What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2022-02-16 compared with 2021-02-17 · 157 added, 95 removed, 457 unchanged (36% of the section changed)

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See Note 3 – Acquisition to consolidated financial statements for a full description of the Acquisition.

In the healthcare field, GCE, together with Orbis Education, works in partnership with a growing number of top universities and healthcare networks across the country, offering healthcare-related academic programs at off-campus classroom and laboratory sites located near healthcare providers and developing high-quality, career-ready graduates who enter the workforce ready to meet the demands of the healthcare industry.

Since the Acquisition, GCE, together with Orbis Education, has continued to add additional university partners.

In the healthcare field, we work in partnership with a growing number of top universities and healthcare networks across the country, offering healthcare-related academic programs at off-campus classroom and laboratory sites located near healthcare providers and developing high-quality, career-ready graduates who enter the workforce ready to meet the demands of the healthcare industry.

In addition, we have begun providing certain services to a university partner to assist them in expanding their online graduate programs.

As of December 31, 2021, GCE provided education services to 27 university partners across the United States.

Prior to July 1, 2018, GCE operated GCU.

On July 1, 2018, GCE sold GCU to an independent, non-profit entity (the “Transaction.”) See Note 2 – The Transaction to consolidated financial statements for a full description of the Transaction.

Accordingly, results of operations for the year ended December 31, 2018 reflect GCE’s operations prior to July 1, 2018 which were made up exclusively of the operations of GCU.

For the period from July 1, 2018 to December 31, 2018, results of operations do not include the operations of GCU but rather reflect the operations of GCE as an educational services company.

We plan to continue to add additional university partners and to roll out additional programs with both our existing partners and with new partners.

We may engage with both new and existing university partners to offer healthcare programs, online only or hybrid programs, or as is the case for our most significant partner, GCU, both healthcare and other programs.

Therefore, we will refer to all university partners as “GCE partners” or “our partners” and will no longer differentiate between partners of GCE and partners of Orbis Education;

we will, however, continue to disclose significant information for GCU, such as enrollments, due to its size in comparison to our other university partners.

In addition, we have centralized a number of services that historically were provided separately to university partners of Orbis Education;

therefore, we refer to all university partners as “GCE partners” or “our partners”.

We do disclose significant information for GCU, such as enrollments, due to its size in comparison to our other university partners.

GCE is an education services company with 27 university partners as of December 31, 2021.

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Technology and Academic Services

We provide technology and academic services that relate to the ongoing maintenance of our university partners’ educational infrastructure, including online course delivery and management, student records, assessment, customer relations management and other internal administrative systems.

relations management and other internal administrative systems.

These services also include curriculum conversion, support for content development, support for faculty and related training and development, technical support, rent and occupancy costs for university partners’ simulation and skills labs, and assistance with state regulatory compliance.

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Technology Services may include the following:

● Learning Management System - GCE designed its learning management system, LoudCloud.

The system was designed around the pedagogical principles that guide our thinking about curriculum and instruction.

This system was designed for small classes that are instructor led, highly interactive and collaborative.

● Learning Management System (“LMS”) - GCE designed and offers to its university partners a new LMS, called Halo.

GCU started utilizing Halo in the Fall of 2021 and is continuing to transition its students to the new LMS from the prior LMS, LoudCloud, with a goal to complete transition by the Fall of 2022.

The basic functionality includes an interactive course syllabus, discussion questions and forums, instruction interaction, class quizzes, group assignments, written assignment submission and rubrics, grading, participation, attendance and integration with our student information system.

The functions in Halo have been reimagined to work more intuitively with new user interface design and more seamless ways of accomplishing the same tasks.

Halo was designed as a “cloud native” application taking advantage of all the performance and reliability features of the cloud.

Halo supports small classes that are instructor led, highly interactive and collaborative.

Rich content that originates from a myriad of sources, including direct advisement from industry, is coupled with a robust discussion environment.

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The writing assignments are designed to promote critical thinking which is often connected to solving real world problems.

Because of its modular implementation, this platform can easily and reliably scale as student populations increase.

This platform can easily and reliably scale as student populations increase.

The platform provides in-depth analytics that allow us to closely monitor student success and the quality of instructional resources.

Students learn to navigate many ancillary systems connected to LoudCloud.

GCE also designed its previous learning management system, LoudCloud which GCU used since 2011.

● Internal administration - We utilize a commercial customer relations management development platform to distribute, manage, track, and report on all interactions with prospective student leads as well as all active and inactive students.

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We evaluate all faculty according to university partner standards and provide evaluation results, if requested.

Many of the health sciences

specific faculty development resources are accredited by the International Association for Continuing Education and Training (“IACET”) and the American Nurses Credentialing Center (“ANCC”) allowing faculty to earn continuing education credits.

● Class Scheduling – GCE has a class scheduling department and has developed a proprietary system to provide these services to our university partners.

Our scheduling software provides students the

ability to set their class schedule and flexibility to make changes and create opportunities to complete courses in a myriad of online or onsite options.

Our scheduling software provides students the ability to set their class schedule and flexibility to make changes and create opportunities to complete courses in a myriad of online or onsite options.

We optimize class size prior to course starts based on university partner standards, in order to maximize class resources and faculty utilization.

● Skills and Simulation Lab Sites – GCE secures and develops off-campus classroom and laboratory sites for use in various programs offered by our university partners, including the accelerated Bachelor of Science in Nursing (ABSN).

