National American University Holdings, Inc. - FORM 10-K/A

Attached files

file	filename
EX-32.2 - CERTIFICATE PURSUANT TO SECTION 18 U.S.C. PURSUANT TO SECTION 906 OF THE SARBANE - National American University Holdings, Inc.	nauh_ex322.htm
EX-32.1 - CERTIFICATE PURSUANT TO SECTION 18 U.S.C. PURSUANT TO SECTION 906 OF THE SARBANE - National American University Holdings, Inc.	nauh_ex321.htm
EX-31.2 - CERTIFICATION PURSUANT TO RULE 13A-14(A)/15D-14(A) CERTIFICATIONS SECTION 302 OF - National American University Holdings, Inc.	nauh_ex312.htm
EX-31.1 - CERTIFICATION PURSUANT TO RULE 13A-14(A)/15D-14(A) CERTIFICATIONS SECTION 302 OF - National American University Holdings, Inc.	nauh_ex311.htm
EX-23.1 - CONSENTS OF EXPERTS AND COUNSEL - National American University Holdings, Inc.	nauh_ex231.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-K/A

Amendment No. 2

☒ ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended May 31, 2016

☐ TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______to__________

Commission File No. 001-34751

National American University Holdings, Inc.

(Exact name of registrant as specified in its charter)

Delaware	83-0479936
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

5301 S. Highway 16	57701
Rapid City, SD	(Zip Code)
(Address of principal executive offices)

(605) 721-5200

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Common Stock, $.0001 par Value		The NASDAQ Stock Market
Title of each class		Name of each exchange on which registered

Securities registered pursuant to section 12(g) of the Act:

None

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☑

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑ No ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐		Accelerated filer ☐
Non-accelerated filer ☐ (Do not check if a smaller reporting company)		Smaller reporting company ☑

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of February 28, 2017, there were 24,224,924 shares of Common Stock, $0.0001 par value per share outstanding.

The aggregate market value of the registrant’s common stock held by non-affiliates computed by reference to the price at which the common equity was last sold as of November 30, 2016, was approximately $19.7 million.

DOCUMENTS INCORPORATED BY REFERENCE

Certain portions of the Registrant’s Definitive Proxy Statement for its 2016 Annual Meeting of Stockholders are incorporated by reference into Part III of this Report.

EXPLANATORY NOTE

The registrant filed with the Securities and Exchange Commission an Annual Report on Form 10-K for the year ended May 31, 2016 on August 5, 2016, as amended by that certain Amendment No. 1 filed on September 13, 2016 (the “Form 10-K”). The registrant is filing this Amendment No. 2 solely (1) to correct an error of missing signature on the Report of Independent Registered Public Accounting Firm under Item 8 of the Form 10-K and (2) to correct an error of missing signature on Exhibit 23.1 Consent of Independent Registered Public Accounting Firm to the Form 10-K.

As required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended, new certifications by our principal executive officer and principal financial officer are being filed as exhibits to this Amendment No. 2. Except as expressly set forth in this Amendment No. 2, the Form 10-K has not been amended, updated or otherwise modified.

Item 8. Financial Statements and Supplementary Data.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

National American University Holdings, Inc.


		Page
Consolidated Annual Financial Statements:
Report of Independent Registered Public Accounting Firm		86
Consolidated Balance Sheets as of May 31, 2016 and 2015		87
Consolidated Statements of Income and Comprehensive Income for the fiscal years ended May 31, 2016, 2015 and 2014		88
Consolidated Statements of Stockholders’ Equity for the fiscal years ended May 31, 2016, 2015 and 2014		89
Consolidated Statements of Cash Flows for the fiscal years ended May 31, 2016, 2015 and 2014		90
Notes to Annual Consolidated Financial Statements		92
Financial Statement Schedules All schedules are omitted because they are not applicable or not required.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

National American University Holdings, Inc. and subsidiaries

Rapid City, South Dakota

We have audited the accompanying consolidated balance sheets of National American University Holdings, Inc. and subsidiaries (the "Company") as of May 31, 2016 and 2015, and the related consolidated statements of operations and comprehensive income, stockholders' equity, and cash flows for each of the three years in the period ended May 31, 2016. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the consolidated financial position of National American University Holdings, Inc. and subsidiaries as of May 31, 2016 and 2015, and the results of its operations and its cash flows for each of the three years in the period ended May 31, 2016, in conformity with accounting principles generally accepted in the United States of America.

/s/ Deloitte & Touche

Minneapolis, MN

August 5, 2016

NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
AS OF MAY 31, 2016 AND 2015
(In thousands, except share and per share amounts)
	May 31	May 31,
	2016	2015
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$21,713	$23,300
Available for sale investments	4,117	4,102
Student receivables — net of allowance of $723 and $1,583 at May 31, 2016
and May 31, 2015, respectively	3,011	14,358
Other receivables	375	1,195
Income taxes receivable	2,780	0
Deferred income taxes	2,621	2,335
Prepaid and other current assets	2,078	2,151
Total current assets	36,695	47,441
Total property and equipment - net	31,273	36,390
OTHER ASSETS:
Condominium inventory	621	385
Land held for future development	312	312
Course development — net of accumulated amortization of $3,051 and $2,760 at
May 31, 2016 and May 31, 2015, respectively	817	804
Other	998	1,212
Total other assets	2,748	2,713
TOTAL	$70,716	$86,544

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of capital lease payable	$285	$244
Accounts payable	2,913	3,246
Dividends payable	1,090	1,139
Income taxes payable	110	1
Deferred income	1,649	1,459
Accrued and other liabilities	5,861	6,746
Total current liabilities	11,908	12,835
DEFERRED INCOME TAXES	2,190	3,283
OTHER LONG-TERM LIABILITIES	4,686	6,047
CAPITAL LEASE PAYABLE, NET OF CURRENT PORTION	11,567	11,853
COMMITMENTS AND CONTINGENCIES (Note 15)
STOCKHOLDERS' EQUITY:
Common stock, $0.0001 par value (50,000,000 authorized; 28,472,129 issued and
24,140,972 outstanding as of May 31, 2016; 28,262,241 issued and 25,191,414
outstanding as of May 31, 2015)	3	3
Additional paid-in capital	58,893	58,336
Retained earnings	4,012	13,751
Treasury stock, at cost (4,331,157 shares at May 31, 2016 and 3,070,827
shares at May 31, 2015)	(22,477)	(19,455)
Accumulated other comprehensive loss, net of taxes - unrealized loss on available
for sale securities	(2)	(1)
Total National American University Holdings, Inc. stockholders' equity	40,429	52,634
Non-controlling interest	(64)	(108)
Total stockholders' equity	40,365	52,526
TOTAL	$70,716	$86,544

The accompanying notes are an integral part of these consolidated financial statements.

NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE YEARS ENDED MAY 31, 2016, 2015 AND 2014
(In thousands, except share and per share amounts)



	2016	2015	2014
REVENUE:
Academic revenue	$88,697	$108,360	$117,099
Auxiliary revenue	6,306	7,920	9,076
Rental income — apartments	1,110	1,164	1,138
Condominium sales	0	447	440

Total revenue	96,113	117,891	127,753

OPERATING EXPENSES:
Cost of educational services	26,093	28,551	29,478
Selling, general and administrative	72,211	73,301	85,286
Auxiliary expense	4,667	5,629	6,236
Cost of condominium sales	0	368	386
Loss (gain) on disposition of property	735	(1,710)	114

Total operating expenses	103,706	106,139	121,500

OPERATING (LOSS) INCOME	(7,593)	11,752	6,253

OTHER INCOME (EXPENSE):
Interest income	87	148	142
Interest expense	(870)	(891)	(770)
Other income — net	178	178	149

Total other expense	(605)	(565)	(479)

(LOSS) INCOME BEFORE INCOME TAXES	(8,198)	11,187	5,774

INCOME TAX BENEFIT (EXPENSE)	2,894	(4,433)	(2,306)

NET (LOSS) INCOME	(5,304)	6,754	3,468

NET (INCOME) LOSS ATTRIBUTABLE TO
NON-CONTROLLING INTEREST	(44)	(38)	17

NET (LOSS) INCOME ATTRIBUTABLE TO NATIONAL
AMERICAN UNIVERSITY HOLDINGS, INC. AND
SUBSIDIARIES	(5,348)	6,716	3,485

OTHER COMPREHENSIVE (LOSS) INCOME, NET OF TAX
Unrealized (losses) gains on investments, net of tax (expense)
benefit of $1, $(2), and $1 for 2016, 2015 and 2014, respectively	(1)	2	(10)


COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO
NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC.	$(5,349)	$6,718	$3,475


Basic net (loss) earnings per share attributable to National	$(0.22)	$0.27	$0.14
American University Holdings, Inc.
Diluted net (loss) earnings per share attributable to National	$(0.22)	$0.27	$0.14
American University Holdings, Inc.
Basic weighted average shares outstanding	24,651,521	25,160,729	25,093,096
Diluted weighted average shares outstanding	24,651,521	25,165,732	25,094,361

The accompanying notes are an integral part of these consolidated financial statements.

NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED MAY 31, 2016, 2015, AND 2014
(In thousands, except share and per share amounts)

	Equity attributable to National American University Holdings, Inc. and Subsidiaries
					Accumulated
		Additional			other		Total
	Common	paid-in	Retained	Treasury	comprehensive	Non-controlling	stockholders'
	stock	capital	earnings	stock	income (loss)	interest	equity

Balance - May 31, 2013	$3	$57,656	$12,610	$(19,359)	$7	$(129)	$50,788

Purchase of 17,190 shares common
stock for the treasury	0	0	0	(64)	0	0	(64)
Share based compensation expense	0	1,535	0	0	0	0	1,535
Dividends declared ($0.045 per share)	0	0	(4,522)	0	0	0	(4,522)
Net income (loss)	0	0	3,485	0	0	(17)	3,468
Other comprehensive loss, net of tax	0	0	0	0	(10)	0	(10)
Balance - May 31, 2014	$3	$59,191	$11,573	$(19,423)	$(3)	$(146)	$51,195

Purchase of 10,454 shares common
stock for the treasury	0	0	0	(32)	0	0	(32)
Share based compensation expense	0	(855)	0	0	0	0	(855)
Dividends declared ($0.045 per share)	0	0	(4,538)	0	0	0	(4,538)
Net income	0	0	6,716	0	0	38	6,754
Other comprehensive income, net of tax	0	0	0	0	2	0	2
Balance - May 31, 2015	$3	$58,336	$13,751	$(19,455)	$(1)	$(108)	$52,526

Purchase of 1,260,330 shares
common stock for the treasury	0	0	0	(3,022)	0	0	(3,022)
Share based compensation expense	0	557	0	0	0	0	557
Dividends declared ($0.045 per share)	0	0	(4,391)	0	0	0	(4,391)
Net (loss) income	0	0	(5,348)	0	0	44	(5,304)
Other comprehensive loss, net of tax	0	0	0	0	(1)	0	(1)
Balance - May 31, 2016	$3	$58,893	$4,012	$(22,477)	$(2)	$(64)	$40,365

The accompanying notes are an integral part of these consolidated financial statements.

NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MAY 31, 2016, 2015, AND 2014
(In thousands)



	2016	2015	2014

CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income	$(5,304)	$6,754	$3,468
Adjustments to reconcile net (loss) income to net cash flows provided by (used in)
operating activities:
Depreciation and amortization	5,596	6,127	6,356
Loss (gain) on disposition of property and equipment	735	(1,710)	114
Provision for uncollectable tuition	5,403	5,602	3,879
Noncash compensation expense	557	(855)	1,535
Deferred income taxes	(1,379)	(1,534)	(1,881)
Changes in assets and liabilities:
Student and other receivables	6,764	(4,332)	(16,383)
Prepaid and other current assets	73	(53)	(1,257)
Condominium inventory	(236)	367	382
Other assets	202	(19)	66
Income taxes receivable/payable	(2,671)	(1,157)	1,280
Accounts payable	(372)	230	(1,839)
Deferred income	190	149	146
Accrued and other liabilities	(891)	(337)	92
Other long-term liabilities	(1,361)	(384)	(48)

Net cash flows provided by (used in) operating activities	7,306	8,848	(4,090)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of available for sale investments	(3,897)	(50,141)	(36,980)
Proceeds from sale of available for sale investments	3,881	61,478	42,277
Purchases of property and equipment	(959)	(1,311)	(4,532)
Proceeds from sale of property and equipment	75	3,628	503
Course development	(304)	(143)	(247)
Payment of deposit on property and equipment	0	0	(200)
Payments received on contract for deed	6	160	296
Payments received on note receivable	0	1,390	641
Other	11	8	(31)

Net cash flows (used in) provided by investing activities	(1,187)	15,069	1,727

CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of capital lease payable	(244)	(206)	(157)
Purchase of treasury stock	(3,022)	(32)	(64)
Dividends paid	(4,440)	(4,533)	(4,392)

Net cash flows used in financing activities	(7,706)	(4,771)	(4,613)


			(Continued)
The accompanying notes are an integral part of these consolidated financial statements.

NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MAY 31, 2016, 2015, AND 2014
(In thousands)



	2016	2015	2014

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	$(1,587)	$19,146	$(6,976)

CASH AND CASH EQUIVALENTS -- Beginning of year	23,300	4,154	11,130

CASH AND CASH EQUIVALENTS -- End of year	$21,713	$23,300	$4,154

SUPPLEMENTAL DISCLOSURE OF CASH FLOW AND
NON-CASH INFORMATION:
Cash paid for income taxes, net of refunds	$1,156	$7,124	$2,907
Cash paid for interest	$871	$885	$787
Tenant improvements on capital lease financed through note receivable	$0	$0	$2,000
Property and equipment purchases included in accounts payable	$63	$24	$419
Dividends declared and unpaid at May 31, 2016, 2015, and 2014	$1,090	$1,139	$1,134

			(Concluded)
The accompanying notes are an integral part of these consolidated financial statements.

NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED MAY 31, 2016, 2015 AND 2014

(In thousands, except share and per share amounts)

STATEMENT PRESENTATION AND BASIS OF CONSOLIDATION

The accompanying financial statements are presented on a consolidated basis. The accompanying financial statements include the accounts of National American University Holdings, Inc. (the “Company”), its subsidiary, Dlorah, Inc. (“Dlorah”), and its divisions, National American University (“NAU” or the “University”), Fairway Hills, the Fairway Hills Park and Recreational Association, the Park West Owners’ Association, the Vista Park Owners’ Association, and the Company’s interest in Fairway Hills Section III Partnership (the “Partnership”). The Partnership is 50% owned by Dlorah and 50% owned by individual family members, most of whom are either direct or indirect stockholders of the Company.

The Partnership is deemed to be a variable interest entity (“VIE”) under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810-10, Consolidation. The Company determines whether it is the primary beneficiary of an entity subject to consolidation based on a qualitative assessment of the purpose and design of the VIE, the risks that the VIE was designed to create and pass along to other entities, the activities of the VIE that most significantly impact the VIE’s economic performance and which entity could direct those activities. The Company assesses it’s VIE determination with respect to an entity on an ongoing basis and has not identified any additional VIEs in which it holds a significant interest.

The Company has determined that the Partnership qualifies as a VIE and that the Company is the primary beneficiary of the Partnership. Accordingly, the Company consolidated assets, liabilities, and net income of the Partnership within its consolidated balance sheets and statements of operations and comprehensive income and appropriately presented the balances as non-controlling interest within the consolidated balance sheets. As of May 31, 2016 and 2015, the consolidated balance sheets include Partnership assets of $611 and $685, respectively, and Partnership liabilities of $91 and $94, respectively. The consolidated statements of operations and comprehensive income include Partnership net income (loss) of $88, $75, and $(34), for the years ended May 31, 2016, 2015, and 2014, respectively.

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Throughout the notes to consolidated financial statements, amounts in tables are in thousands of dollars, except for per share data as otherwise designated. The Company’s fiscal year end is May 31. These financial statements include consideration of subsequent events through issuance. All intercompany transactions and balances have been eliminated in consolidation.

Unless the context otherwise requires, the terms “we”, “us”, “our” and the “Company” used throughout this document refer to National American University Holdings, Inc. and its wholly owned subsidiary, Dlorah, Inc., which owns and operates National American University, sometimes referred to as “NAU” or the “University”.

Estimates — The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts and disclosures reported in the financial statements. On an ongoing basis, the Company evaluates the estimates and assumptions, including those related to bad debts, income taxes and certain accruals. Actual results could differ from those estimates.

NATURE OF OPERATIONS

National American University Holdings, Inc., formerly known as Camden Learning Corporation, was incorporated in the State of Delaware on April 10, 2007. On November 23, 2009, Dlorah, Inc., a South Dakota corporation (“Dlorah”), became a wholly-owned subsidiary of the Company pursuant to an Agreement and Plan of Reorganization between the Company and Dlorah.

The Company’s common stock is listed as NAUH on the NASDAQ Global Market. The Company, through Dlorah, owns and operates National American University. NAU is a regionally accredited, proprietary, multi-campus institution of higher learning, offering associate, bachelors, masters and doctoral degree programs in allied health, legal studies, education, business, accounting and information technology. Courses are offered through educational sites and online. During the fiscal year ended May 31, 2016, operations include educational sites located in Colorado, Indiana, Kansas, Minnesota, Missouri, Nebraska, New Mexico, Oklahoma, Oregon, South Dakota, and Texas; distance learning service center in Texas; and distance learning operations and central administration offices in Rapid City, South Dakota. A substantial portion of NAU’s academic income is dependent upon federal student financial aid programs, employer tuition assistance, and contracts to provide online course development, hosting and technical assistance to other educational institutions. To maintain eligibility for financial aid programs, NAU must comply with U.S. Department of Education requirements, including the maintenance of certain financial ratios.

The Company, through Dlorah’s Fairway Hills real estate division, also manages apartment units and develops and sells multi-family residential real estate in Rapid City, South Dakota.

Approximately 92% of the Company’s total revenues for each of the years ended May 31, 2016, 2015, and 2014, respectively, were derived from NAU’s academic revenue.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents — The Company considers all highly liquid debt instruments with original maturities of three months or less to be cash equivalents. Cash is held in bank accounts that periodically exceed insured limits; however, no losses have occurred, and the Company feels the risk of loss is not significant.

