8-K/A - APEI - Equibles

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K/A

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of TheSecurities Exchange Act of 1934

Date of Report (Date of earliest event reported): September 1, 2021

American Public Education, Inc.

(Exact name of registrant as specified in its charter)

Delaware	001-33810	01-0724376
(State or other jurisdiction<br><br> of<br> incorporation)	(Commission<br><br> File Number)	(IRS Employer<br><br> Identification No.)
111 W. Congress Street<br><br> <br>Charles Town, West Virginia	25414
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(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code:

304-724-3700

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the<br> Exchange Act (17 CFR 240.13e-4(c))
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Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	APEI	Nasdaq Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

EXPLANATORY NOTE

This Current Report on Form 8-K/A (this “Amendment”) amends the Current Report on Form 8-K filed by American Public Education, Inc. (the “Company”) on September 2, 2021 (the “Initial Form 8-K”) relating to the completed acquisition of Rasmussen, LLC by the Company.

This Amendment amends the Initial Form 8-K to include the historical financial statements and pro forma financial information required by Items 9.01(a) and 9.01(b) of Form 8-K and should be read in conjunction with the Initial Form 8-K.

Section 9 – Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits

(a)	Financial Statements of Business Acquired

Audited consolidated balance sheets of Rasmussen as of December 31, 2020 and December 31, 2019, and the related consolidated statements of income, stockholder’s equity and cash flows for each of the two years in the period ended December 31, 2020, are attached hereto as Exhibit 99.2 and incorporated herein by reference.

Unaudited interim consolidated financial statements of Rasmussen as of and for the six months ended June 30, 2021 and June 30, 2020 are attached hereto as Exhibit 99.3 and incorporated herein by reference.

(b)	Pro Forma Financial Information

Unaudited pro forma condensed combined financial information of the Company and Rasmussen as of and for the nine months ended September 30, 2021 and for the year ended December 31, 2020 are attached hereto as Exhibit 99.4 and incorporated herein by reference.

(d)	Exhibits
Exhibit No.	Description
---	---
2.1	Membership Interest Purchase Agreement, dated October 28, 2020, by and among American Public Education, Inc., FAH Education, LLC,<br>Rasmussen, LLC, and Rasmussen College, LLC (incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K<br>(File No. 001-33810) filed with the Securities and Exchange Commission on October 29, 2020).
10.1	Credit Agreement, dated September 1, 2021, by and among American Public Education, Inc., the Lenders and Issuing Banks from<br>time to time party thereto, Macquarie Capital Funding LLC, Macquarie Capital (USA) Inc., and Truist Securities, Inc. (incorporated<br>by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 001-33810) filed with the Securities and Exchange<br>Commission on September 2, 2021). *
10.2	Collateral Agreement, dated September 1, 2021, by and among American Public Education, Inc., Macquarie Capital Funding LLC, as administrative<br>agent and collateral agent and the Guarantors from time to time party thereto (incorporated by reference to Exhibit 10.2 to the Company’s<br>Current Report on Form 8-K (File No. 001-33810) filed with the Securities and Exchange Commission on September 2, 2021). *
23.1	Consent of McClintock & Associates, independent auditor<br>to Rasmussen, LLC.
99.1	American Public Education, Inc. press release dated September 2, 2021 (incorporated by reference to Exhibit 99.1 to the Company’s<br>Current Report on Form 8-K (File No. 001-33810) furnished with the Securities and Exchange Commission on September 2, 2021).
99.2	Audited consolidated balance sheets of Rasmussen, LLC as of December 31, 2020 and December 31, 2019, and the related consolidated<br>statements of income, stockholder’s equity and cash flows for each of the two years in the period ended December 31, 2020.
99.3	Unaudited interim consolidated financial statements of Rasmussen, LLC as of and for the six months ended June 30, 2021 and June 30,<br>2020.
99.4	Unaudited pro forma condensed combined financial information of the Company and Rasmussen, LLC as of and for the nine months ended<br>September 30, 2021 and for the year ended December 31, 2020.
104	Cover Page Interactive Data File (embedded within the Inline<br>XBRL document).

* Exhibits and schedules to this agreement have been omitted as permitted under Item 601 of Regulation S-K and will be furnished supplementally upon request to the Securities and Exchange Commission.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		American Public Education, Inc.
Date:	November 17, 2021	By:	/s/ Richard W. Sunderland, Jr.
			Richard W. Sunderland, Jr., Executive Vice President and Chief Financial Officer

Exhibit 23.1

CONSENT OF INDEPENDENT AUDITOR

We hereby consent to the incorporation by reference in this Current Report on Form 8-K/A of our report dated November 15, 2021, relating to the Rasmussen, LLC and Subsidiary Audited Consolidated Financial Statements as of and for each of the years ended December 31, 2020 and 2019.

Sincerely,

/s/ McClintock & Associates, P.C.

McClintock & Associates

Exhibit 99.2

RASMUSSEN,llc

AND SUBSIDIARY

AuditedConsolidated Financial Statements

YearEnded December 31, 2020

andAs of December 31, 2019

andfor the Period from

March 16,2019 to December 31, 2019 (Successor)

andfor the Period from

January 1,2019 to March 15, 2019 (Predecessor)

IndependentAuditor’s Report

To the Member

Rasmussen, LLC and Subsidiary

Oak Brook, Illinois

We have audited the accompanying consolidated financial statements of Rasmussen, LLC and Subsidiary which comprise the consolidated balance sheets as of December 31, 2020 and 2019, and the related consolidated statements of income, comprehensive income, changes in member’s equity (Successor), changes in shareholders’ equity (Predecessor), and cash flows for the year ended December 31, 2020 and for the period from March 16, 2019 to December 31, 2019 (Successor) and for the period from January 1, 2019 to March 15, 2019 (Predecessor), and the related notes to the consolidated financial statements.

Management’sResponsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’sResponsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Rasmussen, LLC and Subsidiary as of December 31, 2020 and 2019, and the results of their operations and their cash flows for the year ended December 31, 2020 and for the period from March 16, 2019 to December 31, 2019 (Successor) and for the period from January 1, 2019 to March 15, 2019 (Predecessor) in accordance with accounting principles generally accepted in the United States of America.

/s/ McClintock & Associates, P.C.

Pittsburgh, Pennsylvania

October 29, 2021

Rasmussen, LLC and Subsidiary

ConsolidatedBalance Sheets (in thousands)

ASSETS


		2019
CURRENT ASSETS
Cash and cash equivalents	37,076	$	15,823
Restricted cash	786		706
Accounts receivable, net of allowance<br> for doubtful accounts of 3,385 and 4,159, respectively	5,938		4,157
Prepaid expenses	4,496		3,715
Other current assets	1,912		1,194
TOTAL CURRENT ASSETS	50,208		25,595
FURNITURE, EQUIPMENT AND IMPROVEMENTS, net	31,137		27,075
OTHER ASSETS
Deposits and other assets	576		89
Due from Parent	0		1,752
Curriculum development costs, net of<br> accumulated amortization of 250 and 0, respectively	1,206		0
Goodwill	66,526		66,526
Other intangible assets, net of accumulated<br> amortization of 22,870 and 10,105, respectively	44,053		56,818
TOTAL OTHER ASSETS	112,361		125,185
TOTAL ASSETS	193,706	$	177,855

All values are in US Dollars.

LIABILITIES AND MEMBER'S EQUITY
CURRENT LIABILITIES
Accounts payable	$	12,771	$	2,133
Accrued expenses		6,468		6,706
Due to students under financial aid<br> programs		786		706
Prepaid tuition		4,155		3,676
Deferred revenue and scholarships		0		1,590
Current portion of long-term debt,<br> net of deferred financing costs		5,363		11,503
TOTAL CURRENT LIABILITIES		29,543		26,314
LONG-TERM LIABILITIES
Long-term debt, net of current portion<br> and deferred financing costs		40,965		59,580
Deferred rent		4,604		314
Fair value of interest rate swap contract		1,431		852
Other long-term liabilities		492		1,287
TOTAL LONG-TERM LIABILITIES		47,492		62,033
MEMBER'S EQUITY		116,671		89,508
TOTAL LIABILITIES AND MEMBER'S<br> EQUITY	$	193,706	$	177,855

See accompanying notes to consolidated financial statements.

Rasmussen, LLC and Subsidiary

ConsolidatedStatements of Income (in thousands)

				Successor			Predecessor
				March 16,			January 1,
	Year Ended			2019 to			2019 to
	December 31,			December 31,			March 15,
	2020			2019			2019
REVENUES	$	261,545		$	193,171		$	51,354
OPERATING EXPENSES
Instructional		107,812			88,186			19,591
General and administrative		40,931			30,173			12,639
Admissions		68,368			52,527			12,699
Depreciation and amortization		20,137			15,697			1,059
TOTAL OPERATING EXPENSES		237,248			186,583			45,988
INCOME FROM OPERATIONS BEFORE OTHER<br> INCOME (EXPENSE)		24,297			6,588			5,366
Investment income		86			62			114
Interest expense		(3,573	)		(3,902	)		0
		(3,487	)		(3,840	)		114
NET INCOME	$	20,810		$	2,748		$	5,480

See accompanying notes to consolidated financial statements.

Rasmussen, LLC and Subsidiary

Consolidated Statementsof Comprehensive Income (in thousands)

				Successor			Predecessor
				March 16,			January 1,
	Year Ended			2019 to			2019 to
	December 31,			December 31,			March 15,
	2020			2019			2019
NET INCOME	$	20,810		$	2,748		$	5,480
OTHER COMPREHENSIVE LOSS
Unrealized loss in fair value of interest<br> rate swap contract		(579	)		(852	)		0
TOTAL OTHER COMPREHENSIVE<br> LOSS		(579	)		(852	)		0
TOTAL COMPREHENSIVE INCOME	$	20,231		$	1,896		$	5,480

See accompanying notes to consolidated financial statements.

Rasmussen, LLC and Subsidiary

ConsolidatedStatement of Changes in Shareholders’ Equity (in thousands)

			Additional
	Common		Paid-In		Retained			Treasury
	Stock		Capital		Earnings			Stock
Predecessor:
BALANCE AT DECEMBER 31, 2018	$	428	$	70,585	$	65,024		$	(29,169	)
Net income		0		0		5,480			0
Stock compensation expense		0		365		0			0
Other distributions to shareholders		0		0		(44,500	)		0
Distributions to shareholders for income taxes		0		0		(263	)		0
BALANCE AT MARCH 15, 2019	$	428	$	70,950	$	25,741		$	(29,169	)

See accompanying notes to consolidated financial statements.

Rasmussen,LLC and Subsidiary

ConsolidatedStatement of Changes in Member’s Equity (inthousands)

							Accumulated
							Other
	Member's			Accumulated			Comprehensive
	Capital			Deficit			Loss			Total
Successor:
BALANCE AT MARCH 16, 2019	$	88,462		$	0		$	0		$	88,462
Net income		0			2,748			0			2,748
Return of capital		(850	)		0			0			(850	)
Total other comprehensive loss		0			0			(852	)		(852	)
BALANCE AT DECEMBER 31, 2019		87,612			2,748			(852	)		89,508
Net income		0			20,810			0			20,810
Capital contributions		13,000			0			0			13,000
Distributions to member		0			(6,068	)		0			(6,068	)
Total other comprehensive loss		0			0			(579	)		(579	)
BALANCE AT DECEMBER 31, 2020	$	100,612		$	17,490		$	(1,431	)	$	116,671

See accompanying notes to consolidated financial statements.

Rasmussen,LLC and Subsidiary

ConsolidatedStatements of Cash Flows (in thousands)

				Successor			Predecessor
				March 16,			January 1,
	Year Ended			2019 to			2019 to
	December 31,			December 31,			March 15,
	2020			2019			2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	20,810		$	2,748		$	5,480
Adjustments to reconcile net income to net<br> cash provided by operating activities:
Provision for bad debt		5,020			4,922			1,177
Depreciation and amortization		20,137			15,697			1,059
Deferred financing costs		262			208			0
Stock compensation expense		0			0			365
Deferred rent		4,290			314			314
Decrease (increase) in:
Accounts receivable		(7,195	)		(3,106	)		(2,738	)
Prepaid expenses		(782	)		(967	)		587
Other current assets		(324	)		930			(588	)
Deposits and other assets		(487	)		9			(665	)
Due from Parent		1,752			(1,752	)		0
Increase (decrease) in:
Accounts payable		10,637			1,567			(1,878	)
Accrued expenses		(1,828	)		(7,297	)		2,442
Due to students under financial aid programs		81			275			(243	)
Prepaid tuition		479			(11,706	)		11,505
Deferred revenue and scholarships		0			1,590			0
Other long-term liabilities		(793	)		(170	)		(40	)
Total net operating<br> adjustments		31,249			514			11,297
NET CASH PROVIDED BY OPERATING ACTIVITIES		52,059			3,262			16,777
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for curriculum development costs		(1,456	)		0			0
Acquisition of furniture,<br> equipment and improvements		(11,184	)		(5,218	)		(692	)
NET CASH USED IN INVESTING ACTIVITIES		(12,640	)		(5,218	)		(692	)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on long-term line of credit		0			(6,700	)		0
Payments on long-term debt		(25,018	)		(2,813	)		0
Other distributions to shareholders		0			0			(44,500	)
Distributions to shareholders for income<br> taxes		0			0			(263	)
Return of capital		0			(850	)		0
Capital contributions		13,000			0			0
Distributions to member		(6,068	)		0			0
NET CASH USED<br> IN FINANCING ACTIVITIES		(18,086	)		(10,363	)		(44,763	)
NET INCREASE (DECREASE) IN CASH,<br> CASH EQUIVALENTS AND RESTRICTED CASH		21,333			(12,319	)		(28,678	)
Cash, cash equivalents and restricted<br> cash at beginning of period		16,529			28,848			48,832
CASH, CASH EQUIVALENTS AND<br> RESTRICTED CASH AT END OF PERIOD	$	37,862		$	16,529		$	20,154

See accompanying notes to consolidated financial statements.

Rasmussen,LLC and Subsidiary

Notes toConsolidated Financial Statements

NoteA - Nature of Operations and Subsequent Event

Rasmussen, LLC (Company) owns 100% of Rasmussen College, LLC (College) and provides corporate services to the College. The Company’s corporate headquarters is in Oak Brook (Chicago), Illinois.

