017
|
|
|
2017
|
|
Software
|
|
$
|
2,198,473
|
|
|
$
|
2,131,344
|
|
Accumulated amortization
|
|
|
(953,218
|
)
|
|
|
(994,017
|
)
|
Software, net
|
|
$
|
1,245,255
|
|
|
$
|
1,137,327
|
|
Depreciation and Amortization expense for all Property and Equipment as well as the portion for just software is presented below for three months ended July 31, 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
|
July 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Depreciation and Amortization Expense
|
|
|
125,082
|
|
|
|
135,147
|
|
|
|
|
|
|
|
|
|
|
Software Amortization Expense
|
|
|
107,607
|
|
|
|
124,180
|
|
The following is a schedule of estimated future amortization expense of software at July 31, 2017:
|
|
|
|
|
Year Ending April 30,
|
|
|
|
2018
|
|
$
|
311,020
|
|
2019
|
|
|
342,717
|
|
2020
|
|
|
272,875
|
|
2021
|
|
|
200,428
|
|
2022
|
|
|
118,215
|
|
Total
|
|
$
|
1,245,255
|
|
9
ASPEN GROUP, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2017
(Unaudited)
Note 4. Courseware
Courseware costs capitalized were $19,000 and $4,450 for the three months ended July 31, 2017 and 2016 respectively. When Courseware becomes fully amortized it is written off against the accumulated amortization. There is no expense impact to these write-offs.
Courseware consisted of the following at July 31, 2017 and April 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
July 31,
|
|
|
April 30,
|
|
|
|
2017
|
|
|
2017
|
|
Courseware
|
|
$
|
273,577
|
|
|
$
|
271,777
|
|
Accumulated amortization
|
|
|
(122,738
|
)
|
|
|
(126,300
|
)
|
Courseware, net
|
|
$
|
150,839
|
|
|
$
|
145,477
|
|
Amortization expense of courseware for the three months ended July 31, 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
|
July 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Amortization Expense
|
|
|
13,638
|
|
|
|
15,902
|
|
The following is a schedule of estimated future amortization expense of courseware at July 31, 2017:
|
|
|
|
|
Year Ending April 30,
|
|
|
|
2018
|
|
$
|
40,490
|
|
2019
|
|
|
53,269
|
|
2020
|
|
|
39,427
|
|
2021
|
|
|
12,463
|
|
2022
|
|
|
5,190
|
|
Total
|
|
$
|
150,839
|
|
Note 5. Senior Secured Term Loan
On July 25, 2017, the Company signed a $10 million senior secured term loan with Runway Growth Capital Fund (formerly known as GSV Growth Capital Fund). The Company drew $5 million under the facility at closing, with the remaining $5 million to be drawn following the closing of the Companys acquisition of substantially all the assets of the 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.
The Company will be required to begin making principal repayments upon the 24-month anniversary of the initial closing (July 24, 2019), 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 and will pay another 0.25% origination fee upon the second closing, will be subject to a final payment fee of 3.25% of the principal lent, and issued 224,174 5-year warrants at an exercise price of $6.87. The relative fair value of the warrants was $478,428 and was recorded as debt discount along with other direct costs of the term loan and is being amortized to interest expense over the term of the loan. (See Note 7)
10
ASPEN GROUP, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2017
(Unaudited)
Note 6. 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 July 31, 2017, 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 July 31, 2017, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations.
Regulatory Matters
The Companys subsidiary, Aspen University, is 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 Aspen University to significant regulatory scrutiny on the basis of numerous standards that schools must satisfy to participate in the various types of federal student financial assistance programs authorized under Title IV of the HEA.
On August 22, 2017, the DOE informed Aspen University of its determination that the institution has qualified to participate under the HEA and the Federal student financial assistance programs (Title IV, HEA programs), and set a subsequent program participation agreement reapplication date of March 31, 2021.
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 operates 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.
Return of Title IV Funds
An institution participating in Title IV Programs must correctly calculate the amount of unearned Title IV Program funds that have been disbursed to students who withdraw from their educational programs before completion and must return those unearned funds in a timely manner, no later than 45 days of the date the school determines that the student has withdrawn. Under 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.
11
ASPEN GROUP, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2017
(Unaudited)
Note 7. Stockholders Equity
Common Stock
Effective May 24, 2017, the Company entered into waiver agreements with all of its investors in the April 2017 common stock offering. In consideration for waiving their registration rights, the Company paid to each of the investors 1.5% of their investment amount in the offering. The total amount paid was $112,500 and was recorded in general and administrative expenses during the quarter ended July 31, 2017.
The Company issued 89,480 shares in conjunction with cash and cashless warrant exercises during the three months ended July 31, 2017.