Investments — The Company’s investments consist of certificates of deposit. These securities are classified as “available-for-sale.” Available-for-sale securities represent securities carried at fair value in the consolidated balance sheets. Certain of the Company’s certificates of deposit have maturity dates greater than one year. However, these certificates of deposit can be accessed at any time and are convertible to cash on demand. As such, the Company has classified these amounts as current assets in the consolidated balance sheets. Unrealized gains and losses deemed to be temporary are reported net of taxes and included in other comprehensive income within stockholders’ equity. Realized gains and losses and declines in value deemed to be other-than-temporary on available-for-sale securities are included in other income – net in the consolidated statements of operations. Fair value of the securities is based upon quoted market prices in active markets or estimated fair value when quoted market prices are not available. The cost basis for realized gains and losses on available-for-sale securities is determined on a specific identification basis. During the year ended May 31, 2015, all U.S. Treasury debt securities were liquidated. Proceeds from the sale or call of investments totaled $3,881, $61,478 and $42,277 for the years ended May 31, 2016, 2015 and 2014, respectively.

The Company’s investments were comprised of the following at May 31:

	2016					2015
	Amortized Cost	Gross Unrealized Holding Gains	Gross Unrealized Holding Losses		Fair Value	Amortized Cost	Gross Unrealized Holding Gains	Gross Unrealized Holding Losses	Fair Value
Certificate of Deposits	$4,119	$-	$(2	)	$4,117	$4,102	$-	$-	$4,102

As of May 31, 2016, the Company’s investments all mature in one to three years.

Declines in the fair value of individual securities classified as available-for-sale below their amortized cost that are determined to be other than temporary result in write-downs of the individual securities to their fair value, with the resulting write-downs included in current earnings as realized losses. Unrealized losses that may occur are generally due to changes in interest rates and, as such, are considered by the Company to be temporary. Management evaluates securities for other-than-temporary impairment on at least a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investments in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. The Company had no impairments during the year ended May 31, 2016.

Student Receivables — Student receivables are recorded at estimated net realizable value and are revised periodically based on estimated future collections. Interest and service charges are applied to all past due student receivables; however, collections are first applied to principal balances until such time that the entire principal balance has been received. Student accounts are charged off only when reasonable collection means are exhausted. Bad debt expense is included in selling, general and administrative expenses on the consolidated statements of operations.

Other Receivables — Other Receivables consist primarily of the current portion of institutional receivables, which are amounts due from students and are stated at net realizable value. Long-term portion of these institutional receivables are included in other assets.

Property and Equipment — Property and equipment are stated at cost. Renewals and improvements exceeding five hundred dollars are capitalized, while repairs and maintenance are expensed when incurred. Upon the retirement, sale or disposition of assets, costs and related accumulated depreciation are eliminated from the accounts and any gain or loss is reflected in loss (gain) in disposition of property. For financial statement purposes, depreciation includes the depreciation of the capital lease asset in the amount of $530 for each of the fiscal years 2016, 2015 and 2014. Total depreciation and amortization expense in operating expenses was $5,596, $6,127, and $6,356 for the fiscal years 2016, 2015 and 2014, respectively. The amortization portion of these amounts relates to capitalized course development costs and was $291, $339, and $354 for the fiscal years 2016, 2015 and 2014, respectively. Depreciation is computed using the straight-line method over the following estimated useful lives:

		Years
Buildings and building improvements		19–40
Land improvements		10–20
Furniture, vehicles, and equipment		5–15

For tax purposes, depreciation is computed using the straight-line and accelerated methods.

Property and equipment — net consists of the following as of May 31 (in thousands):

	2016	2015
Land	$119	$119
Land improvements	23	23
Buildings and building improvements	39,759	40,718
Furniture, vehicles, and equipment	27,904	28,171
Total gross property and equipment	67,805	69,031
Less accumulated depreciation	(36,532)	(32,641)
Total net property and equipment	$31,273	$36,390

Condominium Inventory — Condominium inventory is stated at cost (including capitalized interest). Condominium construction costs are accumulated on a specific identification basis. Under the specific identification basis, cost of revenues includes all applicable land acquisition, land development and specific construction costs (including direct and indirect costs) of each condominium paid to third parties. Land acquisition, land development and condominium construction costs do not include employee related benefit costs. The specific construction and allocated land costs of each condominium, including models, are included in direct construction. Allocated land acquisition and development costs are estimated based on the total costs expected in a project. Direct construction also includes amounts paid through the closing date of the condominium for construction materials and contractor costs. Condominium inventory is recorded as a long term asset due to the normal operating cycle being greater than one year.

Capitalized Course Development Costs — The University internally develops curriculum and electronic instructional materials for certain courses. The curriculum is primarily developed by employees and contractors. The curriculum is integral to the learning system. Customers do not acquire the curriculum or future rights to it.

The Company capitalizes course development costs. Costs that qualify for capitalization are external direct costs, payroll, and payroll-related costs. Costs related to general and administrative functions are not capitalizable and are expensed as incurred. Capitalization ends at such time that the course and/or material is available for general use by faculty and students. After becoming available for general use, the costs are amortized on a course-by-course basis over a period of three to five years. After the amortization period commences, the cost of maintenance and support is expensed as incurred, because it does not provide future benefit. If it is determined that the curriculum will not be used, the capitalized curriculum costs are written off and expensed in the period of this determination.

Impairment of Long-Lived Assets — Long-lived assets are reviewed for impairment when circumstances indicate the carrying value of an asset may not be recoverable. For assets that are to be held and used, an impairment loss is recognized when the estimated undiscounted cash flows associated with the asset or group of assets is less than their carrying value. If impairment exists, an adjustment is made to write the asset down to its fair value, and a loss is recorded as the difference between the carrying value and fair value. Fair values are determined based on quoted market values, discounted cash flows, or internal and external appraisals, as applicable. Assets to be held for sale are carried at the lower of carrying value or fair value, less cost to sell.

During November 2015, the Company announced the closure of the Denver campus, effective February 29, 2016. In January 2016, the Company announced the closure of two additional campuses: Weldon Spring, Missouri and Tigard, Oregon, both effective March 1, 2016. Due to the closure of these three campuses, undepreciated leasehold improvements and other fixed assets of $85, $328 and $394, respectively, were fully written off during the year ended May 31, 2016. The write-down is included in loss on disposition of property, within the NAU segment, in the consolidated financial statements. The Company had no impairments in 2015 or 2014.

Deferred Income Taxes — Deferred income taxes are provided using the asset and liability method whereby deferred tax assets and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. We recognize a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion, or all, of a deferred tax asset will not be realized.

Non-Controlling Interest — The non-controlling interest presented on the consolidated statements of operations and comprehensive income represents the individual owners’ share of the Partnership’s income or loss. The consolidated balance sheet amount “Non-controlling interest” represents the individual owners’ share of the Partnership obligations in excess of Partnership assets. The Company has determined the non-controlling owners have a legal obligation to fund such deficits and believes it is fully collectable at May 31, 2016.

Leases — Leases in which the risk of ownership is retained by the lessor are classified as operating leases. Leases which substantially transfer all of the benefits and risks inherent in ownership to the lessee are classified as capital leases. Assets acquired under capital leases are depreciated on the same basis as owned property and equipment or the related lease term, whichever is shorter. Leasehold improvements are depreciated over the depreciable lives of the corresponding fixed asset or the related lease term, whichever is shorter.

Academic Revenue Recognition — Academic revenue represents tuition revenue and the revenue generated through NAU’s teaching relationships with other non-related party institutions. Tuition revenue and affiliate revenue is recorded ratably over the length of respective courses. Academic revenue also includes certain fees and charges assessed at the start of each term. The portion of tuition and registration fee payments received but not earned is recorded as deferred income and reflected as a current liability on the consolidated balance sheets, as such amount represents revenue that the Company expects to earn within the next year. Academic revenue is reported net of adjustments for refunds and scholarships. If a student withdraws prior to the completion of the academic term, the respective portion of tuition and registration fees that the Company already received and is not entitled to are refunded back to the students and the Department of Education. Refunds and scholarships are recorded during the respective terms. For students that have withdrawn from all classes during an academic term, the University estimates the expected receivable balance that is due from such students and records a provision to reduce academic revenue for that amount calculated based on historical collection trends and adjusted for known current factors. The amount is then recognized as academic revenue at the time the receivable is collected (e.g. cash basis).

Auxiliary Revenue — Auxiliary revenue represents revenues from the University’s bookstore operations. Revenue is recognized as items are sold and is recorded net of any applicable sales tax. The Company does not have book inventory because the book operation is outsourced to a third party vendor. Since the Company has the discrete ability to set book prices and maintains inventory and credit risk, we utilize gross reporting of revenue and expenses. Books sales revenue is recorded as auxiliary revenue and the related costs are recorded as auxiliary expense.

Rental Income — Rental income is primarily obtained from tenants of three apartment complexes under short-term operating leases. Tenants are required to pay rent on a monthly basis. Rent not paid by the end of the month is considered past due, while significant amounts paid in advance are included in deferred income on the consolidated balance sheets. If a tenant becomes 60 days past due, eviction procedures are started.

Rental Expense — The University accounts for rent expense under its long-term operating leases using the straight-line method. Certain of the University’s operating leases contain rent escalator provisions. Accordingly, a $5,432 and $6,047, deferred rent and tenant improvement liability at May 31, 2016 and 2015, respectively, is recorded in accrued and other liabilities and other long-term liabilities on the consolidated balance sheets.

Advertising — The University follows the policy of expensing the cost of advertising as incurred. Advertising costs of $10,734, $9,807 and $12,077 for 2016, 2015 and 2014, respectively, are included in selling, general, and administrative expenses on the consolidated statements of operations and comprehensive income.

RECENTLY ADOPTED AND NEW ACCOUNTING PRONOUNCEMENTS

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606), which removes inconsistencies and weaknesses in revenue requirements, provides a more robust framework for addressing revenue issues, improves comparability of revenue recognition practices across entities, provides more useful information to users of the consolidated financial statements through improved disclosure requirements, and simplifies the preparation of the consolidated financial statements by reducing the number of requirements to which an entity must refer. The ASU outlines five steps to achieve proper revenue recognition: identify the contract with the customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue when (or as) the entity satisfies the performance obligation. This standard is effective for public entities for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. This standard will be effective for the Company’s fiscal year 2019 in the first quarter ending August 31, 2018. The Company is currently evaluating and has not yet determined the impact implementation will have on the Company’s consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, that will explicitly require management to assess an entity’s ability to continue as a going concern, and to provide related footnote disclosures in certain circumstances. This standard will be effective for the Company’s fiscal year ending May 31, 2017. The adoption of this standard is not expected to have a significant impact on the Company’s consolidated financial statements.

In February 2015, the FASB issued ASU No. 2015-02, Amendments to the Consolidation Analysis, which requires reevaluation of all legal entities under a revised consolidation model. The standard will specifically affect limited partnerships and similar legal entities, the evaluation of fees paid to a decision maker or a service provider as a variable interest, the effect of fee arrangements and related parties on the primary beneficiary determination, and certain investment funds. This standard will be effective for the Company’s fiscal year 2017 during the first quarter ending August 31, 2016. The Company has evaluated the impact implementation will have on the Company’s consolidated financial statements, and does not expect it to be significant.

