LINCOLN EDUCATIONAL SERVICES : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

All references in this Quarterly Report on Form 10-Q to "we," "our," "us" and the "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," or similar words, and include, without
limitation, statements relating to future enrollment, revenues, revenues per
student, earnings growth, operating expenses, capital expenditures and the
ultimate effect of the COVID-19 pandemic on the Company's business and results.
These statements are based on the 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" section of our Annual Report on Form 10-K for the year ended December
31, 2019, 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
included in our Annual Report on Form 10-K for the year ended December 31, 2019,
as filed with the SEC, which includes audited consolidated financial statements
for our three fiscal years ended December 31, 2019.

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 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 three reportable business segments: (a) Transportation and Skilled Trades, (b) Healthcare and Other Professions or "HOPS", and (c) Transitional, which refers to campus operations that have been closed.

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. On March 11, 2020, the World Health Organization declared the COVID-19
outbreak to be a pandemic. On March 13, 2020, a national emergency was declared,
which made federal funds available to respond to the crisis. Beginning on March
15, 2020, many businesses closed or reduced hours throughout the U.S. to combat
the spread of COVID-19. All 50 states have reported cases of COVID-19 and the
states have implemented various containment efforts, including lockdowns on
non-essential businesses. The circumstances related to COVID-19 are
unprecedented, dynamic and evolving and currently unpredictable.  As the
economic impact of the COVID-19 pandemic continues to change, 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 to online, remote learning.  As part of this
transition, the Company has incurred additional expenses.  Related to this
transition, some students have been placed on leave of absence as they could not
complete their externships and some students chose not to participate in online
learning.

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Additionally, certain programs were extended due to restricted access to
externship sites and classroom labs.  In response to COVID-19, we have also
implemented initiatives to safeguard our students and our employees in this time
of crisis. Due to phased re-opening on a state-by-state basis, our schools have
been reopening since May 2020. As of September 30, 2020, all of our schools have
re-opened and we now expect the majority of the students who were placed on
leave or otherwise deferred their programs to finish their programs.

The following discussion highlights how we are responding to the changing
circumstances and the currently anticipated impacts of COVID-19 on our
business.  Due to the evolving landscape relating to COVID-19 and the
unpredictability of the circumstances, the information below should be read in
conjunction with our COVID-19 Pandemic risk factor. See Part II, Item 1A. "Risk
Factors - COVID-19 Pandemic" in this Quarterly Report on Form 10-Q for risks to
our business arising as a consequence of COVID-19. See also Part I, Item 1A.
"Risk Factors" in our Annual Report on Form 10-K for the year ended December 31,
2019 (the "2019 Form 10-K") for additional risk factors relating to our Company
and the industry. In addition, see the forward-looking and cautionary statements
discussion above. Forward-looking statements are subject to risks,
uncertainties, assumptions, and other factors that may cause actual results to
be materially different from those reflected in such forward-looking statements.
These factors include, among others, the risks and uncertainties set forth in
Item 1A. "Risk Factors" and elsewhere in the 2019 Form 10-K and this Quarterly
Report on Form 10-Q for the fiscal quarter ended September 30, 2020.

Transition to Distance Learning

In the first and second quarters, the Company quickly transitioned all of its
programs from in-person, hands-on learning to online, remote learning.  The
Company obtained approvals from the DOE, certain states and agencies to
transition to distance learning.  The Company worked with its book vendors to
obtain e-books for the students.  The Company has ensured that all students have
either received laptops or tablets or that they already owned a device.  The
Company has enhanced its education platform for online learning through a
software program.  As schools have reopened, we are adhering to social
distancing protocols which may differ from school-to-school depending on
physical circumstances as well as other factors and we are limiting the number
of students on campus at one time.  The schools continue to teach a portion of
each program through distance learning and labs are generally taught in-person.

Employees

Our employees have been affected by COVID-19 in many ways, including disruptions
due to unexpected school and day-care closings, family underemployment or
unemployment, and learning how to work remotely and, in some cases, with new
tools and technology to learn and to support that work. Our goal has been to
support our employees during the present uncertainty while remaining focused on
meeting the needs of our students and business continuity. Early in the crisis,
we provided employees with information about best practices to prevent the
spread of COVID-19 and other viruses and illnesses. We recommended that
non-student interfacing employees work from home and we reduced the density and
provided physical space for us to implement social distancing protocols for the
employees who were required to work in our offices. Later, we enabled
substantially all of our workforce to work remotely. In addition, we have
limited in-person meetings, non-employee visits to our locations, and
non-essential business travel.

To further protect the health and welfare of our employees we have also
encouraged employees who potentially have been exposed to COVID-19 to
self-quarantine for 14 days while we continue to pay them. To ease access to
medical assistance, we are waiving co-payments for COVID-19 testing and
telemedicine for those employees enrolled in our health insurance plans.  The
Company's vacation policy was enhanced in the second quarter of 2020 to include
up to two weeks of payments for unused vacation days for instructors.

Community

We understand that the communities in which our employees live, work, and serve
are also suffering distress as a result of COVID-19. Due to the growing needs of
our neighbors, healthcare providers and many of the organizations in place to
provide assistance are overburdened. In March 2020, several campuses in the
Tri-State (NY, NJ & CT) area donated medical supplies and personal protective
equipment to major medical facilities throughout the region.

Operations

We have robust pandemic and business continuity plans that include our business
units and technology environments. When COVID-19 advanced to a pandemic, we
activated our business continuity plan (the "Continuity Plan"). As an element of
the Continuity Plan, we activated our Health Communications Response Team
("HCRT"), a group of the corporate senior managers, who directed a series of
activities to address the health and safety of our workforce, to assist
students, to sustain business operations, to coordinate communication and to
address our management of other ongoing pandemic activities.