● Skills and Simulation Lab Sites – GCE secures, develops and finances off-campus classroom and laboratory sites for use in various programs offered by our university partners, including the accelerated Bachelor of Science in Nursing (ABSN).

Off-campus classroom and laboratory sites are branded for specific university partners and all classrooms, faculty, counselors, staff and specialized equipment are centralized and made accessible to every university partner student.

The laboratories contain the latest in skills and simulation learning technology;

including computer-based scenarios, hands-on work with physical simulators and internally developed Mixed Reality (“MR”) with state-of-the-art technology, which help students gain unique experiences in an alternative clinical setting.

Counseling Services and Support

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GCE assesses levels of satisfaction using student surveys.

● Field Experience Counseling – For university partner students pursuing programs that lead to external credentials (e.g.

teaching, nursing, counseling, theology, etc.), GCE leverages a growing nationwide network of approved healthcare facilities, schools, preceptors, and supervisors to ensure that all students are able to meet program-specific requirements.

Each student is assigned a counselor before or during their first course, and several prescribed appointments with their counselor are scheduled throughout the student’s program to ensure that all state-specific progression requirements are met well in advance of deadlines.

● Field Experience Counseling – For university partner students pursuing programs that lead to external credentials (e.g., teaching, nursing, counseling, theology, etc.), GCE leverages a growing nationwide network of approved healthcare facilities, schools, preceptors, and supervisors to ensure that all students are able to meet program-specific requirements.

requirements are met well in advance of deadlines.

GCE assists in gathering all required documentation, verifying it as official, and storing it as part of the student’s record.

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GCE develops effective communication strategies that encompass the entire student lifecycle from prospect through alumni.

● Brand Identity – GCE’s award-winning team of specialists have proven track records developing strong brands and ensuring the right image is exposed to the consumer.

GCE specializes in storytelling shaped by logo creation, taglines, content development, and custom music.

● Brand Identity – GCE’s award-winning team of specialists have proven track records of developing strong brands and ensuring the right image is exposed to the consumer.

GCE specializes in storytelling shaped by logo creation, positioning taglines, campaign and content development, custom music, and sonic branding.

● Media Planning and Strategy –GCE offers full-service media planning and strategies that are built to grow sophisticated brands through traditional and digital media platforms.

GCE understands today’s culture consumes media and we create robust strategies that build long lasting connections with proven results.

GCE understands today’s culture and how content is consumed in the everchanging world of media.

GCE creates robust strategies that build long lasting connections with proven results.

● Video – GCE’s team of in-house video experts specialize in high-quality content expanding across a wide variety of marketing channels.

Capabilities include broadcast-quality commercials, explainer videos, mini- and full-length documentaries, animations, motion graphics, and short, stackable video content for a variety of social media channels.

GCE enhances its internal team with preferred partners to help offset workload.

● Data Science and Analysis – GCE employs a team of in-house data analysis professionals who apply prescriptive analytics to facilitate important business decisions.

GCE specializes in all aspects of data science, including predictive modeling, data mining and visualization to enrich today’s technology and data-driven marketplace, while providing the information required for success.

Capabilities include broadcast-quality commercials, explainer videos, mini- and full-length documentaries, original programming, animations, motion graphics, and short, stackable video content for a variety of social media channels.

GCE enhances its internal team with preferred partners to help offset workload and provide scalability of production requirements.

● Business Intelligence and Data Science – GCE employs a team of in-house data analysis professionals who apply descriptive and prescriptive analytics to help understand the marketplace and facilitate important business decisions.

GCE specializes in all aspects of data analytics and science, including predictive modeling, data mining and visualization to enrich today’s technology and data-driven marketplace, while providing the information required for success.

● Market Research – GCE’s market research professionals survey market, population and job data for various locations across the country in order to make data-driven recommendations for new sites, partnerships, and educational offerings that will maximize reach and impact and provide education and career training to the areas where it will be most impactful.

Back-Office Services

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Social Responsibility and Human Capital Development

Our business was created and continues to evolve to meet the needs of the local community in which we operate as well as those outside our community.

Social responsibility and human capital development are significant focuses of the Company.

Our efforts are led by our Chief Executive Officer and a portion of his compensation is tied to our success in these areas.

To this end, our business was created and continues to evolve to meet the needs of the local community in which we operate as well as those outside our community.

We started by identifying what we believe to be the educational challenges that our country is facing and then worked to find solutions to these challenges.

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● Most university professors have no formal training in teaching, learning or course design;

● Universities are under significant financial pressure, which has only been enhanced during 2020 due to the pandemic;

● Universities are under significant financial pressure, which has only been enhanced during 2020 and 2021 due to the pandemic and a declining number of high school graduates attending college.

We provide the capital, technology and expertise to our university partners to lessen the challenges in each of the areas listed above (see Item 1.

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We work with our university partners and thousands of high schools across the country on dual credit, online prerequisite courses and other programs that shorten the time to completion thereby lowering cost and debt levels.

We focus with our university partners on programs where there are skills shortages such as health care, teacher education, science, technology, engineering and math.

We focus with our university partners and their local communities to develop programs where there are skills shortages such as health care, teacher education, science, technology, engineering and math.

GCE provides expanded academic counseling services and support to the students of our university partners which has proven to increase retention and completion.

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● Improving Our Neighborhood and Increased Home Values - Together with Habitat for Humanity and in concert with our largest university partner, we are participating in the largest home renovation project in the country in the West Phoenix area surrounding GCU’s campus.

