At the closing of the Credit Facility, the Lender advanced the Term Loan to the Company, the net proceeds of which were $19.7 million after deduction of the ~~Lender’s~~Lender’s origination fee in the amount of $0.3 million and other Lender fees and reimbursements to the Lender that are customary for facilities of this type. The Company used the net proceeds of the Term Loan, together with cash on hand, to repay the existing credit facility and transaction expenses.

Pursuant to the terms of the Credit Agreement, letters of credit issued under the Revolving Loan reduce dollar for dollar the availability of borrowings under the Revolving Loan.

Accrued interest on each loan under the Credit Facility is payable monthly in arrears. The Term Loan and the Delayed Draw Term Loan bear interest at a floating interest rate based on the then one month London Interbank Offered Rate ~~(“LIBOR”~~(“LIBOR”) plus 3.50%. At the closing of the Credit Facility, the Company entered into a swap transaction with the Lender for 100% of the principal balance of the Term Loan, which matures on the same date as the Term Loan. At the end of the borrowing availability period for the Delayed Draw Term Loan, the Company is required to enter into a swap transaction with the Lender for 100% of the principal balance of the Delayed Draw Term Loan, which will mature on the same date as the Delayed Draw Term Loan, pursuant to a swap agreement between the Company and the Lender or the ~~Lender’s~~Lender’s affiliate. The Term Loan and Delayed Draw Term Loan are subject to a LIBOR interest rate floor of 0.25% if there is no swap agreement.

Revolving Loans bear interest at a floating interest rate based on the then LIBOR plus an indicative spread determined by the ~~Company’s~~Company’s leverage as defined in the Credit Agreement or, if the borrowing of a Revolving Loan is to be repaid within 30 days of such borrowing, the Revolving Loan will accrue interest at the ~~Lender’s~~Lender’s prime rate plus 0.50% with a floor of 4.0%. Revolving Loans are subject to a LIBOR interest rate floor of 0.00%.

Letters of credit are charged an annual fee equal to (i) an applicable margin determined by the leverage ratio of the Company less (ii) 0.25%, paid quarterly in arrears, in addition to the ~~Lender’s~~Lender’s customary fees for issuance, amendment and other standard fees. Letters of credit totaling $4 million that were outstanding under the existing credit facility are treated as letters of credit under the Revolving Loan.

Under the terms of the Credit Agreement, the Company may prepay the Term Loan and/or the Delayed Draw Term Loan in full or in part without penalty except for any amount required to compensate the Lender for any swap breakage or other costs incurred in connection with such prepayment. The Lender receives an unused facility fee of 0.50% per annum payable quarterly in arrears on the unused portions of the Revolving Loan.

In addition to the foregoing, the Credit Agreement contains customary representations, warranties and affirmative and negative covenants (including financial covenants that (i) restrict capital expenditures, (ii) restrict leverage, (iii) require maintaining minimum tangible net worth, (iv) require maintaining a minimum fixed charge coverage ratio and (v) require the maintenance of a minimum of $5 million in quarterly average aggregate balances on deposit with the Lender, which, if not maintained, will result in the assessment of a quarterly fee of $12,500), as well as events of default customary for facilities of this type. As of ~~March 31,~~June 30, 2021, the Company was in compliance with all debt covenants. The Credit Agreement also limited the payment of cash dividends during the first twenty-four months of the agreement to $1.7 million but an amendment to the Credit Agreement entered into on November 10, 2020 raised the cash dividend limit to $2.3 million in such twenty-four-month period.

As of ~~March~~ June 30~~31,~~, 2021 and December 31, 2020, the Company had $~~17.3~~16.8 million and $17.8 million, respectively, outstanding under the Credit Facility offset by $~~0.6~~0.5 million and $0.6 million of deferred finance fees, respectively. As of ~~March~~ June 30~~31,~~, 2021 and December 31, 2020, letters of credit in the aggregate outstanding principal amount of $4.0 million were outstanding under the Credit Facility.

~~Index~~

Scheduled maturities of long-term debt at ~~March~~ June 30~~31,~~, 2021 are as follows:

Year ending December 31,
2021 $ 1,500
2022 2,000
2023 2,000
2024 11,833
$ 17,333

Year ending December 31,
2021 (excluding the six months ended June 30, 2021)	$	1,000
2022		2,000
2023		2,000
2024		11,833
	$	16,833

7.	~~STOCKHOLDERS’ EQUITY~~

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7. STOCKHOLDERS’ EQUITY

Common Stock

Holders of our common stock are entitled to receive dividends when and as declared by our Board of Directors and have the right to 1 vote per share on all matters requiring shareholder approval. The Company has 0t declared or paid any cash dividends on our common stock since the ~~Company’s~~Company’s Board of Directors discontinued our quarterly cash dividend program in February 2015. The Company has no current intentions to resume the payment of cash dividends to holders of common stock in the foreseeable future.

Preferred Stock

On November 14, 2019, the Company raised gross proceeds of $12.7 million from the sale of 12,700 shares of its newly designated Series A Convertible Preferred Stock, 0 par value per share (the ~~“Series~~“Series A Preferred ~~Stock”~~Stock”). The Series A Preferred Stock was designated by the ~~Company’s~~Company’s Board of Directors pursuant to a certificate of amendment to the ~~Company’s~~Company’s amended and restated certificate of incorporation (the ~~“Charter Amendment”~~“Charter Amendment”). The liquidation preference associated with the Series A Preferred Stock was $1,000 per share at December 31, 2020. Upon issuance each share of Series A Preferred Stock was convertible at $2.36 per share of common stock (as may be adjusted pursuant to the Charter Amendment, the ~~“Conversion Price”~~“Conversion Price”) into 423,729 shares of common stock (the number of shares into which the Series A Preferred Stock is convertible at any time, the ~~“Conversion Shares”~~“Conversion Shares”). The Company incurred issuance costs of $0.7 million as part of this transaction.

The description below provides a summary of certain material terms of the Series A Preferred Stock:

Securities Purchase Agreement.

The Series A Preferred Stock was sold by the Company pursuant to a Securities Purchase Agreement dated as of November 14, 2019 (the ~~“SPA”~~“SPA”) among the Company, Juniper Targeted Opportunity Fund, L.P. and Juniper Targeted Opportunities, L.P. (together, ~~“Juniper Purchasers”~~“Juniper Purchasers”) and Talanta Investment, Inc. (“(“Talanta,”” together with Juniper Purchasers, the ~~“Investors”~~“Investors”). Among other things, the SPA includes covenants relating to the appointment of a director to the ~~Company’s~~Company’s Board of Directors to be selected solely by the holders of the Series A Preferred Stock.

Dividends. Dividends on the Series A Preferred Stock (“(“Series A ~~Dividends”~~Dividends”), at the initial annual rate of 9.6% is to be paid, in arrears, from the date of issuance quarterly on each December 31, March 31, June 30 and September 30 with September 30, 2020 being the first dividend payment date. The Company, at its option, may pay dividends either (a) in cash or (b) by increasing the number of Conversion Shares by the dollar amount of the dividend divided by the Conversion Price. The dividend rate is subject to increase (a) 2.4% per annum on the fifth anniversary of the issuance of the Series A Preferred Stock and (b) by 2% per annum but in no event above 14% per annum should the Company fail to perform certain obligations under the Charter Amendment. The Series A Preferred Stock is not currently redeemable and may not become redeemable in the future. As a result, the Company is not required to re-measure the Series A Preferred Stock and does not accrete changes in the redemption value. As of ~~March 31,~~June 30, 2021 and December 31, 2020, we paid a ~~$0.3~~$0.6 million and $1.4 million, respectively, cash dividend on the outstanding shares of Series A Preferred Stock rather than increasing the number of Conversion Shares. Dividends are included in the consolidated balance sheets within additional paid-in-capital when the Company maintains an accumulated deficit.

Holders of Series A Preferred Stock Right to Convert into Common Stock. Each share of Series A Preferred Stock, at any time, is convertible into a number of shares of common stock equal to (i) the sum of (A) $1,000 (subject to adjustment as provided in the Charter Amendment) plus (B) the dollar amount of any declared Series A Dividends not paid in cash divided by (ii) the Conversion Price ($2.36 per share subject to anti-dilution adjustments) as of the applicable Conversion Date (as defined in the Charter Amendment). At all times, however, the number of Conversion Shares that can be issued to any holder of Series A Preferred Stock may not result in such holder and its affiliates owning more than 19.99% of the total number of shares of common stock outstanding after giving effect to the conversion (the ~~“Hard Cap”~~“Hard Cap”), unless prior shareholder approval is obtained or no longer required by the rules of the principal stock exchange on which the ~~Company’s~~Company’s common stock trades.

~~Index~~

Mandatory Conversion. If, at any time following November 14, 2022, the volume weighted average price of the ~~Company’s~~Company’s common stock equals or exceeds 2.25 times the Conversion Price (currently $5.31 per share) for a period of 20 consecutive trading days and on each such trading day at least 20,000 shares of common stock was traded, the Company may, at its option and subject to the Hard Cap, require that any or all of the then outstanding shares of Series A Preferred Stock be automatically converted into Conversion Shares.

Redemption. Beginning November 14, 2024, the Company may redeem all or any of the Series A Preferred Stock for a cash price equal to the greater of (“(“Liquidation ~~Preference”~~Preference”) (i) the sum of $1,000 (subject to adjustment as provided in the Charter Amendment) plus the dollar amount of any declared Series A Dividends not paid in cash and (ii) the value of the Conversion Shares were such Series A Preferred Stock converted (as determined in the Charter Amendment) without regard to the Hard Cap.

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Change of Control. In the event of certain changes of control, some of which are not in the ~~Company’s~~Company’s control, as defined in the Charter Amendment as a ~~“Fundamental Change”~~“Fundamental Change” or a ~~“Liquidation”~~“Liquidation” (as defined in the Charter Amendment), the holders of Series A Preferred Stock shall be entitled to receive the Liquidation Preference, unless such Fundamental Change is a stock merger in which certain value and volume requirements are met, in which case the Series A Preferred Stock will be converted into common stock in connection with such stock merger. The Company has classified the Series A Preferred Stock as mezzanine equity on the Consolidated Balance Sheet based upon the terms of a change of control which could be outside the ~~Company’s~~Company’s control.

Voting. Holders of shares of Series A Preferred Stock will be entitled to vote with the holders of shares of common stock and not as a separate class, at any annual or special meeting of shareholders of the Company, on an as-converted basis, in all cases subject to the Hard Cap. In addition, a majority of the voting power of the Series A Preferred Stock must approve certain significant actions of the Company, including (i) declaring a dividend or otherwise redeeming or repurchasing any shares of common stock and other junior securities, if any, subject to certain exceptions, (ii) incurring indebtedness, except for certain permitted indebtedness and (iii) creating a subsidiary other than a wholly-owned subsidiary.

Additional Provisions. The Series A Preferred Stock is perpetual and, therefore, does not have a maturity date. The conversion price of the Series A Preferred Stock is subject to anti-dilution protections if the Company affects a stock split, stock dividend, subdivision, reclassification or combination of its common stock and certain other economically dilutive events.

Registration Rights Agreement. The Company also is a party to a Registration Rights Agreement ~~(“RRA”~~(“RRA”) with the holders of the Series A Preferred Stock. The RRA provides for unlimited demand registration rights, of which there can be 2 underwritten offerings each for at least $5 million in gross proceeds, and piggyback registration rights, with respect to the Conversion Shares. In addition, the RRA obligated the Company to register ~~“for~~“for the ~~shelf”~~shelf” the resale of the Conversion Shares through the filing of a registration statement to such effect (the ~~“Resale~~“Resale Shelf Registration ~~Statement”~~Statement”) and have such Resale Shelf Registration Statement declared effective by the Securities and Exchange Commission (the ~~“SEC”~~“SEC”). The SEC declared the Resale Shelf Registration Statement effective on October 16, 2020.

Restricted Stock

The Company currently ~~has 3~~issues restricted stock ~~incentive plans: a Long-Term Incentive Plan (the “LTIP”), a Non-Employee Directors Restricted Stock Plan (the “Non-Employee Directors Plan”) and~~awards under the Lincoln Educational Services Corporation 2020 Long-Term Incentive ~~Compensation~~ Plan (the ~~“2020 Plan”).~~

“2020 Plan”). As more fully described below, the Company continues to maintain the Lincoln Educational Services Corporation 2005 Long Term Incentive Plan, as amended and amended and restated (the “Prior Plan”) only with respect to awards made thereunder, but, as no shares remain available under the Prior Plan, the Company no longer makes grants under such plan.

2020 Plan

On March 26, 2020, the Board adopted the 2020 Plan to provide an incentive to certain directors, officers, employees and consultants of the Company to align their interests in the ~~Company’s~~Company’s success with those of its shareholders through the grant of equity-based awards. On June 16, 2020, the shareholders of the Company approved the 2020 Plan. The 2020 Plan is administered by the Compensation Committee of the Board, or such other qualified committee appointed by the Board, who will, among other duties, have full power and authority to take all actions and to make all determinations required or provided for under the 2020 Plan. Pursuant to the 2020 Plan, the Company may grant options, share appreciation rights, restricted shares, restricted share units, incentive stock options and nonqualified stock options. The 2020 Plan has a duration of 10 years.

~~Index~~

Subject to adjustment as described in the 2020 Plan, the aggregate number of shares of common stock available for issuance under the 2020 Plan is 2,000,000 shares. ~~As of March~~ ~~31,~~

On May 6, 2021,~~, a total of~~ ~~98,614~~ 76,195 restricted shares of common stock ~~have been~~were issued to non-employee directors which vest on the first anniversary of the grant date.

On June 16, 2020, 111,376 restricted shares of common stock were issued to non-employee directors which are fully vested on June 16, 2021.

On August 7, 2020, 2 non-employee directors were appointed to the ~~Company’s~~Company’s Board of Directors and 17,096 restricted shares of common stock were granted to each ~~non-employee~~ of ~~these~~those individuals. These shares ~~vest~~vested on June 16, 2021.

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Also on August 7, 2020, a non-employee director retired from his position on the ~~Company’s~~Company’s Board of Directors and 12,762 restricted shares of common stock held by him which were unvested were accelerated to vest effective August 7, 2020.

On February 25, 2021, performance-based restricted shares were granted to certain employees of the Company. The shares vest ratably on the first, second and third anniversary dates of the grant based upon the attainment of a financial target during each of the fiscal years ending December 31, 2021, 2022 and 2023, respectively, except in extraordinary circumstances. There is no restriction on the right to vote or the right to receive dividends with respect to any of such restricted shares. For the three and six months ended ~~March~~ June 30~~31,~~, 2021, the Company recorded expense of $~~0.1~~ 0.3 million and $0.4 million, respectively, as the expectation of attainment of the target is probable.

On February 20, 2020, performance-based restricted shares were granted to certain employees of the Company. The shares vest 20%, 30% and 50% on the first,, second and third anniversary dates of the grant, respectively, based upon the attainment of a financial target during each fiscal years ending December 31,2020,2021 and 2022, respectively, except in extraordinary circumstances. There is no restriction on the right to vote or the right to receive dividends with respect to any of such restricted shares. For the three months ended June 30, 2021 and 2020, the Company recorded expense of $0.2 million and $0.2 million, respectively, as the expectation of attainment of the target is probable. For the six months ended June 30, 2021 and 2020, the Company recorded expense of $0.4 million and $0.2 million, respectively, as the expectation of attainment of the target is probable.

