Franklin Covey Co: Form 10-Q for the period ended Nov 30, 2025

Management’s discussion and analysis of financial condition and results of operations (Management’s Discussion and Analysis) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based upon management’s current expectations and are subject to various uncertainties and changes in circumstances. Important factors that could cause actual results to differ materially from those described in forward-looking statements are set forth below under the heading “Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995.”

We suggest that the following discussion and analysis be read in conjunction with the Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended August 31, 2025, as filed with the SEC on November 12, 2025.

Non-GAAP Measures

This Management’s Discussion and Analysis includes the concept of Adjusted EBITDA, which is a non-GAAP financial measure. We define Adjusted EBITDA as net income or loss excluding the impact of interest, income taxes, intangible asset amortization, depreciation, stock-based compensation expense, and certain other items such as restructuring and headquarters moving costs. We reference this non-GAAP measure in our decision making because it provides supplemental information that facilitates consistent internal comparisons to the operating performance of prior periods and we believe it provides investors with greater transparency to evaluate our operational activities and financial results. For a reconciliation of our reportable segment Adjusted EBITDA to income or loss before income taxes, a related GAAP measure, refer to Note 7, Segment Information, to our unaudited condensed consolidated financial statements.

RESULTS OF OPERATIONS

Overview

Franklin Covey Co. is a global company focused on individual and organizational performance improvement. Our mission is to “enable greatness in people and organizations everywhere,” and our worldwide resources are organized to help individuals and organizations achieve sustained superior performance at scale through changes in human behavior. We believe that our content and services create the connection between capabilities and results. Our business is currently structured around two divisions, the Enterprise Division and the Education Division. The Enterprise Division consists of our North America and International segments and is focused on selling our offerings to corporations, governments, not-for-profits, and other related organizations. Our offerings delivered through the Enterprise Division are designed to help organizations and individuals achieve their own great results. Our Education Division is centered around the principles found in The Leader in Me and is dedicated to helping educational institutions build cultures that will produce great results, including increased student performance, improved school culture, and increased parental and teacher involvement.

For Franklin Covey, fiscal 2025 was a year of transition and transformation as we initiated a new go-to-market and sales strategy in North America. In addition, our fiscal 2025 results of operations were adversely impacted by various macroeconomic factors, including reduced U.S. federal government spending and geopolitical tensions that produced instability in certain regions of the world. This resulted in a reduction of invoiced amounts and net revenue for fiscal 2025, which will continue to impact fiscal 2026 as we recognize a lower base of previously deferred revenue. Despite these headwinds, we have retained the vast majority of our client base and now with the bulk of our transformation investments coming to completion, we believe these efforts are beginning to bear fruit. We view fiscal 2026 to be a year of execution and a return to growth, and believe fiscal 2027 will continue the momentum and provide accelerating and compounding growth and cash flow. We believe the transformative investments made in our Enterprise North America go-to-market strategy plus our continued investments in content and technology position us for meaningful growth in the future.

During the first quarter of fiscal 2026, we were encouraged by strong growth in Enterprise North America invoiced amounts. This is a primary lead metric that we believe demonstrates the positive momentum building from our go-to-market investments.

Our consolidated revenue for the quarter ended November 30, 2025, was $64.0 million, compared with $69.1 million in the first quarter of fiscal 2025 and reflected the impact of conditions previously described. Foreign exchange rates did not have a material impact on our consolidated revenue during the first quarter of fiscal 2026. The Company’s revenue performance during the quarter ended November 30, 2025, included the following key metrics:

