What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-09-25 compared with 2024-10-01 · 159 added, 115 removed, 256 unchanged (52% of the section changed)

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dollars, unless otherwise noted.

are a provider of postsecondary education services through our accredited academic institutions, HDMC, CCC and Integrity.

30, 2024, we enrolled 2,166 students.

For additional information regarding our business and our academic institutions, see “Business.”

provide career-focused, post-secondary education services to students at all stages of adult life, from recent high school graduates

to working parents, through our accredited academic institutions:

High Desert Medical College, which we acquired in July 2010, Central

Coast College, which we acquired in January 2019, Contra Costa Medical Career College, which we acquired in December 2024, and Integrity

College of Health.

On December 31, 2019, we entered into a Membership Interest Purchase Agreement with the sole member of Integrity.

We purchased from the sole member of Integrity on that date 24.5% of her interest and obtained an exclusive option to acquire her remaining

membership interest upon payment of $100, which was exercised on September 15, 2020.

For purposes of our financial statements, the acquisition

of Integrity is deemed to have been effective as of December 31, 2019.

As of June 30, 2025, we enrolled 3,101 students.

Desert Medical College

was established in the State of California in 2002 and began offering classes in 2003.

It started with campuses in Lancaster, California,

and added its first branch in 2008 in Bakersfield, California.

Due to enrollment growth and high demand for its services, HDMC expanded

to add a branch campus in Temecula, California in order to accommodate 250 to 400 additional students.

HDMC offers UT, VN, VN Associate

of Applied Science degree program, Associate Degree of Nursing, nursing assistant, MRI Associate of Applied Science, cardiac sonography,

pharmacy technician, dental assisting, clinical medical assisting, medical administrative assisting programs, medical billing and coding,

veterinary assistant, phlebotomy technician avocational, nursing assistant avocational, UT Associate of Applied Science degree programs,

and an EMT program.

HDMC also has obtained approval ACCET to offer a surgical technology Associate of Applied Science program and sterile

processing technician program and plans to begin doing so in October 2025, pending receipt of approval from the BPPE and ED.

30, 2025, HDMC had 1,956 students enrolled in its programs.

Coast College

was established in the State of California in 1983.

In 1991, CCC moved to its current location in Salinas, California to accommodate

growing enrollment numbers and the addition of new training programs.

offers the following certificate or degree programs:

business administrative specialist, computer specialist:

accounting, medical administrative

assistant, medical assisting, nursing assistant, UT, UT Associate of Applied Science, veterinary assistant, veterinary technology Associate

of Applied Science, VN, surgical technology (Associate of Applied Science), dental assisting, sterile processing technician and pharmacy

CCC also offers an avocational phlebotomy technician program.

CCC also has obtained approval from ACCET to offer an MRI Associate

of Applied Science Program and cardiac sonography Associate of Applied Science programs and plans to begin doing so in October 2025,

pending receipt of additional approvals.

As of June 30, 2025, CCC had 495 students enrolled in its programs.

College of Health

was established in the State of California in 2007.

Integrity’s campus is located in Pasadena, California.

Integrity offers VN,

VN Associate of Applied Science, RN to BSN, medical assisting, medical billing and coding, veterinary assistant, and Diagnostic Medical

Sonography programs.

Integrity also plans to offer an EMT program beginning in early 2026 and is in the process of obtaining approvals

for the program (for which Integrity is not planning for ED approval to make Title IV funds available for students who enroll in the

For purposes of our financial statements, Legacy Education, L.L.C.

is deemed to have acquired Integrity in December 2019.

of June 30, 2025, Integrity had 202 students enrolled in its programs.

Costa Medical Career College

offers the following certificate and degree programs:

surgical technology (Associate of Applied Science), sterile processing technician,

pharmacy technician, diagnostic medical sonography, medical assisting with phlebotomy, dental assisting, vocational nursing, clinical

medical assisting, EKG/ECG technician, medical administrative assistant/billing and coding specialist and medical assisting and phlebotomy

As of June 30, 2025, CCMCC had 448 students enrolled in its programs.

operating data

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leases and amortization of intangible assets.

expense reflects interest paid under notes issued to our investors, IRS interest, non-cash interest related to unit option grants, interest

related to notes associated with CCC, and other debt related interest.

expense reflects interest paid under notes issued to our investors, Internal Revenue Service interest, non-cash interest related to unit

option grants, interest related to notes associated with CCC, and other debt related interest.

income relates to interest received from investments.

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regarding matters that are inherently uncertain.

preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the

reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial

statements and the reported amounts of revenues and expenses during the reporting period.