In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes, which no longer requires an entity to separate deferred income tax liabilities and assets into current and noncurrent amounts in a classified statement of financial position. Instead, deferred tax liabilities and assets will be classified as noncurrent. For public business entities, this update will be effective for financial statements issued for annual periods beginning after December 15, 2016, and for interim periods within those annual periods. The Company has elected early adoption and will implement the accounting update effective for the Company’s fiscal year 2017 in the first quarter ending August 31, 2016. This accounting update will require reclassification of all current deferred tax liabilities and assets to noncurrent in the consolidated balance sheets, which will have an immaterial impact on the Company’s consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities which address written aspects of recognition, measurement, presentation and disclosure of financial instruments. This standard will be effective for the Company’s fiscal year ending 2019 in the first quarter ending August 31, 2018. The Company is currently evaluating the impact that the standard will have on the consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) which supersedes FASB ASC Topic 840, Leases and provides principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than twelve months regardless of classification. If the available accounting election is made, leases with a term of twelve months or less can be accounted for similar to existing guidance for operating leases. The standard will be effective for the Company’s fiscal year ending 2020 in the first quarter ending August 31, 2019. The Company is currently evaluating and has not yet determined the impact implementation will have on the Company’s consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting, which is intended to simplify various aspects of share-based accounting. Specifically, the standard (1) requires all excess tax benefits and deficiencies to be recognized as income tax expense/benefit in the income statement as discrete items in the reporting period in which they occur, with no charges to additional paid-in capital; (2) requires excess tax benefits to be classified as operating cash flows; (3) allows an accounting election to account for forfeitures when they occur, instead of as they are expected to vest; (4) allows awards settled in cash to qualify for equity classification if withholding is up to the maximum statutory tax rates in the applicable jurisdictions; (5) clarifies that cash paid by an employer to taxing authorities when directly withholding shares for tax-withholding purposes should be classified as a financing activity in the cash flow statement. This standard will be effective for the Company’s fiscal year ending 2018, in the first quarter ending August 31, 2017. The Company is currently evaluating and has not yet determined the impact implementation will have on the consolidated financial statements.

DEPARTMENT OF EDUCATION REQUIREMENTS

The University extends unsecured credit to a portion of the students who are enrolled throughout the campuses for tuition and other educational costs. A substantial portion of credit extended to students is repaid through the students’ participation in various federal financial aid programs authorized by Title IV Higher Education Act of 1965, as amended (the “Higher Education Act”). The University is required under 34 CFR 600.5(d) to maintain at least 10% of its revenues (calculated on a cash basis) from non-Title IV program funds, commonly referred to as the “90/10 Rule”. An institution is subject to loss of eligibility to participate in Title IV programs if it fails to meet the 10% threshold for two consecutive fiscal years. If the Company were to violate the 90/10 Rule, it would become ineligible to participate in Title IV programs as of the first day of the fiscal year following the second consecutive fiscal year in which it exceeded the 90% Title IV program funds threshold and would be unable to regain eligibility for two fiscal years thereafter. The University believes they are in compliance with this requirement for the years ended May 31, 2016, 2015 and 2014, as shown in the underlying calculation:

	2016		2015		2014
Title IV HEA
funds received	$90,238		$106,305		$107,333
Academic revenue	$103,904	=86.85%	$119,200	=89.18%	$120,169	=89.32%
(cash basis)

To participate in Title IV Programs, a school must be authorized to offer its programs of instruction by relevant state education agencies, be accredited by an accrediting commission recognized by the U.S. Department of Education (the “Department of Education”), and be certified as an eligible institution by the Department of Education. For this reason, educational institutions are subject to extensive regulatory requirements imposed by all of these entities. After an educational institution receives the required certifications by the appropriate entities, the educational institution must demonstrate compliance with the Department of Education’s regulations pertaining to Title IV Programs on an ongoing basis. Included in these regulations is the requirement that the Company must satisfy specific standards of financial responsibility.

The Department of Education evaluates educational institutions for compliance with these standards each year, based upon an educational institution’s annual audited financial statements, as well as following any changes in ownership. Under regulations which took effect July 1, 1998, the Department of Education calculates an educational institution’s composite score for financial responsibility based on its (i) equity ratio, which measures the educational institution’s capital resources, ability to borrow and financial viability; (ii) primary reserve ratio, which measures the educational institution’s ability to support current operations from expendable resources; and (iii) net income ratio, which measures the educational institution’s ability to operate at a profit. This composite score can range from -1 to +3.

An educational institution that does not meet the Department of Education’s minimum composite score requirements of 1.5 may establish its financial responsibility by posting a letter of credit or complying with additional monitoring procedures as defined by the Department of Education. Based on the consolidated financial statements for the 2016, 2015 and 2014 fiscal years, the University’s calculations result in a composite score of 1.8, 3.0, and 2.3, respectively. Therefore the University currently meets the minimum composite score requirement as most recently required by the Department of Education.

Finally, to remain eligible to participate in Title IV programs, an educational institution’s student loan cohort default rates must remain below certain specified levels. An educational institution loses eligibility to participate in Title IV programs if its cohort default rate equals or exceeds 40% for any given year or 30% for three consecutive years. Our official cohort default rates for federal fiscal years 2012 and 2011 are 20.8% and 21.4%, respectively. The draft cohort rate for federal fiscal year 2013 is 23.7%.

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The University’s current certification to participate in the Title IV programs, which is not provisional, was effective in June 2013 and extends through March 31, 2019.

CONDOMINIUM PROJECT

The Company built 24 condominium units to be sold to the general public called Vista Park. These condominium units are accounted for within condominium inventory within the consolidated balance sheets, and the sales of the condominium units are recorded within condominium sales within the consolidated statements of income and comprehensive income. No units were sold in the year ended May 31, 2016; a total of twelve units were sold from the inception of the project through year ended May 31, 2016.

CONTRACT FOR DEED

The Company signed a contract for deed on its former Rapid City campus on March 28, 2013 for $4,000 (see Note 9 for capital lease on new campus). The sale did not meet the accounting requirements to be consummated and was not recorded at this time. On July 11, 2014, the contract for deed was settled. The Company collected the outstanding proceeds, which included $3,230 of principal and $85 of interest that was offset by $59 of lease-back payments and maintenance expenses related to the long-term operating lease. All remaining liens on the property were released and deemed sold, resulting in a gain of $1,743.

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LINES OF CREDIT

The University maintained a $3,000 unsecured revolving line of credit with Great Western Bank that was subject to annual renewals and matured on May 31, 2016. The Company chose not to renew the line for the next fiscal year due to adequate cash available. Advances under the line bore interest at prime (3.50% at May 31, 2016). No advances were made on this line of credit in 2016, 2015 or 2014.

LEASES

The University leases building facilities for branch operations and equipment for classroom operations under operating leases with various terms and conditions. Total rent expense for the years ended May 31, 2016, 2015 and 2014, was $5,737, $6,037, and $6,025, respectively, which is included in selling, general, and administrative expenses on the consolidated statements of operations and comprehensive income.