As of December 31, 2020, 792 different projects have been completed in which 26,000 hours have been logged by volunteers.

These efforts, combined with GCU’s expanded presence in the community, have resulted in a significant increase in home values in the 85017 zip code.

As of December 31, 2021, 392 homes have been completed in which 27,900 hours have been logged by volunteers.

These efforts, combined with GCE and GCU’s expanded presence in the community, have contributed to a significant increase in home values of 527% since 2011 in the 85017 zip code.

● Furthering Job Creation - We, along with GCU have launched a number of new business enterprises that have reduced costs, provided management opportunities for recent graduates and employment opportunities for students and neighborhood residents, while spurring economic growth in the area.

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This event offers a unique opportunity for organizations to team build and work together to raise important funds for SOIN athletes.

The vision of Special Olympics Indiana

is that sport will open hearts and minds towards people with intellectual disabilities and create inclusive communities across the state and throughout the world.

The vision of Special Olympics Indiana is that sport will open hearts and minds towards people with intellectual disabilities and create inclusive communities across the state and throughout the world.

● Youth Opportunity Foundation - Our employees volunteer and donate time and funds to the Youth Opportunity Foundation which provides advocacy, clinical treatment, education and workforce development for at-risk young people in underprivileged areas.

● Covid-19 Response :

Our employees and the students of our university partners volunteered at COVID Point of Distribution sites (“POD”), including the GCU POD, which is being jointly operated by GCU and GCE at no cost to the state of Arizona, and other PODs including those run by our hospital partners.

Our employees and the students of our university partners volunteered at COVID Point of Distribution sites (“POD”), including the GCU POD, which was being jointly operated by GCU and GCE at no cost to the state of Arizona, and other PODs including those run by our hospital partners.

The students of our university partners assisted the clinical staff at the PODs in clinical positions including vaccine dilution, vaccine administration and patient observation or in non-clinical positions such as checking in vaccine recipients, documenting vaccinations, traffic flow and sitting with recipients after administration.

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● Funding of Student Tuition Organizations - GCE contributes to private school tuition organizations, which are entities that allocate financial contributions toward tuition assistance and scholarships for disadvantaged students to attend Arizona private schools.

In 2020, we increased our annual contribution to $5.0 million from $4.0 million in 2019.

In each of 2021 and 2020, we contributed $5.0 million to these organizations.

● Encouraging Employee Giving - We participate in Donate to Elevate, a program that encourages employees to participate in the Arizona individual tax credit program, which allows individual taxpayers to contribute money in lieu of state income tax payments to benefit private schools and other non-profit entities in Arizona, as well as local public schools and public charter schools.

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Over 40 organizations are approved for employee volunteerism, including Habitat for Humanity.

In addition, GCE continues to partner in countless community events and projects throughout the year, helping organizations such as the Phoenix Rescue Mission, Feed My Starving Children, Arizona Foster Care, Boy/Girl Scouts, Goodwill Arizona, St.

In addition, GCE has historically partnered in countless community events and projects throughout the year, helping organizations such as the Phoenix Rescue Mission, Feed My Starving Children, Arizona Foster Care, Boy/Girl Scouts, Goodwill Arizona, St.

Vincent de Paul, Young Life, Elevate Phoenix, Back to School Clothing Drive and St.

Mary’s Food Bank.

Our employees also went out into our surrounding neighborhoods to participate in programs such as Serve the City, Canyon Kids, Salute Our Troops, Colter Commons senior home visits and the Run to Fight Children’s Cancer.

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● Our Diverse Leadership - Our ability to attract and retain diverse talent is reflected at both the Board and management levels.

Three of our five directors are women and one director identifies with an underrepresented diverse ethnicity.

In addition, for all of our employees at the level of manager and above totaling 522 persons, 65.9% are held by women and other diverse persons, collectively.

● Our Diverse Workforce - As of December 31, 2020, for all of our employees totaling 4,625, 76.1% are women and other diverse persons, collectively.

Three of our six directors are women and two directors identify with an underrepresented diverse ethnicity.

In addition, for all of our employees at the level of manager and above

totaling 556 persons, 67.6% are held by women and other diverse persons, collectively, an increase of 2.6% over 2020.

● Our Diverse Workforce - As of December 31, 2021, for all of our employees totaling 4,955, 78.3% are women and other diverse persons, collectively, an increase of 2.9% over 2020.

As of December 31, 2021, GCE employed approximately 3,675 professional and administrative personnel, including technical and academic advisors, counseling advisors, marketing and communication professionals, and personnel that handle financial aid processing, information technology, human resources, corporate accounting, finance, and other administrative functions.

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We post all open positions to a variety of diversity-related job boards to ensure we attract diverse candidates.

We also collect and analyze employee demographic data to identify current trends and areas of opportunity in regards to our diversity efforts.

We also collect and analyze employee demographic data to identify current trends and areas of opportunity in regard to our diversity efforts.

● Diversity Training - We provide employees and management with regular diversity training.

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Thereafter, all employees complete the training every other year, while management undertakes it annually.

We have also provided Implicit Bias Training to hiring managers, and in 2021 this training will be expanded to include all employees.

We have also provided Implicit Bias Training to all employees.

Employee Learning and Development (ELD) Services.

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Environmental Awareness

Online education is inherently more environmentally friendly than traditional campus education with a reduction in greenhouse gas (“GHG”) production caused by traveling to and from a brick-and-mortar campus.