Warrants
A summary of the Companys warrant activity during the three months ended July 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
|
|
|
$
|
1,991,067
|
|
Granted
|
|
|
|
224,174
|
|
|
|
6.87
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
(125,404
|
)
|
|
|
0.27
|
|
|
|
|
|
|
|
|
|
Surrendered
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
|
(5,384
|
)
|
|
|
3.99
|
|
|
|
|
|
|
|
|
|
Balance Outstanding, July 31, 2017
|
|
|
|
1,007,509
|
|
|
$
|
3.80
|
|
|
|
2.2
|
|
|
$
|
2,803,461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, July 31, 2017
|
|
|
|
1,007,509
|
|
|
$
|
3.80
|
|
|
|
2.2
|
|
|
$
|
2,803,461
|
|
In connection with the Senior Secured Term Loan that was finalized on July 25, 2017, the Company issued 224,174 5-year warrants at an exercise price of $6.87. (See Note 5)
The Company issued 89,480 shares of Common Stock in conjunction with the exercise of 125,404 warrants.
Stock Incentive Plan and Stock Option Grants 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, in the form of incentive stock options, non-qualified stock options, restricted shares, stock appreciation rights and restricted stock units to employees, consultants, officers and directors. As of July 31, 2017, there were 867,116 shares remaining 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 option term, expected volatility of the Companys stock price over the expected term, expected risk-free interest rate over the expected option term, expected dividend yield rate over 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 three months ended July 31, 2017 and 2016.
|
|
|
|
|
|
|
|
|
|
|
July 31,
|
|
|
|
2017
|
|
|
2016
|
|
Expected life (years)
|
|
|
3.5
|
|
|
|
4 - 6.5
|
|
Expected volatility
|
|
|
40% - 43
|
%
|
|
|
40% - 43
|
%
|
Weighted-average volatility
|
|
|
38.6
|
%
|
|
|
40.0
|
%
|
Risk-free interest rate
|
|
|
0.38
|
%
|
|
|
0.38
|
%
|
Dividend yield
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
Expected forfeiture rate
|
|
|
n/a
|
|
|
|
n/a
|
|
12
ASPEN GROUP, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2017
(Unaudited)
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 the average 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.
A summary of the Companys stock option activity for employees and directors during the three months ended July 31, 2017, is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Number of
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
Options
|
|
Shares
|
|
|
Price
|
|
|
Term
|
|
|
Value
|
|
Balance Outstanding, April 30, 2017
|
|
|
2,097,384
|
|
|
$
|
2.42
|
|
|
|
3.09
|
|
|
$
|
7,267,892
|
|
Granted
|
|
|
535,500
|
|
|
|
4.98
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Outstanding, July 31, 2017
|
|
|
2,632,884
|
|
|
$
|
2.94
|
|
|
|
3.14
|
|
|
$
|
16,732,558
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, July 31, 2017
|
|
|
1,377,363
|
|
|
$
|
2.28
|
|
|
|
1.53
|
|
|
$
|
8,689,038
|
|
On May 13, 2017, the Company granted its executive officers a total of 500,000 five-year options to purchase shares of the Companys 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 $98,700 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.
As of July 31, 2017, there was approximately $1,325,277 of unrecognized compensation costs related to nonvested share-based compensation arrangements. That cost is expected to be recognized over a weighted-average period of 2.75 years.
The Company recorded compensation expense of $159,300 and $95,607 for the three months ended July 31, 2017 and 2016, respectively, in connection with stock options.
Stock Option Grants to Non-Employees
There were no stock options granted to non-employees during three months ended July 31, 2017 and 2016. The Company recorded no compensation expense for the three months ended July 31, 2017 and 2016. There was no unrecognized compensation cost at July 31, 2017. All remaining options expired during the year ended April 30, 2017.
13
ASPEN GROUP, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2017
(Unaudited)
Note 8. Pending Acquisition
On May 13, 2017, the Company entered into a definitive agreement to acquire the operating assets of United States University (USU), a regionally accredited for-profit university based in San Diego, California for a total purchase price of $9 million. The transaction is subject to customary closing conditions and regulatory approvals by the DOE, WASC Senior College and University Commission, and state regulatory and programmatic accreditation bodies. The earliest that Aspen Group would receive required regulatory approvals would be November 2017.
In furtherance of this possible acquisition, the Company lent $900,000 to the target with the loan guaranteed by its principal owner. The Company also entered into a Marketing Consulting Agreement with USU. The note for $900,000 and 8% per annum interest is immediately due upon the earlier of (i) the closing of the acquisition in which case it shall be a credit towards the $2.5 million cash due at closing, (ii) January 15, 2018, or (iii) the termination of the acquisition. The Company drew the $900,000 from the third party line of credit. (See Note 5)
Note 9. Subsequent Events
On August 22, 2017, the DOE informed Aspen University of its determination that the institution has qualified to participate under HEA and the Federal student financial assistance programs (Title IV, HEA programs), and set a subsequent program participation agreement reapplication date of March 31, 2021.
14