Legacy Education Inc. 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. You should read the following discussion and analysis of our financial condition and plan of operations together with our accompanying consolidated financial statements and the related notes appearing elsewhere in this Annual Report on Form 10-K. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included elsewhere in this Annual Report on Form 10-K. All amounts in this report are in U.S. dollars, unless otherwise noted. Overview We 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. 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, 2026, we enrolled 3,377 students. High Desert Medical College HDMC 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, Medical Billing and Coding, Veterinary Assistant, Phlebotomy Technician avocational, UT Associate of Applied Science degree programs, EMT, Surgical Technology Associate of Applied Science, and Sterile Processing Technician programs. As of June 30, 2026, HDMC had 2,097 students enrolled in its programs. Central Coast College CCC 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. In September 2026, CCC entered into a lease for a new, additional location in Houston, Texas, which CCC currently projects to open in November 2026, subject to receipt of the required regulatory and accreditation approvals. CCC offers the following certificate or degree programs: 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, Pharmacy Technician, MRI Associate of Applied Science, and Cardiac Sonography Associate of Applied Science. CCC also offers an avocational Phlebotomy Technician program. As of June 30, 2026, CCC had 576 students enrolled in its programs. Integrity College of Health Integrity was established in the State of California in 2007. Integrity’s campus is located in Pasadena, California. Integrity offers VN, RN to BSN, Medical Assisting, Medical Billing and Coding, Veterinary Assistant, Sterile Processing Technician, and Diagnostic Medical Sonography programs. Integrity also plans to offer an EMT program (for which Integrity is not planning to seek ED approval because it does not intend to make Title IV funds available for students who enroll in the program). Integrity has filed its application for the program with BPPE, is awaiting final approval and expects to begin offering the program in late 2026. Integrity earned initial accreditation from NLN CNEA for its Bachelor of Science in Nursing RN to BSN Track in June 2025. For purposes of our financial statements, Legacy Education, L.L.C. is deemed to have acquired Integrity in December 2019. As of June 30, 2026, Integrity had 196 students enrolled in its programs. Contra Costa Medical Career College CCMCC was established in the State of California in 2007. CCMCC’s campus is located in Antioch, California. CCMCC offers the following certificate and degree programs: VN, Surgical Technology (Associate of Applied Science), Sterile Processing Technician, Pharmacy Technician, Diagnostic Medical Sonography, Medical Assisting with Phlebotomy, Dental Assisting, Clinical Medical Assisting, EKG/ECG Technician, Medical Administrative Assistant/Billing and Coding Specialist, and Phlebotomy (avocational) programs. CCMCC also has obtained approval from ACCET and BPPE to offer programs in Cardiac Sonography Associate of Applied Science, Veterinary Assistant, and MRI Associate of Applied Science, and plans to begin offering the programs in the second quarter of fiscal 2027. As of June 30, 2026, CCMCC had 508 students enrolled in its programs. 89 Key operating data In evaluating our operating performance, our management focuses in large part on our revenue and income before income taxes and period-end enrollment at our academic institutions. Trends and uncertainties regarding revenue and operations Liquidity We currently believe our liquidity position is stable and we expect to be able to fund our business for at least the next 12 months. We believe that we have sufficient capital to withstand a potential downturn in our business. Key Financial Metrics Revenue Tuition revenue is primarily derived from postsecondary education services provided to students. Generally, tuition and other fees are paid upfront and recorded in contract liabilities in advance of the date when education services are provided to the student. A tuition receivable is recorded for the portion of tuition not paid in advance. In some instances, installment billing is available to students which reduces the amount of cash consideration received in advance of performing the service. The contractual terms and conditions associated with installment billing indicate that the student is liable for the total contract price, therefore mitigating the Company’s exposure to losses associated with nonpayment. Tuition revenue is recognized ratably over the instruction period. The Company generally uses the time elapsed method, an input measure, as it best depicts the simultaneous consumption and delivery of tuition services. Revenue associated with distinct course materials is recognized at the point of time when control transfers to the student, generally when the materials are delivered to the student. Revenue associated with lab services is recognized over the period of time when the service is performed. Enrollments Enrollments are a function of the number of continuing students at the beginning of each