• Enterprise Division revenues for the first quarter of fiscal 2026 totaled $47.5 million compared with $51.6 million in the first quarter of fiscal 2025. Enterprise Division revenue performance was impacted by a $3.9 million decrease in North America segment revenues and a $0.2 million decrease in International segment revenues. Revenue performance in these segments were adversely impacted by canceled government contracts, ongoing geopolitical tensions, and other macroeconomic difficulties, which hampered subscription revenue growth in fiscal 2025 and which now flow through as we recognize previously deferred revenue. Despite these difficult conditions, we were encouraged by the growth in invoiced amounts in the North America segment in the first quarter as previously described, which we believe will translate to increased reported revenue in future quarters.
• Education Division revenues in the first quarter of fiscal 2026 were $16.1 million compared with $16.5 million in the prior year. The decrease was primarily due to reduced classroom and training materials sales. In the first quarter of fiscal 2025, we entered into a new state-wide initiative that included large materials orders during the first year of the contract. Materials orders from this contract did not repeat at the same level in fiscal 2026. However, decreased materials revenue was partially offset by increased training and coaching revenue and membership subscription revenues as the Education Division delivered over 100 more training and coaching days than in the prior year.
• Consolidated subscription and subscription services revenues for the first quarter of fiscal 2026 were $52.0 million compared with $55.8 million in the first quarter of the prior year. For the quarter ended November 30, 2025, subscription and contractually committed revenue invoiced was $26.0 million compared with $24.7 million in fiscal 2025.
• Consolidated deferred revenue on November 30, 2025, increased 5% to $100.2 million compared with $95.7 million on November 30, 2024.
• As of November 30, 2025, 58% of our AAP contracts are for at least two years, compared with 55% at November 30, 2024, and the percentage of contracted amounts represented by multi-year contracts was 61% compared with 60% at November 30, 2024.
• Unbilled deferred revenue on November 30, 2025, was $72.1 million compared with $73.0 million on November 30, 2024. Unbilled deferred revenue represents business that is contracted, but unbilled and therefore excluded from our balance sheet.

The following is a summary of other unaudited consolidated financial information from the first quarter of fiscal 2026, which ended on November 30, 2025:

• Cost of Revenue/Gross Profit – For the quarter ended November 30, 2025, our cost of revenue totaled $15.7 million compared with $16.4 million in the prior year. Gross profit for the first quarter of fiscal 2026 was $48.4 million compared with $52.7 million in the prior year. The decrease in gross profit was primarily due to decreased revenue as described above. Gross margin for the first quarter of fiscal 2026 remained strong and was 75.5% of revenue compared with 76.3% in the prior year. The decrease was primarily due to increased fixed costs related to the delivery of consulting days and live seminar presentations in our Education and International segments, combined with lower revenue.
• Operating Expenses – Our operating expenses for the first quarter of fiscal 2026 totaled $52.0 million and increased $0.8 million compared with the prior year, which was primarily due to a $1.5 million increase in restructuring charges and a $0.7 million increase in building exit costs which primarily consist of legal expenses. These increases were partially offset by decreased selling, general, and administrative (SG&A) expenses driven by cost reduction efforts, and decreased stock-based compensation expense. During the first quarter of fiscal 2026, we continued to restructure our business to reduce costs and streamline certain areas of our operations. We incurred $3.4 million of expense for this restructuring activity, which consisted primarily of severance and related costs.
• Income Taxes – Our income tax benefit for the quarter ended November 30, 2025, was $0.3 million on a pre-tax loss of $(3.6) million, resulting in an effective benefit rate of 9.4%. By comparison, our first quarter of fiscal 2025 income tax provision was $0.4 million on pre-tax income of $1.6 million, reflecting an effective income tax rate of 25.6%. The lower effective tax benefit rate in the first quarter of fiscal 2026 is primarily due to a significant decrease in non-deductible executive compensation compared with the first quarter of fiscal 2025.
• Net Income (Loss) and Adjusted EBITDA – For the first quarter of fiscal 2026, we realized a net loss of $(3.3) million, or $(0.27) per share, compared with net income of $1.2 million, or $0.09 per diluted share, in the first quarter of fiscal 2025, reflecting the factors previously discussed. Our Adjusted EBITDA for the quarter ended November 30, 2025, totaled $3.7 million compared with $7.7 million in the prior year. Foreign exchange rates had an insignificant impact on our Adjusted EBITDA for the quarter ended November 30, 2025.
• Liquidity and Financial Position – Our liquidity and financial position remained strong throughout the first quarter of fiscal 2026. At November 30, 2025, we had $80 million of available liquidity which consisted of $17.5 million of cash and our full undrawn $62.5 million line of credit even after using $10.7 million of cash to purchase shares of our common stock during the first quarter of fiscal 2026.

Further details regarding our results for the quarter ended November 30, 2025, are provided throughout the following Management’s Discussion and Analysis.

Quarter Ended November 30, 2025 Compared with the Quarter Ended November 30, 2024

Enterprise Division

North America Segment

The North America segment includes our personnel that serve clients in the United States and Canada. The following comparative information is for our North America segment in the periods indicated (in thousands):

Revenue. For the quarter ended November 30, 2025, North America segment revenue was $36.3 million compared with $40.1 million in the prior year. North America segment revenues for the quarter were adversely impacted by lower invoiced amounts in prior periods, canceled or postponed government contracting, and ongoing macroeconomic uncertainty. However, we were encouraged by strong growth in North America segment invoiced amounts in the first quarter of fiscal 2026 and believe the new go-to-market strategy is gaining momentum. During the first quarter of fiscal 2026, North America AAP subscription plus subscription services revenues were $32.2 million compared with $36.0 million in the prior year, reflecting the decline in invoiced amounts during fiscal 2025 and decreased services revenues. Rolling four quarter North America AAP subscription and subscription service revenues were $134.6 million compared with $144.5 million for the corresponding period ended November 30, 2024. We remain optimistic about the expected results of our new North America go-to-market strategy as our new North America sales structure is in place and executing on their directives. However, the continued uncertain macroeconomic environment may prevent us from achieving expected sales goals during fiscal 2026. Foreign exchange rates had an insignificant impact on North America revenues and operating results during the first quarter of fiscal 2026.

Gross Profit. Gross profit was impacted by lower revenue as described above. North America gross margin remained strong and relatively flat during the quarter ended November 30, 2025, and was 81.5% of revenue compared with 81.8% in the prior year.

SG&A Expense. North America segment SG&A expenses remained relatively flat when compared with the prior year.

International Segment

Our International segment consists of our directly owned international offices and our international licensees that provide our services and products in countries or regions that are not served by a directly owned office. Our directly owned international offices serve clients in Australia, Austria, China, France, Germany, Ireland, Japan, New Zealand, Switzerland, and the United Kingdom. The following comparative information is for our International segment in the periods indicated (in thousands):

Revenue. International revenues for the quarter ended November 30, 2025, decreased primarily due to lower revenue from our China office, which continues to be adversely impacted by international geopolitical tensions. Excluding China, our revenue from the International segment increased 4% and our licensee revenue increased 8% compared with the first quarter of fiscal 2025. Our revenue in international markets is highly dependent upon regional macroeconomic strength, which can vary significantly in the current global macroeconomic environment. Foreign exchange rates had an insignificant impact on the revenue and operating results of our International segment in the first quarter of fiscal 2026. We believe international revenues will improve in future periods as multiple international trade issues are resolved and economic conditions stabilize and strengthen.

Gross Profit. Gross profit in the International segment decreased primarily due to reduced revenue in our China office as previously described. Gross margin for the first quarter of fiscal 2026 was 77.4% of revenue compared with 78.5% in the prior year and decreased primarily due to increased fixed costs related to the delivery of live seminars combined with lower revenue in our China office when compared with fiscal 2025. Excluding China, our International gross margin was 79.5% for the first quarter of fiscal 2026.

SG&A Expenses. International SG&A expenses decreased $1.3 million primarily due to cost reduction initiatives enacted to offset the impact of decreased revenue and decreased bad debt expense compared with the prior year.

Education Division

Our Education Division is comprised of our domestic and international Education practice operations (focused on sales to educational institutions) and includes our widely acclaimed The Leader in Me program. The following comparative information is for our Education Division in the periods indicated (in thousands):

Revenue. Education Division revenue for the quarter ended November 30, 2025, decreased 2%, or $0.4 million, compared with the first quarter of the prior year. The decrease in Education Division revenue was primarily due to decreased sales of classroom and training materials, due in part to a new initiative with a state that began in the first quarter of fiscal 2025 that did not repeat at the same level in fiscal 2026, and a symposium event that did not repeat. These declines were partially offset by increased coaching and consulting revenue and increased membership subscription revenues resulting from schools which started The Leader in Me during fiscal 2025. Materials revenue declined $0.7 million over the prior year, which included $0.4 million of classroom and training materials from the state-wide initiative in fiscal 2025. The delivery of training and coaching days remained strong during the first quarter of fiscal 2026 as the Education Division delivered over 100 more training and coaching days than in the prior year. Training and coaching days are recognized as revenue when they are delivered. Education subscription and subscription services revenues in the first quarter of fiscal 2026 decreased 2% compared with the same period of the prior year due to decreased materials revenue. Foreign exchange rates had an immaterial impact on Education Division revenue and operating results for the first quarter of fiscal 2026. We continue to be pleased with the strength and momentum of our Education Division, which added 624 new Leader in Me schools in a very challenging funding environment during fiscal 2025. We believe the momentum generated in fiscal 2025 will continue through the remainder of fiscal 2026. At November 30, 2025, over 8,000 schools around the world were using The Leader in Me program.

Gross Profit. Education Division gross profit decreased primarily due to revenue performance as previously discussed. Education segment gross margin declined to 61.6% compared with 63.2% in the prior year as a result of increased fixed costs associated with school memberships, increased materials costs, and increased platform costs combined with lower revenue during the first quarter of fiscal 2026.

SG&A Expenses. Education SG&A expenses increased primarily due to increased associate expenses from new personnel, changes to compensation plans, increased commissions on previously deferred revenue, and increases to the allowance for credit losses.

Other Operating Expense Items

Depreciation Expense – Our depreciation expense for the quarter ended November 30, 2025, increased $0.1 million to $1.1 million, compared with $1.0 million in the prior year, primarily due to new assets acquired in the fourth quarter of the prior year in connection with our new headquarters office. We currently anticipate that depreciation expense will total approximately $4.5 million in fiscal 2026.

Amortization Expense – Compared with the prior year, our amortization expense decreased $0.4 million to $0.7 million primarily due to the re-evaluation of the useful lives of content and license rights originally acquired in the merger with the Covey Leadership Center. These intangible assets continue to be some of our primary revenue and cash flow generating assets. Based on the re-evaluation of these intangible assets, we extended the useful lives of these assets by approximately 5 years. We currently anticipate our finite-lived intangible asset amortization expense will total $3.0 million in fiscal 2026.

Interest Income – Our interest income decreased by $0.2 million to $0.1 million in the first quarter of fiscal 2026 compared with the prior year due to decreased cash and lower interest rates on those balances.

Interest Expense – First quarter interest expense of $0.1 million decreased by $0.1 million compared with the first quarter of fiscal 2025 due to decreased debt balances as payments have been made in the normal course of business.

Income Taxes

Our income tax benefit for the quarter ended November 30, 2025, was $0.3 million on a pre-tax loss of $(3.6) million, for an effective benefit rate of 9.4%. In the first quarter of the prior year, our income tax provision was $0.4 million on pre-tax income of $1.6 million, reflecting an effective income tax rate of 25.6%. Our effective tax benefit rate for the first quarter of fiscal 2026 was lower than the effective rate for the first quarter of fiscal 2025 primarily due to a significant decrease in non-deductible executive compensation in the first quarter of fiscal 2026 compared with the first quarter of fiscal 2025.

During the first quarter of fiscal 2026 we paid $0.4 million of cash for income taxes.

LIQUIDITY AND CAPITAL RESOURCES

Introduction

At November 30, 2025 we had $80 million of available liquidity, which consisted of $17.5 million in cash combined with our undrawn $62.5 million revolving credit facility. Of our $17.5 million of cash on November 30, 2025, $8.6 million was held outside the U.S. by our foreign subsidiaries. We routinely repatriate cash from our foreign subsidiaries and consider cash generated from foreign activities a key component of our overall liquidity position. Our primary sources of liquidity are cash flows from the sale of services and products in the normal course of business and available proceeds from our credit facility. Our primary uses of liquidity include payments for operating activities, opportunistic purchases of our common stock, working capital expansion, and capital expenditures (including curriculum development).

We previously entered into a credit agreement (the 2023 Credit Agreement) with KeyBank National Association leading a group of financial institutions. The 2023 Credit Agreement provides up to $70.0 million in total credit, of which $7.5 million was used to replace the outstanding term loan balance from the previous credit agreement. The remaining $62.5 million is available as a revolving line of credit or for future term loans. The 2023 Credit Agreement matures on March 27, 2028.

