##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-K
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the fiscal year ended: December 31, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For
the transition period from
[]
to
[]
 Commission file number: 001-34211
 GRAND CANYON EDUCATION, INC.
 (Exact name of registrant as specified in its charter)
 DELAWARE
    
    20-3356009(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 3300
W. CAMELBACK ROAD, PHOENIX, ARIZONA 85017  (Address of principal executive offices, including zip
code)
 Registrants telephone number, including area code:
(602) 639-7500
 Securities registered pursuant to Section 12(b) of the Act:
 (Title of Each Class)
    
    (Name of Each Exchange on Which Registered)Grand Canyon Education, Inc.
    
    The NASDAQ Global MarketCommon stock, $.01 par value
 Securities registered pursuant to Section 12(g) of the Act:
None  (Title of class)
 Yes
o No
þ
 Yes
o No
þ
 þ o
 o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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##### 



PagePART ISpecial Note Regarding Forward-Looking Statements
    
    
    3Item 1. Business
    
    
    5Item 1A. Risk Factors
    
    
    37Item 1B. Unresolved Staff Comments
    
    
    63Item 2. Properties
    
    
    63Item 3. Legal Proceedings
    
    
    63Item 4. Submission of Matters to a Vote of Security Holders
    
    
    64PART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
    
    
    65Item 6. Selected Consolidated Financial Data
    
    
    69Item 7. Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    72Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    89Item 8. Financial Statements and Supplementary Data
    
    
    96Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
    
    
    128Item 9A. Controls and Procedures
    
    
    128Item 9B. Other Information
    
    
    129PART IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    129Item 11. Executive Compensation
    
    
    129Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
    
    
    129Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    130Item 14. Principal Accounting Fees and Services
    
    
    130PART IVItem 15. Exhibits, Financial Statement Schedules
    
    
    130SIGNATURES
    
    
    133Exhibit Index
    
    
    134Exhibit 23.1Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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Special Note Regarding Forward-Looking Statements
 Business Risk Factors Managements Discussion and Analysis of Financial Condition and Results of Operations
  
    
    our failure to comply with the extensive regulatory framework applicable to our industry, including
Title IV of the Higher Education Act and the regulations thereunder, state laws and regulatory
requirements, and accrediting commission requirements;
    
    the results of the ongoing investigation by the Department of Educations Office of Inspector General
and the pending qui tamaction regarding the manner in which we have compensated our enrollment
personnel, and possible remedial actions or other liability resulting therefrom;
    
    the ability of our students to obtain federal Title IV funds, state financial aid, and private financing;
    
    risks associated with changes in applicable federal and state laws and regulations and accrediting
commission standards;
    
    our ability to hire and train new, and develop and train existing, enrollment counselors;
    
    the pace of growth of our enrollment;
    
    our ability to convert prospective students to enrolled students and to retain active students;
    
    our success in updating and expanding the content of existing programs and developing new programs in a
cost-effective manner or on a timely basis;
  3




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
    
    industry competition, including competition for qualified executives and other personnel;
    
    risks associated with the competitive environment for marketing our programs;
    
    failure on our part to keep up with advances in technology that could enhance the online experience for
our students;
    
    our ability to manage future growth effectively;
    
    general adverse economic conditions or other developments that affect job prospects in our core
disciplines; and
    
    other factors discussed under the headings Risk Factors, Managements Discussion and Analysis of
Financial Condition and Results of Operations, Business, and Regulation.
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Part I
 
 Item 1. Business
 Overview
    
    
    focus on our core disciplines of education, business, and healthcare;
    
    convenient and flexible online delivery platform targeted at working adults;
    
    innovative marketing, recruitment, and retention approach; and
    
    expanding portfolio of academically rigorous, career-oriented program
offerings.
   5




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History
    6




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Our Approach to Academic Quality
  
    
    Academically rigorous, career oriented curricula.We create academically
rigorous curricula that are designed to enable all students to gain the
foundational knowledge, professional competencies, and demonstrable skills
required to be successful in their chosen fields. Our curriculum is designed
and delivered by faculty that are committed to delivering a high quality,
rigorous education. We design our curricula to address specific
career-oriented objectives that we believe working adult students in the
disciplines we serve are seeking. Through this combination, we believe that we
produce graduates that can compete and become leaders in their chosen fields.
 
    
    Qualified faculty.We demonstrate our commitment to high quality education
by hiring and contracting qualified faculty with relevant practical experience.
Substantially all of our current faculty members hold at least a masters
degree in their respective field and approximately 30% of our faculty members
hold a doctoral degree. Many of our faculty members are able to integrate
relevant, practical experiences from their professional careers into the
courses they teach. We invest in the professional development of our faculty
members by providing training in traditional and online teaching techniques,
hosting events and discussion forums that foster sharing of best practices, and
continually assessing teaching effectiveness through peer reviews and student
evaluations.
 
    
    Standardized course design.We employ a standardized curriculum development
process to ensure a consistent learning experience with frequent
faculty-student interaction in our courses. We thereafter continuously review
our programs in an effort to ensure that they remain consistent, up-to-date,
and effective in producing the desired learning outcomes. We also regularly
review student surveys to identify opportunities for course modifications and
upgrades.
 
    
    Effective student services.We establish teams comprised of enrollment,
academic and finance personnel that act as the primary support contact point
for each of our students, beginning at the application stage and continuing
through graduation. In recent years, we have also concentrated on improving
the technology used to support student learning, including enhancing our online
learning platform and further improving student services through the
implementation of online interfaces. As a result, many of our support
services, including academic, administrative, library, and career services, are
accessible online, generally allowing users to access these services at a time
and in a manner that is generally convenient to them.
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
    
    Continual academic oversight.We have centralized the academic oversight
and assessment functions for all of our programs through our Office of
Assessment, which continuously evaluates the academic content, delivery method,
faculty performance, and desired learning outcomes for each of our programs.
We continuously assess outcomes data to determine whether our students graduate
with the knowledge, competencies, and skills that are necessary to succeed in
the workplace. The Office of Assessment also initiates and manages periodic
examinations of our curricula by internal and external reviewers to evaluate
and verify program quality and workplace applicability. Based on these
processes and student feedback, we determine whether to modify or discontinue
programs that do not meet our standards or market needs, or to create new
programs. The Office of Assessment also oversees regular reviews of our
programs conducted by accrediting commissions.
  
    
    Flexibility in program delivery.We also seek to meet market demands by
providing students with the flexibility to take courses exclusively online or
to combine online coursework with various campus and onsite options. For
example, based on market demand, particularly in connection with our nursing
programs, we have established satellite locations at multiple hospitals that
allow nursing students to take clinical courses onsite while completing other
course work online. We have established similar onsite arrangements with other
major employers, including schools and school districts through which students
can pursue student teaching opportunities. This flexibility raises our profile
among employers, encourages students to take and complete courses and
eliminates inconveniences that tend to lessen student persistence.
 
    
    Small class size.At December 31, 2008, over 85% of our ground and online
classes had 25 or fewer students. These class sizes provide each student with
the opportunity to interact directly with course faculty and to receive
individualized feedback and attention while also affording our faculty with the
opportunity to engage proactively with a manageable number of students. We
believe this interaction enhances the academic quality of our programs by
promoting opportunities for students to participate actively and thus build the
requisite knowledge, competencies, and skills.
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Accreditation and Program Approvals
  Specialized Accreditations and ProgramCollege
    
    Approvals
    
    Current PeriodCollege of Education
    
         The Arizona State
Board of Education
approves our College of
Education to offer
Institutional
Recommendations for the
certification of
elementary, secondary,
and special education
teachers and school
administrators.
    
    2008  2010Ken Blanchard College of
Business
    
         The Association of
Collegiate Business
Schools and Programs
accredits our Master of
Business Administration
degree program and our
Bachelor of Science
degree programs in
Accounting, Business
Administration, and
Marketing.
    
    2007  2017College of Nursing and
Health Sciences
    
         The Commission on
Collegiate Nursing
Education accredits our
Bachelor of Science
(B.S.) in Nursing and
Master of Science (M.S.)
 Nursing degree
programs.
    
    2006  2016 (B.S.)
2006  2011 (M.S.)     The Arizona State
Board of Nursing
approves our Bachelor of
Science (B.S.) in
Nursing and Master of
Science (M.S.)  Nursing
degree programs.
    
    2006  2016 (B.S.)
2006  2011 (M.S.)     The Commission on
Accreditation of
Athletic Training
Education accredits our
Athletic Training
Program.
    
    2008  2013
  Curricula
   9




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
    
    the College of Education, which has a nearly 60-year history as one of
Arizonas leading teachers colleges and consistently graduates teachers who
meet or exceed state averages on the Arizona Educator Proficiency Assessment
exams;
 
    
    the Ken Blanchard College of Business, which has a well-known brand among
our target student population, an advisory board that includes nationally
recognized business leaders, and a reputation for offering career-oriented
degree programs, including an Executive MBA and programs in leadership,
innovation, and entrepreneurship;
 
    
    the College of Nursing and Health Sciences, which has a strong reputation
within the Arizona healthcare community and is the second largest nursing
program in Arizona; and
 
    
    the College of Liberal Arts, which develops and provides many of the general
education course requirements in our other colleges and also serves as one of
the vehicles through which we offer programs in additional targeted
disciplines.
   College of Education
    
    Ken Blanchard College of BusinessDegree Program
    
    Emphasis
    
    Degree Program
    
    EmphasisMaster of Arts in Teaching
    
    
    
    Ken Blanchard Executive MBAMaster of Education
    

    Education Administration  Institutional Recommendation (IR)
    
    Master of Business Administration
    

    Accounting    General Management    Education Administration 
Organizational Leadership
    
    
    
        Finance    Education Administration 
School Leadership
    
    
    
        Health Systems Management    Elementary Education  IR
    
    
    
        Leadership    Elementary Education  Non-IR
    
    
    
        Management of Information Systems    Curriculum and Instruction: Reading
    
    Master of Science
    
        Marketing    Curriculum and Instruction: Technology
    
    
    
        Six Sigma    Secondary Education  IR
    
    
    
        Leadership    Secondary Education  Non-IR
    Special Education for Certified Special Educators
    
    
    

    Leadership  Disaster Preparedness Crisis Management    Teaching English to Speakers of Other Languages
    
    Bachelor of Science
    
        Executive Fire Leadership    Special Education  IR
    
    
    
        Accounting    Special Education  Non-IR
    
    
    
        Business Administration    Applied Management    Finance and Economics    Entrepreneurial Studies    Public Safety Administration    Emergency ManagementBachelor of Science
    
        Elementary/Special Education    Elementary Education  Early Childhood Education    Elementary Education  English    Elementary Education  Math    Elementary Education  Science    Secondary Education  Biology*    Secondary Education  Business Education    Secondary Education  Chemistry*    Secondary Education  Mathematics    Secondary Education  Social Studies    Secondary Education  Physical Education    Secondary Education  EnglishDoctor of Education    Organizational Leadership
  10




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College of Nursing and Health Sciences
    
    College of Liberal ArtsDegree Program
    
    Emphasis
    
    Degree Program
    
    EmphasisMaster of Science  Nursing
    
        Family Nurse Practitioner*    Nursing Leadership in Healthcare Systems
    
    Bachelor of Science
    
        Justice Studies    Clinical Nurse Specialist*
    
    
    
        Psychology    Clinical Nurse Specialist (Education Focus)*
    
    
    
        Sociology    Nursing Education
    
    Bachelor of Arts
    
        Communications    English Literature    Interdisciplinary StudiesMaster of Science
    
        Professional Counseling
    
    
    
        Christian Studies    Addiction Counseling
    
    
    
        HistoryBachelor of Science in Nursing*Bachelor of Science
    

    Biology  Pre-Medicine*    Biology  Pre-Pharmacy*    Biology  Pre-Physician Assistant*    Biology  Pre-Physical Therapy*    Biology  Biomedical Science*    Health Science: Professional Development and Advanced Patient Care    Respiratory Care    Medical Imaging Sciences    Athletic Training*    Corporate Fitness and Wellness  Athletic Coaching*    Corporate Fitness and Wellness  Health Education*    Addiction Counseling    Physical Education  Health Education*    Physical Education  Athletic Coaching*Undergraduate Minors    Athletic Coaching*
    
        Christian Studies    Behavioral Sciences*
    
        Communication    Business
    
        English Literature    Justice Studies    History    Physical Education*    Health Education*
    
        Psychology    Sociology
 
 *
    
    Indicates program was offered on ground only    11




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New Program Development
  Assessment
  Faculty
    12




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Student Support Services
  Academic services.
 Administrative services.
 Library services.
 Career services.
 Technology support services.
 Marketing, Recruitment, and Retention
 Marketing.
  13




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
    
    Internet and affiliate advertising, which generates the majority of our
leads and which includes purchasing leads from aggregators and also engaging in
targeted, direct email advertising campaigns, and coordinated campaigns with
various affiliates;
 
    
    search engine optimization techniques, through which we seek to obtain high
placement in search engine results in response to key topic and word searches
and drive traffic to our website;
 
    
    seminar and event marketing, in which our marketing and enrollment personnel
host group events at various venues, including community colleges,
corporations, and hospitals;
 
    
    referrals from existing students, alumni, and employees;
 
    
    a national accounts program that seeks to develop relationships with
employers in our core disciplines, including healthcare providers, school
districts, emergency services providers, and large corporations, that may be
interested in providing dedicated and customized online and onsite educational
opportunities to their employees, and to encourage senior executives to
participate in executive training programs; and
 
    
    print and direct mail advertising campaigns, and other public relations and
communications efforts, including promoting our athletic programs and student
and alumni events.
 Recruitment.
  14




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Retention.
 Admissions
  Enrollment
   15




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December 31, 2008
    
    
    December 31, 2007# of Students
    
    
    % of Total
    
    
    # of Students
    
    
    % of TotalMasters (1)
    
    
    13,031
    
    
    
    52.9
    %
    
    
    9,156
    
    
    
    62.1
    %Bachelors
    
    
    11,605
    
    
    
    47.1
    %
    
    
    5,598
    
    
    
    37.9
    %Total
    
    
    24,636
    
    
    
    100.0
    %
    
    
    14,754
    
    
    
    100.0
    %
 December 31, 2008
    
    
    December 31, 2007# of Students
    
    
    % of Total
    
    
    # of Students
    
    
    % of TotalOnline
    
    
    21,955
    
    
    
    89.1
    %
    
    
    12,497
    
    
    
    84.7
    %Ground (2)
    
    
    2,681
    
    
    
    10.9
    %
    
    
    2,257
    
    
    
    15.3
    %Total
    
    
    24,636
    
    
    
    100.0
    %
    
    
    14,754
    
    
    
    100.0
    %
 (1)
    
    Includes 56 students pursuing doctoral degrees at December 31, 2008.(2)
    
    Includes our traditional ground students, as well as our professional studies
students. Tuition and Fees
     16




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Sources of Student Financing
  Title IV programs.
  