period and new enrollments during the period, offset by students who either graduated or withdrew during the period. Costs and expenses Educational service. This expense consists primarily of costs related to the administration and delivery of educational programs by our academic institutions. This expense category includes salaries, benefits, share-based compensation, student books, student supplies and occupancy costs. General and administrative. This expense includes bad debt expense, legal and professional fees, insurance, accreditation fees, and travel of employees engaged in corporate management, finance, human resources, compliance and other corporate functions. This expense also includes marketing and advertising costs, which are expensed in the fiscal year incurred. Depreciation and amortization . This expense reflects depreciation and amortization of property and equipment, amortization of assets under capital leases and amortization of intangible assets. Interest expense This expense reflects interest paid under notes issued to our investors, Internal Revenue Service interest, and other debt related interest. Interest income This income relates to interest received from investments as well as interest income related to student notes. Factors Affecting Comparability We believe the following factors have had, or can be expected to have, a significant effect on the comparability of recent or future results of operations: Seasonality Our operations are generally subject to seasonal trends. We generally experience a seasonal increase in new enrollments during the first quarter of our fiscal year, as well as during the third quarter each year, when most other colleges and universities begin their fall semesters and subsequent to holiday break. While we enroll students throughout the year, our second quarter revenue generally is lower than other quarters due to the holiday season. 90 Critical Accounting Policies and Use of Estimates The discussion of our financial condition and results of operations is based upon our annual consolidated financial statements, which have been prepared in accordance with GAAP. Critical accounting policies are those policies that, in management’s view, are most important in the portrayal of our financial condition and results of operations. The footnotes to our annual consolidated financial statements included elsewhere in this Annual Report on Form 10-K include disclosure of significant accounting policies. The methods, estimates, and judgments we use in applying our accounting policies have a significant impact on the results we report in our financial statements. These critical accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates regarding matters that are inherently uncertain. The 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. 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 receivable. Revenue Recognition Tuition revenue is recognized ratably over the instruction period. The transaction price is stated in the contract and known at the time of contract inception; however, variable consideration arises when a student drops from a program under the Company’s refund policy and when a student requires additional hours to complete the program beyond the contracted end date. The Company believes that its experience with these situations is of little predictive value because the future performance of students is dependent on each individual and the amount of variable consideration is highly susceptible to factors outside of the Company’s influence. Accordingly, no variable consideration has been included in the transaction price or recognized as income until the constraint has been eliminated. Refunds generally result in a reduction of deferred revenue during the period that the student drops or withdraws from a class. Allowance for Credit Losses The 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. 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. The Company applies reserves to its receivables based upon an estimate of the risk presented by the age of the receivables and student status. The Company writes off accounts 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 evaluates expected credit losses on a periodic basis utilizing historical collection experience, aging of receivables, student status, current economic conditions, and other relevant collectability factors. Because a substantial portion of our revenue is derived from Title IV Programs, any legislative or regulatory action that significantly reduces the funding available under Title IV Programs, or the ability of our students or institutions to participate in Title IV Programs, could have a material effect on the collectability of our receivables. The allowance for credit losses was $1,994,492 and $1,641,052 as of June 30, 2026 and 2025, respectively. Our provision for credit losses as a percentage of revenue for the fiscal years ended June 30, 2026 and 2025 was 5.0% and 5.3%, respectively. A one percentage point increase in our provision for credit losses as a percentage of revenue for the fiscal years ended June 30, 2026 and 2025 would have resulted in an increase in the provision for credit losses of approximately $0.8 million and $0.6 million, respectively. Long-Lived Assets The 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. 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. 