Prior Plan

Under the Prior Plan, certain employees received awards of restricted shares of common stock based on service and performance. The number of shares granted to each employee was based on the amount of the award and the fair market value of a share of common stock on the date of grant. The 2020 Plan provides that there will be no new grants under the Prior Plan effective as of the date of shareholder approval, June 16, 2020, of the 2020 Plan. The 2020 Plan also states that the shares available under the 2020 Plan will be 2 million shares plus the number of shares remaining available under the Prior Plan. As no shares remain available under the Prior Plan, there can be no additional grants thereunder. Outstanding grants under the Prior Plan remain in effect according to their terms. Therefore, those grants are subject to the particular award agreement relating thereto and to the Prior Plan to the extent that the plan addresses those grants. The Prior Plan remains in effect only to that extent.

On February 28, 2019, restricted shares were granted to certain employees of the Company under the Prior Plan, which shares ratably vest over three years. There is no restriction on the right to vote or the right to receive dividends with respect to any of such restricted shares. For each of the three months ended ~~March~~ ~~31,2021~~ ~~and~~ ~~2020,~~ ~~the Company recorded expense of~~ ~~$0.1 million~~ ~~as the expectation of attainment of the target is probable.~~

~~LTIP~~

Under the LTIP, certain employees have received awards of restricted shares of common stock based on service and performance. The number of shares granted to each employee is based on the amount of the award and the fair market value of a share of common stock on the date of grant. The 2020 Plan makes it clear that there will be no new grants under the LTIP effective as of the date of shareholder approval, June 16, 2020. The 2020 Plan also states that the shares available under the 2020 Plan will be 2 million shares plus the number of shares remaining available under the LTIP. As no shares remain available under the LTIP there can be no additional grants under the LTIP. Outstanding grants under the LTIP remain in effect according to their terms. Therefore, those grants are subject to the particular award agreement relating thereto and to the LTIP to the extent that the prior plan provides rules relating to those grants. The LTIP remains in effect only to that extent.

~~On February 28, 2019, restricted shares were granted to certain employees of the Company, which shares ratably vest over~~ 30~~three years. There is no restriction on the right to vote or the right to receive dividends with respect to any of such restricted shares. For each of the~~ ~~three~~ ~~months ended March~~ ~~31,~~, 2021 and 2020, the Company recorded expense of $0.1 million in connection with ~~this~~that grant. For the six months ended June 30, 2021 and 2020, the Company recorded expense of $0.2 million and $0.3 million, respectively, in connection with that grant.

~~Non-Employee Directors Plan~~

Pursuant to the Non-Employee Directors Plan, each non-employee director of the Company receives an annual award of restricted shares of common stock on the date of the Company’s annual meeting of shareholders. The number of shares granted to each non-employee director is based on the fair market value of a share of common stock on that date. The restricted shares vest on the first anniversary of the grant date. There is no restriction on the right to vote or the right to receive dividends with respect to any of such restricted shares.

For the three months ended March 31~~31,~~, 2021 and 2020 and six months ended June 30, 2021 and 2020, the Company completed a net share settlement for 154,973 and 58,451 restricted shares, respectively, on behalf of certain employees ~~that~~who participate in the ~~LTIP~~Prior Plan upon the vesting of the restricted shares pursuant to the terms of the ~~LTIP.~~Prior Plan. The net share settlement was in connection with income taxes incurred on restricted shares that vested and were transferred to the employees during 2021 and/or 2020, creating taxable income for the employees. At the ~~employees’~~employees’ request, the Company will pay ~~these~~those taxes on behalf of the employees in exchange for the employees’ returning an equivalent value of restricted shares to the Company. ~~These~~ Those transactions resulted in a decrease of $1.0 million and $0.2 million for each of the three months ended March 31~~31,~~, 2021 and 2020 and six months ended June 30, 2021 and 2020, respectively, to equity on the condensed consolidated balance sheets, as the cash payment of the taxes effectively was a repurchase of the restricted shares granted in previous years.

~~Index~~

The following is a summary of transactions pertaining to restricted stock:

Shares
Weighted
Average Grant
Date Fair Value
Per Share

Nonvested restricted stock outstanding at December 31, 2020 1,572,159 $ 2.77
Granted 574,614 5.83
Canceled 0 0
Vested (383,226 ) 2.76

Nonvested restricted stock outstanding at March 31, 2021
1,763,547 3.77

	Shares			Weighted Average Grant Date Fair Value Per Share
Nonvested restricted stock outstanding at December 31, 2020		1,572,159		$	2.77
Granted		650,809			5.95
Canceled		0			0
Vested		(498,936	)		3.04

Nonvested restricted stock outstanding at June 30, 2021		1,724,032			3.86

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The restricted stock expense for the three months ended ~~March~~ June 30~~31,~~, 2021 and 2020 was $~~0.5~~0.8 million and $0.3 million, respectively. The restricted stock expense for the six months ended June 30, 2021 and 2020 was $1.3 million and $0.6 million, respectively. The unrecognized restricted stock expense as of ~~March 31,~~June 30, 2021 and December 31, 2020 was $~~6.6~~6.7 million and $3.2 million, respectively. As of ~~March~~ June 30~~31,~~, 2021, outstanding restricted shares under the ~~LTIP~~Prior Plan had aggregate intrinsic value of $~~11.3~~13.4 million.

Stock Options

The fair value of the stock options used to compute stock-based compensation is the estimated present value at the date of grant using the Black-Scholes option pricing model. The following is a summary of transactions pertaining to stock options:

Shares
Weighted
Average
Exercise Price
Per Share

Weighted
Average
Remaining
Contractual
Term

Aggregate
Intrinsic Value
(in thousands)

Outstanding at December 31, 2020
81,000 $ 7.79 1.17 years $ 0
Granted/Vested 0 0 0
Canceled 0 0 0

Outstanding at March 31, 2021
81,000 7.79 0.92 years 0

Vested as of March 31, 2021
81,000 7.79 0.92 years 0

Exercisable as of March 31, 2021
81,000 7.79 0.92 years 0

	Shares	Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2020	81,000	$	7.79	1.17 years	$	0
Granted/Vested	0		0			0
Canceled	0		0			0

Outstanding at June 30, 2021	81,000		7.79	0.67 years		0

Vested as of June 30, 2021	81,000		7.79	0.67 years		0

Exercisable as of June 30, 2021	81,000		7.79	0.67 years		0

As of ~~March~~ June 30~~31,~~, 2021, there was 0 unrecognized pre-tax compensation expense.

8.	INCOME TAXES

The provision for income taxes for the three months ended June 30, 2021 and 2020 was $0.7 million, or 23.1% of pretax income, and approximately $0.1 million, or 6.0% of pretax income, respectively. The provision for income taxes for the ~~three~~six months ended ~~March~~ June 30, 2021 and 2020 was $~~31,~~2.0 ~~2021~~ ~~and~~ ~~2020~~ ~~was~~ ~~$1.2~~ million,, or ~~21.7%~~22.2% of pretax income, and approximately $$0.1 million,, or ~~2.9%~~11.5% of pretax loss, respectively. The increase ~~quarter over quarter~~for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 was due to the reversal of a full valuation allowance at December 31, 2020, resulting in an effective tax rate of ~~21.7%~~22.2% infor the ~~current quarter.~~six months ended June 30, 2021.

9.	COMMITMENTS AND CONTINGENCIES

In the ordinary conduct of its business, the Company is subject to certain lawsuits, investigations and claims, including, but not limited to, claims involving students or graduates and routine employment matters. Although the Company cannot predict with certainty the ultimate resolution of lawsuits, investigations and claims asserted against it, the Company does not believe that any currently pending legal proceedings to which it is a party will have a material adverse effect on the ~~Company’s~~Company’s business, financial condition, and results of operations or cash flows.

Information regarding certain specific legal proceedings in which the Company is involved is contained in Part II, Item 1 hereof as well as in Part I, Item 3, and in Note 15 to the Notes to the Consolidated Financial Statements included in the ~~Company’s~~Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020. Unless otherwise indicated in this report, all proceedings discussed in the earlier report which are not indicated therein as having been concluded, remain outstanding as of ~~March 31,~~June 30, 2021.

~~Index~~

10.

SEGMENTS

We operate our business in 2 reportable segments: (a) the Transportation and Skilled Trades segment; and (b) the Healthcare and Other Professions segment. Our reportable segments have been determined based on a method by which we now evaluate performance and allocate resources. Each reportable segment represents a group of post-secondary education providers that offer a variety of degree and non-degree academic programs. These segments are organized by key market segments to enhance operational alignment within each segment to more effectively execute our strategic plan. Each of the ~~Company’s~~Company’s schools is a reporting unit and an operating segment. Our operating segments are described below.

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Transportation and Skilled Trades –– The Transportation and Skilled Trades segment offers academic programs mainly in the career-oriented disciplines of transportation and skilled trades (e.g. automotive, diesel, HVAC, welding and manufacturing).

Healthcare and Other Professions –– The Healthcare and Other Professions segment offers academic programs in the career-oriented disciplines of health sciences, hospitality and business and information technology (e.g. dental assistant, medical assistant, practical nursing, culinary arts and cosmetology).

The Company also utilizes the Transitional segment on a limited basis solely when and if it closes a school.

We evaluate segment performance based on operating results. Adjustments to reconcile segment results to consolidated results are included under the caption ~~“Corporate,”~~“Corporate,” which primarily includes unallocated corporate activity.

Summary financial information by reporting segment is as follows:

For the Three Months Ended March 31,
Revenue Operating Income (Loss)
2021
% of
Total
2020
% of
Total
2021 2020
Transportation and Skilled Trades $ 55,670 71.4 % $ 49,056 70.0 % $ 12,324 $ 4,840
Healthcare and Other Professions 22,326 28.6 % 20,985 30.0 % 2,949 2,000
Corporate 0 0 (9,254 ) (8,186 )
Total $ 77,996 100.0 % $ 70,041 100.0 % $ 6,019 $ (1,346 )

	For the Three Months Ended June 30,
	Revenue										Operating Income (Loss)
	2021		% of Total			2020		% of Total			2021			2020
Transportation and Skilled Trades	$	56,965		70.8	%	$	42,915		68.7	%	$	11,256		$	4,870
Healthcare and Other Professions		23,499		29.2	%		19,555		31.3	%		2,962			2,731
Corporate		0					0					(10,766	)		(6,441	)
Total	$	80,464		100.0	%	$	62,470		100.0	%	$	3,452		$	1,160

Total Assets
March 31, 2021 December 31, 2020
Transportation and Skilled Trades $ 134,111 $ 133,078
Healthcare and Other Professions 32,453 32,753
Corporate 73,289 79,359
Total $ 239,853 $ 245,190

	For the Six Months Ended June 30,
	Revenue										Operating Income (Loss)
	2021		% of Total			2020		% of Total			2021			2020
Transportation and Skilled Trades	$	112,636		71.1	%	$	91,971		69.4	%	$	23,581		$	9,708
Healthcare and Other Professions		45,825		28.9	%		40,540		30.6	%		5,911			4,733
Corporate		0					0					(20,020	)		(14,626	)
Total	$	158,461		100.0	%	$	132,511		100.0	%	$	9,472		$	(185	)

	Total Assets
	June 30, 2021		December 31, 2020
Transportation and Skilled Trades	$	134,854	$	133,078
Healthcare and Other Professions		31,977		32,753
Corporate		77,815		79,359
Total	$	244,646	$	245,190

~~Index~~Table of Contents

~~11.~~

~~FAIR VALUE~~

11. FAIR VALUE

The carrying amount and estimated fair value of the ~~Company’s~~Company’s financial instrument assets and liabilities, which are not measured at fair value on the Condensed Consolidated Balance Sheet, are listed in the table below:

March 31, 2021

Carrying
Amount

Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)

Significant Other
Observable Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)
Total
Financial Assets:
Cash and cash equivalents $ 26,742 $ 26,742 $ 0 $ 0 $ 26,742
Prepaid expenses and other current assets 10,770 0 10,770 0 10,770

Financial Liabilities:
Accrued expenses $ 10,713 $ 0 $ 10,713 $ 0 $ 10,713
Other short term liabilities 73 0 73 0 73
Derivative qualifying cash flow hedge 666 0 666 0 666
Credit facility 16,757 0 15,222 0 15,222

December 31, 2020

Carrying
Amount

Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)

Significant Other
Observable Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)
Total
Financial Assets:
Cash and cash equivalents $ 38,026 $ 38,026 $ 0 $ 0 $ 38,026
Prepaid expenses and other current assets 3,723 0 3,723 0 3,723

Financial Liabilities:
Accrued expenses $ 16,692 $ 0 $ 16,692 $ 0 $ 16,692
Other short term liabilities 26 0 26 0 26
Derivative qualifying cash flow hedge 877 0 877 0 877
Credit facility 17,212 0 15,487 0 15,487

	June 30, 2021
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Financial Assets:
Cash and cash equivalents	$	33,007	$	33,007	$	0	$	0	$	33,007
Prepaid expenses and other current assets		4,239		0		4,239		0		4,239

Financial Liabilities:
Accrued expenses	$	14,836	$	0	$	14,836	$	0	$	14,836
Other short term liabilities		59		0		59		0		59
Derivative qualifying cash flow hedge		617		0		617		0		617
Credit facility		16,303		0		15,107		0		15,107

	December 31, 2020
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Financial Assets:
Cash and cash equivalents	$	38,026	$	38,026	$	0	$	0	$	38,026
Prepaid expenses and other current assets		3,723		0		3,723		0		3,723

Financial Liabilities:
Accrued expenses	$	16,692	$	0	$	16,692	$	0	$	16,692
Other short term liabilities		26		0		26		0		26
Derivative qualifying cash flow hedge		877		0		877		0		877
Credit facility		17,212		0		15,487		0		15,487

As of ~~March 31,~~June 30, 2021 and December 31, 2020, we estimated the fair value of the Credit Facility based on a present value analysis utilizing aggregate market yields obtained from independent pricing sources for similar financial instruments.

The carrying amounts reported on the Consolidated Balance Sheets for Cash and cash equivalents, Restricted cash and Noncurrent restricted cash approximate fair value because they are highly liquid.

The carrying amounts reported on the Consolidated Balance Sheets for Prepaid expenses and other current assets, Accrued expenses and Other short term liabilities approximate fair value due to the short-term nature of these items.

Qualifying Hedge Derivative

On November 14, 2019, in connection with its Credit Facility, the Company entered into an interest rate swap for the Term Loan with a notional amount of $20 million which expires on December 1, 2024. The loan has a 10-year straight line amortization. A principal amount of $0.2 million is paid monthly. This interest rate swap converts the floating interest rate Term Loan to a fixed rate, plus a borrowing spread. The interest rate is variable based on LIBOR plus 3.50% and the ~~Company’s~~Company’s fixed rate is 5.36%. The Company designated this interest rate swap as a cash flow hedge.

