Note 11. Subsequent Events

Term Loans

On March 6, 2019, the Company entered into loan agreements (each a “Loan Agreement” and together, the “Loan Agreements”) with the Foundation, of which Mr. Leon Cooperman, a stockholder of the Company, is the trustee, and another stockholder of the Company (each a “Lender” and together, the “Lenders”). Each Loan Agreement provides for a $5 million term loan (each a “Loan” and together, the “Loans”), evidenced by a term promissory note and security agreement (each a “Note” and together, the “Term Notes”), for combined total proceeds of $10 million. The Company borrowed $5 Million from each Lender that day. The Term Notes bear interest at 12% per annum and mature on September 6, 2020, subject to one 12-month extension upon the Company’s option, and upon payment of a 1% one-time extension fee.

Pursuant to the Loan Agreements and the Term Notes, all future or contemporaneous indebtedness incurred by the Company, including any sums borrowed under the $5 Million Credit Facility Agreement (see Note 5), other than indebtedness expressly permitted by the Loan Agreements and the Term Notes, will be subordinated to the Loans.

The Company’s obligations under the Loan Agreements are secured by a first priority lien in certain deposit accounts of the Company, all current and future accounts receivable of Aspen University and USU, subsidiaries of the Company (the “Subsidiaries”), certain of the deposit accounts of the Subsidiaries and all of the outstanding capital stock of the Subsidiaries (the “Collateral”).

Amendment to the Credit Facility Agreement

On March 6, 2019, in connection with entering into the Loan Agreements, the Company amended and restated the Credit Facility Agreement (the “Amended and Restated Facility Agreement”) and the related revolving promissory note. The Amended and Restated Facility Agreement provides among other things that the Company’s obligations thereunder are secured by a first priority lien in the Collateral, on a pari passu basis with the Lenders.

Intercreditor Agreement

On March 6, 2019, in connection with entering into the Loan Agreements, the Company also entered into an intercreditor agreement (the “Intercreditor Agreement”) among the Company, the Lenders and the lender under the Credit Facility Agreement. The Intercreditor Agreement provides among other things that the Company’s obligations under, and the security interests in the Collateral granted pursuant to, the Loan Agreements and the Amended and Restated Facility Agreement shall rank pari passu to one another.

Warrants

Pursuant to the Loan Agreements, on March 6, 2019 the Company issued to each Lender warrants to purchase 100,000 shares of the Company’s common stock exercisable for five years from the date of issuance at the exercise price of $6.00 per share.

Payment of Convertible Note

On February 25, 2019, the Company prepaid the remaining $1,000,000 of principal of and paid $80,000 interest under the convertible note in the initial principal amount of $2,000,000 issued on December 1, 2017 (the “Convertible Note”)(See Notes 5 and 8). The $80,000 paid represents the interest which would have accrued on the outstanding principal amount of the Convertible Note on December 1, 2019, the final maturity date. Upon the receipt of the payment, the Convertible Note was terminated. This prepayment eliminated the note holder’s option to convert principal and interest into the Company’s common stock on the scheduled maturity date and also was pre-condition for borrowing the $10,000,000 under the Loan Agreements.

Letter of Credit Increase for USU

The DOE has notified USU that an additional letter of credit (“LOC”) for $255,708 needs to be provided to the DOE by March 31, 2019. Although USU passed its composite score, this increase is due to the score on its acid ratio test.  The LOC is for one year.