    
    FFEL.Under the FFEL Program, banks and other lending institutions make
loans to students. The FFEL Program includes the Federal Stafford Loan
Program, the Federal PLUS Program (which provides loans to graduate and
professional studies students as well as parents of dependent undergraduate
students), and the Federal Consolidation Loan Program. If a student defaults
on an FFEL loan, payment to the lender is guaranteed by a federally recognized
guaranty agency, which is then reimbursed by the Department of Education.
Students who demonstrate financial need may qualify for a subsidized Stafford
loan. With a subsidized Stafford loan, the federal government pays the
interest on the loan while the student is in school and during grace periods
and any approved periods of deferment, until the students obligation to repay
the loan begins. Unsubsidized Stafford loans are not based on financial need,
and are available to students who do not qualify for a subsidized Stafford loan
or, in some cases, in addition to a subsidized Stafford loan. Loan funds are
disbursed to us, and we in turn disburse the amounts in excess of tuition and
fees to students.Effective July 1, 2008, under the Federal Stafford Loan Program, a dependent
undergraduate student can borrow up to $5,500 for the first academic year, $6,500
for the second academic year, and $7,500 for each of the third and fourth academic
years. Students classified as independent, and dependent students whose parents
were denied a parent loan for undergraduate students, can obtain up to an additional
$4,000 for each of the first and second academic years and an additional $5,000 for
each of the third and fourth academic years. Students enrolled in graduate programs
can borrow up to $20,500 per academic year. Students enrolled in certain
graduate-level health programs can receive an additional $12,500 per academic year.
    
    Pell.Under the Pell Program, the Department of Education makes grants to
undergraduate students who demonstrate financial need. Effective July 1, 2008,
the maximum annual grant a student can receive under the Pell Program is
$4,731, and effective July 1, 2009, the maximum annual amount will
increase to $5,350. Under the August 2008 reauthorization of the Higher Education Act,
students are able for the first time to receive Pell Grant funds for attendance
on a
year-round basis, which means that the amount a student can receive in a
given year is more than the traditionally defined maximum annual amount.
  17




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Other financial aid programs.
 Private loans.
 Other sources.
 Technology Systems and Management
  Online course delivery and management.
 Internal administration.
  18




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Infrastructure.
 Ground Campus
    Employees
  Competition
    19




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
    
    availability of career-oriented and accredited program offerings;
 
    
    the types of degrees offered and marketability of those degrees;
 
    
    reputation, regulatory approvals, and compliance history of the school;
 
    
    convenient, flexible and dependable access to programs and classes;
 
    
    qualified and experienced faculty;
 
    
    level of student support services;
 
    
    cost of the program;
 
    
    marketing and selling effectiveness; and
 
    
    the time necessary to earn a degree.
 Available Information
 www.gcu.edu
  20




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REGULATION
     State Education Licensure and Regulation
   21




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State Professional Licensure
  
    
    whether the institution and the program were approved by the state in which
the graduate seeks licensure, or by a professional association;
 
    
    whether the program from which the student graduated meets all requirements
for professional licensure in that state;
 
    
    whether the institution and the program are accredited and, if so, by what
accrediting commissions; and
 
    
    whether the institutions degrees are recognized by other states in which a
student may seek to work.
  22




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Accreditation
     23




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
    
    The Association of Collegiate Business Schools and Programs accredits our
Master of Business Administration degree program and our Bachelor of Science
degree programs in Accounting, Business Administration, and Marketing;
 
    
    The Commission on Collegiate Nursing Education accredits our Bachelor of
Science in Nursing and Master of Science  Nursing degree programs; and
 
    
    The Commission on Accreditation of Athletic Training Education accredits our
Athletic Training Program.
  Regulation of Federal Student Financial Aid Programs
    24




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Congressional action.
  Eligibility and certification procedures.
   25




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qui tam
 Administrative capability.
 
    
    comply with all applicable Title IV program requirements;
 
    
    have an adequate number of qualified personnel to administer the Title IV
programs;
 
    
    have acceptable standards for measuring the satisfactory academic progress
of its students;
 
    
    not have student loan cohort default rates above specified levels;
 
    
    have various procedures in place for awarding, disbursing and safeguarding
Title IV funds and for maintaining required records;
 
    
    administer the Title IV programs with adequate checks and balances in its
system of internal controls;
  26




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
    
    not be, and not have any principal or affiliate who is, debarred or
suspended from federal contracting or engaging in activity that is cause for
debarment or suspension;
 
    
    provide financial aid counseling to its students;
 
    
    refer to the Department of Educations Office of Inspector General any
credible information indicating that any student, parent, employee, third-party
servicer or other agent of the institution has engaged in any fraud or other
illegal conduct involving the Title IV programs;
 
    
    submit all required reports and financial statements in a timely manner; and
 
    
    not otherwise appear to lack administrative capability.
  
    
    require the institution to repay Title IV funds its students previously
received;
 
    
    transfer the institution from the advance method of payment of Title IV
funds to heightened cash monitoring status or the reimbursement system of
payment;
 
    
    place the institution on provisional certification status; or
 
    
    commence a proceeding to impose a fine or to limit, suspend or terminate the
institutions participation in the Title IV programs.
  Financial responsibility.
 
    
    equity ratio, which measures the institutions capital resources, financial
viability and ability to borrow;
 
    
    primary reserve ratio, which measures the institutions ability to support
current operations from expendable resources; and
 
    
    net income ratio, which measures the institutions ability to operate at a
profit or within its means.
   27




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Return of Title IV funds for students who withdraw.
  28




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The 90/10 Rule.
 Student loan defaults.
   29




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Incentive compensation rule.
 qui tam qui tam qui tam qui tam qui tam Legal Proceedings
  30




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Legal Proceedings
 qui tam qui tam
 Compliance reviews.
 Privacy of student records.
  31




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Potential effect of regulatory violations.
   Uncertainties, increased oversight, and changes in student loan environment.
  32




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
    
    authorizes the Department of Education to purchase Title IV loans from
lenders, thereby providing capital to the lenders to enable them to continue
making Title IV loans to students; and
 
    
    permits the Department of Education to designate institutions eligible to
participate in a lender of last resort program, under which federally
recognized student loan guaranty agencies will be required to make Title IV
loans to all otherwise eligible students at those institutions.
   33




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Regulatory Standards that May Restrict Institutional Expansion or Other Changes
  Adding teaching locations, implementing new educational programs, and increasing enrollment.
  Acquiring other schools
 Provisional certification
  34




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qui tam
 Change in ownership resulting in a change in control.
   35




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36




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Additional state regulation.
 
 Item 1A. Risk Factors
 You should carefully consider the risks and uncertainties described below and all other
information contained in this Annual Report on Form 10-K . In order to help assess the major risks
in our business, we have identified many, but not all, of these risks. Due to the scope of our
operations, a wide range of factors could materially affect future developments and performance.
 Managements Discussion and Analysis of Financial Condition and Results of Operations Financial Statements and Supplementary Data, .
  37




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Risks Related to the Regulation of Our Industry
 Our failure to comply with the extensive regulatory requirements governing our school could result
in financial penalties, restrictions on our operations or growth, or loss of external financial aid
funding for our students.
   If the Department of Education does not recertify us to continue participating in the Title IV
programs, our students would lose their access to Title IV program funds, or we could be
recertified but required to accept significant limitations as a condition of our continued
participation in the Title IV programs.
   38




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Business 
Regulation  Regulation of Federal Student Financial Aid Programs  Eligibility and certification
procedures qui tam
 The Office of Inspector General of the Department of Education has commenced an investigation of
Grand Canyon University, which is ongoing and which may result in fines, penalties, other
sanctions, and damage to our reputation in the industry.
 Business  Regulation  Regulation of Federal Student Financial Aid Programs 
Incentive compensation rule
  Business 
Regulation  Regulation of Federal Student
Financial Aid Programs  Potential effect of regulatory violations
  39




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A qui tam lawsuit has been filed against us alleging, among other things, that we have improperly
compensated certain of our enrollment counselors, and we may incur liability, be subject to
sanctions, or experience damage to our reputation as a result of this lawsuit.
 qui tam qui tam Business Regulation  Regulation of Federal Student Financial Aid Programs 
Incentive compensation rule qui tam
 qui tam qui tam qui tam
 qui tam qui tam
  40




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Congress may change the eligibility standards or reduce funding for the Title IV programs, which
could reduce our student population, revenue, and profit margin.
 Business Regulation 
Regulation of Federal Student Financial Aid Programs
 If we do not meet specific financial responsibility standards established by the Department of
Education, we may be required to post a letter of credit or accept other limitations in order to
continue participating in the Title IV programs, or we could lose our eligibility to participate in
the Title IV programs.
   41




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If we do not comply with the Department of Educations administrative capability standards, we
could suffer financial penalties, be required to accept other limitations in order to continue
participating in the Title IV programs, or lose our eligibility to participate in the Title IV
programs.
  We would lose our ability to participate in the Title IV programs if we fail to maintain our
institutional accreditation, and our student enrollments could decline if we fail to maintain any
of our accreditations or approvals.
 Business  Regulation  Accreditation
 If we do not maintain our state authorization in Arizona, we may not operate or participate in the
Title IV programs.
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If a substantial number of our students cannot secure Title IV loans as a result of decreased
lender participation in the Title IV programs or if lenders increase the costs or reduce the
benefits associated with the Title IV loans they provide, we could be materially adversely
affected.
  
    
    authorizes the Department of Education to purchase Title IV loans from
lenders, thereby providing capital to the lenders to enable them to continue
making Title IV loans to students; and
 
    
    permits the Department of Education to designate institutions eligible to
participate in a lender of last resort program, under which federally
recognized student loan guaranty agencies will be required to make Title IV
loans to all otherwise eligible students at those institutions.
  An increase in interest rates could adversely affect our ability to attract and retain students.
 Risk Factors  We may lose our eligibility to participate in the Title
IV programs if our student loan default rates are too high,
  43




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Our failure to comply with the regulatory requirements of states other than Arizona could result in
actions taken by those states that could have a material adverse effect on our enrollments.
    The inability of our graduates to obtain a professional license or certification in their chosen
field of study could reduce our enrollments and revenues, and potentially lead to student claims
against us that could be costly to us.
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Increased scrutiny by various governmental agencies regarding relationships between student loan
providers and educational institutions and their employees have produced significant uncertainty
concerning restrictions applicable to the administration of the Title IV loan programs and the
funding for those programs which, if not satisfactorily or timely resolved, could result in
increased regulatory burdens and costs for us and could adversely affect our student enrollments.
   Government agencies, regulatory agencies, and third parties may conduct compliance reviews, bring
claims, or initiate litigation against us based on alleged violations of the extensive regulatory
requirements applicable to us, which could require us to pay monetary damages, be sanctioned or
limited in our operations, and expend significant resources to defend against those claims.
 qui tam
  45




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Business  Regulation  Regulation of Federal Student Financial Aid Programs  Incentive
compensation rule; Risk Factors  The Office of Inspector General of the Department of
Education has commenced an investigation of Grand Canyon University, which is ongoing and which may
result in fines, penalties, other sanctions, and damage to our reputation in the industry; Risk Factors  We were recently notified that a qui tam lawsuit has been filed against us alleging,
among other things, that we have improperly compensated certain of our enrollment counselors, and
we may incur liability, be subject to sanctions, or experience damage to our reputation as a result
of this lawsuit; Legal Proceedings
 A decline in the overall growth of enrollment in postsecondary institutions, or in the number of
students seeking degrees in our core disciplines, could cause us to experience lower enrollment at
our schools, which could negatively impact our future growth.
  If our students were unable to obtain private loans from third-party lenders, our business could be
adversely affected given our increasing reliance on such lenders as a source of net revenue.
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If any of the education regulatory agencies that regulate us do not approve or delay their approval
of any transaction involving us that constitutes a change in control, our ability to operate or
participate in the Title IV programs may be impaired.
      47




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We are subject to sanctions if we pay impermissible commissions, bonuses, or other incentive
payments to persons involved in certain recruiting, admissions, or financial aid activities.
  Risk Factors  The Office of Inspector General of the Department of
Education has commenced an investigation of Grand Canyon University, which is ongoing and which may
result in fines, penalties, other sanctions, and damage to our reputation in the industry Business  Regulation  Regulation of Federal Student Financial Aid Programs  Incentive
compensation rule qui tam Risk Factors A
qui tam lawsuit has been filed against us alleging, among other things, that we have improperly
compensated certain of our enrollment counselors, and we may incur liability, be subject to
sanctions, or experience damage to our reputation as a result of this lawsuit qui tam
 Our reputation and our stock price may be negatively affected by the actions of other postsecondary
educational institutions.
   48




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If the percentage of our revenue that is derived from the Title IV programs is too high, we may
lose our eligibility to participate in those programs.
  We may lose our eligibility to participate in the Title IV programs if our student loan default
rates are too high.
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We are subject to sanctions if we fail to correctly calculate and timely return Title IV program
funds for students who withdraw before completing their educational program.
  We cannot offer new programs, expand our operations into certain states, or acquire additional
schools if such actions are not timely approved by the applicable regulatory agencies, and we may
have to repay Title IV funds disbursed to students enrolled in any such programs, schools, or
states if we do not obtain prior approval.
  Risks Related to Our Business
 Our success depends, in part, on the effectiveness of our marketing and advertising programs in
recruiting new students.
  
    
    the reduced availability of, or higher interest rates and other costs
associated with, Title IV loan funds or other sources of financial aid;
 
    
    the emergence of more successful competitors;
 
    
    factors related to our marketing, including the costs and effectiveness of
Internet advertising and broad-based branding campaigns and recruiting efforts;
 
    
    performance problems with our online systems;
 
    
    failure to maintain institutional and specialized accreditations;
 
    
    the requirements of the education agencies that regulate us which restrict
schools initiation of new programs and modification of existing programs;
 
    
    the requirements of the education agencies that regulate us which restrict
the ways schools can compensate their recruitment personnel;
 
    
    increased regulation of online education, including in states in which we do
not have a physical presence;
  50




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
    
    restrictions that may be imposed on graduates of online programs that seek
certification or licensure in certain states;
 
    
    student dissatisfaction with our services and programs;
 
    
    adverse publicity regarding us, our competitors, or online or for-profit
education generally;
 
    
    price reductions by competitors that we are unwilling or unable to match;
 
    
    a decline in the acceptance of online education;
 
    
    an adverse economic or other development that affects job prospects in our
core disciplines; and
 
    
    a decrease in the perceived or actual economic benefits that students derive
from our programs.
  If we are unable to hire and train new and existing employees responsible for student recruitment,
the effectiveness of our student recruiting efforts would be adversely affected.
  We operate in a highly competitive industry, and competitors with greater resources could harm our
business.
 Business  Competition
  51




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Capacity constraints, system disruptions, or security breaches in our online computer networks
could have a material adverse effect on our ability to attract and retain students.
  We may not be able to successfully implement our growth strategy if we are not able to improve the
content of our existing academic programs or to develop new programs on a timely basis and in a
cost-effective manner, or at all.
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Our failure to keep pace with changing market needs and technology could harm our ability to
attract students.
  If we do not maintain existing, and develop additional, relationships with employers, our future
growth may be impaired.
  Our failure to effectively manage our growth could harm our business.
  Our success depends upon our ability to recruit and retain key personnel.
   53




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The protection of our operations through exclusive proprietary rights and intellectual property is
limited, and from time to time we encounter disputes relating to our use of intellectual property
of third parties, any of which could harm our operations and prospects.
     54