The Company entered into this interest rate swap to hedge exposure resulting from the interest rate risk. The purpose of this hedge is to reduce the variability of the interest rate based on LIBOR. The Company manages these exposures within specified guidelines through the use of derivatives. All of our derivative instruments are utilized for risk management purposes, and the Company does not use derivatives for speculative trading purposes.

~~Index~~Table of Contents

The following summarizes the fair value of the outstanding derivative:

March 31, 2021 December 31, 2020

Liability⁽¹⁾

Liability⁽¹⁾

Notional Fair Value Notional Fair Value
Derivative derived as a hedging instrument:
Interest Rate Swap $ 17,333 $ 666 $ 17,833 $ 877

	June 30, 2021				December 31, 2020
	Liability⁽¹⁾				Liability⁽¹⁾
	Notional		Fair Value		Notional		Fair Value
Derivative derived as a hedging instrument:
Interest Rate Swap	$	16,833	$	617	$	17,833	$	877

(1)

The ~~Company’s~~Company’s derivative liability is measured at fair value using observable market inputs such as interest rates and our own credit risk as well as an evaluation of our ~~counterparty’s~~counterparty’s credit risk. Based on these inputs the derivative liability is classified within Level 2 of the valuation hierarchy. The liability is included in other long-term liabilities in the condensed consolidated balance sheets.

The following summarizes the financial statement classification and amount of interest expense recognized on hedging instruments:

Three Months Ended
March 31, 2021 March 31, 2020
Interest expense
Interest Rate Swap $ 100 $ 100

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Interest Expense
Interest Rate Swap	$	100	$	100	$	200	$	100

The following summarizes the effect of derivative instruments designated as hedging instruments in Other Comprehensive ~~Income/~~Income (Loss):

Three Months Ended
March 31, 2021 March 31, 2020
Interest expense
Interest Rate Swap $ 211 $ (748 )

	Three Months Ended June 30,					Six Months Ended June 30,
	2021		2020			2021		2020
Derivative qualifying as cash flow hedge
Interest rate swap income (loss)	$	49	$	(95	)	$	260	$	(843	)

12.	COVID-19 PANDEMIC AND CARES ACT

The Company began seeing the impact of the global COVID-19 pandemic on its business in early March 2020 and some effects of the pandemic have continued. The spread of COVID-19 has had an unprecedented impact on higher educational institutions across the country, including our schools, and has led to the closure of campuses and the transition of academic programs from in-person instruction to online, ~~delivery.~~remote learning and back. The impact for the Company was primarily related to transitioning classes from in-person, hands-on learning to online, remote learning which resulted in, among other things, additional expenses. Further, related to this transition, some students were placed on leave of absence as they could not complete their externships and some students chose not to participate in online learning. As a result, certain programs were extended due to restricted access to externship sites and classroom labs which did not have a material impact on our consolidated financial statements. In accordance with phased re-opening as applied on a state-by-state basis, all of our schools have now re-opened and the majority of the students who were on leave of absence or have deferred their programs returned to school to finish their programs. The Company has considered the impact of COVID-19 on the assumptions and estimates used to prepare its consolidated financial statements and has determined that there were no material adverse impacts on the Company’s results of operations and financial position at June 30, 2021. The Company expects to continue to be impacted by COVID-19 as the situation remains dynamic and evolving and subject to rapid and possibly material change. Additional impacts may arise of which the Company is not currently aware. The nature and extent of such impacts will depend on future developments, which are highly uncertain and cannot be predicted.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the ~~“CARES Act”~~“CARES Act”) was signed into law which includes a $2 trillion federal economic relief package providing financial assistance and other relief to individuals and businesses impacted by the spread of COVID-19. The CARES Act includes provisions for financial assistance and other regulatory relief benefitting students and their postsecondary institutions. Among other things, the CARES Act includes a $14 billion higher education emergency relief fund ~~(“HEERF”~~(“HEERF”) for the DOE to distribute directly to institutions of higher education. Institutions are required to use at least half of the HEERF funds for emergency grants to students for expenses related to disruptions in campus operations (e.g., food, housing, etc.). Institutions are permitted to use the remainder of the funds for additional emergency grants to students or to cover institutional costs associated with significant changes to the delivery of instruction due to the COVID-19 emergency, provided that those costs do not include payment to contractors for the provision of pre-enrollment recruitment activities, endowments, or capital outlays associated with facilities related to athletics, sectarian instruction, or religious worship. The law requires institutions receiving funds to continue to the greatest extent practicable to pay its employees and contractors during the period of any disruptions or closures related to the COVID-19 emergency. Other than as disclosed below, the CARES Act had no material impact on the Company’s income tax provision for the year ended December 31, 2020 or the six months ended June 30, 2021. The Company continues to evaluate the impact of the CARES Act on its financial position, results of operations and cash flows.

~~Index~~Table of Contents

The DOE has allocated funds to each institution of higher education based on a formula contained in the CARES Act. The formula is heavily weighted toward institutions with large numbers of Pell Grant recipients. The DOE allocated $27.4 million to our schools distributed in 2 equal installments and required them to be utilized by April 30, 2021 and May 14, 2021, respectively. As of ~~March 31,~~June 30, 2021, the Company had distributed the full $13.7 million of its first installment as emergency grants to students and has utilized the full $13.7 million of its second installment~~of which $5.7~~ ~~million remains to be drawn down by the Company in the second quarter.~~. Proceeds from the second installment for permitted expenses were primarily utilized to either offset original expenses incurred or to reduce student accounts receivable driving a decrease in bad debt expense, both uses resulted in a decrease in our selling general and administrative expenses.

On March 19, 2021, the Department of Education released guidance clarifying previous guidance on permitted institutional uses of funds received from the HEERF. In accordance with this guidance, the Company was able to provide financial relief for students who dropped out of school due to COVID-19 related circumstances with unpaid accounts receivable balances covering the period from March 15, 2020 to March 31, 2021. This relief was provided using the ~~Company’s~~Company’s financial resources combined with HEERF funds resulting in a net benefit to bad debt expense of approximately $3.0 million.

The Company was also permitted to delay payment of FICA payroll taxes through January 1, 2021 and has done so. The Company will have to repay 50% of the deferred payments by January 3, 2022, and the remaining 50% by January 3, 2023. As of ~~March 31,~~June 30, 2021, the Company had deferred payments of $4.5 million.

On December 27, 2020, the Consolidated Appropriations Act, 2021 was signed into law. This annual appropriations bill contained the Coronavirus Response and Relief Supplemental Appropriations Act, 2021 ~~(“CRRSAA”~~(“CRRSAA”). CRRSAA provided an additional $81.9 billion to the Education Stabilization Fund including $22.7 billion for the HEERF, which were originally created by the CARES Act in March 2020. The higher education provisions of the CRRSAA are intended in part to provide additional financial assistance benefitting students and their postsecondary institutions in the wake of the spread of COVID-19 across the country and its impact on higher educational institutions.

Like the CARES Act, the CRRSAA directs the majority of HEERF funds to a general program providing direct grants to institutions. Institutions generally must designate ~~“at~~“at least the same ~~amount”~~amount” of the funds for direct grants to students as was required under the CARES Act. We may only use the new HEERF funds for grants to students. The student grants must prioritize students with exceptional need and may be used for any component of the ~~student’s~~student’s cost of attendance or for emergency costs that arise due to coronavirus, such as tuition, food, housing, health care (including mental health care), or child care. We may use the remaining HEERF funds to (1) defray expenses associated with coronavirus (including lost revenue, reimbursement for expenses already incurred, technology costs associated with a transition to distance education, faculty and staff trainings, and payroll); (2) carry out student support activities authorized by the Higher Education Act that address needs related to coronavirus; or (3) for additional financial aid grants to students.

Upon the passage of the CRRSAA, DOE began allocating the funds to each institution of higher education based on a formula contained in the law. The DOE has allocated a total of $15.4 million to our schools and the funds became available in February 2021. The DOE has begun releasing guidance relating to the use of these funds and is expected to provide additional information in the coming weeks. Failure to comply with requirements for the usage and reporting of these funds could result in requirements to repay some or all of the allocated funds and in other sanctions. As of ~~March 31,~~June 30, 2021, the Company has not drawn down any of these allocated funds.

~~Index~~Table of Contents

~~13.~~

~~SUBSEQUENT EVENTS~~

As previously disclosed in Lincoln’s Annual Report on Form 10-K, Lincoln is subject to an extensive regulatory scheme which includes, without limitation, the Borrower Defense to Repayment regulations; see the Company’s disclosures in its Annual Report on Form 10-K for the fiscal year ended December 31, 2020 under the captions “Regulatory Environment – Borrower Defense to Repayment Regulations” and “Risk Factors—We could be subject to liabilities, letter of credit requirements and other sanctions under the DOE’s Borrower Defense to Repayment Regulations.” On April 29, 2021, Lincoln received communication from the DOE indicating that the DOE was in receipt of a number of borrower defense applications containing allegations concerning Lincoln and requiring the DOE to undertake a fact-finding process pursuant to DOE regulations. Among other things, the communication outlines a process by which the DOE will provide to Lincoln each application allowing Lincoln the opportunity to submit responses to the applications. Further, the communication outlines certain information requests, relating to the period between 2007 and 2013, in connection with the DOE’s preliminary review of the borrower defense applications. Based upon publicly available information, it appears that the DOE has undertaken similar reviews of other educational institutions which have also been the subject of various borrower defense applications. The DOE’s communication does not specify a precise number of applications that are the subject of the review nor the aggregate dollar amount of the loans that could be at issue and which the DOE could seek to recover from Lincoln. Given the very recent receipt of the communication, the limited information contained therein and the early stage of Lincoln’s internal review, management is not able to predict the outcome of the DOE’s review at this time. Lincoln is assessing the requests made in the DOE communication and expects to timely respond to the inquiries. Additionally, while the Company has not yet begun to receive any borrower defense applications from the DOE, it expects to thoroughly review and respond to each application.

~~Index~~

Item 2.

~~MANAGEMENT’S~~

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

All references in this Quarterly Report on Form 10-Q to ~~“we,” “our,” “us”~~“we,” “our,” “us” and the ~~“Company,”~~“Company,” refer to Lincoln Educational Services Corporation and its subsidiaries unless the context indicates otherwise.

The following discussion may contain forward-looking statements regarding the Company, our business, prospects and our results of operations that are subject to certain risks and uncertainties posed by many factors and events that could cause our actual business, prospects and results of operations to differ materially from those that may be anticipated by such forward-looking statements. Such statements may be identified by the use of words such as ~~“expect,” “estimate,” “assume,” “believe,” “anticipate,” “may,” “will,” “forecast,” “outlook,” “plan,” “project,”~~“expect,” “estimate,” “assume,” “believe,” “anticipate,” "may," “will,” “forecast,” “outlook,” “plan,” “project,” or similar words, and include, without limitation, statements relating to future enrollment, revenues, revenues per student, earnings growth, operating expenses, capital expenditures and effect of pandemics such as the COVID-19 pandemic and its ultimate effect on the ~~Company’s~~Company’s business and results. These statements are based on the ~~Company’s~~Company’s current expectations and are subject to a number of assumptions, risks and uncertainties. Additional factors that could cause or contribute to differences between our actual results and those anticipated include, but are not limited to, those described in the ~~“Risk Factors”~~“Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC and in our other filings with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. We undertake no obligation to revise any forward-looking statements in order to reflect events or circumstances that may subsequently arise. Readers are urged to carefully review and consider the various disclosures made by us in this Quarterly Report and in our other reports filed with the SEC that advise interested parties of the risks and factors that may affect our business.

The interim financial statements and related notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q and the discussions contained herein should be read in conjunction with the annual financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC, which includes audited consolidated financial statements for our two fiscal years ended December 31, 2020.

General

The Company provides diversified career-oriented post-secondary education to recent high school graduates and working adults. The Company offers programs in automotive technology, skilled trades (which include HVAC, welding and computerized numerical control and electrical and electronic systems technology, among other programs), healthcare services (which include nursing, dental assistant and medical administrative assistant, among other programs), hospitality services (which include culinary, therapeutic massage, cosmetology and aesthetics) and information technology programs. The schools, currently consisting of 22 schools in 14 states, operate under Lincoln Technical Institute, Lincoln College of Technology, Lincoln Culinary Institute, and Euphoria Institute of Beauty Arts and Sciences and associated brand names. Most of the campuses serve major metropolitan markets and each typically offers courses in multiple areas of study. Five of the campuses are destination schools, which attract students from across the United States and, in some cases, from abroad. The ~~Company’s~~Company’s other campuses primarily attract students from their local communities and surrounding areas. All of the campuses are nationally or regionally accredited and are eligible to participate in federal financial aid programs by the DOE and applicable state education agencies and accrediting commissions, which allow students to apply for and access federal student loans as well as other forms of financial aid.

Our business is organized into two reportable business segments: (a) Transportation and Skilled Trades, and (b) Healthcare and Other Professions or ~~“HOPS”~~“HOPS”.

Impact of COVID-19 on the Company

During the first quarter of 2020, COVID-19 began to spread worldwide and has caused significant disruptions to the U.S. and world economies. In early March 2020, the Company began seeing the impact of the COVID-19 pandemic on our business. The circumstances related to COVID-19 are unprecedented, dynamic and evolving and currently, with variants of the virus arising, remain unpredictable. As the economic impact of the COVID-19 pandemic continues to ~~change,~~evolve, we could see significant changes to our operations.

To date, the impact of COVID-19 has primarily related to transitioning classes from in-person, hands-on ~~learning~~instruction to online, remote learning and back. As part of this transition, the Company has incurred additional expenses. Related to this transition, 102 students were placed on leave of absence as they could not complete their externships and certain programs were extended due to restricted access to externship sites and classroom labs. In response to COVID-19, we implemented initiatives to safeguard our students and our employees. Due to phased re-opening on a state-by-state basis, our schools have been reopening since May 2020. Currently, all of our schools are open and ~~we expect the majority~~only 17 of ~~the students who were placed on leave or otherwise deferred their programs to finish their programs~~.

~~Index~~

~~Student Population and Financial Results~~

~~As of March 31, 2021, the Company had placed 98~~our students on leave of absence due to COVID-19 remain on leave of absence and we expect the majority of them to complete their programs.

Table of Contents

Student Population and Financial Results

As of June 30, 2021, the Company had 17 students on leave of absence due to COVID-19. It is expected that a majority of these students will complete their externships. Further, the Company had extended the length and graduation dates of a few programs in which distance learning could only be utilized for a small percentage of these programs.

The Company has campuses where students live in dorms that are operated by either the Company itself, Collegiate Housing or other housing options. The majority of the students had returned home and their dorm charges have been reversed. In addition, at campuses where students have meal plans, the Company’s cafeterias have been closed and all charges for meal plans have been reversed. For students that remained in dorms, the Company has given the students gift cards to assist in replacing their meal plans. As the students are returning to campus the dorms have reopened and the schools have limited the number of students in dorms to adhere to social distancing.

~~Extended Student Financing Programs~~

COVID-19 is having far reaching, negative impacts on individuals, businesses, and, consequently, the overall economy. Specifically, COVID-19 has materially disrupted business operations resulting in significantly higher levels of unemployment or underemployment. As a consequence, we expect many of our individual students will experience financial hardship, making it difficult, if not impossible, to meet their payment obligations to us without temporary assistance.