It also increases student capacity while eliminating the need for construction of a physical campus.

A majority of our university partners’ students are enrolled in hybrid or online educational models.

In addition, a significant number of our university partners’ students utilize an ebook format versus paper textbooks.

GCE owns a four-story 325,000 square foot administrative building, which includes office space for approximately 2,700 employees, and a parking garage at our headquarters in Phoenix, Arizona.

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● Reducing Water Consumption - Water usage is another environmental factor for office space that is magnified by the Arizona weather.

GCE’s office building utilizes numerous water conservation methods including push-tap faucets, waterless urinals, and a rooftop rain water collection system for irrigating the landscaping below, which significantly reduces our water consumption.

● Other Design Features -.

Additional environment-friendly design features include low VOC paints, use of recycled building materials, interior and exterior LED light bulbs, motion sensor lighting and implementation of an energy-efficient VRF mechanical system.

GCE’s office building utilizes numerous water conservation methods including push-tap faucets, waterless urinals, and a rooftop rainwater collection system for irrigating the landscaping below, which significantly reduces our water consumption.

● Other Design Features - Additional environment-friendly design features include low VOC paints, use of recycled building materials, interior and exterior LED light bulbs, motion sensor lighting and implementation of an energy-efficient VRF mechanical system.

In addition to our efficient facilities, we have undertaken other measures to minimize our environmental impact, including, among others:

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● participating in a recycling program aimed at minimizing the volume of waste products generated by GCE.

Due to our significant investment in infrastructure, since March 2020, when the World Health Organization declared the COVID-19 a global pandemic, over 95% of our diverse workforce has been able to work remotely.

Due to our significant investment in infrastructure, since March 2020, when the World Health Organization declared the COVID-19 a global pandemic, approximately 90% of our diverse workforce is continuing to work remotely and is expected to continue doing so for the foreseeable future.

This has not only allowed our employees to remain physically safe but has also resulted in savings in the areas of waste, janitorial costs, and travel costs related to business travel and commuting.

Most employees will continue to work from home until at least July 1, 2021.

Our off-campus classroom and laboratory sites are all designed with the same efficient footprint in the 31 sites opened as of December 31, 2021.

Climate Disclosures

We do not operate in a high-risk industry for climate risks.

We believe that we have low climate risk with respect to our physical environment (e.g., fires, drought, hailstorms, increasing weather pattern changes).

Approximately 90% of our workforce is continuing to work remotely for the foreseeable future.

We have insurance policies in place to cover any damage for our property, plant and equipment.

We are evaluating emissions reduction requirements with key suppliers for costs such as information security systems, communication and marketing costs, travel costs, and continued expansion of our off-campus classroom and laboratory sites.

We currently do not have any regulatory emissions reporting obligations.

We do not have significant risk from a transition to a low-carbon economy, which could result in changing customer behavior.

Our customers are university partners located in the United States.

Corporate Governance

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The following highlights certain key aspects of our corporate governance framework:

o We Have an Independent and Diverse Board - Four of our five directors are independent.

Three of our five directors are diverse persons, and one of the three diverse directors identifies with an under represented diverse ethnicity.

o We Have Majority Voting for Directors - We have adopted majority voting for directors pursuant to which nominees who fail to achieve an affirmative majority of votes cast must submit their resignation.

o We Hold Annual Elections for Directors - We do not have a staggered board.

o We Assess Board Performance - We conduct regular evaluations of our Board and Committees.

o Our Independent Directors Meet Without Management - Our independent directors meet regularly in executive sessions without management present.

o We Have a Stock Ownership Policy - We require both our named executive officers and our directors to maintain a meaningful ownership stake at levels specified in our stock ownership policy.

o Our Key Committees are Independent - We have fully independent Audit, Compensation and Nominating and Corporate Governance Committees.

o We Do Not Have a “Poison Pill” - We do not maintain a stockholder rights plan.

You can learn more about GCE, view our governance materials and much more by visiting our website, www.gce.com.

● We Have an Independent and Diverse Board - Five of our six directors are independent.

Three of our six directors are diverse persons, and two of our directors identify with an under-represented diverse ethnicity.

● We Have Majority Voting for Directors - We have adopted majority voting for directors pursuant to which nominees who fail to achieve an affirmative majority of votes cast must submit their resignation.

● We Hold Annual Elections for Directors - We do not have a staggered board.

● We Assess Board Performance - We conduct regular evaluations of our Board and Committees.

● Our Independent Directors Meet Without Management - Our independent directors meet regularly in executive sessions without management present.

● We Have a Stock Ownership Policy - We require both our named executive officers and our directors to maintain a meaningful ownership stake at levels specified in our stock ownership policy.

● Our Key Committees are Independent - We have fully independent Audit, Compensation and Nominating and Corporate Governance Committees.

● We Do Not Have a “Poison Pill” - We do not maintain a stockholder rights plan.

Cybersecurity Controls

● Our Audit Committee is tasked with oversight of the cybersecurity controls in place at the Company.

● The Company employs a dedicated Chief Information Security Officer (“CISO”), with an experienced and competent security team, and works closely with the Chief Risk Officer to provide risk reporting and ensure security and compliance.

The Company regularly engages third party experts to perform cybersecurity assessments.

These assessments are normally performed on an annual basis.