The College operates post-secondary schools in Florida, Illinois, Kansas, Minnesota, North Dakota, and Wisconsin, with its Main Campus located in St. Cloud, Minnesota. These schools award diplomas, certificates, associate degrees, and bachelor’s degrees focused on the following career fields: Education, Health Sciences, Business, Justice Studies, Nursing, Technology and Design. The schools also award master’s degrees in Nursing, Human Resource Management, and Healthcare Administration. In addition to students who matriculate locally at the College’s locations, the schools reach students nationwide through their online programs and corporate training programs. The College is regionally accredited by the Higher Learning Commission of the North Central Association of Colleges and Schools and participates in the federal Title IV student aid programs, as well as student grant programs in several states.

On March 15, 2019, FAH Education, LLC (Parent), a Delaware limited liability company, acquired all of the outstanding equity interest of the Company under a Unit Purchase Agreement (Agreement). The acquisition was funded through equity contributions and a credit agreement (Note G). This transaction is referred to as the “FAH Acquisition” (Note S). Prior to the Agreement, the Company and the College were both incorporated in the state of Delaware. Immediately prior to the execution and delivery of, and the consummation of the Agreement, the Company and the College filed a Statement of Conversion with the state of Delaware to convert from a business corporation to a limited liability company (Conversion).

On October 28, 2020, the Parent signed a membership interest purchase agreement to sell 100% of its membership interest in the Company and the College to American Public Education, Inc. for $329 million (APEI Sale). The transaction closed on September 1, 2021 and is subject to regulatory review and closing conditions (Note M).

The College participates in Student Financial Aid (SFA) under the Title IV Programs administered by the U.S. Department of Education (ED) pursuant to the Higher Education Act of 1965, as amended (HEA).

Management has evaluated subsequent events through October 29, 2021, the date the consolidated financial statements were available to be issued and except as noted in the paragraph above and disclosed in Note G, Note M and Note N, has no material subsequent events to report.

Rasmussen, LLC and Subsidiary

Notes to Consolidated FinancialStatements

Note B- Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (GAAP).

In the accompanying consolidated balance sheet of Rasmussen, LLC and Subsidiary as of December 31, 2019, the consideration paid by the Parent in connection with the FAH Acquisition has been “pushed down” to the Company and has been allocated to the assets acquired and liabilities assumed based on their estimated fair values in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 805, Business Combinations. Due to the impact of pushdown accounting, the Company’s consolidated financial statements for the year ended December 31, 2019 are presented in two distinct periods to indicate the application of the different bases of accounting between the periods presented: (1) the period up to the FAH Acquisition date, January 1, 2019 through March 15, 2019, labeled “Predecessor” and (2) the period from the FAH Acquisition date, March 16, 2019 through December 31, 2019, labeled “Successor”. The Predecessor period represents the financial information of the Company prior to the FAH Acquisition, while the Successor period represents the financial information of the Company subsequent to the FAH Acquisition. The accompanying consolidated financial statements include a black line division to indicate the application of the basis of accounting utilized by the Predecessor and Successor reporting entities.

Change in Fiscal Year End

Due to the FAH Acquisition, during 2020, the Company changed its fiscal year end from September 30th to December 31st.

Consolidation

The consolidated financial statements include the accounts and results of operation of the Rasmussen, LLC and its wholly owned subsidiary, Rasmussen College, LLC. All significant intercompany transactions and account balances have been eliminated in consolidation.

Use of Estimates in the Preparation ofConsolidated Financial Statements

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. In addition, because of the inherent uncertainties in estimating certain accrued expenses, it is reasonably possible that the estimates used will change in the near term.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash in the bank, overnight sweep accounts and all short-term investments with original maturities of 90 days or less. At December 31, 2020 and 2019, the Company only held cash and did not have any cash equivalents.

Rasmussen,LLC and Subsidiary

Notesto Consolidated Financial Statements

NoteB - Summary of Significant Accounting Policies (continued)

Restricted Cash

The Company has cash of approximately $786,000 and $706,000 as of December 31, 2020 and 2019, respectively, shown as restricted with a corresponding liability “Due to students under financial aid programs”. These funds represent amounts advanced by various governmental agencies that have not yet been earned or distributed to eligible students.

Accounts Receivable and Allowance for DoubtfulAccounts

Accounts receivable consist primarily of amounts due to the Company from its students for tuition and fees. Accounts receivable are stated at the amount of consideration from students of which the Company has an unconditional right to receive. Management has estimated an allowance for doubtful accounts based upon historical losses and the sum of the collection risks associated with student uncollected balance at year-end. Balances owed by students who have graduated or withdrawn are pursued by the Company and eventually submitted to an outside collection agency and written off after 90 to 110 days unless the student is in compliance with their payment plan.

Furniture, Equipment and Improvements

Furniture, equipment and leasehold improvements are recorded on the basis of cost. Expenditures for renewals and betterments which extend the life of the assets are capitalized. Repairs and maintenance items are charged to expense as incurred. Gain or loss on the sale or disposal is recorded in the year of disposition.

Government Assistance

The Company received Higher Education Emergency Relief Funds (HEERF), in the form of government grants, related to the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). As there is no current U.S. GAAP guidance related to for-profit business entities that received government grants, the Company has elected to adopt International Accounting Standards (IAS) 20, Accounting for Government Grants and Disclosure of Government Assistance. Under IAS 20, government grant proceeds received are recognized as income grant on a systematic and rational basis over the periods in which the Company recognizes as expenses the costs the proceeds are intended to defray. Any government grant proceeds received prior to the corresponding cost being incurred are recorded as a deferred government grant liability. The Company has presented the government grant income net of the applicable expenses.

Curriculum Development Costs

The Company developed curriculum internally, which is primarily provided as online content and accessed via the Internet.

The Company capitalizes curriculum development costs incurred during the application development stage of the project in accordance with FASB ASC Topic 350, Goodwill and Other Intangible Assets. Many of the Company’s new courses leverage off of proven delivery platforms and are primarily content, which has no technological hurdles. As a result, a significant portion of the Company’s courseware development costs qualify for capitalization due to the concentration of its development efforts on the content of the courseware. Capitalization ends when a course is available for educational instruction, at which time they are amortized on a straight-line basis over two to three years. Amortization expense for the year ended December 31, 2020 was approximately $250,000. No amortization expense was recorded for the periods March 16, 2019 through December 31, 2019 (Successor) and January 1, 2019 through March 15, 2019 (Predecessor), as the curriculum development costs were capitalized during the year ended December 31, 2020.

Rasmussen,LLC and Subsidiary

Notesto Consolidated Financial Statements

NoteB - Summary of Significant Accounting Policies (continued)

Goodwill and Other Intangible Assets

Goodwill represents the excess of the cost of identified assets, including other intangible assets, acquired through business combinations over the estimated fair value of the net assets as of the purchase date. Other intangible assets are originally measured based on their fair values in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 805, Business Combinations. The Company performed, with the assistance of independent valuation experts, tests to determine the fair value of these assets as well as established useful lives. Assets with finite useful lives are amortized on a straight-line basis over their estimated useful lives.

The FASB ASC Topic 350, Goodwill andOther Intangible Assets requires that goodwill and other intangible assets be subject to annual impairment testing. In accordance with Accounting Standards Update (ASU) No. 2011-08, Testing of Goodwill for Impairment, and ASU No. 2012-02, Testing Indefinite-Lived Intangible Assets for Impairment, management may first assess qualitative factors (macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, other relevant entity-specific events, events affecting the reporting unit, etc.) to determine whether it is more likely than not (a likelihood of more than 50%) that the fair value of the reporting unit is less than its carrying amount, including goodwill and other intangible assets. If, after assessing the qualitative factors, management believes that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, management performs the two-step goodwill and other intangible asset impairment test to identify potential goodwill and other intangible assets impairment and measure the amount of goodwill and other intangible assets impairment loss to be recognized (if any). Management’s assessment of various qualitative factors did not indicate the amount of goodwill and other intangible assets to be impaired as of December 31, 2020 and 2019. As a result, the two-step goodwill and other intangible asset impairment test was not performed, and no impairment loss occurred during the year ended December 31, 2020 and during the period March 16, 2019 through December 31, 2019 (Successor).

Internally Developed Software

The Company has capitalized internally developed software costs in accordance with FASB ASC Subtopic 350-40, Internal-Use Software. Costs associated with the research phase, including the determination of existence of needed technology and the formation, evaluation, and selection of alternatives are expensed as incurred. Costs associated with the development phase, including software design and configuration, coding, installations, testing, and parallel processing are capitalized. General administrative, overhead, training, maintenance, updates, and minor modifications are expensed when incurred.

Amortization expense is computed using the straight-line method based on an estimated useful life of three to five years. The amortization expense for the periods March 16, 2019 through December 31, 2019 (Successor) and January 1, 2019 through March 15, 2019 (Predecessor), was approximately $72,000 and $22,000, respectively. The internally developed software was fully amortized as of December 31, 2019. As a result, no amortization expense was recorded for the year ended December 31, 2020.

Rasmussen,LLC and Subsidiary

Notesto Consolidated Financial Statements

NoteB - Summary of Significant Accounting Policies (continued)

Prepaid Tuition and Revenue Recognition

Deferred Revenue and Scholarships

Generally, student tuition and fees are earned as of the Company’s year-end, however, the Company has deferred revenue as of December 31, 2019 of approximately $949,000, which relates to corporate training programs and a Registered Nursing to Bachelor Science Nursing subscription program taught on schedules different from the Company’s traditional calendar as well as preordered course materials for the terms that began on January 6, 2020.

As of December 31, 2019, the Company has established a reserve of approximately $641,000 for deferred scholarships which are expected to be earned in the future by current students.

See Note Q for additional information related to revenue recognition.

Deferred Financing Costs

Costs related to obtaining the credit agreement are capitalized and amortized over the term of the related debt using the straight-line method. In accordance with ASU No. 2015-03, Interest – Imputation of Interest (Topic 835-30): Simplifying the Presentation of Debt IssuanceCosts, these costs are presented as a reduction in the carrying value of the related debt liability on the accompanying balance sheet (Note G).

Deferred Rent

The Company has entered into operating leases which contain provisions for escalating rent. The Company recognizes rent expense on the straight-line method over the lives of the leases. The cumulative excess of the amounts expensed over the payments required under the leases through December 31, 2020 and 2019 is recorded as deferred rent. This credit will be used to offset future rent expense for financial statement purposes.

Sublease rental income is recognized on a straight-line basis over the term of the lease and deferred sublease income is recorded with prepaid expenses and other current assets. Sublease rental income is recorded as a reduction of rent expense.

Interest Rate Swap Contract

The interest rate swap contract, which is a derivative instrument and qualifies as a cash flow hedge, is reported at fair value (Note H). The unrealized gain or loss on the interest rate swap contract is reported as a component of other comprehensive income (loss) and is recognized when interest on the interest rate swap contract is paid or received.

Rasmussen,LLC and Subsidiary

Notesto Consolidated Financial Statements

NoteB - Summary of Significant Accounting Policies (continued)

Income Taxes

Prior to the Conversion, the Company had elected under the Internal Revenue Code to be taxed as a Subchapter S Corporation, and the College had elected under the Federal Internal Revenue Code to be a Qualified Subchapter S Subsidiary (QSSS) of the Company. A QSSS is treated as a disregarded entity for income tax purposes, so only one federal and one state tax return were filed for the consolidated group. In lieu of corporate income taxes, the shareholders of an S Corporation are taxed on their proportionate shares of the corporation’s taxable income. Some states impose an entity level income tax on S Corporations; however, it is determined that the entity level state income tax is immaterial. Therefore, no provision for federal or state income taxes has been included in the consolidating financial statements relating to the period prior to the Conversion.

As a result of the Conversion, the Company and the College are single member limited liability companies (disregarded entities for tax purposes) and are included with the federal and state tax returns of the Parent. The Parent has elected to be treated as a partnership for federal and state income tax purposes. A partnership is not a tax paying entity for federal and state income tax purposes. Income, loss, deductions and credits pass through proportionately to its members and are taxed at the individual members’ income tax rates. Accordingly, no provision for federal or state income taxes has been included in the consolidated financial statements.

Financial Instruments

The fair values and carrying amounts of the Company’s financial instruments, primarily current assets and liabilities, are approximately equivalent due to their short-term lives.

Advertising Costs

Advertising costs are expensed as incurred. Total marketing cost, inclusive of advertising expense for the year ended December 31, 2020 and the periods March 16, 2019 through December 31, 2019 (Successor) and January 1, 2019 through March 15, 2019 (Predecessor), was approximately $47,392,000, $38,610,000 and $5,492,000, respectively.

Adopted Accounting Pronouncements

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flow (Topic 230) Restricted Cash. This ASU requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. This ASU is effective for the Company’s year ended December 31, 2019.

Recent****Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases. This ASU supersedes existing guidance on accounting for leases in ASC Topic 840, Leases. The standard requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet. A lessee should recognize in the balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. This ASU will be effective for the Company’s year ended December 31, 2022. The amendments should be applied at the beginning of the earliest period presented using a modified retrospective approach. The Company is currently in the process of assessing the impact of the adoption of this standard on its financial statements.

Rasmussen,LLC and Subsidiary

Notesto Consolidated Financial Statements

NoteC - Concentration of Credit Risk

The Company, at times, has cash deposits which exceed $250,000 in an individual bank. The Federal Deposit Insurance Corporation (FDIC) insures only the first $250,000 of funds at member banks.

The accounts receivable are primarily amounts due from students for tuition and fees. Many of the Company’s students are eligible for federal government loan and grant programs and state grant programs which are administered by the Company. These receivables are unsecured. In addition, the Company receives funding from several other sources such as Veterans Administration programs, state grants, workforce training contracts, and alternative loans. Students typically apply the funds received from SFA and other funding to pay their tuition and fees. The receipt of SFA and other funding reduces the amount due from the student and has no impact on revenue recognition.

The Company maintains an interest rate swap contract (Note H) with a financial institution. The Company’s ability to maintain its fixed interest rate is dependent upon the credit worthiness of the financial institution

The Company has entered into various multi-year contracts, including leases and other service agreements that may result in additional costs if the Company chose to pursue early termination.

NoteD - Furniture, Equipment and Improvements

Furniture, equipment and improvements as of December 31, 2020 and 2019, consist of the following (in thousands):

	2020			2019
Furniture<br> and equipment	$	9,188		$	7,733
Computer<br> equipment and software		6,084			4,663
Leasehold<br> improvements		21,323			19,101
		36,595			31,497
Less<br> accumulated depreciation and amortization		(12,641	)		(5,519	)
		23,954			25,978
Construction<br> in progress		7,183			1,097
	$	31,137		$	27,075

Depreciation and amortization expense, related to furniture, equipment and improvements, is computed using the straight-line method based on the following estimated useful lives:

Furniture and equipment	5 - 7 years
Computer equipment and software	3 - 5 years
Leasehold improvements	Remaining lease term

Depreciation and amortization expense, related to furniture, equipment and improvements, charged to operations for the year ended December 31, 2020 and the periods March 16, 2019 through December 31, 2019 (Successor) and January 1, 2019 through March 15, 2019 (Predecessor), was approximately $7,123,000, $5,519,000 and $1,038,000, respectively.

Rasmussen,LLC and Subsidiary

Notesto Consolidated Financial Statements

NoteE - Other Intangible Assets

The Company acquired other intangible assets through business combinations related to the value of accreditation and tradename. These assets are determined to have indefinite useful lives and are reviewed for impairment by management on an annual basis. The Company acquired other intangible assets through business combinations related to course content and student base. These assets are determined to have finite useful lives and are amortized on a straight-line bases over their estimated useful lives.

In accordance with FASB ASC Topic 805, BusinessCombinations, the Company recognized adjustments to the amount of intangible assets related to the FAH Acquisition (Note A). During the measurement period of the FAH Acquisition, new information was obtained about facts and circumstances that, if known, would have affected the measurement of the amounts recognized as of that date.

The change of the Company’s net carrying amount of intangible assets is as follows (in thousands):

Predecessor:
No<br> activity for the period January 1, 2019 to March 15, 2019
Successor:
Intangible<br> assets acquired on March 15, 2019	$	145,283
Decrease<br> resulting from fair value adjustment of net assets acquired		(11,834	)
Total<br> intangible assets (Note S)		133,449
Other<br> intangible assets values assigned		(66,923	)
Goodwill<br> balance as of December 31, 2019	$	66,526

A summary of the other intangible assets and their accumulated amortization, as of December 31, 2020 are as follows (in thousands):

	2020
	Gross Carrying		Accumulated			Net Carrying
	Amount		Amortization			Amount
Finite-lived<br> other intangible assets:
Course<br> content	$	6,086	$	(2,726	)	$	3,360
Student<br> base		33,730		(20,144	)		13,586
Total<br> finite-lived other intangible assets		39,816		(22,870	)		16,946
Indefinite-lived<br> other intangible assets:
Trademarks/tradenames		19,264		0			19,264
Accreditation		7,843		0			7,843
Total<br> indefinite-lived other intangible assets:		27,107		0			27,107
Total<br> other intangible assets	$	66,923	$	(22,870	)	$	44,053

Rasmussen,LLC and Subsidiary

Notesto Consolidated Financial Statements

NoteE - Other Intangible Assets (continued)

A summary of the other intangible assets and their accumulated amortization, as of December 31, 2019, are as follows (in thousands):

	2019
	Gross Carrying		Accumulated			Net Carrying
	Amount		Amortization			Amount
Finite-lived<br> other intangible assets:
Course<br> content	$	6,086	$	(1,204	)	$	4,882
Student<br> base		33,730		(8,901	)		24,829
Total<br> finite-lived other intangible assets		39,816		(10,105	)		29,711
Indefinite-lived<br> other intangible assets:
Trademarks/tradenames		19,264		0			19,264
Accreditation		7,843		0			7,843
Total<br> indefinite-lived other intangible assets:		27,107		0			27,107
Total<br> other intangible assets	$	66,923	$	(10,105	)	$	56,818

At the acquisition date, the useful life assigned to each type of intangible asset with a finite useful life was as follows:

	Useful Life
Course<br> content	48<br> months
Student<br> Base	36<br> months

The estimated future amortization expense for the years subsequent to December 31, 2020 are as follows (in thousands):

Years Ending
December 31,	Amount
2021	$	12,765
2022		3,864
2023		317
	$	16,946

Amortization expense of other intangible assets charged to operations for the year ended December 31, 2020 and the periods March 16, 2019 through December 31, 2019 (Successor) and January 1, 2019 through March 15, 2019 (Predecessor), was approximately $12,765,000, $10,105,000 and $0, respectively.

Rasmussen,LLC and Subsidiary

Notesto Consolidated Financial Statements

NoteF - Long-Term Line of Credit

The Company has available a $30,000,000 revolving long-term line of credit which includes $5,000,000 specifically for swingline loans. The long-term line of credit requires quarterly interest payments at the base rate plus the applicable margin with the principal payment due on the outstanding balance on March 15, 2024. The base rate is the higher of the Administrative Agent’s prime lending rate, the Federal Funds Rate plus one-half of one percent, and the One Month Libor Index Rate plus one percent. As of December 31, 2020 and 2019, the outstanding balance of the long-term line of credit was $0. However, the amount available to draw as of December 31, 2020 is $29,381,075 as the balance of the revolving line is being used to secure a letter of credit (Note I). The long-term line of credit is governed by a credit agreement (Note G).

NoteG - Credit Agreement and Long-Term Debt and Subsequent Event

In connection with the FAH Acquisition, the Company entered into a credit agreement which includes a $75,000,000 term loan and $30,000,000 revolving long-term line of credit (Note F). The credit agreement also includes a commitment by the issuing bank to provide a letter of credit of up to $25,000,000 to the Company upon request. If requested and issued, the $25,000,000 letter of credit will be secured by the $30,000,000 revolving line of credit, whereby limiting the available amount of the revolving line of credit, by the amount of the issued letters of credit (Note F). As of December 31, 2020, the Company has issued letters of credit of approximately $619,000 from the issuing bank (Note I). As of December 31, 2019, the Company had not requested letters of credit from the issuing bank. During May 2021, the Company obtained a letter of credit from the issuing bank of approximately $23,071,000 (Note M). The credit agreement includes three financial institutions, each providing a portion of the credit extended to the Company with one of the financial institutions acting as the Administrative Agent.

The $75,000,000 term loan is due in 19 quarterly principal payments, plus interest, beginning on June 30, 2019, with any unpaid interest and principal due on March 15, 2024. The term loan contains mandatory pre-payments based on certain events and excess cash flows of the Company as defined in the credit agreement. During 2020, the Company made an excess cash flows principal payment equal to $17,158,000. The Company may also make additional optional pre-payments on the term loan at their discretion. During 2020, the Company made optional pre-payments of $3,000,000. The term loan bears interest at the base rate plus an applicable margin. The base rate is the higher of the Administrative Agent’s prime lending rate, the Federal Funds Rate plus one-half of one percent, and the One Month Libor Index Rate plus one percent. The applicable margin was 2.75% and the interest rate of the term loan was 3.15% and 4.95% as of December 31, 2020 and 2019, respectively. The outstanding balance on the term loan was approximately $47,170,00 and $72,188,000 as of December 31, 2020 and 2019, respectively.

The credit agreement which governs the $75,000,000 term loan and the $30,000,000 long-term line of credit is secured by the outstanding equity interest of the Parent, the Company, and the College, all assets (both tangible and intangible) of the Parent, the Company, and the College and is guaranteed by the Parent and the Company. The credit agreement also contains various financial and non-financial covenants which are common to credit agreements of this nature and are measured on a quarterly basis. The credit agreement contains certain restrictions on the Company’s ability to obtain other sources of financing, as well as certain limitations on the Company’s ability to pay dividends to members. These restrictions and limitations are effective until the expiration of the credit agreement in March 2024, or upon full repayment of the term loan and any draws against the long-term line of credit (whichever is sooner). The Company was in compliance with the covenants as of December 31, 2020 and 2019.

Rasmussen,LLC and Subsidiary

Notesto Consolidated Financial Statements

NoteG - Credit Agreement, Long-Term Debt and Subsequent Event (continued)

The Company entered into an interest rate swap contract with a financial institution associated with $50,000,000 of the term loan (Note H).

The aggregate annual amounts of principal payments required on the term loan and amortization of related deferred financing costs for years subsequent to December 31, 2020, are approximately as follows (in thousands):

Years Ending	Principal		Deferred		****	Net
December 31,	Payments		Financing Costs		****	Amount
2021	$	5,625	$	(262	)	$	5,363
2022		7,031		(262	)		6,769
2023		7,500		(262	)		7,238
2024		27,014		(56	)		26,958
	$	47,170	$	(842	)	$	46,328

NoteH - Interest Rate Swap Contract

The Company entered in an interest rate swap contract (Swap) and the Company records the Swap, which is a financial instrument and qualifies as a cash flow hedge, at fair value (see Note B). The notional amount of the Swap is $50,000,000 and the Company intends to retain the Swap until its scheduled maturity on April 30, 2022.

The Company entered into this Swap to hedge exposure resulting from the interest rate risk. The purpose of this hedge is to reduce the variability of the interest rate of the Company’s term loan (Note G). The Company manages these exposures within specified guidelines through the use of derivatives. The Company only utilizes derivative instruments for risk management purposes and does not use derivatives for speculative trading purposes.

At December 31, 2020 and 2019, the fair value of the Swap was approximately negative $1,431,000 and negative $852,000, respectively, and is reported as a long-term liability in the accompanying consolidated balance sheets. The unrealized gain or loss on the interest rate swap contract is reported as a component of other comprehensive income (loss) and is recognized when interest on the interest rate swap contract is paid or received. The fair value of the Swap was estimated by the financial institution issuing the Swap based upon observable market inputs such as interest rates, credit risks, and the net present value of expected future cash flows. These estimates may change due to changes in the estimate of future market interest rates.

The Fixed Rate of interest appurtenant to the Swap is 2.271%. The floating rate of interest is based upon USD-LIBOR-BBA and is adjusted monthly. The interest expense, related to the Swap, was approximately $835,000 for the year ended December 31, 2020, and $39,000 and $0 for periods March 16, 2019 through December 31, 2019 (Successor) and January 1, 2019 through March 15, 2019 (Predecessor), respectively.

Rasmussen,LLC and Subsidiary

Notesto Consolidated Financial Statements

NoteI - Commitments and Contingencies

The Company leases classroom and office facilities under numerous operating leases expiring at various dates through 2033. The Company has options to extend some of these leases, and to lease additional space at the then current rates of the leases. Future minimum lease payments are subject to annual increases. In addition, the Company is responsible for supplemental lease payments to reimburse the landlords for their proportionate share of the building’s operating costs, real estate taxes, and insurance.

The Company receives income from third parties for sublease agreements. One of the sublease agreements expired during 2020 and as of December 31, 2020, there is only one remaining sublease agreement which expires during August 2026. The Company is still responsible for the proportionate share of the buildings’ operating costs, real estate taxes, and insurance which are included in the commitments. Sublease rental income of approximately $229,000, $283,000 and $74,000 is recorded as a reduction of rent expense for the year ended December 31, 2020 and for the periods March 16, 2019 through December 31, 2019 (Successor) and January 1, 2019 through March 15, 2019 (Predecessor), respectively.

The Company has entered into Service Agreements with a third party, whereas the third party provides marketing and IT services to the Company. The agreements have initial terms that expire September 30, 2024 (Initial Term). The marketing agreement automatically renews for successive three-year periods (MA Renewal Term) unless terminated 12 months prior to the end of the Initial Term or MA Renewal Term. For the year ended December 31, 2020 and for the periods March 16, 2019 through December 31, 2019 (Successor) and January 1, 2019 through March 15, 2019 (Predecessor), the Company paid approximately $46,398,000, $34,137,000 and $8,625,000, respectively, as base costs under the marketing agreement and approximately $836,000, $600,000 and $581,000, respectively, as additional services. The IT service agreement will automatically renew for successive five-year terms (IT Renewal Term) unless terminated 24 months prior to the Initial Term or IT Renewal Term. For the year ended December 31, 2020 and for the periods March 16, 2019 through December 31, 2019 (Successor) and January 1, 2019 through March 15, 2019 (Predecessor), the IT service fee was approximately $15,823,000, $11,796,000 and $3,093,000, respectively, and the Company paid approximately $267,000, $535,000 and $185,000, respectively, as additional services.

Future minimum lease payments under noncancelable operating lease agreements, service agreements and sublease income, for the next five years and in the aggregate are approximately as follows (in thousands):

			Future
Years Ending	Future		Sublease
December 31,	Commitments		Income
2021	$	34,823	$	9
2022		32,660		9
2023		28,500		9
2024		22,956		10
2025		7,835		10
Thereafter		34,708		7
	$	161,482	$	54

Rasmussen, LLC and Subsidiary

Notes to Consolidated FinancialStatements

Note****I - Commitments and Contingencies (continued)

The amount charged to operations under all operating leases for the year ended December 31, 2020 and for the periods March 16, 2019 through December 31, 2019 (Successor) and January 1, 2019 through March 15, 2019 (Predecessor), was approximately $13,495,000, $10,607,000 and $2,596,000, respectively.

In certain instances, the Company has issued letters of credit naming a landlord as beneficiary. At December 31, 2020, there was $619,000 of letters of credit issued and the letters of credit are secured by a line of credit as more fully described in Note F and no letters of credit existed as of December 31, 2019.

The Company has a partially self-insured health plan (Plan) for its employees covering medical, dental, and pharmacy prescription. The Plan had a yearly loss limit per person of $170,000 and a maximum claims expense of 125% of the average claim value which computed to approximately $10,702,000 for the year ended December 31, 2020. Dental claims are not part of the stop-loss limits. As of December 31, 2020 and 2019, the Company accrued approximately $1,809,000 and $1,723,000, respectively, for outstanding invoices and to cover claims which have been incurred but not reported. This estimate was provided by the Company’s health plan provider and was derived from historical business claim lags.

NoteJ - Member’s Equity

As of December 31, 2020 and 2019, Member’s Equity consists of one class of common units.

The Company is authorized to issue 1,000 Common Units, of which, 1,000 units are issued and outstanding as of December 31, 2020 and 2019.

NoteK - Retirement Saving Plan

The Company sponsors a 401(k) retirement plan for all eligible employees as defined by the Plan. The participants may contribute a portion of their salary not to exceed certain Internal Revenue Code limits. The Company may make discretionary contributions. The employer currently matches 50% of the first 6% of compensation. For the year ended December 31, 2020 and for the periods March 16, 2019 through December 31, 2019 (Successor) and January 1, 2019 through March 15, 2019 (Predecessor), the discretionary contribution charged to the Company’s operations was approximately $1,723,000, $1,257,000 and $322,000, respectively. The Company may also make discretionary “non-elective” contributions. For the year ended December 31, 2020 and for the periods March 16, 2019 through December 31, 2019 (Successor) and January 1, 2019 through March 15, 2019 (Predecessor), the Company did not make any additional discretionary “non-elective” contributions.

Rasmussen,LLC and Subsidiary

Notesto Consolidated Financial Statements

NoteL - Related Party Transactions

Prior to the FAH Acquisition, three of the Company’s Minnesota and North Dakota classrooms and school offices were leased from several corporations, a partnership, and a limited liability corporation, which are each owned, in part, by a former shareholder of the Company, prior to the FAH Acquisition. These commitments are included in the future minimum lease payments as more fully described in Note I. The amount of rent charged to operations from these related parties totaled approximately $269,000 for the period January 1, 2019 through March 15, 2019 (Predecessor).

Employees of the Company donate money to a not-for-profit organization and the Company receives scholarships, on behalf of its students, from the not-for-profit organization. The Company received $217,453 and $0 in scholarships, on behalf of its students, from the not-for-profit organization during the periods

March 16, 2019 through December 31, 2019 (Successor) and January 1, 2019 through March 15, 2019 (Predecessor), respectively. The not-for-profit organization was dissolved on September 11, 2020 and no scholarships were received during the year ended December 31, 2020.

The Company advances monies to/from the Parent, for various operating purposes. The advances are noninterest bearing and have no scheduled terms of repayment. As of December 31, 2019, the due from Parent was approximately $1,752,000 and no outstanding balance existed as of December 31, 2020.

The outstanding equity interest of the Parent and the Company and all assets (both tangible and intangible) of the Parent and the Company secure College’s $75,000,000 term loan and $30,000,000 long-term line of credit. College’s $75,000,000 term loan and $30,000,000 long-term line of credit is also guaranteed by the Parent and the Company.

Rasmussen,LLC and Subsidiary

Notesto Consolidated Financial Statements

NoteM – Regulatory and Subsequent Events

The Company participates in SFA under the Title IV Programs administered by ED pursuant to the HEA. Political and budgetary concerns can significantly affect the Title IV Programs, and Congress must reauthorize the HEA approximately every six years. The Company must also demonstrate to ED its compliance with the HEA and the regulations promulgated thereunder on an ongoing basis.

To participate in the Title IV Programs, an institution is subject to extensive regulation and periodic reviews by the federal and state governmental agencies, and accrediting bodies involved. An institution must be authorized to offer its programs of instruction by the relevant agencies of the state in which it is located, accredited by an accrediting agency recognized by ED, and certified as eligible by ED. On a periodic basis, an institution must be re-approved by these agencies and bodies to continue to receive Title IV funds. During 2017, ED performed a program review of the Company authorized by Title IV of the HEA and the Company has not received a report from ED. The Company also receives a portion of funds from the Veterans Administration (VA) through various veterans’ benefits programs. Similar to the Title IV Programs, the veterans benefit programs are subject to political and budgetary considerations and periodic reviews by the VA. Depending on the severity of a regulatory violation, a regulator can initiate repayment of the applicable funds awarded, transfer the Company to a delayed method of funding, or begin proceedings related to suspension, limitation, or termination. Except as noted above, as of December 31, 2020, the Company was properly authorized by the regulatory agencies involved, and no regulatory reviews were being conducted by the respective agencies. The Company is subject to final approval of the change in ownership resulting from the FAH Acquisition (Note A) from the applicable federal regulator. Management received this approval from ED in April of 2021. In addition, the APEI Sale (Note A) will be subject to similar final approvals.

Regulations have been established which impose limitations on institutions whose former students default on the repayment of their federally guaranteed or funded student loans above a specific cohort default rate (CDR). An institution whose CDR equals or exceeds 30% for three consecutive years will no longer be eligible to participate in the William D. Ford Federal Direct Loan (Direct Loan) and Federal Pell Grant programs for the remainder of the fiscal year in which the school is notified of its sanction and for the following two fiscal years. An institution whose CDR exceeds 40% will lose Direct Loan program eligibility for the remainder of the fiscal year in which the school is notified of its sanction and for the following two fiscal years. As of December 31, 2020 and 2019, the College had a cohort default rates below the sanction levels described above.

Under the federal regulations mentioned above, ED calculates the institution’s composite score based on a three-factor financial responsibility ratio. An institution which does not meet ED’s minimum composite score of 1.5 can demonstrate financial responsibility by meeting the “zone alternative” or posting a letter of credit in favor of ED. The “zone alternative” includes a delayed method of cash funding for Title IV aid, and the providing of additional information to ED, upon request. The Company’s composite score was previously calculated on the Company’s prior fiscal year end, which was September 30^th^. In April 2021, based upon the Company’s September 30, 2020 composite score ratio, the Company had to post a letter of credit of approximately $23,071,000 and was placed on the Heightened Cash Monitoring 1 payment method in regard to Title IV funding. The letter of credit was posted during May 2021 and is secured by the Company’s long-term line of credit (Note F). Due to the FAH Acquisition, the Company changed its fiscal year end from September 30 to December 31. As of December 31, 2020, the College had a composite score of 1.7, compared to a minimum required of 1.5, and ED has not yet released the letter of credit.

Regulations have been established which restrict the proportion of cash receipts for tuition and fees from eligible programs to not more than 90% from the Title IV Programs. The failure of the College to meet the 90% limitation for two consecutive years results in the loss of the College’s ability to participate in FSA programs. The College’s rate was below 90% for the two most recent financial statements submitted to ED.

Rasmussen,LLC and Subsidiary

Notesto Consolidated Financial Statements

NoteM – Regulatory and Subsequent Event (continued)

Institutions are subject to borrower defense to repayment (BDTR) regulations which provides the right to student borrowers to have their federal loans discharged when certain circumstances or event occur. New regulations became effective on July 1, 2020. The previous regulations were issued in 2016 and became effective on October 12, 2018 as a result of various administrative and court actions. The BDTR are applicable based upon when the student borrower’s loans occurred and, as such, institutions are subject to both the current and the 2016 regulations. Both the current and the 2016 regulations-imposed changes to the financial responsibility standards. They created triggers which requires an institution to report certain financial and non-financial events, which occur between audit report submissions, to ED within 10 days. Theses triggers are either mandatory or discretionary in enabling ED to impose a letter of credit on an institution if certain negative events occur.

NoteN – COVID-19 Pandemic and Government Relief and Subsequent Event

In March 2020, the President of the United States of America declared the outbreak of the novel coronavirus (COVID-19) a national emergency. In addition, the Governors of Florida, Illinois, Kansas, Minnesota, North Dakota, and Wisconsin, have declared states of emergencies that required all non-essential businesses to close their physical presence.

The Company originally suspended in-person instructional activities at its physical locations in the respective states and began offering the courses through online instruction for the current students enrolled. The courses are currently offered through a combination of online and in-person instruction and the Company has reduced operating hours or provided work-from-home opportunities to its workforce. ED and other regulatory bodies have issued guidance to enable flexibility in the modality of teaching to enable Title IV funding and other aid to continue to be available. In addition, Congress has approved emergency relief funding for institutions of higher education as part of the CARES Act for post-secondary educational institutions and their students.

The schools operated by the Company have received HEERF student grants. These funds are meant for students who have had their education disrupted by the COVID-19 outbreak. These funds are to be distributed directly to Title IV eligible students and are not to be used for operations and will not impact the Company’s expenses. As of December 31, 2020, the Company was awarded $5,694,000 for students and have expended all of these funds. In addition, the Company utilized $11,000 of its institutional HEERF grants for emergency student grants thus disbursing a total of $5,705,000. These student HEERF grant revenue and disbursements are offset in the consolidated statement of income. During March 2021, the Company was awarded an additional $8,547,754 of HERRF student grants to be distributed.

In addition, Congress has approved HEERF institutional grants. The schools operated by the Company have been awarded funds of $5,694,000. As of December 31, 2020, $1,178,000 of these funds have been expended including the $11,000 that was spent on additional student HEERF grants. The institutional HEERF grant recognized as of December 31, 2020 is the $1,178,000 and this amount is reflected as a reduction of the related expenses or the capital acquisitions.

The Company expects the economic conditions to be temporary; however, the length time of the conditions are uncertain. The impact of the national emergency on the results of operations and financial position of the Company, cannot be reasonably estimated at this time.

Rasmussen,LLC and Subsidiary

Notesto Consolidated Financial Statements

NoteO – Supplemental Disclosure of Cash Flow Information

The following is a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheet that sum to the total of the same such amounts shown in the consolidated statement of cash flows as of December 31, 2020 and 2019 (in thousands):

	2020		2019
Cash and cash equivalents	$	37,076	$	15,823
Restricted cash		786		706
Total cash, cash equivalents, and restricted cash shown in the consolidated statement of cash flows	$	37,862	$	16,529

Cash paid for interest during the year ended December 31, 2020 and the periods March 16, 2019 through December 31, 2019 (Successor) and January 1, 2019 through March 15, 2019 (Predecessor), was approximately $3,310,000, $3,694,000 and $0, respectively.

NoteP - Fair Value

ASC Topic 820, Fair Value Measurements andDisclosures establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC Topic 820 are described as follows:

Level 1	Inputs in the valuation methodology are unadjusted quoted prices<br>for identical assets or liabilities in active markets that the Company has the ability to access.
Level 2	Inputs to the valuation methodology include:
---	---

Quoted prices for similar assets or liabilities in active markets.

Quoted prices for identical or similar assets or liabilities in inactive markets.

Inputs other than quoted prices that are observable for the asset or liability.

Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3	Inputs to the valuation methodology are unobservable and significant<br>to the fair value measurement.

The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. The following is a description of the valuation methodology used for liabilities measured at fair value.

Interest RateSwap Contract

The fair value was estimated by a third party based upon observable market inputs such as interest rates, credit risks, and the net present value of expected future cash flows, therefore, was classified within Level 2 of the valuation hierarchy.

Rasmussen,LLC and Subsidiary

Notesto Consolidated Financial Statements

NoteP - Fair Value (continued)

Long-Term Debt

The carrying amount approximates fair value because the interest rate on the outstanding debt was variable, therefore was classified within Level 3 of the valuation hierarchy.

The following table presents the carrying amount and fair value of the Company’s financial instruments recognized in the accompanying consolidated balance sheet and the level within the Topic 820 fair value hierarchy in which the fair value measurements fall at December 31, 2020 and 2019 (in thousands):

	December 31, 2020
	Carrying		Fair Value
	Amount		Level 1		Level 2		Level 3		Total
Financing liabilities:
Interest rate swap agreement	$	1,431	$	0	$	1,431	$	0	$	1,431
Long-term debt	$	47,170	$	0	$	0	$	47,170	$	47,170
	December 31, 2019
---	---	---	---	---	---	---	---	---	---	---
	Carrying		Fair Value
	Amount		Level 1		Level 2		Level 3		Total
Financing liabilities:
Interest rate swap agreement	$	852	$	0	$	852	$	0	$	852
Long-term debt	$	72,188	$	0	$	0	$	72,188	$	72,188

The following is a reconciliation of the beginning and ending balances of recurring fair value measurements recognized in the accompanying consolidated balance sheet as of December 31, 2020 and 2019 using significant unobservable (Level 3) inputs (in thousands):

	Long-term
	Debt
Predecessor:
No activity for the period January 1, 2019 to March 15, 2019
Successor:
Beginning balance	$	0
Unrealized loss included in other comprehensive income		0
Purchases, sales, issuances and settlements, net		72,188
Transfers in and/or out of Level 3		0
Long-term debt balance as of December 31, 2019		72,188
Unrealized loss included in other comprehensive income		0
Purchases, sales, issuances and settlements, net		(25,018	)
Transfers in and/or out of Level 3		0
Long-term debt balance as of December 31, 2020	$	47,170

Rasmussen,LLC and Subsidiary

Notesto Consolidated Financial Statements

NoteQ - Revenue

On January 1, 2019, the Company adopted the new standard on revenue recognition, ASU 2014-09, using the modified retrospective approach of ASU 2016-10. The adoption of the guidance in ASU 2014-09 as amended by ASU 2016-10 did not have a material impact on the measurement or recognition of revenue in any prior or current reporting periods and there was no adjustment to members’ equity. The core principle of the new standard is that a company should recognize revenue to depict the transfer of promised goods or services to students in an amount that reflects the consideration to which the company expects to be entitled in exchange for such goods or services. Substantially all of the Company’s revenues are considered to be revenues from contracts with students. No significant customer exists and are generally from the surrounding areas of the campus locations, except for the online program which enrolls students nationwide (Note A). The Company has adopted the portfolio approach in accounting for revenue since the economic substance of the contract is similar for all students.

Principal Activities

The following is a description of principal activities from which the Company generates its revenue.

Instructional services revenue includes tuition, course and administrative fees. The Company generally recognizes revenue ratably as instructional services are provided over the quarterly term. Tuition is charged by term based upon the number of credit hours, and fees are charged on a per term basis, as applicable. Generally, instructional services are billed when a course or term begins. The Company also offers Competency-Based Education (CBE) programs under six-month terms. These programs are taught on a nonstandard term structure and are priced on a per-credit basis or via a subscription basis. Revenue for these programs is earned ratably over the nonstandard term.

Textbooks are charged at $15 per book per term, and students can opt-out to acquire these books on their own. Textbooks are not a separate performance obligation and, as such, are earned over the term.

Other fees revenue represents one-time, non-refundable fees and are not material to the consolidated financial statements. Generally other fee revenue is recognized when the fee is charged to the student, which coincides with the completion of the specific performance obligation to the student.

The Company provides various scholarships and tuition grants to assist students with their educational programs. Institutional scholarships for the year ended December 31, 2020 and for the periods March 16, 2019 through December 31, 2019 (Successor) and January 1, 2019 through March 15, 2019 (Predecessor) of approximately $17,285,000, $11,429,000 and $3,065,000, respectively, are reflected as a reduction in the revenue recognized and are deemed to be related to the Company’s primary performance obligation which is tuition. These scholarships are recognized over the same period as the respective tuition revenue.

Disaggregation of Revenue

While the Company operates in multiple states and online, management views and evaluates the operational results as one line of business.

