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Note 12. StockholdersÂ’ Equity

Preferred Stock

The Company is authorized to issue 1,000,000 shares of “blank check” preferred stock with designations, rights and preferences as may be determined from time to time by our Board of Directors. As of April 30, 2019 and April 30, 2018, we had no shares of preferred stock issued and outstanding. On June 28, 2019 the CompanyÂ’s Stockholders voted to reduce the number of Authorized Shares of Common Stock from 250 million to 40 million shares. ÌýThe number of authorized shares of Preferred Stock was also reduced from 10 million to 1 million shares.

Common Stock

Effective May 24, 2017, the Company entered into waiver agreements with all of its investors in the April 2017 common stock offering. In consideration for waiving their registration rights, the Company paid to each of the investors 1.5% of their investment amount in the offering. The total amount paid was $112,500 and was recorded in general and administrative expenses during the quarter ended July 31, 2017.

In November 2017, the company issued 5,000 restricted shares each to two consultants assisting with establishing the new campus. The shares were valued at $88,699 based on the trading price of $8.87 on the grant date and recorded as a prepaid asset being amortized over the six month term of the agreement.

On December 1, 2017 certain assets were acquired and certain liabilities assumed from Educacion Significativa, LLC (dba United States University) by United States University, Inc. United States University, Inc. is a wholly owned subsidiary of Aspen Group Inc. (“AGI”). As part of the purchase price the company issued 1,203,209 shares of AGI stock were valued at the quoted closing price of $8.49 per share as of November 30, 2017. (See Note 5)

On April 18, 2018 and April 23, 2018, the Company raised a total of $23,023,000 through an equity raise of 3,220,000 shares of common stock at $7.15 per share. The number of shares raised on April 18, 2018 was 2,800,000 and then another 420,000 shares were raised on April 23, 2018. The cost of raising these funds was approximately $2.2 million and was recorded as a reduction of equity. Proceeds from the equity raise were first used to repay the senior secured term loan and the remainder to support the operations of USU and the pre-licensure campus.

During fiscal 2018, the Company issued 171,962 shares of common stock upon the cashless exercise of warrants.

During fiscal 2018, the Company issued 87,775 shares of common stock upon the exercise of warrants and received proceeds of $246,380.

During fiscal 2018, the Company issued 136,563 shares of common stock upon the exercise of stock options and received proceeds of $475,825.

During the year ended April 30, 2019, the Company issued 111,666 shares of common stock upon the cashless exercise of stock options.

During the year ended April 30, 2019, the Company issued 119,594 shares of common stock upon the cashless exercise of 218,323 stock warrants.

During the year ended April 30, 2019, the Company issued 56,910 shares of common stock upon the exercise of stock options for cash and received proceeds of $128,201.

During the year ended April 30, 2019, the Company issued 43,860 shares of common stock upon the exercise of 43,860 stock warrants for cash and received proceeds of $100,000.

Restricted Stock

On September 6, 2018, the Board approved a grant of 25,000 shares of restricted stock to the Chief Financial Officer. The stock vests over 36 months and the stock price was $7.15 on the date of the grant. The value of the compensation was approximately $180,000 and will be recognized over 36 months.

On December 24, 2018, the Compensation Committee of the Board approved a grant of a total of 24,672 shares or restricted common stock to certain directors pursuant to the Ë¿¹ÏÊÓƵ. 2018 Equity Incentive Plan (the “2018 Plan”). The restricted shares shall vest in three equal annual increments on December 24, 2019, December 24, 2020 and December 24, 2021, subject to continued service as a director of the Company, on each applicable vesting date. The compensation of these restricted shares is approximately $127,000 and will be recognized over 36 months. Also, one director opted for an annual payment in cash of $35,000, which will be paid quarterly, in lieu of the restricted stock grant. Expense recognition for the restricted stock and the cash payment commenced on December 24, 2018.

On April 10, 2019, the Company granted 25,000 shares to its investor relations firm, of which 5,000 were vested and the balance vest quarterly over one year, subject to continued service. The total value was $122,250 since the stock closed at $4.89 on April 10, 2019, which will be recognized over the service period.