As defined in the 2023 Credit Agreement, we are (i) required to maintain a Leverage Ratio of less than 3.00 to 1.00 and a Fixed Charge Coverage Ratio greater than 1.15 to 1.00; and (ii) we are restricted from making certain distributions to stockholders, including repurchases of common stock. However, we are permitted to make distributions, including through purchases of outstanding common stock, provided that we are in compliance with the Leverage Ratio and Fixed Charge Coverage Ratio financial covenants before and after such distribution. At November 30, 2025, we believe that we were in compliance with the terms and covenants contained in the 2023 Credit Agreement.

The following discussion is a description of the primary factors affecting our cash flows and their effects upon our liquidity and capital resources during the quarter ended November 30, 2025.

Cash Flows Provided By Operating Activities

Our primary source of cash from operating activities was the sale of services to our customers in the normal course of business. Our primary uses of cash for operating activities were payments for SG&A expenses, direct costs necessary to conduct training programs, to fund working capital changes, and to suppliers for materials used in training manuals sold. Our cash provided by operating activities during the first quarter of fiscal 2026 was $0.1 million compared with $14.1 million in the first quarter of fiscal 2025. The decrease in cash flows from operating activities was primarily attributable to unfavorable changes in working capital balances, including less cash collected from receivables, and lower operating income in the first quarter compared with the prior year. We expect our cash flows from operating activities will improve in future periods of fiscal 2026; however certain conditions are beyond our control, including ongoing difficulties in the macroeconomic environment and further governmental actions, and our cash flows from operating activities may be less than our expectations.

Cash Flows Used For Investing Activities and Capital Expenditures

For the quarter ended November 30, 2025, our cash used for investing activities totaled $3.8 million. Our primary uses of cash for investing activities consisted of additional investments in the development of our offerings and purchases of property and equipment in the normal course of business.

In the first quarter of fiscal 2026, we spent $2.0 million on the development of our various offerings and related content. We believe continued investment in our offerings and content is key to future growth and the development of our business. We currently expect that our capital spending for curriculum development will total between approximately $8 million and $10 million in fiscal 2026.

Our cash used for purchases of property and equipment during the first quarter of fiscal 2026 totaled $1.7 million and consisted primarily of leasehold improvements on our new corporate headquarters, and computer software and hardware. We currently anticipate that our purchases of property and equipment will total between approximately $5 million and $7 million in fiscal 2026.

Cash Flows Used For Financing Activities

In the first quarter of fiscal 2026, our net cash used for financing activities totaled $10.4 million. Our primary use of financing cash was $10.7 million used to purchase shares of our common stock, which consisted of shares purchased on the open market and shares withheld for income taxes on stock-based compensation awards (Note 2). Partially offsetting our use of cash for purchasing shares of our common stock for treasury were $0.3 million of proceeds received from our ESPP participants to purchase shares of common stock during the first quarter of fiscal 2026.

On April 18, 2024, our Board of Directors approved a plan to purchase up to $50.0 million of our outstanding common stock. On August 11, 2025, the Board of Directors approved a replenishment of the plan to purchase up to $50.0 million of common stock. On August 14, 2025 we initiated a 10b5-1 plan to purchase up to $10.0 million of our common stock through daily transactions. This 10b5-1 plan was completed in October 2025. On November 17, 2025, we initiated a new 10b5-1 plan to purchase up to $20.0 million of our common stock through daily transactions. We anticipate that this repurchase plan will be completed in the second quarter of fiscal 2026.

Our uses of financing cash during the remainder of fiscal 2026 may include purchases of our common stock. However, the timing and amount of common stock purchases is dependent on a number of factors, including available resources, and we are not obligated to make purchases of our common stock during any future period except as required by any outstanding 10b5-1 purchase plan.

Sources of Liquidity

We expect to pay the liabilities from our leases and notes payable; pay for projected capital expenditures; and meet other obligations in fiscal 2026 and beyond from current cash balances and future cash flows from operating activities. Going forward, we will continue to incur costs necessary for the day-to-day operation of the business and may use additional credit and other financing alternatives, if necessary, for these expenditures. We previously entered into a new credit agreement (the 2023 Credit Agreement) which we expect to renew and amend on a regular basis to maintain the long-term borrowing capacity of this credit facility. Additional potential sources of liquidity available to us include factoring receivables, issuance of additional equity, or issuance of debt to public or private sources. If necessary, we will evaluate all of these options and select one or more of them depending on overall capital needs and the associated cost of capital.