Reports are sent to the Audit Committee monthly, and Security, Risk and Compliance updates are provided quarterly.

● The Company has implemented policies and procedures for all employees including:

o Information security/cybersecurity policies, which are internally available for all employees;

o Information security/cybersecurity awareness training;

o A clear escalation process which employees can follow in the event an employee notices something suspicious;

o Information security/cybersecurity is part of the employee performance evaluations and/or disciplinary actions.

● The Company maintains a cyber insurance policy.

The Company has not had a security breach and has not incurred any expenses for a security breach in the past three years.

Our service revenue normally fluctuates due to changes in our university partners’ enrollment which tends to be higher in the Spring and Fall periods and lower in the Summer.

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This intellectual property includes but is not limited to technology, courseware materials and business know-how and internal processes and procedures developed to respond to the requirements of operating a post-secondary educational institution with a significant online campus and to comply with the rules and regulations of various education regulatory agencies.

We rely on a combination of copyrights, trademarks, service marks, trade secrets, domain names, and agreements to protect our intellectual property.

We rely on a combination

of copyrights, trademarks, service marks, trade secrets, domain names, and agreements to protect our intellectual property.

We protect our intellectual property by signing agreements with employees, independent contractors, consultants, companies, and any other third party that creates intellectual property for us that assign any intellectual property rights to us.

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Those Title IV programs include educational loans with below-market interest rates that are issued by the federal government under the Federal Direct Loan program (the “FDL Program”), as well as grant programs for students with demonstrated financial need.

To participate in the Title IV programs, a school must receive and maintain authorization by the appropriate state agency or agencies, be accredited by an accrediting commission recognized by ED, and be certified as an eligible institution by ED.

To participate in the Title IV programs, a school must receive and maintain authorization by the

appropriate state agency or agencies, be accredited by an accrediting commission recognized by ED, and be certified as an eligible institution by ED.

● As a third-party servicer under the HEA and the related regulations, we also have a direct relationship with ED.

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§ 668.25 , which among other things, requires third-party servicers, in their contracts with institutions, to be contractually obligated to, among other things:

o Comply with all statutory provisions of or applicable to Title IV of the HEA, including the requirement to use any funds that the servicer administers under any Title IV, HEA program and

any interest or other earnings thereon solely for the purposes specified in and in accordance with that program;

o Comply with all statutory provisions of or applicable to Title IV of the HEA, including the requirement to use any funds that the servicer administers under any Title IV, HEA program and any interest or other earnings thereon solely for the purposes specified in and in accordance with that program;

o Refer to the Office of Inspector General of ED for investigation any information indicating there is reasonable cause to believe that the institution might have engaged in fraud or other criminal misconduct in connection with the institution’s administration of any Title IV, HEA program or an applicant for Title IV, HEA program assistance might have engaged in fraud or other criminal misconduct in connection with his or her application;

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State regulatory requirements for online education have historically varied among the states.

To address this issue and to meet new ED requirements many schools have applied and sought to become an approved institutional participant

in the State Authorization Reciprocity Agreement (“SARA”).

To address this issue and to meet new ED requirements many schools have applied and sought to become an approved institutional participant in the State Authorization Reciprocity Agreement (“SARA”).

SARA is an agreement among member states, districts and territories that establishes comparable national standards for interstate offering of post-secondary distance education courses and programs.

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While we are not directly subject to those laws, those laws may inhibit our university partners from expanding or operating in those states, limiting our ability to serve our university partners, which could significantly affect our business.

In addition, state laws can indirectly regulate how GCE provides its services to its university partners.

For example, some states have considered new requirements that would dictate what information GCE must convey to students and prospective students and impose reporting requirements related to the nature of our services.

To the extent such requirements were ultimately enacted into law, they could significantly affect our business.

State Professional Licensure

Many states have specific requirements that an individual must satisfy in order to be licensed as a professional in specified fields, including fields such as healthcare, education, and counseling.

These requirements vary by state and by field.

These requirements vary by state and

A student’s success in obtaining licensure following graduation typically depends on several factors, including the background and qualifications of the individual graduate, as well as the following factors, among others:

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To be eligible to participate in the Title IV programs, an institution must comply with specific requirements contained in the HEA and the regulations issued thereunder by ED.

An institution must, among other things, be licensed or authorized to offer its educational programs by the state in which it is physically located and maintain institutional accreditation by an accrediting commission recognized by ED.

An institution must, among other things, be licensed

or authorized to offer its educational programs by the state in which it is physically located and maintain institutional accreditation by an accrediting commission recognized by ED.

The substantial amount of federal funds disbursed to schools through the Title IV programs and the large number of students and institutions participating in these programs have caused Congress to require ED to exercise considerable regulatory oversight over educational institutions.

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The reauthorized HEA reauthorized all of the Title IV programs in which institutions participate but made numerous revisions to the requirements governing the Title IV programs, including provisions relating to student loan default rates and the formula for determining the maximum amount of revenue that institutions are permitted to derive from the Title IV programs.

In addition, members of Congress periodically introduce legislation that would impact Title IV programs and the higher

education industry generally.

In addition, members of Congress periodically introduce legislation that would impact Title IV programs and the higher education industry generally.

Because a significant percentage of our revenue is indirectly derived from the Title IV programs, any action by Congress that significantly reduces Title IV program funding or the ability of our university partners to participate in the Title IV programs could reduce the ability of some students to finance their education at our university partner institutions and materially decrease their student enrollment.