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We are subject to laws and regulations as a result of our collection and use of personal
information, and any violations of such laws or regulations, or any breach, theft, or loss of such
information, could adversely affect our reputation and operations.
    We operate in a highly competitive market with rapid technological change, and we may not have the
resources needed to compete successfully.
  At present we derive a significant portion of our revenues and operating income from our graduate
programs.
   55




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We may incur liability for the unauthorized duplication or distribution of class materials posted
online for class discussions.
  We use third-party software for our online classroom, and if the provider of that software were to
cease to do business or was acquired by a competitor, we may have difficulty maintaining the
software required for our online classroom or updating it for future technological changes, which
could adversely affect our performance.
  Seasonal and other fluctuations in our results of operations could adversely affect the trading
price of our common stock.
  We only recently began operating as a for-profit company and have a limited operating history as a
for-profit company. Accordingly, our historical and recent financial and business results may not
necessarily be representative of what they will be in the future.
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Our current success and future growth depend on the continued acceptance of the Internet and the
corresponding growth in users seeking educational services on the Internet.
  
    
    inadequate Internet infrastructure;
 
    
    security and privacy concerns;
 
    
    the unavailability of cost-effective Internet service and other
technological factors; and
 
    
    changes in government regulation of Internet use.
  Government regulations relating to the Internet could increase our cost of doing business, affect
our ability to grow or otherwise have a material adverse effect on our business.
  A reclassification of our online faculty by federal or state authorities from independent
contractor to employee status could materially increase our costs.
   57




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We may incur significant costs complying with the Americans with Disabilities Act and similar laws.
  Our failure to comply with environmental laws and regulations governing our activities could result
in financial penalties and other costs.
  If we expand in the future into new markets outside the United States, we would be subject to risks
inherent in non-domestic operations.
  Our failure to obtain additional capital in the future could adversely affect our ability to grow.
   58




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If we are not able to integrate acquired schools, our business could be harmed.
  
    
    inability to maintain uniform standards, controls, policies, and procedures;
 
    
    distraction of managements attention from normal business operations during
the integration process;
 
    
    inability to obtain, or delay in obtaining, approval of the acquisition from
the necessary regulatory agencies, or the imposition of operating restrictions
or a letter of credit requirement on us or on the acquired school by any of
those regulatory agencies;
 
    
    expenses associated with the integration efforts; and
 
    
    unidentified issues not discovered in our due diligence process, including
legal contingencies.
  Risks Related to Owning our Common Stock
 Our executive officers, directors, and principal existing stockholders own a large percentage of
our voting stock, which may allow them to collectively control substantially all matters requiring
stockholder approval and, in the case of certain of our principal stockholders, will have other
unique rights that may afford them access to our management.
  We are incurring increased costs as a result of being a public company, and the requirements of
being a public company may divert management attention from our business.
   59




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Your percentage ownership in us may be diluted by future issuances of capital stock, which could
reduce your influence over matters on which stockholders vote.
  A substantial potion of our outstanding common stock will soon be released from restrictions on
resale and may be sold in the public market in the near future. Future sales of shares by existing
stockholders may cause the market price of shares of our common stock to decline.
  Provisions in our charter documents and the Delaware General Corporation Law could make it more
difficult for a third party to acquire us and could discourage a takeover and adversely affect
existing stockholders.
   60




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We currently do not intend to pay dividends on our common stock and, consequently, your only
opportunity to achieve a return on your investment is if the price of our common stock appreciates.
  The price of our common stock may be volatile, and as a result returns on an investment in our
common stock may be volatile.
   
    
    our quarterly or annual earnings or earnings of other companies in our
industry;
 
    
    the publics reaction to our press releases, our other public announcements,
and our filings with the SEC;
 
    
    changes in earnings estimates or recommendations by research analysts who
track our common stock or the stocks of other companies in our industry;
 
    
    changes in our number of enrolled students;
 
    
    new laws or regulations or new interpretations of laws or regulations
applicable to our business;
 
    
    seasonal variations in our student population;
 
    
    the availability and cost of Title IV funds, other student financial aid,
and private loans;
 
    
    the failure to maintain or keep in good standing our regulatory approvals
and accreditations;
 
    
    changes in accounting standards, policies, guidance, interpretations, or
principles;
 
    
    changes in general conditions in the U.S. and global economies or financial
markets, including those resulting from war, incidents of terrorism, or
responses to such events;
  61




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
    
    an adverse economic or other development that affects job prospects in our
core disciplines;
 
    
    litigation involving our company, or investigations or audits by regulators
into the operations of our company or our competitors, including the
investigation of Grand Canyon University currently being conducted by the
Office of Inspector General of the Department of Education, and the pending qui
tam action regarding the manner in which we have compensated our enrollment
personnel; and
 
    
    sales of common stock by our directors, executive officers, and significant
stockholders.
   Seasonal and other fluctuations in our results of operations could adversely affect the trading
price of our common stock.
  If we fail to maintain proper and effective disclosure controls and procedures and internal
controls over financial reporting, our ability to produce accurate financial statements could be
impaired, which could adversely affect our stock price, our ability to operate our business and
investors views of us.
   62




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If securities analysts do not publish research or reports about our business or if they downgrade
their evaluations of our stock, the price of our stock could decline.
  
 Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
  
 Item 3. Legal Proceedings
   63




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qui tam qui tam qui tam
 qui tam
  
 Item 4. Submission of Matters to a Vote of Security Holders
   64




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PART II
 
 Item 5.
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
 Market Information
   High
    
    
    Low2008Fourth Quarter
    
    $
    19.12
    
    
    $
    9.49
 Holders
  Dividends
    65




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Recent Sales of Unregistered Securities
  Preferred Stock
    Common Stock
  Use of Proceeds from our Initial Public Offering
   66




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Securities Authorized for Issuance under Equity Compensation Plans
 Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
 Purchases of Equity Securities
  Company Stock Performance
   67




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COMPARISON OF CUMULATIVE TOTAL RETURN*
 
 
 *
    
    $100 invested on 11/20/08 in stock & 10/31/08 in
index-including reinvestment of dividends. Fiscal year ending December 31.  11/20/08
    
    
    11/08
    
    
    12/08Grand Canyon Education, Inc.
    
    
    100.00
    
    
    
    125.23
    
    
    
    158.48S&P 500
    
    
    100.00
    
    
    
    92.83
    
    
    
    93.81NASDAQ Composite
    
    
    100.00
    
    
    
    89.53
    
    
    
    92.23Peer Group
    
    
    100.00
    
    
    
    115.66
    
    
    
    112.62
     68




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Item 6. Selected Financial and Other Data
 Financial Statements and Supplementary Data Managements Discussion and Analysis of
Financial Condition and Results of Operations
 February 2, 2004to December 31,
    
    
    Year Ended December 31,2004(1)
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008(Unaudited)Statement of Operations Data:Net revenue
    
    $
    25,629
    
    
    $
    51,793
    
    
    $
    72,111
    
    
    $
    99,326
    
    
    $
    161,309Costs and expenses:Instructional costs and services
    
    
    19,705
    
    
    
    28,063
    
    
    
    31,287
    
    
    
    39,050
    
    
    
    54,450Selling and promotional
    
    
    9,735
    
    
    
    14,047
    
    
    
    20,093
    
    
    
    35,148
    
    
    
    65,551General and administrative
    
    
    10,828
    
    
    
    12,968
    
    
    
    15,011
    
    
    
    17,001
    
    
    
    26,825Royalty to former owner
    
    
    448
    
    
    
    1,619
    
    
    
    2,678
    
    
    
    3,782
    
    
    
    1,686Total costs and expenses
    
    
    40,716
    
    
    
    56,697
    
    
    
    69,069
    
    
    
    94,981
    
    
    
    148,512Operating income (loss)
    
    
    (15,087
    )
    
    
    (4,904
    )
    
    
    3,042
    
    
    
    4,345
    
    
    
    12,797Interest expense
    
    
    (1,135
    )
    
    
    (3,098
    )
    
    
    (2,827
    )
    
    
    (2,975
    )
    
    
    (2,897
    )Interest income
    
    
    10
    
    
    
    276
    
    
    
    912
    
    
    
    1,172
    
    
    
    640Income (loss) before income taxes
    
    
    (16,212
    )
    
    
    (7,726
    )
    
    
    1,127
    
    
    
    2,542
    
    
    
    10,540Income tax expense (benefit)(2)
    
    
    
    
    
    
    (3,440
    )
    
    
    529
    
    
    
    1,016
    
    
    
    3,855Net income (loss)
    
    
    (16,212
    )
    
    
    (4,286
    )
    
    
    598
    
    
    
    1,526
    
    
    
    6,685Preferred dividends
    
    
    
    
    
    
    
    
    
    
    (527
    )
    
    
    (349
    )
    
    
    (938
    )Net income available (loss attributable)
to common stockholders
    
    $
    (16,212
    )
    
    $
    (4,286
    )
    
    $
    71
    
    
    $
    1,177
    
    
    $
    5,747Earnings (loss) per common shareBasic
    
    
    N/A
    
    
    $
    (0.23
    )
    
    $
    0.00
    
    
    $
    0.06
    
    
    $
    0.26Diluted
    
    
    N/A
    
    
    $
    (0.23
    )
    
    $
    0.00
    
    
    $
    0.03
    
    
    $
    0.17Shares used in computing earnings (loss)
per common shareBasic
    
    
    N/A
    
    
    
    18,470
    
    
    
    18,853
    
    
    
    18,923
    
    
    
    22,185Diluted
    
    
    N/A
    
    
    
    18,470
    
    
    
    36,858
    
    
    
    35,143
    
    
    
    33,430
  69




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February 2, 2004to December 31,
    
    
    Year Ended December 31,2004(1)
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008(Unaudited)Other Data:Capital expenditures
    
    $
    24,376
    
    
    $
    817
    
    
    $
    2,387
    
    
    $
    7,406
    
    
    $
    8,374Depreciation and amortization
    
    $
    1,136
    
    
    $
    1,879
    
    
    $
    2,396
    
    
    $
    3,300
    
    
    $
    5,095Adjusted EBITDA(3)
    
    $
    (13,503
    )
    
    $
    (895
    )
    
    $
    9,074
    
    
    $
    11,723
    
    
    $
    25,675Period end enrollment:Online
    
    
    3,141
    
    
    
    6,212
    
    
    
    8,406
    
    
    
    12,497
    
    
    
    21,955Ground
    
    
    1,852
    
    
    
    2,210
    
    
    
    2,256
    
    
    
    2,257
    
    
    
    2,681
 As of December 31,2004
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008(Unaudited)
    
    
    (Unaudited)Balance Sheet Data:Cash and cash equivalents
    
    $
    3,476
    
    
    $
    544
    
    
    $
    11,535
    
    
    $
    18,930
    
    
    $
    35,152Cash, cash equivalents and investments  restricted
    
    
    
    
    
    
    2,035
    
    
    
    5,900
    
    
    
    7,578
    
    
    
    5,600Total assets
    
    
    30,892
    
    
    
    51,859
    
    
    
    61,232
    
    
    
    88,568
    
    
    
    116,990Capital lease obligations (including short-term)
    
    
    24,360
    
    
    
    24,789
    
    
    
    29,728
    
    
    
    29,228
    
    
    
    30,509Other indebtedness (including short-term indebtedness)
    
    
    4,511
    
    
    
    2,635
    
    
    
    2,462
    
    
    
    2,408
    
    
    
    1,744Preferred stock
    
    
    
    
    
    
    25,590
    
    
    
    21,390
    
    
    
    31,948
    
    
    
    Total stockholders/members (deficit) equity(2)
    
    
    (7,645
    )
    
    
    (12,111
    )
    
    
    (11,723
    )
    
    
    (10,386
    )
    
    
    53,590
 
 (1)
    
    On February 2, 2004, we acquired the assets of Grand Canyon University from a non-profit
foundation and converted its operations from non-profit to for-profit status. While the
university has continuously operated since 1949, for accounting and financial statement
reporting purposes, we treat the date of acquisition and conversion to for-profit status as
the date of inception of our business.(2)
    
    On August 24, 2005, we converted from a limited liability company to a taxable corporation.
For all periods subsequent to such date, we have been subject to corporate-level U.S. federal
and state income taxes.(3)
    
    Adjusted EBITDA is defined as net income (loss) plus interest expense net of interest income,
plus income tax expense (benefit), and plus depreciation and amortization (EBITDA), as
adjusted for (i) royalty payments incurred pursuant to an agreement with our former owner that
has been terminated as of April 15, 2008, as discussed in Item 7, Managements Discussion and
Analysis of Financial Condition and Results of Operations Factors affecting comparability
Settlement with former owner, and Note 2 to our financial statements that are included in Item
8, Financial Statements and Supplementary Data; (ii) management fees and expenses that are no
longer paid; (iii) contributions made to Arizona school tuition organizations in lieu of
payments of state income taxes; and (iv) share-based compensation.  70




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
    
    in developing our internal budgets and strategic plan;
 
    
    as a measurement of operating performance;
 
    
    as a factor in evaluating the performance of our management for compensation
purposes; and
 
    
    in presentations to the members of our board of directors to enable our
board to have the same measurement basis of operating performance as are used
by management to compare our current operating results with corresponding prior
periods and with the results of other companies in our industry.
 Managements Discussion and Analysis of Financial
Condition and Results of Operations Non-GAAP Discussion
  Year Ended December 31,2006
    
    
    2007
    
    
    2008Net income (loss)
    
    $
    598
    
    
    $
    1,526
    
    
    $
    6,685Plus: interest expense net of interest income
    
    
    1,915
    
    
    
    1,803
    
    
    
    2,257Plus: income tax expense (benefit)
    
    
    529
    
    
    
    1,016
    
    
    
    3,855Plus: depreciation and amortization
    
    
    2,396
    
    
    
    3,300
    
    
    
    5,095EBITDA
    
    
    5,438
    
    
    
    7,645
    
    
    
    17,892Plus: royalty to former owner(a)
    
    
    2,678
    
    
    
    3,782
    
    
    
    1,686Plus: management fees and expenses(b)
    
    
    958
    
    
    
    296
    
    
    
    356Plus: contributions made in lieu of state income taxes(c)
    
    
    
    
    
    
    
    
    
    
    750Plus: share-based compensation(d)
    
    
    
    
    
    
    
    
    
    
    4,991Adjusted EBITDA
    
    $
    9,074
    
    
    $
    11,723
    
    
    $
    25,675
 
 (a)
    
    Reflects the royalty fee arrangement with the former owner of Grand Canyon University in
which we agreed to pay a stated percentage of cash revenue generated by our online programs.
As a result of the settlement of a dispute with the former owner, we are no longer obligated
to pay this royalty, although the settlement includes a prepayment of future royalties that
will be amortized in 2008 and future periods. See Item 7, Managements Discussion and
Analysis of Financial Condition and Results of Operations Factors affecting comparability
Settlement with former owner, and Note 2 to our financial statements that are included in Item
8, Financial Statements and Supplementary Data.  71




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(b)
    
    Reflects management fees and expenses of $0.3 million, $0.3 million, and $0.4 million for the
years ended December 31, 2006, 2007, and 2008, respectively, to the general partner of
Endeavour Capital Fund IV, L.P., one of our significant stockholders, and an aggregate of $0.7
million for the years ended December 31, 2006, to an entity affiliated with a former director
and another affiliated with a significant stockholder, in each case following their investment
in us. The agreements relating to these arrangements have all terminated.(c)
    
    Reflects contributions made to various Arizona school tuition organizations to assist with
funding for education. In connection with such contributions made we received a
dollar-for-dollar state income tax credit, which resulted in a reduction in our effective
income tax rate to 36.6% for the year ended December 31, 2008. Had this payment not been made
our effective tax rate would have been 40.8%. Such contributions are viewed by our management
to be made in lieu of payments of state income taxes and are therefore excluded from
evaluation of our core operating performance.(d)
    
    Reflects share based compensation expense recorded in the fourth quarter of 2008, $1.3
million of which relates to stock granted to our new Chief Executive Officer in connection
with our initial public offering and $3.7 million of which relates to share-based compensation
for stock options granted to employees and directors in connection with our initial public
offering of common stock. 
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Financial Statements and Supplementary Data Risk Factors Forward-Looking Statements
 Executive Overview
 General
   72




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
    
    Initial Public Offering  On November 19, 2008, our registration
statement for our initial public offering of common stock became effective.
In the initial public offering, we sold 10,500,000 shares of common stock
at a price to the public of $12.00 per share, before underwriting discounts
and commissions. On November 26, 2008, the underwriters elected to
exercise in full the underwriters option to purchase, and we sold, an
additional 1,575,000 shares at the initial public offering price to cover
over-allotments. The aggregate gross proceeds of the shares offered and
sold by us, including in connection with the underwriters exercise of the
over-allotment option, totaled $144.9 million. We used $108.7 million of
the proceeds to pay a special distribution on an as converted basis to the
common and preferred shareholders of record as of November 18, 2008, $10.1
million to pay underwriting discounts and commissions, and $6.0 million to
pay other expenses in connection with the offering. The remaining $20.1
million of net proceeds from the offering will be used for general
corporate purposes.
 
