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ASPEN : MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (form 10-Q)

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" in "Item 1.
Financial Statements"):
•Convertible Notes - On September 14, 2020, the $10 million secured Convertible
Notes, which were issued by the Company on January 22, 2020 automatically
converted into shares of the Company's common stock 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. The accelerated non-cash amortization
charge related to unamortized debt discounts as a result of the debt
extinguishment in the second quarter of fiscal year 2021 was approximately
$1.4 million, which is included in interest expense.
•Revolving Credit Facility - The $5 million Revolving Credit Facility matures on
November 4, 2021; with a 2{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} Commitment Fee on the undrawn portion payable
quarterly. At October 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{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} 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 three and six
months ended October 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 three and six months ended October
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 three and
six months ended October 31, 2020 and 2019.
AGI Student Population Overview
AGI's overall active student body (includes both Aspen University and USU) grew
24{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} year-over-year from 10,718 to 13,238 as of October 31, 2020 and students
seeking nursing degrees were 11,442 or 86{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of total active students at both
universities. Active student body is comprised of active degree-seeking
students, enrolled in a course at the end of the second quarter of fiscal year
2021 or are registered for an upcoming course.
Aspen University's total active degree-seeking student body grew 21{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}
year-over-year from 9,016 to 10,779. USU's total active degree-seeking student
body grew year-over-year from 1,702 to 2,459 or 44{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}.
[[Image Removed: aspu-20201031_g2.jpg]]
Company Overview
AGI is an education technology holding company. It operates two universities,
Aspen University ("Aspen University" 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 October 31, 2020,
11,442 of 13,238 or 86{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of all active 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 plan offers online
associate and most bachelor students the opportunity to pay their tuition and
fees at $250/month, online
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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
In the second quarter of fiscal year 2021, the Company delivered a quarterly
record of 2,659 new student enrollments, a sequential increase of 13{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}, and 20{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}
year-over-year. Aspen University accounted for 2,010 new student enrollments, a
sequential increase of 13{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} and 10{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} 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 second quarter
given that many have been furloughed or laid off since the pandemic first began.
USU delivered 649 new student enrollments in the quarter driven primarily by FNP
enrollments, a 65{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} increase year-over-year.
Below is a table reflecting new student enrollments for the past five quarters:
                                                 New Student Enrollments
                          Q2'20           Q3'20           Q4'20           Q1'21          Q2'21
Aspen University         1,823           1,371           1,344           1,779          2,010
USU                        394             375             432             572            649
Total                    2,217           1,746           1,776           2,351          2,659



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 (CAC)


Cost per Enrollment (CAC) (previously referred to as CPE)
The Cost per Enrollment measures the advertising investment spent in a given six
month period, divided by the number of new student enrollments achieved in that
given six month period, in order to obtain an average CAC.
Revenue per Enrollment (RPE)
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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 second quarter of fiscal year 2021 the Marketing Efficiency Ratio (MER)
for our universities remained above 13X, representing revenue-per-enrollment
(LTV) over cost-per-enrollment (CAC), which was a decline of 10{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} for Aspen
University and 30{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} for USU, as shown in the table below:
                                                                        

Second Quarter Marketing Efficiency Ratio

                                  Enrollments             CAC1              LTV2              Q2 '21 MER              Q2 '20 MER            MER {de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} Change
Aspen University                     2,010             $  1,112$ 15,181    3                 13.7X                   15.2X                (10) {de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}
USU                                    649             $  1,240$ 17,820    4                 14.4X                   20.7X                (30) {de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}

_____________________

1 Based on 6-month rolling weighted average CAC for each university’s
enrollments
2 Weighted Lifetime Value (LTV) of a new student enrollment
3 Weighted average LTV for all Aspen University enrollments in the quarter
4 LTV for USU’s MSN-FNP Program

Compared to the prior year period, AGI’s weighted average cost of enrollment
(CAC) increased 31{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}, from $875 to $1,143, as shown in the table below. On a
sequential basis, AGI’s CAC declined 5{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}, from $1,203 to $1,143.

                                                                  Second 

Quarter Weighted Average Cost of Enrollment

                                    Q2 '20 Enrollments         Q2'20 CAC1           Q2'21 Enrollments           Q2'21 CAC1          CAC {de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} Change
Aspen University                            1,823             $      879                  2,010               $     1,112                    27  {de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}
USU                                           394             $      862                    649               $     1,240                    44  {de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}
Weighted Average                                              $      875$     1,143                    31  {de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}



_
1Based on 6-month rolling average
Bookings Analysis and ARPU
On a year-over-year basis, fiscal second quarter 2021 Bookings increased 34{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} to
$42,079,380, delivering a company-wide average revenue per enrollment (ARPU)
increase of 12{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} to $15,825, reflecting a shift in the revenue mix toward higher
LTV nursing licensure degree programs.
                                                                    Second 

Quarter Bookings and Average Revenue Per Enrollment (ARPU)

                                                                                                                                                  Percent Change
                                                                                                                                                 Total Bookings &
                                       Q2'20 Enrollments         Q2'20 Bookings 1           Q2'21 Enrollments           Q2'21 Bookings 1              ARPU 1
Aspen University                             1,823             $      24,294,600                  2,010               $      30,514,200                      26  {de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}
USU                                            394             $       7,021,080                    649               $      11,565,180                      65  {de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}
Total                                        2,217             $      31,315,680                  2,659               $      42,079,380                      34  {de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}
ARPU                                                           $          14,125                                      $          15,825                      12  {de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}