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Using the ED’s cash-basis, regulatory formula under the 90/10 Rule as currently in effect, GCU, our most significant client, derived approximately 69.7% and 71.8% of its 90/10 Rule revenue from Title IV program funds for the fiscal years ended June 30, 2021 and 2020, respectively.

Accordingly, even if ED continues to treat GCU as a proprietary institution for nonprofit purposes, we do not expect this rule to have any material impact on GCU.

Accordingly, even if ED continues to treat GCU as a proprietary institution for Title IV purposes, we do not expect this rule to have any material impact on GCU.

In March 2021, the $1.9 trillion American Rescue Plan Act of 2021 (“ARPA”) was signed into law.

Among other things, the ARPA also includes a provision that amends the 90/10 rule.

The ARPA amends the 90/10 rule by treating other “Federal funds that are disbursed or delivered to or on behalf of a student to be used to attend such institution” in the same way as Title IV funds are currently treated in the 90/10 rule calculation.

This means that institutions subject to the 90/10 Rule will be required to limit the combined amount of Title IV funds and applicable “Federal funds” revenue in a fiscal year to no more than 90% in a fiscal year as calculated under the rule.

Consequently, the ARPA change to the 90/10 rule is expected to increase the 90/10 rule calculations at GCU.

The ARPA does not identify the specific Federal funding programs that will be covered by this provision, but it is expected to include funding from federal student aid programs such as the veterans’ benefits programs.

GCU has informed us that it does not believe any change to the 90/10 rule calculation being currently discussed will have a material impact on its calculation.

The ARPA states that the amendments to the 90/10 rule apply to institutional fiscal years beginning on or after January 1, 2023 and are subject to the HEA’s negotiated rulemaking process which may not commence earlier than October 1, 2021.

The ED has started the negotiated rulemaking process and completed the first round of negotiations on January 21, 2022.

We cannot predict the additional changes to the 90/10 rule or other regulations that might occur as a result of negotiated rulemaking to be conducted during 2021 and 2022 as required by the ARPA.

Student loan defaults.

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For each federal fiscal year, ED calculates a rate of student defaults for each institution (known as a “cohort default rate”).

The rate is calculated by determining the rate at which borrowers who became subject to their repayment obligation in one federal fiscal year default in that same year or by the end of the second year following the first federal fiscal year (the “three-year method”).

ED applies legal thresholds to measure an institution’s compliance.

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An institution that participates in the Title IV programs may not provide any commission, bonus, or other incentive payment based directly or indirectly on success in securing enrollments or financial aid to any person or entity engaged in any student recruitment, admissions, or financial aid awarding activity.

In its program participation agreement with ED, each higher education institution agrees that it will not "provide any commission, bonus, or other incentive payment based in any part, directly or indirectly, upon success in securing enrollments or the award of financial aid, to any person or entity who is engaged in any student recruitment or admission activity, or in making decisions regarding the award of Title IV, HEA program funds."

Pursuant to this rule, we are prohibited from offering our covered employees, who are those employees involved with or responsible for recruiting or admissions activities, any bonus or incentive-based compensation based on the successful recruitment, admission or enrollment of students into a postsecondary institution.

We are also precluded from offering our covered employees who

work on financial aid matters (if any), any bonus or incentive-based compensation based on the award of financial aid to students enrolled in a postsecondary institution.

In its program participation agreement with ED, each higher education institution agrees that it will not “provide any commission, bonus, or other incentive payment based in any part, directly or indirectly, upon success in securing enrollments or the award of financial aid, to any person or entity who is engaged in any student recruitment or admission activity, or in making decisions regarding the award of Title IV, HEA program funds.” Pursuant to this rule, we are prohibited from offering our covered employees, who are those employees involved with or responsible for recruiting or admissions activities, any bonus or incentive-based compensation based on the successful recruitment, admission or enrollment of students into a postsecondary institution.

We are also precluded from offering our covered employees who work on financial aid matters (if any), any bonus or incentive-based compensation based on the award of financial aid to students enrolled in a postsecondary institution.

In addition, the incentive compensation rule raises a question as to whether companies like ours, as an entity, are prohibited from entering into tuition revenue-sharing arrangements with university partners.

On March 17, 2011, ED issued official agency guidance, known as a "Dear Colleague Letter,"

or a DCL, providing guidance on this point.

The DCL states that "[t]he Department generally views payment based on the amount of tuition generated as an indirect payment of incentive compensation based on success in recruitment and therefore a prohibited basis upon which to measure the value of the services provided"

and that "[t]his is true regardless of the manner in which the entity compensates its employees."

But the DCL also provides an important exception to the ban on tuition revenue-sharing arrangements between institutions and third parties.

that provides a set of "bundled services"

that includes recruitment services, such as those we provide.

Example 2-B in the DCL is described as a "possible business model"

developed "with the statutory mandate in mind."

Example 2-B describes the following as a possible business model:

"A third-party that is not affiliated with the institution it serves and is not affiliated with any other institution that provides educational services, provides bundled services to the institution including marketing, enrollment application assistance, recruitment services, course support for online delivery of courses, the provision of technology, placement services for internships, and student career counseling.

The institution may pay the entity an amount based on tuition generated for the institution by the entity’s activities for all the bundled services that are offered and provided collectively, as long as the entity does not make prohibited compensation payments to its employees, and the institution does not pay the entity separately for student recruitment services provided by the entity."