    
    Enrollment, Net Revenue and Operating Income Growth  We
achieved 67.0% growth in enrollment for the fiscal year ended December 31,
2008 as compared to fiscal year ended December 31, 2007, which was the
primary factor contributing to a 62.4% increase in net revenue over the
same period. In addition, we increased tuition for students in our online
and professional studies programs by 5.0% to 5.3% for our 2008-09 academic
year, as compared to 2.6%
to 4.2% for the prior academic year. Tuition for our traditional ground
programs increased 11.2% for our 2008-09 academic year, as compared to 16.0%
for the prior academic year. The enrollment and tuition price increases
were partially offset by the continuing mix shift towards online programs,
which have a lower tuition price per credit hour and with respect to which
our online students take fewer credit hours per semester than our
traditional ground students. Operating income was $12.8 million for the
fiscal year ended December 31, 2008, an increase of 194.5% over the $4.3
million in operating income for 2007.
 
    
    OIG Investigation and Qui Tam Law Suit  In recent years,
several for-profit education companies have been faced with whistleblower
lawsuits, known as qui tamcases, brought by current or former employees
alleging that their institution had made impermissible incentive payments
to admissions employees. The employees bringing such lawsuits typically
seek, for themselves and for the federal government, substantial financial
penalties against the subject company. In this regard, on September 11,
2008, we were served with a qui tamlawsuit that had been filed against us
in August 2007 in the United States District Court for the District of
Arizona by a then-current employee on behalf of the federal government.
All proceedings in the lawsuit had been under seal until September 5, 2008,
when the court unsealed the first amended complaint, which had been filed
on August 11, 2008. The lawsuit alleges, among other things, that we have
improperly compensated certain of our enrollment counselors in violation of
the Title IV law governing compensation of such employees, and as a result,
improperly received Title IV program funds. See Item 1A, Risk Factors  We
were recently notified that a qui tam lawsuit has been filed against us
alleging, among other things, that we have improperly compensated certain
of our enrollment counselors, and we may incur liability, be subject to
sanctions, or experience damage
  73




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to our reputation as a result of this
lawsuit, Item 1, Business  Legal Proceedings; Item 1, Business 
Regulation  Regulation of Federal Student Financial Aid Programs 
Incentive compensation rule; and Item 3, Legal Proceedings. Further, on
August 14, 2008, the Office of Inspector General of the Department of
Education served an administrative subpoena on Grand Canyon University
requiring us to provide certain records and information related to
performance reviews and salary adjustments for all of our enrollment
counselors and managers from January 1, 2004 to the present. See Item 1A,
Risk Factors  The Office of Inspector General of the Department of
Education has commenced an investigation of Grand Canyon University, which
is ongoing and which may result in fines, penalties, other sanctions, and
damage to our reputation in the industry; Item 1, Business  Regulation 
Regulation of Federal Student Financial Aid Programs  Incentive
compensation rule; and Item 3, Legal Proceedings. These matters remain
ongoing. If it were determined that any of our compensation practices
violated the incentive compensation law, we could be subject to substantial
monetary liabilities, fines, and other sanctions or could suffer an adverse
outcome in the qui tamlitigation, any of which could have a material
adverse effect on our business, prospects, financial condition and results
of operations and could adversely affect our stock price.
 
    
    Changes in Executive Management Team Effective July 1, 2008, we
hired Brian Mueller, Stan Meyer and Dan Bachus to serve as our Chief
Executive Officer, Executive Vice President, and Chief Financial Officer,
respectively. Mr. Mueller has been involved in the education industry for
over 25 years, most
recently as the president of Apollo Group, Inc., a for-profit, postsecondary
education company and the parent company of the University of Phoenix. Mr.
Meyer also has over 25 years of experience in the education industry, most
recently served as the executive vice president of marketing and enrollment
for Apollo Group, Inc. Mr. Bachus, who is a certified public accountant,
has worked in the education industry for approximately seven years,
including as the chief accounting officer and controller for Apollo Group,
Inc. This team, together with our other senior officers, possesses extensive
experience in the management and operation of publicly-traded for-profit,
postsecondary education companies, as well as other educational services
businesses, including in the areas of marketing, recruiting, and retaining
students pursuing online and other distance education degree offerings.
 
    
    Share-Based Compensation  In the fourth quarter of 2008, we
recognized $3.7 million in share-based compensation in conjunction with
grants of 710,494 fully vested options and 2,594,583 time vested options to
purchase shares of our common stock to our employees and directors in
connection with our initial public offering, which options were granted
with an exercise price equal to the initial public offering price of $12.00
per share. We also recognized $1.3 million in compensation expense, which
is reflected in general and administrative expense, in conjunction with the
grant of 109,329 shares of common stock to our Chief Executive Officer in
connection with our initial public offering, which shares were valued at
the initial public offering price of $12.00 per share.
  74




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Key financial metrics
 Net revenue
     December 31,2006
    
    
    2007
    
    
    2008#
of Students
    
    

%
of Total
    
    

#
of Students
    
    

%
of Total
    
    

#
of Students
    
    

%
of TotalMasters degree(1)
    
    
    7,812
    
    
    
    73.3
    %
    
    
    9,156
    
    
    
    62.1
    %
    
    
    13,031
    
    
    
    52.9
    %Bachelors degree
    
    
    2,850
    
    
    
    26.7
    %
    
    
    5,598
    
    
    
    37.9
    %
    
    
    11,605
    
    
    
    47.1
    %Total
    
    
    10,662
    
    
    
    100.0
    %
    
    
    14,754
    
    
    
    100.0
    %
    
    
    24,636
    
    
    
    100.0
    %
 December 31,2006
    
    
    2007
    
    
    2008#
of Students
    
    

%
of Total
    
    

#
of Students
    
    

%
of Total
    
    

#
of Students
    
    

%
of TotalOnline
    
    
    8,406
    
    
    
    78.8
    %
    
    
    12,497
    
    
    
    84.7
    %
    
    
    21,955
    
    
    
    89.1
    %Ground(2)
    
    
    2,256
    
    
    
    21.2
    %
    
    
    2,257
    
    
    
    15.3
    %
    
    
    2,681
    
    
    
    10.9
    %Total
    
    
    10,662
    
    
    
    100.0
    %
    
    
    14,754
    
    
    
    100.0
    %
    
    
    24,636
    
    
    
    100.0
    %
 (1)
    
    Includes 56 students pursuing doctoral degrees at December 31, 2008.(2)
    
    Includes our traditional ground students, as well as our professional students.  75




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76




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Costs and expenses
 Instructional cost and services
 Selling and promotional
  General and administrative
 Royalty to former owner
 Interest expense
  77




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Factors affecting comparability
  Public company expenses
 Settlement with former owner
 Management fees and expenses
 Share-based and other executive compensation
  78




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General and administrative expenses and tax expense
 qui tam
  License agreement
 Critical Accounting Policies and Estimates
   79




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Revenue recognition Revenue Recognition in
Financial Statements
 Allowance for doubtful accounts
 Long-Lived Assets
 Income taxes Accounting for Uncertainty in Income Taxes Accounting for Income Taxes
  80




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Results of Operations
  Year Ended December 31,2006
    
    
    2007
    
    
    2008Net revenue
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Operating expensesInstructional cost and services
    
    
    43.4
    
    
    
    39.3
    
    
    
    33.8Selling and promotional
    
    
    27.9
    
    
    
    35.4
    
    
    
    40.6General and administrative
    
    
    20.8
    
    
    
    17.1
    
    
    
    16.6Royalty to former owner
    
    
    3.7
    
    
    
    3.8
    
    
    
    1.0Total operating expenses
    
    
    95.8
    
    
    
    95.6
    
    
    
    92.1Operating income
    
    
    4.2
    
    
    
    4.4
    
    
    
    7.9Interest expense
    
    
    (3.9
    )
    
    
    (3.0
    )
    
    
    (1.8
    )Interest income
    
    
    1.2
    
    
    
    1.2
    
    
    
    0.4Income before income taxes
    
    
    1.5
    
    
    
    2.6
    
    
    
    6.5Income tax expense
    
    
    0.7
    
    
    
    1.0
    
    
    
    2.4Net income
    
    
    0.8
    
    
    
    1.6
    
    
    
    4.1
 Year Ended December 31, 2008 Compared to Year Ended December 31, 2007
 Net revenue
 Instructional cost and services expenses
  81




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Selling and promotional expenses
 General and administrative expenses qui tam Legal Proceedings
 Royalty to former owner
  82




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Interest expense
 Interest income
 Income tax expense
 Net income
 Year Ended December 31, 2007 Compared to Year Ended December 31, 2006
 Net revenue
 Instructional cost and services expenses
  83




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Selling and promotional expenses
 General and administrative expenses
 Royalty to former owner
 Interest expense
 Interest income
 Income tax expense
 Net income
  84




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Seasonality
  Liquidity, Capital Resources, and Financial Position
 Liquidity
     85




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Cash Flows
 Operating Activities
  Investing Activities
 Financing Activities
 Contractual Obligations
  Payments Due by PeriodLess than
    
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 YearsLong term debt(1)
    
    $
    1.7
    
    
    $
    0.3
    
    
    $
    0.7
    
    
    $
    0.2
    
    
    $
    0.5Capital lease obligations(1)
    
    
    56.5
    
    
    
    3.8
    
    
    
    7.4
    
    
    
    7.3
    
    
    
    38.0Operating lease obligations(2)
    
    
    35.5
    
    
    
    3.3
    
    
    
    7.1
    
    
    
    5.8
    
    
    
    19.3Total contractual obligations
    
    $
    93.7
    
    
    $
    7.4
    
    
    $
    15.2
    
    
    $
    13.3
    
    
    $
    57.8
 (1)
    
    See Note 8, Notes Payable and Capital Lease Obligations, to our financial statements,
included in Item 8, Financial Statements and Supplementary Data, for a discussion of our long
term debt and capital lease obligations.(2)
    
    See Note 9, Commitments and Contingencies, to our financial statements, included in Item 8,
Financial Statements and Supplementary Data, for a discussion of our operating lease
obligations.  86




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Off-Balance Sheet Arrangements
  Non-GAAP Discussion
  Financial Statements and Supplementary Data
   87




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
    
    cash expenditures for capital expenditures or contractual commitments;
 
    
    changes in, or cash requirements for, our working capital requirements;
 
    
    interest expense, or the cash requirements necessary to service interest or
principal payments on our indebtedness;
 
    
    the cost or cash required to replace assets that are being depreciated or
amortized; and
 
    
    the impact on our reported results of earnings or charges resulting from (i)
royalties to our prior owner, including amortization of royalties prepaid in
connection with our settlement, (ii) management fees and expenses that were
payable until completion of our public offering, (iii) contributions to Arizona
school tuition organizations in lieu of the payment of state income taxes; and
(iv) share-based compensation.
   Year Ended December 31,2006
    
    
    2007
    
    
    2008Net income
    
    $
    598
    
    
    $
    1,526
    
    
    $
    6,685Plus: interest expense net of interest income
    
    
    1,915
    
    
    
    1,803
    
    
    
    2,257Plus: income tax expense (benefit)
    
    
    529
    
    
    
    1,016
    
    
    
    3,855Plus: depreciation and amortization
    
    
    2,396
    
    
    
    3,300
    
    
    
    5,095EBITDA
    
    
    5,438
    
    
    
    7,645
    
    
    
    17,892Plus: royalty to former owner(a)
    
    
    2,678
    
    
    
    3,782
    
    
    
    1,686Plus: management fees and expenses(b)
    
    
    958
    
    
    
    296
    
    
    
    356Plus: contributions made in lieu of state income taxes(c)
    
    
    
    
    
    
    
    
    
    
    750Plus: share-based compensation(d)
    
    
    
    
    
    
    
    
    
    
    4,991Adjusted EBITDA
    
    $
    9,074
    
    
    $
    11,723
    
    
    $
    25,675
 (a)
    
    Reflects the royalty fee arrangement with the former owner of Grand Canyon University in
which we agreed to pay a stated percentage of cash revenue generated by our online programs.
As a result of the settlement of a dispute with the former owner, we are no longer obligated
to pay this royalty, although the settlement includes a prepayment of future royalties that
will be amortized in 2008 and future periods. See Note 2 to our financial statements included
in Item 8, Financial Statements and Supplementary Data.  88




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(b)
    
    Reflects management fees and expenses of $0.3 million, $0.3 million, and $0.4 million for the
years ended December 31, 2006, 2007, and 2008, respectively, to the general partner of the
Endeavour Entities, and an aggregate of $0.7 million for the year ended December 31, 2006, to
an entity affiliated with a former director and another affiliated with a then significant
stockholder following their investment in us. The agreements relating to these arrangements
have all terminated.(c)
    
    Reflects contributions made to various Arizona school tuition organizations to assist with
funding for education. In connection with such contributions made we received a
dollar-for-dollare state income tax credit, which resulted in a reduction in our effective
income tax rate to 36.6% for the year ended December 31, 2008. Had this payment not been made
our effective tax rate would have been 40.8%. Such contributions are viewed by our management
to be made in lieu of payments of state income taxes and are therefore excluded from
evaluation of our core operating performance.(d)
    
    Reflects share based compensation expense recorded in the fourth quarter of 2008, $1.3
million of which relates to stock granted to our new Chief Executive Officer in connection
with our initial public offering and $3.7 million of which relates to share-based compensation
for stock options granted to employees and directors in connection with our initial public
offering. Recent Accounting Pronouncements
 Financial Statements and Supplementary
Data
 
 Item 7A. Quantitative and Qualitative Disclosures about Market Risk
 Impact of Inflation.
 Market risk
 Interest rate risk
  89




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Item 8. Financial Statements and Supplementary Data
 PageReport of Independent Registered Public Accounting Firm
    
    
    91Balance Sheets as of December 31, 2007 and 2008
    
    
    92Statements of Operations for the years ended December 31, 2006, 2007 and 2008
    
    
    93Statements of Preferred Stock and Stockholders (Deficit) Equity for the years ended December 31, 2006, 2007, and 2008
    
    
    94Statements of Cash Flows for the years ended December 31, 2006, 2007, and 2008
    
    
    95Notes to Financial Statements
    
    
    96
  90




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Report of Independent Registered Public Accounting Firm
 
     
  91




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##### Table of Contents



Grand Canyon Education, Inc.
 
