Legacy Education Inc.
For the period ended Jun 30, 2025. Filed Sep 25, 2025.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2025 · Filed Sep 25, 2025
LGCY$8.62-2.2%Stored close · as of Nov 6, 2026
What changed in Risk Factors?
Read the current filingPrevious report: 10-K
Period ended 2024-06-30; filed 2024-10-01.
0001493152-24-038926
Item 1A. Risk FactorsCurrent report: 10-K
Period ended 2025-06-30; filed 2025-09-25.
0001493152-25-014945
Item 1A. Risk FactorsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 150 previous paragraphs and 197 current paragraphs.
111 unchanged; 37 reworded; 44 added; 2 removed; 0 previous and 5 current paragraphs rearranged.
Tables are not compared: 10 previous and 17 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (44)
Current report
More recently, on July 4, 2025, the President signed into law the One Big Beautiful Bill Act (“OBBBA”), which has a general effective date of July 1, 2026 and makes changes to the HEA, including the Title IV programs. ED intends to conduct a negotiated rulemaking process in 2025 for the purpose of establishing new regulations impacting the new OBBBA requirements. See “Education Regulations – Negotiated Rulemaking.” Consequently, we expect the new requirements will impact our institutions and operations, but we cannot predict the ultimate scope, content, and impact of the new OBBBA requirements under future ED regulations and guidance. We are currently assessing, and will continue to assess, the potential impact of the requirements on us and our institutions.
Current report
Among other things, the OBBBA establishes limits on the amount of Title IV loans students and parents can borrow. These limits will not apply to students that will be enrolled as of the effective date, up until their expected time of completion as defined by the OBBBA. The OBBBA establishes a limit of $20,000 annually and $65,000 in total for PLUS loans taken out by parent borrowers for undergraduate programs. The OBBBA also creates a lifetime loan limit of $257,500 for all borrowers. It also requires institutions to prorate loans for students attending less than full-time. We are in the process of evaluating the impact these loan limitations may have 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.
Current report
The OBBBA also establishes a new accountability measure that applies to our degree programs and that is based on a comparison of graduate earnings to the earnings of working adults without degrees under a complex formula that ED is expected to address in future regulations. Under the new accountability measure, an associate degree program would lose its Title IV loan eligibility if the median earnings of a cohort of graduates are less than the median earnings of working adults with a high school diploma and no further degrees for two out of three years. ED will create a process for appealing the programmatic median earnings data. Institutions that do not meet the accountability measure for one year will also be required to notify students of the risk of losing eligibility. Our institutions offer a limited number of associate degree programs that will be subject to the new accountability measure. We cannot yet predict with certainty whether our degree programs will meet the accountability measure or whether they will be at risk of losing eligibility to participate in the Title IV loan programs.
Current report
The OBBBA also restricts student eligibility for the Pell Grant by disqualifying students with a student aid index that equals or exceeds twice the amount of the total maximum Pell Grant, and disqualifying students who receive grant aid from non-federal sources that equals or exceeds the student’s cost of attendance for that period. We are evaluating whether and to what extent this change might impact the Pell eligibility of some of our students and whether alternative sources of financial aid, such as third-party loans, might be necessary for these students. The OBBBA also establishes Workforce Pell Grants for eligible students enrolled in certain short-term educational programs that meet eligibility requirements. The eligibility requirements include criteria related to the program’s length and a determination of eligibility by the state. Many of our programs are longer than the eligibility requirements, but we are evaluating whether opportunities exist for other current or future programs at our institutions.
Current report
Additionally, the OBBBA delays the effective date of the 2022 version of the revised borrower defense to repayment regulations and closed school loan discharge regulations for ten years, until July 1, 2035. See “Education Regulations - Borrower Defense to Repayment Regulations.”
Current report
Congressional committees and members actively continue to propose and consider legislation on a wide range of topics related to the Title IV programs that could impact further the amount of Title IV funding available to schools and students and impose additional accountability requirements on institutions and also that could eliminate or modify certain rules that are less favorable to schools like ours. However, the process of Congressional passage of new legislation is ongoing, is subject to further negotiation and amendment, and is further subject to Congressional approval. Therefore, the timing and outcome of this process and the scope of any additional legislation that might be enacted cannot be predicted with any certainty at this time. We are continuing to monitor the process.
Current report
As previously reported, there are indications based on recent elections that the new administration, and potentially the U.S. Congress, will attempt to dissolve ED, diminish its operational role, and/or transfer some or all of its functions to one or more agencies. See our Quarterly Report on Form 10-Q, filed with the SEC on February 13, 2025, for the section titled “Regulatory Updates” for additional information. In March 2025, ED implemented a reduction in force (“RIF”) that, coupled with resignations by ED staff, reportedly reduced ED’s workforce by approximately half. The RIF also eliminated several school participation divisions, including the school participation division that previously oversaw the operations of our institutions, and eliminated or significantly reduced several other offices or divisions within ED. We currently are working with other offices and personnel at ED on some of our pending matters, but it is possible that we could encounter delays and difficulties obtaining timely ED approval of recent and future acquisitions of other schools. See “Education Regulations – School Acquisitions” and “Education Regulations – Change of Control.” We also could encounter delays and difficulties obtaining timely ED approval of new campuses or other educational programs for which we wish to offer Title IV funds to students and which require ED approval. See “Education Regulations – Opening Additional Campuses and Adding Educational Programs.”
Current report
In March 2025, the President issued an Executive Order calling for all necessary steps to close ED although the executive order did not indicate the process or timing for accomplishing this task nor identify where some of the functions of ED might be transferred. We continue to monitor developments in this area, but cannot yet predict whether the administration or Congress will be successful in closing or further reducing ED and/or transferring some or all of its functions to one or more agencies, or whether such a proposal would disrupt or change the availability of Title IV funds to us and our students or change the rules applicable to us and our schools to continue receiving Title IV funds. We also cannot predict the success of any litigation challenging any efforts to close or restructure ED. Any executive or legislative action impacting ED, the availability of Title IV funds, or the rules applicable to us could have a material adverse effect on us and our institutions.
Current report
On July 24, 2025, ED announced it intends to establish two negotiated rulemaking committees: one that will consider changes to the federal student loan programs and one that will consider institutional and programmatic accountability, including changes to the Pell Grant. The rulemaking is intended to implement recent changes to the Title IV, HEA programs included in the OBBBA. See “Education Regulations – Congressional Action.” We expect the new requirements will impact our institutions and operations, but we cannot predict the ultimate scope, content, and impact of the new OBBBA requirements under future ED regulations and guidance. We are currently assessing, and will continue to assess, the potential impact of the requirements on us and our institutions and to monitor the negotiated rulemaking process.
Current report
On April 4, 2025, ED announced its intention to conduct negotiated rulemaking to prepare proposed regulations on topics pertaining to Title IV regulations, potentially including Public Service Loan Forgiveness, loan repayment programs, and “streamlining” current federal student financial assistance regulations. ED held public hearings to discuss the rulemaking agenda on April 29, 2025 and May 1, 2025 and requested comments on rulemaking topics be submitted by May 5, 2025. The Public Service Loan Forgiveness Committee met from June 30, 2025 to July 2, 2025. We cannot predict the ultimate timing, content, and impact of any regulations and guidance ED might propose and ultimately adopt. In addition, the President directed federal agencies on April 9, 2025 to identify existing regulations that are unlawful or otherwise objectionable and to take steps to repeal or modify these regulations. We cannot predict what rules ED might attempt to repeal or modify, the timing and outcome of these efforts, or the impact of any regulatory repeals of modifications on our business and schools.
Current report
ED also grants closed school loan discharges to students when it determines the student’s institution or campus has closed. When an institution or location meets ED’s definition of a closed school or location, affected students can apply for a discharge of the Title IV loans incurred for the program of study the student did not complete due to the closure, and ED grants the discharge if the student meets certain requirements. ED also may seek to recover the cost of the discharge from the institution. If any of our locations or institutions close, our institutions could be subject to liabilities for closed school loan discharges. In conjunction with the 2022 revisions to the BDR rule, ED also revised the closed school loan discharge provisions. However, these revisions are also enjoined as well as delayed under the OBBBA. We cannot predict the outcome of any future revisions to the closed school loan discharge provisions that ED may initiate.
Current report
ED’s proposed regulatory agenda first published in early September 2025 includes an intent to address certain issues including financial responsibility requirements via negotiated rulemaking. We cannot predict how ED will address these requirements or the impact the changes to financial responsibility requirements may have on our schools.
Current report
ED published a notice in early September 2025 regarding its agenda for regulatory initiatives which, among other things, indicated an intent to address certain issues including administrative capability requirements. We cannot predict whether ED intends to address these requirements through negotiated rulemaking, published guidance, or other actions, nor can we predict the impact on our institutions of any changes that might occur to the administrative capability requirements. We are continuing to monitor developments on this topic.
Current report
Legacy Education Antioch, LLC, a wholly-owned subsidiary of Legacy LLC entered into the APA with the Company, Legacy Education, LLC, a wholly-owned subsidiary of the Company, CCMCC, CCMCC Online and, solely with respect to certain portions of the APA, Stacey Orozco and Bulmaro Orozco, the sole owners CCMCC and CCMCC Online. The CCMCC Transaction was consummated on December 18, 2024.
Current report
CCMCC’s TPPPA contains conditions on its participation in the Title IV Programs that are typically imposed by ED when a change of ownership occurs. These conditions include restrictions on growth (e.g., the addition of new programs and locations, increase in credential level, change in program length), bi-weekly and monthly financial reporting, and a reporting requirement related to certain types of student complaints. If CCMCC does not timely comply with these reporting requirements, or its reports contain information of concern to ED, ED may request further information from CCMCC or the Company or take action against CCMCC or the Company.
Current report
If agencies require us to obtain other approvals in connection with the CCMCC Transaction, we will be required to undergo an application process for approvals from the applicable agencies and could be subject to conditions or restrictions (or loss of approval) depending on the outcome of the approval process. If any applicable agencies determine that we did not follow required procedures in providing notification and seeking approval of the CCMCC Transaction, or if any agencies do not approve the CCMCC Transaction, we could be subject to sanctions by the applicable agencies including loss of CCMCC’s approvals from these agencies.
Current report
In addition to school acquisitions, other types of transactions can also cause a change of control. ED, most of our state education agencies, our accreditors, and other regulators have standards pertaining to the change of control of schools, but these standards are not uniform. ED regulations describe some transactions that constitute a change of control, including the transfer of a controlling interest in the voting stock of an institution or the institution’s parent corporation including our Company. A significant purchase or disposition of our common stock could be determined by ED to be a change of control under this standard. On October 28, 2022, ED published a final rule revising its change in ownership regulations, which became effective July 1, 2023. The new requirements, such as requiring notice to ED and current and prospective students at least 90 days prior to a change in ownership, could make it more difficult to execute a change in ownership or an acquisition, which could make it less desirable to acquire an ownership interest in our Company, or which could result in conditions or restrictions as a result of a transaction involving us or an acquired institution. In addition, ED’s revisions to its financial responsibility standards published on October 31, 2023 and effective July 1, 2024 impose additional financial tests, and potentially additional letter of credit requirements, related to changes in ownership.