On March 17, 2011, ED issued official agency guidance, known as a “Dear Colleague Letter,” or a DCL, providing guidance on this point.

The DCL states that “[t]he Department generally views payment based on the amount of tuition generated as an indirect payment of incentive compensation based on success in recruitment and therefore a prohibited basis upon which to measure the value of the services provided” and that “[t]his is true regardless of the manner in which the entity compensates its employees.” But the DCL also provides an important exception to the ban on tuition revenue-sharing arrangements between institutions and third parties.

According to the DCL, ED does not consider payment based on the amount of tuition generated by an institution to violate the incentive compensation ban if the payment compensates an “unaffiliated third party” that provides a set of “bundled services” that includes recruitment services, such as those we provide.

Example 2-B in the DCL is described as a “possible business model” developed “with the statutory mandate in mind.” Example 2-B describes the following as a possible business model:

“A third-party that is not affiliated with the institution it serves and is not affiliated with any other institution that provides educational services, provides bundled services to the institution including marketing, enrollment application assistance, recruitment services, course support for online delivery of courses, the provision of

technology, placement services for internships, and student career counseling.

The DCL guidance indicates that an arrangement that complies with Example 2-B will be deemed to be in compliance with the incentive compensation provisions of the HEA and ED’s regulations.

Our business model and contractual arrangements with our university partners closely follow Example 2-B in the DCL.

In addition, we assure that none of our "covered employees"

is paid any bonus or other incentive compensation in violation of the rule.

In addition, we assure that none of our “covered employees” is paid any bonus or other incentive compensation in violation of the rule.

Because the bundled services rule was promulgated in the form of agency guidance issued by ED in the form of a DCL and is not codified by statute or regulation, the rule could be altered or removed without prior notice, public comment period or other administrative procedural requirements that accompany formal agency rulemaking.

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On September 23, 2019, ED published new regulations related to the “Borrower Defense to Repayment” regulations.

These regulations, which are effective July 1, 2020 modify the existing regulations to now permit borrowers to raise as a defense to repayment on a student loan any statement, act, or omission to a borrower that is false, misleading, or deceptive;

These regulations, which were effective July 1, 2020 modify the existing regulations to now permit borrowers to raise as a defense to repayment on a student loan any statement, act, or omission to a borrower that is false, misleading, or deceptive;

made with knowledge of its false, misleading, or deceptive nature or with a reckless disregard for the truth;

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The regulation also establishes discretionary triggering events for which ED may determine that an institution is not able to meet its financial or administrative obligations if the events are likely to have a material adverse effect on the financial condition of the institution.

The regulations require the institution to notify ED of the occurrence of a mandatory or discretionary event in accordance with procedures established by ED, typically within 10 days of the occurrence of the event with certain

ED may make a determination that an institution fails to meet the financial responsibility standards based on the occurrence of one or more mandatory or discretionary triggers and impose a letter of credit and/or other conditions upon the institution.

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Note, the borrower defense to repayment regulations discussed herein were and are extensive and this does not attempt to discuss all the facets of any of the versions of these regulations.

Moreover, as discussed below, the ED is currently undergoing a regulatory process designed to revise these regulations.

While we are watching this process closely, we cannot determine what the outcome will be or the effect of these regulations on out university partners or on GCE.

Compliance reviews.

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As part of ED’s ongoing monitoring of institutions’ administration of the Title IV programs, the HEA also requires institutions to annually submit to ED a Title IV compliance audit conducted by an independent certified public accountant in accordance with applicable federal and ED audit standards.

In addition, to enable ED to make a determination of an institution’s financial responsibility, each institution must annually submit audited financial statements prepared in accordance with ED regulations.

In addition, to enable ED to make a determination of an

institution’s financial responsibility, each institution must annually submit audited financial statements prepared in accordance with ED regulations.

As a third-party servicer, not only are our university partners subject to reviews and audits that may require our involvement, but we are also subject to program reviews from ED and the Office of the Inspector General.

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On July 1, 2019, ED rescinded the previously enacted gainful employment regulations.

While this change is effective July 1, 2020, ED also permitted institutions to enact this change as early as July 1, 2019, so long as any such institution made manifest its intention to be subject to the rescinded regulations.

While this change was effective July 1, 2020, ED also permitted institutions to enact this change as early as July 1, 2019, so long as any such institution made manifest its intention to be subject to the rescinded regulations.

It is our understanding that GCU had made manifest that intention and, as of July 1, 2019, is no longer subject to the gainful employment rules.

While GCU largely complied with the previously published gainful employment rules, the previously published draft rates did indicate that four current degree programs were in the “Zone” – that is, potentially faced sanctions in the future if GCU could not reform the program to comply with the regulations – including three undergraduate education programs and the Masters in Theology.

As discussed below, the Department is currently engaged in a negotiated rulemaking on the gainful employment rule.

While we are watching this process closely, we cannot determine what the outcome will be or the effect of these regulations on out university partners or on GCE.

Substantial misrepresentation .

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We and our employees and subcontractors, as agents of our university partners, must use a high degree of care to comply with such rules and are prohibited by contract from making any false, erroneous or misleading statements about our university partners.

To avoid an issue under the misrepresentation rule and similar rules, we assure that all marketing materials are

approved in advance by our university partners before they are used by our employees and we carefully monitor our subcontractors.

To avoid an issue under the misrepresentation rule and similar rules, we assure that all marketing materials are approved in advance by our university partners before they are used by our employees and we carefully monitor our subcontractors.