 Balance Sheets
 As of December 31,($ in thousands, except share data)
    
    2007
    
    
    2008ASSETS:Current assetsCash and cash equivalents
    
    $
    18,930
    
    
    $
    35,152Restricted cash and cash equivalents
    
    
    4,280
    
    
    
    2,197Accounts receivable, net of allowance for doubtful accounts of
$12,158 and $6,356 at December 31, 2007 and 2008
    
    
    7,114
    
    
    
    9,442Due from related parties
    
    
    6,001
    
    
    
    Income taxes receivable
    
    
    
    
    
    
    1,576Deferred income taxes
    
    
    4,640
    
    
    
    2,603Other current assets
    
    
    1,349
    
    
    
    2,629Total current assets
    
    
    42,314
    
    
    
    53,599Property and equipment, net
    
    
    33,849
    
    
    
    41,399Restricted cash and investments
    
    
    3,298
    
    
    
    3,403Prepaid royalties
    
    
    317
    
    
    
    8,043Goodwill
    
    
    2,941
    
    
    
    2,941Deferred income taxes
    
    
    2,806
    
    
    
    7,404Deposit with former owner
    
    
    3,000
    
    
    
    Other assets
    
    
    43
    
    
    
    201Total assets
    
    $
    88,568
    
    
    $
    116,990LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS (DEFICIT) EQUITY:Current liabilitiesAccounts payable
    
    $
    3,434
    
    
    $
    5,770Accrued liabilities
    
    
    6,893
    
    
    
    9,674Income taxes payable
    
    
    241
    
    
    
    172Deferred revenue and student deposits
    
    
    10,369
    
    
    
    14,262Royalty payable to former owner
    
    
    7,428
    
    
    
    Due to related parties
    
    
    1,005
    
    
    
    1,197Line of credit
    
    
    6,000
    
    
    
    Current portion of capital lease obligations
    
    
    1,150
    
    
    
    1,125Current portion of notes payable
    
    
    646
    
    
    
    357Total current liabilities
    
    
    37,166
    
    
    
    32,557Capital lease obligations, less current portion
    
    
    28,078
    
    
    
    29,384Notes payable, less current portion and other
    
    
    1,762
    
    
    
    1,459Total liabilities
    
    
    67,006
    
    
    
    63,400Commitments and contingenciesSeries A convertible preferred stock, $0.01 par value:Authorized  9,700 and 0 shares at December 31, 2007 and 2008,
respectivelyIssued and outstanding  5,953 and 0 shares at December 31, 2007
and 2008, respectively
    
    
    18,610
    
    
    
    Series B 12% convertible preferred stock, $0.01 par value:Authorized  2,200 and 0 shares at December 31, 2007 and 2008,
respectivelyIssued and outstanding  0 shares at December 31, 2007 and 2008
    
    
    
    
    
    
    Series C convertible preferred stock, $0.01 par value:Authorized  3,900 and 0 shares at December 31, 2007 and 2008,
respectivelyIssued and outstanding  3,829 and 0 shares at December 31, 2007
and 2008, respectively
    
    
    13,338
    
    
    
    Stockholders (deficit) equityPreferred stock, $0.01 par value, 10,000,000 shares authorized; 0 shares issued and
outstanding at December 31, 2007 and 2008
    
    
    
    
    
    
    Common
stock, $0.01 par value, 100,000,000 shares authorized; 19,036,050 and 45,465,160
shares issued and outstanding at December 31, 2007 and 2008,
respectively
    
    
    190
    
    
    
    455Additional paid-in capital
    
    
    7,719
    
    
    
    64,808Accumulated other comprehensive income
    
    
    79
    
    
    
    16Accumulated deficit
    
    
    (18,374
    )
    
    
    (11,689
    )Total stockholders (deficit) equity
    
    
    (10,386
    )
    
    
    53,590Total liabilities, preferred stock and stockholders (deficit) equity
    
    $
    88,568
    
    
    $
    116,990
   92




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Grand Canyon Education, Inc.
 
 Statements of Operations
 Year Ended December 31,(In thousands, except per share data)
    
    2006
    
    
    2007
    
    
    2008Net revenue
    
    $
    72,111
    
    
    $
    99,326
    
    
    $
    161,309Costs and expenses:Instructional costs and services
    
    
    31,287
    
    
    
    39,050
    
    
    
    54,450Selling and promotional, including
$3,742 in 2006, $4,293 in 2007 and
$5,895 in 2008, to related parties
    
    
    20,093
    
    
    
    35,148
    
    
    
    65,551General and administrative
    
    
    15,011
    
    
    
    17,001
    
    
    
    26,825Royalty to former owner
    
    
    2,678
    
    
    
    3,782
    
    
    
    1,686Total costs and expenses
    
    
    69,069
    
    
    
    94,981
    
    
    
    148,512Operating income
    
    
    3,042
    
    
    
    4,345
    
    
    
    12,797Interest expense
    
    
    (2,827
    )
    
    
    (2,975
    )
    
    
    (2,897
    )Interest income
    
    
    912
    
    
    
    1,172
    
    
    
    640Income before income taxes
    
    
    1,127
    
    
    
    2,542
    
    
    
    10,540Income tax expense
    
    
    529
    
    
    
    1,016
    
    
    
    3,855Net income
    
    
    598
    
    
    
    1,526
    
    
    
    6,685Preferred dividends
    
    
    (527
    )
    
    
    (349
    )
    
    
    (938
    )Net income available to common stockholders
    
    $
    71
    
    
    $
    1,177
    
    
    $
    5,747Earnings per share:Basic income per share
    
    $
    0.00
    
    
    $
    0.06
    
    
    $
    0.26Diluted income per share
    
    $
    0.00
    
    
    $
    0.03
    
    
    $
    0.17Basic weighted average shares outstanding
    
    
    18,853
    
    
    
    18,923
    
    
    
    22,185Diluted weighted average shares outstanding
    
    
    36,858
    
    
    
    35,143
    
    
    
    33,430
   93




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Grand Canyon Education, Inc.
 
 Statements of Preferred Stock and Stockholders (Deficit) Equity
 ($ in thousands, except share data)
 Preferred Stock
    
    
Stockholders (Deficit) EquityAccumulatedSeries A Convertible
    
    
    Series B Convertible
    
    
    Series C
    
    
    
    
    
    
    
    
    
    
    Additional
    
    
    OtherPreferred Stock
    
    
    Preferred Stock
    
    
    Preferred Stock
    
    
    Common Stock
    
    
    Paid-in
    
    
    Comprehensive
    
    
    AccumulatedShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Par Value
    
    
    Capital
    
    
    Income
    
    
    Deficit
    
    
    TotalBalance at
December 31, 2005
    
    
    5,953
    
    
    $
    18,610
    
    
    
    2,163
    
    
    $
    6,980
    
    
    
    
    
    
    $
    
    
    
    
    18,853,450
    
    
    $
    189
    
    
    $
    8,198
    
    
    $
    
    
    
    $
    (20,498
    )
    
    $
    (12,111
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    598
    
    
    
    598Unrealized gains
on
available-for-sale
securities, net of
taxes of $23
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35
    
    
    
    
    
    
    
    35Comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    633Redemption of
Series B
Convertible
Preferred Stock
    
    
    
    
    
    
    
    
    
    
    (1,298
    )
    
    
    (4,200
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Value assigned to
Blanchard shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    282
    
    
    
    
    
    
    
    
    
    
    
    282Dividend on Series
B Convertible
Preferred Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (527
    )
    
    
    
    
    
    
    
    
    
    
    (527
    )Balance at
December 31, 2006
    
    
    5,953
    
    
    
    18,610
    
    
    
    865
    
    
    
    2,780
    
    
    
    
    
    
    
    
    
    
    
    18,853,450
    
    
    
    189
    
    
    
    7,953
    
    
    
    35
    
    
    
    (19,900
    )
    
    
    (11,723
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,526
    
    
    
    1,526Unrealized gains
on
available-for-sale
securities, net of
taxes of $30
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    44
    
    
    
    
    
    
    
    44Comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,570Conversion of
Series B
Convertible
Preferred Stock to
Series C
Preferred Stock
    
    
    
    
    
    
    
    
    
    
    (865
    )
    
    
    (2,780
    )
    
    
    800
    
    
    
    2,780
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Payment of amounts
due to related
party with Series
C Preferred Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    34
    
    
    
    120
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of Series
C Preferred Stock
for cash, net of
issuance costs of
$36
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,995
    
    
    
    10,409
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of
Blanchard shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    182,600
    
    
    
    1
    
    
    
    115
    
    
    
    
    
    
    
    
    
    
    
    116Dividend on Series
B Convertible
Preferred Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (320
    )
    
    
    
    
    
    
    
    
    
    
    (320
    )Accretion of
Series C Preferred
Stock Dividend
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29
    
    
    
    
    
    
    
    
    
    
    
    (29
    )
    
    
    
    
    
    
    
    
    
    
    (29
    )Balance at
December 31, 2007
    
    
    5,953
    
    
    
    18,610
    
    
    
    
    
    
    
    
    
    
    
    3,829
    
    
    
    13,338
    
    
    
    19,036,050
    
    
    
    190
    
    
    
    7,719
    
    
    
    79
    
    
    
    (18,374
    )
    
    
    (10,386
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,685
    
    
    
    6,685Unrealized losses
on available
for-sale
securities, net of
taxes of $42
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (63
    )
    
    
    
    
    
    
    (63
    )Comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,622Undeclared
dividends on
Series C Preferred
Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    938
    
    
    
    
    
    
    
    
    
    
    
    (938
    )
    
    
    
    
    
    
    
    
    
    
    (938
    )Issuance of
Blanchard shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    182,600
    
    
    
    2
    
    
    
    2,994
    
    
    
    
    
    
    
    
    
    
    
    2,996Cancellation of
IAS warrant, net
of $2,316 deferred
taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,684
    )
    
    
    
    
    
    
    
    
    
    
    (3,684
    )Exercise of warrant
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    909,348
    
    
    
    9
    
    
    
    517
    
    
    
    
    
    
    
    
    
    
    
    526Conversion of
Series A and
Series C
Convertible
Preferred Stock to
Common Stock
    
    
    (5,953
    )
    
    
    (18,610
    )
    
    
    
    
    
    
    
    
    
    
    (3,829
    )
    
    
    (14,276
    )
    
    
    13,103,511
    
    
    
    131
    
    
    
    32,755
    
    
    
    
    
    
    
    
    
    
    
    32,886Stock issued in
initial public
offering, net of
issuance costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,075,000
    
    
    
    121
    
    
    
    128,635
    
    
    
    
    
    
    
    
    
    
    
    128,756Special
distribution to
stockholders from
initial public
offering proceeds
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (108,675
    )
    
    
    
    
    
    
    
    
    
    
    (108,675
    )Restricted stock
granted to Chief
Executive Officer
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    109,329
    
    
    
    1
    
    
    
    1,310
    
    
    
    
    
    
    
    
    
    
    
    1,311Share-based
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,563
    
    
    
    
    
    
    
    
    
    
    
    3,563Exercise of stock
options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    49,322
    
    
    
    1
    
    
    
    591
    
    
    
    
    
    
    
    
    
    
    
    592Excess tax benefit
from share-based
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21
    
    
    
    
    
    
    
    
    
    
    
    21Balance at
December 31, 2008
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    45,465,160
    
    
    $
    455
    
    
    $
    64,808
    
    
    $
    16
    
    
    $
    (11,689
    )
    
    $
    53,590
   94




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##### Table of Contents



Grand Canyon Education, Inc.
 
 Statements of Cash Flows
 Year Ended December 31,($ in thousands)
    
    2006
    
    
    2007
    
    
    2008Cash flows provided by operating activities:Net income
    
    $
    598
    
    
    $
    1,526
    
    
    $
    6,685Adjustments to reconcile net income to net cash provided by operating activities:Share-based compensation
    
    
    
    
    
    
    
    
    
    
    4,991Excess tax benefits from share-based compensation
    
    
    
    
    
    
    
    
    
    
    (21
    )Provision for bad debts
    
    
    4,664
    
    
    
    6,257
    
    
    
    8,465Depreciation and amortization
    
    
    2,396
    
    
    
    3,300
    
    
    
    5,095Deferred income taxes
    
    
    (2,148
    )
    
    
    (1,656
    )
    
    
    (245
    )Other
    
    
    
    
    
    
    19
    
    
    
    (106
    )Changes in assets and liabilities:Accounts receivable
    
    
    (5,974
    )
    
    
    (8,573
    )
    
    
    (10,793
    )Prepaid expenses and other assets
    
    
    (451
    )
    
    
    (442
    )
    
    
    (751
    )Due to/from related parties
    
    
    202
    
    
    
    (107
    )
    
    
    468Accounts payable
    
    
    1,663
    
    
    
    253
    
    
    
    927Accrued liabilities
    
    
    (646
    )
    
    
    3,802
    
    
    
    3,596Income taxes payable
    
    
    2,280
    
    
    
    (2,294
    )
    
    
    (1,624
    )Deferred revenue and student deposits
    
    
    1,538
    
    
    
    4,236
    
    
    
    3,893Prepaid royalties to former owner
    
    
    
    
    
    
    
    
    
    
    (5,920
    )Royalty payable to former owner
    
    
    2,678
    
    
    
    3,782
    
    
    
    (7,428
    )Deposit with former owner
    
    
    
    
    
    
    (3,000
    )
    
    
    3,000Net cash provided by operating activities
    
    
    6,800
    
    
    
    7,103
    
    
    
    10,232Cash flows provided by (used in) investing activities:Capital expenditures
    
    
    (2,387
    )
    
    
    (7,406
    )
    
    
    (8,374
    )Change in restricted cash and cash equivalents
    
    
    (791
    )
    
    
    (1,454
    )
    
    
    2,083Purchases of investments
    
    
    
    
    
    
    
    
    
    
    (2,627
    )Proceeds from sale or maturity of investments
    
    
    9,045
    
    
    
    (149
    )
    
    
    2,570Net cash provided by (used in) investing activities
    
    
    5,867
    
    
    
    (9,009
    )
    
    
    (6,348
    )Cash flows provided by (used in) financing activities:Principal payments on notes payable and capital lease obligations
    
