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Quarterly report pursuant to sections 13 or 15(d)

Significant Accounting Policies

v2.4.0.6
Significant Accounting Policies
 3 Months Ended
Mar. 31, 2012
Notes to Financial Statements  
Significant Accounting Policies

 Principles of Consolidation


The consolidated financial statements include the accounts of Ë¿¹ÏÊÓƵ. and its wholly-owned subsidiaries.  All intercompany balances and transactions have been eliminated in consolidation.

 

Use of Estimates


The preparation of the unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts in the unaudited condensed consolidated financial statements.  Actual results could differ from those estimates.  Significant estimates in the accompanying unaudited condensed consolidated financial statements include the allowance for doubtful accounts and other receivables, the valuation of collateral on certain receivables, the valuation and amortization periods of intangible assets, valuation of stock-based compensation and the valuation allowance on deferred tax assets.


Restricted Cash


Restricted cash represents amounts pledged as security for transactions involving Title IV programs.  Upon the DOE’s completion of its review of the Company’s application to participate in Title IV programs, the funds are expected to be released and available for use by the Company.


Consistent with the Higher Education Act, Aspen’s certification to participate in Title IV programs terminated after closing of the Reverse Merger, and Aspen must apply to DOE to reestablish its eligibility and certification to participate in the Title IV programs.  However, in order to avoid significant disruption in disbursements of Title IV funds, the DOE may temporarily and provisionally certify an institution that is seeking approval of a change in ownership, like Aspen, under certain circumstances while the DOE reviews the institution’s application.  On March 15, 2012 the DOE asked Aspen to provide to the DOE by March 28, 2012 a letter of credit in the amount of $105,865, which is 10% of Aspen’s Title IV receipts in 2011.  On March 27, 2012, the Company opened a 12-month money market account, bearing 0.20% interest, maturing March 28, 2013, with its banking institution in the amount of $105,865 and pledged that to the letter of credit.  The Company shall consider $105,865 as restricted cash until such letter of credit expires.


Fair Value Measurements


Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants.  The Company classifies assets and liabilities recorded at fair value under the fair value hierarchy based upon the observability of inputs used in valuation techniques.  Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed market assumptions. The fair value measurements are classified under the following hierarchy:

 

 

• Level 1—Observable inputs that reflect quoted market prices (unadjusted) for identical assets and liabilities in active markets;

 

 

• Level 2—Observable inputs, other than quoted market prices, that are either directly or indirectly observable in the marketplace for identical or similar assets and liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets and liabilities; and

 

 

• Level 3—Unobservable inputs that are supported by little or no market activity that are significant to the fair value of assets or liabilities.


The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.

 

Table of Contents

 

ASPEN GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2012

(Unaudited)

 


Instructional Costs and Services


Instructional costs and services consist primarily of costs related to the administration and delivery of the Company's educational programs.  This expense category includes compensation for faculty and administrative personnel, costs associated with online faculty, curriculum and new program development costs, bad debt expense related to accounts receivable, technology license costs and costs associated with other support groups that provide services directly to the students.

 

General and Administrative


General and administrative expenses include compensation of employees engaged in corporate management, finance, human resources, information technology, compliance and other corporate functions.  General and administrative expenses also include consulting fees, financial aid processing costs, professional services fees, travel and entertainment expenses and facility costs.


Net Loss Per Share


Net loss per common share is based on the weighted average number of shares of common stock outstanding during each period. Common stock equivalents, including 2,070,000 and 0 stock options, 493,500 and 0 stock warrants, and a variable amount of shares underlying $670,000 (a minimum of 670,000 common shares as of March 31, 2012) and $162,000 of convertible notes payable for the three months ended March 31, 2012 and 2011, respectively, are not considered in diluted loss per share because the effect would be anti-dilutive.


Reclassifications


Certain amounts in the accompanying financial statements have been reclassified as compared to how they were originally reported.  In particular, consulting expenses have been reclassified from marketing and promotional costs to general and administrative costs.  Call center expenses and Title IV student processing expenses have been reclassified from instructional costs and services to general and administrative costs.  The following table shows the reclassifications to the condensed consolidated statement of operations for the three months ended March 31, 2012 and 2011.

 

 

 

 

    For the Three Months Ended March 31, 2012                    
          Reclassifications                    
                      Title IV                    
                      Student           Correction        
    As Previously     Consulting     Call Center     Processing     As     of an Error     As  
    Reported     Expense     Expenses     Expenses     Reclassified     (See Note 13)     Restated  
                                           
Costs and expenses:                                          
Instructional costs and services   $ 808,902           $ (60,850 )   $ (6,900 )   $ 741,152     $ 163,545     $ 904,697  
Marketing and promotional     482,565     $ (45,260 )                     437,305               437,305  
General and adminstrative     1,606,316       45,260       60,850       6,900       1,719,326               1,719,326  
Depreciation and amortization     89,749                               89,749               89,749  
Total costs and expenses   $ 2,987,532                             $ 2,987,532             $ 3,151,077  

  

Table of Contents

 

ASPEN GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2012

(Unaudited)

 

 

    For the Three Months Ended March 31, 2011        
          Reclassifications        
                      Title IV        
                      Student        
    As Previously     Consulting     Call Center     Processing     As  
    Reported     Expense     Expenses     Expenses     Reclassified  
                               
Costs and expenses:                              
Instructional costs and services   $ 552,867           $ (13,838 )   $ (7,770 )   $ 531,259  
Marketing and promotional     113,594     $ (34,000 )                     79,594  
General and adminstrative     312,889       34,000       13,838       7,770       368,497  
Depreciation and amortization     52,445                               52,445  
Total costs and expenses   $ 1,031,795                             $ 1,031,795  

 

Recent Accounting Pronouncements


In June 2011, the FASB, issued ASU 2011-05, which amends ASC Topic 220, Comprehensive Income, which requires an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements.  It eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders' equity.  The ASU does not change the items which must be reported in other comprehensive income, how such items are measured or when they must be reclassified to net income.  This ASU is effective for interim and annual periods beginning after December 15, 2011.  The Company adopted ASU 2011-05 effective January 1, 2012, and such adoption did not have a material effect on the Company's financial statements.