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In response to a growing infected population across the United States, as noted
above, we executed plans for social-distancing in our facilities and implemented
work-from-home contingencies. As the virus spread, we created remote-working
capabilities for our employees. We also completed a series of additional steps
to appropriately ensure compliance with our telecommuting policy. The policy is
designed to create a secure at-home work environment that protects our students'
information and transactions while also providing the necessary technology
capabilities to enable effective remote-working for our staff.

There has been a modest decline in productivity for certain departments as our
personnel have been adjusting to this significant change in work environment. We
currently believe our technology infrastructure is sufficient to maintain a
remote-working environment for the vast majority of our workforce for the
foreseeable future and that productivity should improve as our staff adjust to
this significant change in work environment. The level and ability of our
employees to continue working from home could change, however, as conditions
surrounding COVID-19 evolve and should infections increase, or if there are
interruptions in the internet infrastructure where our employees live or if our
internet service providers are otherwise adversely affected.

Return to In-Person Operations

Due to the phase-in of reopening which has been addressed on a state-by-state
basis, we reopened our schools and we continue to follow the guidelines released
by each state and city in which our schools are located.  The HCRT is continuing
to closely monitor the guidelines released by each state and city in which our
schools are located for any change.  As part of reopening our schools, we
purchased personal protective equipment, are limiting the number of students in
classrooms, have separated students by at least 6 feet, have closed/limited all
common areas, have increased the sanitation of our facilities, require everyone
at the schools to wear a cloth face mask and maintain a daily log of anyone at
the school and monitor body temperatures of those at the school through
non-contact thermometers.  In a similar way, we are also rotating employees'
schedules to limit/control the number of employees in spaces.

Student Population and Financial Results

As of September 30, 2020, the Company had 104 students on leave of absence due
to COVID-19.  The number of students on leave of absence due to COVID-19 has
continued to drop as it was almost 700 on June 30, 2020.  The majority of these
students were at the end of their programs and were on externship which they
were not able to complete.  The Company expects a majority of these students
will return to school or an externship by the end of the year.

The Company has extended the length and graduation dates of a few programs as
there is only a small percentage of these programs that can be taught through
distance learning.

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 remain 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.

Institutional Student Loans

COVID-19 is having far reaching, negative impact 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.

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Liquidity

As previously reported, over the course of 2019, we significantly increased our
overall liquidity position. As a result of these efforts, we currently believe
our liquidity position is stable and we expect to be able to fund our business
operations for the remainder of 2020 and we believe that we have sufficient
capital to withstand the potential downturn in our business. Regulatory agencies
have also provided regulatory capital relief to institutions as a result of the
crisis as discussed below. However, if circumstances surrounding COVID-19 change
in a significantly adverse way, it is possible our liquidity could be materially
and adversely affected, which could materially and adversely impact our business
operations and our overall financial condition.

Regulatory

On March 27, 2020, the CARES Act was signed into law, which includes a $2
trillion federal economic relief package providing financial assistance and
other relief to individuals and business impacted by the spread of COVID-19.
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 on-ground to
online delivery.  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") 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.

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 to be distributed in two equal installments.  The
Company received $13.7 million in the first installment which was intended for
emergency grants to students.  The Company has distributed $12.6 million to the
students and expects to distribute the remainder over the next few months.  The
$1.1 million remaining to be distributed is included in restricted cash on the
Company's Condensed Consolidated Balance Sheets.  As of September 30, 2020, the
Company had received $13.7 million from the second installment which is intended
for institutional costs and additional emergency grants to students.  As of
September 30, 2020, the Company has utilized $3.3 million of these funds for
permitted expenses which was netted against the original expenses included in
selling, general and administrative on the Condensed Consolidated Statement of
Operations.  The DOE also has published guidance regarding permitted and
prohibited use of these funds and requirements for reporting the use of these
funds.  If the funds are not spent or accounted for in accordance with
applicable requirements, we could be required to return funds or be subject to
other sanctions.

The CARES Act also contains separate educational provisions that relieve both
institutions and students from complying with the requirement to repay Title IV
funds following a student's withdrawal as a result of the COVID-19 emergency.
Ordinarily, when a student withdraws, the institution (and, in some cases, the
student) may be required to return unearned portions of the Title IV grant and
loan funds awarded for the period.  Institutions will be required to report to
the DOE the total amount of grant and loan funds the institution has not
returned due to the waiver.  For federal loan borrowers, the CARES Act also
directs the DOE to cancel the borrower's obligation to repay any Direct Loan
associated with the relevant period.  The law also expands the options to avoid
student withdrawals due to a cessation of attendance by placing students on an
approved leave of absence and waives certain requirements normally applicable to
a leave of absence.  The CARES Act also allows institutions to exclude from the
calculation of a student's satisfactory academic progress any attempted credits
not completed due to the COVID-19 emergency.

The Company is also permitted to delay payment of FICA payroll taxes until January 1, 2021. The Company will have to repay 50 percent of the deferred payments by December 31, 2021, and the remaining 50 percent by December 31, 2022. As of September 30, 2020, the Company had deferred payments of $3.0 million.

Other

Based on analysis of ASC 350 and ASC 360, during the three and nine months ended
September 30, 2020, we are currently not aware of any material impairments of
our goodwill, indefinite-lived intangible assets or finite-lived assets.  The
Company will continue to assess the relevant criteria on a quarterly basis based
on updated cash flow and market assumptions.  Unfavorable changes in cash flow
or market assumptions could result in impairment of these assets in future
periods.