Current report
Most of our state education agencies, our accreditors, and other regulators include the sale of a controlling interest of common stock in the definition of a change of control although some agencies could determine that the sale or disposition of a smaller interest would result in a change of control. A change of control under the definition of one of these agencies would require the affected school to reaffirm its state authorization, accreditation, or other approval. Some agencies would require approval prior to a sale or disposition that would result in a change of control in order to maintain authorization or accreditation. The requirements to obtain such reaffirmation from the states and our accreditors vary widely.
Current report
ED requires institutions to periodically report changes in ownership even when a change does not result in a change in control or require ED approval. While ED’s regulations require reporting of owners holding at least a five percent ownership interest (as well as changes representing at least 5% but under 25% on a quarterly basis or sooner if the institution plans to undergo a change in ownership), the recently implemented overhaul of ED’s electronic application system through which institutions report ownership requests a disclosure of all owners regardless of their ownership percentage. The new electronic application also requests granular detail about reported owners. We may not have access to contemporaneous ownership information given the day-to-day fluctuations of trading on the public market. Access to information regarding Non-Objecting Beneficial Owners is expensive and this information is typically not current by the time obtained. Moreover, we cannot predict whether investors will timely report investments such that we could access accurate beneficial ownership information and even if investors do comply with reporting requirements, certain passive investors would not typically be reported until 45 days following our fiscal year end. We are as yet uncertain regarding our ability to timely obtain ownership information and timely report this information to ED. Failure to timely report ownership changes could result in adverse action by ED, or conditions or restrictions imposed by ED on one or more of our institutions.
Current report
Our institutions may encounter difficulty timely identifying and reporting to ED on the electronic application for each of our institutions’ several hundred owners. Integrity may also encounter additional difficulty reporting ownership given ED has not yet approved the prior change in control of Integrity and, as a result, we could encounter difficulty obtaining access to the electronic application. ED has informed us that it only will require us to report owners with a five percent or greater ownership interest in the Company although this guidance could change in the future and we could encounter difficulty identifying and timely reporting owners under current or future ED guidance. Our institutions will also be required to timely report any additional changes to ownership percentages and given the frequency such changes can occur for a publicly traded company, we may have difficulty timely complying with ED’s reporting requirements. These difficulties could result in adverse action by ED, or conditions or restrictions imposed by ED on one or more of our institutions.
Current report
If we decide to issue preferred stock or additional common stock in the future, this issuance could result in a change in ownership or control requiring regulatory approval. ED considers both control rights and beneficial ownership interest among other factors when evaluating whether a change in ownership resulting in a change in control has occurred. Similarly, changes to our board of directors or the right to appoint directors could result in a change in ownership or control requiring regulatory approval.
Current report
We have verified that most of our education regulators and accreditors do not treat the initial public offering as a change in ownership or control requiring agency approval. If agencies require us to obtain approvals in connection with the initial public offering, we will be required to undergo an application process for approvals from the applicable agencies and could be subject to conditions or restrictions depending on the outcome of the approval process. If an agency notified us that we moved forward with the initial public offering without making or obtaining required pre-closing notices and approvals prior to the initial public offering, we could be subject to sanctions by the applicable agencies including loss of our approvals from these agencies. On July 30, 2024, ED provided written confirmation the offering as described would not constitute a change of control under its regulations. However, subsequent offerings, transactions or other events could be deemed to be a change of control in the future.
Current report
With regard to the agencies that institutionally accredit our institutions or authorize them to operate in the state of California:
Current report
The California Board of Registered Nursing requires pre-closing approval of a change of ownership before it occurs and requires post-closing approval of a change in organizational structure. We requested confirmation from the California Board of Registered Nursing that the initial public offering as described will not be treated as a change in ownership that requires approval before the offering occurs, but have not received a determination from the agency. If the California Board of Registered Nursing determines we were required to obtain the agency’s approval prior to the initial public offering under its statutes, rules or standards, then, as noted above, we could be subject to sanctions by this agency including potential loss of our approval.
Current report
We are in the process of initiating communications with our education regulators and accreditors on this subject and have not received responses as to whether they will treat the initial public offering as a change in ownership or control requiring agency approval. If we are required to go through a change of ownership and/or control review process with these agencies, one or more of these agencies could impose additional conditions or restrictions or delay or decline to issue an approval. If an agency does not require us to go through a change of ownership and/or control review process, we may be required to submit notices or other information to the agency which could result in further scrutiny or inquiries by the agency.
Current report
A change of control could occur as a result of future transactions in which the Company or our institutions are involved. Some corporate reorganizations and some changes in the board of directors of the Company are examples of such transactions. Once we become a publicly traded corporation, ED regulations provide that a change of control also could occur in one of at least two ways: (a) if a person acquires ownership and control of the corporation so that the corporation is required to file a Current Report on Form 8-K with the Securities and Exchange Commission disclosing the change of control or (b) if the corporation has a shareholder that owns at least 25% of the total outstanding voting stock of the corporation and is the largest shareholder of the corporation, and that shareholder ceases to own at least 25% of such stock or ceases to be the largest shareholder. These standards are subject to interpretation by ED.
Current report
Moreover, the potential adverse effects of a change of control could influence future decisions by us and our stockholders regarding the sale, purchase, transfer, issuance or redemption of our stock. In addition, the adverse regulatory effect of a change of control also could discourage bids for shares of our common stock and could have an adverse effect on the market price of our shares.
Current report
In January through March 2024, ED conducted negotiated rulemaking to prepare proposed regulations on several topics including the rules pertaining to returns of Title IV Program funds. On July 24, 2024, ED promulgated proposed amended regulations related to return of Title IV calculations. ED published the final regulations on January 3, 2025, with a general effective date of July 1, 2026. The regulations codify ED’s guidance requiring the date of determination of withdrawal to be documented within 14 days after the student’s last date of attendance for institutions that take attendance; remove the option for clock-hour programs to use the “cumulative” method to calculate Title IV earned; and changes Return of Title IV calculations amended for programs offered in modules. We are evaluating whether and the extent to which the new regulations may negatively impact our performance of return of Title IV.
Current report
The failure of any of our institutions to detect and prevent financial aid fraud could result in liabilities, loss of accreditation or Title IV eligibility, or third-party claims.
Current report
Institutions must detect and prevent financial aid fraud attempts. For example, ED requires institutions to maintain systems to identify conflicting information that affects a student’s eligibility for financial aid and resolve it before disbursing aid. ED also requires institutions to report suspicions of fraud to the ED’s Office of the Inspector General. If our efforts to detect and prevent financial aid fraud are unsuccessful or found to be deficient, it could lead to a finding of noncompliance with Title IV requirements, accreditation standards, or other agencies, and could result in liabilities, loss of accreditation or Title IV eligibility, as well as third-party claims.
Current report
We may acquire other companies or technologies which could divert our management’s attention, result in dilution to our shareholders and otherwise disrupt our operations and adversely affect our operating results.
Current report
We may in the future seek to acquire or invest in businesses, applications and services or technologies that we believe could complement or expand our services, enhance our technical capabilities or otherwise offer growth opportunities. The pursuit of potential acquisitions may divert the attention of management and cause us to incur various expenses in identifying, investigating and pursuing suitable acquisitions, whether or not they are consummated.
Current report
In addition, we do not have any experience in acquiring other businesses. If we acquire additional businesses, we may not be able to integrate the acquired personnel, operations and technologies successfully, or effectively manage the combined business following the acquisition. We also may not achieve the anticipated benefits from the acquired business due to a number of factors, including:
Current report
In addition, a significant portion of the purchase price of companies we acquire may be allocated to acquired goodwill and other intangible assets, which must be assessed for impairment at least annually. In the future, if our acquisitions do not yield expected returns, we may be required to take charges to our operating results based on this impairment assessment process, which could adversely affect our results of operations. Acquisitions could also result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect our operating results. In addition, if an acquired business fails to meet our expectations, our operating results, business and financial position may suffer.
Current report
We are subject to the rules and regulation of the NYSE American and are required to comply with certain continued exchange listing standards and requirements or be subject to delisting.
Current report
We must meet certain financial and liquidity criteria to maintain the listing of our common stock on the NYSE American. If we fail to meet any of the NYSE American’s continued listing standards or we violate NYSE American listing requirements, our common stock may be delisted. A delisting of our common stock from NYSE American may materially impair our shareholders’ ability to buy and sell our common stock and could have an adverse effect on the market price of, and the efficiency of the trading market for, our common stock. The delisting of our common stock could significantly impair our ability to raise capital and the value of your investment.
Current report
Our stock price may be volatile, and you could lose all or part of your investment.
Current report
You should consider an investment in our common stock to be risky, and you should invest in our common stock only if you can withstand a significant loss and wide fluctuations in the market value of your investment. The trading price of our common stock may fluctuate substantially. This may be especially true for companies with a small public float. These fluctuations could cause you to lose all or part of your investment in our common stock. Some factors that may cause the market price of our common stock to fluctuate, in addition to the other risks mentioned in this “Risk Factors” section and elsewhere in this Annual Report on Form 10-K, are:
Current report
In addition, if the market for stocks in our industry or industries related to our industry, or the stock market in general, experiences a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, financial condition and results of operations. Furthermore, in the past, shareholders of public companies have often brought securities class action suits against companies following periods of instability in the market price of their securities. If we were involved in a class action suit, it could divert a significant amount of our management’s attention and other resources from our business and operations and require us to incur significant expenses to defend the suit, which could harm our results of operations. Any such class action suit, whether or not successful, could harm our reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may be required to pay significant damages, which could have a material adverse effect on our financial condition and results of operations.
Showing the first 40 of 44 passages. Open the source sections for the rest.
Removed paragraphs (2)
Previous report
In January through March 2024, ED conducted negotiated rulemaking to prepare proposed regulations on several topics including the rules pertaining to returns of Title IV Program funds. On July 24, 2024, ED promulgated proposed amended regulations related to return of Title IV calculations. Our institutions are required to perform return of Title IV calculations and the final version of the amended regulations may impact our performance of these mandatory calculations. We cannot predict the ultimate timing, content and effective date of final amended regulations, or any future rulemaking process by ED that would result, though it is possible such future regulations are more onerous or could negatively impact our institutions.
Previous report
On April 5, 2024, the Company executed a Letter of Intent with Contra Costa Medical Career College (“CCMCC”), CCMCC Online, Inc., and Contra Costa Community Outreach Clinic and Laboratory (collectively, “Contra Costa”) which describes a potential transaction whereby the Company would acquire substantially all of the assets of Contra Costa for a mix of cash and Company common stock. The Company contemplates it would teach-out the Contra Costa students and subsequently establish CCMCC as an additional location of CCC, in each case subject to all required regulatory approvals and the execution of a definitive agreement with Contra Costa. If CCMCC incurs any liabilities associated with prior noncompliance with applicable laws or ED discharge of Title IV loans for students who do not complete the teach-out, ED could interpret its rules to require us to assume these liabilities. If ED or other regulators impose conditions or decline to provide requisite approvals associated with the acquisition, the teach-out, or the addition of the CCMCC campus as an additional location of CCC, it could impair our ability to expand our CCC institution through the acquisition of substantially all of the assets of Contra Costa
Reworded paragraphs (37)
Previous wording
Each of our institutions (HDMC, CCC, and Integrity) participates in the federal student aid programs authorized by Title IV of the Higher Education Act of 1965 (“HEA”), as amended (“Title IV Programs”), as well as other federal and state financial aid programs and are subject to extensive regulation by the U.S. Department of Education (“ED”), other federal and state educational agencies and accreditors. CCC and HDMC are approved to offer, and must comply with applicable requirements related to, veterans education assistance administered by the Department of Veterans Affairs (“VA”), Cal Grants administered by the California Student Aid Commission, and funds administered under the Workforce Innovation and Opportunity Act. We derive a substantial portion of our revenue and cash flows from the Title IV Programs and a significant portion of our students rely on financial aid received under the Title IV Programs in order to attend our institutions. To qualify as an eligible institution to participate in the Title IV Programs, an institution must among other things receive and maintain authorization by the appropriate state education agencies, be accredited by an accreditor recognized by ED, and be certified by ED as an eligible institution.
Current wording
Each of our institutions (HDMC, CCC, Integrity, and CCMCC) participates in the federal student aid programs authorized by Title IV of the HEA, as amended (Title IV Programs), as well as other federal and state financial aid programs and are subject to extensive regulation by ED, other federal and state educational agencies and accreditors. CCC, HDMC, and CCMCC are approved to offer, and must comply with applicable requirements related to, veterans education assistance administered by the VA. CCC and HDMC are also approved to offer, and must comply with applicable requirements related to, Cal Grants administered by the California Student Aid Commission, and funds administered under the Workforce Innovation and Opportunity Act. We derive a substantial portion of our revenue and cash flows from the Title IV Programs and a significant portion of our students rely on financial aid received under the Title IV Programs in order to attend our institutions. To qualify as an eligible institution to participate in the Title IV Programs, an institution must among other things receive and maintain authorization by the appropriate state education agencies, be accredited by an accreditor recognized by ED, and be certified by ED as an eligible institution.
Previous wording
Our institutions are subject to the educational laws and regulations of the State of California where our physical campuses are located. We also may be subject to the educational laws of other states if we acquire a new institution in the state or if one of our institutions adds a new campus in the state or otherwise conducts other operations in the state covered by applicable state educational law including, but not limited to, student recruitment, advertising or certain types of distance education. State educational laws establish standards and requirements for, among other things, student instruction, faculty qualifications, campuses and facilities, educational programs, financial stability, administrative staff, marketing and recruiting, distribution of information to current and prospective students, payment of refunds to students who withdraw, private and institutional loans, distance education, student services, student complaints, student admissions, transfer of academic credits, substantive changes, acquisitions, and policies and minimum graduation and job placement outcomes for institutions and/or their individual educational programs. Our institutions are authorized to operate by the California Bureau for Private Postsecondary Education (“BPPE”). We also may be required to obtain approvals and comply with requirements of state agencies that regulate certain occupational educational programs such as, for example, VN and phlebotomy. The California Board of Registered Nurses approves the Associate degree of Nursing program at HDMC. The VN programs at HDMC and Integrity are approved by BVNPT. The phlebotomy programs at HDMC and CCC are approved by California Department of Public Health. In addition, we are subject to state consumer protection laws.
Current wording
Our institutions are subject to the educational laws and regulations of the State of California where our physical campuses are located. We also may be subject to the educational laws of other states if we acquire a new institution in the state or if one of our institutions adds a new campus in the state or otherwise conducts other operations in the state covered by applicable state educational law including, but not limited to, student recruitment, advertising or certain types of distance education. State educational laws establish standards and requirements for, among other things, student instruction, faculty qualifications, campuses and facilities, educational programs, financial stability, administrative staff, marketing and recruiting, distribution of information to current and prospective students, payment of refunds to students who withdraw, private and institutional loans, distance education, student services, student complaints, student admissions, transfer of academic credits, substantive changes, acquisitions, and policies and minimum graduation and job placement outcomes for institutions and/or their individual educational programs. Our institutions are authorized to operate by BPPE. We also may be required to obtain approvals and comply with requirements of state agencies that regulate certain occupational educational programs such as, for example, VN and phlebotomy. The California Board of Registered Nurses approves the Associate degree of Nursing program at HDMC. The VN programs at HDMC, Integrity, and CCMCC are approved by BVNPT. The phlebotomy programs at HDMC and CCC are approved by California Department of Public Health. In addition, we are subject to state consumer protection laws.
Previous wording
Attorneys general in many states have become more active in enforcing consumer protection laws, including, for example, laws related to marketing, advertising and recruiting practices and the financing of education at for-profit educational institutions. Further, some state attorneys general have partnered with the Consumer Financial Protection Bureau (“CFPB”), the Federal Trade Commission (“FTC”), and other federal and state agencies to review industry practices and collaborate on enforcement actions against educational institutions. These actions increase the likelihood of scrutiny of marketing, advertising, recruiting, financing, and other practices of educational institutions and may result in unforeseen consequences, increasing risk and making our operating environment more challenging.
Current wording
Attorneys general in many states have become more active in enforcing consumer protection laws, including, for example, laws related to marketing, advertising and recruiting practices and the financing of education at for-profit educational institutions. Further, some state attorneys general have partnered with federal and state agencies to review industry practices and collaborate on enforcement actions against educational institutions. These actions increase the likelihood of scrutiny of marketing, advertising, recruiting, financing, and other practices of educational institutions and may result in unforeseen consequences, increasing risk and making our operating environment more challenging.
Previous wording
State education laws and regulations may limit our campuses’ ability to operate or to award degrees, diplomas, or certificates or offer new programs. Moreover, under the HEA, authorization by state education agencies is necessary to maintain eligibility to participate in the Title IV Programs. ED regulations also require institutions offering postsecondary education through distance education to students located in a state in which the institution is not physically located (as determined by the institution at the time of a student’s initial enrollment and, if applicable, upon formal receipt of information from the student that their location has changed to another state) to meet state educational requirements in that state or participate in a state authorization reciprocity agreement in order to disburse Title IV funds to such students. We have obtained approval to offer portions of our programs via distance education from ACCET for HDMC and CCC, ABHES for Integrity, and from the BPPE for HDMC, CCC, and Integrity. The State of California does not, however, presently participate in any state authorization reciprocity agreement whereby our institutions may offer programs via distance education to students located in other states without our obtaining applicable authorizations from those other states. Our institutions presently do not have any state postsecondary authorizations outside of California.
Current wording
State education laws and regulations may limit our campuses’ ability to operate or to award degrees, diplomas, or certificates or offer new programs. Moreover, under the HEA, authorization by state education agencies is necessary to maintain eligibility to participate in the Title IV Programs. ED regulations also require institutions offering postsecondary education through distance education to students located in a state in which the institution is not physically located (as determined by the institution at the time of a student’s initial enrollment and, if applicable, upon formal receipt of information from the student that their location has changed to another state) to meet state educational requirements in that state or participate in a state authorization reciprocity agreement in order to disburse Title IV funds to such students. We have obtained approval to offer portions of our programs via distance education from ACCET for CCC, CCMCC and HDMC, ABHES for Integrity, and from the BPPE for HDMC, CCC, CCMCC and Integrity. The State of California does not, however, presently participate in any state authorization reciprocity agreement whereby our institutions may offer programs via distance education to students located in other states without our obtaining applicable authorizations from those other states. Our institutions presently do not have any state postsecondary authorizations outside of California.
Previous wording
In addition, an institution must make disclosures readily available to enrolled and prospective students regarding whether programs leading to professional licensure or certification meet state educational requirements, and provide a direct disclosure to students in writing if the program leading to professional licensure or certification does not meet state educational requirements in the state in which the student is located (which is only California for our current students). Under ED’s rules effective July 1, 2024, an institution must certify that its programs satisfy the applicable educational requirements for professional licensure or certification needed to practice or find employment in an occupation for which the program prepares a student in the state in which the school or where a student is located or intends to seek employment (which, although our current students are located in California, could be a state other than California and could require us to refrain from enrolling students in a state if our program does not satisfy the applicable educational requirements in the state). We believe the Title IV-eligible educational programs offered by our institutions satisfy all such currently applicable state educational requirements for professional licensure or certification. ED also commenced a negotiated rulemaking process to develop new regulations on topics that include state authorization and convened a negotiated rulemaking committee to consider proposals from January through March 2024. On July 17, 2024, ED announced that proposed rules related to cash management, state authorization and accreditation will be published by next year. We cannot predict the ultimate timing or content of any new regulations that might emerge from this process. See Risk Factors at “Additional ED or other rulemaking could materially and adversely affect our operations, business, results of operations, financial condition and cash flows.”
Current wording
In addition, an institution must make disclosures readily available to enrolled and prospective students regarding whether programs leading to professional licensure or certification meet state educational requirements, and provide a direct disclosure to students in writing if the program leading to professional licensure or certification does not meet state educational requirements in the state in which the student is located (which is only California for our current students). Under ED’s rules effective July 1, 2024, an institution must certify that its programs satisfy the applicable educational requirements for professional licensure or certification needed to practice or find employment in an occupation for which the program prepares a student in the state in which the school or where a student is located or intends to seek employment (which, although our current students are located in California, could be a state other than California and could require us to refrain from enrolling students in a state if our program does not satisfy the applicable educational requirements in the state). We believe the Title IV-eligible educational programs offered by our institutions satisfy all such currently applicable state educational requirements for professional licensure or certification.
Previous wording
*Institutional Accreditation.*In the U.S., accrediting agencies are non-governmental entities that periodically review the academic quality of an institution’s instructional programs and its administrative and financial operations to ensure the institution has the resources to perform its educational mission. Accrediting agencies impose standards that extend to most aspects of an institution’s operations and educational programs including, but not limited to, requirements to maintain threshold graduation and job placement rates for its educational programs. ED requires an institution to be accredited by an ED-recognized accrediting agency in order for the institution to participate in the Title IV Programs. HDMC and CCC are currently accredited by ACCET through April 2029 and April 2025, respectively. Integrity is accredited by ABHES through February 2026. ACCET and ABHES are ED-recognized accrediting agencies. The failure to comply with accreditation standards could subject an institution to additional oversight and reporting requirements, accreditation proceedings such as a show-cause directive, an action to defer or deny action related to an institution’s application for a new grant of accreditation, or an action to suspend or revoke an institution’s accreditation or a program’s approval. If our institutions or programs are subject to negative accreditation actions or are placed on probationary accreditation status, we may experience adverse publicity, impaired ability to attract and retain students, and substantial expense to obtain unqualified accreditation status. The inability to obtain reaccreditation following periodic reviews or any final loss of institutional accreditation after exhaustion of the administrative agency processes would result in a loss of Title IV Program funds and state authorization for the affected institution. Such events and any related claims brought against us could have a material adverse impact on our business, reputation, financial condition, results of operations and cash flows.
Current wording
*Institutional Accreditation.*In the U.S., accrediting agencies are non-governmental entities that periodically review the academic quality of an institution’s instructional programs and its administrative and financial operations to ensure the institution has the resources to perform its educational mission. Accrediting agencies impose standards that extend to most aspects of an institution’s operations and educational programs including, but not limited to, requirements to maintain threshold graduation and job placement rates for its educational programs. ED requires an institution to be accredited by an ED-recognized accrediting agency in order for the institution to participate in the Title IV Programs. HDMC, CCC, and CCMCC are currently accredited by ACCET through April 2029, April 2030, and April 2026, respectively. Integrity is accredited by ABHES through February 2026. ACCET and ABHES are ED-recognized accrediting agencies. The failure to comply with accreditation standards could subject an institution to additional oversight and reporting requirements, accreditation proceedings such as a show-cause directive, an action to defer or deny action related to an institution’s application for a new grant of accreditation, or an action to suspend or revoke an institution’s accreditation or a program’s approval. If our institutions or programs are subject to negative accreditation actions or are placed on probationary accreditation status, we may experience adverse publicity, impaired ability to attract and retain students, and substantial expense to obtain unqualified accreditation status. The inability to obtain reaccreditation following periodic reviews or any final loss of institutional accreditation after exhaustion of the administrative agency processes would result in a loss of Title IV Program funds and state authorization for the affected institution. Such events and any related claims brought against us could have a material adverse impact on our business, reputation, financial condition, results of operations and cash flows.
Previous wording
*Programmatic Accreditation.*Many states and professional associations require professional programs to be accredited. While programmatic accreditation is not a sufficient basis to qualify for institutional Title IV Program certification, programmatic accreditation may improve employment opportunities for program graduates in their chosen field. Moreover, ED requires an institution to hold programmatic accreditation for an educational program if required by a state or federal agency (including as a condition of employment in the occupation for which the institutional program prepares the students). The veterinary technology program at CCC is accredited by the American Veterinary Medical Association. Integrity’s Registered Nurse to Bachelor of Science in Nursing holds pre-accreditation candidacy status from the Commission for Nursing Education Accreditation. All of the Title IV-eligible educational programs offered by our institutions are within the scope of institutional accreditation from either ACCET or ABHES, and we do not believe any of our Title IV-eligible educational programs that do not hold programmatic accreditation are required to hold programmatic accreditation by any currently applicable state or federal agency. Those of our programs that do not have programmatic accreditation, where available, or fail to maintain such accreditation, may experience adverse publicity, loss of access to Title IV funds, declining enrollments, litigation or other claims from students or suffer other adverse impacts, which could result in it being impractical for us to continue offering such programs.
Current wording
*Programmatic Accreditation.*Many states and professional associations require professional programs to be accredited. While programmatic accreditation is not a sufficient basis to qualify for institutional Title IV Program certification, programmatic accreditation may improve employment opportunities for program graduates in their chosen field. Moreover, ED requires an institution to hold programmatic accreditation for an educational program if required by a state or federal agency (including as a condition of employment in the occupation for which the institutional program prepares the students). The veterinary technology program at CCC is accredited by the American Veterinary Medical Association. Integrity’s Registered Nurse to Bachelor of Science in Nursing holds pre- accreditation candidacy status from the Commission for Nursing Education Accreditation. Additionally, CCC is pursuing initial programmatic accreditation with ABHES for the Surgical Technology Associate of Applied Science program for consideration during the Spring 2026 visit cycle. The Associate of Applied Science in Surgical Technology at CCMCC is accredited by ABHES and will engage in reaccreditation in the Spring 2026 visit cycle. All of the Title IV-eligible educational programs offered by our institutions are within the scope of institutional accreditation from either ACCET or ABHES, and we do not believe any of our Title IV-eligible educational programs that do not hold programmatic accreditation are required to hold programmatic accreditation by any currently applicable state or federal agency. Those of our programs that do not have programmatic accreditation, where available, or fail to maintain such accreditation, may experience adverse publicity, loss of access to Title IV funds, declining enrollments, litigation or other claims from students or suffer other adverse impacts, which could result in it being impractical for us to continue offering such programs.
Previous wording
*ED Recognition of Accrediting Agencies.*Our participation in Title IV Programs is dependent on ED continuing to recognize the accrediting agencies that accredit our colleges and universities. Each of our institutions currently are accredited by an ED-recognized accrediting agency. The standards and practices of these agencies have become a focus of attention by state attorneys general, members of Congress, ED’s Office of Inspector General and ED over recent years, and are the subject of upcoming rulemaking. ED held negotiated rulemaking sessions between January and March 2024, and the negotiators did not reach consensus on proposed language. On July 17, 2024, ED announced that proposed rules related to cash management, state authorization and accreditation will be published by next year. ED has indicated during negotiated rulemaking its intent to require accreditors to take action against institutions more promptly when accreditors identify noncompliance and to modify accreditor review of substantive changes and limit the time an institution can remain in noncompliance with accrediting agency standards, which could increase the amount of enforcement activities by accrediting agencies against institutions like ours. ED also proposed expanding requirements related to accrediting agencies’ conflict of interest policies and student achievement standards, for example.
Current wording
*ED Recognition of Accrediting Agencies.*Our participation in Title IV Programs is dependent on ED continuing to recognize the accrediting agencies that accredit our colleges and universities. Each of our institutions currently are accredited by an ED- recognized accrediting agency. The standards and practices of these agencies have become a focus of attention by state attorneys general, members of Congress, ED’s Office of Inspector General and ED over recent years. ED held negotiated rulemaking sessions between January and March 2024, and the negotiators did not reach consensus on proposed language. ED terminated the negotiated rulemaking process for accreditation as of December 20, 2024. However, ED published a proposed regulatory agenda in early September 2025 that, among other things, includes a proposal to engage in negotiated rulemaking to provide institutions flexibility to change accreditors and “remove other burdensome requirements that erect barriers to entry for new accreditation agencies.” This proposal is in its early stages and, therefore, we cannot predict whether and how such a rulemaking would impact the accreditors that accredit our institutions or the accreditation requirements applicable to our institutions.
Previous wording
This focus may make the accreditation review process longer and potentially more challenging for our institutions when they undergo their normal accreditation review processes. It may also make the process by which ED evaluates and recognizes accreditors as appropriate Title IV Program gatekeepers longer and more challenging for our accreditors. ED recognized accreditors are facing increased political pressure as part of this recognition process to apply heightened levels of scrutiny or review and/or apply new requirements or standards to for-profit institutions. These pressures may result in future modifications to accreditation criteria, practices or other policies and procedures, with which our institutions may not be able to comply. If ED withdraws recognition from ACCET and/or ABHES, ED may continue our schools’ eligibility for a period of up to 18 months from the date of the withdrawal of recognition, and our schools could apply for accreditation from other ED-recognized accrediting agencies. ED could impose provisional certification and other conditions and restrictions on our schools during this period. If ACCET and/or ABHES lose recognition from ED and our schools are unable to obtain accreditation from a different ED-recognized accrediting agency in the required time period, our schools could lose eligibility to participate in Title IV Programs.
Current wording
If ED withdraws recognition from ACCET and/or ABHES, ED may continue our schools’ eligibility for a period of up to 18 months from the date of the withdrawal of recognition, and our schools could apply for accreditation from other ED-recognized accrediting agencies. ED could impose provisional certification and other conditions and restrictions on our schools during this period. If ACCET and/or ABHES lose recognition from ED and our schools are unable to obtain accreditation from a different ED-recognized accrediting agency in the required time period, our schools could lose eligibility to participate in Title IV Programs.
Previous wording
The U.S. Congress must periodically reauthorize the HEA and other laws governing the Title IV Programs and annually determine the funding level for each Title IV Program, and may pass new laws or revise existing laws at any time. Political and budgetary concerns significantly affect the Title IV Programs. We cannot predict when or whether Congress will consider or vote on legislation to reauthorize the HEA or to create new laws or revise existing laws. Furthermore, we cannot predict with any certainty the outcome of the HEA reauthorization process nor the extent to which any legislation that Congress could adopt at any time could materially affect our business, financial condition and results of operations. However, recent elections have increased the number and influence of legislators and regulators who have been critical of the for-profit postsecondary education sector that includes our institutions, which has led and could continue to lead to significant legislative changes in connection with amendments to the HEA, annual appropriations, or other changes to laws, that have been and may continue to be adverse to our institutions and other for-profit institutions. Moreover, current requirements for student or school participation in Title IV Programs may change or one or more of the present Title IV Programs could be replaced by other programs with materially different student or school eligibility requirements. For example, the American Rescue Plan Act of 2021 (“ARPA”) was signed into law in March 2021 and included, among other things, a provision that amended the 90/10 Rule (as defined herein) in the HEA. See “Risk Factors -Our institutions could lose their eligibility to participate in federal student financial aid programs if the percentage of their revenues derived from applicable federal student aid programs is too high.” If we cannot comply with the provisions of the HEA, as they may be enforced or amended, or if the cost of such compliance is excessive, or if funding is materially reduced, our revenues or profit margin could be materially adversely affected.
Current wording
The U.S. Congress must periodically reauthorize the HEA and other laws governing the Title IV Programs and annually determine the funding level for each Title IV Program, and may pass new laws or revise existing laws at any time. Political and budgetary concerns significantly affect the Title IV Programs. We cannot predict when or whether Congress will consider or vote on legislation to reauthorize the HEA or to create new laws or revise existing laws. Furthermore, we cannot predict with any certainty the outcome of the HEA reauthorization process nor the extent to which any legislation that Congress could adopt at any time could materially affect our business, financial condition and results of operations. Current requirements for student or school participation in Title IV Programs may change or one or more of the present Title IV Programs could be replaced by other programs with materially different student or school eligibility requirements. For example, the American Rescue Plan Act of 2021 (“ARPA”) was signed into law in March 2021 and included, among other things, a provision that amended the 90/10 Rule (as defined herein) in the HEA. See “Risk Factors -Our institutions could lose their eligibility to participate in the Title IV programs if the percentage of their revenues derived from applicable federal educational student aid programs is too high.” If we cannot comply with the provisions of the HEA, as they may be enforced or amended, or if the cost of such compliance is excessive, or if funding is materially reduced, our revenues or profit margin could be materially adversely affected.
Previous wording
ED has promulgated a substantial number of new regulations in recent years that impact our business, including, but not limited to, the “borrower defense to repayment” regulations discussed in the risk factors below, as well as rules regarding compensation for persons engaged in certain aspects of admissions and financial aid, state authorization, clock and credit hours, prohibitions on “substantial misrepresentations,” gainful employment, certification procedures, financial responsibility, administrative capability, ability to benefit, closed school loan discharges, the 90/10 Rule, changes in ownership, Title IX, and other topics. These and other regulations 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.
Current wording
ED has promulgated a substantial number of new regulations in recent years that impact our business, including, but not limited to, the “borrower defense to repayment” regulations discussed in the risk factors below, as well as rules regarding compensation for persons engaged in certain aspects of admissions and financial aid, state authorization, clock and credit hours, prohibitions on “substantial misrepresentations,” gainful employment, certification procedures, financial responsibility, administrative capability, ability to benefit, closed school loan discharges, the 90/10 Rule, changes in ownership, Title IX, cash management, return of Title IV funds, distance education, accreditation and other topics. These and other regulations 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.
Previous wording
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. Recent and upcoming elections may result in changes at ED and other federal agencies that are likely to lead to future regulatory actions that could be aimed at for-profit postsecondary institutions like our institutions. See “Risk Factors -Our institutions could lose their eligibility to participate in federal student financial aid programs if the percentage of their revenues derived from applicable federal student aid programs is too high.” In October through December 2023, ED conducted negotiated rulemaking to develop new regulations related to student debt relief. In addition, in January through March 2024, ED conducted negotiated rulemaking to prepare proposed regulations on a variety of topics including, but not limited to cash management, state authorization, distance education, return of Title IV, and accreditation. On July 24, 2024, ED published proposed regulations in the Federal Register, related to return of Title IV calculations and distance education. Our institutions are required to perform return of Title IV calculations and the upcoming final version of the regulations may impact our performance of these mandatory calculations. If our institutions begin offering distance education programs, the proposed rules on distance education could impact our reporting requirements and our performance of the return of Title IV calculations. If ED publishes final regulations by November 1, 2024, the regulations typically would have a general effective date of July 1, 2025. On July 17, 2024, ED announced that proposed rules related to cash management, state authorization and accreditation will be published by next year. We cannot predict the ultimate timing, content and effective date of the regulations that will emerge from these processes. ED could consider additional topics for proposed regulations during the rulemaking process or by initiating additional rulemaking processes. On July 17, 2024, ED announced that it will conduct negotiated rulemaking on third-party servicer requirements for institutions and servicers but did not provide a timeline. The negotiated rulemaking process is likely to lead to future ED regulations that could negatively impact schools like ours. ED also has announced its intention to propose regulations that would increase the information security requirements applicable to institutions participating in the Title IV Programs, including with respect to sensitive personal data residing in school information systems, but we cannot predict the ultimate timing, content, and impact of any regulations ED might propose and ultimately adopt.
Current wording
ED’s proposed regulatory agenda published in early September 2025 indicates an intent to address several topics (including through rulemaking), including accreditation, changes in ownership, cash management, administrative capability, and financial responsibility requirements, civil rights investigations, and privacy of education records. Whether via sub-regulatory guidance or a rulemaking process, we cannot predict how ED’s actions on these topics will impact schools like ours. 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.
Previous wording
In May 2021, ED announced its intention to initiate a rulemaking process on several topics, including gainful employment. 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 have been filed challenging these regulations, however, we cannot predict the outcome of these cases.
Current wording
In May 2021, ED announced its intention to initiate a rulemaking process on several topics, including gainful employment. 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. We cannot predict the outcome of this case.
Previous wording
The financial value transparency and gainful employment regulations include standards for annually evaluating postsecondary educational programs based on the calculation of debt-to-earnings rates and an “earnings premium” measure. The rule establishes formulae for calculating these rates using data such as student debt, student earnings data, and median earnings data for working adults with only a high school diploma or GED, which the rule uses to compare to median earnings data of the institution’s graduates. Under the regulations, ED will annually calculate and publish the debt-to-earnings rates and median earnings data for our educational programs. If these calculations show that any of our educational programs do not comply with debt-to-earnings or median earnings regulatory thresholds for two of three consecutive years, those educational programs would lose Title IV Program eligibility. ED also requires institutions to provide warnings to current and prospective students about programs in danger of losing of Title IV Program eligibility which could negatively impact our retention of current students and enrollment of new students in these programs. The regulations also require certifications and data reporting to ED and providing required student disclosures related to gainful employment. Some of the data ED will use to calculate the debt-to-earnings rates and earnings premium measures is not yet readily accessible to institutions. Therefore, it is difficult for us to predict how our institutions will perform under the new standards and the extent to which our programs could lose Title IV Program eligibility under the new standards. We also do not have control over some of the factors that could impact the rates and measures for our programs which could make it difficult to mitigate the impact of the regulations on our programs. However, the new regulations could require us to modify or eliminate programs to comply with the new regulations and could result in the loss of Title IV Program eligibility for our programs that fail to comply with the regulations which could have a material adverse effect on our student population and our revenues.
Current wording
The financial value transparency and gainful employment regulations include standards for annually evaluating postsecondary educational programs based on the calculation of debt-to-earnings rates and an “earnings premium” measure. The rule establishes formulae for calculating these rates using data such as student debt, student earnings data, and median earnings data for working adults with only a high school diploma or GED, which the rule uses to compare to median earnings data of the institution’s graduates. Under the regulations, ED will annually calculate and publish the debt-to-earnings rates and median earnings data for our educational programs. If these calculations show that any of our educational programs do not comply with debt-to-earnings or median earnings regulatory thresholds for two of three consecutive years, those educational programs would lose Title IV Program eligibility. ED also requires institutions to provide warnings to current and prospective students about programs in danger of losing of Title IV Program eligibility which could negatively impact our retention of current students and enrollment of new students in these programs. The regulations also require certifications and data reporting to ED and providing required student disclosures related to gainful employment. Some of the data ED will use to calculate the debt-to-earnings rates and earnings premium measures is not yet readily accessible to institutions. Therefore, it is difficult for us to predict how our institutions will perform under the new standards and the extent to which our programs could lose Title IV Program eligibility under the new standards. We also do not have control over some of the factors that could impact the rates and measures for our programs which could make it difficult to mitigate the impact of the regulations on our programs. However, the new regulations could require us to modify or eliminate programs to comply with the new regulations and could result in the loss of Title IV Program eligibility for our programs that fail to comply with the regulations which could have a material adverse effect on our student population and our revenues. As noted elsewhere, our degree programs also will be subject to a new separate earnings measure under the OBBBA.
Previous wording
Among other things, the 2022 version of the BDR regulations also amended the processes for BDR applications received on or after, or that were pending with ED as of, July 1, 2023. The 2022 version of the BDR regulations applies the revised federal BDR standard to all BDR claims received on or after, or pending with the Secretary as of, July 1, 2023, but would not allow for recovery against institutions for discharged amounts first disbursed prior to July 1, 2023 unless the BDR claim would have been approved under the substantive BDR standard applicable to the time period in which the loan was disbursed as set forth in the prior versions of the BDR regulations. The defenses to repayment are based on certain acts or omissions, including misrepresentations, by an institution or a covered party. The regulations establish detailed procedures and standards for the loan discharge processes, including the information required for borrowers to receive a loan discharge, and the authority of ED to seek recovery from the institution of the amount of discharged loans. The 2022 version of the BDR regulations were to take effect on July 1, 2023, in addition to certain closed school loan discharge provisions part of the same rule, but are currently enjoined by the U.S. Court of Appeals for the Fifth Circuit pursuant to litigation captionedCareer Colleges and Schools of Texas v. U.S. Department of Education, No. 23-50491. The Career Colleges and Schools of Texas (“CCST”) filed a complaint challenging the regulations in February 2023. In April 2024, the Fifth Circuit granted a preliminary injunction to block enforcement of the 2022 version of the BDR regulations while the case is pending. Therefore, the 2022 version of the BDR regulations are not in effect, but the previous BDR regulations in effect prior to July 1, 2023, generally remain in effect in the meantime and apply different substantive standards and procedures based on when a BDR claimant’s loans were disbursed. We cannot predict the outcome of this case or if and when the revised BDR regulations could take effect.
Current wording
Among other things, the 2022 version of the BDR regulations also amended the processes for borrowers to receive from ED a discharge of the obligation to repay certain Title IV Program loans when the BDR applications received on or after, or that were pending with ED as of, July 1, 2023. The 2022 version of the BDR regulations applies the revised federal BDR standard to all BDR claims received on or after, or pending with the Secretary as of, July 1, 2023, but would not allow for recovery against institutions for discharged amounts first disbursed prior to July 1, 2023 unless the BDR claim would have been approved under the substantive BDR standard applicable to the time period in which the loan was disbursed as set forth in the prior versions of the BDR regulations. The defenses to repayment are based on certain acts or omissions, including misrepresentations, by an institution or a covered party. The regulations establish detailed procedures and standards for the loan discharge processes, including the information required for borrowers to receive a loan discharge, and the authority of ED to seek recovery from the institution of the amount of discharged loans. The 2022 version of the BDR regulations were to take effect on July 1, 2023, in addition to certain closed school loan discharge provisions part of the same rule, but are currently enjoined and delayed. The Career Colleges and Schools of Texas (“CCST”) filed a complaint challenging the regulations in February 2023. In April 2024, the U.S. Court of Appeals for the Fifth Circuit granted a preliminary injunction to block enforcement of the 2022 version of the BDR regulations while the case is pending. Further, the OBBBA, enacted July 4, 2025, delays the effective date of the 2022 version of the revised BDR regulations for ten years, until July 1, 2035.Therefore, the 2022 version of the BDR regulations are not in effect, but the previous BDR regulations in effect prior to July 1, 2023, generally remain in effect in the meantime and apply different substantive standards and procedures based on when a BDR claimant’s loans were disbursed.
Previous wording
On June 22, 2022, ED reached a settlement with plaintiffs in the case titledSweet v. Cardona, which was filed by student loan borrowers to challenge ED’s adjudication of BDR claims. The settlement resulted in automatic relief of claims pending as of June 22, 2022 that were filed against institutions on a list of about 150 institutions named in the settlement agreement, which did not include any of our institutions. In addition, under the settlement, any borrower who filed a defense to repayment claim between June 22, 2022 and November 15, 2022 are “Post-Class Applicants” whose applications will be adjudicated under the 2016 version of the BDR regulations and will be decided by January 2026. HDMC received and timely responded to seven BDR applications from Post-Class Applicants. CCC and Integrity have not received any BDR applications from Post-Class Applicants. It is possible that we could receive BDR claims in the future. If we or our representatives are found to have engaged in certain acts or omissions under the broad definitions contained in the 2016 version of the BDR regulations, or other BDR regulations that could be in place in the future, we could be subject to substantial repayment obligations and subject to other sanctions.
Current wording
On June 22, 2022, ED reached a settlement with plaintiffs in the case titledSweet v. Cardona, which was filed by student loan borrowers to challenge ED’s adjudication of BDR claims. The settlement resulted in automatic relief of claims pending as of June 22, 2022 that were filed against institutions on a list of about 150 institutions named in the settlement agreement, which did not include any of our institutions. In addition, under the settlement, any borrower who filed a defense to repayment claim between June 22, 2022 and November 15, 2022 are “Post-Class Applicants” whose applications will be adjudicated under the 2016 version of the BDR regulations and will be decided by January 2026. HDMC received and timely responded to seven BDR applications from Post-Class Applicants. CCC, Integrity, and CCMCC (at least since we acquired CCMCC) have not received any BDR applications from Post-Class Applicants. It is possible that we could receive BDR claims in the future. If we or our representatives are found to have engaged in certain acts or omissions under the broad definitions contained in the 2016 version of the BDR regulations, or other BDR regulations that could be in place in the future, we could be subject to substantial repayment obligations and subject to other sanctions.
Previous wording
The current ED administration has been more active in processing BDR applications and has recently distributed claims to institutions for an opportunity to respond to borrower allegations. ED may, on its own or in response to other constituencies, allocate additional resources to reviewing and adjudicating BDR applications from federal student loan borrowers. We cannot predict how many BDR applications have been filed by our former students, but if we receive such claims from ED, we may incur significant costs in responding to the borrower allegations and, if adjudicated as valid by ED, repaying the federal government for the amount of loans discharged pursuant to such claims.
Current wording
In recent years, ED has been more active in processing BDR applications and has recently distributed claims to institutions for an opportunity to respond to borrower allegations. ED may, on its own or in response to other constituencies, allocate additional resources to reviewing and adjudicating BDR applications from federal student loan borrowers. We cannot predict how many BDR applications have been filed by our former students, but if we receive such claims from ED, we may incur significant costs in responding to the borrower allegations and, if adjudicated as valid by ED, repaying the federal government for the amount of loans discharged pursuant to such claims.
Previous wording
ED annually evaluates the financial responsibility of HDMC, CCC, and Integrity on a consolidated basis. We have calculated our composite score for the 2023 fiscal year to be 3.0, however this score is subject to determination by ED based on its review of our consolidated audited financial statements for the 2023 fiscal year. However, if our composite scores in the future were to decrease, we may become subject to the additional requirements noted above or our Title IV Program eligibility could be affected. We cannot predict how long it will take the ED to make its determination or the outcome of its determination.