We believe that our existing cash and cash equivalents, cash generated by operating activities, and the availability of external funds as described above, will be sufficient for us to maintain our operations for at least the upcoming 12 months. However, our ability to maintain adequate capital for our operations in the future is dependent upon a number of factors, including sales trends, macroeconomic activity, our ability to contain costs, levels of capital expenditures, collection of accounts receivable, and other factors. Some of the factors that influence our operations are not within our control, such as general economic conditions, business conditions in international locations, geopolitical tensions in various locations, and the introduction of new offerings or technology by our competitors. We will continue to monitor our liquidity position and may pursue additional financing alternatives, as described above, to maintain sufficient resources for future growth and capital requirements. However, there can be no assurance such financing alternatives will be available to us on acceptable terms, or at all.

Material Uses of Cash and Contractual Obligations

We do not operate any manufacturing, mining, or other capital-intensive facilities, and we have not structured any special purpose entities, or participated in any commodity trading activities, which would expose us to potential undisclosed liabilities or create adverse consequences to our liquidity. However, we have normal ongoing cash expenditures and are subject to various contractual obligations that are required to run our business. Our material cash requirements include the following:

• Associate and Consultant Compensation
• Information Technology Expenditures
• Content Development Costs
• Income Taxes
• Other Contractual Obligations

These material cash requirements are discussed in more detail in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended August 31, 2025, which was filed with the SEC on November 12, 2025 (our Annual Report). During the quarter ended November 30, 2025, there have been no material changes to our expected uses of cash and contractual obligations from those discussed in our Annual Report. However, current economic conditions and other forecasts may change and could alter our expected material uses of cash in future periods. For further information on our material uses of cash and contractual obligations, refer to the information included in our Annual Report.

CRITICAL ACCOUNTING ESTIMATES

Our consolidated financial statements were prepared in accordance with GAAP. For information on our critical accounting policies, see “Critical Accounting Estimates” in the Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Part II, Item 7 of our Annual Report. Refer to those disclosures for further information regarding our uses of estimates and critical accounting policies. There have been no significant changes to our previously disclosed estimates or critical accounting policies.

Estimates

Some of the accounting guidance we use requires us to make estimates and assumptions that affect the amounts reported in our consolidated financial statements. We regularly evaluate our estimates and assumptions and base those estimates and assumptions on historical experience, factors that are believed to be reasonable under the circumstances, and requirements under GAAP. Actual results may differ from these estimates under different assumptions or conditions, including changes in economic conditions and other circumstances that are not within our control, but which may have an impact on these estimates and our actual financial results.

NEW ACCOUNTING PRONOUNCEMENTS

Refer to Note 1 to our unaudited condensed consolidated financial statements for a description of new accounting pronouncements that may impact us.

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Certain statements made by the Company in this report are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934 as amended (the Exchange Act). Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate, or imply future results, performance, or achievements, and may contain words such as “believe,” “anticipate,” “expect,” “estimate,” “project,” or words or phrases of similar meaning. In our reports and filings we may make forward-looking statements regarding, among other things, our expectations about future revenue levels and financial results, our financial performance during fiscal 2026, our expectations regarding a new go-to-market strategy, future training and consulting revenue, expected increases in add-on subscription services revenue and delivered training and coaching days, anticipated renewals of subscription offerings, our ability to hire sales professionals, the amount and timing of capital expenditures, anticipated expenses, including SG&A expenses, depreciation, and amortization, future gross margins, the release of new services or products, the adequacy of existing capital resources, our ability to renew or extend our line of credit facility, expected effective income tax rates, our ability to maintain adequate capital for our operations for at least the upcoming 12 months, the expected impact of the resolution of significant macroeconomic issues and geopolitical tensions, the seasonality of future revenues, future compliance with the terms and conditions of our line of credit, the ability to borrow on our line of credit, expected collection of accounts receivable, estimated capital expenditures, and cash flow estimates used to determine the fair value of long-lived assets. These, and other forward-looking statements, are subject to certain risks and uncertainties that may cause actual results to differ materially from the forward-looking statements. These risks and uncertainties are disclosed from time to time in reports filed by us with the SEC, including reports on Forms 8-K, 10-Q, and 10-K. Such risks and uncertainties include, but are not limited to, the matters discussed in Item 1A of our Annual Report on Form 10-K for the fiscal year ended August 31, 2025, entitled “Risk Factors.” In addition, such risks and uncertainties may include unanticipated developments in any one or more of the following areas: cybersecurity risks; macroeconomic risks; litigation; unanticipated costs or capital expenditures; delays or unanticipated outcomes relating to our strategic plans; dependence on existing products or services; the rate and consumer acceptance of new product introductions, including the All Access Pass; competition; the impact of foreign exchange rates; the number and nature of customers and their product orders, including changes in the timing or mix of product or training orders; pricing of our products and services and those of competitors; adverse publicity; and other factors which may adversely affect our business.