As a result of the negative impact on employment from COVID-19, we are observing higher levels of financial hardship for our students, which we expect will lead to higher levels of forbearance, delinquency and defaults. We expect that, left unabated, this deterioration in forbearance, delinquency and default rates will persist until such time as the economy and employment return to relatively normal levels.

We expect that, as the economic impact of COVID-19 evolves, we will continue to evaluate the measures we have put in place to assist our students during this unprecedented challenge. We continue to adapt and evolve our collections practices to meet the needs of our students.

Critical Accounting Policies and Estimates

For a description of our critical accounting policies and estimates, refer to ~~“Management’s~~“Management’s Discussion and Analysis of Financial Condition and Results of Operations –– Critical Accounting Policies and ~~Estimates”~~Estimates” and Note 1 to the Condensed Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and Note 1 to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for the quarter ended ~~March 31,~~June 30, 2021.

In addition, due to the impact of the COVID-19 pandemic, we have reassessed those of our accounting policies whose application places the most significant demands on ~~management’s~~management’s judgment, for instance, revenue recognition, allowance for doubtful account, goodwill, and long-lived assets, stock-based compensation, derivative instruments and hedging activity, borrowings, assumptions related to ROU assets, lease cost, income taxes and assets and obligations related to employee benefit plans. Such reassessments did not have a significant impact on our results of operations and cash flows for the periods presented.

Effect of Inflation

Inflation has not had a material effect on our operations.

2625

~~Index~~Table of Contents

Results of Continuing Operations for the Three and Six Months Ended ~~March 31,~~June 30, 2021

The following table sets forth selected consolidated statements of operations data as a percentage of revenues for each of the periods indicated:

Three Months Ended
March 31,

2021 2020
Revenue 100.0 % 100.0 %
Costs and expenses:
Educational services and facilities 41.5 % 43.2 %
Selling, general and administrative 50.8 % 58.7 %
Total costs and expenses 92.3 % 101.9 %
Operating Income (loss) 7.7 % -1.9 %
Interest expense, net -0.3 % -0.5 %
Income (loss) from opeartions before income taxes 7.4 % -2.4 %
Provision for income taxes 1.6 % 0.1 %
Net Income (loss) 5.8 % -2.5 %

	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Revenue		100.0	%		100.0	%		100.0	%		100.0	%
Costs and expenses:
Educational services and facilities		41.9	%		42.0	%		41.7	%		42.6	%
Selling, general and administrative		53.8	%		56.3	%		52.3	%		57.6	%
Gain on sale of assets		0.0	%		-0.2	%		0.0	%		-0.1	%
Total costs and expenses		95.7	%		98.1	%		94.0	%		100.1	%
Operating income (loss)		4.3	%		1.9	%		6.0	%		-0.1	%
Interest expense, net		-0.4	%		-0.5	%		-0.4	%		-0.5	%
Income (loss) from operations before income taxes		3.9	%		1.4	%		5.6	%		-0.6	%
Provision for income taxes		0.9	%		0.1	%		1.2	%		0.1	%
Net income (loss)		3.0	%		1.3	%		4.4	%		-0.7	%

Three Months Ended ~~March 31,~~June 30, 2021 Compared to Three Months Ended ~~March 31,~~June 30, 2020

Consolidated Results of Operations

Revenue. Revenue increased ~~$8.0~~$18.0 million, or ~~11.4%~~28.8% to ~~$78.0~~$80.5 million for the three months ended ~~March 31,~~June 30, 2021 from ~~$70.0~~$62.5 million in the prior year comparable period. The increase in revenue was ~~mainly due to student population growth resulting from~~the result of a ~~9.8%~~16.3% increase in average population, driven by continued student ~~population~~start growth, which increased 8.0% for the quarter compared to the prior ~~year. The two primary revenue drivers were beginning~~year in combination with starting the year with approximately 1,000 ~~students~~ more students than in the prior year comparable ~~period, coupled with an increase in student starts.~~

~~Student start growth increased 30.6% or by approximately 800 students for the three months ended March 31, 2021 as compared~~period. Further contributing to the increase was the normalization of our revenue stream driven by the return to in-person instruction at all of our campuses.

The prior year ~~comparable period. Contributing to~~financial results reflect the ~~favorable comparison~~unprecedented impact from the COVID-19 pandemic which started in March of 2020. As a result, certain financial and operational comparisons quarter over quarter ~~were~~may be distorted due to the impact of COVID-19. One area impacted by the pandemic was student starts. Student start results during the second quarter of 2020 included approximately 300 students ~~which~~whom delayed their start date from the first quarter to the second quarter of 2020 due to the onset of the ~~pandemic last year were scheduled to start in prior year’s first quarter and delayed to~~pandemic. Excluding these student from the second ~~quarter. Increased student starts we believe is attributable to prior and current marketing initiatives driving both brand awareness and contributing to our success~~quarter population, resulted in ~~obtaining new~~a 19.1% increase in student starts. ~~As of March 31, 2021,~~ Additionally, Lincoln has experienced ~~over three years of~~ consistent start growth. over the last three years.

For a general discussion of trends in our student enrollment, see “Seasonality and Outlook” below.

Educational services and facilities expense. Our educational services and facilities expense increased ~~$2.1~~$7.5 million, or ~~7.0%~~28.4% to ~~$32.3~~$33.7 million for the three months ended ~~March 31,~~June 30, 2021 from ~~$30.2~~$26.2 million in the prior year comparable period. The ~~increase was primarily driven by increases~~higher costs were mainly concentrated in instructional, books and tools and facilities expenses. Instructional expense and books and tools expense increased as a result of a ~~larger~~growing student population in addition to operating with a hybrid remote and in-person instruction in the current year compared to remote learning in the prior year. Similarly, facilities expense increased when compared to prior year due to one-time rent reductions coupled with overall facilities savings during campus closures as a result of COVID-19.

Educational services and facilities expense, as a percentage of revenue, decreased slightly to 41.9% from 42.0% for the three months ended June 30, 2021 and 2020, respectively.

Selling, general and administrative expense. Our selling, general and administrative expense increased $8.1 million, or 23.2% to $43.3 million for the three months ended June 30, 2021 from $35.2 million in the prior year comparable period. The increase in expense quarter over ~~quarter.~~ quarter was driven by several factors including an increased student population; the normalization of operating expenses in the current year resulting from the return to in-person instruction at all of our campuses; an improved business climate as the country begins to reopen and a $1.5 million increase in incentive compensation tied directly to improved financial performance.

Selling, general and administrative expense, as a percentage of revenue, decreased to 53.8% from 56.3% for the three months ended June 30, 2021 and 2020, respectively.

Table of Contents

Net interest expense. Net interest expense remained essentially flat at $0.3 million for the three months ended June 30, 2021 and 2020, respectively.

Income taxes. Our provision for income taxes was $0.7 million compared to approximately $0.1 million for the three months ended June 30, 2021 and 2020, respectively. The higher provision for the second quarter of 2021 compared to prior year was due to the release of the valuation allowance as of December 31, 2020. The effective tax rate for the three months ending June 30, 2021 was 23.1%.

Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020

Consolidated Results of Operations

Revenue. Revenue increased $26.0 million, or 19.6% to $158.5 million for the six months ended June 30, 2021 from $132.5 million in the prior year comparable period. The increase in revenue was the result of a 13.0% increase in average population, driven by continued student start growth, up 18.0% year over year in combination with starting the year with approximately 1,000 more students than in the prior year comparable period. Further contributing to the increase was the normalization of our revenue stream driven by the return to in-person instruction at all of our campuses.

The prior year financial results reflect the unprecedented impact from the COVID-19 pandemic which started in March of 2020. As a result, certain financial and operational comparisons quarter over quarter may be distorted as a result of the impact of COVID-19.

For a general discussion of trends in our student enrollment, see “Seasonality and Outlook” below.

Educational services and facilities expense. Our educational services and facilities expense increased $9.5 million, or 16.9% to $66.0 million for the six months ended June 30, 2021 from $56.5 million in the prior year comparable period. The higher costs were mainly concentrated in instructional, books and tools and facilities expenses. Instructional expense and books and tools expense increased as a result of a growing student population in addition to operating with a hybrid remote and in-person instruction in the current year compared to remote learning in the prior year. Similarly, facilities expense increased when compared to prior year due to one-time rent reductions coupled with overall facilities savings during campus closures as a result of COVID-19.

Educational services and facilities expense, as a percentage of revenue, decreased to ~~41.5%~~41.7% from ~~43.2%~~42.6% for the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020, respectively.

Selling, general and administrative expense. Our selling, general and administrative expense ~~decreased $1.5~~increased $6.6 million, or ~~3.7%~~8.7% to ~~$39.6~~$82.9 million for the ~~three~~six months ended ~~March 31,~~June 30, 2021 from ~~$41.1~~$76.3 million in the prior year comparable period. The ~~decrease~~increase in expense quarter over quarter was ~~primarily~~ driven by ~~reductions~~several factors including an increased student population; the normalization of operating expenses in the current year resulting from the return to in-person instruction at all of our campuses; an improved business climate as the country begins to reopen and a $2.2 million increase in incentive compensation tied directly to improved financial performance. Partially offsetting the increased expenses was a reduction in bad debt ~~expense and sales expense, partially offset by increases in administrative~~ expense.

Bad debt expense for the ~~first quarter of~~six months ended June 30, 2021 was favorable compared to the prior year period by ~~$2.4~~$1.5 million, as a result of an adjustment made during the first quarter to qualifying student accounts receivables following guidance published on March 19, 2021 by the Department of Education. This new guidance clarified previous guidance on permitted institutional uses of funds from the Higher Education Emergency Relieve Funds ~~(“HEERF”~~(“HEERF”).

In accordance with this guidance, we combined applicable HEERF funding with ~~Company’s~~Company’s funds to provide financial relief to students who dropped from school due to COVID-19 related circumstances with unpaid accounts receivable balances during the period from March 15, 2020 to March 31, 2021. The relief resulted in a net benefit to bad debt expense of approximately $3.0 million. Without this adjustment bad debt expense for the ~~first quarter of 2021,~~six months ended June 30,2021, as a percentage of total revenue, would have been comparable with prior year.

~~Index~~

Reductions in sales expense was the result of continued travel restrictions imposed by the COVID-19 pandemic in the current quarter, while travel restrictions in the prior year comparable period did not occur until the middle of March, at the onset of COVID-19.

~~Increased administrative expense was resulting from incentive plans tied to improved financial performance quarter over quarter.~~

Marketing investments continued in the first quarter of 2021 in an effort to drive prospective students to our website via paid search marketing in addition to increasing investments on paid social media channels. Despite the continued investments in marketing, the overall cost per student continued to decrease, a trend we have been experiencing over the past several years.

Selling, general and administrative expense, as a percentage of revenue, decreased to ~~50.8%~~52.3% from ~~58.7%~~57.6% for the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020, respectively.

Net interest expense. Net interest expense decreased ~~less than~~by $0.1 ~~million, or 19.5% to $0.3~~ million for the ~~three~~six months ended ~~March 31,~~June 30, 2021 to $0.6 million from ~~$0.4~~$0.7 million in the prior year comparable period.

Table of Contents

Income taxes. Our provision for income taxes was ~~$1.2~~$2.0 million compared to ~~less than~~ $0.1 million for the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020, respectively. The higher provision for the ~~first quarter of~~six months ended June 30, 2021 compared to prior year was due to the release of the valuation allowance as of December 31, 2020. The effective tax rate for the ~~month~~six months ending ~~March 31,~~June 30, 2021 was ~~21.7%~~22.2%. ~~The increase quarter over quarter was due to the reversal of a full valuation allowance at December 31, 2020, resulting in an effective tax rate of 21.7% in the current quarter.~~

Due to our federal net operating loss (“NOL”) of $43 million and our state NOL of $77 million we do not anticipate paying any federal income taxes and only paying nominal state income taxes this year.

Segment Results of Operations

We operate our business in two reportable segments: (a) the Transportation and Skilled Trades segment; and (b) the Healthcare and Other Professions ~~(“HOPS”~~(“HOPS”) segment. Our reportable segments have been determined based on a method by which we now evaluate performance and allocate resources. Each reportable segment represents a group of post-secondary education providers that offer a variety of degree and non-degree academic programs. These segments are organized by key market segments to enhance operational alignment within each segment to more effectively execute our strategic plan. Each of the ~~Company’s~~Company’s schools is a reporting unit and an operating segment. Our operating segments are described below.

The Company also utilizes the Transitional segment solely when and if it closes a school.

~~Index~~Table of Contents

The following table presents results for our two reportable segments for the three months ended ~~March 31,~~June 30, 2021 and 2020:

Three Months Ended March 31,
2021 2020 % Change
Revenue:
Transportation and Skilled Trades $ 55,670 $ 49,056 13.5 %
Healthcare and Other Professions 22,326 20,985 6.4 %
Total $ 77,996 $ 70,041 11.4 %

Operating Income (Loss):
Transportation and Skilled Trades $ 12,324 $ 4,840 154.6 %
Healthcare and Other Professions 2,949 2,000 47.5 %
Corporate (9,254 ) (8,186 ) -13.0 %
Total $ 6,019 $ (1,346 ) 547.2 %

Starts:
Transportation and Skilled Trades 2,339 1,720 36.0 %
Healthcare and Other Professions 1,209 996 21.4 %
Total 3,548 2,716 30.6 %

Average Population:
Transportation and Skilled Trades 8,032 7,305 10.0 %
Leave of Absence - COVID-19 (15 ) (33 ) 54.5 %
Transportation and Skilled Trades Excluding Leave of Absence - COVID-19 8,017 7,272 10.2 %

Healthcare and Other Professions 4,409 3,987 10.6 %
Leave of Absence - COVID-19 (90 ) (22 ) -309.1 %
Healthcare and Other Professions Excluding Leave of Absence - COVID-19 4,319 3,965 8.9 %

Total 12,441 11,292 10.2 %
Total Excluding Leave of Absence - COVID-19 12,336 11,237 9.8 %

End of Period Population:
Transportation and Skilled Trades 8,212 7,250 13.3 %
Leave of Absence - COVID-19 (19 ) (131 ) 85.5 %
Transportation and Skilled Trades Excluding Leave of Absence - COVID-19 8,193 7,119 15.1 %

Healthcare and Other Professions 4,532 4,021 12.7 %
Leave of Absence - COVID-19 (79 ) (193 ) 59.1 %
Healthcare and Other Professions Excluding Leave of Absence - COVID-19 4,453 3,828 16.3 %

Total 12,744 11,271 13.1 %
Total Excluding Leave of Absence - COVID-19 12,646 10,947 15.5 %

	Three Months Ended June 30,
	2021			2020			% Change
Revenue:
Transportation and Skilled Trades	$	56,965		$	42,915			32.7	%
HOPS		23,499			19,555			20.2	%
Total	$	80,464		$	62,470			28.8	%

Operating Income (Loss):
Transportation and Skilled Trades	$	11,256		$	4,870			131.1	%
Healthcare and Other Professions		2,962			2,731			8.5	%
Corporate		(10,766	)		(6,441	)		-67.1	%
Total	$	3,452		$	1,160			-197.6	%

Starts:
Transportation and Skilled Trades		2,509			2,302			9.0	%
Healthcare and Other Professions		1,194			1,127			5.9	%
Total		3,703			3,429			8.0	%

Average Population:
Transportation and Skilled Trades		8,039			7,298			10.2	%
Leave of Absense - COVID-19		(25	)		(424	)		94.1	%
Transportation and Skilled Trades Excluding Leave of Absense - COVID-19		8,014			6,874			16.6	%

Healthcare and Other Professions		4,508			4,254			6.0	%
Leave of Absense - COVID-19		(40	)		(393	)		89.8	%
Healthcare and Other Professions Excluding Leave of Absense - COVID-19		4,468			3,861			15.7	%

Total		12,547			11,552			8.6	%
Total Excluding Leave of Absense - COVID-19		12,482			10,735			16.3	%

End of Period Population:
Transportation and Skilled Trades		8,467			7,826			8.2	%
Leave of Absense - COVID-19		(7	)		(463	)		98.5	%
Transportation and Skilled Trades Excluding Leave of Absense - COVID-19		8,460			7,363			14.9	%

Healthcare and Other Professions		4,410			4,456			-1.0	%
Leave of Absense - COVID-19		(10	)		(233	)		95.7	%
Healthcare and Other Professions Excluding Leave of Absense - COVID-19		4,400			4,223			4.2	%

Total		12,877			12,282			4.8	%
Total Excluding Leave of Absense - COVID-19		12,860			11,586			11.0	%

~~Index~~Table of Contents

Three Months Ended June 30, 2021 Compared to the Three Months Ended June 30, 2020

Transportation and Skilled Trades

Student ~~start results~~starts increased ~~36.0%~~9.0%, to ~~2,339~~approximately 2,500 for the three months ended ~~March 31,~~June 30, 2021 from ~~1,720~~approximately 2,300 in the prior year comparable period.