Future minimum lease payments on non-cancelable operating leases for the five years ending May 31 are as follows (in thousands)-

2017	$	6,028
2018		6,039
2019		5,769
2020		5,213
2021		4,139
Thereafter		9,376

Future minimum lease payments include the remaining lease payments for the Tigard and Weldon Spring campuses. The associated lease payments were not accelerated because we are still receiving economic benefit from the leases. The Denver campus lease terminated on February 29, 2016; therefore, is not included in the payments listed above.

As part of ongoing operations, the Company entered into a capital lease arrangement for additional space that houses the corporate headquarters, distance learning operations, and the new Rapid City campus operations (see Note 7). During the year ended May 31, 2014, the Company increased its capital lease obligation by $2,000 to account for tenant improvements. The Company initially paid for the improvements and reached an agreement with the lessor to be reimbursed for the amount under the terms of a $2,000 note receivable. The note receivable required monthly payments of $14 at 6% that directly offset the monthly payments to the lessor under the capital lease obligation. In June 2014, the landlord of the property paid the $1,373 remaining balance of the note receivable.

The Company is obligated to make future payments under the capital lease obligation, which totaled $20.3 million, had a net present value of $11.9 million as of May 31, 2016, and was recognized as current and non-current capital lease payable of $285 and $11,567 at May 31, 2016 and $244 and $11,853 at May 31, 2015, respectively. The asset totals $10,600, and accumulated depreciation totals $2,429 and $1,899 at May 31, 2016 and 2015, respectively. The net amount is included in net property and equipment in the consolidated balance sheets.

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The following is a schedule of future minimum commitments under the revised capital lease obligation as of May 31, 2016:

2017	$1,137
2018	1,159
2019	1,183
2020	1,207
2021	1,231
Thereafter	14,370
Total future minimum lease obligation	$20,287
Less: Imputed interest on capital leases	(8,435)
Net present value of lease obligations	$11,852

10.

STOCKHOLDERS’ EQUITY

The authorized capital stock for the Company is 51,100,000 shares, consisting of (i) 50,000,000 shares of common stock, par value $0.0001 and (ii) 1,000,000 shares of preferred stock, par value $0.0001, and (iii) 100,000 shares of class A common stock, par value $0.0001. Of the authorized shares, 24,140,972 and 25,191,414 shares of common stock were outstanding as of May 31, 2016 and 2015, respectively. No shares of preferred stock or Class A common stock were outstanding at May 31, 2016 and 2015.

Stock Repurchase Plan

On August 6, 2015, the Company’s Board of Directors authorized the repurchase of up to 350,000 shares, for aggregate consideration not to exceed $1.25 million, of the Company’s outstanding common stock in both open market and privately negotiated transactions. The plan is authorized for a period of one year from August 10, 2015. The timing and actual number of shares purchased depends on a variety of factors such as price, corporate and regulatory requirements, and other prevailing market conditions.

During the year ended May 31, 2016, the Company repurchased 353,581 shares for $868 under this authorization. In addition, the Company repurchased 853,073 shares of its outstanding common stock for $2,039 from a single unrelated shareholder. This repurchase was approved by the Company’s Board of Directors and was separate from the August 6, 2015 repurchase authorization.

On February 12, 2016, the Company announced that its Board of Directors authorized the Company to repurchase up to $500 worth of shares of its common stock in open market or privately negotiated transactions, at a price of $1.75 or less per share, for aggregate consideration not to exceed $500, to be implemented during a period of one year from the date the stock repurchase plan is announced to the public. During the year ended May 31, 2016, the Company repurchased 30,440 shares for $50 under this authorization.

During the years ended May 31, 2016 and 2015, respectively, $65 and $32 of additions to treasury stock resulted from the settlement of stock-based compensation.

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Stock-Based Compensation

In December 2009, the Company adopted the 2009 Stock Option and Compensation Plan (the “Plan”) pursuant to which the Company may grant restricted stock awards, restricted stock units and stock options to aid in recruiting and retaining employees, officers, directors and other consultants. Restricted stock awards accrue dividends that are paid when the shares vest. Restricted stock unit awards do not accrue dividends prior to vesting. Grants are issued at prices determined by the compensation committee, generally equal to the closing price of the stock on the date of the grant, vest over various terms (generally three years), and expire ten years from the date of the grant. The Plan allows vesting based upon performance criteria. Certain option and share awards provide for accelerated vesting if there is a change in control of the Company (as defined in the Plan). The fair value of stock options granted is calculated using the Black-Scholes option pricing model. Share options issued under the Plan may be incentive stock options or nonqualified stock options. At May 31, 2016, all stock options issued have been nonqualified stock options. A total of 1,300,000 shares were authorized by the Plan. Shares forfeited or canceled are eligible for reissuance under the Plan. At May 31, 2016, 431,397 shares of common stock remain available for issuance under the Plan.

In October 2013, the Company’s Board of Directors adopted the 2013 Restricted Stock Unit Plan (the “2013 Plan”) authorizing the issuance of up to 750,000 shares of the Company’s stock to participants in the 2013 Plan. The Company may grant restricted stock awards or restricted stock units to aid in recruiting and retaining employees, officers, directors and other consultants. Restricted stock awards accrue dividends that are paid when the shares vest. Restricted stock unit awards do not accrue dividends prior to vesting. Restricted stock grants are issued at prices determined by the compensation committee, generally equal to the closing price of the stock on the date of the grant and vest over various terms. Shares forfeited or canceled are eligible for reissuance under the Plan. At May 31, 2016, 750,000 shares of common stock remain available for issuance under the 2013 Plan.

Restricted stock

The fair value of restricted stock awards was calculated using the Company’s stock price as of the associated grant date, and the expense is accrued ratably over the vesting period of the award.

During the year ended May 31, 2015, the Company awarded 42,155 restricted stock awards with time based vesting at a grant date fair value of $3.11 per share to members of the board of directors. These shares vested on October 20, 2015. During the year ended May 31, 2015, 580,000 RSUs granted June 1, 2013 under the 2013 Plan were canceled and the related compensation expense previously recorded of $1,170 was reversed as the performance criteria was not attained.