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Critical Accounting Policies and Estimates

For a description of our critical accounting policies and estimates, refer to
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Critical Accounting Policies and 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, 2019 and Note 1 to the
Condensed Consolidated Financial Statements included in this Quarterly Report on
Form 10-Q for the quarter ended September 30, 2020.

In addition, due to outbreak of COVID-19, we have reassessed those of our
accounting policies whose application places the most significant demands on
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.

Results of Continuing Operations for the Three and Nine Months Ended September 30, 2020

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          Nine Months Ended
                                                         September 30,              September 30,
                                                       2020          2019          2020         2019
Revenue                                                  100.0 %      100.0 %        100.0 %     100.0 %
Costs and expenses:
Educational services and facilities                       43.5 %       45.7 %         42.9 %      46.6 %
Selling, general and administrative                       51.7 %       51.6 %         55.4 %      55.9 %
(Gain) loss on sale of assets                              0.0 %       -0.3 %          0.0 %      -0.1 %
Total costs and expenses                                  95.2 %       97.0 %         98.3 %     102.4 %
Operating income (loss)                                    4.8 %        3.0 %          1.7 %      -2.4 %
Interest expense, net                                     -0.4 %       -1.1 %         -0.5 %      -1.1 %
Income (loss) from operations before income taxes          4.4 %        1.9 %          1.2 %      -3.5 %
Provision for income taxes                                 0.1 %        0.0 %          0.1 %       0.1 %
Net income (loss)                                          4.3 %        1.9 

% 1.1 % -3.6 %

Three Months Ended September 30, 2020 Compared to Three Months Ended September 30, 2019

Consolidated Results of Operations

Revenue.  Revenue was up $6.2 million, or 8.5% to $78.8 million for the three
months ended September 30, 2020 from $72.6 million in the prior year comparable
period. The increase year over year is primarily due to an 8.1% increase in
average student population, driven by a 15.3% increase in student starts.
Revenue growth was less than student population growth due to the continued
impact of COVID-19 during the quarter.  Restricted access to externship sites
and classroom labs extended graduation dates for certain programs which deferred
$0.4 million of revenue to the fourth quarter along with a $0.5 million decrease
in non-tuition revenue

Student start growth of 15.3% benefitted from our ongoing investments in
marketing as well as continuous evaluation and improvement of the admissions
process.  Increased efficiency is evidenced by a decline in the overall cost to
obtain student starts while continuing growth.  Lincoln has now experienced
three years of consistent growth in student starts, with the only exception
being the first quarter of 2020 which was impacted by COVID-19.

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

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Educational services and facilities expense.  Our educational services and
facilities expense increased $1.0 million, or 3.1% to $34.2 million for the
three months ended September 30, 2020 from $33.2 million in the prior year
comparable period.  The increase in expense year over year was driven by
additional instructional expense and books and tools expense resulting from an
increased student population combined with the return to in person instruction
at all of our campuses either at the end of the second quarter or during the
third quarter.

Educational services and facilities expense, as a percentage of revenue, decreased to 43.5% from 45.7% for the three months ended September 30, 2020 and 2019, respectively.

Selling, general and administrative expense. Our selling, general and
administrative expense increased $3.2 million, or 8.5% to $40.7 million for the
three months ended September 30, 2020 from $37.5 million in the prior year
comparable period.  The increase was primarily driven by additional bad debt
expense and marketing investments, partially offset by cost savings in sales and
student services.

Bad debt expense increased mainly due to a higher reserve amount for doubtful
accounts related to higher accounts receivable and lower historical repayment
rates.  Factors which contributed to the increase in accounts receivable include
the increase in new start volume and challenges we faced in reaching students
during campus closures due to COVID-19 and following the campus re-opening due
to reduced student on-ground hours.  Furthermore, during the initial transition
to remote learning certain students experienced difficulty adapting to the new
learning environment, which led to an uptick of the failure rate.  As a result,
these students did not meet the Title IV grade standards thus delaying their
Title IV disbursements. However, our team is focused on driving improvement in
the fourth quarter.

Marketing investments increased year over year to continue to capitalize on cost
effective lead-generating opportunities in higher converting channels while also
investing to drive greater brand awareness.  Despite the increased investment in
marketing, our cost per start in the third quarter and for the full year
decreased compared to the prior year, demonstrating that we are achieving a
strong return on our investment as evidenced by a 15.3% increase in starts year
over year.  Also contributing to the increase in marketing spend was a shift in
advertising production costs of approximately $0.6 million from the second
quarter to the third quarter as a result of COVID-19.

Reductions in sales expense was the result of travel restrictions imposed by the COVID-19 pandemic, while lower student services expense was the result of suspended busing and transportation services for students.

Selling, general and administrative expense, as a percentage of revenue, increased slightly to 51.7% from 51.6% for the three months ended September 30, 2020 and 2019, respectively.

Net interest expense.  Net interest expense for the three months ended September
30, 2020 decreased by $0.5 million, or 63.1% to $0.3 million from $0.8 million
in the prior year comparable period.  The reduction in expense year over year is
due to more favorable terms from the refinance of our previous credit facility
which occurred in November 2019 as well as a lower loan balance outstanding in
the current year.

Income taxes.    Our provision for income taxes has remained essentially flat at
less than $0.1 million for the three months ended September 30, 2020 and 2019.
No federal or state income tax benefit was recognized for either period loss due
to the recognition of a full valuation allowance. Income tax expense resulted
from various minimum state taxes.

Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019

Consolidated Results of Operations

Revenue.  Revenue increased $11.9 million, or 6.0% to $211.3 million for the
nine months ended September 30, 2020 from $199.4 million in the prior year
comparable period. The increase year over year is primarily due to a 5.9%
increase in average student population, driven by a 9.8% increase in student
starts. Revenue growth was less than student population growth due to the
continued impact of COVID-19 during the quarter.  Restricted access to
externship sites and classroom labs extended graduation dates for certain
programs which deferred $0.4 million of revenue to the fourth quarter along with
a $1.2 million decrease in non-tuition revenue

Student start growth of 9.8% benefitted from our ongoing investments in
marketing as well as continuous evaluation and improvement of the admissions
process.  Increased efficiency is evidenced by a decline in the overall cost to
obtain student starts while continuing growth.  Lincoln has now experienced
three years of consistent growth in student starts, with the only exception
being the first quarter of 2020 which was impacted by COVID-19.

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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 decreased $2.2 million, or 2.4% to $90.7 million for the nine
months ended September 30, 2020 from $92.9 million in the prior year comparable
period.  Reduced costs were driven by costs savings in facilities expense due to
facility closures during the first and second quarter as a result of COVID-19
and successful renegotiations of lease terms at certain campuses reducing rent
expense during campus closures.  Partially offsetting the cost reductions were
additional instructional expense and books and tools expense resulting from an
increased student population combined with the return to in person instruction
at all of our campuses either at the end of the second quarter or during the
third quarter.

Educational services and facilities expense, as a percentage of revenue, decreased to 42.9% from 46.6% for the nine months ended September 30, 2020 and 2019, respectively.

Selling, general and administrative expense.  Our selling, general and
administrative expense increased $5.5 million, or 4.9% to $117.0 million for the
nine months ended September 30, 2020 from $111.5 million in the prior year
comparable period. The increase was primarily driven by additional bad debt
expense and marketing investments, partially offset by cost savings in sales and
student services.

Bad debt expense increased mainly due to a higher reserve amount for doubtful
accounts related to higher accounts receivable and lower historical repayment
rates.  Factors which contributed to the increase in accounts receivable include
the increase in new start volume and challenges we faced in reaching students
during campus closures due to COVID-19 and following the campus re-opening due
to reduced student on-ground hours.  Furthermore, during the initial transition
to remote learning certain students experienced difficulty adapting to the new
learning environment, which led to an uptick of the failure rate.  As a result,
these students did not meet the Title IV grade standards thus delaying their
Title IV disbursements. However, our team is focused on driving improvement in
the fourth quarter.

Marketing investments increased year over year to continue to capitalize on cost
effective lead generating opportunities in higher converting channels while also
investing to drive greater brand awareness.  Despite the increased investment in
marketing, our cost per start for the full year decreased compared to the prior
year, demonstrating that we are achieving a strong return on our investment as
evidenced by a 9.8% increase in starts year over year.

Reductions in sales expense were the result of travel restrictions imposed by
the COVID-19 pandemic, while lower student services expense was the result of
suspended busing and transportation services for students.

Selling, general and administrative expense, as a percentage of revenue, decreased to 55.4% from 55.9% for the nine months ended September 30, 2020 and 2019, respectively.

Net interest expense.  Net interest expense for the nine months ended September
30, 2020 decreased by $1.2 million, or 55.0%, to $0.9 million from $2.1 million
in the prior year comparable period.  The decrease year over year is due to
several factors including more favorable terms from the refinance of our
previous credit facility, a lower loan balance outstanding in the current year
and the write-off of some non-cash deferred finance fees in the prior year.

Income taxes.    Our provision for income taxes has remained essentially flat at
$0.2 million for the nine months ended September 30, 2020 and 2019,
respectively. No federal or state income tax benefit was recognized for either
period loss due to the recognition of a full valuation allowance. Income tax
expense resulted from various minimal state tax expenses.

Segment Results of Operations

We operate our business in three reportable segments: (a) the Transportation and
Skilled Trades segment; (b) the Healthcare and Other Professions ("HOPS")
segment; and (c) the Transitional 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 schools is a reporting unit and an
operating segment.  Our operating segments are described below.

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).

Transitional - The Transitional segment refers to campus operations which have been closed.

The Company continually evaluates each campus for profitability, earning
potential, and customer satisfaction.  This evaluation takes several factors
into consideration, including the campus' geographic location and program
offerings, as well as skillsets required of our students by their potential
employers.  The purpose of this evaluation is to ensure that our programs
provide our students with the best possible opportunity to succeed in the
marketplace with the goals of attracting more students to our programs and,
ultimately, to provide our shareholders with the maximum return on their
investment.  As of September 30, 2020, no campuses have been categorized in the
Transitional segment.

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

                                       31

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Index

The following table presents results for our two reportable segments (as no campuses have been categorized in the Transitional segment) for the three months ended September 30, 2020 and 2019:

Three Months Ended September 30,

                                                                             2020              2019          % Change

Revenue:

Transportation and Skilled Trades                                         $    56,828       $    52,652            7.9 %
HOPS                                                                           21,964            19,942           10.1 %
Total                                                                     $    78,792       $    72,594            8.5 %

Operating Income (Loss):
Transportation and Skilled Trades                                         $     9,138       $     6,752           35.3 %
Healthcare and Other Professions                                                1,654             1,403           17.9 %
Corporate                                                                      (6,952 )          (6,012 )        -15.6 %
Total                                                                     $     3,840       $     2,143          -79.2 %

Starts:
Transportation and Skilled Trades                                               3,982             3,398           17.2 %
Healthcare and Other Professions                                                1,528             1,381           10.6 %
Total                                                                           5,510             4,779           15.3 %

Average Population:
Transportation and Skilled Trades                                               8,349             7,635            9.4 %
Leave of Absense - COVID-19                                                      (333 )               -          100.0 %

