Lincoln Edu (K1L) Risk Analysis

Our strategic plans for future expansion are based, in part, on our ability to open new schools as additional locations of our existing institutions, add new educational programs at our existing schools, and take into account the applicable approval requirements of the DOE and our other regulatory agencies for adding new locations and educational programs. See Part I, Item 1. "Business - Regulatory Environment - Opening Additional Schools and Adding Educational Programs". If an institution erroneously determines that a new location or an educational program is eligible for purposes of Title IV Programs, the institution would likely be liable for repayment of Title IV Program funds provided to students in that educational program. The failure to obtain applicable approvals from the DOE and other applicable regulators without delay or material condition in connection with the addition of a new location or educational program could have a significant impact on our business and results of operations.

An institution participating in Title IV Programs must correctly calculate the amount of unearned Title IV Program funds that have been credited to students who withdraw from their educational programs before completing them and must return those unearned funds in a timely manner, generally within 45 days of such student's withdrawal. If the unearned funds are not properly calculated and timely returned, we may have to post a letter of credit in favor of the DOE or may be otherwise sanctioned by the DOE, which could increase our cost of regulatory compliance and adversely affect our results of operations. See Part I, Item 1. "Business - Regulatory Environment – Return of Title IV Program Funds."

The DOE's regulations prohibit an institution that participates in the Title IV Programs from engaging in substantial misrepresentation of the nature of its educational programs, financial charges, graduate employability or its relationship with the DOE, which is broadly defined, and provide for prohibitions on certain types of recruiting tactics and conduct that the DOE deems to be aggressive or deceptive. See Part I, Item 1. "Business - Regulatory Environment – Substantial Misrepresentation." If the DOE determines that one of our institutions has engaged in substantial misrepresentation or other prohibited conduct, the DOE may impose sanctions or other conditions upon the institution including, but not limited to, initiating an action to fine the institution or limit, suspend, or terminate its eligibility to participate in Title IV Programs and may seek to discharge students' loans and impose liabilities upon the institution. The regulations also could result in further scrutiny of marketing and recruiting practices by institutions like our schools and could increase the chances of the DOE finding practices to be noncompliant and imposing sanctions based on the alleged noncompliance.

The DOE typically places an institution on provisional certification status following a change in ownership resulting in a change of control, and may provisionally certify an institution for other reasons including, but not limited to, failure to comply with certain standards of administrative capability or financial responsibility. During the time when an institution is provisionally certified, it may be subject to adverse action with fewer due process rights than those afforded to other institutions. In addition, an institution that is provisionally certified must apply for and receive approval from the DOE for certain substantive changes including, but not limited to, the establishment of an additional location, an increase in the level of academic offerings or the addition of new programs. Our institutions were provisionally certified by the DOE in the past, but the DOE does not provisionally certify our institutions in their current program participation agreements. See Part I, Item 1. "Business - Regulatory Environment – Regulation of Federal Student Financial Aid Programs." The DOE's current regulations establish rules that, among other things, authorize additional conditions and restrictions on provisionally certified institutions and expand existing regulations regarding administrative capability and financial responsibility. See Part I, Item 1. "Business – Regulatory Environment – Regulation of Federal Student Financial Aid Programs." Any adverse action by the DOE or increased regulatory burdens as a result of the DOE placing one or more of our institutions on provisional certification status in the future could have a material adverse effect on enrollments and our revenues, financial condition, cash flows and results of operations.

Because we operate in a highly regulated industry, we are subject to compliance reviews and claims of noncompliance and lawsuits by government agencies and third parties. We may be subject to further reviews related to, among other things, issues of noncompliance identified in recent audits and reviews related to our institutions' compliance with Title IV Program requirements or related to liabilities for the discharge of loans to certain students who attended campuses of our institutions that are now closed. See Part I, Item 1. "Business - Regulatory Environment – Compliance with Regulatory Standards and Effect of Regulatory Violations." If the results of these reviews or proceedings are unfavorable to us, or if we are unable to defend successfully against third-party lawsuits or claims, we may be required to pay money damages or be subject to fines, limitations on the operations of our business, loss of federal and state funding, injunctions or other penalties. Even if we adequately address issues raised by an agency review or successfully defend a third-party lawsuit or claim, we may have to divert significant financial and management resources from our ongoing business operations to address issues raised by those reviews or defend those lawsuits or claims. Certain of our institutions are subject to ongoing reviews and proceedings. See Part I, Item 1. "Business – Regulatory Environment – Accreditation," "Regulatory Environment – Other Financial Assistance Programs," "Regulatory Environment – Borrower Defense to Repayment," "Regulatory Environment - Compliance with Regulatory Standards and Effect of Regulatory Violations," and "Regulatory Environment – Consumer Protection Laws and Scrutiny of the For-Profit Post-secondary Education Sector."