Additionally, matters regarding substantial misrepresentation, and defining what constitutes “aggressive recruiting,” are currently the subject of negotiated rulemaking.

While we are watching this process closely, we cannot determine what the outcome will be or the effect of these regulations on out university partners or on GCE.

Despite our best efforts, we may face complaints from students and prospective students of our university partners over statements made by us and our agents throughout the conduct of our services which would expose our university partners, and derivatively us, to increased risk of enforcement action and applicable sanctions or other penalties and increased risk of private qui tam actions under the Federal False Claims Act.

Also, if ED determines that an institution (including its contractors) has engaged in substantial misrepresentation, ED may revoke an institution’s program participation agreement, impose limitations on the institution’s participation in Title IV programs, deny applications from the institution for approval of new programs or locations or other matters, or initiate proceedings to fine the institution or limit, suspend, or terminate its eligibility to participate in Title IV programs.

Also, if ED determines that an institution (including its contractors) has engaged in substantial misrepresentation, ED may revoke an institution’s

program participation agreement, impose limitations on the institution’s participation in Title IV programs, deny applications from the institution for approval of new programs or locations or other matters, or initiate proceedings to fine the institution or limit, suspend, or terminate its eligibility to participate in Title IV programs.

Similar rules apply under state laws or are incorporated in institutional accreditation standards and the Federal Trade Commission, or FTC, applies similar rules prohibiting any unfair or deceptive marketing practices to the education sector.

If ED or another regulator determines that statements made by us or on our behalf are in violation of the regulations, we could be subject to sanctions and other liability, which could have a material adverse effect on our business.

Negotiated Rulemaking.

The ED periodically issues new regulations and guidance that can have an adverse effect on our partner institutions.

The ED has changed its regulations, and may make other changes in the future, in a manner which could require us to incur additional costs in connection with providing the services that we provide our partners affect their ability to remain eligible to participate in the Title IV programs, impose restrictions on their participation in the Title IV programs, affect the rate at which students enroll in our partners’ programs, or otherwise have a significant impact on our business and results of operations.

We cannot predict the timing and content of any new regulations or guidance that the ED may seek to impose or whether and to what extent the ED under the new administration may issue new regulations and guidance that could adversely impact our partner institutions.

In May 2021, the ED announced its intention to establish negotiated rulemaking committees to prepare proposed regulations on an extensive range of topics including without limitation changes of ownership and change in control of institutions of higher education, certification procedures for participation in the Title IV programs, standards of administrative capability, ability to benefit standards, borrower defense to repayment, discharges for borrowers with a total and permanent disability, closed school loan discharges, discharges for false certification of student eligibility, loan repayment plans, the public service loan forgiveness program, mandatory pre-dispute arbitration and prohibition of class action lawsuits provisions in institutional enrollment agreements, financial responsibility standards including events that indicate heightened financial risk, gainful employment, and Pell Grant eligibility for prison education programs.

The ED also could consider additional topics for proposed regulations during the negotiated rulemaking process.

The negotiated rulemaking process could lead to future ED regulations that could adversely impact our partner institutions.

The negotiated rulemaking sessions began on October 4, 2021.

The topics have included total and permanent disability discharges, closed school discharges, public student loan forgiveness, borrower defense to repayment, aggressive recruiting, pre-dispute arbitration and class action waivers, income driven repayment, interest capitalization, false certification discharges, and prison exchange programs and could include other issues that the ED might add to the agenda.

The remaining sessions are scheduled to occur periodically through March 2022.

The ED is expected to publish proposed regulations in the Federal Register for public comment during the period after the conclusion of the negotiated rulemaking sessions.

If the final regulations are published by or before November 1, 2022, then the regulations typically would not take effect until July 1, 2023.

However, we cannot predict the ultimate timing and content of any final regulations following the conclusion of the rulemaking process.

Additionally, on October 4, 2021, the ED published a notice in the Federal Register announcing its intention to establish a negotiated rulemaking committee to prepare proposed regulations affecting institutional and programmatic eligibility, including the gainful employment rule and the 90/10 rule changes made by the ARPA.

We also cannot predict with certainty the ultimate combined impact of the regulatory changes which have occurred in recent years and that may occur as a result of the upcoming negotiated rulemaking, nor can we predict the effect of future legislative or regulatory action by federal, state or other agencies regulating our education programs or other aspects of our operations, how any resulting regulations will be interpreted or whether we and our partner institutions will be able to comply with these requirements in the future.

Any such actions by legislative or regulatory bodies that affect our programs and operations could have a material adverse effect on our student population and our partner institutions, including the need to cease offering a number of programs.

Regulatory Standards that May Restrict Institutional Expansion or Other Changes

Many actions that our university partners may wish to take in connection with expanding their operations or other changes are subject to review or approval by the applicable regulatory agencies.

For example, requirements and standards of state post-secondary agencies, accrediting commissions, and ED limit an institution’s ability in certain instances to establish additional teaching locations, implement new educational programs, or increase enrollment in certain programs.

For example, requirements and

standards of state post-secondary agencies, accrediting commissions, and ED limit an institution’s ability in certain instances to establish additional teaching locations, implement new educational programs, or increase enrollment in certain programs.

Many states require review and approval before institutions can add new locations or programs, and many states limit the number of pre-licensure professional students (such as nursing) colleges may enroll.

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What changed 10-K

Item 1. Business