Transportation and Skilled Trades Excluding Leave of Absense - COVID-19

     8,016             7,635            5.0 %

Healthcare and Other Professions                                                4,286             3,619           18.4 %
Leave of Absense - COVID-19                                                      (137 )               -          100.0 %

Healthcare and Other Professions Excluding Leave of Absense - COVID-19

     4,149             3,619           14.6 %

Total                                                                          12,635            11,254           12.3 %
Total Excluding Leave of Absense - COVID-19                                    12,165            11,254            8.1 %

End of Period Population:
Transportation and Skilled Trades                                               8,811             8,055            9.4 %
Leave of Absense - COVID-19                                                       (67 )               -          100.0 %

Transportation and Skilled Trades Excluding Leave of Absense - COVID-19

     8,744             8,055            8.6 %

Healthcare and Other Professions                                                4,462             3,960           12.7 %
Leave of Absense - COVID-19                                                       (37 )               -          100.0 %

Healthcare and Other Professions Excluding Leave of Absense - COVID-19

     4,425             3,960           11.7 %

Total                                                                          13,273            12,015           10.5 %
Total Excluding Leave of Absense - COVID-19                                    13,169            12,015            9.6 %



                                       32

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Index

Three Months Ended September 30, 2020 Compared to the Three Months Ended September 30, 2019

Transportation and Skilled Trades

Operating income increased $2.3 million to $9.1 million for the three months
ended September 30, 2020 from $6.8 million in the prior year comparable period.
The increase year over year was mainly driven by the following factors:

? Revenue increased $4.1 million, or 7.9%, to $56.8 million from $52.7 million in

the prior year. The increase is due primarily to a 5.0% increase in average

student population, driven by a 17.2% increase in student starts. The revenue

increase was despite the continued impact of COVID-19, which caused a $0.4

million decrease in non-tuition revenue.

? Educational services and facilities expense remained essentially flat at $23.9

million and $23.7 million for the three months ended September 30, 2020 and

   2019, respectively.

? Selling, general and administrative expense increased $1.4 million, or 6.4% to

$23.8 million for the three months ended September 30, 2020 from $22.4 million

in the prior year comparable period. The increase was due to several factors

including increased bad debt expense and marketing investments, partially

offset by savings realized in sales expense and student services, all of which

are discussed in the consolidated results of operations.

Healthcare and Other Professions

Operating income increased $0.3 million to $1.7 million for the three months
ended September 30, 2020 from $1.4 million in the prior year comparable period.
The increase year over year was mainly driven by the following factors:

? Revenue increased $2.1 million, or 10.1%, to $22.0 million from $19.9 million

in the prior year. The increase quarter over quarter is due primarily to a

14.6% increase in average student population, driven by a 10.6% increase in

student starts. The increases in revenue was despite the continued impact of

COVID-19 during the third quarter that deferred $0.4 million of revenue to the

fourth quarter as a result of extended graduation dates for certain programs

and a $0.1 million decrease in non-tuition revenue.

? Educational services and facilities expense increased $0.9 million, or 9.4%, to

$10.4 million for the three months ended September 30, 2020 from $9.5 million

in the prior year comparable period. The increase in expense was driven by

additional instructional expense and books and tools expense resulting from an

increased student population combined with the return to in person instruction

at all of our campuses either at the end of the second quarter or during the

   third quarter.

? Selling, general and administrative expenses increased $0.9 million, or 9.8%,

to $9.9 million for the three months ended September 30, 2020 from $9.0 million

in the prior year comparable period. The increase was due to increased bad

debt expense in combination with increased marketing expense, both of which are

discussed above in the consolidated results of operations.

Transitional

No campuses have been classified in the Transitional segment for the three months ending September 30, 2020 and 2019, respectively.

Corporate and Other
This category includes unallocated expenses incurred on behalf of the entire
Company.  Corporate and other expenses were $6.9 million, a $0.9 million
increase compared to $6.0 in the prior year.  Additional expenses were the
result of several factors including increases in incentive compensation accrual
due to financial performance, stipends provided to all employees due to the
COVID-19 pandemic and increase in non-cash stock expense

                                       33

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Index

The following table presents results for our two reportable segments for the nine months ended September 30, 2020 and 2019:

Nine Months Ended September 30,

                                                                              2020             2019         % Change

Revenue:

Transportation and Skilled Trades                                         $    148,799       $ 141,005            5.5 %
HOPS                                                                            62,504          58,422            7.0 %
Total                                                                     $    211,303       $ 199,427            6.0 %

Operating Income (Loss):
Transportation and Skilled Trades                                         $     18,848       $  11,051           70.6 %
Healthcare and Other Professions                                                 6,388           4,214           51.6 %
Corporate                                                                      (21,581 )       (20,079 )         -7.5 %
Total                                                                     $      3,655       $  (4,814 )        175.9 %

Starts:
Transportation and Skilled Trades                                                8,004           7,247           10.4 %
Healthcare and Other Professions                                                 3,651           3,368            8.4 %
Total                                                                           11,655          10,615            9.8 %

Average Population:
Transportation and Skilled Trades                                                7,651           7,169            6.7 %
Leave of Absense - COVID-19                                                       (260 )             -          100.0 %

Transportation and Skilled Trades Excluding Leave of Absense - COVID-19

      7,391           7,169            3.1 %

Healthcare and Other Professions                                                 4,176           3,581           16.6 %
Leave of Absense - COVID-19                                                       (188 )             -          100.0 %

Healthcare and Other Professions Excluding Leave of Absense - COVID-19

      3,988           3,581           11.4 %

Total                                                                           11,827          10,750           10.0 %
Total Excluding Leave of Absense - COVID-19                                     11,379          10,750            5.9 %