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. The Company had no long-lived asset impairments as of June 30, 2026 and June 30, 2025. Income taxes GAAP requires management to evaluate tax positions taken by us and recognize a tax liability if we have taken an uncertain position that more likely than not would not be sustained upon examination by the Internal Revenue Service. Management has analyzed our tax positions and believes there are no uncertain positions taken or expected to be taken that would require recognition of a liability or disclosure in the financial statements. Deferred tax assets are subject to periodic recoverability assessments. Realization of the deferred tax assets, net of deferred tax liabilities, is principally dependent upon achievement of projected future taxable income. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the benefits of these deductible differences. The Company had no valuation allowance as of June 30, 2026 and 2025. We account for income taxes payable or refundable for the current year and deferred tax assets and liabilities for future tax consequences of events that have been recognized in our financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which the temporary differences are expected to be realized. 91 Share Based Compensation The Company utilizes Accounting Standards Codification (“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 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. Goodwill and Other Indefinite-lived Assets We test goodwill and other indefinite-lived assets for impairment at least annually, or more frequently if events or changes in circumstances indicate that the asset may be impaired. There were no goodwill or other indefinite-lived intangible asset impairments for the periods presented, and based on current qualitative impairment tests, goodwill and other indefinite-lived intangible assets are not at risk of failing the quantitative impairment test. Results of Operations Fiscal Year Ended June 30, 2026 Compared to Fiscal Year Ended June 30, 2025 The following table sets forth our consolidated statements of income (loss) data as a percentage of revenue for the years ended June 30, 2026 and 2025: Year ended June 30, Percentage Change 2026 2025 (decrease) Revenue 100.0 % 100.0 % Costs and expenses: Educational services 53.6 % 53.4 % 0.2 % General and administrative 30.2 % 29.8 % 0.4 % General and administrative – related party 0.6 % 0.6 % 0.0 % Depreciation and amortization 0.8 % 0.7 % 0.1 % Total costs and expenses 85.2 % 84.4 % 0.8 % Operating income 14.8 % 15.6 % -0.8 % Loss on debt settlement -0.4 % - % -0.4 % Interest expense -0.1 % -0.2 % 0.1 % Interest income 1.6 % 1.8 % -0.2 % Income before income taxes 15.8 % 17.2 % -1.4 % Income tax expense -4.4 % -5.4 % 1.0 % Net income 11.4 % 11.7 % -0.3 % Revenue . Our revenue was approximately $80.1 million in fiscal 2026 compared to approximately $64.2 million in fiscal 2025, an increase of approximately $15.9 million, or approximately 24.8%, driven by new student starts of 3,483 resulting in a 9% increase in student enrollment to 3,377. The increase was also impacted by the timing of the CCMCC acquisition in December 2024 in which a full year of revenue was reported in the current year while only half in the prior year. 92 Educational services . Our educational service expense was approximately $42.9 million in fiscal 2026 compared to approximately $34.2 million in fiscal 2025, an increase of approximately $8.7 million, or approximately 25.3%. The increase was primarily attributable to the increased instructional and staffing costs required to support the increase in enrollments as well as increased rent and books, supplies, externship fees and an increase in non-cash compensation charge of approximately $0.6 million. As a percentage of revenue, educational services expense increased from 53.4% to 53.6% primarily due to increased non-cash compensation as well as books, supplies and externship fees. General and administrative expense . Our general and administrative expense was approximately $24.2 million in fiscal 2026, compared to approximately $19.1 million in fiscal 2025, an increase of approximately $5.1 million, or approximately 26.7%. General and administrative expense increased primarily due to higher marketing expense, professional fees, and increased bad debt expense associated with higher student enrollment, growth in accounts receivable balances, and the Company’s periodic reassessment of expected credit losses and write-offs associated with inactive student accounts. As a percentage of revenue, general and administrative expense increased from 29.8% to 30.2% primarily due to increases in office supplies and other general and administrative expenses offset by a reduction in bad debt as a percentage of revenue. Of the total general and administrative expense, $5.9 million and $4.7 million relate to marketing expenses for fiscal 2026 and 2025, respectively. Bad debt expense was approximately $4.0 million, or 5% of revenue in fiscal 2026 compared to approximately $3.4 million, or 5.3% of revenue in fiscal 2025. General and administrative – related party expense. Our general and administrative – related party expense was approximately $0.5 million in fiscal 2026, compared to approximately $0.4 million in fiscal 2025. The increase was primarily attributable to increased investment in corporate