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<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="center" style="font-size: 10pt; margin-top: 0pt"><b> </b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>1. Nature of Business</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Grand Canyon Education, Inc. (the “University”) is a regionally accredited provider of postsecondary education services focused on offering graduate and undergraduate degree programs in its core disciplines of education, business, healthcare, and liberal arts. The University offers courses online, at its approximately 100 acre traditional ground campus in Phoenix, Arizona and onsite at the facilities of employers. The University is accredited by The Higher Learning Commission of the North Central Association of Colleges and Schools. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>2. Restatement of Financial Statements </b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">On November 3, 2011, the University determined that there was an error in the methodology it used to estimate its allowance for doubtful accounts and that its financial statements for the three months ended March 31, 2011 needed to be restated. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In recent periods, the University experienced a significant change in the composition of its receivable balances since its transition to the borrower-based financial aid model in the second quarter of 2010 in which the receivables due from former students had grown as a percentage of the total amount outstanding. However, the University’s historical process for estimating the allowance for doubtful accounts did not consider the disaggregation of receivable balances by student based on enrollment status. As a result, the growth in the inactive student receivables was not evident when making the allowance estimate in prior periods. As the University’s collection experience indicates that receivables from former students carry a higher risk, this disaggregated information should have been considered in determining the probability of loss within the University’s receivables. If such information had been evaluated, management would have increased the allowance for doubtful accounts to reflect the increased risk profile of the receivables in prior periods. Accordingly, the Audit Committee of the Board of Directors together with management, determined that, because management should have taken the additional steps necessary to develop the disaggregated information for use in the analysis of reserve requirements and resulting allowance for doubtful accounts, the financial statements for the fiscal year ended December 31, 2010 and for the quarters ended June 30, 2010, September 30, 2010, March 31, 2011 and June 30, 2011 should be restated to correct the allowance for doubtful accounts. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The following table summarizes the unaudited quarterly results of operations as originally reported and as restated for the three months ended March 31, 2011. </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="44%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000" colspan="6"><b>2011</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>First Quarter</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>First Quarter</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>As Reported</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>As Restated</b></td> <td> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Net revenue</b> </div></td> <td> </td> <td align="left">$</td> <td align="right">101,709</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">101,709</td> <td> </td> </tr> <tr valign="bottom" style="padding-top: 1px"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Costs and expenses:</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff; padding-top: 1px"> <td> <div style="margin-left:30px; text-indent:-15px">Instructional costs and services </div></td> <td> </td> <td> </td> <td align="right">45,830</td> <td> </td> <td> </td> <td> </td> <td align="right">48,875</td> <td> </td> </tr> <tr valign="bottom" style="padding-top: 1px"> <td> <div style="margin-left:30px; text-indent:-15px">Selling and promotional </div></td> <td> </td> <td> </td> <td align="right">29,832</td> <td> </td> <td> </td> <td> </td> <td align="right">29,832</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff; padding-top: 1px"> <td> <div style="margin-left:30px; text-indent:-15px">General and administrative </div></td> <td> </td> <td> </td> <td align="right">6,832</td> <td> </td> <td> </td> <td> </td> <td align="right">6,832</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Total costs and expenses</b> </div></td> <td> </td> <td> </td> <td align="right">82,494</td> <td> </td> <td> </td> <td> </td> <td align="right">85,539</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Operating income</b> </div></td> <td> </td> <td> </td> <td align="right">19,215</td> <td> </td> <td> </td> <td> </td> <td align="right">16,170</td> <td> </td> </tr> <tr valign="bottom" style="padding-top: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">Net interest expense </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(75</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(75</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Income before income taxes</b> </div></td> <td> </td> <td> </td> <td align="right">19,140</td> <td> </td> <td> </td> <td> </td> <td align="right">16,095</td> <td> </td> </tr> <tr valign="bottom" style="padding-top: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">Income tax expense </div></td> <td> </td> <td> </td> <td align="right">7,842</td> <td> </td> <td> </td> <td> </td> <td align="right">6,614</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Net income</b> </div></td> <td> </td> <td align="left">$</td> <td align="right">11,298</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">9,481</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Earnings per share:</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff; padding-top: 1px"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Basic income per share(1)</b> </div></td> <td> </td> <td align="left">$</td> <td align="right">0.25</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">0.21</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Diluted income per share(1)</b> </div></td> <td> </td> <td align="left">$</td> <td align="right">0.25</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">0.21</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Basic weighted average shares outstanding</b> </div></td> <td> </td> <td> </td> <td align="right">45,590</td> <td> </td> <td> </td> <td> </td> <td align="right">45,590</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Diluted weighted average shares outstanding</b> </div></td> <td> </td> <td> </td> <td align="right">46,089</td> <td> </td> <td> </td> <td> </td> <td align="right">46,089</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr style="font-size: 6pt"> <td width="3%"> </td> <td width="1%"> </td> <td width="96%"> </td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left">(1)</td> <td> </td> <td>The sum of quarterly income per share may not equal annual income per share due to rounding.</td> </tr> </table> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The following is a summary of the changes on the University’s balance sheet. </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="72%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>As of March 31, 2011</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>As Reported</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>As Restated</b></td> <td> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Accounts receivable, net of allowance for doubtful accounts of $13,169 (As Reported) and $31,366 (As Restated) </div></td> <td> </td> <td> </td> <td align="right">32,369</td> <td> </td> <td> </td> <td> </td> <td align="right">13,972</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Deferred income taxes </div></td> <td> </td> <td> </td> <td align="right">9,143</td> <td> </td> <td> </td> <td> </td> <td align="right">16,563</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Total current assets </div></td> <td> </td> <td> </td> <td align="right">128,286</td> <td> </td> <td> </td> <td> </td> <td align="right">117,309</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Total assets </div></td> <td> </td> <td> </td> <td align="right">286,464</td> <td> </td> <td> </td> <td> </td> <td align="right">275,487</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Accumulated earnings </div></td> <td> </td> <td> </td> <td align="right">71,278</td> <td> </td> <td> </td> <td> </td> <td align="right">60,302</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Total stockholders’ equity </div></td> <td> </td> <td> </td> <td align="right">135,313</td> <td> </td> <td> </td> <td> </td> <td align="right">124,336</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Total liabilities and stockholders’ equity </div></td> <td> </td> <td> </td> <td align="right">286,464</td> <td> </td> <td> </td> <td> </td> <td align="right">275,487</td> <td> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The following is a summary of the changes on the University’s statement of cash flows. </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="72%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6"><b>Three Months Ended</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>March 31, 2011</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>As Reported</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>As Restated</b></td> <td> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Net income </div></td> <td> </td> <td> </td> <td align="right">11,298</td> <td> </td> <td> </td> <td> </td> <td align="right">9,481</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Provision for bad debts </div></td> <td> </td> <td> </td> <td align="right">6,988</td> <td> </td> <td> </td> <td> </td> <td align="right">10,034</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Deferred income taxes </div></td> <td> </td> <td> </td> <td align="right">1,004</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(224</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Net cash provided by operating activities </div></td> <td> </td> <td> </td> <td align="right">23,413</td> <td> </td> <td> </td> <td> </td> <td align="right">23,413</td> <td> </td> </tr>  </table> </div> </div>

<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>3. Summary of Significant Accounting Policies</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Unaudited Interim Financial Information</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The accompanying unaudited interim financial statements of the University have been prepared in accordance with U.S. generally accepted accounting principles, consistent in all material respects with those applied in its financial statements included in its Annual Report on Form 10-K/A for the fiscal year ended December 31, 2010. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. Such interim financial information is unaudited but reflects all adjustments that in the opinion of management are necessary for the fair presentation of the interim periods presented. Interim results are not necessarily indicative of results for a full year. This Quarterly Report on Form 10-Q/A should be read in conjunction with the University’s audited financial statements and footnotes included in its Annual Report on Form 10-K/A for the fiscal year ended December 31, 2010 from which the December 31, 2010 balance sheet information was derived. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Restricted Cash and Cash Equivalents</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">A significant portion of the University’s revenue is received from students who participate in government financial aid and assistance programs. Restricted cash and cash equivalents primarily represents amounts received from the federal and state governments under various student aid grant and loan programs, such as Title IV. These funds are received subsequent to the completion of the authorization and disbursement process for the benefit of the student. The U.S. Department of Education requires Title IV funds collected in advance of student billings to be segregated in a separate cash or cash equivalent account until the students are billed for their portion. The University also classifies the $5,200 that it agreed to pay to settle the <i>qui tam </i>matter as restricted cash, subject to the distribution of the settlement amount from escrow in accordance with the terms of the settlement agreement. The University records all of these amounts as a current asset in restricted cash and cash equivalents. Restricted cash and cash equivalents is excluded from cash and cash equivalents until the cash is no longer restricted. The majority of these funds remain as restricted cash and cash equivalents for an average of 60 to 90 days from the date of receipt. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In the fourth quarter of 2010, the counterparty to the University’s interest rate swap made a collateral call and the University posted $760 of pledged collateral as noncurrent restricted cash. The pledged collateral was reduced to $445 as of March 31, 2011. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Derivatives and Hedging</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Derivative financial instruments are recorded on the balance sheet as assets or liabilities and re-measured at fair value at each reporting date. For derivatives designated as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Derivative financial instruments enable the University to manage its exposure to interest rate risk. The University does not engage in any derivative instrument trading activity. Credit risk associated with the University’s derivatives is limited to the risk that a derivative counterparty will not perform in accordance with the terms of the contract. Exposure to counterparty credit risk is considered low because these agreements have been entered into with institutions with strong credit ratings, and they are expected to perform fully under the terms of the agreements. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">On June 30, 2009, the University entered into an interest rate corridor instrument and an interest rate swap to manage its 30 Day LIBOR interest exposure related to its variable rate debt, which commenced in April 2009 and matures in April 2014. The fair value of the interest rate corridor instrument as of March 31, 2011 and December 31, 2010 was $25 and $27, respectively, which is included in other assets. The fair value of the interest rate swap is a liability of $583 and $686 as of March 31, 2011 and December 31, 2010, respectively, which is included in other noncurrent liabilities. The fair values of each derivative instrument were determined using a hypothetical derivative transaction and Level 2 of the hierarchy of valuation inputs. These derivative instruments were designated as cash flow hedges of variable rate debt obligations. The adjustment of $74 and $245 in the first three months of 2011 and 2010, respectively, for the effective portion of the loss on the derivatives is included as a component of other comprehensive income, net of taxes. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The interest rate corridor instrument hedges variable interest rate risk starting July 1, 2009 through April 30, 2014 with a notional amount of $11,268 as of March 31, 2011. The corridor instrument permits the University to hedge its interest rate risk at several thresholds; the University will pay variable interest rates based on the 30 Day LIBOR rates monthly until that index reaches 4%. If 30 Day LIBOR is equal to 4% through 6%, the University will pay 4%. If 30 Day LIBOR exceeds 6%, the University will pay actual 30 Day LIBOR less 2%. This reduces the University’s exposure to potential increases in interest rates. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The interest rate swap commenced on May 1, 2010 and continues each month thereafter until April 30, 2014 and has a notional amount of $11,268 as of March 31, 2011. The University will receive 30 Day LIBOR and pay 3.245% fixed interest on the amortizing notional amount. Therefore, the University has hedged its exposure to future variable rate cash flows through April 30, 2014. The interest rate swap is not subject to a master netting arrangement and collateral has been called by the counterparty and reflected in a restricted cash account as of March 31, 2011 and December 31, 2010 in the amount of $445 and $760, respectively. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">As of March 31, 2011 no derivative ineffectiveness was identified. Any ineffectiveness in the University’s derivative instruments designated as hedges would be reported in interest expense in the income statement. For the three months ended March 31, 2011 $8 of credit risk was recorded in interest expense on the derivatives. At March 31, 2011, the University is not expected to reclassify gains or losses on derivative instruments from accumulated other comprehensive (loss) income into earnings during the next 12 months. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Fair Value of Financial Instruments</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">As of March 31, 2011, the carrying value of cash and cash equivalents, accounts receivable, account payable and accrued expenses approximate their fair value based on the liquidity or the short-term maturities of these instruments. The carrying value of debt approximates fair value as it is based on variable rate index. The carrying value of capital lease obligations approximate fair value based upon market interest rates available to the University for debt of similar risk and maturities. Derivative financial instruments are carried at fair value, determined using Level 2 of the hierarchy of valuation inputs, with the use of inputs other than quoted prices that are observable for the asset or liability. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Revenue Recognition</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Net revenues consist primarily of tuition and fees derived from courses taught by the University online, at its 100 acre traditional campus in Phoenix, Arizona, and onsite at the facilities of employers, as well as from related educational resources such as access to online materials. Tuition revenue and most fees and related educational resources are recognized pro-rata over the applicable period of instruction, net of scholarships provided by the University. For the three months ended March 31, 2011 and 2010, the University’s revenue was reduced by approximately $19,769 and $13,771, respectively, as a result of scholarships that the University offered to students. The University maintains an institutional tuition refund policy, which provides for all or a portion of tuition to be refunded if a student withdraws during stated refund periods. Certain states in which students reside impose separate, mandatory refund policies, which override the University’s policy to the extent in conflict. If a student withdraws at a time when only a portion, or none of the tuition is refundable, then in accordance with its revenue recognition policy, the University continues to recognize the tuition that was not refunded as pro-rata over the applicable period of instruction. Since the University recognizes revenue pro-rata over the term of the course and because, under its institutional refund policy, the amount subject to refund is never greater than the amount of the revenue that has been deferred, under the University’s accounting policies revenue is not recognized with respect to amounts that could potentially be refunded. The University’s change in April 2010 to a non-term borrower-based institution from a term based institution for federal student financial aid funding purposes does not have any impact on the timing and recognition of revenues. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Instructional Costs and Services</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Instructional costs and services consist primarily of costs related to the administration and delivery of the University’s educational programs. This expense category includes salaries, benefits and share-based compensation for full-time and adjunct faculty and administrative personnel, information technology costs, bad debt expense, curriculum and new program development costs (which are expensed as incurred) and costs associated with other support groups that provide services directly to the students. This category also includes an allocation of depreciation, amortization, royalty to former owner, rent, and occupancy costs attributable to the provision of educational services, primarily at the University’s Phoenix, Arizona campus. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Selling and Promotional</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Selling and promotional expenses include salaries, benefits and share-based compensation of personnel engaged in the marketing, recruitment, and retention of students, as well as advertising costs associated with purchasing leads, hosting events and seminars, and producing marketing materials. This category also includes an allocation of depreciation, amortization, rent, and occupancy costs attributable to selling and promotional activities at the Company’s facilities in Arizona. Selling and promotional costs are expensed as incurred. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Through December 2010, the University was a party to a revenue sharing arrangement (the Collaboration Agreement) with Mind Streams, L.L.C. (Mind Streams), a related party pursuant to which it paid a percentage of the net revenue that it actually received from applicants recruited by those entities that matriculated at Grand Canyon University. Mind Streams bore all costs associated with the recruitment of these applicants. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">As a result of new rules adopted by the U.S. Department of Education and effective July 1, 2011, the University determined that revenue sharing arrangements like the Collaboration Agreement, and the manner in which it pays amounts under the Collaboration Agreement, will most likely no longer be permitted. Accordingly, the University and Mind Streams entered into an agreement, dated December 30, 2010, pursuant to which the University agreed to pay Mind Streams an amount equal to (a) $8,500, plus (b) Mind Streams’ applicable share of any net revenue actually received by the University on or before February 28, 2011 with respect to any such Mind Streams identified students commencing University courses prior to November 1, 2010. In return, Mind Streams agreed to (i) accept such amounts in full and complete satisfaction of all amounts owed by the University to Mind Streams under the Collaboration Agreement, and (ii) transfer to the University a proprietary database of potential student leads. A payment of $8,500 was made in January 2011 in conjunction with this agreement. Additionally in 2010, Gail Richardson, the father of Brent D. Richardson, the University’s Executive Chairman, and Christopher C. Richardson, the University’s General Counsel and a director, formed a new entity, Lifetime Learning, which plans to generate and sell leads to the University and other entities in the education sector. For the three months ended March 31, 2011 and 2010, the University expensed approximately $401 and $2,347, respectively, pursuant to these arrangements, exclusive of the settlement arrangement discussed above. As of March 31, 2011 and December 31, 2010 $564, and $9,367, respectively, were due to these related parties. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>General and Administrative</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">General and administrative expenses include salaries, benefits and share-based compensation of employees engaged in corporate management, finance, human resources, compliance, and other corporate functions. General and administrative expenses also include an allocation of depreciation, amortization, rent, and occupancy costs attributable to the departments providing general and administrative functions. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Exit Costs</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In November 2009, the University finalized a plan to centralize its student services operations in Arizona and, as a result, closed its student services facility in Utah. The exit costs incurred in connection with this decision have been expensed and are presented separately on the income statement. The costs incurred included severance payments; relocation expenses; future lease payments, net of estimated sublease rentals; and the write off of leasehold improvements associated with this leased space. The following is a summary of the University’s exit activities: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="44%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Accrued Exit Costs</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"> </td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>at</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Accrued Exit</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>December 31,</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Costs at</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Exit Costs</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Payments in 2011</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>March 31, 2011</b></td> <td> </td> </tr>   <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Accrued exit costs </div></td> <td> </td> <td align="left">$</td> <td align="right">64</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">—</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left">$</td> <td align="right">(24</td> <td nowrap="nowrap">)</td> <td> </td> <td align="left">$</td> <td align="right">40</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Use of Estimates</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results could differ from those estimates. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Segment Information</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The University operates as a single educational delivery operation using a core infrastructure that serves the curriculum and educational delivery needs of both its ground and online students regardless of geography. The University’s Chief Executive Officer manages the University’s operations as a whole and no expense or operating income information is generated or evaluated on any component level. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Reclassifications</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Certain reclassifications have been made to the prior period balances to conform to the current period. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Recent Accounting Pronouncements</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The University has reviewed and evaluated all recent accounting pronouncements and believes there are none that could potentially have a material impact on the University’s financial condition, results of operations, or disclosures. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>4. Net Income Per Common Share</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Basic net income per common share is calculated by dividing net income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per common share reflects the assumed conversion of all potentially dilutive securities, consisting of stock options, for which the estimated fair value exceeds the exercise price, less shares which could have been purchased with the related proceeds, unless anti-dilutive. For employee equity awards, repurchased shares are also included for any unearned compensation adjusted for tax. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The table below reflects the calculation of the weighted average number of common shares outstanding, on an as if converted basis, used in computing basic and diluted earnings per common share. </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="72%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Three Months Ended March 31,</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td> <td> </td> </tr>   <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Denominator: </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Basic weighted average shares outstanding </div></td> <td> </td> <td> </td> <td align="right">45,590,195</td> <td> </td> <td> </td> <td> </td> <td align="right">45,673,917</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Effect of dilutive stock options and restricted stock </div></td> <td> </td> <td> </td> <td align="right">498,720</td> <td> </td> <td> </td> <td> </td> <td align="right">650,856</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Diluted weighted average shares outstanding </div></td> <td> </td> <td> </td> <td align="right">46,088,915</td> <td> </td> <td> </td> <td> </td> <td align="right">46,324,773</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Diluted weighted average shares outstanding exclude the incremental effect of shares that would be issued upon the assumed exercise of stock options. For the three months ended March 31, 2011 and 2010, approximately 2,244,541 and 506,868, respectively, of the University’s stock options outstanding were excluded from the calculation of diluted earnings per share as their inclusion would have been anti-dilutive. These options could be dilutive in the future. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>5. Valuation and Qualifying Accounts</b> </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="44%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Balance at</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Balance at</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Beginning of</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Charged to</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>End of</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Period</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Expense</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Deductions</b><sup style="font-size: 85%; vertical-align: text-top"><b>(1)</b></sup></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Period</b></td> <td> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Allowance for doubtful accounts receivable: </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Three months ended March 31, 2011 (Restated) </div></td> <td> </td> <td align="left">$</td> <td align="right">30,112</td> <td> </td> <td> </td> <td> </td> <td align="right">10,034</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(8,780</td> <td nowrap="nowrap">)</td> <td> </td> <td align="left">$</td> <td align="right">31,366</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Three months ended March 31, 2010 </div></td> <td> </td> <td align="left">$</td> <td align="right">7,553</td> <td> </td> <td> </td> <td> </td> <td align="right">4,774</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(4,479</td> <td nowrap="nowrap">)</td> <td> </td> <td align="left">$</td> <td align="right">7,848</td> <td> </td> </tr>  </table> </div> <div align="left"> <div style="font-size: 3pt; margin-top: 0pt; width: 18%; border-top: 0px solid #000000">  </div> </div> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr style="font-size: 6pt"> <td width="3%"> </td> <td width="1%"> </td> <td width="96%"> </td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left">(1)</td> <td> </td> <td> <div style="text-align: justify">Deductions represent accounts written off, net of recoveries. </div></td> </tr> </table> </div>

<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>6. Property and Equipment</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Property and equipment consist of the following: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="72%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>As of</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>As of March</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>December 31,</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>31, 2011</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td> <td> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Land </div></td> <td> </td> <td align="left">$</td> <td align="right">8,282</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">8,282</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Land improvements </div></td> <td> </td> <td> </td> <td align="right">1,597</td> <td> </td> <td> </td> <td> </td> <td align="right">1,597</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Buildings </div></td> <td> </td> <td> </td> <td align="right">49,939</td> <td> </td> <td> </td> <td> </td> <td align="right">48,323</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Equipment under capital leases </div></td> <td> </td> <td> </td> <td align="right">4,502</td> <td> </td> <td> </td> <td> </td> <td align="right">4,502</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Leasehold improvements </div></td> <td> </td> <td> </td> <td align="right">11,835</td> <td> </td> <td> </td> <td> </td> <td align="right">11,407</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Computer equipment </div></td> <td> </td> <td> </td> <td align="right">38,796</td> <td> </td> <td> </td> <td> </td> <td align="right">36,742</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Furniture, fixtures and equipment </div></td> <td> </td> <td> </td> <td align="right">11,896</td> <td> </td> <td> </td> <td> </td> <td align="right">11,401</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Internally developed software </div></td> <td> </td> <td> </td> <td align="right">4,390</td> <td> </td> <td> </td> <td> </td> <td align="right">3,825</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Other </div></td> <td> </td> <td> </td> <td align="right">1,098</td> <td> </td> <td> </td> <td> </td> <td align="right">998</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Construction in progress </div></td> <td> </td> <td> </td> <td align="right">36,390</td> <td> </td> <td> </td> <td> </td> <td align="right">21,349</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td align="right">168,725</td> <td> </td> <td> </td> <td> </td> <td align="right">148,426</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Less accumulated depreciation and amortization </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(28,070</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(24,427</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Property and equipment, net </div></td> <td> </td> <td align="left">$</td> <td align="right">140,655</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">123,999</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div> </div>

<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>7. Commitments and Contingencies</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Leases</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The University leases certain land, buildings and equipment under non-cancelable operating leases expiring at various dates through 2023. Future minimum lease payments under operating leases due each year are as follows at March 31, 2011: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="86%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">2011 </div></td> <td> </td> <td align="left">$</td> <td align="right">3,745</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">2012 </div></td> <td> </td> <td> </td> <td align="right">6,243</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">2013 </div></td> <td> </td> <td> </td> <td align="right">7,020</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">2014 </div></td> <td> </td> <td> </td> <td align="right">6,640</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">2015 </div></td> <td> </td> <td> </td> <td align="right">5,764</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Thereafter </div></td> <td> </td> <td> </td> <td align="right">24,188</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Total minimum payments </div></td> <td> </td> <td align="left">$</td> <td align="right">53,600</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Total rent expense and related taxes and operating expenses under operating leases for the three months ended March 31, 2011 and 2010 were $1,593 and $1,084, respectively. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Legal Matters</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">From time to time, the University is a party to various lawsuits, claims, and other legal proceedings that arise in the ordinary course of business, some of which are covered by insurance. When the University is aware of a claim or potential claim, it assesses the likelihood of any loss or exposure. If it is probable that a loss will result and the amount of the loss can be reasonably estimated, the University records a liability for the loss. If the loss is not probable or the amount of the loss cannot be reasonably estimated, the University discloses the nature of the specific claim if the likelihood of a potential loss is reasonably possible and the amount involved is material. With respect to the majority of pending litigation matters, the University’s ultimate legal and financial responsibility, if any, cannot be estimated with certainty and, in most cases, any potential losses related to those matters are not considered probable. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In connection with the <i>qui tam </i>lawsuit that had been filed against the University in August 2007 in the United States District Court for the District of Arizona (the “Court”) by a then-current employee on behalf of the federal government, and in connection with the related settlement agreement approved by the Court in August 2010, the University continues to maintain a $5,200 accrued litigation loss and a commensurate amount of restricted cash of $5,200 in an interest-bearing segregated account controlled by the University, for payment to the United States and the relator in accordance with the terms of the settlement agreement on the earlier of September 1, 2011 or the issuance by the Department of Education to the University of a full three-year Title IV program participation agreement. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Upon resolution of any pending legal matters, the University may incur charges in excess of presently established reserves. Management does not believe that any such charges would, individually or in the aggregate, have a material adverse effect on the University’s financial condition, results of operations or cash flows. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Tax Reserves, Non-Income Tax Related</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">From time to time the University has exposure to various non-income tax related matters that arise in the ordinary course of business. At March 31, 2011 and December 31, 2010, the University had reserved approximately $83 and $92, respectively, for tax matters where its ultimate exposure is considered probable and the potential loss can be reasonably estimated. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>8. Income Taxes</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The University’s uncertain tax positions are related to tax years that remain subject to examination by tax authorities. As of March 31, 2011, the earliest tax year still subject to examination for federal and state purposes is 2007 and 2005, respectively. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>9. Share-Based Compensation</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">On September 27, 2008 the University’s shareholders approved the adoption of the 2008 Equity Incentive Plan (“Incentive Plan”) and the 2008 Employee Stock Purchase (“ESPP”). A total of 4,199,937 shares of the University’s common stock were originally authorized for issuance under the Incentive Plan. On January 1, of each subsequent year in accordance with the terms of the Incentive Plan, the number of shares authorized for issuance under the Incentive Plan automatically increased by 2.5% of the number of shares of common stock issued and outstanding on the previous December 31, raising the total number of shares of common stock authorized for issuance under the Incentive Plan to 7,622,034 shares. Although the ESPP has not yet been implemented, a total of 1,049,984 shares of the University’s common stock have been authorized for sale under the ESPP. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">A summary of the activity related to stock options granted under the University’s Incentive Plan since December 31, 2010 is as follows: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="44%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="14" style="border-bottom: 1px solid #000000"><b>Summary of Stock Options Outstanding</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Weighted</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Weighted</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"> </td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Average</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Average</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"> </td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Exercise</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Remaining</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Aggregate</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Total</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Price per</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Contractual</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Intrinsic</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Shares</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Share</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Term (Years)</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Value ($)(1)</b></td> <td> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Outstanding as of December 31, 2010</b> </div></td> <td> </td> <td> </td> <td align="right">4,026,172</td> <td> </td> <td> </td> <td> </td> <td align="right">14.24</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Granted </div></td> <td> </td> <td> </td> <td align="right">1,226,250</td> <td> </td> <td> </td> <td> </td> <td align="right">15.34</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Exercised </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(1,154</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">12.00</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Forfeited, canceled or expired </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(29,208</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">18.22</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Outstanding as of March 31, 2011</b> </div></td> <td> </td> <td> </td> <td align="right">5,222,060</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">14.47</td> <td> </td> <td> </td> <td> </td> <td align="right">8.42</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">157</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Exercisable as of March 31, 2011</b> </div></td> <td> </td> <td> </td> <td align="right">1,671,032</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">12.95</td> <td> </td> <td> </td> <td> </td> <td align="right">7.77</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">2,590</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Available for issuance as of March 31, 2011</b> </div></td> <td> </td> <td> </td> <td align="right">1,978,459</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr>  </table> </div> <div align="left"> <div style="font-size: 3pt; margin-top: 0pt; width: 18%; border-top: 0px solid #000000">  </div> </div> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr style="font-size: 6pt"> <td width="3%"> </td> <td width="1%"> </td> <td width="96%"> </td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left">(1)</td> <td> </td> <td> <div style="text-align: justify">Aggregate intrinsic value represents the value of the University’s closing stock price on March 31, 2011 ($14.50) in excess of the exercise price multiplied by the number of options outstanding or exercisable. </div></td> </tr> </table> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Share-based Compensation Expense</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The table below outlines share-based compensation expense for the quarter ended March 31, 2011 and 2010 related to restricted stock and stock options granted: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="72%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td> <td> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Instructional costs and services </div></td> <td> </td> <td align="left">$</td> <td align="right">620</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">379</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Selling and promotional </div></td> <td> </td> <td> </td> <td align="right">64</td> <td> </td> <td> </td> <td> </td> <td align="right">37</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">General and administrative </div></td> <td> </td> <td> </td> <td align="right">746</td> <td> </td> <td> </td> <td> </td> <td align="right">621</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px"><b>Share-based compensation expense included in operating expenses</b> </div></td> <td> </td> <td> </td> <td align="right">1,430</td> <td> </td> <td> </td> <td> </td> <td align="right">1,037</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Tax effect of share-based compensation </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(572</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(415</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px"><b>Share-based compensation expense, net of tax</b> </div></td> <td> </td> <td align="left">$</td> <td align="right">858</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">622</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div> </div>

<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>10. Regulatory</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The University is subject to extensive regulation by federal and state governmental agencies and accrediting bodies. In particular, the Higher Education Act of 1965, as amended (the “Higher Education Act”), and the regulations promulgated thereunder by the Department of Education, subject the University to significant regulatory scrutiny on the basis of numerous standards that schools must satisfy in order to participate in the various federal student financial assistance programs under Title IV of the Higher Education Act. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">To participate in the Title IV programs, an institution must be authorized to offer its programs of instruction by the relevant agency of the state in which it is located, accredited by an accrediting agency recognized by the Department of Education and certified as eligible by the Department of Education. The Department of Education will certify an institution to participate in the Title IV programs only after the institution has demonstrated compliance with the Higher Education Act and the Department of Education’s extensive regulations regarding institutional eligibility. An institution must also demonstrate its compliance to the Department of Education on an ongoing basis. The University submitted its application for recertification in March 2008 in anticipation of the expiration of its provisional certification on June 30, 2008. The Department of Education did not make a decision on the University’s recertification application by June 30, 2008, and therefore the University’s participation in the Title IV programs had been automatically extended thereafter on a month-to-month basis pending the Department of Education’s decision. While this decision remained pending, on January 12, 2011, the University disclosed the termination of certain voting agreements that had the effect of triggering a change in control under Department of Education regulations because it caused the University’s largest stockholder group to own and control less than 25% of the outstanding voting stock. On April 8, 2011, following the completion of the Department of Education’s review of the information that the University provided in connection with the termination of the voting agreements, the Department of Education notified the University that it approved its application for a change of ownership and issued to the University a new, provisional program participation agreement to participate in the Title IV programs. While this certification is provisional, it does remove the University from month-to-month status, provides for the University’s continued participation in Title IV programs through December 31, 2013, and does not impose any conditions (such as any letter of credit requirement) or other restrictions on the University during the provisional period other than the standard restrictions applicable to a provisional certification. In accordance with the terms of the provisional certification, the University may apply for recertification on a full basis by submitting a complete application by no later than September 30, 2013. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Because the University operates in a highly regulated industry, it, like other industry participants, may be subject from time to time to investigations, claims of non-compliance, or lawsuits by governmental agencies or third parties, which allege statutory violations, regulatory infractions, or common law causes of action. While there can be no assurance that regulatory agencies or third parties will not undertake investigations or make claims against the University, or that such claims, if made, will not have a material adverse effect on the University’s business, results of operations or financial condition, management believes the University is in compliance with applicable regulations in all material respects. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In connection with its administration of the Title IV federal student financial aid programs, the Department of Education periodically conducts program reviews at selected schools that receive Title IV funds. In July 2010, the Department of Education initiated a program review of Grand Canyon University covering the 2008-2009 and 2009-2010 award years. As part of this program review, a Department of Education program review team conducted a site visit on the University’s campus and reviewed, and in some cases requested further information regarding, the University’s records, practices and policies relating to, among other things, financial aid, enrollment, enrollment counselor compensation, program eligibility and other Title IV compliance matters. Upon the conclusion of the site visit, the University was informed by the program review team that it would (i) conduct further review of the University’s documents and records offsite, (ii) upon completion of such review, schedule a formal exit interview to be followed by a preliminary program review report in which any preliminary findings of non-compliance would be presented, and (iii) conclude the review by issuance of a final determination letter. The program review team has not yet scheduled a formal exit interview with the University. Accordingly, at this point, the program review remains open and the University intends to continue to cooperate with the review team until the program review is completed. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">While the University has not yet received notification of the timing of its exit interview or the Department of Education’s preliminary program review report or final determination letter, following the conclusion of the site visit the University became aware that the program review team had two preliminary findings of concern. The first issue is whether a compensation policy in use during part of the period under review improperly rewarded some enrollment counselors based on success in enrolling students in violation of applicable law. As the University has previously disclosed, while it believes that the University’s compensation policies and practices at issue in the program review were not based on success in enrolling students in violation of applicable law, the Department of Education’s regulations and interpretations of the incentive compensation law do not establish clear criteria for compliance in all circumstances and some of the University’s practices in prior years were not within the scope of any of the specific “safe harbors” provided in the compensation regulations and applicable during that period. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The second issue is whether, during the award years under review, certain programs offered within the University’s College of Liberal Arts provided students with training to prepare them for gainful employment in a recognized occupation. This “gainful employment” standard has been a requirement for Title IV eligibility for programs offered at proprietary institutions of higher education such as Grand Canyon University although, pursuant to legislation passed in 2008 and effective as of July 1, 2010, this requirement no longer applies to designated liberal arts programs offered by the University and certain other institutions that have held accreditation by a regional accrediting agency since a date on or before October 1, 2007 (the University has held a regional accreditation since 1968). Subsequent to the site visit, the program review team submitted a written request to the University in which the program review team stated the view that, prior to July 1, 2010, traditional liberal arts programs were not considered as being eligible under Title IV but then requested additional information from the University that would help the Department of Education determine whether the programs offered within the University’s College of Liberal Arts were eligible under Title IV because they did provide training to prepare students for gainful employment in a recognized occupation. While the University was not informed as to which specific programs offered within the University’s College of Liberal Arts the program review team believes may be ineligible, in August 2010 the University provided the Department of Education with the requested information which the University believes will demonstrate that the programs offered within the University’s College of Liberal Arts met this requirement. The University has received no further communications from the Department of Education regarding the program review. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The University’s policies and procedures are planned and implemented to comply with the applicable standards and regulations under Title IV. If and to the extent the Department of Education’s final determination letter identifies any compliance issues, the University is committed to resolving such issues and ensuring that Grand Canyon University operates in compliance with all Department of Education requirements. Program reviews may remain unresolved for months or years with little or no communication from the Department of Education, and may involve multiple exchanges of information following the site visit. The University cannot presently predict whether or if further information requests will be made, when the exit interview will take place, when the preliminary program review report or final determination letter will be issued, or when the program review will be closed. If the Department of Education were to make significant findings of non-compliance in the final program review determination letter, including any finding related to the two issues discussed above, then, after exhausting any administrative appeals available to the University, the University could be required to pay a fine, return Title IV monies previously received, or be subjected to other administrative sanctions. While the University cannot currently predict the outcome of the Department of Education review, any adverse finding could damage the University’s reputation in the industry and have a material adverse effect on the University’s business, results of operations, cash flows and financial position. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>11. Treasury Stock</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">On August 16, 2010, the University announced that its Board of Directors had authorized the University to repurchase up to $25,000 of common stock, from time to time, depending on market conditions and other considerations. The expiration date on the repurchase authorizations is September 30, 2011 and repurchases occur at the University’s discretion. Repurchases may be made in the open market or in privately negotiated transactions, pursuant to the applicable Securities and Exchange Commission rules. The amount and timing of future share repurchases, if any, will be made as market and business conditions warrant. Since the approval of the share repurchase plan, the University has purchased 995,200 shares of common stock shares at an aggregate cost of $14,993 which includes 945,200 shares of common stock at an aggregate cost of $14,211 during the three months ended March 31, 2011, which are recorded at cost in the accompanying balance sheets and statement of stockholders’ equity. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>12. Subsequent Events</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">On April 8, 2011, the University entered into an amended and restated loan agreement with Bank of America, N.A. (the “Amended Agreement”). Under the Amended Agreement, the bank (a) extended the maturity date of the University’s existing loan from April 30, 2014 to March 31, 2016 and decreased the interest rate on the outstanding balance from the BBA Libor Rate plus 225 basis points to the BBA Libor Rate plus 200 basis points (all other terms of the existing loan remain the same), and (b) provided to the University a revolving line of credit in the amount of $50,000 through March 31, 2016 to be utilized for working capital, capital expenditures, share repurchases and other general corporate purposes. The Amended Agreement contains standard covenants that are substantially consistent with those included in the prior agreement, including covenants that, among other things, restrict the University’s ability to incur additional debt or make certain investments, require the University to maintain compliance with certain applicable regulatory standards, and require the University to maintain a certain financial condition. Indebtedness under the Amended Agreement is secured by all of the University’s assets. </div> </div>

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