    
    (1,179
    )
    
    
    (1,230
    )
    
    
    (1,357
    )Repayment on line of credit
    
    
    
    
    
    
    
    
    
    
    (6,000
    )Proceeds from line of credit and other debt obligations
    
    
    
    
    
    
    6,000
    
    
    
    Repurchase of Institute Warrant
    
    
    
    
    
    
    
    
    
    
    (6,000
    )Repayment of Institute Note Payable
    
    
    
    
    
    
    
    
    
    
    (1,250
    )Net proceeds from issuance of preferred stock
    
    
    
    
    
    
    4,684
    
    
    
    Proceeds from related party payable on preferred stock
    
    
    4,200
    
    
    
    
    
    
    
    5,725Redemptions of preferred stock
    
    
    (4,200
    )
    
    
    
    
    
    
    Dividends on preferred stock
    
    
    (497
    )
    
    
    (153
    )
    
    
    Net proceeds from issuance of common stock
    
    
    
    
    
    
    
    
    
    
    128,756Payment of special distribution
    
    
    
    
    
    
    
    
    
    
    (108,675
    )Proceeds from exercise of warrant
    
    
    
    
    
    
    
    
    
    
    526Net proceeds from exercise of stock options
    
    
    
    
    
    
    
    
    
    
    592Excess tax benefits from share-based compensation
    
    
    
    
    
    
    
    
    
    
    21Net cash provided by (used in) financing activities
    
    
    (1,676
    )
    
    
    9,301
    
    
    
    12,338Net increase in cash and cash equivalents
    
    
    10,991
    
    
    
    7,395
    
    
    
    16,222Cash and cash equivalents, beginning of year
    
    
    544
    
    
    
    11,535
    
    
    
    18,930Cash and cash equivalents, end of year
    
    $
    11,535
    
    
    $
    18,930
    
    
    $
    35,152Supplemental disclosure of cash flow informationCash paid during the year for interest
    
    $
    2,523
    
    
    $
    2,645
    
    
    $
    3,709Cash paid during the year for income taxes
    
    $
    397
    
    
    $
    4,964
    
    
    $
    5,274Supplemental disclosure of non-cash investing and financing activitiesPurchase of equipment through capital lease obligations
    
    $
    5,945
    
    
    $
    676
    
    
    $
    2,481Purchases of property and equipment included in accounts payable
    
    $
    
    
    
    $
    
    
    
    $
    1,292Issuance of Series B and Series C convertible preferred stock for notes
receivable
    
    $
    
    
    
    $
    5,725
    
    
    $
    Receipt of marketable securities for Series B convertible preferred stock
    
    $
    2,908
    
    
    $
    
    
    
    $
    Issuance of Series C convertible preferred stock for settlement of balances
owed
    
    $
    
    
    
    $
    120
    
    
    $
    Accretion of dividends on Series C convertible preferred stock
    
    $
    
    
    
    $
    29
    
    
    $
    938Value assigned to Blanchard shares
    
    $
    282
    
    
    $
    116
    
    
    $
    2,996Assumption of future obligations under gift annuities
    
    $
    
    
    
    $
    
    
    
    $
    887Deferred tax on repurchase of Institute Warrant
    
    $
    
    
    
    $
    
    
    
    $
    2,316Conversion of Series A and Series C convertible preferred stock
    
    $
    
    
    
    $
    
    
    
    $
    32,886
   95




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##### Table of Contents



Grand Canyon Education, Inc.
 
 Notes to Financial Statements
(In thousands of dollars, except share and per share data)
 1. Nature of Business
    2. Summary of Significant Accounting Policies
 Formation and Transactions with Former Owner
   
    
    $26,750 in cash;
    
    the assumption of a $1,500 note payable to a third party (the Kirksville
Note);
 
    
    the issuance by the Company to the Institute of a warrant (the Institute
Warrant) to purchase a 10.0% non-dilutable equity interest in the Company for an
exercise price of $1 during a one month period beginning in July 1, 2011 subject
to a right for the Company to repurchase the warrant at any time prior to its
exercise for $6,000.
  96




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##### Table of Contents



Grand Canyon Education, Inc.
 Notes to Financial Statements
(In thousands of dollars, except share and per share data)
     
    
    the satisfaction in full of all past royalties due to the Institute under the
Royalty Agreement and the elimination of the existing obligation to pay royalties
for online student revenues in perpetuity;
    
    the repurchase of the Institute Warrant;
    
    the acquisition by the Company of the real property and related building
located on the Campus that was owned by the Institute and not transferred in
connection with the Ancillary Agreement;
    
    the termination of a sublease agreement pursuant to which the Institute leased
office space on the Campus;
  97




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##### Table of Contents



Grand Canyon Education, Inc.
 Notes to Financial Statements
(In thousands of dollars, except share and per share data)
 
    
    the assumption by the Company of all future payment obligations in respect to
certain gift annuities made to the school by donors prior to the acquisition; and
    
    the satisfaction in full of the $1,250 Institute Loan (including all accrued
and unpaid interest thereon).
  Accounting for the April 15, 2008 Settlement of the Standstill Agreement
  ($ in thousands)Initial Payment
    
    $
    3,000Optional Payment
    
    
    19,500Total Payment to be allocated
    
    $
    22,5001) Obligations settledAccrued royalties due under Royalty Agreement (as of April 15, 2008)
    
    $
    8,730Repurchase of Institute Warrant
    
    
    6,000Repayment of Institute Loan, including accrued interest
    
    
    2,257Other amounts due to the Institute
    
    
    3272) Liabilities assumedAssumption of gift annuities obligation, at fair value
    
    
    (887
    )3) Cost to be allocated to assets acquiredReal property and prepaid royalty asset
    
    
    6,073Total fair value estimates
    
    $
    22,500
   i.e
  98




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##### Table of Contents



Grand Canyon Education, Inc.
 Notes to Financial Statements
(In thousands of dollars, except share and per share data)
  Use of Estimates
  Reclassifications
  Cash and Cash Equivalents
  Restricted Cash and Cash Equivalents
  Restricted Cash and Investments
 Accounting for Certain Investments in
Debt and Equity Securities
  99




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##### Table of Contents



Grand Canyon Education, Inc.
 Notes to Financial Statements
(In thousands of dollars, except share and per share data)
 Fair Value of Financial Instruments
  Fair Value Measurements (Level 3).
   Allowance for Doubtful Accounts
   100




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##### Table of Contents



Grand Canyon Education, Inc.
 Notes to Financial Statements
(In thousands of dollars, except share and per share data)
 Property and Equipment
 Capitalization of Interest Costs
 Year Ended December 31,2006
    
    
    2007
    
    
    2008Interest incurred
    
    $
    2,925
    
    
    $
    3,102
    
    
    $
    3,022Interest capitalized
    
    
    98
    
    
    
    127
    
    
    
    125Interest expense
    
    $
    2,827
    
    
    $
    2,975
    
    
    $
    2,897
  Long-Lived Assets
  Goodwill
 Goodwill and Other Intangible Assets
   101




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##### Table of Contents



Grand Canyon Education, Inc.
 Notes to Financial Statements
(In thousands of dollars, except share and per share data)
 Share-Based Compensation
 Share-Based Payment
  Share Based Payment Share-Based Payment
 Income Taxes
 Accounting for Income
Taxes
 Accounting for
Uncertainty in Income Taxes
   102




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##### Table of Contents



Grand Canyon Education, Inc.
 Notes to Financial Statements
(In thousands of dollars, except share and per share data)
 Revenue Recognition
 Revenue Recognition in Financial Statements
 Instructional Costs and Services
  Selling and Promotional
    103




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##### Table of Contents



Grand Canyon Education, Inc.
 Notes to Financial Statements
(In thousands of dollars, except share and per share data)
 General and Administrative
  Royalty to Former Owner
 Formation and Transactions with Former Owner
 Insurance/Self-Insurance
  Concentration of Credit Risk
    104




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##### Table of Contents



Grand Canyon Education, Inc.
 Notes to Financial Statements
(In thousands of dollars, except share and per share data)
 Accumulated Other Comprehensive Income
  Segment Information
  3. Initial Public Offering and Special Distribution
    105




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##### Table of Contents



Grand Canyon Education, Inc.
 Notes to Financial Statements
(In thousands of dollars, except share and per share data)
 4.
    
    Restricted Cash and Investments
  As of December 31, 2007Gross
    
    
    Gross
    
    
    EstimatedAdjusted
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    (Losses)
    
    
    ValueMoney Market Funds
    
    $
    258
    
    
    $
    
    
    
    $
    
    
    
    $
    258Municipal Securities
    
    
    550
    
    
    
    18
    
    
    
    (1
    )
    
    
    567U.S. Agency
    
    
    2,358
    
    
    
    115
    
    
    
    
    
    
    
    2,473Total
    
    $
    3,166
    
    
    $
    133
    
    
    $
    (1
    )
    
    $
    3,298
 As of December 31, 2008Gross
    
    
    Gross
    
    
    EstimatedAdjusted
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    (Losses)
    
    
    ValueMoney Market Funds
    
    $
    2,928
    
    
    $
    
    
    
    $
    
    
    
    $
    2,928Municipal Securities
    
    
    448
    
    
    
    28
    
    
    
    (1
    )
    
    
    475Total
    
    $
    3,376
    
    
    $
    28
    
    
    $
    (1
    )
    
    $
    3,403
  Due in one year or less
    
    $
    2,928Due in one to five years
    
    
    371Due in five to ten years
    
    
    104Due after ten years
    
    
    $
    3,403
   106




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Grand Canyon Education, Inc.
 Notes to Financial Statements
(In thousands of dollars, except share and per share data)
 5. Property and Equipment
  As of December 31,2007
    
    
    2008Buildings under capital lease
    
    $
    20,562
    
    
    $
    22,283Equipment under capital leases
    
    
    2,236
    
    
    
    1,571Leasehold improvements
    
    
    8,073
    
    
    
    12,773Furniture, fixtures and equipment
    
    
    9,515
    
    
    
    14,439Other
    
    
    805
    
    
    
    1,222Construction in progress
    
    
    1,020
    
    
    
    2,04942,211
    
    
    
    54,337Less accumulated depreciation and amortization
    
    
    (8,362
    )
    
    
    (12,938
    )Property and equipment, net
    
    $
    33,849
    
    
    $
    41,399
  6. Accrued Liabilities
  As of December 31,2007
    
    
    2008Accrued compensation and benefits
    
    $
    3,775
    
    
    $
    5,340Accrued interest
    
    
    1,096
    
    
    
    284Deferred rent
    
    
    
    
    
    
    34Tax reserves, non-income tax related
    
    
    
    
    
    
    710FIN 48 accrual
    
    
    
    
    
    
    299Other accrued expenses
    
    
    2,022
    
    
    
    3,007$
    6,893
    
    
    $
    9,674
  107




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Grand Canyon Education, Inc.
 Notes to Financial Statements
(In thousands of dollars, except share and per share data)
 7. Financing Arrangements
   8. Capital Lease Obligations, Notes Payable, and Other
  As of December 31,2007
    
    
    2008Capital Lease ObligationsCapital lease for buildings (monthly payments of
$301 at an implicit interest rate of 8.7% through
2024)
    
    $
    28,451
    
    
    $
    30,098Capital leases for equipment (various leases
extending into 2012, with implicit interest rates
ranging from 7.4% to 9.3%, monthly payments
totaling $35)
    
    
    777
    
    
    
    41129,228
    
    
    
    30,509Less: Current portion of capital lease obligations
    
    
    1,150
    
    
    
    1,125$
    28,078
    
    
    $
    29,384
 As of December 31,2007
    
    
    2008Notes PayableInstitute Loan, settled in April 2008
    
    $
    1,250
    
    
    $
    Kirksville Note; monthly payments of
$20; interest at 3.9% through
September 2011
    
    
    840
    
    
    
    628Various Gift Annuities; quarterly
payments of $34 extending through
2018; interest at 10%
    
    
    
    
    
    
    875Notes payable for vehicles requiring
monthly payments with interest rates
ranging from 9.5% to 11.0% extending
into January 2013
    
    
    318
    
    
    
    2412,408
    
    
    
    1,744Less: Current portion
    
    
    646
    
    
    
    357$
    1,762
    
    
    $
    1,387
  108




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Grand Canyon Education, Inc.
 Notes to Financial Statements
(In thousands of dollars, except share and per share data)
  Accounting for Leases
  December 31, 2008Capital LeaseObligations
    
    
    Notes Payable2009
    
    $
    3,829
    
    
    $
    3382010
    
    
    3,756
    
    
    
    3502011
    
    
    3,682
    
    
    
    3022012
    
    
    3,639
    
    
    
    1222013
    
    
    3,614
    
    
    
    81Thereafter
    
    
    37,943
    
    
    
    55156,463
    
    
    $
    1,744Less: Portion representing interest
    
    
    25,954Present value of minimum lease payments
    
    $
    30,509
  109




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Grand Canyon Education, Inc.
 Notes to Financial Statements
(In thousands of dollars, except share and per share data)
 9. Commitments and Contingencies
 Leases
  December 31,20082009
    
    $
    3,2872010
    
    
    3,6992011
    
    
    3,4442012
    
    
    3,1812013
    
    
    2,653Thereafter
    
    
    19,254Total minimum payments
    
    $
    35,518
  Legal Matters
    110




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Grand Canyon Education, Inc.
 Notes to Financial Statements
(In thousands of dollars, except share and per share data)
   qui tam qui tam qui tam
  111




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##### Table of Contents



Grand Canyon Education, Inc.
 Notes to Financial Statements
(In thousands of dollars, except share and per share data)
  qui
tam
  Tax Reserves, Non-Income Tax Related
  10. Earnings Per Share
   Year Ended December 31,2006
    
    
    2007
    
    
    2008Denominator:Basic common shares outstanding
    
    
    18,853,450
    
    
    
    18,922,838
    
    
    
    22,184,766Effect of dilutive preferred stock
    
    
    14,494,788
    
    
    
    12,393,062
    
    
    
    9,559,801Effect of dilutive warrants
    
    
    3,509,572
    
    
    
    3,805,384
    
    
    
    1,666,312Effect of contingently issuable
common stock
    
    
    
    
    
    
    21,912
    
    
    
    19,010Diluted common shares outstanding
    
    
    36,857,810
    
    
    
    35,143,196
    
    
    
    33,429,889
  112




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##### Table of Contents



Grand Canyon Education, Inc.
 Notes to Financial Statements
(In thousands of dollars, except share and per share data)
  11. Preferred Stock and Equity Transactions
 Preferred Stock
  Series A Convertible Preferred Stock
  Series B Convertible Preferred Stock
    113




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Grand Canyon Education, Inc.
 Notes to Financial Statements
(In thousands of dollars, except share and per share data)
 Series C Preferred Stock
    Common Stock
   114




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##### Table of Contents



Grand Canyon Education, Inc.
 Notes to Financial Statements
(In thousands of dollars, except share and per share data)
  Preferred Stock
  Warrants to Purchase Common Stock
    115




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##### Table of Contents



Grand Canyon Education, Inc.
 Notes to Financial Statements
(In thousands of dollars, except share and per share data)
 Investor Rights Agreement
  12. Income Taxes
   Year Ended December 31,2006
    