Operating income increased ~~$7.5~~$6.4 million to ~~$12.3~~$11.3 million for the three months ended ~~March 31,~~June 30, 2021 from ~~$4.8~~$4.9 million in the prior year comparable period. The increase quarter over quarter was mainly driven by the following factors.

•

Revenue increased $14.1 million, or 32.7% to $57.0 million for the three months ended June 30, 2021 from $42.9 million in the prior year comparable period. The increase in revenue was primarily driven by average student population, up 16.6% resulting from continued start growth quarter over quarter in addition to the normalization of our revenue stream with the return to in-person instruction at all of our campuses.

•

Educational services and facilities expense increased $5.1 million, or 29.4% to $22.7 million for the three months ended June 30, 2021 from $17.6 million in the prior year comparable period. The increase in expense was driven by additional instructional expense, books and tools expense and facilities expense resulting from an increased student population combined with the return to in-person instruction at all of our campuses in the current quarter.

•

Selling, general and administrative expense increased $2.4 million, or 11.7% to $23.0 million for the three months ended June 30, 2021 from $20.6 million in the prior year comparable period. Additional costs were a result of an increased student population quarter over quarter; the normalization of operating expenses in the current year resulting from the return to in-person instruction at all of our campuses and an improved business climate as the country begins to reopen.

Healthcare and Other Professions

Student starts increased 5.9%, to approximately 1,200 for the three months ended June 30, 2021 from approximately 1,100 in the prior year comparable period.

Operating income increased $0.2 million to $2.9 million for the three months ended June 30, 2021 from $2.7 million in the prior year comparable period. The increase quarter over quarter was mainly driven by the following factors:

•

Revenue increased $3.9 million, or 20.2% to $23.4 million for the three months ended June 30, 2021 from $19.5 million in the prior year comparable period. The increase in revenue was primarily driven by average student population, up 15.7% resulting from continued start growth quarter over quarter in addition to the normalization of our revenue stream with the return to in-person instruction at all of our campuses.

•

Educational services and facilities expense increased $2.3 million, or 26.4% to $11.0 million for the three months ended June 30, 2021 from $8.7 million in the prior year comparable period. The increase in expense was driven by additional instructional expense, books and tools expense and facilities expense resulting from an increased student population combined with the return to in-person instruction at all of our campuses in the current quarter.

•

Selling, general and administrative expense increased $1.4 million, or 17.5% to $9.5 million for the three months ended June 30, 2021 from $8.1 million in the prior year comparable period. Additional costs were a result of an increased student population quarter over quarter; the normalization of operating expenses in the current year resulting from the return to in-person instruction at all of our campuses and an improved business climate as the country begins to reopen.

Revenue increased $6.6 million, or 13.5% to $55.7 million for the three months ended March 31, 2021 from $49.1 million in the prior year comparable period. The increase in revenue was primarily due to a 10.2% increase in average student population, driven by starting the year with approximately 570 more students, coupled with a 36.0% increase in student starts quarter over quarter.

Educational services and facilities expense increased $1.3 million, or 6.5% to $21.9 million for the three months ended March 31, 2021 from $20.6 million in the prior year comparable period. The increase was primarily driven by increases in instructional expense and books and tools expense as a result of a larger student population year over year.

Selling general and administrative expense decreased $2.2 million, or 9.3% to $21.4 million for the three months ended March 31, 2021 from $23.6 million in the prior year comparable period. The decrease was primarily due to reductions in bad debt expense and sales expense, which is discussed in detail above in the consolidated results of operations.

~~Healthcare and Other Professions~~

~~Student start results increased 21.4% to 1,209 for the three months ended March 31, 2021 from 996 in the prior year comparable period.~~

Operating income increased $0.9 million to $2.9 million for the three months ended March 31, 2021 from $2.0 million in the prior year comparable period. The increase quarter over quarter was mainly driven by the following factors:

Revenue increased by $1.3 million, or 6.4% to $22.3 million for the three months ended March 31, 2021 from $21.0 million in the prior year comparable period. The increase in revenue was primarily due to a 8.9% increase in average student population, driven by starting the year with approximately 470 more students coupled with a 21.4% increase in student starts quarter over quarter.

Educational services and facilities expense increased $0.7 million, or 8.0% to $10.4 million for the three months ended March 31, 2021 from $9.7 million in the prior year comparable period. The increase was primarily driven by increases in instructional expense and books and tools expense as a result of a larger student population year over year.

Selling general and administrative expense decreased $0.4 million, or 4.1% to $8.9 million for the three months ended March 31, 2021 from $9.3 million in the prior year comparable period. The decrease was primarily driven by bad debt expense, which is discussed in detail in the consolidated results of operations.

Corporate and Other

This category includes unallocated expenses incurred on behalf of the entire Company. Corporate and other expenses were ~~$9.3~~$10.8 million and ~~$8.2~~$6.4 million for each of the three months ended ~~March~~ June 30, 2021 and 2020, respectively. The additional expenses quarter over quarter were driven by several factors including the normalization of operating expenses in the current year; an improved business climate as the country begins to reopen and a $1.5 million increase in incentive compensation tied directly to improved financial performance.

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The following table present results for our two reportable segments for the six months ended June 30, 2021 and 2020:

	Six Months Ended June 30,
	2021			2020			% Change
Revenue:
Transportation and Skilled Trades	$	112,636		$	91,971			22.5	%
HOPS		45,825			40,540			13.0	%
Total	$	158,461		$	132,511			19.6	%

Operating Income (Loss):
Transportation and Skilled Trades	$	23,581		$	9,708			142.9	%
Healthcare and Other Professions		5,911			4,733			24.9	%
Corporate		(20,020	)		(14,626	)		-36.9	%
Total	$	9,472		$	(185	)		5220.0	%

Starts:
Transportation and Skilled Trades		4,848			4,022			20.5	%
Healthcare and Other Professions		2,403			2,123			13.2	%
Total		7,251			6,145			18.0	%

Average Population:
Transportation and Skilled Trades		8,036			7,302			10.1	%
Leave of Absense - COVID-19		(20	)		(223	)		91.0	%
Transportation and Skilled Trades Excluding Leave of Absense - COVID-19		8,016			7,079			13.2	%

Healthcare and Other Professions		4,459			4,120			8.2	%
Leave of Absense - COVID-19		(65	)		(213	)		69.5	%
Healthcare and Other Professions Excluding Leave of Absense - COVID-19		4,394			3,907			12.5	%

Total		12,495			11,422			9.4	%
Total Excluding Leave of Absense - COVID-19		12,410			10,986			13.0	%

End of Period Population:
Transportation and Skilled Trades		8,467			7,826			8.2	%
Leave of Absense - COVID-19		(7	)		(463	)		98.5	%
Transportation and Skilled Trades Excluding Leave of Absense - COVID-19		8,460			7,363			14.9	%

Healthcare and Other Professions		4,410			4,456			-1.0	%
Leave of Absense - COVID-19		(10	)		(233	)		95.7	%
Healthcare and Other Professions Excluding Leave of Absense - COVID-19		4,400			4,223			4.2	%

Total		12,877			12,282			4.8	%
Total Excluding Leave of Absense - COVID-19		12,860			11,586			11.0	%

Six Months Ended June 30, 2021 Compared to the Six Months Ended June 30, 2020

Transportation and Skilled Trades

Student starts increased 20.5%, to approximately 4,800 for the six months ended June 30, 2021 from approximately 4,000 in the prior year comparable period.

Operating income increased $13.9 million to $23.6 million for the six months ended June 30, 2021 from $9.7 million in the prior year comparable period. The increase year over year was mainly driven by the following factors.

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•

Revenue increased $20.6 million, or 22.5% to $112.6 million for the six months ended June 30, 2021 from $92.0 million in the prior year comparable period. The increase in revenue was primarily driven by average student population, up 13.2% resulting from continued start growth quarter over quarter in addition to the normalization of our revenue stream with the return to in-person instruction at all of our campuses.

•

Educational services and facilities expense increased $6.5 million, or 17.0% to $44.6 million for the six months ended June 30, 2021 from $38.1 million in the prior year comparable period. The increase in expense was driven by additional instructional expense, books and tools expense and facilities expense resulting from an increased student population combined with the return to in-person instruction at all of our campuses in the current year.

•

Selling, general and administrative expense increased $0.2 million to $44.4 million for the six months ended June 30, 2021 from $44.2 million in the prior year comparable period.

Healthcare and Other Professions

Student starts increased 13.2%, to approximately 2,400 for the six months ended June 30, 2021 from approximately 2,100 in the prior year comparable period.

Operating income increased $1.2 million to $5.9 million for the six months ended June 30, 2021 from $4.7 million in the prior year comparable period. The increase year over year was mainly driven by the following factors:

•

Revenue increased $5.3 million, or 13.0% to $45.8 million for the six months ended June 30, 2021 from $40.5 million in the prior year comparable period. The increase in revenue was primarily driven by average student population, up 12.5% resulting from continued start growth quarter over quarter in addition to the normalization of our revenue stream with the return to in-person instruction at all of our campuses.

•

Educational services and facilities expense increased $3.0 million, or 16.7% to $21.4 million for the six months ended June 30, 2021 from $18.4 million in the prior year comparable period. The increase in expense was driven by additional instructional expense, books and tools expense and facilities expense resulting from an increased student population combined with the return to in-person instruction at all of our campuses in the current year.

•

Selling, general and administrative expense increased $1.0 million, or 6.0% to $18.5 million for the six months ended June 30, 2021 from $17.5 million in the prior year comparable period. Additional costs were a result of an increased student population quarter over quarter; the normalization of operating expenses in the current year resulting from the return to in-person instruction at all of our campuses and an improved business climate as the country begins to reopen.

Corporate and Other

This category includes unallocated expenses incurred on behalf of the entire Company. Corporate and other expenses were $20.0 million and $14.6 million for each of the six months ended June 30, 2021 and 2020, respectively. The additional expenses quarter over quarter were driven by several factors including the normalization of operating expenses in the current year; an improved business climate as the country begins to reopen and a $2.2 million increase ~~is resulting from~~in incentive ~~plans~~compensation tied directly to improved financial ~~performance quarter over quarter.~~performance.

LIQUIDITY AND CAPITAL RESOURCES

Our primary capital requirements are for maintenance and expansion of our facilities and the development of new programs. Our principal sources of liquidity have been cash provided by operating activities and borrowings under our Credit Facility. The following chart summarizes the principal elements of our cash flow for each of the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020, respectively:

Three Months Ended
March 31,

2021 2020
Net cash used in operating activities $ (8,299 ) $ (11,947 )
Net cash used in investing activities (1,219 ) (1,287 )
Net cash used in financing activities (1,766 ) (15,669 )

	Three Months Ended June 30,
	2021			2020
Net cash provided by operating activities	$	1,067		$	6,468
Net cash used in investing activities		(3,516	)		(2,975	)
Net cash used in financing activities		(2,570	)		(16,169	)

Table of Contents

As of ~~March 31,~~June 30, 2021, the Company had a net cash balance of ~~$10.0~~$16.7 million compared to a net cash balance of $20.8 million at December 31, 2020. The net cash balance is calculated as our cash, cash equivalents and restricted cash less both short and long-term portion of the credit agreement. The decrease in cash position from year end was the result of ~~several factors including~~ the seasonality of our business in addition to a decrease in ~~the~~ accrued expenses driven by the payment of incentive ~~compensation and increased receivables in the current quarter that will be reimbursed in the second quarter.~~compensation. When comparing the current quarter end net cash balance of ~~$10.0~~$16.7 million to a net ~~debt~~cash balance of ~~$8.8~~$7.8 million as of ~~March 31,~~June 30, 2020, the increase in cash position can mainly be attributed to net income generated by the company in addition to a decrease in net payments on borrowing in the current ~~quarter.~~year.

~~Index~~

Our primary source of cash is tuition collected from our students. The majority of students enrolled at our schools rely on funds received under various government-sponsored student financial aid programs to pay a substantial portion of their tuition and other education-related expenses. The most significant source of student financing is Title IV Programs, which represented approximately 77% of our cash receipts relating to revenues in 2020. Pursuant to applicable regulations, students must apply for a new loan for each academic period. Federal regulations dictate the timing of disbursements of funds under Title IV Programs and loan funds are generally provided by lenders in two disbursements for each academic year. The first disbursement is usually received approximately 31 days after the start of a ~~student’s~~student’s academic year and the second disbursement is typically received at the beginning of the sixteenth week from the start of the ~~student’s~~student's academic year. Certain types of grants and other funding are not subject to a 31-day delay. In certain instances, if a student withdraws from a program prior to a specified date, any paid but unearned tuition or prorated Title IV Program financial aid is refunded according to federal, state and accrediting agency standards.

As a result of the significant amount of Title IV Program funds received by our students, we are highly dependent on these funds to operate our business. Any reduction in the level of Title IV Program funds that our students are eligible to receive or any restriction on our eligibility to receive Title IV Program funds would have a significant impact on our operations and our financial condition. For more information, see Part I, Item 1A. ~~“Risk~~“Risk Factors - Risks Related to Our ~~Industry”~~Industry” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Operating Activities

Net cash provided by operating activities was $1.1 million and $6.5 million for each of the six months ended June 30, 2021 and 2020, respectively. Included in cash provided by operating activities in the six months ended June 30, 2020 was $14.5 million in federal funds received under the Cares Acts intended for reimbursement to students for expenses related to disruptions in campus operations as a direct result of the COVID-19 pandemic. Excluding these funds, we would have reported net cash used in operating activities of $8.0 million. The increase of $9.0 million in cash provided by operating activities was ~~$8.3 million and $11.9 million~~primarily driven by net income generated for ~~each of~~ the ~~fiscal quarters ended March 31, 2021 and 2020, respectively. For the three~~six months ended March 31, 2021, changes in our operating assets and liabilities resulted in cash outflows of $12.8 million, primarily attributable to a $7.1 million increase in prepaid expenses and current assets coupled with a decrease in accrued expenses of approximately $6.0 million related to the payment of prior year incentive compensation accruals.June 30, 2021.

Investing Activities

Net cash used in investing activities was ~~$1.2~~$3.5 million for the ~~three~~six months ended ~~March 31,~~June 30, 2021 compared to ~~$1.3~~$3.0 million in the prior year comparable period.

One of our primary uses of cash in investing activities was capital expenditures associated with investments in training technology, classroom furniture, and new program buildouts.

We currently lease a majority of our campuses. We own our real property in Grand Prairie, Texas; Nashville, Tennessee; and Denver, Colorado and our former school property located in Suffield, Connecticut.

Capital expenditures were 2% of revenues in 2020 and are expected to approximate 2% of revenues in 2021. We expect to fund future capital expenditures with cash generated from operating activities and borrowings under our credit facility.

Financing Activities

Net cash used in financing activities was ~~$1.8~~$2.6 million for the ~~three~~six months ended ~~March 31,~~June 30, 2021 compared to ~~$15.7~~$16.2 million in the prior year comparable period. The decrease of ~~$13.9~~$13.6 million was driven by several factors including a decrease in net payments on borrowing of $15.0 million ~~quarter~~year over ~~quarter,~~year, an increase of $0.8 million in equity based compensation in addition to dividends paid in the current year of ~~$0.3~~$0.6 million.

Credit Facility with Sterling National Bank

On November 14, 2019, the Company entered into a new senior secured credit agreement (the ~~“Credit Agreement”~~“Credit Agreement”) with its lender, Sterling National Bank (the ~~“Lender”~~“Lender”), providing for borrowing in the aggregate principal amount of up to $60 million (the ~~“Credit Facility”~~“Credit Facility”).

Table of Contents

The Credit Facility is comprised of four facilities: (1) a $20 million senior secured term loan maturing on December 1, 2024 (the ~~“Term Loan”~~“Term Loan”), with monthly interest and principal payments based on 120-month amortization with the outstanding balance due on the maturity date; (2) a $10 million senior secured delayed draw term loan maturing on December 1, 2024 (the ~~“Delayed~~“Delayed Draw Term ~~Loan”~~Loan”), with monthly interest payments for the first 18 months and thereafter monthly payments of interest and principal based on 120-month amortization and all balances due on the maturity date; (3) a $15 million senior secured committed revolving line of credit providing a sublimit of up to $10 million for standby letters of credit maturing on November 13, 2022 (the ~~“Revolving Loan”~~“Revolving Loan”), with monthly payments of interest only; and (4) a $15 million senior secured non-restoring line of credit maturing on January 31, 2021 (the ~~“Line~~“Line of Credit ~~Loan”~~Loan”). The Credit Agreement gives the Company the right to permanently terminate, in its entirety, the Revolving Loan or the Line of Credit Loan or permanently reduce the amount available for borrowing under the Revolving Loan or the Line of Credit Loan. In April 2020, the Company terminated the Line of Credit Loan. On November 10, 2020, the Company entered into an amendment to its Credit Agreement to extend the Delayed Draw Availability Period by one year to May 31, 2022 and to increase the amount of permitted cash dividends that the Company can pay on its Series A Preferred Stock during the first twenty-four months of the Credit Agreement from $1.7 million to $2.3 million.

~~Index~~

The Credit Facility is secured by a first priority lien in favor of the Lender on substantially all of the personal property owned by the Company, as well as a pledge of the stock and other equity in the ~~Company’s~~Company’s subsidiaries and mortgages on parcels of real property owned by the Company in Colorado, Tennessee and Texas, at which three of the ~~Company’s~~Company’s schools are located, as well as a former school property owned by the Company located in Connecticut.

Pursuant to the terms of the Credit Agreement, letters of credit issued under the Revolving Loan reduce dollar for dollar the availability of borrowings under the Revolving Loan.

Accrued interest on each loan under the Credit Facility ~~will be~~is payable monthly in arrears. The Term Loan and the Delayed Draw Term Loan bear interest at a floating interest rate based on the then one month London Interbank Offered Rate ~~(“LIBOR”~~(“LIBOR”) plus 3.50%. At the closing of the Credit Facility, the Company entered into a swap transaction with the Lender for 100% of the principal balance of the Term Loan, which matures on the same date as the Term Loan. At the end of the borrowing availability period for the Delayed Draw Term Loan, the Company is required to enter into a swap transaction with the Lender for 100% of the principal balance of the Delayed Draw Term Loan, which will mature on the same date as the Delayed Draw Term Loan, pursuant to a swap agreement between the Company and the Lender or the ~~Lender’s~~Lender’s affiliate. The Term Loan and Delayed Draw Term Loan are subject to a LIBOR interest rate floor of .25% if there is no swap agreement.

Revolving Loans bear interest at a floating interest rate based on the then LIBOR plus an indicative spread determined by the ~~Company’s~~Company’s leverage as defined in the Credit Agreement or, if the borrowing of a Revolving Loan is to be repaid within 30 days of such borrowing, the Revolving Loan will accrue interest at the ~~Lender’s~~Lender’s prime rate plus .50% with a floor of 4.0%. Revolving Loans are subject to a LIBOR interest rate floor of .00%.

Letters of credit are charged an annual fee equal to (i) an applicable margin determined by the leverage ratio of the Company less (ii) .25%, paid quarterly in arrears, in addition to the ~~Lender’s~~Lender’s customary fees for issuance, amendment and other standard fees. Letters of credit totaling $4 million that were outstanding under the existing credit facility are treated as letters of credit under the Revolving Loan.

As of ~~March 31,~~June 30, 2021 and December 31, 2020, the Company had ~~$17.3~~$16.8 million and $17.8 million, respectively, outstanding under the Credit Facility offset by ~~$0.6~~$0.5 million and $0.6 million of deferred finance fees, respectively. As of ~~March 31,~~June 30, 2021 and December 31, 2020, letters of credit in the aggregate outstanding principal amount of $4.0 million ~~and $4.0 million, respectively,~~ were outstanding under the Credit Facility.

3234

~~Index~~Table of Contents

The following table sets forth our long-term debt (in thousands):

	June 30, 2021			December 31, 2020
Credit agreement	$	16,833		$	17,833
Deferred Financing Fees		(530	)		(621	)
		16,303			17,212
Less current maturities		(2,000	)		(2,000	)
	$	14,303		$	15,212

March 31, December 31,
2021 2020
Credit agreement $ 17,333 $ 17,833
Deferred Financing Fees (576 ) (621 )
16,757 17,212
Less current maturities (2,000 ) (2,000 )
$ 14,757 $ 15,212

Contractual Obligations

Current portion of Long-Term Debt, Long-Term Debt and Lease Commitments. As of ~~March 31,~~June 30, 2021, our current portion of long-term debt and long-term debt consisted of borrowings under our Credit Facility. We lease offices, educational facilities and various items of equipment for varying periods through the year 2031 at basic annual rentals (excluding taxes, insurance, and other expenses under certain leases).

As of ~~March 31,~~June 30, 2021, we had outstanding loan principal commitments to our active students of ~~$25.9~~$28.1 million. These are institutional loans and no cash is advanced to students. The full loan amount is not guaranteed unless the student completes the program. The institutional loans are considered commitments because the students are packaged to fund their education using these funds and they are not reported on our financials.

Regulatory Updates

~~The ARPA and the “90/10 Rule.”~~

In March 2021, the $1.9 trillion American Rescue Plan Act of 2021 (“ARPA”) was signed into law. Among other things, the ARPA provides $40 billion in relief funds that will go directly to colleges and universities with $395.8 million going to for-profit institutions. Institutions will be required to spend at least half of their allocations on emergency financial aid grants to students. We anticipate that a portion of these funds will be allocated to our institutions but have not yet received notification of the precise amounts that will be allocated to our institutions.

~~In addition, the ARPA also includes a provision that amends the 90/10 rule.~~ A proprietary institution that derives more than 90% of its total revenue from Title IV Programs for two consecutive fiscal years becomes immediately ineligible to participate in Title IV Programs and may not reapply for eligibility until the end of at least two fiscal years. An institution with revenues exceeding 90% for a single fiscal year will be placed on provisional certification and may be subject to other enforcement measures. If Congress or the DOE were to amend the 90/10 Rule to treat other forms of federal financial aid as Title IV Program revenue for 90/10 Rule purposes, lower the 90% threshold, or otherwise change the calculation methodology, or make other changes to the 90/10 Rule, those changes could make it more difficult for our institutions to comply with the 90/10 Rule.

The ARPA amends the 90/10 rule by treating other “Federal funds that are disbursed or delivered to or on behalf of a student to be used to attend such institution” in the same way as Title IV funds are currently treated in the 90/10 rule calculation. This means that our institutions will be required to limit the combined amount of Title IV funds and applicable “Federal funds” revenue in a fiscal year to no more than 90% in a fiscal year as calculated under the rule. Consequently, the ARPA change to the 90/10 rule is expected to increase the 90/10 rule calculations at our institutions. The ARPA does not identify the specific Federal funding programs that will be covered by this provision, but it is expected to include funding from federal student aid programs such as the veterans’ benefits programs, which include the Post-9/11 GI Bill and Veterans Readiness and Employment services and from which we derived approximately 8% of our revenues on a cash basis in 2020.

The ARPA states that the amendments to the 90/10 rule apply to institutional fiscal years beginning on or after January 1, 2023 and are subject to the HEA’s negotiated rulemaking process which may not commence earlier than October 1, 2021. Accordingly, the ARPA change to the 90/10 rule is not expected to apply to our 90/10 rule calculations until our 2023 fiscal year. Moreover, we cannot predict the additional changes to the 90/10 rule or other regulations that might occur as a result of negotiated rulemaking to be conducted during 2021 and 2022 as required by the ARPA.

~~Index~~

We expect to make changes to our operations in order to address the current and future provisions in the 90/10 rule and in order to maintain the 90/10 percentages at our institutions below the 90% threshold as calculated under DOE regulations. However, we do not have significant control over the amount of Title IV funds that our students may receive and borrow. Our institutions’ 90/10 percentages can be increased by increases in Title IV aid availability (including, for example, increases in Pell Grant funds) and be decreased by decreases in the availability of state grant program funding and other sources of student aid that do not count as Title IV funds in the 90/10 calculation. Our institutions’ 90/10 percentages also will increase when the ARPA amendments to the 90/10 rule take effect to the extent that students eligible to receive military and veteran education assistance enroll and use their financial assistance at our institutions. We cannot be certain that the changes we make in the future will succeed in maintaining our institutions’ 90/10 percentages below required levels or that the changes will not materially impact our business operations, revenues, and operating costs.

If any of our institutions lose eligibility to participate in Title IV Programs, that loss would cause an event of default under our credit agreement, would also adversely affect our students’ access to various government-sponsored student financial aid programs, and would have a significant impact on the rate at which our students enroll in our programs and on our business and results of operations.

Borrower Defense to Repayment Regulations.

As previously disclosed in Lincoln’s Annual Report on Form 10-K, Lincoln is subject to an extensive regulatory scheme which includes, without limitation, the Borrower Defense to Repayment regulations. On July 1, 2020, the ~~DOE’s~~DOE’s published final Borrower Defense to Repayment regulations became effective. Among other things, these new regulations amend the processes for borrowers to receive from DOE a discharge of the obligation to repay certain Title IV Program loans first disbursed on or after July 1, 2020 based on certain acts or omissions by the institution or a covered party. The new and existing DOE regulations establish detailed procedures and standards for the loan discharge processes for periods prior to July 1, 2017, between July 1, 2017 and June 30, 2020, and on or after July 1, 2020, including the information required for borrowers to receive a loan discharge, and the authority of the DOE to seek recovery from the institution of the amount of discharged loans. The current and future rules could have a material adverse effect on our ~~schools’~~schools’ business and results of operations, and the broad sweep of the rules may, in the future, require our schools to submit a letter of credit based on expanded standards of financial responsibility. See the ~~Company’s~~Company’s disclosures in its Annual Report on Form 10-K for the fiscal year ended December 31, 2020 under the captions ~~“Regulatory~~“Regulatory Environment –– Borrower Defense to Repayment ~~Regulations”~~Regulations” and ~~“Risk~~“Risk Factors –– We could be subject to liabilities, letter of credit requirements, and other sanctions under the ~~DOE’s~~DOE’s Borrower Defense to Repayment Regulations.””

As previously disclosed in Lincoln’s Annual Report on Form 10-K, Lincoln is subject to an extensive regulatory scheme which includes, without limitation, the Borrower Defense to Repayment regulations; see the Company’s disclosures in its Annual Report on Form 10-K for the fiscal year ended December 31, 2020 under the captions “Regulatory Environment – Borrower Defense to Repayment Regulations” and “Risk Factors—We could be subject to liabilities, letter of credit requirements and other sanctions under the DOE’s Borrower Defense to Repayment Regulations.” On April 29, 2021, Lincoln received communication from the DOE indicating that the DOE was in receipt of a number of borrower defense applications containing allegations concerning Lincoln and requiring the DOE to undertake a fact-finding process pursuant to DOE regulations. Among other things, the communication outlines a process by which the DOE will provide to Lincoln each application allowing Lincoln the opportunity to submit responses to the applications. Further, the communication outlines certain information requests, relating to the period between 2007 and 2013, in connection with the ~~DOE’s~~DOE’s preliminary review of the borrower defense applications. Based upon publicly available information, it appears that the DOE has undertaken similar reviews of other educational institutions which have also been the subject of various borrower defense applications. ~~The DOE’s communication does not specify a precise number of applications that are the subject of the review nor the aggregate dollar amount of the loans that could be at issue and which~~We subsequently received from the DOE ~~could seek~~one group of 175 borrower application claims in May 2021 and another group of 140 borrower application claims in July 2021. We are in the process of thoroughly reviewing and responding to ~~recover from Lincoln. Given~~each borrower application sent to us by the ~~very recent receipt of the communication, the limited information contained therein and~~DOE.

Given the early stage of ~~Lincoln’s internal review,~~this matter, management is not able to predict the outcome of the ~~DOE’s~~DOE’s review at this time. ~~Lincoln is assessing~~If the ~~requests made~~DOE disagrees with our legal and factual grounds for contesting the applications, the DOE may impose liabilities on the Company based on the discharge of the loans at issue in the pending applications which could have a material adverse effect on our business and results of operations.

It is possible that we may receive from the DOE ~~communication and expects to timely respond to~~in the ~~inquiries. Additionally, while the Company has not yet begun to receive any~~future borrower defense applications submitted by or on behalf of prior, current, or future Lincoln students and that the DOE could seek to recover liabilities from Lincoln for discharged loans.

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The DOE has announced, generally, that it intends to establish new regulations on a variety of topics including borrower defense to repayment, that could result in regulations that would make it easier for borrowers to obtain discharges of their loans and for the DOE to recover liabilities from institutions. See “Negotiated Rulemaking.”

The ARPA and the “90/10 Rule.”

In March 2021, the $1.9 trillion American Rescue Plan Act of 2021 (the “ARPA”) was signed into law. Among other things, the ARPA provides $40 billion in relief funds that will go directly to colleges and universities with $395.8 million going to for-profit institutions. We have been allocated approximately $8 million in funds that must be used entirely for student financial aid grants. As of June 30, 2021, none of these funds have been drawn down.

In addition, the ARPA also includes a provision that amends the 90/10 Rule. A for-profit institution that derives more than 90% of its total revenue from Title IV Programs for two consecutive fiscal years becomes immediately ineligible to participate in Title IV Programs and may not reapply for eligibility until the end of at least two fiscal years. An institution with revenues exceeding 90% for a single fiscal year will be placed on provisional certification and may be subject to other enforcement measures. See the Company’s disclosures in its Annual Report on Form 10-K for the fiscal year ended December 31, 2020 under the captions “Regulatory Environment – The ‘90/10 Rule’” and “Risk Factors – Our institutions would lose eligibility to participate in Title IV Programs if the percentage of their revenues derived from those programs exceeds 90%, which could reduce our student population and revenues.” If Congress or the DOE were to amend the 90/10 Rule to treat other forms of federal financial aid as Title IV Program revenue for 90/10 Rule purposes, lower the 90% threshold, or otherwise change the calculation methodology (each of which has been proposed by some Congressional members in proposed legislation), or make other changes to the 90/10 Rule, those changes could make it more difficult for our institutions to comply with the 90/10 Rule.

The ARPA states that the amendments to the 90/10 Rule apply to institutional fiscal years beginning on or after January 1, 2023 and are subject to the HEA’s negotiated rulemaking process which may not commence earlier than October 1, 2021. Accordingly, the ARPA change to the 90/10 rule is not expected to apply to our 90/10 Rule calculations until our 2023 fiscal year. Moreover, we cannot predict the additional changes to the 90/10 Rule or other regulations that might occur as a result of negotiated rulemaking to be conducted during 2021 and 2022 as required by the ARPA.

We expect to make changes to certain of our operations in order to address the current and future provisions in the 90/10 Rule and in order to maintain the 90/10 percentages at our institutions below the 90% threshold as calculated under DOE regulations. However, we do not have significant control over the amount of Title IV funds that our students may receive and borrow. Our institutions’ 90/10 percentages can be increased by increases in Title IV aid availability (including, for example, increases in Pell Grant funds) and be decreased by decreases in the availability of state grant program funding and other sources of student aid that do not count as Title IV funds in the 90/10 calculation. Our institutions’ 90/10 percentages also will increase when the ARPA amendments to the 90/10 Rule take effect to the extent that students eligible to receive military and veteran education assistance enroll and use their financial assistance at our institutions. We cannot be certain that the changes we make in the future will succeed in maintaining our institutions’ 90/10 percentages below required levels or that the changes will not materially impact our business operations, revenues, and operating costs.

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Negotiated Rulemaking. The DOE periodically issues new regulations and guidance that can have an adverse effect on our institutions. See the Company’s disclosures in its Annual Report on Form 10-K for the fiscal year ended December 31, 2020 under the captions “Regulatory Environment – Negotiated Rulemaking” and “Risk Factors - The DOE has changed its regulations, and may make other changes in the future, in a manner which could require us to incur additional costs in connection with our administration of the Title IV Programs, affect our ability to remain eligible to participate in the Title IV Programs, impose restrictions on our participation in the Title IV Programs, affect the rate at which students enroll in our programs, or otherwise have a significant impact on our business and results of operations.” We cannot predict the timing and content of any new regulations or guidance that the DOE may seek to impose or whether and to what extent the DOE under the new administration may issue new regulations and guidance that could adversely impact for-profit schools including our institutions. For example, the ARPA will require the DOE to initiate a process to amend its regulations regarding the 90/10 Rule. See “The ARPA and the ‘90/10 Rule.’”

In addition, in May 2021, the DOE announced its intention to establish negotiated rulemaking committees to prepare proposed regulations on an extensive range of topics including without limitation changes of ownership and change in control of institutions of higher education, certification procedures for participation in the Title IV Programs, standards of administrative capability, ability to benefit standards, borrower defense to repayment, discharges for borrowers with a total and permanent disability, closed school loan discharges, discharges for false certification of student eligibility, loan repayment plans, the public service loan forgiveness program, mandatory pre-dispute arbitration and prohibition of class action lawsuits provisions in institutional enrollment agreements, financial responsibility standards including events that indicate heightened financial risk, gainful employment, and Pell Grant eligibility for prison education programs. The DOE also could consider additional topics for proposed regulations during the negotiated rulemaking process. The negotiated rulemaking process could lead to future DOE regulations that could adversely impact for-profit schools including our institutions.

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

Closed School Loan Discharges. The DOE may grant closed school loan discharges of Federal student loans based upon applications by qualified students. The DOE also may initiate discharges on its own for students who have not reenrolled in another Title IV Program eligible school within three years after the closure and who attended campuses that closed on or after November 1, 2013, as did some of our former campuses. If the DOE discharges some or all of these loans, the DOE may seek to recover the cost of the loan discharges from us. The DOE also has announced that it intends to establish new regulations on a variety of topics including closed school loan discharges, which could result in regulations that would make it easier for borrowers to obtain discharges of their loans and for the DOE to recover liabilities from institutions. See “Negotiated Rulemaking.”

We have received five separate letters from the DOE ~~it expects~~since September 3, 2020, asserting liabilities for closed school loan discharges in connection with the closure of some of our campuses. The total liability paid to ~~thoroughly review~~the DOE since September 3, 2020, has been approximately $280,000. The most recent correspondence from the DOE on this topic was dated February 11, 2021, which asserted a liability of approximately $74,000 for two previously closed campuses. We have appealed this amount on March 2, 2021, and ~~respond~~the DOE subsequently notified us on July 26, 2021, that based on our appeal, the liability would be reduced to ~~each application.~~$61,000. We cannot predict the timing or amount of the outcome of the DOE’s consideration of our response, nor can we predict any additional loan discharges that the DOE may approve or the liabilities that the DOE may seek from us for these campuses or other campuses that have closed in the past.

Seasonality

Our revenue and operating results normally fluctuate as a result of seasonal variations in our business, principally due to changes in total student population. Student population varies as a result of new student enrollments, graduations and student attrition. Historically, our schools have had lower student populations in our first and second quarters and we have experienced larger class starts in the third quarter and higher student attrition in the first half of the year. Our second half growth is largely dependent on a successful high school recruiting season. We recruit our high school students several months ahead of their scheduled start dates and, thus, while we have visibility on the number of students who have expressed interest in attending our schools, we cannot predict with certainty the actual number of new student enrollments and the related impact on revenue. Our expenses, however, typically do not vary significantly over the course of the year with changes in our student population and revenue.

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Item 4.

CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures. Our Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Securities Exchange Act Rule 13a-15(e)) as of the end of the quarterly period covered by this report, have concluded that our disclosure controls and procedures are adequate and effective to reasonably ensure that material information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the ~~SEC’s~~SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

~~Index~~

(b) Changes in Internal Control Over Financial Reporting. There were no changes made during our most recently completed fiscal quarter in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

As a result of the COVID-19 pandemic, certain employees of the Company began working remotely in March 2020 but these changes to the working environment did not have a material effect on the ~~Company’s~~Company’s internal control over financial reporting. There was no other change in the ~~Company’s~~Company’s internal control over financial reporting that occurred during the quarter ended ~~March 31,~~June 30, 2021 that has materially affected, or is reasonably likely to materially affect, the ~~Company’s~~Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.

LEGAL PROCEEDINGS

In the ordinary conduct of our business, we are subject to periodic lawsuits, investigations and claims, including, but not limited to, claims involving students or graduates and routine employment matters. Although we cannot predict with certainty the ultimate resolution of lawsuits, investigations and claims asserted against us, we do not believe that any currently pending legal proceeding to which we are a party will have a material adverse effect on our business, financial condition, results of operations or cash flows. Information regarding certain specific legal proceedings in which the Company is involved is contained in Part I, Item 3, and in Note 15 to the notes to the Condensed Consolidated Financial Statements included in the ~~Company’s~~Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020. Unless otherwise indicated in this report, all proceedings discussed in the earlier report which are not indicated therein as having been concluded, remain outstanding as of ~~March 31,~~June 30, 2021.

AsFollowing a wave of hundreds of class action lawsuits being served upon colleges and universities across the country by students in connection with transitioning from in-person to online classes due to COVID-19, a class action lawsuit was filed against the Company in New Jersey Federal District Court and served on December 21, 2020. Like most of the other lawsuits across the country, the suit alleges breach of contract, unjust enrichment and conversion. In lieu of an Answer, on January 25, 2021 the Company filed a Motion to Dismiss Plaintiff’s Complaint for Failure to State a Claim. On July 9, 2021 the court granted the Company’s Motion to dismiss the breach of contract, unjust enrichment claims for tuition and registration fees and conversion claims in their entireties. The only claim remaining is for student and technology fees, where the judge stated it was premature to dismiss those claims. On July 23, 2021, the Company submitted its Motion for Reconsideration as to the remaining claim and awaits a ruling in this regard.

Table of Contents

Also, as previously disclosed in ~~Lincoln’s~~Lincoln’s Annual Report on Form 10-K, ~~Lincoln is subject to an extensive regulatory scheme which includes, without limitation, the Borrower Defense to Repayment regulations; see the Company’s disclosures in its Annual Report~~ on Form 10-K for the fiscal year ended December 31, 2020 under the captions “Regulatory Environment – Borrower Defense to Repayment Regulations” and “Risk Factors—We could be subject to liabilities, letter of credit requirements and other sanctions under the DOE’s Borrower Defense to Repayment Regulations.” On April 29, 2021, Lincoln received communication from the DOE indicating that the DOE was in receipt of a number of borrower defense applications containing allegations concerning Lincoln and requiring the DOE to undertake a fact-finding process pursuant to DOE regulations. Among other things, the communication outlines a process by which the DOE will provide to Lincoln each application allowing Lincoln the opportunity to submit responses to the applications. Further, the communication outlines certain information requests, relating to the period between 2007 and 2013, in connection with the ~~DOE’s~~DOE’s preliminary review of the borrower defense applications. Based upon publicly available information, it appears that the DOE has undertaken similar reviews of other educational institutions which have also been the subject of various borrower defense applications. ~~The DOE’s communication does not specify a precise number of applications that are the subject of the review nor the aggregate dollar amount of the loans that could be at issue and which~~We subsequently received from the DOE ~~could seek~~one group of 175 borrower application claims in May 2021 and another group of 140 borrower application claims in July 2021. We are in the process of thoroughly reviewing and responding to ~~recover from Lincoln. Given~~each borrower application sent to us by the ~~very recent receipt of the communication, the limited information contained therein and~~DOE.

If the DOE grants any pending or future borrower applications, the DOE regulations state that the DOE may initiate an appropriate proceeding to recover liabilities arising from the loans in the applications. If the DOE ~~it expects~~initiates such a proceeding, the Company would request reconsideration of the liabilities. We cannot predict the timing or amount of all borrower defense applications that borrowers may submit to ~~thoroughly review~~the DOE or that the DOE may grant in the future, or the timing or amount of any possible liabilities that the DOE may seek to recover from the Company, if any. See the Company’s disclosures in its Annual Report on Form 10-K for the fiscal year ended December 31, 2020 under the captions “Regulatory Environment – Borrower Defense to Repayment Regulations” and ~~respond~~“Risk Factors – We could be subject to ~~each application.~~liabilities, letter of credit requirements, and other sanctions under the DOE’s Borrower Defense to Repayment Regulations.”

Item 6.

EXHIBITS

Exhibit Number		Description

3.1
~~3.1~~		Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to the ~~Company’s~~Company’s Registration Statement on Form S-1/A (Registration No. 333-123644) filed June 7, 2005.

3.2
~~3.2~~		Certificate of Amendment, dated November 14, 2019, to the Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.2 of the ~~Company’s~~Company’s Registration Statement on Form S-3 filed October 6, 2020).

3.3
~~3.3~~		Bylaws of the Company, as amended on March 8, 2019 (incorporated by reference to the ~~Company’s~~Company’s Form 8-K filed June 28 2005).

31.1*
31.1*		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*
31.2*		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

~~Index~~

32*
32**	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101*
101**		The following financial statements from Lincoln Educational Services ~~Corporation’s~~Corporation’s Quarterly Report on Form 10-Q for the quarter ended ~~March 31,~~June 30, 2021, formatted in Inline Extensible Business Reporting Language ~~(“iXBRL”~~(“iXBRL”): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Comprehensive (Loss) Income, (iv) Condensed Consolidated Statements of Changes in ~~Stockholders’~~Stockholders’ Equity, (v) Condensed Consolidated Statements of Cash Flows and (vi) the Notes to Condensed Consolidated Financial Statements, tagged as blocks of text and in detail.

104
~~104~~		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

*	Filed herewith.

Furnished herewith. This exhibit will not be deemed ~~“filed”~~“filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Such exhibit shall not be deemed incorporated into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

3639

~~Index~~Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

			LINCOLN EDUCATIONAL SERVICES CORPORATION

Date: ~~May 10,~~August 9, 2021	By:	/s/ Brian Meyers
		Brian Meyers

		Executive Vice President, Chief Financial Officer and Treasurer

~~Index~~Table of Contents

Exhibit Index

3.1		Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to the ~~Company’s~~Company’s Registration Statement on Form S-1/A (Registration No. 333-123644) filed June 7, 2005.

3.2		Certificate of Amendment, dated November 14, 2019, to the Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.2 of the ~~Company’s~~Company’s Registration Statement on Form S-3 filed October 6, 2020).

3.3		Bylaws of the Company, as amended on March 8, 2019 (incorporated by reference to the ~~Company’s~~Company’s Form 8-K filed June 28 2005).

31.1*		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32**		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101*
101**		The following financial statements from Lincoln Educational Services ~~Corporation’s~~Corporation’s Quarterly Report on Form 10-Q for the quarter ended ~~March 31,~~June 30, 2021, formatted in Inline Extensible Business Reporting Language ~~(“iXBRL”~~(“iXBRL”): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Comprehensive (Loss) Income, (iv) Condensed Consolidated Statements of Changes in ~~Stockholders’~~Stockholders’ Equity, (v) Condensed Consolidated Statements of Cash Flows and (vi) the Notes to Condensed Consolidated Financial Statements, tagged as blocks of text and in detail.

104
~~104~~		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*	Filed herewith.