End of Period Population:
Transportation and Skilled Trades                                                8,811           8,055            9.4 %
Leave of Absense - COVID-19                                                        (67 )             -          100.0 %

Transportation and Skilled Trades Excluding Leave of Absense - COVID-19

      8,744           8,055            8.6 %

Healthcare and Other Professions                                                 4,462           3,960           12.7 %
Leave of Absense - COVID-19                                                        (37 )             -          100.0 %

Healthcare and Other Professions Excluding Leave of Absense - COVID-19

      4,425           3,960           11.7 %

Total                                                                           13,273          12,015           10.5 %
Total Excluding Leave of Absense - COVID-19                                     13,169          12,015            9.6 %



                                       34

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Index

Nine Months Ended September 30, 2020 Compared to the Nine Months Ended September 30, 2019

Transportation and Skilled Trades

Operating income increased $7.8 million, or 70.6% to $18.8 million for the nine
months ended September 30, 2020 from $11.0 million in the prior year comparable
period.  The increase year over year was primarily driven by the following
factors:

? Revenue increased $7.8 million, or 5.5%, to $148.8 million from $141.0 million

in the prior year. The increase is due primarily to a 3.1% increase in average

student population, driven by a 10.4% increase in student starts. The revenue

increase was despite the continued impact of COVID-19, which caused a $0.9

million decrease in non-tuition revenue.

? Educational services and facilities expense decreased $2.8 million, or 4.3% to

$62.0 million for the nine months ended September 30, 2020 from $64.8 million

in the prior year comparable period. Reduced costs were a primarily driven by

savings in facilities expense due to facility closures during the first and

second quarter as a result of COVID-19. In addition, during the temporary

campus closures management successfully negotiated more favorable lease terms

at certain campuses reducing rent expense during facility closures.

? Selling, general and administrative expense increased $2.6 million, or 4.0% to

$68.0 million for the nine months ended September 30, 2020 from $65.4 million

in the prior year comparable period. The increase year over year was primarily

due to bad debt expense and additional marketing investments, partially offset

   by cost savings realized in sales expense and student services expense
   discussed above in the consolidated results of operations.

Healthcare and Other Professions

Operating income increased $2.2 million, or 51.6% to $6.4 million for the nine
months ended September 30, 2020 from $4.2 million in the prior year comparable
period.  The increase was mainly driven by the following factors:

? Revenue increased $4.1 million, or 7.0%, to $62.5 million from $58.4 million in

the prior year. The increase year over year is due primarily to a 11.4%

increase in average student population, driven by a 8.4% increase in student

starts. The increases in revenue was despite the continued impact of COVID-19

during the third quarter that deferred $0.4 million of revenue to the fourth

quarter as a result of extended graduation dates for certain programs and a

$0.3 million decrease in non-tuition revenue.

? Educational services and facilities expense increased $0.5 million, or 2.0% to

$28.7 million for the nine months ending September 30, 2020 from $28.2 million

in the prior year comparable period. The increase in expense year over year

was driven by additional instructional expense and books and tools expense

resulting from an increased student population combined with the return to in

person instruction at all of our campuses either at the end of the second

quarter or during the third quarter. Partially offsetting these increases were

costs savings in facilities expense due to facility closures during the first

and second quarter as a result of COVID-19 and successful renegotiations of

lease terms at certain campuses reducing rent expense during campus closures.

? Selling, general and administrative expense increased $1.4 million, or 5.2% to

$27.4 million for the nine months ended September 30, 2020 from $26.0 million

in the prior year comparable period. The increase was primarily driven by bad

debt expense, which was discussed previously in the consolidated results of

   operations.

Transitional

No campuses have been classified in the Transitional segment for the nine months ending September 30, 2020 and 2019, respectively.

Corporate and Other
This category includes unallocated expenses incurred on behalf of the entire
Company.  Corporate and other expenses were $21.6 million, a $1.5 million
increase compared to $20.1 in the prior year.  Additional expenses were the
result of several factors including increases in incentive compensation accrual
due to financial performance, stipends provided to all employees due to the
COVID-19 pandemic and increase in non-cash stock expense

                                       35

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Index

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 nine months ended September 30, 2020 and 2019,
respectively:

                                                         Nine Months Ended
                                                           September 30,
                                                        2020          2019

Net cash provided by (used in) operating activities $ 10,222 $ (4,893 ) Net cash used in investing activities

                    (3,457 )      (3,061 )
Net cash used in financing activities                   (17,816 )     

(22,238 )

As of September 30, 2020, the Company had cash, cash equivalents and restricted
cash of $27.6 million, which includes cash received under the CARES Act of $11.5
million.  As of September 30, 2020, the Company had a net cash balance of $9.9
million calculated as cash, cash equivalents and restricted cash, less both the
short-term and long-term portion of the Company's Credit Facility. Excluding
cash deposits from the CARES Act of $11.5 million, the Company had a reconciled
net debt balance of $1.5 million.  As of September 30, 2020, the Company also
can borrow an additional $21.0 million under its Credit Facility.  The increase
in cash position can mainly be attributed to the net income generated in the
second and third quarter of 2020

During the third quarter, the Company paid a $1.1 million cash dividend to its
Series A preferred shareholders pursuant to the Securities Purchase Agreement
entered into on November 14, 2019 and the Company's Amended and Restated
Certificate of Incorporation.  This dividend covered the period from November
14, 2019 through September 30, 2020.  The Company has the option to pay the
preferred stock dividends in cash or through an increase in the stated value of
the preferred shares.  The company elected to pay the dividend in cash given its
strengthened liquidity position and the significantly higher stock price over
the conversion price at the time of the payment.