Current wording
ED annually evaluates the financial responsibility of HDMC, CCC, Integrity, and CCMCC on a consolidated basis. We have calculated our composite score for the 2024 fiscal year to be 3.0, however this score is subject to determination by ED based on its review of our consolidated audited financial statements for the 2024 fiscal year. Our next composite score will be calculated based on audited financial statements for the 2025 fiscal year due for submission to ED by December 31, 2025. We expect the composite score for the 2025 fiscal year to exceed 1.5, but the final composite score is subject to our final calculation and to determination by ED based on its review of our consolidated financial statements for the 2025 fiscal year. However, if our composite scores in the future were to decrease, we may become subject to the additional requirements noted above or our Title IV Program eligibility could be affected. We cannot predict how long it will take the ED to make its determination or the outcome of its determination.
Previous wording
The regulations require an institution to notify ED of the occurrence of a mandatory or discretionary triggering event and, in some cases, provide an opportunity to provide certain information to ED to demonstrate why the event does not establish the institution’s lack of financial responsibility or require the submission of a letter of credit and impose other conditions or requirements. If more than one of these financial responsibility triggers occur, ED could impose separate letters of credit to address each triggering event.
Current wording
The regulations require an institution to notify ED of the occurrence of a mandatory or discretionary triggering event and, in some cases, provide an opportunity to submit certain information to ED to demonstrate why the event does not establish the institution’s lack of financial responsibility or require the submission of a letter of credit and impose other conditions or requirements. If more than one of these financial responsibility triggers occur, ED could impose separate letters of credit to address each triggering event.
Previous wording
ED assesses the administrative capability of each institution that participates in the Title IV Programs under a series of separate standards. Failure to satisfy any of the standards may lead ED to find the institution ineligible to participate in the Title IV Programs or to place the institution on provisional certification as a condition of its participation and potentially impose fines or other sanctions. On October 31, 2023, ED published regulations revising and expanding its administrative capability standards. Those revisions took effect on July 1, 2024. The criteria for administrative capability include, among other things, that the institution:
Current wording
ED assesses the administrative capability of each institution that participates in the Title IV Programs under a series of separate standards. Failure to satisfy any of the standards may lead ED to find the institution ineligible to participate in the Title IV Programs or to place the institution on provisional certification as a condition of its participation and potentially impose fines or other sanctions. On October 31, 2023, ED published regulations revising and expanding its administrative capability standards. Those revisions, effective July 1, 2024, modified the criteria for administrative capability such that they now include, among other things, that the institution:
Previous wording
An institution participating in the Title IV Programs may not provide any commission, bonus or other incentive payment based directly or indirectly on success in securing enrollments or financial aid to any person or entity engaged in any student recruiting or admission activities or in making decisions regarding the awarding of Title IV Program funds. This statutory prohibition under the HEA, and as implemented by ED, applies to all institutional employees and service providers who are engaged in or responsible for any student recruitment or admission activity or making decisions regarding the award of financial aid. We cannot predict how ED will interpret and enforce the incentive compensation prohibition. The prohibition on incentive compensation has had and will continue to have a significant impact on the productivity of our employees, on the retention of our employees and on our business and results of operations. Failure to comply with the incentive compensation prohibition could result in loss of an institution’s certification to participate in the Title IV Programs, limitations on Title IV Program participation or financial penalties. On July 17, 2024, ED announced it will issue guidance related to the incentive compensation rule no sooner than later this year, which could, among other things, modify existing published ED guidance related to the incentive compensation rule.
Current wording
An institution participating in the Title IV Programs may not provide any commission, bonus or other incentive payment based directly or indirectly on success in securing enrollments or financial aid to any person or entity engaged in any student recruiting or admission activities or in making decisions regarding the awarding of Title IV Program funds. This statutory prohibition under the HEA, and as implemented by ED, applies to all institutional employees and service providers who are engaged in or responsible for any student recruitment or admission activity or making decisions regarding the award of financial aid. We cannot predict how ED will interpret and enforce the incentive compensation prohibition. The prohibition on incentive compensation has had and will continue to have a significant impact on the productivity of our employees, on the retention of our employees and on our business and results of operations. Failure to comply with the incentive compensation prohibition could result in loss of an institution’s certification to participate in the Title IV Programs, limitations on Title IV Program participation or financial penalties. On July 17, 2024, ED announced it will issue guidance related to the incentive compensation rule no sooner than later that year, but it has not yet issued such guidance.
Previous wording
Under the HEA, a proprietary institution that derives more than 90% of its total revenue from the Title IV Programs or, for fiscal years beginning on or after January 1, 2023, from all federal educational assistance funds) for two consecutive fiscal years becomes immediately ineligible to participate in the Title IV Programs and may not reapply for eligibility until the end of at least two fiscal years (“90/10 Rule”). An institution whose receipts of applicable funds exceeds 90% of revenue for a single fiscal year will be placed on provisional certification, be required to notify ED and its students of the possibility of a loss of Title IV Program eligibility, and may be subject to other enforcement measures, including a requirement to submit a letter of credit. See “Business - Education Regulations - Financial Responsibility Standards.” We have calculated the 90/10 Rule percentages for the 2023, 2022 and 2021 fiscal years as follows for HDMC, CCC and Integrity: HDMC 84.53%, 82.17% and 84.24%; CCC 74.48%, 72.34% and 71.18%; and Integrity 88.14%, 85.43%, and 89.47%, respectively. Our 90/10 calculations are subject to review and potential recalculation by ED. In addition, the 90/10 Rule is complex and there is some ambiguity in certain technical aspects of the calculation methodology under the 90/10 Rule. If ED comes out with additional guidance or interpretations that are different than our interpretations, ED could recalculate the 90/10 Rule percentages of our institutions, which could result in one or more of the percentages exceeding 90 percent. All of these calculations are subject to review, differing interpretations, and potential recalculation by ED which makes it more difficult for our institutions to comply with the 90/10 Rule. A loss of eligibility to participate in Title IV Programs for any of our institutions would have a significant impact on the rate at which our students enroll in our programs and on our business and results of operations. Moreover, if an institution violated the 90/10 Rule and became ineligible to participate in Title IV Programs but continued to disburse Title IV Program funds, ED would require the institution to repay all Title IV Program funds received by the institution after the effective date of the loss of eligibility.
Current wording
Under the HEA, a proprietary institution that derives more than 90% of its total revenue from the Title IV Programs or, for fiscal years beginning on or after January 1, 2023, from all federal educational assistance funds, for two consecutive fiscal years becomes immediately ineligible to participate in the Title IV Programs and may not reapply for eligibility until the end of at least two fiscal years (“90/10 Rule”). An institution whose receipts of applicable funds exceeds 90% of revenue for a single fiscal year will be placed on provisional certification, be required to notify ED and its students of the possibility of a loss of Title IV Program eligibility, and may be subject to other enforcement measures, including a requirement to submit a letter of credit. See “Business - Education Regulations - Financial Responsibility Standards.” We have calculated the 90/10 Rule percentages for the 2024, 2023, and 2022 fiscal years as follows for HDMC, CCC, and Integrity: HDMC 87.55%, 84.53%, and 82.17%; CCC 79.51%, 74.48%, and 72.34%; Integrity 84.19%, 88.14%, and 85.43% respectively. CCMCC’s 90/10 Rule percentage for its 2022 fiscal year was 21.76%, and for its 2023 fiscal year was 48.63%. CCMCC’s next 90/10 Rule percentage will be reported to ED in connection with the Company’s next annual financial statement and compliance audit submissions. Our calculations of the 90/10 Rule percentage for the 2025 fiscal year for HDMC, CCC, Integrity, and CCMCC are due on December 31, 2025 and each are expected to be below 90%. The 90/10 calculations for our institutions are subject to review and potential recalculation by ED. In addition, the 90/10 Rule is complex and there is some ambiguity in certain technical aspects of the calculation methodology under the 90/10 Rule. If ED comes out with additional guidance or interpretations that are different than our interpretations, ED could recalculate the 90/10 Rule percentages of our institutions, which could result in one or more of the percentages exceeding 90%. All of these calculations are subject to review, differing interpretations, and potential recalculation by ED which makes it more difficult for our institutions to comply with the 90/10 Rule. A loss of eligibility to participate in Title IV Programs for any of our institutions would have a significant impact on the rate at which our students enroll in our programs and on our business and results of operations. Moreover, if an institution violated the 90/10 Rule and became ineligible to participate in Title IV Programs but continued to disburse Title IV Program funds, ED would require the institution to repay all Title IV Program funds received by the institution after the effective date of the loss of eligibility.
Previous wording
The American Rescue Plan Act (“ARPA”) amended the 90/10 Rule by treating other federal student financial assistance funds in the same manner as Title IV Program funds in the 90/10 Rule percentage. This amendment requires our institutions to limit the combined amount of Title IV Program funds and other federal student financial assistance funds in a fiscal year to no more than 90% in a fiscal year as calculated under the 90/10 Rule. ED published final regulations on the 90/10 Rule on October 28, 2022. The final regulations became effective July 1, 2023 and applied to fiscal years beginning on or after January 1, 2023 (which will be the fiscal years ending June 30, 2024 for our schools). The new rule modified how institutions counted revenue when calculating compliance with the 90/10 Rule, and added a requirement to notify students of the potential loss of eligibility resulting from not meeting the 90/10 standard, among other changes. ED has published a Notice in the Federal Register listing the types of funds that are considered federal education assistance funds under the new 90/10 Rule. The funds include GI Bill funding and Military Tuition Assistance, among other sources of funds. We expect the change in the 90/10 Rule will increase our 90/10 Rule percentages and make it more difficult to comply with the 90/10 Rule and could require changes to maintain compliance.
Current wording
The American Rescue Plan Act (“ARPA”) amended the 90/10 Rule by treating other federal student financial assistance funds in the same manner as Title IV Program funds in the 90/10 Rule percentage. This amendment requires our institutions to limit the combined amount of Title IV Program funds and other federal student financial assistance funds in a fiscal year to no more than 90% in a fiscal year as calculated under the 90/10 Rule. ED published final regulations on the 90/10 Rule on October 28, 2022. The final regulations became effective July 1, 2023 and applied to fiscal years beginning on or after January 1, 2023 (which was the fiscal years ending June 30, 2024 for our schools). The new rule modified how institutions counted revenue when calculating compliance with the 90/10 Rule, and added a requirement to notify students of the potential loss of eligibility resulting from not meeting the 90/10 standard, among other changes. ED has published a Notice in the Federal Register listing the types of funds that are considered federal education assistance funds under the new 90/10 Rule. The funds include GI Bill funding and Military Tuition Assistance, among other sources of funds. We expect the change in the 90/10 Rule will increase our 90/10 Rule percentages and make it more difficult to comply with the 90/10 Rule and could require changes to maintain compliance.