advisors. Depreciation and amortization. Our depreciation and amortization expense was approximately $0.6 million in fiscal 2026 as compared to approximately $0.4 million in fiscal 2025. Loss on debt settlement. We recorded a non-cash loss on debt settlement of approximately $0.3 million in fiscal 2026, representing the excess of the fair value of the 75,000 shares of common stock issued over the $500,000 principal amount of the unsecured promissory note extinguished in the exchange. There was no comparable charge in fiscal 2025. Interest expense . Our interest expense was approximately $0.07 million in fiscal 2026 as compared to approximately $0.11 million in fiscal 2025, a decrease of approximately $0.04 million, primarily attributable to lower average debt outstanding following the repayment of equipment loans and the CCMCC seller note during fiscal 2026. Interest income. Our interest income was approximately $1.3 million in fiscal 2026 as compared to approximately $1.1 million in fiscal 2025, an increase of approximately $0.1 million, primarily attributable to higher average cash and cash equivalent balances, including amounts held in U.S. Treasury bills and U.S. Treasury money market funds with a weighted average yield of approximately 3.5% per annum as of June 30, 2026. Income tax expense . Our income tax expense was approximately $3.5 million in fiscal 2026 compared to an approximately $3.5 million expense in fiscal 2025. Our effective tax rate decreased to approximately 27.9% in fiscal 2026 from approximately 31.6% in fiscal 2025, which was primarily attributable to increased tax benefit associated with stock option exercises and the income tax treatment of incentive stock options and non-qualified stock options. Net Income . We had net income of approximately $9.1 million in fiscal 2026 compared to approximately $7.5 million in fiscal 2025, an increase of approximately $1.6 million, due to reasons mentioned above. Liquidity and Capital Resources Our cash and cash equivalents were approximately $22.7 million and $20.3 million as of June 30, 2026 and June 30, 2025, respectively. We are not party to a revolving line of credit or other debt facility. Based on our current level of operations and anticipated growth, we believe that our cash flow from operations, the proceeds from our initial public offering and other sources of liquidity, including cash and cash equivalents, will provide adequate funds for ongoing operations, planned capital expenditures and working capital requirements for at least the next 12 months. Capital expenditures were approximately $1.3 million and $0.8 million for fiscal year 2026 and fiscal year 2025, respectively. In September 2026, CCC entered into a lease for its planned new campus in Houston, Texas with an initial term of 130 months and total base rent of approximately $6.9 million, with base rent abated for the first ten months of the lease term. CCC will also pay its pro rata share of the building’s operating expenses, rent on any portion of the premises it occupies before the commencement date defined in the lease, and any tenant improvement costs in excess of the landlord’s allowance. See Note 18 – Subsequent Events to our consolidated financial statements. 93 Title IV and other government funding A significant portion of our revenue is derived from student tuition payments funded by the Title IV Programs. As such, the timing of disbursements under the Title IV Programs is based on federal regulations and our ability to successfully and timely arrange financial aid for our students. Title IV Program funds are generally provided in multiple disbursements before we earn a significant portion of tuition and fees and incur related expenses over the period of instruction. Students must apply for new Title IV Program loans and grants each academic year. These factors, together with the timing of our students beginning their programs, affect our operating cash flow. Financial responsibility Based on the most recent fiscal year-end financial statements, we satisfied the composite score requirement of the financial responsibility test which institutions must satisfy in order to participate in the Title IV Programs. Cash Flow Activities for the Years Ended June 30, 2026 and 2025 Operating activities Net cash provided by operating activities was approximately $4.0 million in fiscal year 2026, compared to approximately $7.8 million in fiscal 2025, a decrease of approximately $3.7 million. The decrease was primarily attributable to the $9.0 million increase in accounts receivable in fiscal 2026, compared to a $3.9 million increase in fiscal 2025, partially offset by the $1.6 million increase in net income and the $0.6 million increase in the provision for credit losses. Investing activities Net cash used in investing activities was approximately $1.3 million in fiscal year 2026 and approximately $7.0 million in fiscal year 2025, a decrease of approximately $5.6 million due primarily to the cash paid for the acquisition of CCMCC in fiscal year 2025, with no comparable acquisition in fiscal year 2026. Financing activities Net cash used in financing activities was approximately $0.3 million in fiscal year 2026, primarily due to $0.8 million of principal payments on debt, partially offset by $0.6 million of proceeds from the exercise of stock options. Net cash provided by financing activities was approximately $9.1 million in fiscal year 2025, primarily due to the net proceeds from the Company’s initial public offering. Financings ● From 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. ● From 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. 