·	Revenue for instructional services for the year ended December 31, 2020 and for the periods<br> March 16, 2019 through December 31, 2019 (Successor) and January 1, 2019 through March 15, 2019<br> (Predecessor), was approximately $276,602,000, $202,920,000 and $53,845,000, respectively.
·	Revenue for textbooks charges for the year ended December 31, 2020 and for the periods<br> March 16, 2019 through December 31, 2019 (Successor) and January 1, 2019 through March 15, 2019<br> (Predecessor), was approximately $1,934,000, $1,370,000 and $463,000, respectively.
---	---

Rasmussen,LLC and Subsidiary

Notesto Consolidated Financial Statements

NoteQ - Revenue (Continued)

ContractBalances and Performance Obligations

When the Company begins providing the performance obligations, a contract receivable is created, resulting in accounts receivable on the Company’s consolidated balance sheet. The Company accounts for receivables in accordance with ASC 310, Receivables. The Company uses the portfolio approach, a practical expedient, to evaluate if a contract exists and to assess collectability at the time of contract inception based on historical experience. Contracts are subsequently reviewed for collectability if significant events or circumstances indicate a change.

The related accounts receivable balances are recorded in the Company’s consolidated balance sheet as student accounts receivable. The Company has four terms in a fiscal year and the student tuition and fees are earned over the terms which matches the related educational performance obligation. Revenue earned by the Company at a point in time is not material to the consolidated financial statements. Transaction prices for the various charges are fixed and are published in the Company’s catalog.

As a practical expedient, due to the short-term nature of each term, the Company has elected not to provide disclosures about transaction prices allocated to unsatisfied performance obligations if contract durations are less than one-year, or if the Company has the right to consideration from a student in an amount that corresponds directly with the value provided to the student for performance obligations completed to date.

The Company has assessed the costs incurred to obtain a contract with a student and determined them to be immaterial. There are no significant contract assets and prepaid tuition (contract liability) is the only significant contract liability impacted by the adoption of ASU 2016-10. Prepaid tuition in the amount of approximately $4,155,000 and $3,676,000 is recorded as a liability on the consolidated balance sheets as of December 31, 2020 and 2019, respectively. The change in the contract liability balance is the result of payments received in advance of satisfying performance obligations, offset by revenue recognized during that period.

Refund Policy

The Company provides a stated period of time during which students may withdraw from a term, without further financial obligation resulting in a refund liability. The refund policy for the Company is as follows:

·	Prior to the period of instruction, all payments will be refunded as the Company doesn’t charge<br>a student until one week is completed.
·	After the period of instruction, the amount charged for tuition and awarded for institutional scholarships<br>/ grants will be prorated up to the 60% point of the term. After the 60% point of the term, no refunds of tuition or adjustment to institutional<br>scholarships / grants will occur.
---	---

Separate refund policies exist for any state aid received by the student and these policies vary by state. If a student withdraws during the academic term, the Company calculates the portion of instructional services and fees that are non-refundable based on the tuition refund policy and recognizes it as revenue in the period the withdrawal occurs. These tuition adjustments are recognized as they occur and, as of December 31, 2020 and 2019, these charges are fully earned under the applicable regulatory standards.

Rasmussen, LLC and Subsidiary

Notes to Consolidated FinancialStatements

Note Q - Revenue (Continued)

Refund Policy (continued)

The Company’s tuition revenue varies from period to period based on the number of students enrolled and the programs in which they are enrolled. Students may remit tuition payments at any time, or they may elect various payment options that can delay receipt of payment up until the term starts or longer. These other payment options include payments by employees, financial aid, alternative loans, and cash payments. Generally, financial aid and outside source funds are received on a term basis. Cash payment plans exist for the students and the Company does not offer long-term financed plans.

Refund Liability

Because the terms coincide with the Company’s fiscal quarter and year, there is no refund liability as of December 31, 2020 and 2019.

Note****R - Stock Compensation Plans

Prior to the FAH Acquisition (Note A), the Company had various stock compensation plans. Options and restricted stock were granted under the 2008 plan, the 2009 plan, the 2011 plan and the 2015 plan (Plans). As of the time of the FAH Acquisition, all remaining unvested options and restricted stock grants immediately vested. All options holders exercised their options at the time of the FAH Acquisition and consequently these Plans were simultaneously terminated. As a result, for the period from January 1, 2019 to March 15, 2019 (Predecessor), the Company recognized the remaining compensation expense on all options and restricted stock grant which were unvested as of December 31, 2018. The total compensation expense for these options and restricted stock grants was approximately $365,000 for the period from January 1, 2019 to March 15, 2019 (Predecessor).

Note****S - Acquisition

On March 15, 2019, the Parent entered into a Unit Purchase Agreement to acquire all of the outstanding equity interests of the Company (Note A). The FAH Acquisition has been accounted for by the acquisition method of accounting under Topic 835, Business Combinations of FASB ASC, and accordingly, the purchase price has been allocated to the assets acquired and liabilities assumed based on estimated fair values at the date of acquisition.

The Parent believes that the FAH Acquisition was a strategic decision in the respective marketplace of the schools due to the projected economic needs of workers with post-secondary education. Management believes that through its expertise and financial commitment it will be able to continue the growth of the student population and program offerings.

In relation to the Acquisition, the Agreement includes a potential earnout due to the seller calculated at an amount equal to $2.75 for every dollar by which the Parent’s consolidated adjusted EBITDA exceeds $29,600,000 for the 12-month period ending March 31, 2020, up to a maximum amount of $2,750,000. The Parent has determined there is no additional amount due to the seller.

Rasmussen, LLC and Subsidiary

Notes to Consolidated FinancialStatements

Note****S – Acquisition (continued)

The following is a summary (in thousands) of the purchase transaction and the related allocation of the assigned values. The allocation of the assigned values was being evaluated including the existence of other intangible assets (Note E). The Agreement provided for a purchase price adjustment which was computed as of March 15, 2019 and paid prior to December 31, 2019.

Initial purchase price	$	164,300
Purchase price adjustment		850
Purchase price	$	165,150
Assets acquired:
Cash and cash equivalents	$	24,717
Restricted cash		431
Accounts receivable		5,974
Prepaid expenses and other current assets		4,871
Furniture, equipment and improvements		27,376
Deposits and other assets		98
Internally developed software		72
Total assets acquired		63,539
Liabilities assumed:
Accounts payable		566
Accrued expenses		14,003
Due to students under financial aid programs		431
Prepaid tuition		3,931
Deferred tuition and other deferred revenue		11,451
Other long-term liability		1,456
Total liabilities assumed		31,838
Net assets acquired	$	31,701
Purchase price	$	165,150
Net assets acquired		(31,701	)
Intangible assets (Note E)	$	133,449

Exhibit 99.3

RASMUSSEN,LLC

ANDSUBSIDIARY

ReviewedConsolidated

FinancialStatements

Six-monthPeriods Ended

June 30,2021 and 2020

Rasmussen,LLC and Subsidiary

ConsolidatedBalance Sheets (in thousands)

ASSETS

		December 31,
		2020
CURRENT<br> ASSETS	****	****	****
Cash<br> and cash equivalents	39,174	$	37,076
Restricted<br> cash	329		786
Accounts<br> receivable, net of allowance for doubtful accounts of 3,709 and 3,385, respectively	4,971		5,938
Prepaid<br> expenses	3,190		4,496
Other<br> current assets	1,937		1,912
TOTAL<br> CURRENT ASSETS	49,601		50,208
FURNITURE,<br> EQUIPMENT AND IMPROVEMENTS, net	32,374		31,137
OTHER<br> ASSETS	****	****	****
Deposits<br> and other assets	905		576
Curriculum development costs, net of accumulated amortization<br> of 501 and 250, respectively	1,203		1,206
Goodwill	66,526		66,526
Other intangible assets, net of accumulated amortization<br> of 29,253 and 22,870, respectively	37,670		44,053
TOTAL<br> OTHER ASSETS	106,304		112,361
TOTAL<br> ASSETS	188,279	$	193,706

All values are in US Dollars.

LIABILITIESAND MEMBER'S EQUITY

CURRENT LIABILITIES
Accounts<br> payable	$	8,266	$	12,771
Accrued<br> expenses		6,367		6,468
Due<br> to students under financial aid programs		326		786
Prepaid<br> tuition		468		4,155
Deferred<br> revenue and scholarships		1,028		0
Current portion of long-term debt, net of deferred<br> financing costs		4,548		5,363
TOTAL CURRENT LIABILITIES		21,003		29,543
LONG-TERM LIABILITIES
Long-term debt, net of current portion and<br> deferred financing costs		39,690		40,965
Deferred<br> rent		5,493		4,604
Fair<br> value of interest rate swap contract		902		1,431
Other<br> long-term liabilities		558		492
TOTAL LONG-TERM LIABILITIES		46,643		47,492
MEMBER'S EQUITY		120,633		116,671
TOTAL LIABILITIES AND MEMBER'S EQUITY	$	188,279	$	193,706

See independentaccountant’s review report and accompanying notes to consolidated financial statements.

Rasmussen,LLC and Subsidiary

ConsolidatedStatements of Income (in thousands)

	Six-Month			Six-Month
	Period<br> Ended			Period<br> Ended
	June 30,			June 30,
	2021			2020
REVENUES	$	137,348		$	125,878
OPERATING<br> EXPENSES
Instructional		52,790			47,945
General<br> and administrative		28,709			32,195
Admissions		31,493			31,390
Depreciation<br> and amortization		10,294			9,990
TOTAL<br> OPERATING EXPENSES		123,286			121,520
INCOME FROM OPERATIONS BEFORE OTHER<br> INCOME (EXPENSE)		14,062			4,358
Investment<br> income		34			63
Interest<br> expense		(1,483	)		(1,875	)
		(1,449	)		(1,812	)
NET<br> INCOME	$	12,613		$	2,546

See independentaccountant’s review report and accompanying notes to consolidated financial statements.

Rasmussen,LLC and Subsidiary

ConsolidatedStatements of Comprehensive Income (in thousands)

	Six-Month		Six-Month
	Period<br> Ended		Period<br> Ended
	June 30,		June 30,
	2021		2020
NET<br> INCOME	$	12,613	$	2,546
OTHER<br> COMPREHENSIVE INCOME (LOSS)
Unrealized gain (loss) in fair value of interest<br> rate swap contract		529		(1,131	)
TOTAL<br> OTHER
COMPREHENSIVE<br> INCOME (LOSS)		529		(1,131	)
TOTAL<br> COMPREHENSIVE INCOME	$	13,142	$	1,415

See independentaccountant’s review report and accompanying notes to consolidated financial statements.

Rasmussen,LLC and Subsidiary

ConsolidatedStatements of Changes in Member’s Equity (inthousands)

						Accumulated
						Other
	Member's		Accumulated			Comprehensive
	Capital		Earnings			Loss			Total
BALANCE<br> AT DECEMBER 31, 2019	$	87,612	$	2,748		$	(852	)	$	89,508
Net<br> income		0		2,546			0			2,546
Capital<br> contributions		0		0			0			0
Distributions<br> to member		0		(16	)		0			(16	)
Total<br> other comprehensive loss		0		0			(1,131	)		(1,131	)
BALANCE AT JUNE<br> 30, 2020	$	87,612	$	5,278		$	(1,983	)	$	90,907
****	****		****		****	Accumulated		****	****		****
---	---	---	---	---	---	---	---	---	---	---	---
****	****		****		****	Other		****	****		****
****	Member's		Accumulated		****	Comprehensive		****	****		****
****	Capital		Earnings		****	Loss		****	Total
BALANCE AT DECEMBER 31, 2020	$	100,612	$	17,490		$	(1,431	)	$	116,671
Net<br> income		0		12,613			0			12,613
Capital<br> contributions		0		0			0			0
Distributions<br> to member		0		(9,180	)		0			(9,180	)
Total<br> other comprehensive income		0		0			529			529
BALANCE AT JUNE 30, 2021	$	100,612	$	20,923		$	(902	)	$	120,633

Seeindependent accountant’s review report and accompanying notes to consolidated financial statements.

Rasmussen,LLC and Subsidiary

ConsolidatedStatements of Cash Flows (in thousands)

****	Six-Month		****	Six-Month		****
****	Period Ended		****	Period Ended		****
****	June 30,		****	June 30,		****
****	2021		****	2020		****
CASH FLOWS FROM OPERATING ACTIVITIES	****	****	****	****	****	****
Net<br> income	$	12,613		$	2,546
Adjustments<br> to reconcile net income to net cash
provided<br> by operating activities:
Provision<br> for bad debt		2,812			2,139
Depreciation<br> and amortization		10,294			9,990
Deferred<br> loan fees		131			131
Deferred<br> rent		889			1,786
Decrease<br> (increase) in:
Accounts<br> receivable		(1,846	)		(2,419	)
Due<br> from Parent		0			(642	)
Prepaid<br> expenses		1,307			370
Other<br> current assets		(25	)		(796	)
Deposits<br> and other assets		(328	)		(131	)
Increase<br> (decrease) in:
Accounts<br> payable		(4,505	)		(378	)
Accrued<br> expenses		470			1,298
Due<br> to students under financial aid programs		(461	)		(405	)
Prepaid<br> tuition		(3,687	)		(109	)
Deferred<br> revenue and scholarships		457			(337	)
Other<br> long term liabilities		65			(16	)
Total<br> net operating adjustments		5,573			10,481
NET CASH PROVIDED BY OPERATING ACTIVITIES		18,186			13,027
CASH FLOWS FROM INVESTING ACTIVITIES
Payments<br> for curriculum development costs		(255	)		0
Acquisition<br> of furniture, equipment and improvements		(4,891	)		(2,763	)
NET CASH USED IN INVESTING ACTIVITIES		(5,146	)		(2,763	)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments<br> on long-term debt		(2,219	)		(9,625	)
Distributions<br> to member		(9,180	)		(16	)
NET CASH USED IN FINANCING ACTIVITIES		(11,399	)		(9,641	)
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	****	1,641			623
Cash,<br> cash equivalents, and restricted cash at beginning of period		37,862			16,529
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD	$	39,503		$	17,152

See independentaccountant’s review report and accompanying notes to consolidated financial statements.

Rasmussen,LLC and Subsidiary

Notesto Consolidated Financial Statements

NoteA - Nature of Operations and Subsequent Event

Rasmussen, LLC (Company) owns 100% of Rasmussen College, LLC (College) and provides corporate services to the College. The Company’s corporate headquarters are in Oak Brook (Chicago), Illinois.

NoteB - Summary of Significant Accounting Policies

Basisof Presentation

The consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (GAAP).

Changein Fiscal Year End

Due to the FAH Acquisition, during 2020, the Company changed its fiscal year end from September 30^th^ to December 31^st^.

Consolidation

The consolidated financial statements include the accounts and results of operation of the Rasmussen, LLC and its wholly-owned subsidiary, Rasmussen College, LLC. All significant intercompany transactions and account balances have been eliminated in consolidation.

Rasmussen,LLC and Subsidiary

Notesto Consolidated Financial Statements

NoteB - Summary of Significant Accounting Policies (continued)

Useof Estimates in the Preparation of Consolidated Financial Statements

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. In addition, because of the inherent uncertainties in estimating certain accrued expenses, it is at least reasonably possible that the estimates used will change in the near term.

Cashand Cash Equivalents

Cash and cash equivalents consist of cash in the bank, overnight sweep accounts and all short-term investments with original maturities of 90 days or less. At June 30, 2021 and December 31, 2020, the Company only held cash and did not have any cash equivalents.

RestrictedCash

The Company has cash of approximately $329,000 and $786,000 as of June 30, 2021 and December 31, 2020, respectively, shown as restricted with a corresponding liability of $326,000 and $786,000, respectively, “Due to students under financial aid programs”. These funds represent amounts advanced by various governmental agencies that have not yet been earned or distributed to eligible students.

AccountsReceivable and Allowance for Doubtful Accounts

Furniture,Equipment and Improvements

GovernmentAssistance

The Company received Higher Education Emergency Relief Funds (HEERF), in the form of government grants, related to the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). As there is no current U.S. GAAP guidance related to for-profit business entities that received government grants, the Company has elected to adopt International Accounting Standards (IAS) 20, Accounting for Government Grantsand Disclosure of Government Assistance. Under IAS 20, government grant proceeds received are recognized as income grant on a systematic and rational basis over the periods in which the Company recognizes as expenses the costs the proceeds are intended to defray. Any government grant proceeds received prior to the corresponding cost being incurred are recorded as a deferred government grant liability. The Company has presented the government grant income net of the applicable expenses.

Rasmussen,LLC and Subsidiary

Notesto Consolidated Financial Statements

NoteB - Summary of Significant Accounting Policies (continued)

CurriculumDevelopment Costs

The Company developed curriculum internally, which is primarily provided as online content and accessed via the Internet.

The Company capitalizes curriculum development costs incurred during the application development stage of the project in accordance with FASB ASC Topic 350, Goodwill and Other Intangible Assets. Many of the Company’s new courses leverage off of proven delivery platforms and are primarily content, which has no technological hurdles. As a result, a significant portion of the Company’s courseware development costs qualify for capitalization due to the concentration of its development efforts on the content of the courseware. Capitalization ends when a course is available for educational instruction, at which time they are amortized on a straight-line basis over two to three years. Amortization expense for the six-month periods ended June 30, 2021 and 2020 was approximately $251,000 and $0, respectively.

Goodwilland Other Intangible Assets

Goodwill represents the excess of the cost of identified assets, including other intangible assets, acquired through business combinations over the estimated fair value of the net assets as of the purchase date. Other intangible assets are originally measured based on their fair values in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 805, BusinessCombinations. The Company performed, with the assistance of independent valuation experts, tests to determine the fair value of these assets as well as established useful lives. Assets with finite useful lives are amortized on a straight-line basis over their estimated useful lives.

The FASB ASC Topic 350, Goodwill and Other Intangible Assets requires that goodwill and other intangible assets be subject to annual impairment testing. In accordance with Accounting Standards Update (ASU) No. 2011-08, Testing of Goodwill for Impairment, and ASU No. 2012-02, Testing Indefinite-Lived Intangible Assetsfor Impairment, management may first assess qualitative factors (macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, other relevant entity-specific events, events affecting the reporting unit, etc.) to determine whether it is more likely than not (a likelihood of more than 50%) that the fair value of the reporting unit is less than its carrying amount, including goodwill and other intangible assets. If after assessing the qualitative factors, management believes that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, management performs the two-step goodwill and other intangible asset impairment test to identify potential goodwill and other intangible assets impairment and measure the amount of goodwill and other intangible assets impairment loss to be recognized (if any). Management’s assessment of various qualitative factors did not indicate the amount of goodwill and other intangible assets to be impaired as of June 30, 2021 and December 31, 2020. As a result, the two-step goodwill and other intangible asset impairment test was not performed, and therefore no impairment loss has been recorded.

Rasmussen,LLC and Subsidiary

Notesto Consolidated Financial Statements

NoteB - Summary of Significant Accounting Policies (continued)

PrepaidTuition and Revenue Recognition

DeferredFinancing Costs

Costs related to obtaining the credit agreement are capitalized and amortized over the term of the related debt using the straight-line method. In accordance with ASU No. 2015-03, Interest – Imputation of Interest (Topic 835-30): Simplifying the Presentation of Debt Issuance Costs, these costs are presented as a reduction in the carrying value of the related debt liability on the accompanying consolidated balance sheet (Note G).

DeferredRent

The Company has entered into operating leases which contain provisions for escalating rent. The Company recognizes rent expense on the straight-line method over the lives of the leases. The cumulative excess of the amounts expensed over the payments required under the leases is recorded as deferred rent. This credit will be used to offset future rent expense for financial statement purposes.

InterestRate Swap Contract

IncomeTaxes

The Company and the College are single member limited liability companies (disregarded entities for tax purposes) and are included with the federal and state tax returns of the Parent. The Parent has elected to be treated as a partnership for federal and state income tax purposes. A partnership is not a tax paying entity for federal and state income tax purposes. Income, loss, deductions and credits pass through proportionately to its members and are taxed at the individual members’ income tax rates. Accordingly, no provision for federal or state income taxes has been included in the consolidated financial statements.

Rasmussen,LLC and Subsidiary

Notesto Consolidated Financial Statements

NoteB - Summary of Significant Accounting Policies (continued)

FinancialInstruments

The fair values and carrying amounts of the Company’s financial instruments, primarily current assets and liabilities, are approximately equivalent due to their short-term lives.

AdvertisingCosts

Advertising costs are expensed as incurred. Total marketing cost, inclusive of advertising expense for the six-month periods ended June 30, 2021 and 2020 was approximately $23,717,000 and $22,898,000, respectively.

RecentAccounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases. This ASU supersedes existing guidance on accounting for leases in ASC Topic 840, Leases. The standard requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet. A lessee should recognize in the balance sheet, a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. This ASU will be effective for the Company’s year ended December 31, 2022. The amendments should be applied at the beginning of the earliest period presented using a modified retrospective approach. The Company is currently in the process of assessing the impact of the adoption of this standard on its financial statements.

NoteC - Concentration of Credit Risk

The Company, at times, has cash deposits which exceed $250,000 in an individual bank. The Federal Deposit Insurance Corporation (FDIC) insures only the first $250,000 of funds at member banks.

The accounts receivable are primarily amounts due from students for tuition and fees. Many of the Company’s students are eligible for federal government loan and grant programs, and state grant programs which are administered by the Company. These receivables are unsecured. In addition, the Company receives funding from several other sources such as Veterans Administration programs, state grants, workforce training contracts, and alternative loans. Students typically apply the funds received from SFA and other funding to pay their tuition and fees. The receipt of SFA and other funding reduces the amount due from the student and has no impact on revenue recognition.

The Company has entered into various multi-year contracts, including leases and other service agreements that may result in additional costs if the Company chose to pursue early termination.

Rasmussen,LLC and Subsidiary

Notesto Consolidated Financial Statements

NoteD - Furniture, Equipment and Improvements

Furniture, equipment and improvements as of June 30, 2021 and December 31, 2020 consist of the following (in thousands):

	June 30,			December 31,
	2021			2020
Furniture<br> and equipment	$	10,211		$	9,188
Computer<br> equipment and software		6,792			6,084
Leasehold<br> improvements		25,536			21,323
		42,539			36,595
Less<br> accumulated depreciation and amortization		(15,725	)		(12,641	)
		26,814			23,954
Construction<br> in progress		5,560			7,183
	$	32,374		$	31,137

Depreciation and amortization expense, related to furniture, equipment and improvements, is computed using the straight-line method based on the following estimated useful lives:

Furniture<br> and equipment	5<br> - 7 years
Computer<br> equipment and software	3<br> - 5 years
Leasehold<br> improvements	Remaining<br> lease term

Depreciation and amortization expense, related to furniture, equipment and improvements, charged to operations for the six-month periods ended June 30, 2021 and 2020 was approximately $3,654,000 and $3,608,000, respectively.

NoteE - Other Intangible Assets

In accordance with FASB ASC Topic 805, Business Combinations, the Company recognized adjustments to the amount of intangible assets related to the Parent’s acquisition of Rasmussen and the Company (Note A). During the measurement period of the acquisition, new information was obtained about facts and circumstances that, if known, would have affected the measurement of the amounts recognized as of that date.

Rasmussen,LLC and Subsidiary

Notesto Consolidated Financial Statements

NoteE - Other Intangible Assets (continued)

A summary of the other intangible assets and their accumulated amortization, as of June 30, 2021, are as follows (in thousands):

	Gross<br> Carrying		Accumulated			Net<br> Carrying
	Amount		Amortization			Amount
Finite-lived<br> other intangible assets:
Course<br> content	$	6,086	$	(3,487	)	$	2,599
Student<br> base		33,730		(25,766	)		7,964
Total<br> finite-lived other intangible assets		39,816		(29,253	)		10,563
Indefinite-lived<br> other intangible assets:
Trademarks/tradenames		19,264		0			19,264
Accreditation		7,843		0			7,843
Total<br> indefinite-lived other intangible assets		27,107		0			27,107
Total<br> other intangible assets	$	66,923	$	(29,253	)	$	37,670

A summary of the other intangible assets and their accumulated amortization, as of December 31, 2020, are as follows (in thousands):

	Gross<br> Carrying		Accumulated			Net<br> Carrying
	Amount		Amortization			Amount
Finite-lived<br> other intangible assets:
Course<br> content	$	6,086	$	(2,726	)	$	3,360
Student<br> base		33,730		(20,144	)		13,586
Total<br> finite-lived other intangible assets		39,816		(22,870	)		16,946
Indefinite-lived<br> other intangible assets:
Trademarks/tradenames		19,264		0			19,264
Accreditation		7,843		0			7,843
Total<br> indefinite-lived other intangible assets		27,107		0			27,107
Total<br> other intangible assets	$	66,923	$	(22,870	)	$	44,053

Rasmussen,LLC and Subsidiary

Notesto Consolidated Financial Statements

NoteE - Other Intangible Assets (continued)

At the acquisition date, the useful life assigned to each type of intangible asset with a finite useful life was as follows:

	Useful<br> Life
Course<br> content	48<br> months
Student<br> Base	36<br> months

The estimated future amortization expense for the years subsequent to June 30, 2021 are as follows (in thousands):

Years<br> Ending
December 31,	Amount
2021	$	6,382
2022		3,864
2023		317
	$	10,563

Amortization expense of other intangible assets charged to operations for the six-month periods ended June 30, 2021 and 2020 was approximately $6,382,000.

NoteF - Long-Term Line of Credit

The Company has available a $30,000,000 revolving long-term line of credit which includes $5,000,000 specifically for swingline loans. The long-term line of credit requires quarterly interest payments at the base rate plus the applicable margin with the principal payment due on the outstanding balance on March 15, 2024. The base rate is the higher of the Administrative Agent’s prime lending rate, the Federal Funds Rate plus one-half of one percent, and the One Month Libor Index Rate plus one percent. As of June 30, 2021 and December 31, 2020, the outstanding balance of the long-term line of credit was $0. However, the amount available to draw as of June 30, 2021 and December 31, 2020 is $6,309,805 and $29,381,075, respectively, as the balance of the revolving line is being used to secure a letter of credit (Notes I and M). The long-term line of credit is governed by a credit agreement (Note G).

Rasmussen,LLC and Subsidiary

Notesto Consolidated Financial Statements

NoteG - Credit Agreement and Long-Term Debt

In connection with the FAH Acquisition, the Company entered into a credit agreement which includes a $75,000,000 term loan and $30,000,000 revolving long-term line of credit (Note F). The credit agreement also includes a commitment by the issuing bank to provide a letter of credit of up to $25,000,000 to the Company upon request. If requested and issued, the $25,000,000 letter of credit will be secured by the $30,000,000 revolving line of credit, whereby limiting the available amount of the revolving line of credit, by the amount of the issued letters of credit (Note F). As of June 30, 2021 and December 31, 2020, the Company has issued letters of credit of approximately $23,690,000 and $619,000, respectively. The credit agreement includes three financial institutions, each providing a portion of the credit extended to the Company with one of the financial institutions acting as the Administrative Agent.

The $75,000,000 term loan is due in 19 quarterly principal payments, plus interest, beginning on June 30, 2019, with any unpaid interest and principal due on March 15, 2024. The term loan contains mandatory pre-payments based on certain events and excess cash flows of the Company as defined in the credit agreement. During the six-month periods ended June 30, 2021 and 2020, the Company made an excess cash flows principal payment of approximately $0 and $7,281,000, respectively. The Company may also make additional optional pre-payments on the term loan at their discretion. During six-month periods ended June 30, 2021 and 2020, the Company did not make optional pre-payments. The term loan bears interest at the base rate plus an applicable margin. The base rate is the higher of the Administrative Agent’s prime lending rate, the Federal Funds Rate plus one-half of one percent, and the One Month Libor Index Rate plus one percent. The applicable margin was 2.75% and the interest rate of the term loan was 2.85% and 3.15% as of June 30, 2021 and December 31, 2020, respectively. The outstanding balance on the term loan was approximately $44,949,000 and $47,170,000 as of June 30, 2021 and December 31, 2020, respectively.

The credit agreement which governs the $75,000,000 term loan and the $30,000,000 long-term line of credit is secured by the outstanding equity interest of the Parent, College, and the Company, all assets (both tangible and intangible) of the Parent, College, and the Company and is guaranteed by the Company and the Parent. The credit agreement also contains various financial and non-financial covenants which are common to credit agreements of this nature and are measured on a quarterly basis. The credit agreement contains certain restrictions on the Company’s ability to obtain other sources of financing, as well as certain limitations on the Company’s ability to pay dividends to members. These restrictions and limitations are effective until the expiration of the credit agreement in March 2024, or upon full repayment of the term loan and any draws against the long-term line of credit (whichever is sooner). The Company was in compliance with the covenants as of June 30, 2021 and December 31, 2020.