    
    2007
    
    
    2008Current:Federal
    
    $
    2,221
    
    
    $
    2,194
    
    
    $
    3,564State
    
    
    456
    
    
    
    478
    
    
    
    4322,677
    
    
    
    2,672
    
    
    
    3,996Deferred:Federal
    
    
    (1,792
    )
    
    
    (1,358
    )
    
    
    190State
    
    
    (356
    )
    
    
    (298
    )
    
    
    (331
    )(2,148
    )
    
    
    (1,656
    )
    
    
    (141
    )$
    529
    
    
    $
    1,016
    
    
    $
    3,855
  116




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##### Table of Contents



Grand Canyon Education, Inc.
 Notes to Financial Statements
(In thousands of dollars, except share and per share data)
  Year Ended December 31,2006
    
    
    2007
    
    
    2008Statutory U.S.
federal income tax
rate (benefit)
    
    
    34.0
    %
    
    
    34.0
    %
    
    
    35.0
    %State income taxes,
net of federal tax
benefit
    
    
    5.5
    
    
    
    4.7
    
    
    
    5.8State tax credits,
net of federal
benefit
    
    
    
    
    
    
    
    
    
    
    (5.2
    )Non deductible
expenses
    
    
    6.0
    
    
    
    0.5
    
    
    
    0.7Other
    
    
    1.4
    
    
    
    0.8
    
    
    
    0.3Effective income
tax rate (benefit)
    
    
    46.9
    %
    
    
    40.0
    %
    
    
    36.6
    %
  As of December 31,2007
    
    
    2008Current deferred tax asset (liability):Accounts receivable allowance for
doubtful accounts
    
    $
    4,981
    
    
    $
    2,668Tax credits
    
    
    
    
    
    
    183State taxes
    
    
    (286
    )
    
    
    (664
    )Other
    
    
    (55
    )
    
    
    416Current deferred tax asset
    
    
    4,640
    
    
    
    2,603Non-current deferred tax asset (liability):Depreciation and leases
    
    
    1,712
    
    
    
    1,750Share-based compensation
    
    
    
    
    
    
    1,403Unrealized gains on available for sale
securities
    
    
    (52
    )
    
    
    (10
    )Deferred rent
    
    
    
    
    
    
    45Intangibles
    
    
    1,146
    
    
    
    4,216Non-current deferred tax asset
    
    
    2,806
    
    
    
    7,404Net deferred tax asset
    
    $
    7,446
    
    
    $
    10,007
   117




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##### Table of Contents



Grand Canyon Education, Inc.
 Notes to Financial Statements
(In thousands of dollars, except share and per share data)
 Accounting
for Uncertainty in Income Taxes Accounting for Income
Taxes
  Balance at January 1, 2008
    
    $
    404Tax positions taken during the current yearIncreases
    
    
    117Decreases
    
    
    Tax positions taken during a prior yearIncreases
    
    
    227Decreases
    
    
    Decreases for settlements during the period
    
    
    Reductions for lapses of applicable statute of limitations
    
    
    Balance at December 31, 2008
    
    $
    748
   13. Regulatory
   118




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Grand Canyon Education, Inc.
 Notes to Financial Statements
(In thousands of dollars, except share and per share data)
       119




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##### Table of Contents



Grand Canyon Education, Inc.
 Notes to Financial Statements
(In thousands of dollars, except share and per share data)
   14. Share-Based Compensation Plans
 Adoption of Equity Plans
    120




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Grand Canyon Education, Inc.
 Notes to Financial Statements
(In thousands of dollars, except share and per share data)
  Incentive Plan
    121




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##### Table of Contents



Grand Canyon Education, Inc.
 Notes to Financial Statements
(In thousands of dollars, except share and per share data)
  Summary of Stock Options OutstandingWeighted
    
    
    WeightedAverage
    
    
    AverageExercise
    
    
    Remaining
    
    
    AggregateTotal
    
    
    Price per
    
    
    Contractual
    
    
    Intrinsic(Numbers in thousands, except per share data)
    
    Shares
    
    
    Share
    
    
    Term (Years)
    
    
    Value ($)(1)Outstanding as of December 31, 2007
    
    
    
    
    
    $
    Granted
    
    
    3,305
    
    
    
    12.00Exercised
    
    
    (49
    )
    
    
    12.00Forfeited, canceled or expired
    
    
    (8
    )
    
    
    12.00Outstanding as of December 31, 2008
    
    
    3,248
    
    
    $
    12.00
    
    
    
    6.14
    
    
    $
    22,017Exercisable as of December 31, 2008
    
    
    661
    
    
    $
    12.00
    
    
    
    4.85
    
    
    $
    4,483Available for issuance as of December 31,
2008
    
    
    903
 (1)
    
    Aggregate intrinsic value represents the value of our closing stock price on December 31, 2008
($18.78) in excess of the exercise price multiplied by the number of options outstanding or
exercisable.   Outstanding
    
    
    ExercisableWeighted Avg.
    
    
    Weighted Avg.
    
    
    
    
    
    
    Weighted Avg.Contractual
    
    
    Exercise
    
    
    
    
    
    
    ExerciseLife
    
    
    Price
    
    
    
    
    
    
    PriceExercise Price
    
    Outstanding
    
    
    Remaining
    
    
    per Share
    
    
    Exercisable
    
    
    Per Share(Options in thousands)$12.00
    
    
    3,248
    
    
    
    6.14
    
    
    $
    12.00
    
    
    
    661
    
    
    $
    12.00
  ($ in thousands)
    
    2008Amounts related to options exercised:Intrinsic value realized by optionee
    
    $
    249Actual tax benefit realized by Company for tax deductions
    
    $
    98
   122




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##### Table of Contents



Grand Canyon Education, Inc.
 Notes to Financial Statements
(In thousands of dollars, except share and per share data)
 Share-based Compensation Expense
  (Numbers in thousands)
    
    2008Instructional costs and services
    
    $
    1,737Selling and promotional
    
    
    1,322General and administrative
    
    
    619Share-based compensation expense included in
operating expenses
    
    
    3,678Tax effect of share-based compensation
    
    
    (1,454
    )Share-based compensation expense, net of tax
    
    $
    2,224
 Share-based Compensation Expense Assumptions
 Fair Value.
 Year Ended December 31,
    
    2008Weighted average fair value
    
    $
    5.68Expected volatility
    
    
    46.13
    %Expected life (years)
    
    
    6.14Risk-free interest rate
    
    
    2.44
    %Dividend yield
    
    
    0
    %
 Expected Volatility.
 Expected Life (years).
 Risk-Free Interest Rate.
 Dividend Yield.
  123




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##### Table of Contents



Grand Canyon Education, Inc.
 Notes to Financial Statements
(In thousands of dollars, except share and per share data)
 Forfeitures.
 Expected Vesting Period.
 Stock Grant
  401(k) Plan
  15. Related Party Transactions
   Shareholders
 Significant Education Holding, LLC (Sig Ed)
 220 Partners, LLC (220 Partners)
  124




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##### Table of Contents



Grand Canyon Education, Inc.
 Notes to Financial Statements
(In thousands of dollars, except share and per share data)
  Rich Crow Enterprises, LLC (Rich Crow)
  Significant Ventures, LLC (Significant Ventures)
 Endeavour Capital Fund IV, LP, Endeavour Associated Fund IV, LP, and Endeavour Capital
Parallel Fund IV, LP (Endeavour)
 Affiliates
 Mind Streams, LLC (Mind Streams) and 21st Century, LLC (21st Century)
 Youth In Motion
  125




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##### Table of Contents



Grand Canyon Education, Inc.
 Notes to Financial Statements
(In thousands of dollars, except per share data)
 The Center for Educational Excellence, LLC (CEE)
 16. Valuation and Qualifying Accounts
 Balance at
    
    
    
    
    
    
    
    
    
    
    Balance atBeginning of
    
    
    Charged to
    
    
    
    
    
    
    End ofYear
    
    
    Expense
    
    
    Deductions(1)
    
    
    YearAllowance for doubtful
accounts receivable:Year ended December 31, 2006
    
    $
    4,368
    
    
    
    4,664
    
    
    
    (1,652
    )
    
    $
    7,380Year ended December 31, 2007
    
    $
    7,380
    
    
    
    6,257
    
    
    
    (1,479
    )
    
    $
    12,158Year ended December 31, 2008
    
    $
    12,158
    
    
    
    8,465
    
    
    
    (14,267
    )
    
    $
    6,356
 (1)
    
    Deductions represent accounts written off, net of recoveries. 17. Quarterly Results of Operations (Unaudited)
  2008First Quarter
    
    
    Second Quarter
    
    
    Third Quarter
    
    
    Fourth QuarterNet revenue
    
    $
    35,709
    
    
    $
    34,566
    
    
    $
    39,351
    
    
    $
    51,683Costs and expenses:Instructional costs and services
    
    
    11,620
    
    
    
    12,408
    
    
    
    12,967
    
    
    
    17,455Selling and promotional
    
    
    12,586
    
    
    
    14,887
    
    
    
    18,562
    
    
    
    19,516General and administrative
    
    
    4,541
    
    
    
    6,419
    
    
    
    5,032
    
    
    
    10,833Royalty to former owner
    
    
    1,022
    
    
    
    466
    
    
    
    124
    
    
    
    74Total costs and expenses
    
    
    29,769
    
    
    
    34,180
    
    
    
    36,685
    
    
    
    47,878Operating Income (loss)
    
    
    5,940
    
    
    
    386
    
    
    
    2,666
    
    
    
    3,805Net interest expense
    
    
    (560
    )
    
    
    (515
    )
    
    
    (573
    )
    
    
    (609
    )Income (loss) before income taxes
    
    
    5,380
    
    
    
    (129
    )
    
    
    2,093
    
    
    
    3,196Income tax expense (benefit)
    
    
    2,076
    
    
    
    (49
    )
    
    
    841
    
    
    
    987Net income (loss)
    
    
    3,304
    
    
    
    (80
    )
    
    
    1,252
    
    
    
    2,209Preferred dividends
    
    
    (253
    )
    
    
    (268
    )
    
    
    (270
    )
    
    
    (147
    )Net income (loss) available to common
stockholders
    
    $
    3,051
    
    
    $
    (348
    )
    
    $
    982
    
    
    $
    2,062Earnings (loss) per share:Basic income (loss) per share(1)
    
    $
    0.16
    
    
    $
    (0.02
    )
    
    $
    0.05
    
    
    $
    0.07Diluted income (loss) per share(1)
    
    $
    0.09
    
    
    $
    (0.02
    )
    
    $
    0.03
    
    
    $
    0.06Basic weighted average shares
outstanding
    
    
    19,036
    
    
    
    19,142
    
    
    
    19,219
    
    
    
    31,240Diluted weighted average shares
outstanding
    
    
    33,849
    
    
    
    19,142
    
    
    
    30,970
    
    
    
    37,488
 (1)
    
    The sum of quarterly income per share may not equal annual income per share due to rounding and
second quarter net loss.  126




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##### Table of Contents



Grand Canyon Education, Inc.
 Notes to Financial Statements
(In thousands of dollars, except per share data)
 2007First Quarter
    
    
    Second Quarter
    
    
    Third Quarter
    
    
    Fourth QuarterNet revenue
    
    $
    23,213
    
    
    $
    20,858
    
    
    $
    24,401
    
    
    $
    30,854Costs and expenses:Instructional costs and services
    
    
    8,845
    
    
    
    8,710
    
    
    
    9,976
    
    
    
    11,519Selling and promotional
    
    
    6,008
    
    
    
    8,178
    
    
    
    10,105
    
    
    
    10,857General and administrative
    
    
    3,614
    
    
    
    4,763
    
    
    
    3,471
    
    
    
    5,153Royalty to former owner
    
    
    607
    
    
    
    1,022
    
    
    
    956
    
    
    
    1,197Total costs and expenses
    
    
    19,074
    
    
    
    22,673
    
    
    
    24,508
    
    
    
    28,726Operating Income (loss)
    
    
    4,139
    
    
    
    (1,815
    )
    
    
    (107
    )
    
    
    2,128Net interest expense
    
    
    (448
    )
    
    
    (375
    )
    
    
    (526
    )
    
    
    (454
    )Income (loss) before income taxes
    
    
    3,691
    
    
    
    (2,190
    )
    
    
    (633
    )
    
    
    1,674Income tax expense (benefit)
    
    
    1,475
    
    
    
    (875
    )
    
    
    (253
    )
    
    
    669Net income (loss)
    
    
    2,216
    
    
    
    (1,315
    )
    
    
    (380
    )
    
    
    1,005Preferred dividends
    
    
    (83
    )
    
    
    (84
    )
    
    
    (84
    )
    
    
    (98
    )Net income (loss) available to common
stockholders
    
    $
    2,133
    
    
    $
    (1,399
    )
    
    $
    (464
    )
    
    $
    907Earnings (loss) per share:Basic income (loss) per share(1)
    
    $
    0.11
    
    
    $
    (0.07
    )
    
    $
    (0.02
    )
    
    $
    0.05Diluted income (loss) per share(1)
    
    $
    0.06
    
    
    $
    (0.07
    )
    
    $
    (0.02
    )
    
    $
    0.03Basic weighted average shares
outstanding
    
    
    18,853
    
    
    
    18,853
    
    
    
    18,947
    
    
    
    19,036Diluted weighted average shares
outstanding
    
    
    35,058
    
    
    
    18,853
    
    
    
    18,947
    
    
    
    35,215
 (1)
    
    The sum of quarterly income per share may not equal annual income per share due to rounding and
second quarter net loss.  127




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##### Table of Contents



Item 9. Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure
  
 Item 9A. Controls and Procedures
 Disclosure Controls and Procedures
      
    
    engaging a new Chief Financial Officer, and hiring several additional
financial and accounting personnel, all of whom have experience managing or
working in the corporate accounting department of large publicly traded
companies;
 
    
    making numerous policy and procedure changes governing the accounting review
and approval of significant and unusual transactions, including process changes
in the financial reporting area, including additional oversight and review; and
improving in the understanding of roles and responsibilities among our
financial and accounting personnel; and
 
    
    conducting training of our accounting staff for purposes of enabling them to
recognize and properly account for transactions of the type described above.
  128




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Changes in Internal Control Over Financial Reporting
   
 Item 9B. Other Information
  
 PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance
    
 Item 11. Executive Compensation
  
 Item 12.
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
   129




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##### Table of Contents



Item 13. Certain Relationships and Related Transactions, and Director Independence
  
 Item 14. Principal Accounting Fees and Services
  
 PART IV
 
 Item 15. Exhibits, Financial Statement Schedules
 (a) The following documents are filed as part of this Annual Report on Form 10-K:
 Financial Statements filed as part of this report
 Index to Consolidated Financial Statements
    
    PageReport of Independent Registered Public Accounting Firm
    
    
    91Balance Sheets as of December 31, 2007 and 2008
    
    
    92Statements of Operations for the years ended December 31, 2006, 2007 and 2008
    
    
    93Statements of Preferred Stock and Stockholders (Deficit) Equity for the
years ended December 31, 2006, 2007 and 2008
    