94 Impact of Inflation We believe that inflation has not had a material impact on our results of operations for the fiscal years ended 2026 and 2025. There can be no assurance that future inflation will not have an adverse impact on our operating results and financial condition. Segment Information We operate in one reportable segment as a single educational delivery operation using a core infrastructure that serves the curriculum and educational delivery needs of our institution’s students regardless of geography. Our chief operating decision maker, our CEO and President, manages our operations as a whole, and our chief operating decision maker does not evaluate expenses or operating income information on a component level. Recent Accounting Pronouncements In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 profit. 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.” In March 2024, the FASB issued ASU 2024-02, Codification Improvements—Amendments to Remove References to the Concepts Statements, which removes references to various FASB Concepts Statements from the Codification. The Company adopted this guidance on July 1, 2025. The adoption did not have a material effect on the Company’s consolidated financial statements. The Company is an emerging growth company and has elected to use the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. As a result, the Company adopts new or revised accounting standards on the dates applicable to entities that are not public business entities. The following accounting pronouncements have been issued but not yet adopted by the Company: In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disaggregated information about the effective tax rate reconciliation by specified category and disaggregation of income taxes paid by federal, state and foreign jurisdiction. The standard is effective for the Company for the fiscal year ending June 30, 2027, and is to be applied prospectively, with retrospective application permitted. The Company is evaluating the effect of adoption, which is expected to result in expanded income tax disclosures with no change to the amounts recognized in the consolidated financial statements. In July 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which provides a practical expedient for estimating expected credit losses on current accounts receivable and current contract assets arising from transactions accounted for under Topic 606. The standard is effective for the Company for the fiscal year ending June 30, 2027, with early adoption permitted. The Company is evaluating whether it will elect the practical expedient and the effect adoption would have on its consolidated financial statements. 95 In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, as amended in January 2025 by ASU 2025-01, which requires disaggregated disclosure of specified categories of expense included within relevant income statement expense captions. The standard is effective for the Company for the fiscal year ending June 30, 2028, and for interim periods thereafter. The Company is evaluating the effect of adoption, which is expected to result in expanded expense disclosures with no change to the amounts recognized in the consolidated financial statements. In December 2025, the FASB issued ASU 2025-12, Codification Improvements, which includes amendments to Topic 260, Earnings Per Share. The standard is effective for the Company for the fiscal year ending June 30, 2028, and interim periods within that fiscal year, and is to be applied retrospectively to each prior period presented. The Company is evaluating the effect of adoption. In 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, which revises the disclosure requirements for interim reporting periods. The standard is effective for the Company for interim reporting periods within the fiscal year ending June 30, 2029. The Company is evaluating the effect of adoption on its interim financial statements. JOBS Act On April 5, 2012, the JOBS Act was enacted. Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act, for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have chosen to take advantage of the extended transition periods available to emerging growth companies under the JOBS Act for complying with new or revised accounting standards until those standards would otherwise apply to private companies provided under the JOBS Act. As a result, our financial statements may not be comparable to those of companies that comply with public company effective dates for complying with new or revised accounting standards. We are in the process of evaluating the benefits of relying on other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, as an “emerging growth company,” we intend to rely on certain of these exemptions, including, without limitation, (i) providing an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act and (ii) complying with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis. We will 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; (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. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act. 96