The Company entered into an interest rate swap contract with a financial institution associated with $50,000,000 of the term loan (Note H).

Rasmussen,LLC and Subsidiary

Notesto Consolidated Financial Statements

NoteG - Credit Agreement and Long-Term Debt (continued)

The aggregate annual amounts of principal payments required on the term loan and amortization of related deferred financing costs for years subsequent to June 30, 2021, are approximately as follows (in thousands):

Years Ending	Principal		Deferred		****	Net
December 31,	Payments		Financing Costs		****	Amount
2021	$	2,220	$	(131	)	$	2,089
2022		5,551		(262	)		5,289
2023		5,921		(262	)		5,659
2024		31,257		(55	)		31,202
	$	44,949	$	(710	)	$	44,239

NoteH - Interest Rate Swap Contract

At June 30, 2021 and December 31, 2020, the fair value of the Swap was approximately negative $902,000 and negative $1,431,000, respectively and is reported as a long-term liability in the accompanying consolidated balance sheets. The unrealized gain or loss on the interest rate swap contract is reported as a component of other comprehensive income (loss) and is recognized when interest on the interest rate swap contract is paid or received. The fair value of the Swap was estimated by the financial institution issuing the Swap based upon observable market inputs such as interest rates, credit risks, and the net present value of expected future cash flows. These estimates may change due to changes in the estimate of future market interest rates.

The Fixed Rate of interest appurtenant to the Swap is 2.271%. The floating rate of interest is based upon USD-LIBOR-BBA and is adjusted monthly. The interest expense, related to the Swap, was approximately $540,000 and $295,000 for the six-month periods ended June 30, 2021 and 2020, respectively.

Rasmussen,LLC and Subsidiary

Notesto Consolidated Financial Statements

NoteI - Commitments and Contingencies

The Company receives income from third parties for sublease agreements. One of the sublease agreements expired during 2020 and as of June 30, 2021, there is only one remaining sublease agreement which expires during August 2026. The Company is still responsible for the proportionate share of the buildings’ operating costs, real estate taxes, and insurance which are included in the commitments. Sublease rental income of approximately $4,000 and $193,000 is recorded as a reduction of rent expense for the six-month periods ended June 30, 2021 and 2020, respectively.

The Company has entered into Service Agreements with a third party, whereas the third party provides marketing and IT services to the Company. The agreements have initial terms that expire September 30, 2024 (Initial Term). The marketing agreement automatically renews for successive three-year periods (MA Renewal Term) unless terminated 12 months prior to the end of the Initial Term or MA Renewal Term. For the six-month periods ended June 30, 2021 and 2020, the Company paid approximately $22,808,000 and $22,242,000, respectively, as base costs under the marketing agreement and approximately $864,000 and $550,000, respectively, as additional services. The IT service agreement will automatically renew for successive five-year terms (IT Renewal Term) unless terminated 24 months prior to the Initial Term or IT Renewal Term. For the six-month periods ended June 30, 2021 and 2020, the IT service fee was approximately $7,720,000 and $7,912,000, respectively, and the Company paid approximately $142,000 and $168,000, respectively, as additional services.

Future minimum lease payments under noncancelable operating lease agreements, service agreements and sublease income for the next five years and in the aggregate are approximately as follows (in thousands):

			Future
Years<br> Ending	Future		Sublease
December 31,	Commitments		Income
2021	$	18,007	$	5
2022		34,284		9
2023		30,476		9
2024		24,719		9
2025		9,612		11
2026		8,920		7
Thereafter		31,051		0
	$	157,069	$	50

The gross amount charged to operations under all operating leases for the six-month period ended June 30, 2021 and 2020 was approximately $6,530,000 and $6,756,000, respectively.

In certain instances, the Company has issued letters of credit naming a landlord as beneficiary. At June 30, 2021 and December 31, 2020, there was $619,000 and $619,000, respectively, of letters of credit issued and the letters of credit are secured by a line of credit as more fully described in Note F.

Rasmussen,LLC and Subsidiary

Notesto Consolidated Financial Statements

NoteI - Commitments and Contingencies (continued)

The Company has a partially self-insured health plan (Plan) for its employees covering medical, dental, and pharmacy prescription. The Plan had a yearly loss limit per person of $170,000 and a maximum claims expense of 125% of the average claim value which computed to approximately $10,702,000 for the most recent year end of December 31, 2020. Dental claims are not part of the stop-loss limits. The Company accrued approximately $1,167,000 and $1,809,000 as of June 30, 2021 and December 31, 2020, respectively, for outstanding invoices and to cover claims which have been incurred but not reported. This estimate was provided by the Company’s health plan provider and was derived from historical business claim lags.

NoteJ - Member’s Equity

As of June 30, 2021 and December 31, 2020, Member’s Equity consists of one class of common units.

The Company is authorized to issue 1,000 Common Units, of which, 1,000 units are issued and outstanding as of June 30, 2021 and December 31, 2020.

NoteK - Retirement Saving Plan

The Company sponsors a 401(k) retirement plan for all eligible employees as defined by the Plan. The participants may contribute a portion of their salary not to exceed certain Internal Revenue Code limits. The Company may make discretionary contributions. The employer currently matches 50% of the first 6% of compensation. For the six-month periods ended June 30, 2021 and 2020, the discretionary contribution charged to the Company’s operations was approximately $940,000 and $864,000, respectively. The Company may also make discretionary “non-elective” contributions. For the six-month periods ended June 30, 2021 and 2020, the Company did not make any additional discretionary “non-elective” contributions.

NoteL - Related Party Transactions

Rasmussen,LLC and Subsidiary

Notesto Consolidated Financial Statements

NoteM - Regulatory

To participate in the Title IV Programs, an institution is subject to extensive regulation and periodic reviews by the federal and state governmental agencies, and accrediting bodies involved. An institution must be authorized to offer its programs of instruction by the relevant agencies of the state in which it is located, accredited by an accrediting agency recognized by ED, and certified as eligible by ED. On a periodic basis, an institution must be re-approved by these agencies and bodies to continue to receive Title IV funds. During 2017, ED performed a program review of the Company authorized by Title IV of the HEA and the Company has not received a report from ED. The Company also receives a portion of funds from the Veterans Administration (VA) through various veterans’ benefits programs. Similar to the Title IV Programs, the veterans benefit programs are subject to political and budgetary considerations and periodic reviews by the VA. Depending on the severity of a regulatory violation, a regulator can initiate repayment of the applicable funds awarded, transfer the Company to a delayed method of funding, or begin proceedings related to suspension, limitation, or termination. Except as noted above, as of June 30, 2021 and December 31, 2020, the Company was properly authorized by the regulatory agencies involved, and no regulatory reviews were being conducted by the respective agencies. The Company is subject to final approval of the change in ownership resulting from the FAH Acquisition (Note A) from the applicable federal regulator. Management received this approval from ED in April of 2021. In addition, the APEI Sale (Note A) will be subject to similar final approvals.

Regulations have been established which impose limitations on institutions whose former students default on the repayment of their federally guaranteed or funded student loans above a specific cohort default rate (CDR). An institution whose CDR equals or exceeds 30% for three consecutive years will no longer be eligible to participate in the William D. Ford Federal Direct Loan (Direct Loan) and Federal Pell Grant programs for the remainder of the fiscal year in which the school is notified of its sanction and for the following two fiscal years. An institution whose CDR exceeds 40% will lose Direct Loan program eligibility for the remainder of the fiscal year in which the school is notified of its sanction and for the following two fiscal years. As of June 30, 2021 and December 31, 2020, the College had a cohort default rate below the sanction levels described above.

Under the federal regulations mentioned above, ED calculates the institution’s composite score based on a three-factor financial responsibility ratio. An institution which does not meet ED’s minimum composite score of 1.5 can demonstrate financial responsibility by meeting the “zone alternative” or posting a letter of credit in favor of ED. The “zone alternative” includes a delayed method of cash funding for Title IV aid, and the providing of additional information to ED, upon request. The Company’s composite score was previously calculated on the Company’s prior fiscal year end, which was September 30th. In April 2021, based upon the Company’s September 30, 2020 composite score ratio, the Company had to post a letter of credit of approximately $23,071,000 and was placed on the Heightened Cash Monitoring 1 payment method in regard to Title IV funding. The letter of credit was posted during May 2021 and is secured by the Company’s long-term line of credit (Note F). Due to the FAH Acquisition, the Company changed its fiscal year end from September 30 to December 31. As of December 31, 2020, the College had a composite score of 1.7, compared to a minimum required of 1.5, and ED has not yet released the letter of credit.

Rasmussen,LLC and Subsidiary

Notesto Consolidated Financial Statements

NoteM – Regulatory (continued)

NoteN – COVID-19 Pandemic and Government Relief

The schools operated by the Company have received HEERF student grants. These funds are meant for students who have had their education disrupted by the COVID-19 outbreak. These funds are to be distributed directly to Title IV eligible students and are not to be used for operations and will not impact the Company’s expenses. The schools operated by the Company have been awarded funds of approximately $14,242,000. During the six-month periods ended June 30, 2021 and 2020, the Company expended $9,702,842 and $4,168,725, respectively. These student HEERF grant revenue and disbursements are offset in the consolidated statement of income.

In addition, Congress has approved HEERF institutional grants. The schools operated by the Company have been awarded funds of $5,694,000. During the six-month periods ended June 30, 2021 and 2020, the Company expended $3,360,585 and $0, respectively, and the amounts are reflected as a reduction of the related expenses or the capital acquisitions.

Rasmussen,LLC and Subsidiary

Notesto Consolidated Financial Statements

NoteN – COVID-19 Pandemic and Government Relief (continued)

NoteO – Supplemental Disclosures of Cash Flow Information

	June 30,		December 31
	2021		2020
Cash<br> and cash equivalents	$	39,174	$	37,076
Restricted<br> cash		329		786
Total<br> cash, cash equivalents, and restricted cash shown in the consolidated statement of cash flows	$	39,503	$	37,862

Cash paid for interest during the year ended June 30, 2021 and 2020 was approximately $1,352,000 and $1,744,000, respectively.

NoteP – Fair Value

ASC Topic 820, Fair Value Measurements and Disclosures establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC Topic 820 are described as follows:

Level<br> 1	Inputs<br> in the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company<br> has the ability to access.
Level<br> 2	Inputs<br> to the valuation methodology include:
	Quoted<br> prices for similar assets or liabilities in active markets.
	Quoted<br> prices for identical or similar assets or liabilities in inactive markets.
	Inputs<br> other than quoted prices that are observable for the asset or liability.
	Inputs<br> that are derived principally from or corroborated by observable market data by correlation or other means.
Level<br> 3	Inputs<br> to the valuation methodology are unobservable and significant to the fair value measurement.

Rasmussen,LLC and Subsidiary

Notesto Consolidated Financial Statements

NoteP – Fair Value (continued)

InterestRate Swap Contract

Long-TermDebt

The carrying amount approximates fair value because the interest rate on the outstanding debt was variable, therefore was classified within Level 3 of the valuation hierarchy.

	June 30, 2021
	Carrying		Fair Value
	Amount		Level<br> 1		Level<br> 2		Level<br> 3		Total
Financing<br> liabilities:
Interest<br> rate swap agreement	$	902	$	0	$	902	$	0	$	902
Long-term<br> debt	$	44,949	$	0	$	0	$	44,949	$	44,949
	December 31, 2020
---	---	---	---	---	---	---	---	---	---	---
	Carrying		Fair Value
	Amount		Level<br> 1		Level<br> 2		Level<br> 3		Total
Financing<br> liabilities:
Interest<br> rate swap agreement	$	1,431	$	0	$	1,431	$	0	$	1,431
Long-term<br> debt	$	47,170	$	0	$	0	$	47,170	$	47,170

The following is a reconciliation of the beginning and ending balances of recurring fair value measurements for the six-month period ended June 30, 2021, using significant unobservable (Level 3) inputs (in thousands):

	Long-term
	Debt
Beginning<br> balance as of January 1, 2021	$	47,170
Unrealized<br> loss included in other comprehensive income		0
Purchases,<br> sales, issuances and settlements, net		(2,221	)
Transfers<br> in and/or out of Level 3		0
Ending balance as of<br> June 30, 2021	$	44,949

Rasmussen,LLC and Subsidiary

Notesto Consolidated Financial Statements

NoteQ – Revenue

On January 1, 2019, the Company adopted the new standard on revenue recognition, ASU 2014-09, using the modified retrospective approach of ASU 2016-10. The adoption of the guidance in ASU 2014-09 as amended by ASU 2016-10 did not have a material impact on the measurement or recognition of revenue in any prior or current reporting periods and there was no adjustment to members’ equity. The core principle of the new standard is that a company should recognize revenue to depict the transfer of promised goods or services to students in an amount that reflects the consideration to which the company expects to be entitled in exchange for such goods or services. Substantially all of the Company’s revenues are considered to be revenues from contracts with students. No significant customer exists and are generally from the surrounding areas of the campus locations, except for the online program which enrolls students nationwide. (Note A). The Company has adopted the portfolio approach in accounting for revenue since the economic substance of the contract is similar for all students.

PrincipalActivities

The following is a description of principal activities from which the Company generates its revenue.

The Company provides various scholarships and tuition grants to assist students with their educational programs. Institutional scholarships for the six-month periods ended June 30, 2021 and 2020 of approximately $8,048,000 and $8,084,000, respectively, are reflected as a reduction in the revenue recognized and are deemed to be related to the Company’s primary performance obligation which is tuition. These scholarships are recognized over the same period as the respective tuition revenue.

Disaggregationof Revenue

While the Company operates in multiple states and online, management views and evaluates the operational results as one line of business.

·	Revenue<br> for instructional services was approximately $144,247,000 and $132,549,000 for the six-month<br> periods ended June 30, 2021 and June 30, 2020, respectively.
·	Revenue<br> for textbooks charges for the six-month periods ended June 30, 2021 and 2020 was approximately<br> $981,000 and $903,000, respectively.
---	---

Rasmussen,LLC and Subsidiary

Notesto Consolidated Financial Statements

NoteQ - Revenue (continued)

ContractBalances and Performance Obligations

The Company has assessed the costs incurred to obtain a contract with a student and determined them to be immaterial. There are no significant contract assets and prepaid tuition (contract liability) is the only significant contract liability impacted by the adoption of ASU 2016-10. Prepaid tuition in the amount of approximately $468,000 and $4,155,000 is recorded as a liability on the consolidated balance sheet as of June 30, 2021 and December 31, 2020, respectively. The change in the contract liability balance is the result of payments received in advance of satisfying performance obligations, offset by revenue recognized during that period.