To fund our business plans, including any anticipated future losses, purchase
commitments, capital expenditures and principal and interest payments on
borrowings, we leveraged our owned real estate. We are also continuing to take
actions to improve cash flow by aligning our cost structure to our student
population, in addition to our current sources of capital that provide short
term liquidity.

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 78% of our cash receipts relating to revenues in 2019. 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 academic year and the
second disbursement is typically received at the beginning of the sixteenth week
from the start of the 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.  See "Risk Factors" in Item 1A of the Company's Annual Report on Form
10-K for the year ended December 31, 2019.

Operating Activities

Net cash provided by operating activities was $10.2 million for the nine months
ended September 30, 2020 compared to net cash used in operating activities of
$4.9 million in the prior year comparable period.  Included in the September 30,
2020 net cash balance is $11.5 million in federal funds remaining from subsidy
received under the CARES Act which is intended for reimbursement to students for
expenses related to disruptions in campus operations (e.g., food, housing, etc.)
and as permitted to use the funds 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.  Excluding the federal funds received, we would have
reported net cash used by operations of $1.2 million.  The decrease in net cash
used in operating activities for the nine months ended September 30, 2020 as
compared to the nine months ended September 30, 2019 is primarily due to net
income generated in the second and third quarter of 2020.

                                       36

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Index

Investing Activities

Net cash used in investing activities increased $0.4 million to $3.5 million for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019.

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 2019 and are expected to approximate
2% of revenues in 2020.  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 $17.8 million for the nine months
ended September 30, 2020 compared to $22.2 million in the prior year comparable
period.  The decrease of $4.4 million was primarily due to decreased net
payments on borrowings of $16.5 million for the nine months ended September 30,
2020 as compared to $22.1 million in the prior year comparable period.

Net payments on borrowings consisted of: (a) total borrowing to date under our
secured credit facility of $11.0 million; and (b) $27.5 million in total
repayments made by the Company.  See Part II, Item 1A. "Risk Factors - COVID-19
Pandemic" in this Quarterly Report on Form 10-Q for risks associated with
COVID-19.

Credit Facility with Sterling National Bank

On November 14, 2019, the Company entered into a new senior secured credit
agreement (the "Credit Agreement") with its lender, Sterling National Bank (the
"Lender"), pursuant to which the Company obtained a new credit facility in the
aggregate principal amount of up to $60 million (the "Credit Facility").

The Credit Facility is comprised of four facilities: (1) a $20 million senior
secured term loan maturing on December 1, 2024 (the "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 Draw Term
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"),
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 of Credit
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.

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 subsidiaries and mortgages
on parcels of real property owned by the Company in Colorado, Tennessee and
Texas, at which three of the Company's schools are located, as well as a former
school property owned by the Company located in Connecticut.

At the closing of the Credit Facility, the Lender advanced the Term Loan to the
Company, the net proceeds of which was $19.7 million after deduction of the
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.  Borrowings under the Line of Credit Loan are to be secured
by cash collateral.

Under the Credit Agreement, borrowing under the Delayed Draw Term Loan was available through May 31, 2021 but an amendment to the Credit Agreement entered into on November 10, 2020 extended the period through May 31. 2022.

                                       37

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Index

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") 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.
pursuant to a swap agreement between the Company and the Lender.  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 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 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 prime rate plus .50% with a floor of 4.0%.  Line of Credit Loans will
bear interest at a floating interest rate based on the Lender's prime rate of
interest.  Revolving Loans are subject to a LIBOR interest rate floor of .00%.

Letters of credit will be 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 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 and the Line of Credit 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 September 30, 2020 the Company was
in compliance with all debt covenants. As of September 30, 2020 and December 31,
2019, the Company had $18.3 million and $34.8 million, respectively, outstanding
under the Credit Facility; offset by $0.7 million and $0.8 million of deferred
finance fees, respectively.  In January 2020, the Company repaid the $15.0
million outstanding on the Line of Credit Loan.  As of September 30, 2020 and
December 31, 2019, letters of credit in the aggregate outstanding principal
amount of $4.0 million and $4.0 million, respectively, were outstanding under
the Credit Facility.  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.

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

                           September 30,       December 31,
                               2020                2019
Credit agreement          $        18,333     $       34,833
Deferred Financing Fees              (666 )             (805 )
                                   17,667             34,028
Less current maturities            (2,000 )           (2,000 )
                          $        15,667     $       32,028



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Index

Contractual Obligations

Current portion of Long-Term Debt, Long-Term Debt and Lease Commitments.    As
of September 30, 2020, 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).

The following table contains supplemental information regarding our total contractual obligations as of September 30, 2020 (in thousands):

                                                              Payments Due by Period
                                                   Less than 1                                     More than 5
                                       Total          year          1-3 years       3-5 years         years
Credit facility*                     $  18,333     $     2,000     $     4,000     $    12,333     $         -
Operating leases                        90,230          15,276          29,632          23,850          21,472
Interest on term loan**                  3,273             946           1,567             760               -

Total contractual cash obligations $ 111,836 $ 18,222 $ 35,199 $ 36,943 $ 21,472

* Excludes deferred finance fees of $0.7 million.
** Includes fixed rate interest payment resulting from the cash flow hedge.

As of September 30, 2020, we had outstanding loan principal commitments to our
active students of $20.0 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.

Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements as of September 30, 2020, except for
surety bonds.  As of September 30, 2020, we posted surety bonds in the total
amount of approximately $12.4 million.  We are required to post surety bonds on
behalf of our campuses and education representatives with multiple states to
maintain authorization to conduct our business. These off-balance sheet
arrangements do not adversely impact our liquidity or capital resources.