New Jersey		57-1150621
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

14 Sylvan Way, Suite A		07054
Parsippany, NJ		(Zip Code)
(Address of principal executive offices)

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, no par value per share	LINC	The NASDAQ Stock Market LLC

	Large accelerated filer ☐☐	Accelerated filer ☒☒
	Non-accelerated filer ☐☐	Smaller reporting company ☒☒
	Emerging growth company ☐☐

PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets at ~~March 31~~June 30, 2021 and December 31, 2020 (Unaudited)	1
	Condensed Consolidated Statements of Operations for the three and six months ended ~~March 31~~, June 30, 2021 and 2020 (Unaudited)	3
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended ~~March 31~~, June 30, 2021 and 2020 (Unaudited)	4
	Condensed Consolidated Statements of Changes in Convertible Preferred Stock and ~~Stockholders’~~Stockholders’ Equity for the ~~three~~six months ended ~~March 31~~, June 30, 2021 and 2020 (Unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the ~~three~~six months ended ~~March 31~~, June 30, 2021 and 2020 (Unaudited)	6
	Notes to Unaudited Condensed Consolidated Financial Statements (Unaudited)	8
Item 2.	~~Management’s~~Management’s Discussion and Analysis of Financial Condition and Results of Operations	25 24
Item 4.	Controls and Procedures	34 38
PART II.	OTHER INFORMATION	35 38
Item 1.	Legal Proceedings	35 38
Item 6.	Exhibits	35 39
	SIGNATURES	37 40

	March 31, 2021		December 31, 2020
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	26,742	$	38,026
Accounts receivable, less allowance of $22,539 and $25,174 at March 31, 2021 and December 31, 2020, respectively		30,604		30,021
Inventories		2,666		2,394
Prepaid expenses and other current assets		10,770		3,723
Total current assets		70,782		74,164

PROPERTY, EQUIPMENT AND FACILITIES - At cost, net of accumulated depreciation and amortization of $176,757 and $176,300 at March 31, 2021 and December 31, 2020, respectively		49,035		48,388

OTHER ASSETS:
Noncurrent receivables, less allowance of $3,701 and $3,465 at March 31, 2021 and December 31, 2020, respectively		17,070		16,463
Deferred income taxes, net		34,473		35,718
Operating lease right-of-use assets		53,155		55,187
Goodwill		14,536		14,536
Other assets, net		802		734
Total other assets		120,036		122,638
TOTAL ASSETS	$	239,853	$	245,190

	March 31, 2021			December 31, 2020
LIABILITIES, SERIES A CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current portion of credit agreement	$	2,000		$	2,000
Unearned tuition		20,240			23,453
Accounts payable		17,718			15,676
Accrued expenses		10,713			16,692
Income taxes payable		436			491
Current portion of operating lease liabilities		9,370			8,504
Other short-term liabilities		73			26
Total current liabilities		60,550			66,842

NONCURRENT LIABILITIES:
Long-term credit agreement		14,757			15,212
Pension plan liabilities		4,451			4,252
Long-term portion of operating lease liabilities		50,329			52,702
Other long-term liabilities		2,924			3,133
Total liabilities		133,011			142,141

COMMITMENTS AND CONTINGENCIES		0			0

SERIES A CONVERTIBLE PREFERRED STOCK
Preferred stock, 0 par value - 10,000,000 shares authorized, Series A convertible preferred shares, 12,700 shares issued and outstanding at March 31, 2021 and December 31, 2020		11,982			11,982

STOCKHOLDERS’ EQUITY:
Common stock, 0 par value - authorized: 100,000,000 shares at March 31, 2021 and December 31, 2020; issued and outstanding: 26,895,970 shares at March 31, 2021 and 26,476,329 shares at December 31, 2020		141,377			141,377
Additional paid-in capital		30,043			30,512
Treasury stock at cost - 5,910,541 shares at March 31, 2021 and December 31, 2020		(82,860	)		(82,860	)
Retained earnings		10,388			6,203
Accumulated other comprehensive loss		(4,088	)		(4,165	)
Total stockholders’ equity		94,860			91,067
TOTAL LIABILITIES, SERIES A CONVERTIBLE PREFERRED STOCK AND EQUITY	$	239,853		$	245,190

	Three Months Ended March 31,
	2021			2020

REVENUE	$	77,996		$	70,041
COSTS AND EXPENSES:
Educational services and facilities		32,344			30,238
Selling, general and administrative		39,633			41,149
Total costs & expenses		71,977			71,387
OPERATING INCOME (LOSS)		6,019			(1,346	)
OTHER:
Interest expense		(285	)		(354	)
INCOME (LOSS) BEFORE INCOME TAXES		5,734			(1,700	)
PROVISION FOR INCOME TAXES		1,245			50
NET INCOME (LOSS)	$	4,489		$	(1,750	)
PREFERRED STOCK DIVIDENDS		304			0
INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS	$	4,185		$	(1,750	)
Basic
Net income (loss) per common share	$	0.13		$	(0.08	)
Diluted
Net income (loss) per common share	$	0.13		$	(0.08	)
Weighted average number of common shares outstanding:
Basic		24,889			24,598
Diluted		24,889			24,598

	Stockholders’ Equity
	Common Stock					Additional Paid-in			Treasury			Retained			Accumulated Other Comprehensive						Series A Convertible Preferred Stock
	Shares			Amount		Capital			Stock			Earnings			Loss			Total			Shares		Amount
BALANCE - January 1, 2021		26,476,329		$	141,377	$	30,512		$	(82,860	)	$	6,203		$	(4,165	)	$	91,067			12,700	$	11,982
Net income		-			0		0			0			4,489			0			4,489			-		0
Preferred stock dividend		-			0		0			0			(304	)		0			(304	)		-		0
Employee pension plan adjustments		-			0		0			0			0			(134	)		(134	)		-		0
Derivative qualifying as cash flow hedge		-			0		0			0			0			211			211			-		0
Stock-based compensation expense
Restricted stock		574,614			0		493			0			0			0			493			0		0
Net share settlement for equity-based compensation		(154,973	)		0		(962	)		0			0			0			(962	)		0		0
BALANCE -March 31, 2021		26,895,970		$	141,377	$	30,043		$	(82,860	)	$	10,388		$	(4,088	)	$	94,860			12,700	$	11,982

	Stockholders' Equity
	Common Stock					Additional Paid-in			Treasury			Retained			Accumulated Other Comprehensive						Series A Convertible Preferred Stock
	Shares			Amount		Capital			Stock			Earnings			Loss			Total			Shares		Amount
BALANCE - January 1, 2021		26,476,329		$	141,377	$	30,512		$	(82,860	)	$	6,203		$	(4,165	)	$	91,067			12,700	$	11,982
Net income		-			0		0			0			4,489			0			4,489			-		0
Preferred stock dividend		-			0		0			0			(304	)		0			(304	)		-		0
Employee pension plan adjustments		-			0		0			0			0			(134	)		(134	)		-		0
Derivative qualifying as cash flow hedge		-			0		0			0			0			211			211			-		0
Stock-based compensation expense
Restricted stock		574,614			0		493			0			0			0			493			0		0
Net share settlement for equity-based compensation		(154,973	)		0		(962	)		0			0			0			(962	)		0		0
BALANCE - March 31, 2021		26,895,970			141,377		30,043			(82,860	)		10,388			(4,088	)		94,860			12,700		11,982
Net income		-			0		0			0			2,426			0			2,426			-		0
Preferred stock dividend		-			0		0			0			(304	)		0			(304	)		-		0
Employee pension plan adjustments		-			0		0			0			0			(134	)		(134	)		-		0
Derivative qualifying as cash flow hedge		-			0		0			0			0			49			49			-		0
Stock-based compensation expense
Restricted stock		76,195			0		844			0			0			0			844			0		0
Net share settlement for equity-based compensation		0			0		0			0			0			0			0			0		0
BALANCE - June 30, 2021		26,972,165		$	141,377	$	30,887		$	(82,860	)	$	12,510		$	(4,173	)		97,741			12,700	$	11,982

	Three Months Ended March 31,
(in thousands, except share data)	2021			2020
Numerator:
Net income (loss)	$	4,489		$	(1,750	)
Less: preferred stock dividend		(304	)		(308	)
Less: allocation to preferred stockholders		(699	)		0
Less: allocation to restricted stockholders		(252	)		0
Net income (loss) allocated to common stockholders	$	3,234		$	(2,058	)

Basic income (loss) per share:
Denominator:
Weighted average common shares outstanding		24,888,615			24,598,346
Basic income (loss) per share	$	0.13		$	(0.08	)

Diluted income (loss) per share:
Denominator:
Weighted average number of:
Common shares outstanding		24,888,615			24,598,346
Dilutive potential common shares outstanding:
Series A Preferred Stock		0			0
Unvested restricted stock		0			0
Stock options		0			0
Dilutive shares outstanding		24,888,615			24,598,346
Diluted income (loss) per share	$	0.13		$	(0.08	)

		Three months ended March 31, 2021
	a	Transportation and Skilled Trades Segment		Healthcare and Other Professions Segment		Consolidated
Timing of Revenue Recognition
Services transferred at a point in time		$	3,520	$	1,333	$	4,853
Services transferred over time			52,150		20,993		73,143
Total revenues		$	55,670	$	22,326	$	77,996

		Three months ended March 31, 2020
	a	Transportation and Skilled Trades Segment		Healthcare and Other Professions Segment		Consolidated
Timing of Revenue Recognition
Services transferred at a point in time		$	2,498	$	1,073	$	3,571
Services transferred over time			46,558		19,912		66,470
Total revenues		$	49,056	$	20,985	$	70,041

		Three months ended June 30, 2021						Six months ended June 30, 2021
	a	Transportation and Skilled Trades Segment		Healthcare and Other Professions Segment		Consolidated		Transportation and Skilled Trades Segment		Healthcare and Other Professions Segment		Consolidated
Timing of Revenue Recognition
Services transferred at a point in time		$	5,065	$	1,283	$	6,348	$	8,585	$	2,615	$	11,200
Services transferred over time			51,900		22,216		74,116		104,051		43,210		147,261
Total revenues		$	56,965	$	23,499	$	80,464	$	112,636	$	45,825	$	158,461

		Three months ended June 30, 2020						Six months ended June 30, 2020
	a	Transportation and Skilled Trades Segment		Healthcare and Other Professions Segment		Consolidated		Transportation and Skilled Trades Segment		Healthcare and Other Professions Segment		Consolidated
Timing of Revenue Recognition
Services transferred at a point in time		$	2,038	$	939	$	2,977	$	4,536	$	2,013	$	6,549
Services transferred over time			40,877		18,616		59,493		87,435		38,527		125,962
Total revenues		$	42,915	$	19,555	$	62,470	$	91,971	$	40,540	$	132,511

	Three Months Ended March 31,
	2021		2020

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for:
Interest	$	331	$	327
Income taxes	$	0	$	1
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Liabilities accrued for or noncash purchases of fixed assets	$	1,329	$	721

	Six Months Ended June 30,
	2021		2020

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for:
Interest	$	566	$	589
Income taxes	$	652	$	14
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Liabilities accrued for or noncash purchases of fixed assets	$	3,362	$	614

	March 31,
	2021			2020
Weighted-average remaining lease term	5.96 years			6.06 years
Weighted-average discount rate		11.27	%		12.82	%

	As of June 30,
	2021			2020
Weighted-average remaining lease term	5.71 years			6.39 years
Weighted-average discount rate		10.93	%		11.94	%

Year ending December 31,
2021 (excluding the three months ended March 31, 2021)	$	11,507
2022		14,761
2023		13,463
2024		12,318
2025		10,761
2026		7,821
Thereafter		10,561
Total lease payments		81,192
Less: imputed interest		(21,493	)
Present value of lease liabilities	$	59,699

Year ending December 31,
2021 (excluding the six months ended June 30, 2021)	$	7,909
2022		15,668
2023		14,531
2024		12,952
2025		11,205
2026		8,122
Thereafter		10,560
Total lease payments		80,947
Less: imputed interest		(20,308	)
Present value of lease liabilities	$	60,639

	Gross Goodwill Balance		Accumulated Impairment Losses			Net Goodwill Balance
Balance as of January 1, 2021	$	117,176	$	(102,640	)	$	14,536
Adjustments		0		-			0
Balance as of March 31, 2021	$	117,176	$	(102,640	)	$	14,536

Year ending December 31,
2021	$	1,500
2022		2,000
2023		2,000
2024		11,833
	$	17,333

	For the Three Months Ended March 31,
	Revenue										Operating Income (Loss)
	2021		% of Total			2020		% of Total			2021			2020
Transportation and Skilled Trades	$	55,670		71.4	%	$	49,056		70.0	%	$	12,324		$	4,840
Healthcare and Other Professions		22,326		28.6	%		20,985		30.0	%		2,949			2,000
Corporate		0					0					(9,254	)		(8,186	)
Total	$	77,996		100.0	%	$	70,041		100.0	%	$	6,019		$	(1,346	)

	Total Assets
	March 31, 2021		December 31, 2020
Transportation and Skilled Trades	$	134,111	$	133,078
Healthcare and Other Professions		32,453		32,753
Corporate		73,289		79,359
Total	$	239,853	$	245,190

	Three Months Ended
	March 31, 2021		March 31, 2020
	Interest expense
Interest Rate Swap	$	100	$	100

	Three Months Ended March 31,
	2021			2020			% Change
Revenue:
Transportation and Skilled Trades	$	55,670		$	49,056			13.5	%
Healthcare and Other Professions		22,326			20,985			6.4	%
Total	$	77,996		$	70,041			11.4	%

Operating Income (Loss):
Transportation and Skilled Trades	$	12,324		$	4,840			154.6	%
Healthcare and Other Professions		2,949			2,000			47.5	%
Corporate		(9,254	)		(8,186	)		-13.0	%
Total	$	6,019		$	(1,346	)		547.2	%

Starts:
Transportation and Skilled Trades		2,339			1,720			36.0	%
Healthcare and Other Professions		1,209			996			21.4	%
Total		3,548			2,716			30.6	%

Average Population:
Transportation and Skilled Trades		8,032			7,305			10.0	%
Leave of Absence - COVID-19		(15	)		(33	)		54.5	%
Transportation and Skilled Trades Excluding Leave of Absence - COVID-19		8,017			7,272			10.2	%

Healthcare and Other Professions		4,409			3,987			10.6	%
Leave of Absence - COVID-19		(90	)		(22	)		-309.1	%
Healthcare and Other Professions Excluding Leave of Absence - COVID-19		4,319			3,965			8.9	%

Total		12,441			11,292			10.2	%
Total Excluding Leave of Absence - COVID-19		12,336			11,237			9.8	%

End of Period Population:
Transportation and Skilled Trades		8,212			7,250			13.3	%
Leave of Absence - COVID-19		(19	)		(131	)		85.5	%
Transportation and Skilled Trades Excluding Leave of Absence - COVID-19		8,193			7,119			15.1	%

Healthcare and Other Professions		4,532			4,021			12.7	%
Leave of Absence - COVID-19		(79	)		(193	)		59.1	%
Healthcare and Other Professions Excluding Leave of Absence - COVID-19		4,453			3,828			16.3	%

Total		12,744			11,271			13.1	%
Total Excluding Leave of Absence - COVID-19		12,646			10,947			15.5	%

	March 31,			December 31,
	2021			2020
Credit agreement	$	17,333		$	17,833
Deferred Financing Fees		(576	)		(621	)
		16,757			17,212
Less current maturities		(2,000	)		(2,000	)
	$	14,757		$	15,212