Our private education loans are subject to regulation and oversight by federal and state regulatory agencies. The CFPB has exercised supervisory authority over private education loan providers. The CFPB has initiated investigations into the lending practices of institutions in the for-profit education sector. Any adverse legislation, regulations, or investigations regarding private student lending could limit the availability of private student loans to our students or lead to sanctions or liabilities, which could have a significant impact on our business and operations.

An institution must be accredited by an accrediting commission recognized by the DOE and by applicable state educational agencies in order to participate in Title IV Programs. See Part I, Item 1. "Business - Regulatory Environment – State Authorization" and "Business – Regulatory Environment – Accreditation." If any of our schools fail to comply with accrediting or state requirements, the institution and its main and/or branch campuses are subject to the loss of accreditation or state authorization or may be placed on probation or a special monitoring or reporting status which, if the noncompliance with accrediting commission requirements is not resolved, could result in loss of accreditation. If the DOE declines to continue its recognition of ACCSC in the future and if the subsequent period for obtaining accreditation from another DOE-recognized accrediting agency lapses before we obtain accreditation from another DOE-recognized accrediting agency (or if the DOE does not provide such a period for institutions to obtain other accreditation), our schools could lose their Title IV eligibility. Loss of accreditation by any of our main campuses would result in the termination of that school's eligibility and all of its branch campuses to participate in Title IV Programs and could cause us to close the school and its branches, which could have a significant adverse impact on our business and operations. Program accreditation is the process through which specific programs are reviewed and approved by industry- and program-specific accrediting entities. Although program accreditation is not generally necessary for Title IV Program eligibility, such accreditation may be required to allow students to sit for certain licensure exams or to work in a particular profession or career or to meet other requirements. Failure to obtain or maintain such program accreditation may lead to a decline in enrollments in such programs.

An institution that derives more than 90% of its total revenue from Title IV Programs and other "federal funds that are disbursed or delivered to or on behalf of a student to be used attend the institution" (its "90/10 Rule percentage") 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 such revenues that exceed 90% of total revenue for a single fiscal year will be placed in provisional certification status and may be subject to other enforcement measures. If an institution violated the 90/10 Rule and became ineligible to participate in Title IV Programs but continued to disburse Title IV Program funds, the DOE would require the institution to repay all Title IV Program funds received by the institution after the effective date of the loss of eligibility. A loss of eligibility to participate in Title IV Programs for any of our institutions would have a significant impact on the rate at which our students enroll in our programs and on our business and results of operations. The 90/10 Rule previously considered whether an institution derived more than 90% of its total revenue only from Title IV Programs rather than in combination with certain other federal funding. Under the current 90/10 Rule, our institutions are now required to limit the combined amount of Title IV Program funds and applicable "federal funds" revenue (as defined by the DOE) in a fiscal year to no more than 90% in a fiscal year as calculated under the rule. Consequently, the current 90/10 Rule has increased and may continue to increase the 90/10 Rule calculations at our institutions. The 90/10 Rule regulations could have a material adverse effect on us and other schools like ours. See Part I, Item 1. "Business – Regulatory Environment – 90/10 Rule". We cannot be certain that the changes we make to our operations in the future to address the new 90/10 Rule regulations will succeed in maintaining our institutions' 90/10 Rule percentages below required levels or that the changes will not materially impact our business operations, revenues, and operating costs. It also is possible that Congress or the DOE could amend the 90/10 Rule in the future to lower the 90% threshold, change the calculation methodology, or make other changes to the 90/10 Rule that could make it more difficult for our institutions to comply with the 90/10 Rule. If any of our institutions loses eligibility to participate in Title IV Programs, that loss 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.