There were no unvested shares outstanding at April 30, 2018. During fiscal 2019, 10,556 shares of the above restricted stock issuances vested leaving 64,116 total unvested shares at April 30, 2019. Total unrecognized compensation expense related to the unvested common shares as April 30, 2019 amounted to approximately $340,000 which will be amortized over the remaining vesting periods.

Treasury Stock

On July 19, 2018, AGI in simultaneous transactions repurchased 1,000,000 shares of common stock at $7.40 per share and re-sold the shares to a large well-known institutional money manager at $7.40 per share. The shares were purchased by the Company from ESL pursuant to a Securities Purchase Agreement dated July 18, 2018. The purchaser paid $30,000 to a broker-dealer in connection with the transaction. (See Note 14)

Warrants

A summary of the CompanyÂ’s warrant activity during the year ended April 30, 2019 is presented below:

In connection with the Senior Secured Term Loan that was finalized on July 25, 2017, the Company issued 224,174 5-year warrants at an exercise price of $6.87.

In the year ended April 30, 2018, the Company issued 259,737 shares of Common Stock in conjunction with the cash and cashless exercise of 398,526 warrants. The Company received $246,380 in conjunction with the cash exercises.

As noted in Note 10, 92,049 warrants were granted as part of the Credit Facility Agreement executed on November 8, 2018. ÌýThe warrants are five year warrants and exercisable at a price of $5.85.

The Company granted 200,000 warrants on March 5, 2019 related to senior secured loans.

The Company granted 50,000 warrants on April 10, 2019 to an advisory board member for services. The warrants vest ratably over three years.

During the year ended April 30, 2019, 262,183 warrants were exercised. Of these, 218,323 warrants were cashless exercises resulting in 119,594 shares being issued and 43,860 were exercised for cash resulting in 43,860 shares being issued and generating $100,000 in proceeds.

On June 3, 2019, a former director did a cashless exercise of 21,930 warrants, receiving 9,806 shares. On June 7, 2019, the CEO did a cashless exercise for the same amount receiving 9,597 shares.

Stock Incentive Plan and Stock Option Grants to Employees and Directors

On March 13, 2012, the Company adopted the Ë¿¹ÏÊÓƵ. 2012 Equity Incentive Plan (the “2012 Plan”) that provides for the grant of 3,500,000 shares in the form of incentive stock options, non-qualified stock options, restricted shares, stock appreciation rights and restricted stock units to employees, consultants, officers and directors. As of April 30, 2019, there were 322,712 shares remaining available for future issuance under the 2012 Plan.

On December 13, 2018, the stockholders of the Company approved the “2018 Plan” that provides for the grant of 500,000 shares in the form of incentive stock options, non-qualified stock options, restricted shares, stock appreciation rights and restricted stock units to employees, consultants, officers and directors. As of April 30, 2019, there were approximately 8,000 shares remaining available for future issuance under the Plan.

The Company estimates the fair value of share-based compensation utilizing the Black-Scholes option pricing model, which is dependent upon several variables such as the expected option term, expected volatility of the CompanyÂ’s stock price over the expected term, expected risk-free interest rate over the expected option term, expected dividend yield rate over the expected option term, and an estimate of expected forfeiture rates. The Company believes this valuation methodology is appropriate for estimating the fair value of stock options granted to employees and directors which are subject to ASC Topic 718 requirements. These amounts are estimates and thus may not be reflective of actual future results, nor amounts ultimately realized by recipients of these grants. The Company recognizes compensation on a straight-line basis over the requisite service period for each award. The following table summarizes the assumptions the Company utilized to record compensation expense for stock options granted to employees during the period ended.

The Company utilized the simplified method to estimate the expected life for stock options granted to employees. The simplified method was used as the Company does not have sufficient historical data regarding stock option exercises. The expected volatility is based on historical volatility. The risk-free interest rate is based on the U.S. Treasury yields with terms equivalent to the expected life of the related option at the time of the grant. Dividend yield is based on historical trends. While the Company believes these estimates are reasonable, the compensation expense recorded would increase if the expected life was increased, a higher expected volatility was used, or if the expected dividend yield increased.

A summary of the CompanyÂ’s stock option activity for employees and directors during the year ended April 30, 2019, is presented below:

On May 13, 2017, the Company granted its executive officers a total of 500,000 five-year options to purchase shares of the CompanyÂ’s common stock under the Plan. The options vest annually over three years, subject to continued employment at each applicable vesting date, and are exercisable at $4.90 per share. The Chairman and Chief Executive Officer received 200,000 options with a fair value of $282,000, the Chief Operating Officer received 200,000 options with a fair value of $282,000, the Chief Academic Officer received 70,000 options with a fair value of $98,700 and the Chief Financial Officer received 30,000 options with a fair value of $42,300.

In May 2017, the Company issued 5,500 stock options to various employees at exercise prices ranging from $4.95 to $5.10 per share.

Effective June 11, 2017, the Company granted the Chief Academic Officer 30,000 five-year options. The options vest quarterly over a three-year period in 12 equal quarterly increments with the first vesting date being September 11, 2017, subject to continued employment on each applicable vesting date. The options are exercisable at $6.28 per share and the fair value is $54,000.

On August 21, 2017, 52,250 options were issued to 24 employees with an exercise price of $5.95 per share and a fair value of $89,348.

On January 4, 2018, 180,000 options were issued to the board of directors with an exercise price of $9.07 per share and a fair value of $421,200.

On January 17, 2018, 74,000 options were issued to 23 employees with an exercise price of $8.57 per share and a fair value of $149,480.

On February 12, 2018, 31,000 options were granted to 21 employees with an exercise price of $7.31 per share and a fair value of $54,250.

On April 5, 2018, 19,000 options were granted to 24 employees with an exercise price of $7.31 per share and a fair value of $33,250.

During the year ended April 30, 2018, the company issued 113,597 shares of common stock in conjunction with the exercise of 63,838 stock options. The company received $455,387 related to these exercises.

During the year ended April 30, 2019, the Company issued 111,666 shares of common stock upon the cashless exercise of stock options.

During the year ended April 30, 2019, the Company issued 56,910 shares of common stock upon the exercise of stock options for cash and received proceeds of $128,202.

On July 19, 2018, the Board granted 200,000 five year options to the Chief Executive Officer and 180,000 options to each of the Chief Operating Officer and Chief Academic Officer. The fair value per option was $2.56 or $1,433,600 for all 560,000 options granted. The exercise price is $7.55 per share. As of September 6, 2018, the Board approved 180,000 five-year options to the Chief Financial Officer and 50,000 five-year options to the Chief Accounting Officer. The fair value of the two grants on September 6, 2018 was $257,400 for the Chief Financial Officer and $71,500 for the Chief Accounting Officer. As required by the rules of the Nasdaq Stock market, both option grants subject to shareholder approval which occurred on December 13, 2018, which will be the measurement date for recording the transaction and the compensation will be recognized over 33 months. In April 2019, the CEO rescinded his grant and the expenses associated with the unvested options previously recorded was reversed during the year ended April 30, 2019.

On December 13, 2018, the Company granted 67,000 options to 61 employees who had been hired throughout 2018. The fair value of these options was approximately $136,000 and will be recognized over 36 month. The exercise price is $5.20.

On December 24, 2018, the Company granted 61,667 options to three directors, 41,667 to one director, and 10,000 each to two others. The exercise price is $5.1445 and the total fair value was approximately $123,000, which will be recognized over 36 months.

In April 30, 2019, the Company granted 65,750 options to 44 new and continuing employees. The exercise price is $4.56 and the fair value was approximately $117,000.

Effective May 13, 2019, the Company granted 10,000 five-year non-qualified stock options to each of three former directors exercisable at $4.12 per share. On June 18, 2019, as a result of errors in a third party software system used to track stock options, the Company granted Andrew Kaplan, a current director, and two former directors (not recipients of the options in the first sentence) 5,131, 15,000 and 10,000 shares of restricted common stock, respectively.

The Company recorded compensation expense of $1,190,385 for the year ended April 30, 2019 in connection with employee stock options and restricted stock grants.

As of April 30, 2019, there was $1,917,367 of unrecognized compensation costs related to non-vested share-based option arrangements. That cost is expected to be recognized over a weighted-average period of approximately 2.5Ìýyears.