The risks included here are not exhaustive. Other sections of this report may include additional factors that could adversely affect our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors may emerge and it is not possible for our management to predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any single factor, or combination of factors, may cause actual results to differ materially from those contained in forward-looking statements. Given these risks and uncertainties, investors should not rely on forward-looking statements as a prediction of actual results.

The market price of our common stock has been and may remain volatile. In addition, stock markets in general have experienced significant volatility. Factors such as quarter-to-quarter variations in revenues and earnings or losses and our failure to meet expectations could have a significant impact on the market price of our common stock. In addition, the price of our common stock can change for reasons unrelated to our performance, such as government actions on spending and trade. Due to our low market capitalization, the price of our common stock may also be affected by conditions such as a lack of analyst coverage, and fewer potential investors.

Forward-looking statements are based on management’s expectations as of the date made, and we do not undertake any responsibility to update any of these statements in the future except as required by law. Actual future performance and results will differ and may differ materially from that contained in or suggested by forward-looking statements as a result of the factors set forth in this Management’s Discussion and Analysis and elsewhere in our filings with the SEC.

Interest Rate Sensitivity

At November 30, 2025, our long-term obligations primarily consisted of a fixed rate note payable from the purchase of Strive Talent, Inc., and deferred payments and potential contingent consideration resulting from previous business acquisitions. Since our long-term obligations have fixed interest rates, our overall interest rate sensitivity is currently influenced by any amount borrowed on our 2023 Credit Agreement, and the prevailing interest rate on this credit facility. The effective interest rate on the 2023 Credit Agreement is variable and was 5.5% on November 30, 2025. As of November 30, 2025, there were no outstanding borrowings under the 2023 Credit Agreement and, therefore, a change in interest rates would not materially affect our interest expense and cash flows.

There have been no other material changes from the information previously reported under Part II, Item 7A of our Annual Report. We did not utilize any foreign currency or interest rate derivative instruments during the quarter ended November 30, 2025.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

We evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, as of the end of the period covered by this report. Based on this evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q.

There were no changes in our internal controls over financial reporting (as defined in Rule 13a-15(f) or 15d-15(f)) during the most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Refer to Part I, Item 1A, Risk Factors, of our Annual Report for a detailed description of our significant risk factors. Other than the risk factor disclosed in this Item 1A below, there have been no significant changes to these risk factors during the first quarter of fiscal 2026.

Adverse resolution of litigation may harm our operating results or financial condition.

We are subject to various legal proceedings and claims in the ordinary course of business domestically and internationally. Any litigation can be costly, lengthy, and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict. An unfavorable resolution of lawsuits could materially harm our business, operating results, or financial condition.

On December 20, 2024, our office Landlord filed a lawsuit alleging breach of lease for failure to perform certain equipment repairs and replacements. While we believe that the premises and associated equipment remain in sound operating condition, and that no such repair is warranted or needed and we intend to respond to all claims vigorously, we cannot predict with certainty the outcome of current or future legal proceedings. The outcome of legal proceedings, whether or not meritorious, is inherently uncertain. Defending against claims requires significant management attention and financial resources. We may incur costs through defense expenses, settlements, or adverse judgments. These proceedings could materially harm our business operations, financial results and condition, management focus and resources, and reputation and brand value. The costs and distractions of litigation, particularly if claims increase in scope or number, could materially impact our business success and shareholder value.