The DOE periodically issues new regulations and guidance. 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 may issue new regulations and guidance that could adversely impact for-profit postsecondary schools including our institutions. The DOE recently published new regulations on a variety of topics.  It also recently engaged in two negotiated rulemaking processes that resulted in a consensus among the rulemaking committees on proposed regulations. See Part I, Item 1. "Business – Regulatory Environment – Negotiated Rulemaking." If we cannot comply with the provisions of these or other regulations, as they currently exist or may be revised, or if the cost of such compliance is excessive, or if funding is materially reduced, our revenues or profit margin could be materially adversely affected. We cannot predict how the DOE will interpret and enforce current or future regulations or how these regulations, , may impact our schools' participation in Title IV Programs; however, failure to comply with current or future regulations could have a material adverse effect on our schools' business and results of operations, and the broad sweep of the recent rules and the rules that the DOE is currently developing may, in the future, require our schools to submit a letter of credit based on expanded standards of financial responsibility.

The highly regulated industry in which we operate requires compliance with extensive legal requirements that are periodically revised and interpretations of which are continuously evolving. As such, we cannot predict how any of these requirements will be applied or whether our schools will be able to comply with them in the future. Given the complex nature of the requirements and the fact that they are subject to interpretation, it is possible to inadvertently violate such law. In particular, the HEA and DOE regulations specify extensive criteria and numerous requirements that an institution must satisfy in order to participate in Title IV Programs. For a description of these federal, state and accrediting agency criteria, see Part I, Item 1. "Business - Regulatory Environment." If we or any of our schools fail to comply with applicable federal, state or accrediting agency requirements, our regulators could take a variety of adverse actions against us, and our schools could be subject to, among other things, (a) the loss of, or placement of material restrictions or conditions on (i) state licensure or accreditation, (ii) eligibility to participate in and receive Title IV Program funding or other federal or state financial assistance programs, or (iii) capacity to grant degrees, diplomas and certificates or (b) the imposition of liabilities or monetary penalties, or a requirement to provide a letter of credit or other financial protection, any of which could have a material adverse effect on academic or operational initiatives, revenues or financial condition, and impose significant operating restrictions upon us. Any of these actions could have a significant impact on our business. If we are found not to have satisfied the HEA's or the DOE's requirements for Title IV Program funding, one or more of our institutions, including its additional locations, could be limited in its access to, or lose, Title IV Program funding, which could adversely affect our revenue. As we received approximately 85% of our revenue (calculated based on cash receipts) from Title IV Programs during the fiscal year ended December 31, 2025, loss of Title IV Program funding eligibility could adversely affect our revenue which would have a significant impact on our business and results of operations. See Part I, Item 1. "Business – Regulatory Environment – Compliance with Regulatory Standards and Effect of Regulatory Violations" and "Business – Regulatory Environment – Other Financial Assistance Programs."

DOE regulations specify extensive criteria that an institution must satisfy to establish that it has the requisite financial responsibility and administrative capability to participate in Title IV Programs, and the DOE recently published new regulations that expand the number and scope of these criteria. For a description of these criteria, see Part I, Item 1. "Business - Regulatory Environment – Administrative Capability." Our inability to satisfy the DOE's criteria or otherwise fail to comply with one or more DOE requirements, one or more of our institutions and its additional locations could be limited in access to, or lose, Title IV Program funding. As we received approximately 85% of our revenue (calculated based on cash receipts) from Title IV Programs during the fiscal year ended December 31, 2025. Loss of Title IV Program funding could adversely affect our revenue, which would have a significant impact on our business and results of operations.  See Part I, Item 1. "Business - Regulatory Environment – Regulation of Federal Student Financial Aid Programs."

The composition of federal and state executive offices, executive agencies and legislatures that are subject to change based on the results of elections, appointments and other events may adversely impact our industry through constant changes in the regulatory environment resulting from the disparate views towards the for-profit education industry. See Part I. Item 1. "Business - Regulatory Environment – Scrutiny of the For-Profit Postsecondary Education Sector." Any laws or other actions that are adopted that limit our or our students' participation in Title IV Programs or in programs to provide funds for active duty service members and veterans or the amount of student financial aid for which our students are eligible, or any decreases in enrollment related to the regulatory activity concerning this sector, could have a material adverse effect on our academic or operational initiatives, cash flows, results of operations or financial condition.