    
    94Statements of Cash Flows for the years ended December 31, 2006, 2007 and 2008
    
    
    95Notes to Financial Statements
    
    
    96
 Financial Statement Schedules
  Exhibits
 Number
    
    Description
    
    Method of Filing3.1
    
    
    Amended and Restated Certificate of Incorporation
    
    Incorporated by
reference to
Exhibit 3.1 to
Amendment No. 6 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on November 12,
2008.3.2
    
    
    Amended and Restated Bylaws
    
    Incorporated by
reference to
Exhibit 3.2 to
Amendment No. 6 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on November 12,
2008.4.1
    
    
    Specimen of Stock Certificate
    
    Incorporated by
reference to
Exhibit 4.1 to
Amendment No. 2 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on September
29, 2008.4.2
    
    
    Amended and Restated Investor Rights Agreement, dated
September 17, 2008, by and among Grand Canyon
Education, Inc. and the other parties named therein
    
    Incorporated by
reference to
Exhibit 4.2 to
Amendment No. 2 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on September
29, 2008.10.1
    
    
    Amended and Restated Executive Employment Agreement,
dated September 10, 2008, by and between Grand Canyon
Education, Inc. and Brent Richardson
    
    Incorporated by
reference to
Exhibit 10.1 to
Amendment No. 2 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on September
29, 2008.10.2
    
    
    Amended and Restated Executive Employment Agreement,
dated September 10, 2008, by and between Grand Canyon
Education, Inc. and Christopher Richardson
    
    Incorporated by
reference to
Exhibit 10.2 to
Amendment No. 2 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on September
29, 2008.
  130




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##### Table of Contents



Number
    
    Description
    
    Method of Filing10.3
    
    
    Amended and Restated Senior Management Agreement, dated
September 10, 2008, by and between Grand Canyon
Education, Inc. and John Crowley
    
    Incorporated by
reference to
Exhibit 10.3 to
Amendment No. 2 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on September
29, 2008.10.4
    
    
    2008 Equity Incentive Plan
    
    Incorporated by
reference to
Exhibit 10.4 to
Amendment No. 2 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on September
29, 2008.10.5
    
    
    2008 Employee Stock Purchase Plan
    
    Incorporated by
reference to
Exhibit 10.5 to
Amendment No. 2 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on September
29, 2008.10.6
    
    
    Lease Agreement, effective June 28, 2004, by and
between Spirit Finance Acquisitions, LLC and
Significant Education, LLC
    
    Incorporated by
reference to
Exhibit 10.7 to the
Companys
Registration
Statement on Form
S-1 filed with the
SEC on May 13,
2008.10.7
    
    
    First Amendment to Lease Agreement, effective September
24, 2004, by and between Spirit Finance Acquisitions,
LLC and Significant Education, LLC
    
    Incorporated by
reference to
Exhibit 10.8 to the
Companys
Registration
Statement on Form
S-1 filed with the
SEC on May 13,
2008.10.8
    
    
    Second Amendment to Lease Agreement, effective August
23, 2005, by and between Spirit Master Funding, LLC and
Significant Education, LLC
    
    Incorporated by
reference to
Exhibit 10.9 to the
Companys
Registration
Statement on Form
S-1 filed with the
SEC on May 13,
2008.10.9
    
    
    Third Amendment to Lease Agreement, effective June
2006, by and between Spirit Master Funding, LLC and
Significant Education, Inc.
    
    Incorporated by
reference to
Exhibit 10.10 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on May 13,
2008.10.10
    
    
    Fourth Amendment to Lease Agreement, effective August
9, 2006, by and between Spirit Master Funding, LLC and
Significant Education, Inc.
    
    Incorporated by
reference to
Exhibit 10.11 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on May 13,
2008.10.11
    
    
    Fifth Amendment to Lease Agreement, effective December
31, 2006, by and between Spirit Master Funding, LLC and
Significant Education, Inc.
    
    Incorporated by
reference to
Exhibit 10.12 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on May 13,
2008.10.12
    
    
    Sixth Amendment to Lease Agreement, effective September
30, 2007, by and between Spirit Master Funding, LLC and
Significant Education, Inc.
    
    Incorporated by
reference to
Exhibit 10.13 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on May 13,
2008.10.13
    
    
    Seventh Amendment to Lease Agreement, effective March
28, 2008, by and between Spirit Master Funding, LLC and
Significant Education, Inc.
    
    Incorporated by
reference to
Exhibit 10.14 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on May 13,
2008.10.14
    
    
    License Agreement, dated June 30, 2004, by and between
Blanchard Education, LLC and Significant Education, LLC
    
    Incorporated by
reference to
Exhibit 10.15 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on May 13,
2008.10.15
    
    
    Letter Agreement, dated February 6, 2006, by and
between The Ken Blanchard Companies and Grand Canyon
University
    
    Incorporated by
reference to
Exhibit 10.16 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on May 13,
2008.10.16
    
    
    Amendment to License Agreement, dated May 8, 2008, by
and between Blanchard Education, LLC and Grand Canyon
Education, Inc.
    
    Incorporated by
reference to
Exhibit 10.17 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on May 13,
2008.
  131




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##### Table of Contents



Number
    
    Description
    
    Method of Filing10.17
    
    
    Collaboration Agreement, dated July 11, 2005, by and
between Mind Streams, LLC and Significant Education,
LLC (as supplemented by Project One and Project Two)
    
    Incorporated by
reference to
Exhibit 10.18 to
Amendment No. 1 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on August 13,
2008.10.18
    
    
    Executive Employment Agreement, dated June 25, 2008, by
and between Grand Canyon Education, Inc. and Daniel E.
Bachus
    
    Incorporated by
reference to
Exhibit 10.19 to
Amendment No. 1 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on August 13,
2008.10.19
    
    
    Executive Employment Agreement, dated June 25, 2008, by
and between Grand Canyon Education, Inc. and Brian E.
Mueller
    
    Incorporated by
reference to
Exhibit 10.20 to
Amendment No. 1 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on August 13,
2008.10.20
    
    
    Executive Employment Agreement, dated June 25, 2008, by
and between Grand Canyon Education, Inc. and W. Stan
Meyer
    
    Incorporated by
reference to
Exhibit 10.21 to
Amendment No. 1 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on August 13,
2008.10.21
    
    
    Form of Director and Officer Indemnity Agreement
    
    Incorporated by
reference to
Exhibit 10.21 to
Amendment No. 2 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on September
29, 2008.23.1
    
    
    Consent of Independent Registered Public Accounting Firm
    
    Filed herewith.24.1
    
    
    Power of Attorney
    
    See signature page.31.1
    
    
    Certification of the Chief Executive Officer Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
    
    Filed herewith.31.2
    
    
    Certification of the Chief Financial Officer Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
    
    Filed herewith.32.1
    
    
    Certification of Chief Executive Officer Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
    
    Filed herewith.32.2
    
    
    Certification of Chief Financial Officer Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
    
    Filed herewith.
 
  
    
    Indicates a management contract or any compensatory plan, contract or arrangement.
    
    This certification is being furnished solely to accompany this report pursuant to 18 U.S.C.
Section 1350, and is not being filed for purposes of Section 18 of the Exchange Act, and is not to
be incorporated by reference into any filings of the Company, whether made before or after the date
hereof, regardless of any general incorporation language in such filing.  132




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##### Table of Contents



SIGNATURES
  GRAND CANYON EDUCATION, INC.By:
    /s/ Brian E. MuellerName:
    Brian E. MuellerTitle:
    Chief Executive Officer   Signature
    
    Title
    
    Date/s/ Brian E. Mueller

Brian E. Mueller
    
    Chief Executive Officer(Principal Executive Officer)
    
    February 19, 2009/s/ Daniel E. Bachus

Daniel E. Bachus
    
    Chief Financial Officer
(Principal Financial Officer
and Principal Accounting
Officer)
    
    February 19, 2009/s/ Brent D. Richardson

Brent D. Richardson
    
    Executive Chairman
    
    February 19, 2009/s/ Christopher C.
Richardson

Christopher C. Richardson
    
    Director
    
    February 19, 2009/s/ David J. Johnson

David J. Johnson
    
    Director
    
    February 19, 2009/s/ Jack A. Henry

Jack A. Henry
    
    Director
    
    February 19, 2009/s/ D. Mark Dorman

D. Mark Dorman
    
    Director
    
    February 19, 2009/s/ Chad N. Heath

Chad N. Heath
    
    Director
    
    February 19, 2009
  133




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##### Table of Contents



EXHIBIT INDEX
 Number
    
    Description
    
    Method of Filing3.1
    
    
    Amended and Restated Certificate of Incorporation
    
    Incorporated by
reference to
Exhibit 3.1 to
Amendment No. 6 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on November 12,
2008.3.2
    
    
    Amended and Restated Bylaws
    
    Incorporated by
reference to
Exhibit 3.2 to
Amendment No. 6 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on November 12,
2008.4.1
    
    
    Specimen of Stock Certificate
    
    Incorporated by
reference to
Exhibit 4.1 to
Amendment No. 2 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on September
29, 2008.4.2
    
    
    Amended and Restated Investor Rights Agreement, dated
September 17, 2008, by and among Grand Canyon
Education, Inc. and the other parties named therein
    
    Incorporated by
reference to
Exhibit 4.2 to
Amendment No. 2 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on September
29, 2008.10.1
    
    
    Amended and Restated Executive Employment Agreement,
dated September 10, 2008, by and between Grand Canyon
Education, Inc. and Brent Richardson
    
    Incorporated by
reference to
Exhibit 10.1 to
Amendment No. 2 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on September
29, 2008.10.2
    
    
    Amended and Restated Executive Employment Agreement,
dated September 10, 2008, by and between Grand Canyon
Education, Inc. and Christopher Richardson
    
    Incorporated by
reference to
Exhibit 10.2 to
Amendment No. 2 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on September
29, 2008.10.3
    
    
    Amended and Restated Senior Management Agreement, dated
September 10, 2008, by and between Grand Canyon
Education, Inc. and John Crowley
    
    Incorporated by
reference to
Exhibit 10.3 to
Amendment No. 2 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on September
29, 2008.10.4
    
    
    2008 Equity Incentive Plan
    
    Incorporated by
reference to
Exhibit 10.4 to
Amendment No. 2 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on September
29, 2008.10.5
    
    
    2008 Employee Stock Purchase Plan
    
    Incorporated by
reference to
Exhibit 10.5 to
Amendment No. 2 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on September
29, 2008.10.6
    
    
    Lease Agreement, effective June 28, 2004, by and
between Spirit Finance Acquisitions, LLC and
Significant Education, LLC
    
    Incorporated by
reference to
Exhibit 10.7 to the
Companys
Registration
Statement on Form
S-1 filed with the
SEC on May 13,
2008.10.7
    
    
    First Amendment to Lease Agreement, effective September
24, 2004, by and between Spirit Finance Acquisitions,
LLC and Significant Education, LLC
    
    Incorporated by
reference to
Exhibit 10.8 to the
Companys
Registration
Statement on Form
S-1 filed with the
SEC on May 13,
2008.10.8
    
    
    Second Amendment to Lease Agreement, effective August
23, 2005, by and between Spirit Master Funding, LLC and
Significant Education, LLC
    
    Incorporated by
reference to
Exhibit 10.9 to the
Companys
Registration
Statement on Form
S-1 filed with the
SEC on May 13,
2008.10.9
    
    
    Third Amendment to Lease Agreement, effective June
2006, by and between Spirit Master Funding, LLC and
Significant Education, Inc.
    
    Incorporated by
reference to
Exhibit 10.10 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on May 13,
2008.10.10
    
    
    Fourth Amendment to Lease Agreement, effective August
9, 2006, by and between Spirit Master Funding, LLC and
Significant Education, Inc.
    
    Incorporated by
reference to
Exhibit 10.11 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on May 13,
2008.10.11
    
    
    Fifth Amendment to Lease Agreement, effective December
31, 2006, by and between Spirit Master Funding, LLC and
Significant Education, Inc.
    
    Incorporated by
reference to
Exhibit 10.12 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on May 13,
2008.10.12
    
    
    Sixth Amendment to Lease Agreement, effective September
30, 2007, by and between Spirit Master Funding, LLC and
Significant Education, Inc.
    
    Incorporated by
reference to
Exhibit 10.13 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on May 13,
2008.10.13
    
    
    Seventh Amendment to Lease Agreement, effective March
28, 2008, by and between Spirit Master Funding, LLC and
Significant Education, Inc.
    
    Incorporated by
reference to
Exhibit 10.14 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on May 13,
2008.
  134




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##### Table of Contents



Number
    
    Description
    
    Method of Filing10.14
    
    
    License Agreement, dated June 30, 2004, by and between
Blanchard Education, LLC and Significant Education, LLC
    
    Incorporated by
reference to
Exhibit 10.15 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on May 13,
2008.10.15
    
    
    Letter Agreement, dated February 6, 2006, by and
between The Ken Blanchard Companies and Grand Canyon
University
    
    Incorporated by
reference to
Exhibit 10.16 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on May 13,
2008.10.16
    
    
    Amendment to License Agreement, dated May 8, 2008, by
and between Blanchard Education, LLC and Grand Canyon
Education, Inc.
    
    Incorporated by
reference to
Exhibit 10.17 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on May 13,
2008.10.17
    
    
    Collaboration Agreement, dated July 11, 2005, by and
between Mind Streams, LLC and Significant Education,
LLC (as supplemented by Project One and Project Two)
    
    Incorporated by
reference to
Exhibit 10.18 to
Amendment No. 1 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on August 13,
2008.10.18
    
    
    Executive Employment Agreement, dated June 25, 2008, by
and between Grand Canyon Education, Inc. and Daniel E.
Bachus
    
    Incorporated by
reference to
Exhibit 10.19 to
Amendment No. 1 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on August 13,
2008.10.19
    
    
    Executive Employment Agreement, dated June 25, 2008, by
and between Grand Canyon Education, Inc. and Brian E.
Mueller
    
    Incorporated by
reference to
Exhibit 10.20 to
Amendment No. 1 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on August 13,
2008.10.20
    
    
    Executive Employment Agreement, dated June 25, 2008, by
and between Grand Canyon Education, Inc. and W. Stan
Meyer
    
    Incorporated by
reference to
Exhibit 10.21 to
Amendment No. 1 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on August 13,
2008.10.21
    
    
    Form of Director and Officer Indemnity Agreement
    
    Incorporated by
reference to
Exhibit 10.21 to
Amendment No. 2 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on September
29, 2008.23.1
    
    
    Consent of Independent Registered Public Accounting Firm
    
    Filed herewith.24.1
    
    
    Power of Attorney
    
    See signature page.31.1
    
    
    Certification of the Chief Executive Officer Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
    
    Filed herewith.31.2
    
    
    Certification of the Chief Financial Officer Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
    
    Filed herewith.32.1
    
    
    Certification of Chief Executive Officer Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
    
    Filed herewith.32.2
    
    
    Certification of Chief Financial Officer Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
    
    Filed herewith.
 
  
    
    Indicates a management contract or any compensatory plan, contract or arrangement.
    
    This certification is being furnished solely to accompany this report pursuant to 18 U.S.C.
Section 1350, and is not being filed for purposes of Section 18 of the Exchange Act, and is not to
be incorporated by reference into any filings of the Company, whether made before or after the date
hereof, regardless of any general incorporation language in such filing.  135