Actual results could differ from those

Significant items subject to such estimates and assumptions include the evaluation of the Company’s distinct

performance obligations, the valuation of equity instruments and valuation allowances for credit losses related to accounts

preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported

amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the

reported amounts of revenues and expenses during the reporting period.

Actual results could differ from those estimates.

items subject to such estimates and assumptions include the evaluation of the Company’s distinct performance obligations, the valuation

of equity instruments and valuation allowances for credit losses related to accounts receivable.

for Credit Losses

record an allowance for doubtful credit losses for estimated losses resulting from the inability, failure or refusal of our students

Company records an allowance for credit losses for estimated losses resulting from the inability, failure or refusal of its students

to make required payments, which includes the recovery of financial aid funds advanced to a student for amounts in excess of the student’s

cost of tuition and related fees.

We determine the adequacy of our allowance for doubtful accounts based on an analysis of our historical

bad debt experience, current economic trends, and the aging of the accounts receivable and student status.

We apply reserves to our receivables

based upon an estimate of the risk presented by the age of the receivables and student status.

We write off account receivable balances

of inactive students at the earlier of the time the balances were deemed uncollectible, or one year after the revenue is generated.

debt expense is recorded as a general and administrative expense in the income statement.

The Company performs an analysis annually to

determine which accounts are uncollectable and write them off.

of long-lived assets

evaluate the recoverability of our long-lived assets for impairment, other than goodwill, whenever events or changes in circumstances

The Company determines the adequacy of its allowance for doubtful accounts based on an analysis of

its historical bad debt experience, current economic trends, and the aging of the accounts receivable and student status.

applies reserves to its receivables based upon an estimate of the risk presented by the age of the receivables and student status.

Company writes off account receivable balances of inactive students at the earlier of the time the balances were deemed uncollectible,

or one year after the revenue is generated.

Bad debt expense is recorded as a general and administrative expense in the accompanying

statements of operations.

The Company performs an analysis annually to determine which accounts are uncollectable and then writes them

Company evaluates the recoverability of its long-lived assets for impairment, other than goodwill, whenever events or changes in circumstances

indicate that the carrying amount of an asset may not be recoverable.

Recoverability of assets to be held and used is measured by a comparison

of the carrying amount of an asset to undiscounted future net cash flows expected to be generated by the assets.

If such assets are considered

to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair

value of the assets.

Fair value estimates are based on assumptions concerning the amount and timing of estimated future cash flows.

had no long-lived asset impairments as of June 30, 2024 and 2023, respectively.

The recoverability of assets to be held and used is measured by

a comparison of the carrying amount of an asset to undiscounted future net cash flows expected to be generated by the assets.

assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets

exceeds the fair value of the assets.

Fair value estimates are based on assumptions concerning the amount and timing of estimated future

The Company had no long-lived asset impairments as of June 30, 2025 and June 30, 2024.

requires management to evaluate tax positions taken by us and recognize a tax liability if we have taken an uncertain position that is

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Based Compensation

The Company utilizes ASC 718, Stock Compensation, related to accounting

for share-based payments and, accordingly, records compensation expense for share-based awards based upon an assessment of the grant date

fair value for stock options and restricted stock awards.

The Company estimates the fair value of stock-based compensation awards on the

date of grant using an option-pricing model.

The value of the portion of the award that is ultimately expected to vest is recognized as

an expense over the requisite service periods in the Company’s consolidated statements of operations.

The Company estimates the

fair value of stock-based compensation awards using the Black-Scholes model.

This model requires the Company to estimate the expected

volatility and value of its common stock and the expected term of the stock options, all of which are highly complex and subjective variables.

The expected life was calculated based on the simplified method as described by the SEC Staff Accounting Bulletin No.

110, Share-Based

The Company’s estimate of expected volatility was based on the volatility of peers.

The Company has selected a risk-free

rate based on the implied yield available on U.S.

Treasury securities with a maturity equivalent to the expected term of the options.

Company utilizes ASC 718, Stock Compensation, related to accounting for share-based payments and, accordingly, records compensation

expense for share-based awards based upon an assessment of the grant date fair value for stock options and restricted stock awards.

Company estimates the fair value of stock-based compensation awards on the date of grant using an option-pricing model.

the portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service periods in the Company’s

consolidated statements of operations.

The Company estimates the fair value of stock-based compensation awards using the Black-Scholes

This model requires the Company to estimate the expected volatility and value of its common stock and the expected term of the

stock options, all of which are highly complex and subjective variables.