_____________________

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 new student
enrollments for each operating unit.
ASPEN UNIVERSITY'S PRE-LICENSURE BSN HYBRID (ONLINE/ON-CAMPUS) DEGREE PROGRAM
In July 2018, Aspen University through Aspen Nursing of Arizona, 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, Aspen University opened a second campus in the Phoenix
metropolitan area in partnership with HonorHealth.
Aspen University's innovative hybrid (online/on-campus) program allows most of
the credits to be completed online (83 of 120 credits or 69{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}), with pricing
offered at current low tuition rates of $150/credit hour for online general
education courses and
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$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 (PPN) 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).
As of the end of the second fiscal quarter, Aspen University had nearly 500
active students in the final two-year core program which drives revenues of
approximately $20,000 per year, per student in those final two years compared to
approximately $7,000 per year, per student in year one of the program. In
addition, Aspen University currently has approximately 1,800 active students in
the first-year PPN program in the Phoenix metro. In order to ensure these
students have very short wait times to begin in the core program, Aspen
University will be moving to double cohorts in the main Phoenix campus by the
airport starting this coming February, 2021. So rather than starting 30 students
into the core program each semester, Aspen University will increase that
capacity by approximately 50{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} to a total of approximately 45 students each
semester start. This will increase Aspen University's annual revenue run rate at
the main Phoenix campus by approximately $1.8 million starting in the fiscal
fourth quarter.

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 University enrolled PPN nursing students for
its December 8, 2020 semester start date.

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 enrolled
PPN and core nursing students for its September 29, 2020 semester start date.

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, as well as the Tampa campus clinical facility to
be open at the end of this calendar year, for a total of three clinical
facilities available for MSN-FNP weekend immersions scheduled to start early in
2021.

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 material delays to their projected graduation
dates.

ACCOUNTS RECEIVABLE AND MONTHLY PAYMENT PLAN
Since the beginning of fiscal year 2021, the monthly payment plan accounts
receivable balance, both short-term and long-term, has increased by
approximately $6.3 million. 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{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} year-over-year, from 5,927 to
6,638, representing 62{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of Aspen University's total active student body.

USU students paying tuition and fees through a monthly payment method grew from
1,427 to 1,609 students sequentially. Those 1,609 students paying through a
monthly payment method represent 65{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of USU’s total active student body.

Change in Business Mix and Relationship to Accounts Receivable

During the second quarter of fiscal year 2021, revenue from students using the
Monthly Payment Plan increased by approximately 34.9{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} year over year, but
declined as a percentage of total revenue for the second year in a row down from
approximately 2.2{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} in Q2 Fiscal 2020 to 52.4{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} in Q2 Fiscal 2021, while total
revenue increased 40{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} 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 50{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} 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 prior to the start of each term. This means that approximately
90{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of all revenue from these two programs will be paid in
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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 half of fiscal year 2021, no changes to the methodology were made and
$232,000 of 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 $572,000 for Aspen University and by $60,000 for USU in
the second quarter of fiscal year 2021. Note that the AGI's bad debt allowance
started the quarter at $2.16 million and ended the quarter at $2.52 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.

                                       37
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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 happens 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 discussion above, 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 October 31, 2020, the allowance for doubtful accounts was $2,523,293 which
represents approximately 8{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of the gross accounts receivable balance of
$30,765,400, 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 $10,246,622 at October 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:
                                       38

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Table of Contents

                  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.



Fiscal 2021 Developments
On September 14, 2020, after the closing price of our common stock was at least
$10.725 over a 20 consecutive trading day period the $10 million Convertible
Notes automatically converted into 1,398,602 shares of the Company's common
stock at a conversion price of $7.15 per share. The accelerated amortization
charge related to unamortized debt discounts as a result of the debt
extinguishment in the second quarter of fiscal year 2021 was approximately
$1.4 million, which was included in interest expense in the consolidated
statement of operations.
On August 31, 2020, the closing price of the Company's common stock was at least
$9 for 20 consecutive trading days, resulting in, 10{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} or 37,500 of the February
4, 2020 RSU grants to executives vesting immediately. Additionally, on September
2, 2020, the Company's common stock was at least $10 for 20 consecutive trading
days and 25{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} or 93,750 of the RSUs granted vested immediately. On the grant
date, the closing price of the Company's common stock on The Nasdaq Global
Market was $9.49 per share. See Note 7. "Stockholders' Equity" in "Item 1.
Financial Statements" for additional information on the vesting terms for these
RSUs. The accelerated amortization expense related to this transaction in the
second quarter of fiscal year 2021 was approximately $1.2 million for the
vesting of these 131,250 RSUs, which is included in general and administrative
expense in the consolidated statement of operations.
On August 31, 2020, the Company entered into an Equity Distribution Agreement
(the "Agreement") with Canaccord Genuity LLC ("Canaccord"), pursuant to which
the Company may issue and sell from time to time, through Canaccord, up to
$12,309,750 of shares of the Company's common stock. The purpose of this
Agreement is to allow the Company to sell common stock that has been surrendered
from executive officers and director vesting events to pay their portion of
withholding taxes as well as to pay the Company the strike price of options upon
cashless exercise. As of the date of this filing, 292,000 shares have been sold
under the Agreement.
On June 5, 2020, the Company, as an inducement to exercise, reduced by 5{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} 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.

COVID-19 Update

The COVID-19 crisis did not have a material impact on the Company's consolidated
financial results for the second quarter of fiscal year 2021, as evidenced by
our record revenues of approximately $17.0 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.

                                       39
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In our current, third fiscal quarter ending January 31, 2021, which has been
historically a seasonally slower quarter given it falls during the holiday
months of November and December, Aspen University is seeing slightly lower
course registrations than seasonally expected in our Aspen Nursing + Other unit.
We believe COVID-19 'Wave Two' is partly a factor given that all the states in
the country are now affected - not just some of the major metros. Our
predominant student demographic of RNs has been especially overwhelmed over the
past few months, so this isn't unexpected. Given the rollout of COVID-19
vaccines, we are anticipating a full recovery in expected course registrations
in our fourth quarter.

Results of Operations
Set forth below is the discussion of the results of operations of the Company
for the three months ended October 31, 2020 ("Q2 Fiscal 2021") compared to the
three months ended October 31, 2019 ("Q2 Fiscal 2020"), and for the first six
months ended October 31, 2020 ("1H Fiscal 2021") compared to the six months
ended October 31, 2019 ("1H Fiscal 2020").
Revenue
                                       Three Months Ended October 31,                                                         Six Months Ended October 31,
                    2020                $ Change             {de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} Change               2019                  2020                $ Change            {de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} Change               2019
Revenue        $ 16,971,045$ 4,885,080               40{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}             $ 12,085,965$ 32,136,607$ 9,692,660               43{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}            $ 22,443,947

Q2 Fiscal 2021 compared to Q2 Fiscal 2020

Revenue from operations for Q2 Fiscal 2021 increased to $16,971,045 from
$12,085,965 for Q2 Fiscal 2020, an increase of $4,885,080 or 40{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}. The increase
was primarily due to enrollment and student body growth in USU's MSN-FNP and
Aspen's BSN Pre-Licensure program, 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 (ARPU) from $14,125 to $15,825 or 12{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}. 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 Q2 Fiscal 2021 increased 36{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} year-over-year,
while USU's revenues in Q2 Fiscal 2021 increased 53{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} year-over-year.
Aspen University's traditional post-licensure online nursing + other business
unit and doctoral unit contributed 50{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of total Company revenue in Q2 Fiscal
2021, while Aspen University's Pre-Licensure BSN program delivered 21{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of the
Company's revenues in Q2 Fiscal 2021. Finally, USU contributed 29{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of the total
revenues for Q2 Fiscal 2021.
1H Fiscal 2021 compared to 1H Fiscal 2020
Revenue from operations for 1H Fiscal 2021 increased to $32,136,607 from
$22,443,947 for 1H Fiscal 2020, an increase of $9,692,660 or 43{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}. The increase
was primarily due to enrollment and student body growth in the degree programs
with the highest lifetime value (LTV). 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 1H Fiscal 2021 increased 38{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} year-over-year,
while USU's revenues in 1H Fiscal 2021 increased 59{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} year-over-year.
Aspen University's traditional post-licensure online nursing + other business
unit and doctoral unit contributed 51{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of total Company revenue in 1H Fiscal
2021, while Aspen University's Pre-Licensure BSN program delivered 20{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of the
Company's revenues in 1H Fiscal 2021. Finally, USU contributed 29{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of the total
revenues for 1H Fiscal 2021.
The Company now expects annual revenue growth to meet or exceed 38{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} or $67.7
million for the full fiscal year 2021.
Cost of revenue (exclusive of depreciation and amortization shown separately
below)
                                       40

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  Table of Contents
                                             Three Months Ended October 31,                                                      Six Months Ended October 31,
                           2020               $ Change            {de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} Change               2019                 2020                $ Change            {de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} Change               2019
Cost of Revenues
(exclusive of
depreciation and
amortization shown
separately below)     $ 7,324,780$ 3,136,724               75{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}            $ 4,188,056$ 13,172,303$ 4,631,189               54{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}            $ 8,541,114
As a percentage of
revenue                    43{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}                                                           35{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}                   41{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}                                                           38{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}


Q2 Fiscal 2021 compared to Q2 Fiscal 2020
Instructional costs and services
Instructional costs and services for Q2 Fiscal 2021 increased to $3,726,248 or
22{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of revenues from $2,181,067 or 18{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of revenues for Q2 Fiscal 2020, an
increase of $1,545,181 or 71{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}. 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, Austin and Tampa.
Aspen University instructional costs and services represented 20{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of Aspen
University revenues for Q2 Fiscal 2021, while USU instructional costs and
services was 26{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of USU revenues during Q2 Fiscal 2021.
Marketing and promotional
Marketing and promotional costs for Q2 Fiscal 2021 were $3,598,532 or 21{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of
revenues compared to $2,006,989 or 17{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of revenues for Q2 Fiscal 2020, an
increase of $1,591,543 or 79{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}. The increase of marketing as a percentage of
revenues from 17{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} to 21{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} year-over-year in Fiscal Q2 is a result of a planned
advertising spending increase throughout Fiscal Year 2021, targeted primarily to
our highest LTV programs, which has resulted in record new student enrollments
the past two quarters. In addition, pre-revenue marketing spend commenced this
quarter in our two new pre-licensure metros; Austin and Tampa.
Aspen University marketing and promotional costs represented 20{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of Aspen
University revenues for Q2 Fiscal 2021, while USU marketing and promotional
costs was 18{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of USU revenues for Q2 Fiscal 2021.
AGI corporate marketing expenses was $274,552 for Q2 Fiscal 2021 compared to
$247,904 for Q2 Fiscal 2020, an increase of $26,647 or 11{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}.
1H Fiscal 2021 compared to 1H Fiscal 2020
Instructional costs and services
Instructional costs and services for 1H Fiscal 2021 increased to $6,782,961 or
21{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of revenues from $4,324,886 or 19{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of revenues for 1H Fiscal 2020, an
increase of $2,458,075 or 57{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}. 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, Austin and Tampa.
Aspen University instructional costs and services represented 20{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of Aspen
University revenues for 1H Fiscal 2021, while USU instructional costs and
services was 24{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of USU revenues during 1H Fiscal 2021.
Marketing and promotional
Marketing and promotional costs for 1H Fiscal 2021 were $6,389,342 or 20{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of
revenues compared to $4,216,228 or 19{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of revenues for 1H Fiscal 2020, an
increase of $2,173,114 or 52{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}. The increase of marketing as a percentage of
revenues from 19{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} to 20{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} year-over-year in 1H Fiscal 2021 is a result of a
planned advertising spending increase throughout Fiscal Year 2021, targeted
primarily to our highest LTV programs, which has resulted in record new student
enrollments the past two quarters. In addition, pre-revenue marketing spend
commenced in the second quarter in our two new pre-licensure metros; Austin and
Tampa.
Aspen University marketing and promotional costs represented 19{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of Aspen
University revenues for 1H Fiscal 2021, while USU marketing and promotional
costs was 16{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of USU revenues for 1H Fiscal 2021.
                                       41
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AGI corporate marketing expenses was $507,403 for 1H Fiscal 2021 compared to
$476,135 for 1H Fiscal 2020, an increase of $31,268 or 7{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}.
General and administrative
                                                      Three Months Ended October 31,                                                        Six 

Months Ended October 31,

                                   2020                $ Change             {de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} Change               2019                 2020                $ Change             {de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} Change               2019
General and administrative    $ 11,285,155$ 4,091,455               57{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}             $ 7,193,700$ 20,078,911$ 6,088,960               44{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}             $ 13,989,951
As a percentage of revenue          66{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}                                                            60{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}                   62{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}                                                             62{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}


Q2 Fiscal 2021 compared to Q2 Fiscal 2020

General and administrative costs for Q2 Fiscal 2021 were $11.3 million or 66{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of
revenues compared to $7,193,700 or 60{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of revenues during Q2 Fiscal 2020, an
increase of $4,091,455 or 57{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}. The increase was primarily due to higher
headcount and related increase in compensation and benefits expense to support
the growth of the business, accelerated stock-based compensation amortization
expense related to the $9 and $10 tranche RSU price vesting of $1.2 million at
AGI and new campus expansion costs of approximately $0.2 million at Aspen
University.

The remaining $12 tranche related to the Executive RSU grant has approximately
$1.8 million of total unrecognized compensation expense at October 31, 2020,
that could accelerate during the next three years.
Growth of the business includes the element of growth opex. Growth opex
represents our investment in key infrastructure projects to support our
expansion strategy. In Q2 Fiscal 2021, our growth opex investment of $0.24
million is specifically defined as personnel and related costs to expand our
enrollment center, academic and financial aid advisors, and clinical operations
personnel. In our enrollment center specifically, we decided to grow our
enrollment advisors ("EAs") staff from 96 EAs to 118 EAs, adding EAs across
every unit of the Company. We are now fully staffed for the fiscal year to
accomplish our enrollment goals for the remainder of the fiscal year.
Aspen University general and administrative costs which are included in the
above amount represented 32{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of Aspen University revenues for Q2 Fiscal 2021.
The increase was primarily due to new campus expansion costs of approximately
$0.2 million for investment in faculty and campus leadership positions to launch
and support the new Tampa and Austin markets; and approximately $0.1 million in
growth opex.
USU general and administrative costs equaled 43{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of USU revenues for Q2 Fiscal
2021. The increase was primarily due to higher headcount and related increase in
compensation and benefits expense to support the growth of the business, which
includes growth opex of $0.14 million.

AGI's general and administrative costs for Q2 Fiscal 2021 and Q2 Fiscal 2020
which are included in the above amounts equaled $5.3 million and $1.9 million,
respectively. The increase was primarily due to higher headcount and related
increase in compensation and benefits expense to support the growth of the
business and accelerated non-cash stock-based compensation amortization expense
related to the $9 and $10 tranche RSU price vesting of $1.2 million.
1H Fiscal 2021 compared to 1H Fiscal 2020
General and administrative costs for 1H Fiscal 2021 was $20,078,911 or 62{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of
revenues compared to $13,989,951 or 62{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of revenues for 1H Fiscal 2020, an
increase of $6,088,960 or 44{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}. The increase was primarily due to higher
headcount and related increase in compensation and benefits expense to support
the growth of the business and other-employee related costs, accelerated
stock-based compensation amortization expense related to the $9 and $10 tranche
RSU price vesting of $1.2 million at AGI and new campus expansion costs of
approximately $0.2 million at Aspen University.
Aspen University general and administrative costs which are included in the
above amount represented 32{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of Aspen University revenues for 1H Fiscal 2021.
The increase was primarily due to new campus expansion costs of approximately
$0.2 million for investment in faculty and campus leadership positions to launch
and support the new Tampa and Austin markets; and approximately $0.1 million in
growth opex.
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USU general and administrative costs equaled 42{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of USU revenues for 1H Fiscal
2021. The increase was primarily due to higher headcount and related increase in
compensation and benefits expense to support the growth of the business, which
includes growth opex of $0.14 million.

AGI corporate general and administrative costs for 1H Fiscal 2021 and 1H Fiscal
2020 which are included in the above amounts was $8.8 million and $3.9 million,
respectively. The increase was primarily due to higher headcount and related
increase in compensation and benefits expense to support the growth of the
business and accelerated stock-based compensation amortization expense related
to the $9 and $10 tranche RSU price vesting of $1.2 million.
Bad debt expense
                                                Three Months Ended October 31,                                                Six Months Ended October 31,
                                2020             $ Change           {de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} Change              2019                2020              $ Change           {de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} Change             2019
Bad debt expense              $632,000$ 224,241               55{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}              $407,759$ 1,032,000$ 383,342              59{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}            $ 648,658
As a percentage of revenue       4{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}                                                        3{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}                  3{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}                                                        3{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}



Q2 Fiscal 2021 compared to Q2 Fiscal 2020
Bad debt expense for Q2 Fiscal 2021 increased to $632,000 from $407,759 for Q2
Fiscal 2020, an increase of $224,241, or 55{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}. Based on revenue growth trends and
review of accounts receivable, the Company evaluated its reserve methodology and
increased reserves for Aspen and USU accordingly, as well as $232,000 of Aspen
University student accounts were written off.
1H Fiscal 2021 compared to 1H Fiscal 2020
Bad debt expense for 1H Fiscal 2021 increased to $1,032,000 from $648,658 for 1H
Fiscal 2020, an increase of $383,342, or 59{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}. Based on revenue growth trends and
review of accounts receivable, the Company evaluated its reserve methodology and
increased reserves for Aspen and USU accordingly, as well as $232,000 of Aspen
University student accounts were written off in Q2 Fiscal 2021.

Depreciation and amortization

                                             Three Months Ended October 31,                                                  Six Months Ended October 31,
                             2020             $ Change            {de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} Change             2019                2020              $ Change            {de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} Change              2019
Depreciation and
amortization               $526,357$ (101,868)            (16){de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}             $628,225$ 1,016,981$ (217,818)            (18){de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}           $ 1,234,799
As a percentage of
revenue                       3{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}                                                        5{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}                  3{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}                                                          6{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}


Q2 Fiscal 2021 compared to Q2 Fiscal 2020

Depreciation and amortization for Q2 Fiscal 2021 decreased to $526,357 from
$628,225 for Q2 Fiscal 2020, a decrease of $101,868, or 16{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}. The decrease in
depreciation and amortization expense is due primarily to intangible assets
becoming fully amortized at USU, partially offset by investments in developed
capitalized software to support the Company's services.
1H Fiscal 2021 compared to 1H Fiscal 2020
Depreciation and amortization for 1H Fiscal 2021 decreased to $1,016,981 from
$1,234,799 for 1H Fiscal 2020, a decrease of $217,818, or 18{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}. The decrease in
depreciation and amortization expense is due primarily to intangible assets
becoming fully amortized at USU, partially offset by investments in developed
capitalized software to support the Company's services.
Other expense, net
                                              Three Months Ended October 31,                                                    Six Months Ended October 31,
                             2020               $ Change            {de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} Change              2019               2020               $ Change            {de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} Change              2019
Other expense, net        $1,536,748$ 1,240,355              418{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} 
            $296,393$2,115,503$ 1,418,223              203{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}              $697,280



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Q2 Fiscal 2021 compared to Q2 Fiscal 2020

Other expense, net in Q2 Fiscal 2021 of $1,536,748 primarily includes interest
expense of (i) $1.4 million related to the accelerated amortization expense
related to the conversion of the Convertible Notes which occurred on September
14, 2020 and (ii) $111,507 on the Convertible Notes issued on January 22, 2020
as well as the commitment fee on the Revolving Credit Facility.

Other expense, net in Q2 Fiscal 2020 of $296,393 includes: interest expense of
$428,960 primarily related to the Term Loans issued in March 2019 and the
commitment fees on the Revolving Credit Facility; partially offset by $132,567
of other income.
1H Fiscal 2021 compared to 1H Fiscal 2020
Other expense, net in 1H Fiscal 2021 of $2,115,503 primarily includes: interest
expense of (i) a non-cash charge of $1.4 million of accelerated amortization
expense related to the conversion of the Convertible Notes which occurred on
September 14, 2020; (ii) $0.5 million for the Convertible Notes issued on
January 22, 2020 as well as the commitment fee on the Revolving Credit Facility;
(iii) an adjustment of $0.3 million related to the previously reported earned
revenue fee calculation deemed immaterial to our Fiscal 2019 revenue; (iv) a
non-cash modification and accelerated amortization charges of $0.2 million
related to the exercise of the 2018 and 2019 Cooperman Warrants on June 5, 2020;
partially offset by $0.3 million of other income.
Other expense, net in 1H Fiscal 2020 of $697,280 includes: interest expense of
$0.8 million on the Term Loans issued in March 2019 and the commitment fees on
the Revolving Credit Facility; partially offset by $0.1 million of other income.
Net loss
                                       Three Months Ended October 31,                                                          Six Months Ended October 31,
                     2020                $ Change             {de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} Change               2019                 2020                $ Change              {de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} Change               2019
Net loss         $(4,370,525)$ (3,732,357)            (585){de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}             $(638,168)$ (5,313,721)$ (2,600,271)             (96){de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}            $ (2,713,450)

Q2 Fiscal 2021 compared to Q2 Fiscal 2020

Net loss was $(4,370,525), or net loss per basic and diluted share of $(0.19)
for Q2 Fiscal 2021 as compared to $(638,168), or net loss per share of $(0.03)
for Q2 Fiscal 2020, or an increase in net loss of $(3,732,357), or (585){de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}.

This increase in net loss of $3.7 million includes $2.6 million of non-cash
items previously disclosed ($1.2 million non-cash charge related to the RSU
vesting, and the $1.4 million charge related to the conversion of $10 million
Convertible Notes). Without these two items, the net loss increase would have
been approximately $1.2 million. This $1.2 million increase in net loss
year-over-year is a result of the investments in marketing (approximately $1.6
million), growth opex (approximately $0.25 million) and new campus costs
(approximately $0.25 million) disclosed above.
1H Fiscal 2021 compared to 1H Fiscal 2020

Net loss was $(5,313,721), or net loss per basic and diluted share of $(0.23)
for 1H Fiscal 2021 as compared to $(2,713,450), or net loss per share of $(0.14)
for 1H Fiscal 2020, or an increase in net loss of $(2,600,271), or (96){de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}.
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, Adjusted EBITDA and Adjusted Gross Profit, which are
non-GAAP financial measures. We believe that management, analysts and
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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.

General and administrative

Q2 Fiscal 2021 compared to Q2 Fiscal 2020

General and administrative costs for Q2 Fiscal 2021 were $11.3 million or 66{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of
revenues compared to $7,193,700 or 60{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of revenues during Q2 Fiscal 2020, an
increase of $4,091,455 or 57{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}.

