Legacy Education Inc.: Form 10-Q for the period ended Dec 31, 2025

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q. 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included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025 as may be amended, supplemented or superseded from time to time by other reports we file with the SEC. All amounts in this report are in U.S. dollars, unless otherwise noted.

Throughout this Quarterly Report on Form 10-Q references to “we,” “our,” “us,” the “Company,” or “Legacy,” refer to Legacy Education Inc.

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. 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.

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 campus 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 from the Accrediting Council for Continuing Education and Training (“ACCET”), Bureau for Private Postsecondary Education (“BPPE”) and ED to offer a surgical technology Associate of Applied Science program and sterile processing technician program. As of December 31, 2025, HDMC had 2,033 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.

CCC 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, dental assisting, sterile processing technician, and pharmacy technician. CCC also offers an avocational phlebotomy technician program. CCC also has obtained approval from ACCET and BPPE to offer an MRI Associate of Applied Science program and has obtained ACCET, BPPE, and ED approvals to offer a cardiac sonography Associate of Applied Science program. As of December 31, 2025, CCC had 556 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, VN Associate of Applied Science, Registered Nurse to Bachelor of Science in Nursing (“RN to BSN”), medical assisting, medical billing and coding, veterinary assistant, and Diagnostic Medical Sonography programs. Integrity also plans to offer an emergency medical technician (EMT) program 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 program). Integrity also has obtained approval from ABHES to offer a sterile processing technician program and will offer this program pending additional approvals. For purposes of our financial statements, Legacy Education, L.L.C. is deemed to have acquired Integrity in December 2019. As of December 31, 2025, Integrity had 214 students enrolled in its programs.

Contra Costa Medical Career College

Contra Costa was established in the state of California in 2007. Contra Costa’s campus is located in Antioch, California. Contra Costa offers VN, surgical technology, sterile processing technician, pharmacy technician, medical assisting with phlebotomy, clinical medical assisting dental assisting, diagnostic medical sonography, EKG/ECG technician, medical administrative assistant/billing and coding specialist, phlebotomy (avocational) programs. As of December 31, 2025, Contra Costa had 431 students enrolled in its programs.

Recent Developments

Regulatory Updates

Negotiated Rulemaking

ED has promulgated a substantial number of new regulations in recent years that impact our business on a broad range of topics that have had significant impacts on our business, requiring a large number of reporting and operational changes and resulting in changes to and elimination of certain educational programs. Future regulatory actions by ED or other agencies that regulate our institutions are likely to occur and to have significant impacts on our business, require us to change our business practices and incur costs of compliance and of developing and implementing changes in operations, as has been the case with past regulatory changes. See Annual Report at Form 10-K at “Education Regulations – Negotiated Rulemaking.”

On July 24, 2025, ED announced it intended to establish two negotiated rulemaking committees: one that would consider changes to the federal student loan programs and one that would consider programmatic accountability metrics, changes to the Pell Grant Program and other matters. The rulemaking is intended to implement recent changes to the Title IV HEA programs included in the One Big Beautiful Bill Act (“OBBBA”). See Annual Report at Form 10-K “Education Regulations – Congressional Action.”

The first of the two negotiated rulemaking committees (the RISE Committee) convened for one session in September and October and one session in November. On November 6, 2025, the RISE Committee reached consensus on proposed regulations related to topics including, for example, new federal student loan borrowing limits for certain borrowers and educational programs. The OBBBA and proposed regulations include reduced limits on PLUS loans taken out by parent borrowers for undergraduate students to the amounts of $20,000 annually and $65,000 in the aggregate per dependent child. They also limit aggregate loans over a student borrower’s lifetime, excluding PLUS loans, to $257,500. This limitation does not apply to student borrowers during the expected time to complete their credential if the student is enrolled in a program as of June 30, 2026 and a Direct Loan was made for the program prior to July 1, 2026. Institutions will also be required to reduce federal student loan limits for students who are enrolled as less than full-time students or enrolled in a period of enrollment of less than one full academic year. See Annual Report at Form 10-K “Education Regulations – Congressional Action.” The agreed upon language was incorporated into a notice of proposed rulemaking published January 30, 2026 and will undergo a period of public notice and comment before ED makes any amendments and publishes the final regulations. It is expected that the new regulations will go into effect on July 1, 2026 along with the relevant changes in the OBBBA which become effective on that date. We cannot predict the content of the final regulations, but we are currently evaluating the potential impact of the proposed regulations on our institutions and enrollments and the extent to which alternative sources of funding such as third-party loans may be needed for some of our students.

The second of the two negotiated rulemaking committees (the AHEAD Committee) convened for one session in December 2025 and one session in January 2026. On December 12, 2025, the AHEAD Committee reached consensus on proposed regulations related to Pell Grants, including the new Workforce Pell program. The proposed regulations clarify which educational programs are eligible for the Workforce Pell program introduced by the OBBBA. Under the OBBBA and the proposed regulations, to be eligible a program must meet certain short-term length requirements (at least 8 but less than 15 weeks and (i) at least 150 but less than 600 clock hours, (ii) at least four but less than sixteen semester or trimester hours, or (iii) at least six but less than 24 quarter hours) and comply with certain other prohibitions. The proposed regulations also clarify processes for approval by state governors, the Secretary of Education, and a separate “value-added earnings” measure. Among other requirements, approval from a governor requires the governor to determine the program prepares students for an occupation that aligns with the state’s workforce needs, and the Secretary determines whether the program meets completion, placement rate, and value-added earnings requirements. To comply with the value-added earnings measure, the program’s total published tuition and fees may not exceed the value-added earnings (as defined in the proposed regulations) of working students who received a Pell Grant for enrollment in the program and completed the program within the applicable cohort period. We are evaluating potential opportunities under the proposed regulations.

On January 9, 2026, the AHEAD Committee reached consensus on proposed regulations that create new accountability measures based in part on the accountability metrics in the OBBBA and the metrics in the existing gainful employment rules. The new earnings premium measure applies to all degree and non-degree programs at all institutions and eliminates the debt-to-earnings rate measure in the existing gainful employment regulations. Under the earnings premium measure for undergraduate programs (as opposed to the separate measure for graduate programs), the median annual earnings of program completers are compared to the “earnings threshold,” which is the median earnings of holders of high school diplomas who are working adults aged 25-34 using the methodology prescribed in the regulations. If the median annual earnings of program completers fall below the earnings threshold, the Secretary informs the institution that the program is failing under the earnings premium measure and that the program could become ineligible for the Direct Loan programs based on its earnings premium measure for the next award year. The institution must provide a prescribed warning to students and prospective students explaining that it has not passed ED’s standards based on reported earnings of program graduates and that the program could lose access to Direct Loans based on the next calculated metrics. The warning must also include information about accessing the program information website maintained by ED and explain that the student must acknowledge the student viewed the warning in order for the institution to disburse Title IV funds to the student. If the program fails the earnings premium measure in two out of three consecutive award years for which the earnings premium measure is calculated, this would result in the program’s loss of eligibility for Title IV Direct Loans once ED completes a termination action under its established proceedings, unless the institution successfully appeals under those proceedings. Under the proposed regulations, if more than 50% of an institution’s Title IV-recipient students enrolled in, or more than 50% of the institution’s total Title IV funds are from, programs that fail the earnings premium measure in two out of three consecutive award years for which the earnings premium measure is calculated, the institution could be deemed not administratively capable and be placed on provisional status, and the programs could potentially lose access to all Title IV HEA funds if the institution does not successfully appeal the determination.. The proposed regulations also, among other things, describe the process and formulas for calculating earnings accountability measures, revise the requirements for institutional reporting to ED, specify the period of ineligibility for programs that fail the earnings premium measure, allow for limited retention of eligibility during orderly program closure, and modify the institutional data ED is required to disclose on its program information website (this data will continue to include a program’s earnings premium measure. See Annual Report at Form 10-K “Education Regulations – Administrative Capability.”

The consensus regulatory language will be incorporated into a notice of proposed rulemaking which is expected to be released in the coming months and will undergo a period of public notice and comment before ED makes any amendments and publishes the final regulations. It is expected that the new regulations will go into effect on July 1, 2026 along with the relevant changes in the OBBBA which become effective on that date. It is expected that the first accountability measure calculations will take place in 2027 and “failures” can be determined beginning in July 2027, although programs would not lose eligibility until July 1, 2028. These dates are subject to change. We cannot predict the content of the final regulations, but we are currently evaluating the potential impact of the proposed regulations on the Company and are continuing to monitor the ongoing rulemaking process. If one or more of our programs fail to comply with the new requirement, those programs could lose access to Title IV Direct Loans, and potentially Pell Grant eligibility, which could have a material adverse effect on our student population and our revenues. The new regulations could also require us to modify or eliminate programs to comply with the new regulations.

We expect the new regulations that are expected to emerge from the RISE and AHEAD Committees will impact our institutions and operations, but we cannot predict the ultimate scope, content, and impact of the future ED regulations and guidance including any regulations further implementing the new OBBBA requirements. We are currently assessing, and will continue to assess, the potential impact of the new and proposed requirements on us and our institutions and to monitor the ongoing negotiated rulemaking process.

On January 26, 2026, ED announced it intends to establish a negotiated rulemaking committee that will meet in April and May 2026 to consider amendments to the regulations respecting the Secretary’s recognition of accrediting agencies and related institutional eligibility requirements for the Title IV programs. ED’s stated goals for developing these regulations include simplification of the accreditor recognition process, consideration of the effect of accreditation on higher education costs and “credential inflation,” protecting against undue influence from private trade associations, eliminating discriminatory standards, and focusing on data-driven student outcomes. Among ED’s list of ten proposed issues for negotiation are topics such as reviewing accrediting agencies’ responsibilities to ensure they do not contravene Federal or State law, and determining whether regulations should be revised or expanded to ensure accreditation standards do not impede innovation. Each of our institutions are currently accredited by an accrediting agency recognized by ED, and our participation in the Title IV Programs is dependent on ED continuing to recognize the accrediting agencies that accredit our institutions. See Annual Report at Form 10-K “Education Regulations – ED Recognition of Accrediting Agencies.” Any future regulations or regulatory changes resulting from this negotiated rulemaking process could impact the ability of the accreditors that accredit our institutions to maintain recognition by ED and the accreditation requirements applicable to our institutions. We cannot predict whether and how such rulemaking would impact our institutions and operations.

We also cannot predict with certainty the ultimate combined impact of the regulatory changes which have occurred in recent years, nor can we predict the effect of future legislative or regulatory action by federal, state or other agencies regulating our educational programs or other aspects of our operations, how any resulting regulations will be interpreted or whether we and our institutions will be able to comply with these requirements in the future. Any such actions by legislative or regulatory bodies that affect our programs and operations could have a material adverse effect on our student population and our institutions, including the need to cease offering a number of programs.

Financial Value Transparency and Gainful Employment Regulations and Proposed Accountability Regulations

On May 19, 2023, ED published a notice of proposed rulemaking on financial value transparency and gainful employment, and on October 10, 2023, ED published final regulations which became effective on July 1, 2024. Multiple lawsuits were filed challenging these regulations and these were consolidated into one case in the U.S. District Court for the Northern District of Texas. See Annual Report at Form 10-K “Education Regulations – Financial Value Transparency and Gainful Employment Regulations.” ED subsequently filed a motion for summary judgment, which was granted by the court on October 2, 2025, upholding the validity of the regulations. On November 24, 2025, the plaintiffs appealed the summary judgment ruling. We cannot predict the outcome of the appeal at the Fifth Circuit Court of Appeals.

The DOE has proposed new regulations during a negotiated rulemaking process that would replace the debt-to-earnings rate measure and the earnings premium measure in the existing financial value transparency and gainful employment regulations with a new earnings premium accountability framework based in part on the accountability measure introduced in the OBBBA. See “Regulatory Updates – Negotiated Rulemaking;” see also Annual Report at Form 10-K “Education Regulations – Congressional Action.”

Administrative Capability

Based on the Company’s fiscal year end, our annual compliance audits and audited financial statements were due to ED on December 31, 2025. Due to issues with ED’s systems which the Company raised to ED prior to the submission deadline, our institutions were unable to access the eZ-Audit portal to upload the annual audit submissions to ED. ED could conclude that the annual audit submissions were not filed timely as required and impose sanctions (which we would have the opportunity to appeal). However, we provided the entirety of the annual audit submissions to ED by electronic mail by the required deadline such that ED did receive the required annual audit submissions on a timely basis via alternative means.

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, IRS interest, non-cash interest related to unit option grants, interest related to notes associated with CCMCC, and other debt related interest.

Interest income

This income relates to interest received from investments.

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.

Critical Accounting Policies and Use of Estimates

The preparation of the financial statements included elsewhere in this Quarterly Report on Form 10-Q requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.

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.

Allowance for credit losses

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

Impairment of long-lived assets

We evaluate the recoverability of our 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. We had no long-lived asset impairments as of December 31, 2025 and June 30, 2025, respectively

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 is more likely than not would 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 statement.

Corporate tax applies to corporations and limited liability companies that elect to be treated as corporations. The federal income tax rate for c-corporations is 21% and the state tax rate is 8.84%, and it applies to net taxable income from business activity in California.

Corporations are not subject to the state’s franchise tax, but they are subject to the alternative minimum tax (“AMT”) of 6.65%, which limits the effectiveness of a business writing off expenses against income to lower its corporate tax rate. C-corporations pay the state corporate tax of 8.84% or AMT of 6.65%, depending on whether they claim net taxable income.

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.

Share 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 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 as risk of failing.

Results of Operations

Three Months Ended December 31, 2025 Compared to Three Months Ended December 31, 2024

The following table sets forth our consolidated statements of income data as a percentage of revenue for the three months ended December 31, 2025 and 2024:

Revenue. Our revenue was approximately 19.2 million for the three months ended December 31, 2025 compared to approximately $13.7 million for the three months ended December 31, 2024, an increase of approximately $5.5 million, or approximately 40.7% driven by a 49.4% increase in new student starts to 593 from 397 last year resulting in a 16.8% increase in student enrollment.

Educational services. Our educational services expense was approximately $10.3 million for the three months ended December 31, 2025 compared to approximately $7.5 million for the three months ended December 31, 2024, an increase of approximately $2.8 million, or approximately 37.6%. The increase was primarily attributable to the increased instructional and staffing required to support the increase in enrollments as well as increased rent, externship fees and non-cash compensation charge.

General and administrative expense. Our general and administrative expense was approximately $6.1 million for the three months ended December 31, 2025 compared to approximately $4.3 million for the three months ended December 31, 2024, an increase of approximately $1.8 million, or approximately 40.4%. The increase was primarily attributable to an increase in marketing expense, professional fees and bad debt expense. Of the total general and administrative expense, $1.5 million and $1.2 million relate to marketing expense for the three months ended December 31, 2025 and 2024, respectively.

Depreciation and amortization. Our depreciation and amortization expense was approximately $0.2 million for the three months ended December 31, 2025 compared to approximately $0.1 million for the three months ended December 31, 2024.

Interest expense. Our interest expense was approximately $0.0 million for the three months ended December 31, 2025 compared to approximately $0.0 million for the three months ended December 31, 2024.

Income tax expense. Our income tax expense was approximately $0.8 million for the three months ended December 31, 2025 compared to approximately $0.5 million for the three months ended December 31, 2024.

Net Income. Our net income was approximately $2.0 million for the three months ended December 31, 2025 compared to approximately $1.4 million for the three months ended December 31, 2024, an increase of approximately $0.6 million, or approximately 46%, due to the reasons mentioned above.

Six Months Ended December 31, 2025 Compared to Six Months Ended December 31, 2024

The following table sets forth our consolidated statements of income data as a percentage of revenue for the six months ended December 31, 2025 and 2024:

Revenue. Our revenue was approximately $38.6 million for the six months ended December 31, 2025 compared to approximately $27.6 million for the six months ended December 31, 2024, an increase of approximately $10.9 million, or approximately 39.6% driven by a 37.2% increase in new student starts to 1,710 from 1,246 resulting in a 16.8% increase in ending student population.

Educational services. Our educational services expense was approximately $20.6 million for the six months ended December 31, 2025 compared to approximately $14.7 million for the six months ended December 31, 2024, an increase of approximately $5.9 million, or approximately 40.4%. The increase was primarily attributable to the increased instructional and staffing required to support the increase in enrollments as well as increased rent, externship fees and non-cash compensation charge. As a percentage of revenue, educational expenses declined from 54.9% to 53.6% primarily due to operating efficiencies in employee compensation offset by increases in externship fees and non cash compensation.

General and administrative expense. Our general and administrative expense was approximately $12.2 million for the six months ended December 31, 2025 compared to approximately $8.3 million for the six months ended December 31, 2024, an increase of approximately $3.9 million, or approximately 46.9%. The increase was primarily attributable to an increase in marketing expense, professional fees and bad debt expense. Of the total general and administrative expense, $3.0 million and $2.3 million relate to marketing expense for the six months ended December 31, 2025 and 2024, respectively.

Depreciation and amortization. Our depreciation and amortization expense was approximately $0.3 million for the six months ended December 31, 2025 compared to approximately $0.1 million for the six months ended December 31, 2024.

Interest expense. Our interest expense was approximately $0.05 million for the six months ended December 31, 2025 compared to approximately $0.06 million for the six months ended December 31, 2024.

Income tax expense. Our income tax expense was approximately $1.6 million for the six months ended December 31, 2025 compared to approximately $1.3 million for the six months ended December 31, 2024, an increase of approximately $0.3 million, or approximately 20%. The increase is primarily attributable to the increase in income.

Net Income. Our net income was approximately $4.2 million for the six months ended December 31, 2025 compared to approximately $3.5 million for the six months ended December 31, 2024, an increase of approximately $0.7 million, or approximately 21%, due to the reasons mentioned above.

Liquidity and Capital Resources

Our cash and cash equivalents were approximately $21.1 million and $20.3 million as of December 31, 2025, 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 $0.8 million and $0.4 million for the six months ended December 31, 2025, and 2024, respectively.

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 Six Months Ended December 31, 2025 and 2024

Operating activities

Net cash provided by operating activities was approximately $2.1 million and $3.8 million for the six months ended December 31, 2025, and 2024, respectively. The decrease of approximately $1.7 million is primarily attributable to increase to accounts receivable, prepaid expenses and other receivables, offset by an increase in income taxes payable and a reduction to deferred unearned tuition.

Investing activities

Net cash used in investing activities was approximately $0.8 million for the six months ended December 31, 2025, and approximately $6.6 million for the six months ended December 31, 2024 with cash used for purchases of property and equipment in each of the respective reporting periods. During the six months ended December 31, 2024, the Company spent approximately $6.1 million to the acquisition of CCMCC.

Financing activities

Net cash used by financing activities was approximately $0.6 million for the six months ended December 31, 2025, and net cash provided of approximately $9.2 million for the six months ended December 31, 2024.

Financings

• From July 2024 to September 2024, the Company issued 2,500,000 shares of common stock as part of its IPO 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 to the IPO, at a price of $4.00 per share for gross proceeds of $1,500,000.

Impact of Inflation

We believe that inflation has not had a material impact on our results of operations for the three or six months ended December 31, 2025, and 2024. 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 FASB issued ASU2023-07, *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 2026. The adoption of ASU 2023-07 is reflected in Note 2, “Summary of Significant Accounting Policies – Segment Reporting.”

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, 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.

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.

Evaluation of Disclosure Controls and Procedures

Our principal executive officer and principal financial officer evaluated the effectiveness of our “disclosure controls and procedures” as of December 31, 2025, the end of the period covered by this Quarterly Report on Form 10-Q. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is accumulated and communicated to a company’s management, including its principal executive officer and principal financial officer, as appropriate to allow 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 recognizes that any control and procedures, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. Based on the evaluation of our disclosure controls and procedures as of December 31, 2025, our Chief Executive Officer and our Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective.

Changes in Internal Control

There have been no significant changes in our internal control over financial reporting during the three and six months ended December 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Risk factors that affect our business and financial results are discussed in Part I, Item 1A “Risk Factors,” in our Annual Report on Form 10-K for the year ended June 30, 2025 as filed with the SEC on September 25, 2025 (“Annual Report”). Other than the information set forth in this Form 10-Q, including the section titled “Regulatory Updates,” there have been no material changes in our risk factors from those previously disclosed in our Annual Report. You should carefully consider the risks described in our Annual Report which could materially affect our business, financial condition or future results. The risks described in our Annual Report are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and/or operating results. If any of the risks actually occur, our business, financial condition, and/or results of operations could be negatively affected.