The expected life was calculated based on the simplified method

as described by the SEC Staff Accounting Bulletin No.

110, Share-Based Payment.

The Company’s estimate of expected volatility was

based on the volatility of peers.

The Company has selected a risk-free rate based on the implied yield available on U.S.

Treasury securities

with a maturity equivalent to the expected term of the options.

The Company accounts for forfeitures upon occurrence.

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Year ended June 30,

Percentage Change

Costs and expenses:

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$18.2 million, or approximately 39.5%.

The increase was primarily due to increased student enrollment and the increase in pricing of certain programs.

The increase was primarily due to increased student enrollment and the increase in pricing of

certain programs.

Our educational service expense was approximately $34.2 million in fiscal 2025 compared to approximately $26.4 million

in fiscal 2024, an increase of approximately $7.8 million, or approximately 29.5%.

The increase is primarily a result of increased instructional

and staffing required to support the increase in enrollments as well as a non-cash compensation charge of approximately $1.9 million

related to a stock option grant, of which, approximately $1.8 million pertain to options that vested immediately

upon the granting of the award.

and administrative expense .

Our general and administrative expense was approximately $13.0 million in fiscal 2024, compared to approximately

$10.7 million in fiscal 2023, an increase of approximately $2.3 million, or approximately 22.0%.

The increase was primarily related increased

marketing and bad debt expense.

We anticipate general and administrative expense will continue to increase as our business continues

to move towards decentralization, reflecting (i) that we are now more corporate and campus-based, with additional management overseeing

various campuses, and (ii) additional professional fees as we pursue acquisitions of new institutions.

Of the total general and administrative

expense, $4.1 million and $3.5 million related to sales and marketing expense for fiscal 2024 and 2023, respectively.

The increase was primarily attributable to the increased

instructional and staffing required to support the increase in enrollments as well as increased rent and externship fees and our investments

in our RN program offset by a decrease in non-cash compensation charge of $1.3 million.

General and administrative expense .

and administrative expense was approximately $19.3 million in fiscal 2025, compared to approximately $13.0 million in fiscal 2024, an

increase of approximately $6.3 million, or approximately 48.2%.

The increase was primarily attributable to an increase in marketing expense,

professional fees and bad debt expense.

Of the total general and administrative expense, $4.7 million and $4.1 million relate to marketing

expenses for fiscal 2025 and 2024, respectively.

and amortization.

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The increase is primarily due to the increase in income.

We had net income of approximately $5.1 million in fiscal 2024 compared to approximately $2.7 million in fiscal 2023, an

increase of approximately $2.4 million, due to reason mentioned above.

We had net income of approximately

$7.5 million in fiscal 2025 compared to approximately $5.1 million in fiscal 2024, an increase of approximately $2.4 million, due to reasons

mentioned above.

and Capital Resources

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Flow Activities for the Years Ended June 30, 2025 and 2024

cash provided by operating activities was approximately $1.6 million in fiscal year 2024, and net cash provided in operating activities

was approximately $1.8 million in fiscal 2023 primarily due to timing of student payments and financial aid processing

Net cash provided by operating activities was approximately

$7.8 million in fiscal year 2025, and net cash provided in operating activities was approximately $1.6 million in fiscal 2024 primarily

due to an increase to net income of $2.4 million and the increase in collections related to accounts receivable in fiscal 2025.

cash used in investing activities was approximately $7.0 million in fiscal year 2025 and approximately $0.4 million in fiscal year 2024,

a decrease of approximately $0.2 million due primarily to investments relating to our student labs.

cash used in financing activities was approximately $0.2 million in fiscal year 2024 due to repayments f of debt.

Net cash used in financing activities was approximately $1.1 million in fiscal year 2023 mostly due to dividends paid.

July 2021 to September 2021, the Company issued 108,333 shares of common stock to investors at a purchase price of $3.00 per share

for total proceeds of $325,000.

July 2022 to June 2023, the Company issued dividends of $929,116

July 2023 to June 2024, the Company issued dividends of $0

an increase of approximately $6.6 million due primarily to cash paid for the acquisition of CCMCC.

cash used provided by financing activities was approximately $9.1 million in fiscal year 2025 primarily due to proceeds from the Company’s

Net cash used in financing activities was approximately $0.2 million in fiscal year 2024 due to repayments of debt.

July 2024 to September 2024, the Company issued 2,500,000 shares of common stock in its initial public offering at a price of $4.00

per share for gross proceeds of $10,000,000.

