ASPEN GROUP(ASPU) - 2023 Q4 - Annual Report

PART I Financial Statements This section presents Aspen Group, Inc.'s unaudited consolidated financial statements, reporting a net loss of $1.6 million for Q3 and $7.6 million for the nine months ended January 31, 2023 Consolidated Balance Sheet Highlights (Unaudited) | Account | January 31, 2023 | April 30, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $1,603,501 | $6,482,750 | | Total current assets | $31,020,566 | $39,382,591 | | Total assets | $87,834,620 | $91,066,051 | | Total current liabilities | $24,071,254 | $16,835,273 | | Total liabilities | $51,898,336 | $48,520,327 | | Total stockholders' equity | $35,936,284 | $42,545,724 | Consolidated Statement of Operations Highlights (Unaudited) | Metric | Three Months Ended Jan 31, 2023 | Three Months Ended Jan 31, 2022 | Nine Months Ended Jan 31, 2023 | Nine Months Ended Jan 31, 2022 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $15,574,042 | $18,944,798 | $51,542,502 | $57,316,004 | | Operating loss | $(813,793) | $(3,335,644) | $(5,469,208) | $(7,231,639) | | Net loss | $(1,555,040) | $(3,733,997) | $(7,563,651) | $(7,457,143) | | Net loss per share | $(0.06) | $(0.15) | $(0.30) | $(0.30) | Consolidated Statement of Cash Flows Highlights (Unaudited, Nine Months Ended Jan 31) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(4,456,117) | $(7,719,760) | | Net cash used in investing activities | $(1,681,706) | $(3,734,670) | | Net cash (used in) provided by financing activities | $(251,298) | $5,191,034 | | Net decrease in cash, cash equivalents and restricted cash | $(6,389,121) | $(6,263,396) | Note 1. Nature of Operations Aspen Group, Inc. operates as an education technology holding company with two accredited universities, focusing on affordable higher education and the nursing profession - AGI operates as an education technology holding company with two subsidiaries, Aspen University and United States University[27] - The company's primary growth strategy targets the high-growth nursing profession[28] - Both universities are accredited and participate in Title IV federal student financial assistance programs[29][30] Note 5. Debt As of January 31, 2023, the company's long-term debt totaled $15 million, comprising a $5 million credit facility and $10 million in 12% convertible notes, with a $20 million revolving facility expiring unused Long-Term Debt Composition (as of Jan 31, 2023) | Debt Instrument | Principal Amount | | :--- | :--- | | 2018 Credit Facility | $5,000,000 | | 2022 Convertible Notes | $10,000,000 | | Total Long-Term Debt | $15,000,000 | - The $10 million in 2022 Convertible Notes bear 12% interest (later increased to 14%), are convertible to common stock at $1.00 per share, and mature in March 2027[63] - The $5 million 2018 Credit Facility had its maturity extended to November 4, 2023, and was subsequently repaid on May 12, 2023[70][77] - A $20 million 2022 Revolving Credit Facility expired unused on March 14, 2023[66] Note 7. Revenue Revenue, primarily from tuition and fees, totaled $51.5 million for the nine months ended January 31, 2023, a decrease from the prior year, with the pre-licensure nursing program contributing 22% Revenue Disaggregation (Nine Months Ended Jan 31) | Revenue Source | 2023 | 2022 | | :--- | :--- | :--- | | Tuition | $44,264,750 | $50,304,380 | | Course fees | $5,760,009 | $5,967,581 | | Other fees | $1,517,743 | $1,044,043 | | Total Revenue | $51,542,502 | $57,316,004 | - The pre-licensure nursing program, which is being taught out, contributed 19% of revenue in Q3 2023 and 22% in the first nine months of fiscal 2023[121] - Deferred revenue increased to $8.1 million as of January 31, 2023, from $5.9 million as of April 30, 2022[113] Note 10. Commitments and Contingencies The company faces significant regulatory and legal challenges, including a class action lawsuit, a teach-out agreement for its pre-licensure nursing program due to low NCLEX pass rates, and a Department of Education program review - Aspen University faces a class action lawsuit in Arizona alleging violations of the Arizona Consumer Fraud Act and Unjust Enrichment related to its pre-licensure nursing program[137] - Due to low NCLEX pass rates (58% in 2021 vs. 80% standard), Aspen University entered a Consent Agreement with the Arizona State Board of Nursing to voluntarily surrender its pre-licensure program approval and conduct a teach-out for current students[149][152] - On January 6, 2023, the Department of Education initiated an off-site Program Review of Aspen University, focusing on its administration of Title IV programs for the 2021-2023 award years[163] Note 11. Subsequent Events Post-quarter, the company completed a $12.4 million private offering, voluntarily delisted from Nasdaq, and Aspen University faced further regulatory scrutiny including a 'Show Cause' directive and Heightened Cash Management 2 status - On May 12, 2023, the company completed a private offering of $12.4 million in 15% Senior Secured Debentures due 2026, using proceeds to repay the 2018 Credit Facility and for working capital[168] - The company voluntarily delisted its common stock from Nasdaq on March 23, 2023, and now trades on the OTC market to reduce costs and management time[175] - On February 1, 2023, accreditor DEAC issued a 'Show Cause' directive to Aspen University, questioning its compliance and accreditation[178] Subsequently, on February 7, 2023, the DOE placed the university on Heightened Cash Management 2 (HCM2), impacting its access to Title IV funds[183][185] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 27% decline in active students and 18% revenue decrease in Q3 FY2023, driven by program suspension and reduced marketing, offset by restructuring efforts leading to improved operating loss and positive Adjusted EBITDA - The active student body declined 27% year-over-year to 9,956, and new student enrollments dropped 40% in Q3, primarily due to the pre-licensure program stoppage and a significant reduction in marketing spend[201][206] Q3 Fiscal 2023 vs Q3 Fiscal 2022 Performance | Metric | Q3 FY2023 | Q3 FY2022 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $15.6M | $18.9M | (18)% | | Marketing & Promotional Costs | $0.13M | $4.35M | (97)% | | General & Administrative | $9.6M | $11.8M | (18)% | | Net Loss | $(1.6M) | $(3.7M) | 58% improvement | | Adjusted EBITDA | $1.0M | $(1.3M) | N/A | - A restructuring plan implemented in late Q1 2023 involved cutting marketing spend to maintenance levels and eliminating ~70 positions, resulting in total spend reductions of $4.9 million in Q3 2023[298] - The company secured $12.4 million in new 15% Senior Secured Debentures on May 12, 2023, providing $3.4 million in unrestricted cash for working capital after repaying prior debt and fees[290] Quantitative and Qualitative Disclosures About Market Risk This section is marked as not applicable by the company - Not applicable[303] Controls and Procedures Management concluded that disclosure controls and procedures are effective as of January 31, 2023, with no material changes to internal control over financial reporting during the quarter - Management concluded that disclosure controls and procedures are effective as of January 31, 2023[306] - No material changes in internal control over financial reporting occurred during the quarter[307] PART II – OTHER INFORMATION Legal Proceedings No material changes to legal proceedings were reported for the period, consistent with the Annual Report on Form 10-K - No material changes to legal proceedings were reported for the period[310] Risk Factors No new or materially changed risk factors were disclosed in this section for the quarter - This section is marked as 'None', indicating no new risk factors are being disclosed in this filing[311] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - This section is marked as 'None'[312]