Nature of Business

9 Months Ended

Sep. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Zovio Inc (the “Company”) is a Delaware corporation, and is an education technology services company that partners with higher education institutions and employers to deliver innovative, personalized solutions to help learners and leaders achieve their aspirations. In April 2019, the Company acquired both Fullstack Academy, Inc. (“Fullstack”) and TutorMe.com, Inc. (“TutorMe”), each of which became wholly-owned subsidiaries of the Company at that time. Fullstack is an innovative web development school offering immersive technology bootcamps, and TutorMe is an online education platform that provides 24/7 on-demand tutoring and online courses.

On May 23, 2022, the Company completed the sale of TutorMe through an Asset Purchase Agreement (the “Purchase Agreement”). Pursuant to the Purchase Agreement, the Company and TutorMe sold substantially all of the assets of TutorMe’s business in consideration of $55.0 million in cash and the assumption of certain liabilities of TutorMe’s business. The gain on sale of TutorMe is comprised as follows:


TutorMe sale consideration	$	55,000
Less: Disposed net assets:
Accounts receivable, net	1,314
Prepaid and other assets	619
Goodwill	3,472
Intangibles	376
Deferred revenue	(7,732)
Other liabilities	(631)
Less: Transaction fees and adjustments	6,079
Gain on sale of TutorMe	$	51,503

On July 31, 2022, the Company entered into a new asset purchase agreement (the “New Asset Purchase Agreement”), pursuant to which Zovio sold to University of Arizona, and the University of Arizona Global Campus (“Global Campus” or “UAGC”) all of the remaining assets of Zovio related to the UAGC Services Business (the “Transaction”). In connection with the Transaction, the parties terminated the previous agreements. In addition, UAGC (a) paid to Zovio cash in the amount of $1.00, (b) assumed all obligations under Zovio’s business contracts associated with the UAGC Services Businesses, including the lease for the facilities located in Chandler, Arizona, which has a remaining term of eight years and approximately $20.0 million in rent obligations, (c) released Zovio from all remaining obligations under the UAGC/Zovio Agreements, including from all indemnification obligations under the Original Asset Purchase Agreement and all minimum payment guarantees under the UAGC Services Agreement, and (d) granted Zovio a general release of all claims. In addition, UAGC hired substantially all of the UAGC Services Business employees. In turn, Zovio (i) paid to UAGC cash in the amount of $5.5 million, reflecting the allocated minimum payment owed by Zovio to UAGC for the month of July 2022, (ii) paid to UAGC cash in the amount of $5.0 million, and assigned to UAGC the right to a security deposit in the amount of $2.7 million, for assuming Zovio’s obligations under the Chandler lease, (iii) granted UAGC the right to any refund achieved by Zovio after the closing of the Transaction from the State of California as a result of its appeal of that certain judgment set forth in the Statement of Decision issued by the Superior Court of the State of California, County of San Diego on March 3, 2022, (iv) released UAGC from all remaining obligations under the UAGC/Zovio Agreements, and (v) granted UAGC and University of Arizona a general release of all claims.

The Company recorded a $5.8 million loss on transaction for the net asset adjustment from Global Campus in connection with the Transaction on July 31, 2022, which partially offset the gain on the sale of TutorMe noted above.

Following the consummation of the Transaction, Zovio and UAGC have no contractual or other relationship with one another, other than an agreement to reasonably cooperate to effect the Transaction. As of the date hereof, UAGC operates the University as an integrated, online university. Zovio will continue to support the continued growth and expansion of its Fullstack subsidiary and simultaneously explore strategic alternatives for that business.

Prior to the Transaction, the majority of the Company's cash came from the Services Agreement with Global Campus. The service fees in the Services Agreement were subject to certain minimum residual liability adjustments, including performance-based adjustments, minimum profit level adjustments, and excess direct cost adjustments. These adjustments were all variable in nature in that they depend upon the Company’s performance during each service period, and to a certain extent the performance and forecast of Global Campus.