RefundPolicy

·	Prior<br> to the period of instruction, all payments will be refunded as the Company doesn’t<br> charge a student until one week is completed.
·	After<br> the period of instruction, the amount charged for tuition and awarded for institutional scholarships<br> / grants will be prorated up to the 60% point of the term. After the 60% point of the term,<br> no refunds of tuition or adjustment to institutional scholarships / grants will occur.
---	---

Rasmussen,LLC and Subsidiary

Notesto Consolidated Financial Statements

NoteQ - Revenue (continued)

Separate refund policies exist for any state aid received by the student and these policies vary by state. If a student withdraws during the academic term, the Company calculates the portion of instructional services and fees that are non-refundable based on the tuition refund policy and recognizes it as revenue in the period the withdrawal occurs. These tuition adjustments are recognized as they occur and, as of June 30, 2021 and December 31, 2020, these charges are fully earned under the applicable regulatory standards.

RefundLiability

Because the terms coincide with the Company’s fiscal quarter and year, there is no refund liability as of June 30, 2021 and December 31, 2020.

Exhibit 99.4

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021 (1)

(In thousands, except for per share amounts)

	American<br> Public<br><br> Education, Inc.			Rasmussen,<br> LLC <br><br>Adjusted (Note 4)			Transaction<br><br><br> accounting<br><br> adjustments			Notes	Other<br> transaction<br><br> accounting<br><br> adjustments			Notes	Pro Forma Combined
Revenue	$	264,803		$	182,181		$	-			$	-			$	446,984
Costs<br> and expenses												-
Instructional<br> costs and services		105,257			70,851			-				-				176,108
Selling<br> and promotional		60,350			43,294			-				-				103,644
General<br> and administrative		75,579			39,205			-				-				114,784
Loss<br> on disposals of long-lived assets		182			-			-				-				182
Depreciation<br> and amortization		9,561			13,831			818		7(a)		-				24,210
Total<br> costs and expenses		250,929			167,181			818				-				418,928
Income<br> from operations before interest expense, interest income and income taxes		13,874			15,000			(818	)			-				28,056
Interest<br> (expense) income		(1,167	)		(1,926	)		-				(6,950	)	7(b)		(10,043	)
Income<br> from operations before income taxes		12,707			13,074			(818	)			(6,950	)			18,013
Income<br> tax expense (benefit)		3,509			-			1,445		7(c)		-				4,954
Equity<br> investment loss		(827	)		-			-								(827	)
Net<br> income	$	8,371		$	13,074		$	(2,263	)		$	(6,950	)		$	12,232
Net<br> income per common share:
Basic	$	0.47													$	0.70
Diluted	$	0.46													$	0.82
Weighted<br> average number of shares outstanding:
Basic		17,874														17,454
Diluted		18,048														14,948
(1)	The<br> unaudited pro forma condensed combined statement of income for the nine months ended September 30,<br> 2021 includes the historical results of Rasmussen, LLC for the eight month period January 1,<br> 2021 through August 31, 2021 which was derived from Rasmussen's internal financial statements.
---	---

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME

FOR THE YEAR ENDED DECEMBER 31, 2020

(In thousands, except for per share amounts)

	American<br> Public<br><br> Education, Inc.			Rasmussen,<br> LLC <br><br> Adjusted (Note 4)		Transaction<br><br> accounting<br><br> adjustments			Notes	Other<br> transaction<br><br> accounting<br><br> adjustments			Notes	Pro Forma Combined
Revenue	$	321,785		$	261,545	$	-			$	-			$	583,330
Costs and<br> expenses											-
Instructional<br> costs and services		122,161			107,812						-				229,973
Selling and<br> promotional		72,989			68,368						-				141,357
General and<br> administrative		88,043			40,931		-				-				128,974
Loss on disposals<br> of long-lived assets		851			-						-				851
Depreciation<br> and amortization		12,984			20,137		2,099		7(a)		-				35,220
Total<br> costs and expenses		297,028			237,248		2,099				-				536,375
Income from<br> operations before interest expense, interest income and income taxes		24,757			24,297		(2,099	)			-				46,955
Interest expense		-			3,573		-				8,859		7(b)		12,432
Interest<br> income, net		1,092			86		-				-				1,178
Income from<br> operations before income taxes		25,849			20,810		(2,099	)			(8,859	)			35,701
Income tax<br> expense (benefit)		7,020			-		2,798		7(c)		-				9,818
Equity<br> investment loss		(7	)		-		-				-				(7	)
Net<br> income	$	18,822		$	20,810	$	(4,897	)		$	(8,859	)		$	25,876
Net income per common share:
Basic	$	1.27			-									$	1.74
Diluted	$	1.25			-									$	1.72
Weighted average number of shares<br> outstanding:
Basic		14,876			-										14,876
Diluted		15,047			-										15,047

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

On September 1, 2021, American Public Education, Inc. (“APEI”) completed its previously announced acquisition of Rasmussen University (the "Acquisition"), a nursing- and health sciences-focused institution serving over 18,000 students at its 23 campuses across six states and online. The Acquisition was completed pursuant to a Membership Interest Purchase Agreement (the "Purchase Agreement") dated October 28, 2020, by and among APEI, FAH Education, LLC (“Seller”), Rasmussen, LLC (“Rasmussen”), and Rasmussen College, LLC, a wholly owned subsidiary of Rasmussen ("Rasmussen College").

Pursuant to the Purchase Agreement, on the Closing Date, the Company purchased from Seller all membership interests in Rasmussen for an adjusted aggregate purchase price, subject to post-closing working capital adjustments, and net of cash acquired, of $325.5 million in cash. Upon completion of the Rasmussen Acquisition, Rasmussen merged into Rasmussen College and Rasmussen College became a wholly owned subsidiary of the Company

The unaudited pro forma condensed combined statements of income for the year ended December 31, 2020 and nine months ended September 30, 2021 give pro forma effect to the Acquisition as if it had occurred on January 1, 2020. An unaudited pro forma balance sheet has not been presented as the Acquisition has already been fully reflected in the condensed consolidated balance sheet included in the Company's Quarterly Report on Form 10-Q for the nine months ended September 30, 2021, filed on November 8, 2021. The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X.

The unaudited pro forma condensed combined financial information is based on and should be read in conjunction with the audited and unaudited historical financial statements of both APEI and Rasmussen and the notes thereto, as well as the disclosures contained in the section titled "Management’s Discussionand Analysis of Financial Condition and Results of Operations,” in the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2021.

The unaudited pro forma condensed combined financial statements have been presented for illustrative purposes only and do not necessarily reflect what APEI's and Rasmussen's combined financial condition or results of operations would have been had the Acquisition occurred on the dates indicated. Further, the unaudited pro forma condensed combined financial information also may not be useful in predicting the future financial condition and results of operations of APEI. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors. The unaudited pro forma adjustments represent management’s estimates based on information available as of the date of these unaudited pro forma condensed combined financial statements and are subject to change as additional information becomes available and analyses are performed. The pro forma condensed combined financial statements do not include the realization of future cost savings or synergies, integration-related costs to achieve those potential cost savings or restructuring charges that may occur following the Acquisition.

NOTESTO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

Note 1—Basis of presentation

APEI accounts for its acquisition of Rasmussen using the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations, with APEI being the accounting acquirer. ASC 805 requires, among other things the fair value concepts defined in ASC Topic 820, Fair Value Measurements and Disclosures.

The pro forma adjustments reflect preliminary estimates of the fair value of the consideration transferred, the assets acquired and the liabilities assumed, which may change upon finalization of valuation studies. The transaction accounting adjustments for the Acquisition consist of those necessary to account for the Acquisition. The adjustments related to the issuance of debt are shown in a separate column as other transaction accounting adjustments. The final adjustments could be materially different from the pro forma adjustments presented herein. The unaudited pro forma condensed combined statements of income include certain accounting adjustments related to the Acquisition that are expected to have a continuing impact on the combined results, such as increased amortization of the acquired intangible assets.

Under ASC 805, acquisition-related transaction costs (such as costs of services of lawyers, investment bankers, and accountants) are not included as a component of consideration transferred. Such costs are expensed in the statements of income in the periods incurred. Transaction costs that have been already recognized in the historical financial statements of APEI and Rasmussen have not been eliminated in the pro forma condensed combined financial statements.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

Note 2 - Estimated consideration and preliminary purchase price allocation

Estimated consideration was approximately $330.7 million including working capital adjustments and cash contributed at closing. Using the estimated consideration for the Acquisition, APEI has estimated the allocations to such assets and liabilities. The following table summarizes the components of the estimated consideration along with preliminary purchase price allocation:

Cash	$	329,000
Working capital adjustment and additional cash contributions		1,704
Total estimated consideration to be paid		330,704
Assets acquired:
Cash and cash equivalents		5,200
Accounts receivable		10,700
Prepaid expenses		4,600
Property and equipment, net		36,996
Operating lease assets		75,800
Deferred tax asset		3,205
Intangible assets		86,500
Other assets		600
Total assets acquired		223,601
Liabilities assumed:
Accounts payable		1,200
Accrued expenses		6,700
Deferred revenue		22,700
Operating lease liabilities, current		11,200
Operating lease liabilities, long-term		67,000
Other liabilities		1,300
Total liabilities assumed		110,100
Net assets acquired		113,501
Goodwill	$	217,203

NOTESTO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

Note 3 - Significant Accounting Policies

The accounting policies used in the preparation of this unaudited pro forma condensed combined financial information are those set out in APEI's audited financial statements as of and for the fiscal year ended December 31, 2020. The pro forma condensed combined financial statements may not reflect all the adjustments necessary to conform the accounting policies of Rasmussen to those of APEI as APEI is still in the process of analyzing the accounting policies of Rasmussen as compared to those of APEI.

NOTESTO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

Note 4 - APEI and Rasmussen pro forma condensedcombined income statement reclassification adjustments

During the preparation of the pro forma condensed combined financial information, a preliminary analysis of Rasmussen's financial information was completed in order to identify differences in accounting policies and financial statement presentation when compared to APEI.

The following table illustrates the effect of various reclassification adjustments made to Rasmussen's income statements for the eight month period ended August 31, 2021, and for the fiscal year ended December 31, 2020.

	Rasmussen, LLC <br><br>Eight months<br><br> ended <br><br>August 31, 2021		Reclassification (1)			Rasmussen, LLC <br><br>Adjusted
Revenue	$	182,181	$	-		$	182,181
Costs and expenses
Instructional costs and services		-		70,851			70,851
Instructional		78,761		(78,761	)		-
Selling and promotional		-		43,293			43,293
General and administrative		34,116		5,090			39,206
Admissions		45,794		(45,794	)		-
Depreciation and amortization		-		13,831			13,831
Total costs and expenses		158,671		8,510			167,181
Income from operations before interest and income taxes		23,510		(8,510	)		15,000
Investment income		45		(45	)		-
Interest (expense) income		-		(1,926	)		(1,926	)
Amortization expense		8,510		(8,510	)		-
Interest expense		1,971		(1,971	)		-
Net income	$	13,074	$	(0	)	$	13,074
(1)	The purpose of these reclassifications is to align Rasmussen's<br>presentation of its income statement to that of APEI.
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	Rasmussen, LLC <br><br>Year Ended<br> December 31, 2020			Reclassification (1)			Rasmussen, LLC <br><br>Adjusted
---	---	---	---	---	---	---	---	---	---
Revenue	$	261,545		$	-		$	261,545
Costs and expenses
Instructional costs and services					107,812			107,812
Instructional		107,812			(107,812	)		-
Selling and promotional		-			68,368			68,368
General and administrative		40,931			-			40,931
Admissions		68,368			(68,368	)		-
Depreciation and amortization		20,137			-			20,137
Total costs and expenses		237,248			-			237,248
Income from operations before interest income and income taxes		24,297			-			24,297
Investment income		86			(86	)		-
Interest income, net		-			86			86
Interest expense		(3,573	)		-			(3,573	)
Net income	$	20,810		$	-		$	20,810
(1)	The purpose of these reclassifications is to align Rasmussen's<br>presentation of its income statement to that of APEI.
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NOTESTO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

Note 5 - Pro forma adjustments to the UnauditedPro Forma Condensed Combined Statements of Income for the nine month period ended September 30, 2021 and for the year ended December 31,2020

This note should be read in conjunction with Note 1- Basis of Presentation and Note 2-Estimated Consideration and Preliminary Purchase Price Allocation. Adjustments included in the column under the heading 'Transaction accounting adjustments' and 'Other transaction accounting adjustments' represent the following:

		Nine months ended<br><br> September 30, 2021			Year ended December 31, 2020
Expenses
7(a)	Transaction accounting adjustments to depreciation and amortization expense
	Elimination of Rasmussen's amortization on intangibles	$	(8,510	)	$	(12,765)
	Amortization of Rasmussen's intangibles at stepped up value		10,278			15,417
	Elimination of Rasmussen's depreciation expense on property and equipment		(5,330	)		(7,123)
	Depreciation expense of Rasmussen's property and equipment at stepped up value		4,380			6,570
	Total adjustments to depreciation and amortization expense	$	818		$	2,099
7(b)	Other transaction accounting adjustments to interest expense:
	Elimination of interest expense on Rasmussen's debt	$	(1,971	)	$	(3,573)
	Interest expense on new debt (1)		7,235			10,767
	Elimination of deferred financing costs-outstanding on Rasmussen's debt		-			(842	)
	Amortization of new debt issuance costs		1,686			2,507
	Total adjustments to interest income (expense), net	$	(6,950	)	$	(8,859	)
7(c)	Transaction accounting adjustments to income tax expense:
	To adjust for pro forma income tax expense that was calculated using APEI's effective tax rate of 27.5%	$	1,445		$	2,798
(1)	Interest expense was calculated to be 6.25% (Adjusted LIBO Rate<br>plus 5.5%, Adjusted LIBO Rate not being less than 0.75%). If the interest rate was increased or decreased by 1/8 of a percentage point,<br>pro forma net income for the nine months ended September 30, 2021 would change by $1,060 and pro forma net income for the year ended<br>December 31, 2020 would change by $1,577.
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