October 2024 to December 2024, the Company issued 375,000 shares of common stock pursuant to the exercise of the over-allotment option

by the underwriters in connection with the initial public offering at a price of $4.00 per share for gross proceeds of $1,500,000.

believe that inflation has not had a material impact on our results of operations for the fiscal years ended 2025 and 2024.

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Accounting Pronouncements

February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) in order to increase transparency and comparability among organizations

by recognizing lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under current

ASU 2016-02 requires that a lessee should recognize a liability to make lease payments (the lease liability) and a right-of-use

asset representing its right to use the underlying asset for the lease term on the balance sheet.

ASU 2016-02 is effective for fiscal

years beginning after December 15, 2021, using a modified retrospective approach and early adoption is permitted.

The Company adopted

ASU 2016-02 on July 1, 2022.

The Company has elected to apply the short-term scope exception for leases with terms of 12 months or less

at the inception of the lease and will continue to recognize rent expense on a straight-line basis.

As a result of the adoption, on July

1, 2022, the Company recognized a lease liability of approximately $5.7 million, which represented the present value of the remaining

minimum lease payments using an estimated incremental borrowing rate of 3.98%.

As of July 1, 2022, the Company recognized a right-to-use

asset of approximately $5.3 million.

Lease expense did not change materially as a result of the adoption of ASU 2016-02.

June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial

Instruments (“ASU 2016-13”).

ASU 2016-13 provides guidance for recognizing credit losses on financial instruments based on

an estimate of current expected credit losses model.

The amendments are effective for fiscal years beginning after December 15, 2019.

Recently, the FASB issued the final ASU to delay adoption for smaller reporting companies for fiscal years beginning after December 15,

We adopted ASU 2016-13 on July 1, 2023 and it did not have a material impact on our consolidated financial statements and related

August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts

in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.

This ASU amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity’s own equity,

and also improves and amends the related earnings per share guidance for both Subtopics.

The ASU will be effective for smaller reporting

companies for annual reporting periods beginning after December 15, 2023 and interim periods within those annual periods and early adoption

is permitted.

We are currently evaluating the impact of the new guidance on our consolidated financial statements.

June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic

Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”).

ASU 2016-13 provides guidance for recognizing

credit losses on financial instruments based on an estimate of current expected credit losses model.

The amendments are effective for

fiscal years beginning after December 15, 2019.

Subsequently, the FASB issued the final ASU to delay adoption for smaller reporting companies

for fiscal years beginning after December 15, 2022.

The Company adopted ASU 2016-13 on July 1, 2023 and it did not have a material impact

on its consolidated financial statements and related disclosures.

August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives

and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts

in an Entity’s Own Equity.

This ASU amends the guidance on convertible instruments and the derivatives scope exception for

contracts in an entity’s own equity and also improves and amends the related EPS guidance for both Subtopics.

adopted ASU 2020-06 on July 1, 2024 and it did not have a material impact on its consolidated financial statements and related

November 2023, the FASB issued ASU 2023-07, Segment Reporting—Improvements to Reportable Segment Disclosures (“ASU

2023-07”), which requires incremental disclosures related to a public entity’s reportable segments.

Required disclosures

include, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker

(“CODM”) and included within each reported measure of segment profit or loss, an amount for other segment items (which is

the difference between segment revenue less segment expenses and less segment profit or loss) and a description of its composition, the

title and position of the CODM, and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing

segment performance and deciding how to allocate resources.

The standard also permits disclosure of more than one measure of segment

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning

after December 15, 2024.

There are aspects of ASU 2023-07 that apply to entities with one reportable segment.

The Company adopted this

guidance in the fiscal fourth quarter of 2025.

The adoption of ASU 2023-07 is reflected in Note 2 to our audited consolidated financial

statements included herein, “Summary of Significant Accounting Policies - Segment Reporting.”.

April 5, 2012, the JOBS Act was enacted.

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remain an “emerging growth company” until the earliest of (i) the last day of the fiscal year in which we have total annual

gross revenues of $1.235 billion or more, as such amount is indexed for inflation every five years by the Securities and Exchange Commission

to reflect the change in the Consumer Price Index for All Urban Consumers during its most recently completed fiscal year;

(ii) the last

day of our fiscal year following the fifth anniversary of the date of the completion of our initial public offering;

(iii) the date on

which we have issued more than $1 billion in nonconvertible debt during the previous three years;

or (iv) the date on which we are deemed

to be a large accelerated filer under the rules of the Securities and Exchange Commission.

gross revenues of $1.235 billion or more;

(ii) the last day of our fiscal year following the fifth anniversary of the date of the completion

of our initial public offering;

(iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous

or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the Securities and Exchange Commission.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis