果冻APP传媒

Note 1. Nature of Operations and Liquidity

Overview

果冻APP传媒 Group, Inc. (together with its subsidiaries, the 聯Company,聰 聯果冻APP传媒,聰 or 聯AGI聰) is a holding company, which has three subsidiaries. They are 果冻APP传媒 University, Inc. (聯果冻APP传媒 University聰) organized in 1987, 果冻APP传媒 Nursing, Inc. (a subsidiary of 果冻APP传媒 University) and United States University, Inc. (聯USU聰) formed in May 2017. USU was the vehicle we used to acquire United States University on December 1, 2017. (See Note 8). When we refer to USU in this Report, we refer to either the online university which has operated under the name United States University or our subsidiary which operates this university, as the context illustrates.

AGI is an education technology holding company that leverages its infrastructure and expertise to allow its two universities, 果冻APP传媒 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聮 long-term economic success, we exert financial prudence by offering affordable tuition that is one of the greatest values in higher education. In 2014, 果冻APP传媒 University unveiled a monthly payment plan aimed at reversing the college-debt sentence plaguing working-class Americans. The monthly payment plan offers 果冻APP传媒 University bachelor students (except RN to BSN) the opportunity to pay their tuition at $250/month for 72 months ($18,000), nursing bachelor students (RN to BSN) $250/month for 39 months ($9,750), master students $325/month for 36 months ($11,700) and doctoral students $375/month for 72 months ($27,000), interest free, thereby giving students a monthly payment tuition payment option versus taking out a federal financial aid loan.

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

Additionally, 果冻APP传媒 University began its first semester in July 2018 for its previously announced pre-licensure Bachelor of Science in Nursing (BSN) degree program at its initial campus in Phoenix, Arizona. As a result of overwhelming demand in the Phoenix metro area, 果冻APP传媒 University began offering both day (July, November, and March semesters) and evening/weekend (January, May, and September semesters) programs in January 2019, equaling six semester starts per year. 果冻APP传媒聮s innovative hybrid (online/on-campus) program allows most of the credits to be completed online (83 of 120 credits or 69%), with pricing offered at 果冻APP传媒聮s current low tuition rates of $150/credit hour for online general education courses and $325/credit hour for online core nursing courses. For high school students with no prior college credits, the total cost of attendance is less than $50,000.

Since 1993, 果冻APP传媒 University has been nationally accredited by the Distance Education and Accrediting Council (聯DEAC聰), a national accrediting agency recognized by the U.S. Department of Education (the 聯DOE聰). In February 2019, the DEAC informed 果冻APP传媒 University that it had renewed its accreditation for five years through January 2024.

Since 2009, USU has been regionally accredited by WASC Senior College and University Commission. (聯WSCUC聰). In March 2019, the Company was informed of WSCUC聮s formal acceptance of USU聮s Special Visit Review which resulted in confirmation of the university聮s accreditation. 听听

Both universities are qualified to participate under the Higher Education Act of 1965, as amended (HEA) and the Federal student financial assistance programs (Title IV, HEA programs). USU has a provisional certification resulting from the AGI ownership change of control on December 1, 2017.

Basis of Presentation

A. Interim Financial Statements

The interim consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the 聯SEC聰). In the opinion of the Company聮s management, all adjustments (consisting of normal recurring adjustments and reclassifications and non-recurring adjustments) necessary to present fairly our results of operations for the nine months ended January 31, 2019 and 2018, our cash flows for the nine months ended January 31, 2019 and 2018, and our financial position as of January 31, 2019 have been made. The results of operations for such interim periods are not necessarily indicative of the operating results to be expected for the full year.

Certain information and disclosures normally included in the notes to the annual consolidated financial statements have been condensed or omitted from these interim consolidated financial statements. Accordingly, these interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Report on Form 10-K for the period ended April听30, 2018 as filed with the SEC on July 13, 2018. The April听30, 2018 balance sheet is derived from those statements.

B. Liquidity

At January 31, 2019, the Company had a cash balance of $4,197,235 with an additional $192,692 in restricted cash.

听

In April 2018, the Company raised $23,023,000 in equity through the sale of 3,220,000 shares at $7.15 per share. With the proceeds, the Company repaid a $7.5 million senior secured term loan.

听

On November 5, 2018 the Company entered into a three year, senior unsecured revolving credit facility. There is currently no outstanding balance under that facility.

The Company paid $1,160,000 of principal and accrued interest related to a convertible note on December 3, 2018, as explained in Note 5. The Company also anticipates ongoing investment spending, including an expected investment of approximately $600,000 related to the new campus for its Pre-Licensure BSN Program with Honor Health.

During the nine months ending January 31, 2019 the Company used cash of $10,413,138, which included using $7,430,550 in operating activities. The Company expects revenue growth to continue, and expenses to grow at a slower pace. As a result, the Company expects cash used in operations to decline in future quarters as compared to the quarter ending January 31, 2019.

听

As disclosed in more detail in Note 11 subsequent events, in March 2019, the Company entered into loan agreements and received proceeds of $10 million. 听In connection with the loan agreements, the Company issued 18 month senior secured promissory notes, with the right to extend the term of the loan for an additional 12 months by paying a 1% one-time extension fee. Also, on February 25, 2019, the Company repaid the remaining $1 million of principal and paid $80,000 of interest under the convertible note due December 1, 2019, which was the final payment due from the acquisition of USU. (See Note 11)

The Company has considered its liquidity position and believes its current resources are adequate to meet anticipated liquidity needs.