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.

This year, due to COVID-19 and not a seasonality issue, it has not been a
typical year and expenses have varied more significantly. During the first half
of the year, we make significant investments in marketing, staff, programs and
facilities to meet our targets for the second half of the year and, as a result,
such expenses do not fluctuate significantly on a quarterly basis. To the extent
new student enrollments, and related revenue, in the second half of the year
fall short of our estimates, our operating results could be negatively impacted.
We expect quarterly fluctuations in operating results to continue as a result of
seasonal enrollment patterns. Such patterns may change as a result of new school
openings, new program introductions, and increased enrollments of adult students
and/or acquisitions.

Financial Responsibility Update

All institutions participating in the Title IV Programs must satisfy specific
standards of financial responsibility. The DOE evaluates institutions for
compliance with these standards each year based on the institution's annual
audited financial statements, as well as following a change in ownership
resulting in a change of control of the institution.  The most significant
financial responsibility measurement is the institution's composite score, which
is calculated by the DOE.  See the Company's disclosures in its Annual Report on
Form 10-K for the fiscal year ended December 31, 2019 under the caption
"Regulatory Environment - Financial Responsibility Standards."

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We originally were required to submit to the DOE our audited financial
statements for the 2019 fiscal year by June 30, 2020, but the DOE extended the
deadline for institutions to submit audited financial statements by six months
in published guidance prompted by the impact of the COVID-19 pandemic.  We
originally anticipated that our composite score for the 2019 fiscal year would
be 1.6, subject to determination by the DOE based on its review of our
consolidated audited financial statements for the 2019 fiscal year.

We submitted to the DOE our audited financial statements for the 2019 fiscal
year on July 2, 2020, which was after the normal submission deadline of June 30,
2020 but nearly six months in advance of the amended deadline under DOE guidance
published on May 15, 2020.  Subsequently, the DOE issued a notice on October 1,
2020, indicating that the submission was incomplete because it did not include a
required supplemental schedule, did not comply with generally accepted
accounting principles for recognizing lease assets and lease liabilities, and
did not adhere to the proper treatment of long-term debt in its composite score
calculations under the regulations.  Each of these requirements are related to
technical revisions to the composite score calculation that took effect on July
1, 2020.  We did not believe these revisions were expected to apply to the 2019
financial statements because the revisions did not take effect until July 1,
2020 and the original deadline for submission of the 2019 financials was June
30, 2020.  However, the financials were submitted two days after June 30, 2020,
and the DOE has taken the position that its extension of the submission deadline
did not also result in an extension of the then-existing procedures for
calculating the composite score.  The DOE requested that we review and correct
our submission within 45 calendar days.

We prepared an updated submission and composite score calculation in response to
the Department's notice and resubmitted our financial statements for the 2019
fiscal year on November 13, 2020.  We recalculated our composite score at 1.3,
which would result in our institutions remaining in the zone requirements under
the financial responsibility regulations.  See the Company's disclosures in its
Annual Report on Form 10-K for the fiscal year ended December 31, 2019 under the
caption "Regulatory Environment - Financial Responsibility."  We are currently
operating under the "Zone Alternative" and expect to elect to continue
participating under the Zone Alternative if the Department determines that we
are in the zone.

Our final composite score is subject to determination by the Department.  Our
composite score also is subject to reduction under the regulations if a
triggering event occurs and results in circumstances that require recalculation
of the composite score under the regulations.  If an institution's composite
score is below 1.0, the institution is considered by the DOE to lack financial
responsibility. If the DOE determines that an institution does not satisfy the
DOE's financial responsibility standards, depending on its composite score and
other factors, that institution may establish its eligibility to participate in
the Title IV Programs on an alternative basis by, among other things, submitting
a letter of credit or other form of financial protection in an amount to be
determined by the DOE, comply with the zone requirements and potentially accept
other conditions or restrictions.  See the Company's disclosures in its Annual
Report on Form 10-K for the fiscal year ended December 31, 2019 under the
caption "Regulatory Environment - Financial Responsibility."

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. On September 3, 2020, we received final
audit determination letters asserting liabilities for closed school loan
discharges in connection with the closure of certain campuses.  We subsequently
provided additional documentation to the Department that support reductions in
the liability amount and await the final determination by the Department. We
cannot predict the timing or amount of any additional loan discharges that the
DOE may approve or the liabilities that the DOE may seek from us. We have the
right to appeal any asserted liabilities under an administrative appeal process
within the DOE.  We also cannot predict the timing or potential outcome of any
administrative appeals of any such liabilities.

Regulations Update - Negotiated Rulemaking

On April 2, 2020, the DOE published proposed regulations related primarily to
distance education and to topics addressed during negotiated rulemaking
committee meetings that took place in early 2019.  See the Company's disclosures
in its Annual Report on Form 10-K for the fiscal year ended December 31, 2019
under the caption "Regulatory Environment - Negotiated Rulemaking."  The
proposed regulations address topics including, among other things,
correspondence courses, direct assessment programs, foreign institutions,
written arrangements with ineligible institutions or organizations to provide a
portion of an educational program, requirements for prompt action by the DOE on
certain Title IV eligibility applications, requirements related to the length of
educational programs and entry level requirements for the occupation, the clock
to credit hour conversion formula, the requirements for returning unearned Title
IV Program funds received for students who withdraw before completing their
educational programs, and the requirements for measuring a student's
satisfactory academic progress.  On September 2, 2020, the DOE published the
final regulations with some amendments and a general effective date of July 1,
2021.  We are in the process of analyzing the proposed regulations and their
potential impact on us and our institutions.

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