Previous wording
Additional ED regulations restrict the ability of institutions to limit the amount of Title IV Program loans that students and parents may borrow which can impact our ability to control compliance with the 90/10 Rule at our institutions. In addition, there is a lack of clarity regarding some of the technical aspects of the calculation methodology under the 90/10 Rule, which may lead to regulatory action or investigations by ED. Changes in, or new interpretations of, the calculation methodology or other industry practices under the 90/10 Rule could further significantly impact our compliance with the 90/10 Rule, and responding to any review or investigation by ED involving us could require a significant amount of resources. Efforts to reduce the 90/10 Rule percentage for our institutions have and may in the future involve taking measures that involve interpretations of the 90/10 Rule that are without clear precedent, reduce our revenue or increase our operating expenses (or all of the foregoing, in each case perhaps significantly). Because of the changes to the 90/10 Rule made by ARPA and ED, we may be required to make structural changes to our business to remain in compliance, which changes may materially alter the manner in which we conduct our business and materially and adversely impact our business, financial condition, results of operations and cash flows. Furthermore, these required changes could be unsuccessful and could make more difficult our ability to comply with other important regulatory requirements, such as the cohort default rate regulations.
Current wording
ED regulations have restricted the ability of institutions to limit the amount of Title IV Program loans that students and parents may borrow which can impact our ability to control compliance with the 90/10 Rule at our institutions. However, under a provision of the OBBBA that will be effective July 1, 2026, institutions are permitted to limit the total amount of loans that a student may borrow, and that a parent may borrow on behalf of a student, as long as the limit is applied consistently to all students in a program of study. In addition, there is a lack of clarity regarding some of the technical aspects of the calculation methodology under the 90/10 Rule, which may lead to regulatory action or investigations by ED. Changes in, or new interpretations of, the calculation methodology or other industry practices under the 90/10 Rule could further significantly impact our compliance with the 90/10 Rule, and responding to any review or investigation by ED involving us could require a significant amount of resources. Efforts to reduce the 90/10 Rule percentage for our institutions have and may in the future involve taking measures that involve interpretations of the 90/10 Rule that are without clear precedent, reduce our revenue or increase our operating expenses (or all of the foregoing, in each case perhaps significantly). Because of the changes to the 90/10 Rule made by ARPA and ED, we may be required to make structural changes to our business to remain in compliance, which changes may materially alter the manner in which we conduct our business and materially and adversely impact our business, financial condition, results of operations and cash flows. Furthermore, these required changes could be unsuccessful and could make more difficult our ability to comply with other important regulatory requirements, such as the cohort default rate regulations.
Previous wording
In October 2023, ED released the final cohort default rates for the 2020 federal fiscal year. These are the most recent final rates published by ED. The rates for our existing institutions for the 2020, 2019, and 2018 federal fiscal years respectively are as follows: HDMC 0.0%, 1.1%, and 3.4%; CCC 0.0%, 1.4%, and 2.5%; and Integrity 0.0%, 2.5%, and 4.0%. Consequently, none of our institutions had a cohort default rate equal to or greater than 30% for the 2020, 2019, or 2018 federal fiscal years. During the COVID-19 pandemic, ED temporarily suspended federal student loan repayment obligations. This suspension, which lasted over three years, contributed to a reduction in our cohort default rates. Our cohort default rates could be substantially higher for the periods after the suspension expired if borrowers do not timely repay their federal student loans.
Current wording
In September 2025, ED released the final cohort default rates for the 2022 federal fiscal year. These are the most recent final rates published by ED. The rates for our existing institutions for the 2022, 2021, and 2020 federal fiscal years respectively are as follows: HDMC 0%, 0% and 0%; CCC 0%, 0% and 0%, Integrity 0%, 0%, and 0%; and CCMCC 0%, 0%, and 0%. Consequently, none of our institutions had a cohort default rate equal to or greater than 30% for the 2022, 2021, and 2020 federal fiscal years. During the COVID-19 pandemic, ED temporarily suspended federal student loan repayment obligations. This suspension, which lasted over three years, contributed to a reduction in our cohort default rates. Our cohort default rates could be substantially higher for the periods after October 2023, when the suspension expired if borrowers do not timely repay their federal student loans. We are engaging in activities aimed at reminding borrowers of their obligations to repay loans and to reduce the number of borrowers who default on their loans; however, we cannot predict or guarantee that these activities will be successful or that the cohort default rates will not increase or exceed applicable eligibility thresholds.
Previous wording
Under the provisions of the HEA, an institution must apply to ED for continued certification to participate in the Title IV Programs at least every six years or when it undergoes a change in ownership resulting in a change of control. ED defines an institution to consist of both a main campus and its additional locations, if any. Under this definition, for ED purposes, we operate the following three institutions, collectively consisting of three main campuses and two additional locations: HDMC with locations in Lancaster, Bakersfield, and Temecula; CCC located in Salinas; and Integrity located in Pasadena. Generally, the recertification process includes a review by ED of an institution’s educational programs and locations, administrative capability, financial responsibility and other oversight categories. The current expiration date of the program participation agreements for HDMC and CCC is September 30, 2026. Integrity is currently participating in the Title IV Programs under a temporary provisional program participation agreement in connection with its change in ownership and control resulting from our acquisition of the institution. The temporary provisional program participation agreement had an expiration date of November 30, 2020 but continues on a month-to-month basis thereafter based on the institution’s submission to ED of certain required documentation and remains in effect until the conclusion of ED’s review of Integrity’s pending application for approval of its change in ownership and control.
Current wording
Under the provisions of the HEA, an institution must apply to ED for continued certification to participate in the Title IV Programs at least every six years or when it undergoes a change in ownership resulting in a change of control. ED defines an institution to consist of both a main campus and its additional locations, if any. Under this definition, for ED purposes, we operate the following four institutions, collectively consisting of four main campuses and two additional locations: HDMC with locations in Lancaster, Bakersfield, and Temecula; CCC located in Salinas; Integrity located in Pasadena, and CCMCC with a location in Antioch. Generally, the recertification process includes a review by ED of an institution’s educational programs and locations, administrative capability, financial responsibility and other oversight categories. The current expiration date of the program participation agreements for HDMC and CCC is September 30, 2026. Integrity and CMCC are currently participating in the Title IV Programs under a temporary provisional program participation agreement in connection with their change in ownership and control resulting from our acquisition of the institutions. The CCMCC temporary provisional program participation agreement had an expiration date of January 31, 2025 and the Integrity temporary provisional program participation agreement had an expiration date of November 30, 2020, but each temporary provisional program participation agreement continues on a month-to-month basis thereafter based on the institution’s submission to ED of certain required documentation and remains in effect until the conclusion of ED’s review of Integrity’s and CCMCC’s pending applications for approval of its change in ownership and control.
Previous wording
ED typically provides provisional certification to an institution following a change in ownership resulting in a change of control and also may provisionally certify an institution for other reasons, including, but not limited to, noncompliance with certain standards of administrative capability and financial responsibility. Our Integrity institution is currently approved under a temporary provisional program participation agreement which (as described in the subsequent section) permits an institution to continue participating in the Title IV Programs on a month-to-month basis while ED reviews the change in ownership and as long as the institution timely submits certain documentation to ED during the process. An institution that is provisionally certified receives fewer due process rights than those received by other institutions in the event ED takes certain adverse actions against the institution, is required to obtain prior ED approvals of new campuses and educational programs and may be subject to heightened scrutiny by ED. However, provisional certification does not otherwise limit an institution’s access to Title IV Program funds.
Current wording
ED typically provides provisional certification to an institution following a change in ownership resulting in a change of control and also may provisionally certify an institution for other reasons, including, but not limited to, noncompliance with certain standards of administrative capability and financial responsibility. Our Integrity and CCMCC institutions are currently approved under a temporary provisional program participation agreement which (as described in the subsequent section) permits an institution to continue participating in the Title IV Programs on a month-to-month basis while ED reviews the change in ownership and as long as the institution timely submits certain documentation to ED during the process. An institution that is provisionally certified receives fewer due process rights than those received by other institutions in the event ED takes certain adverse actions against the institution, is required to obtain prior ED approvals of new campuses and educational programs and may be subject to heightened scrutiny by ED. However, provisional certification does not otherwise limit an institution’s access to Title IV Program funds.
Previous wording
When a company acquires an institution that is eligible to participate in the Title IV Programs, the acquisition generally will result in the institution undergoing a change of ownership resulting in a change of control as defined by ED and under the rules of other agencies and accreditors. Upon such a change, an institution’s eligibility to participate in the Title IV Programs is generally suspended until it has applied for recertification by ED as an eligible school under its new ownership, which requires that the school also re-establish its state authorization and accreditation. ED may temporarily and provisionally certify an institution seeking approval of a change of control under certain circumstances while ED reviews the institution’s application. The temporary provisional certification typically remains in effect on a month-to-month basis during ED’s review of the application as long as the school timely submits certain documentation during the course of ED’s review.
Current wording
When a company acquires an institution that is eligible to participate in the Title IV Programs, the acquisition generally will result in the institution undergoing a change of ownership resulting in a change of control as defined by ED and under the rules of other agencies and accreditors. Upon such a change, an institution’s eligibility to participate in the Title IV Programs is generally suspended until it has applied for recertification by ED as an eligible school under its new ownership, which requires that the school also re- establish its state authorization and accreditation. ED may temporarily and provisionally certify an institution seeking approval of a change of control under certain circumstances while ED reviews the institution’s application. The temporary provisional certification typically remains in effect on a month-to-month basis during ED’s review of the application as long as the school timely submits certain documentation during the course of ED’s review. ED’s proposed regulatory agenda published in early September of 2025 includes an intent to address certain issues including change of ownership requirements. We cannot predict how ED will address these requirements or the impact the changes to change of ownership requirements may have on our schools.
Previous wording
A student may use Title IV Program funds only to pay the costs associated with enrollment in an eligible educational program offered by an institution participating in the Title IV Programs. Generally, unless otherwise required by ED or regulation, an institution that is eligible to participate in the Title IV Programs may add a new educational program without ED approval. Institutions that are provisionally certified may be required to obtain approval of certain educational programs. Our Integrity institution is provisionally certified and required to obtain prior ED approval of new locations and educational programs. If an institution erroneously determines that an educational program is eligible for purposes of the Title IV Programs, the institution would likely be liable for repayment of Title IV Program funds provided to students in that educational program. Our expansion plans are based, in part, on our ability to add new educational programs at our existing schools and make periodic updates to our programs.
Current wording
A student may use Title IV Program funds only to pay the costs associated with enrollment in an eligible educational program offered by an institution participating in the Title IV Programs. Generally, unless otherwise required by ED or regulation, an institution that is eligible to participate in the Title IV Programs may add a new educational program without ED approval. Institutions that are provisionally certified may be required to obtain approval of certain educational programs. Our Integrity and CCMCC institutions are provisionally certified and required to obtain prior ED approval of new locations and educational programs. If an institution erroneously determines that an educational program is eligible for purposes of the Title IV Programs, the institution would likely be liable for repayment of Title IV Program funds provided to students in that educational program. Our expansion plans are based, in part, on our ability to add new educational programs at our existing schools and make periodic updates to our programs.
Previous wording
Under the WIOA, institutions currently must report data regarding credential attainment rates, job placement rates and other information and may be required to meet negotiated performance goals set by the state agency administering WIOA funds. On June 21, 2024, the U.S. Senate Health, Education, Labor and Pensions (HELP) Committee released a discussion draft of a bill to reauthorize the WIOA. Among other changes, the draft proposes to impose a repayment penalty on certain providers with eligible programs for which program competitors have not met the newly established credential attainment rates or job placement rates.
Current wording
Under the WIOA, institutions currently must report data regarding credential attainment rates, job placement rates and other information and may be required to meet negotiated performance goals set by the state agency administering WIOA funds. Members of Congress have made proposals to reauthorize WIOA but no reauthorization bills have been passed. If passed, proposals to reauthorize WIOA that increase requirements or impose penalties could impact our schools.
Previous wording
As currently proposed in the discussion draft bill, the repayment penalty would only apply to for-profit entities. If any of our institutions’ programs that receive WIOA funds do not meet the established performance levels and if the draft becomes law, our institutions could be required to repay between 5 and 20 percent of the WIOA funds received for training services for that program. If our participating institutions and their programs were to not meet other WIOA requirements, they would risk losing eligibility to participate in the program. Further, reauthorization of the WIOA could result in changes to the process for determining funding for its programs, which could affect our institutions’ revenues.
Current wording
If our participating institutions and their programs were to not meet other WIOA requirements, they would risk losing eligibility to participate in the program. Further, reauthorization of the WIOA could result in changes to the process for determining funding for its programs, which could affect our institutions’ revenues.
Previous wording
In addition to the Title IV Programs and other government-administered programs, all our schools participate in alternative loan programs for their students. Alternative loans fill the gap between what the student receives from all financial aid sources and what the student may need to cover the full cost of his or her education. We also extend credit for tuition and fees to students that attend our campuses. We are required to comply with applicable federal and state laws related to certain consumer and educational loans and credit extensions and are subject to review by federal and state agencies responsible for overseeing compliance with these requirements. Our failure to comply with these requirements could result in repayment liabilities, sanctions, investigations or litigation which could impact our results of operations.
Current wording
In addition to the Title IV Programs and other government-administered programs, all our schools participate in alternative loan programs for their students. Alternative loans fill the gap between what the student receives from all financial aid sources and what the student may need to cover the full cost of his or her education. We also extend credit for tuition and fees to students that attend our campuses. We are required to comply with applicable federal and state laws related to certain consumer and educational loans and credit extensions and education financing and are subject to review by federal and state agencies responsible for overseeing compliance with these requirements. Our failure to comply with these requirements could result in repayment liabilities, sanctions, investigations or litigation which could impact our results of operations.
Previous wording
On January 20, 2022, the CFPB announced its intent to examine the operations of postsecondary schools that extend private loans directly to students. Accompanying this announcement was an update to the CFPB’s Examination Procedures to now require CFPB examiners to review several aspects of educational loans including enrollment restrictions, withholding transcripts, improper accelerated payments, failure to issue refunds, and improper lending relationships. Our institutions may be subject to greater scrutiny by the CFPB than in the past, and failure to comply with applicable laws and requirements could result in repayment liabilities, sanctions, investigations or litigation which could impact our results of operations.
Current wording
On January 20, 2022, the CFPB announced its intent to examine the operations of postsecondary schools that extend private loans directly to students. Accompanying this announcement was an update to the CFPB’s Examination Procedures to now require CFPB examiners to review several aspects of educational loans including enrollment restrictions, withholding transcripts, improper accelerated payments, failure to issue refunds, and improper lending relationships. In May 2025, the CFPB indicated it would deprioritize regulation of student loans. Failure to comply with applicable laws and requirements could result in repayment liabilities, sanctions, investigations or litigation which could impact our operations. If the CFPB prioritizes regulation of student loans in the future, the likelihood of these results would increase.
Previous wording
Because we operate in a highly regulated industry, we are subject to compliance reviews and audits as well as claims of noncompliance and lawsuits by government agencies, regulatory agencies and third parties. Our institutions are subject to audits, program reviews, site visits and other reviews by various federal and state regulatory agencies, including, but not limited to, ED, ED’s Office of Inspector General, state education agencies and other state regulators, the U.S. Department of Veterans Affairs and other federal agencies and by our accrediting agencies. In addition, each of our institutions must retain an independent certified public accountant to conduct an annual audit of the institution’s administration of Title IV Program funds. The institution must submit the resulting audit report to ED for review.
Current wording
Because we operate in a highly regulated industry, we are subject to compliance reviews and audits as well as claims of noncompliance and lawsuits by government agencies, regulatory agencies and third parties. Our institutions are subject to audits, program reviews, site visits and other reviews by various federal and state regulatory agencies, including, but not limited to, ED, ED’s Office of Inspector General, state education agencies and other state regulators, the U.S. Department of Veterans Affairs and other federal agencies and by our accrediting agencies. In addition, each of our institutions must retain an independent certified public accountant to conduct an annual audit of the institution’s administration of Title IV Program funds. Each of our institutions must submit the resulting audit report to ED for review.
Previous wording
If one of our institutions fails to comply with accrediting or state licensing requirements, such school and its main and/or branch campuses and educational programs could be subject to the loss of state licensure or accreditation, which in turn could result in a loss of eligibility to participate in the Title IV Programs. If ED or another agency determined that one of our institutions improperly disbursed Title IV Program funds or other financial assistance funds or violated a provision of the HEA or ED regulations, the institution could be required to repay such funds and related costs to ED or other agencies, and could be assessed an administrative fine or subject to other sanctions including loss of eligibility to participate in the impacted financial assistance program. ED could also place the institution on provisional certification status and/or transfer the institution to the reimbursement or cash monitoring system of receiving Title IV Program funds, under which an institution must disburse its own funds to students and document the students’ eligibility for Title IV Program funds before receiving such funds from ED.
Current wording
If one of our institutions fails to comply with accrediting or state licensing requirements, such school and its main and/or branch campuses and educational programs could be subject to the loss of state licensure or accreditation, which in turn could result in a loss of eligibility to participate in the Title IV Programs. If ED or another agency determined that one of our institutions improperly disbursed Title IV Program funds or other financial assistance funds or violated a provision of the HEA or ED regulations, the institution could be required to repay such funds and related costs to ED or other agencies, and could be assessed an administrative fine or subject to other sanctions including loss of eligibility to participate in the impacted financial assistance program. ED could also place the institution on provisional certification status and/or transfer the institution to the reimbursement or cash monitoring system of receiving Title IV Program funds, under which an institution must disburse its own funds to students and document the students’ eligibility for Title IV Program funds before receiving such funds from ED. It could also impose letters of credit, restrict participation, or take actions such as suspensions or emergency actions.
Previous wording
Concerns over medical epidemics, energy costs, geopolitical issues, the U.S. mortgage market and a deteriorating real estate market, unstable global credit markets and financial conditions, and volatile oil prices have led to periods of significant economic instability, diminished liquidity and credit availability, declines in consumer confidence and discretionary spending, diminished expectations for the global economy and expectations of slower global economic growth, increased unemployment rates, and increased credit defaults in recent years. Our general business strategy may be adversely affected by any such economic downturns, volatile business environments and continued unstable or unpredictable economic and market conditions. If these conditions continue to deteriorate or do not improve, it may make any necessary debt or equity financing more difficult to complete, more costly, and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance, and share price and could require us to delay, curtail or abandon our business plans.
Current wording
Concerns over medical epidemics, energy costs, geopolitical issues, the U.S. mortgage market and a deteriorating real estate market, unstable global credit markets and financial conditions, tariffs and volatile oil prices have led to periods of significant economic instability, diminished liquidity and credit availability, declines in consumer confidence and discretionary spending, diminished expectations for the global economy and expectations of slower global economic growth, increased unemployment rates, and increased credit defaults in recent years. Our general business strategy may be adversely affected by any such economic downturns, volatile business environments and continued unstable or unpredictable economic and market conditions. If these conditions continue to deteriorate or do not improve, it may make any necessary debt or equity financing more difficult to complete, more costly, and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance, and share price and could require us to delay, curtail or abandon our business plans.
Previous wording
We are an “emerging growth company,” as defined in the JOBS Act. We will remain an “emerging growth company” for up to five years. We may take advantage of these provisions until the earlier of (i) the last day of our fiscal year following the fifth anniversary of the closing of our initial public offering (ii) the last day of the fiscal year (a) in which we have total annual gross revenue of at least $1.235 billion or (b) in which we are deemed to be a large accelerated filer, which means the market value of our equity securities that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, and (iii) the date on which we have issued more than $1.0 billion of non-convertible debt in any three-year period. These exemptions include not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and being exempt from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. Additionally, as an emerging growth company, we have elected to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As such, our financial statements may not be comparable to companies that comply with public company effective dates. We cannot predict if investors will find our shares less attractive because we may rely on these provisions. If some investors find our shares less attractive as a result, there may be a less active trading market for our shares and our share price may be more volatile.
Current wording
We are an “emerging growth company,” as defined in the JOBS Act. We will remain an “emerging growth company” for up to five years. We may take advantage of these provisions until the earlier of (i) the last day of our fiscal year following the fifth anniversary of the closing of our initial public offering, (ii) the last day of the fiscal year in which we have total annual gross revenue of at least $1.235 billion or more, (iii) the date on which we are deemed to be a large accelerated filer, which means the market value of our equity securities that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, and (iv) the date on which we have issued more than $1.0 billion of non-convertible debt during the previous three-year period. These exemptions include not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and being exempt from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. Additionally, as an emerging growth company, we have elected to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As such, our financial statements may not be comparable to companies that comply with public company effective dates. We cannot predict if investors will find our shares less attractive because we may rely on these provisions. If some investors find our shares less attractive as a result, there may be a less active trading market for our shares and our share price may be more volatile.
Rearranged current paragraphs (5)
Current report — wording carried from elsewhere
Executive action could affect access to Title IV funding which could reduce our enrollment and revenue and increase costs of operations.
Current report — wording carried from elsewhere
When a company acquires an institution that is eligible to participate in the Title IV Programs, like CCMCC, the acquisition generally will result in the institution undergoing a change of ownership resulting in a change of control as defined by ED and under the rules of other educational agencies and accreditors. Upon such a change, an institution’s eligibility to participate in the Title IV Programs is generally suspended until it has applied for recertification by ED as an eligible school under its new ownership, which requires that the school also re-establish its state authorization and accreditation. ED may temporarily and provisionally certify an institution seeking approval of a change of control under certain circumstances while ED reviews the institution’s application. The temporary provisional certification typically remains in effect on a month-to-month basis during ED’s review of the application as long as the school timely submits certain documentation during the course of ED’s review. Legacy timely submitted a materially complete change in ownership application to ED and CCMCC is now a party to a temporary provisional program participation agreement (“TPPPA”) that allows CCMCC to continue participating in the Title IV Programs. CCMCC also timely filed the required documentation for the TPPPA to remain in effect during ED’s review of the change of ownership. On March 11, 2025, CCMCC provided additional financial information requested by ED.
Current report — wording carried from elsewhere
We cannot predict the timing or outcome of ED’s review of the change of ownership of CCMCC. The time required for ED to act on such an application for approval of a change of ownership resulting in a change of control may vary substantially. ED recertification of an institution following a change of control will be on a provisional basis if ED approves the institution’s application and could contain restrictions or conditions depending on the outcome of its review of the institution under the new ownership including its administrative capability and financial stability.
Current report — wording carried from elsewhere
The approval processes for state and accrediting agencies vary in scope and timing with some agencies requiring approval prior to the acquisition and others not conducting their review until after the acquisition has taken place. With regard to the agencies that accredit CCMCC and CCMCC Online, authorize them to operate in the state of California, or approve their programs:
Current report — wording carried from elsewhere
Other types of transactions could constitute a change in ownership and control that requires the institution to obtain approvals from ED and applicable state and accrediting agencies in order to remain eligible to participate in the Title IV Programs and continue to operate as an accredited institution in the states where the institution operates.