Growth of the business includes the element of growth opex. Growth opex
represents our investment in key infrastructure projects to support our
expansion strategy. In Q2 Fiscal 2021, our growth opex investment of $0.24
million is specifically defined as personnel and related costs to expand our
enrollment center, academic and financial aid advisors, and clinical operations
personnel. In our enrollment center specifically, we decided to grow our
enrollment advisors ("EAs") staff from 96 EAs to 118 EAs, adding EAs across
every unit of the Company. We are now fully staffed for the fiscal year to
accomplish our enrollment goals for the remainder of the fiscal year. New campus
expansion costs were approximately $0.2 million at Aspen University.

This growth spending typically happens in the first half of the fiscal year and
is done in conjunction with our increased marketing spend to drive and support
the increasing enrollment activity across both universities. This investment in
marketing, enrollment staff and other supporting roles will strengthen our
student pipeline for enrollments, which will lead to higher course registrations
and revenue in Q4 and into our next fiscal year.

For Q2 Fiscal 2021, after removing non-cash stock-based compensation expense of
$1.2 million related to the accelerated amortization expense for the price
vesting of Executive RSUs at AGI and the growth investments, our remaining
consolidated G&A was $9.6 million. This represents an increase of $2.4 million
from Q2 Fiscal 2020 compared to the revenue growth of $4.9 million in the year
over year quarter, which is in-line with our target to grow general and
administrative expense at or below 50{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of revenue growth.

1H Fiscal 2021 compared to 1H Fiscal 2020
General and administrative costs for 1H Fiscal 2021 was $20,078,911 or 62{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of
revenues compared to $13,989,951 or 62{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of revenues for 1H Fiscal 2020, an
increase of $6,088,960 or 44{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}.
For 1H Fiscal 2021, after removing non-cash stock-based compensation expense of
$1.2 million related to the accelerated amortization expense for the price
vesting of Executive RSUs at AGI and the growth investments, our remaining
consolidated G&A was $18.3 million. This represents an increase of $4.5 million
from 1H Fiscal 2020 compared to the revenue growth of $9.7 million in the year
over year period, which is in-line with our target to grow general and
administrative expense at or below 50{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of revenue growth.

Adjusted Net Income (Loss) and Adjusted Earnings (Loss) Per Share

AGI defines Adjusted Net Income (Loss) as net earnings (loss) from operations
adding back stock-based compensation expense and non-recurring charges as
reflected in the table below.
Q2 Fiscal 2021 includes non-cash stock-based compensation expense of $1.2
million related to the accelerated amortization expense for the price vesting of
Executive RSUs and non-recurring charges of $1.4 million related to the
accelerated amortization expense of the original issue discount for the
automatic conversion of $10 million Convertible Notes on September 14, 2020,
which is included in interest expense on the statement of operations.

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1H 2021 includes non-cash stock-based compensation expense of $1.2 million and
non-recurring charges of $1.9 million primarily related to items described above
in the Q2 Fiscal 2021 discussion, and $123,947 of interest expense which arose
from the acceleration of amortization arising from the exercise of warrants
issued to a lender incurred in Q1 Fiscal 2021.
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:
                                                     Three Months Ended October 31,                    Six Months Ended October 31,
                                                        2020                    2019                    2020                     2019
Earnings (loss) per share                       $           (0.19)         $     (0.03)         $         (0.23)            $      (0.14)
Weighted average number of common stock
outstanding*                                           22,791,503           18,985,371               22,763,235               18,859,344
Net loss                                        $      (4,370,525)$  (638,168)$    (5,313,721)$ (2,713,450)
Add back:
  Stock-based compensation                              1,831,548              492,130                2,318,658                  990,547
  Non-recurring charges                                 1,362,819                    -                1,906,203                  132,949
Adjusted Net (Loss)                             $      (1,176,158)$  (146,038)$    (1,088,860)$ (1,589,954)
Adjusted (Loss) per Share                       $           (0.05)         $     (0.01)         $         (0.05)            $      (0.08)


________________

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

EBITDA and Adjusted EBITDA

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

                                                      Three Months Ended October 31,                    Six Months Ended October 31,
                                                         2020                    2019                    2020                     2019
Net loss                                         $      (4,370,525)$  (638,168)$    (5,313,721)$ (2,713,450)
Interest expense, net                                    1,529,517              426,694                1,984,740                  846,761
Taxes                                                       36,530               44,168                   34,630                  134,445
Depreciation and amortization                              526,357              628,225                1,016,981                1,234,799
EBITDA                                                  (2,278,121)             460,919               (2,277,370)                (497,445)
Bad debt expense                                           632,000              407,759                1,032,000                  648,658
Stock-based compensation                                 1,831,548              492,130                2,318,658                  990,547
Non-recurring charges                                            -                    -                  419,437                  132,949
Adjusted EBITDA                                  $         185,427          $ 1,360,808$     1,492,725$  1,274,709



Q2 Fiscal 2021 compared to Q2 Fiscal 2020
The Company incurred an EBITDA of $(2,278,121) for Q2 Fiscal 2021 compared to an
EBITDA of $460,919 for Q2 Fiscal 2020. Adjusted EBITDA decreased to $0.2 million
for Q2 Fiscal 2021 from Adjusted EBITDA of $1.4 million for Q2 Fiscal 2020.

Aspen University generated $2.2 million of net income, EBITDA of $2.7 million
and Adjusted EBITDA of $3.4 million in Q2 Fiscal 2021 as compared to $1.8
million of net income, EBITDA of $2.1 million and Adjusted EBITDA of $2.5
million in Q2 Fiscal 2020. Aspen's Pre-Licensure BSN program accounted for $1.1
million of the $2.7 million EBITDA generated at Aspen University in Q2 Fiscal
2021 as compared to $0.5 million of the $2.1 million EBITDA generated in Q2
Fiscal 2020.

USU generated net income of $0.6 million, EBITDA of $0.6 million and Adjusted
EBITDA of $0.7 million in Q2 Fiscal 2021 as compared to net income of $0.2
million, EBITDA of $0.5 million and Adjusted EBITDA of $0.5 million in Q2 Fiscal
2020.

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AGI corporate incurred net loss of $(7.1 million), EBITDA of ($5.6 million) and
Adjusted EBITDA of ($3.9 million) in Q2 Fiscal 2021 as compared to net loss of
$(2.6 million), EBITDA of ($2.1 million) and Adjusted EBITDA of ($1.6 million)
in Q2 Fiscal 2020. Adjusted EBITDA in Q2 Fiscal 2021 includes non-cash stock
based compensation expense of $1.2 million related to the accelerated
amortization expense for the price vesting of Executive RSUs. EBITDA includes
$1.4 million related to the accelerated amortization expense of the original
issue discount for the automatic conversion of $10 million Convertible Notes on
September 14, 2020.

1H Fiscal 2021 compared to 1H Fiscal 2020
The Company incurred an EBITDA of $(2,277,370) for 1H Fiscal 2021 compared to an
EBITDA of $(497,445) for 1H Fiscal 2020. Adjusted EBITDA increased to $1,492,725
for 1H Fiscal 2021 from Adjusted EBITDA of $1,274,709 for 1H Fiscal 2020.

Aspen University generated $4.5 million of net income, EBITDA of $5.5 million
and Adjusted EBITDA of $6.5 million in 1H Fiscal 2021 as compared to $2.7
million of net income, EBITDA of $3.4 million and Adjusted EBITDA of $4.1
million in 1H Fiscal 2020. Aspen's Pre-Licensure BSN program accounted for $2.1
million of the $5.5 million EBITDA generated at Aspen University in 1H Fiscal
2021 as compared to $0.9 million of the $3.4 million EBITDA generated in 1H
Fiscal 2020.

USU generated net income of $1.6 million, EBITDA of $1.6 million and Adjusted
EBITDA of $1.8 million in 1H Fiscal 2021 as compared to net loss of $0.3
million, EBITDA of $0.3 million and Adjusted EBITDA of $0.5 million in 1H Fiscal
2020.

AGI corporate incurred net loss of $(11.4 million), EBITDA of ($9.4 million) and
Adjusted EBITDA of ($6.9 million) in 1H Fiscal 2021 as compared to net loss of
$(5.2 million), EBITDA of ($4.2 million) and Adjusted EBITDA of ($3.3 million)
in 1H Fiscal 2020. Adjusted EBITDA in 1H Fiscal 2021 includes non-cash stock
based compensation expense of $1.2 million related to the accelerated
amortization expense for the price vesting of Executive RSUs in Q2 Fiscal 2021
and $419,437 of non-recurring charges in Q1 Fiscal 2021, compared to $132,949 of
non-recurring charges in Q1 Fiscal 2020. EBITDA in Q2 Fiscal 2021 includes $1.4
million related to the accelerated amortization expense of the original issue
discount for the automatic conversion of $10 million Convertible Notes on
September 14, 2020. An additional non-recurring item in Q1 Fiscal 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.
Adjusted Gross Profit
AGI defines Adjusted Gross Profit as GAAP Gross Profit including amortization
expense which is included in cost of revenue on the statements of operations.
The following table presents a reconciliation of GAAP Gross Profit to Adjusted
Gross Profit inclusive of amortization:


                                                       Three Months Ended October 31,                        Six Months Ended October 31,
                                                        2020                      2019                      2020                      2019
GAAP Gross Profit                                         $9,289,096$7,638,195$18,280,081$13,403,524
Add back amortization expense included in cost
of revenue:
Intangible Asset Amortization                                 10,516                   16,917                     22,463                    36,059
Call Center Software/Website                                 346,653                  242,797                    661,760                   463,250
Total amortization included in cost of revenue               357,169                  259,714                    684,223                   499,309
Adjusted Gross Profit                                     $9,646,265$7,897,909$18,964,304$13,902,833

Revenue                                                  $16,971,045$12,085,965$32,136,607$22,443,947
Cost of Revenue                                            7,324,780                4,188,056                 13,172,303                 8,541,114
Adjusted Gross Profit                                     $9,646,265$7,897,909$18,964,304$13,902,833

GAAP Gross Profit as a {de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of revenue                            55  {de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}                    63  {de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}                      57  {de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}                     60  {de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}
Adjusted Gross Profit as a {de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of revenue                        57  {de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}                    65  {de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}                      59  {de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}                     62  {de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}



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Q2 Fiscal 2021 compared to Q2 Fiscal 2020
GAAP Gross profit increased by 22{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} to $9,289,096 or 55{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} gross margin for Q2
Fiscal 2021 from $7,638,195 or 63{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} gross margin in Q2 Fiscal 2020. Adjusted
Gross profit increased 22{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} to $9,646,265 or 57{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} gross margin for Q2 Fiscal 2021
from $7,897,909 or 65{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} gross margin in Q2 Fiscal 2020.

Aspen University gross margin represented 56{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of Aspen University revenues for
Q2 Fiscal 2021, and USU gross margin represented 56{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of USU revenues for Q2
Fiscal 2021.

1H Fiscal 2021 compared to 1H Fiscal 2020
GAAP Gross profit increased by 36{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} to $18,280,081 or 57{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} gross margin for 1H
Fiscal 2021 from $13,403,524 or 60{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} gross margin in 1H Fiscal 2020. Adjusted
Gross profit increased 36{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} to $18,964,304 or 59{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} gross margin for 1H Fiscal 2021
from $13,902,833 or 62{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} gross margin in 1H Fiscal 2020.
Aspen University gross margin represented 58{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of Aspen University revenues for
1H Fiscal 2021, and USU gross margin represented 60{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of USU revenues for 1H
Fiscal 2021.
Liquidity and Capital Resources
A summary of the Company's cash flows is as follows:
                                         Six Months Ended
                                           October 31,
                                      2020              2019

Net cash (used in) provided by

  Operating activities           $ (2,076,821)$ (2,025,107)
  Investing activities             (2,244,723)       (1,253,653)
  Financing activities              3,297,107           237,713
  Net decrease in cash           $ (1,024,437)$ (3,041,047)Net Cash Used in Operating Activities
Net cash used in operating activities for the six months ended October 31, 2020
consists of net loss adjusted for non-cash items and the effect of changes in
working capital. Non-cash adjustments include stock-based compensation, bad debt
expense, amortization of debt discounts and issue costs, warrants issued for
services, modification charge for warrants exercised, loss on asset disposition
and other adjustments.
Adjustments to Net loss consist primarily of stock-based compensation of
$2,318,658, amortization of debt discounts of $1,550,854, bad debt expense of
$1,032,000 and depreciation and amortization expense of $1,016,981. The increase
from changes in working capital primarily consists of an increase in gross
accounts receivable (both short and long term accounts receivable, before
allowance for doubtful accounts) of $8,246,180, partially offset by an increase
in deferred revenue of $4,915,504 and accrued expenses of $1,282,983. The
increase in accounts receivable is primarily attributed to the growth in
revenues from increased enrollments and students paying through the monthly
payment plan as well as timing of billings for class start near the end of Q2
Fiscal 2021. The increase in deferred revenue is due primarily to timing of
billings for class start near the end of Q2 Fiscal 2021. The increase in accrued
expenses is due primarily to accrual of executive bonus for Fiscal 2021, accrued
payroll due to higher headcount and related increase in compensation and
benefits expense to support the growth of the business and an increase in
accrued marketing due to timing.

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 operations for the six months ended October 31, 2019 consist
primarily of depreciation and amortization expense of $1,234,799, stock-based
compensation of $889,484 and bad debt expense of $648,658. The increase from
changes in working capital primarily consists of an increase in gross accounts
receivable (both short and long term accounts receivable, before allowance for
doubtful accounts) of $5,211,195, partially offset by an increase in deferred
revenue of $3,052,996. The
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increase in accounts receivable is primarily attributed to the growth in
revenues from increased enrollments and students paying through the monthly
payment plan as well as timing of billings for class start near the end of Q2
Fiscal 2020. The increase in deferred revenue is due primarily to timing of
billings for class start near the end of Q2 Fiscal 2020.

Net Cash Used in Investing Activities
Net cash used in investing activities for the six months ended October 31, 2020
includes purchases of property and equipment of $2,233,348 primarily due to
investments in computer equipment and hardware, Company developed software and
new campuses; and purchases of courseware and accreditation of $11,375.
Net cash used in investing activities for the six months ended October 31, 2019
includes purchases of property and equipment of $1,244,078 primarily due to
investments in Company developed software, computer equipment and hardware and
instructional equipment; and purchases of courseware and accreditation of
$9,575.
Net Cash Provided By Financing Activities
Net cash provided by financing activities for the six months ended October 31,
2020 includes proceeds from stock options exercised of $2,215,315 and proceeds
from warrants exercised of $1,081,792 received from the cash exercise of
warrants associated with the Term Loan and Revolving Credit Facility.
Net cash provided by financing activities for the six months ended October 31,
2019 includes proceeds from stock options exercised of $237,713.

Liquidity and Capital Resources
At December 10, 2020, the Company had cash deposits of approximately $15.9
million and approximately $3.2 million of restricted cash.
The Company also has access to a $5 million Revolving Credit Facility. At
October 31, 2020 and April 30, 2020, there were no outstanding borrowings under
this credit facility. With the conversion of the Convertible Notes on September
14, 2020, the Company does not intend to borrow under this facility.
The Company anticipates that it will need to make capital and other expenditures
in connection with the development and expansion of its campus operations. The
Company's FY Fiscal 2021 capital expenditures are expected to be higher than FY
Fiscal 2020 capital expenditures by approximately $1.0 million related to new
campus costs. Additionally, the Company expects additional cash commitments for
letters of credits related to securing new campus locations.
The Company expects that its existing cash resources will be sufficient to fund
its working capital, including capital expenditures, investing and other needs
for more than the next 12 months.
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
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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.
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{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} 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 the 2017 acquisition of USU.
Goodwill has an indefinite life and is not amortized. Goodwill is tested
annually for impairment.
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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 October 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 rate of subsequent campus openings, the expected effect of
telehealth partnership with A-APN, including in relation to expected graduation
dates, our planned USU MSN-FNP weekend lab immersion expansions, the anticipated
impact of our investment in marketing, enrollment staff and other supporting
roles on our student pipeline for enrollments, course registrations and revenue
in Q4 fiscal 2021 and the next fiscal year, the planned introduction of double
cohorts in the core Pre-Licensure BSN Program and the expected effect of this
increase on our revenue run rate at our main campus, the expected impact of
bookings, our estimates concerning Lifetime Value and ARPU, 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 as a percentage of revenue,
the expected changes in our accounts receivable and allowance for doubtful
accounts, including as a percentage of total revenue, our anticipated increase
in cash flows from operations, the expected impact of the COVID-19 vaccines'
rollout on Q4 2021 course starts, our expectations with respect to capital
expenditures and cash commitments, 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, the continued ability of our in-house
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, any delays or
other issues occurring in the manufacturing, delivery and administration of
COVID-19 vaccines, 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.

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