During the quarter ended November 30, 2015, the Company issued 187,500 restricted stock units (“RSUs”) with performance based vesting under the 2013 Plan. The number of shares to be earned was determined by the Company’s profitability and other operating metrics during the year ended May 31, 2016. The grant date fair value of the RSUs was $3.06 per share. No expense was recorded as targeted profitability and operating metrics were not attained and all shares were canceled on May 31, 2016.

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During the year ended May 31, 2016, the Company awarded 40,485 restricted stock awards with time based vesting at a grant date fair value of $2.47 per share to members of the board of directors. Shares vest one year from the grant date and require board service for the entire year.

Compensation expense associated with restricted stock awards, totaled $116 for the year ended May 31, 2016. For the year ended May 31, 2015 compensation expense for restricted stock awards totaled $122, and a reversal of $1,170 associated with the performance based restricted stock units canceled was recorded. For the year ended May 31, 2014, compensation totaled $82 for restricted stock awards and $1,170 for performance based restricted stock units. At May 31, 2016, unamortized compensation cost of restricted stock awards totaled $35. The unamortized cost is expected to be recognized over a weighted-average period of 0.4 years as of May 31, 2016.

A summary of restricted share awards activity as of May 31, 2016 and 2015, and the changes during the years then ended is presented below:

Restricted Shares	Shares	Weighted Average Grant Date Fair Value
Non-vested shares at May 31, 2014	608,170	$4.01
Granted	42,155	3.11
Vested	(28,170)	3.55
Forfeited	(580,000)	4.03
Non-vested shares at May 31, 2015	42,155	$3.11
Granted	40,485	2.47
Vested	(42,155)	3.11
Forfeited	0	0
Non-vested shares at May 31, 2016	40,485	$2.47

Unrestricted stock

Unrestricted stock is issued to certain employees in settlement of a portion of their salaries and bonuses. Compensation expense in the consolidated statements of operations and comprehensive income associated with these unrestricted stock issuances totaled $320, $166 and $261, respectively, for the years ended May 31, 2016, 2015, and 2014.

Stock options

The Company accounts for stock option-based compensation by estimating the fair value of options granted using a Black-Scholes option valuation model. The Company recognizes the expense for grants of stock options on a straight-line basis in the consolidated statements of operations and comprehensive income as selling, general and administrative expense based on their fair value over the requisite service period.

For stock options issued during the years ended May 31, 2016 and 2015, the following assumptions were used to determine fair value:

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Assumptions used:	2016	2015
Expected term (in years)	5.75	5.50
Expected volatility	50.40%	51.40%
Weighted average risk free interest rate	1.54%	1.52%
Weighted average risk free interest rate range	1.54-1.54%	1.52-1.52%
Weighted average expected dividend	5.92	5.79%
Weighted average expected dividend range	5.92-5.92%	5.79-5.79%
Weighted average fair value	$0.84	$0.88

Expected volatilities are based on historic volatilities from the traded shares of NAUH. The expected term of options granted is the safe harbor period. The risk-free interest rate for periods matching the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. Expected dividend is based on the historic dividend of the Company.

A summary of option activity under the Plan as of May 31, 2016 and 2015, and changes during the years then ended is presented below:

Stock Options	Shares	Weighted average exercise price	Weighted average remaining contractual life (in years)	Aggregate intrinsic value
Outstanding at May 31, 2014	75,750	$7.17	7.6	$0
Granted	12,500	3.11
Exercised	0	0
Forfeited or canceled	(9,500)	8.70
Outstanding at May 31, 2015	78,750	$6.34	7.1	$0
Exercisable at May 31, 2015	66,250	$6.85	6.8	$0
Outstanding at May 31, 2015	78,750	$6.34	7.1	$0
Granted	148,475	3.06
Exercised	0	0
Forfeited or canceled	(34,875)	4.67
Outstanding at May 31, 2016	192,350	$4.11	8.4	$0
Exercisable at May 31, 2016	192,350	$4.11	8.4	$0

The Company recorded compensation expense for stock options of $121, $27 and $22, for the years ended May 31, 2016, 2015 and 2014, respectively, in the consolidated statements of operations. As of May 31, 2016, there was no unrecognized compensation cost related to unvested stock option based compensation arrangements granted under the Plan.

The Company plans to issue new shares as settlement of options exercised. There were no options exercised during the years ended May 31, 2016 or 2015.

Dividends

The following table presents details of the Company’s fiscal 2016 and 2015 dividend payments:

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Date declared	Record date	Payment date	Per share
April 7, 2014	June 30, 2014	July 11, 2014	$0.0450
August 11, 2014	September 30, 2014	October 10, 2014	$0.0450
October 6, 2014	December 31, 2014	January 16, 2015	$0.0450
January 24, 2015	March 31, 2015	April 17, 2015	$0.0450
April 13, 2015	June 30, 2015	July 10, 2015	$0.0450
August 10, 2015	September 30, 2015	October 9, 2015	$0.0450
October 5, 2015	December 31, 2015	January 15, 2016	$0.0450
January 23, 2016	March 31, 2016	April 8, 2016	$0.0450
April 4, 2016	June 30, 2016	July 8, 2016	$0.0450

11.

EMPLOYEE COMPENSATION PLANS

Employee Benefit Plan Payable — The Company sponsors a 401(k) plan for its University employees, which provides for a discretionary match, net of forfeitures, of up to 5%. The University uses certain consistently applied operating ratios to determine contributions. The University’s matching contributions paid were $514, $0, and $735 during the years ended May 31, 2016, 2015 and 2014, respectively. At May 31, 2016 and 2015, $49 and $708 was accrued for the University’s match, respectively. Of the $708 accrual at May 31, 2015, $194 was reversed in the year ending May 31, 2016 due to a change in estimate.

Compensation Plans — The Company has entered into employment agreements, as amended, with Dr. Ronald Shape, Chief Executive Officer and Dr. Jerry Gallentine, President, that require, among other things, an annual incentive payment as defined in the agreements. The incentive payments are paid in installments each year, are recorded in selling, general and administrative expenses and accrued in other liabilities in the consolidated financial statements, and total $0, $390 and $197 for 2016, 2015 and 2014, respectively. In addition, as part of the Chief Executive Officer compensation plan, $100 annually will be paid in equal monthly installments converted to the Company’s common stock shares based on the closing price on the last day of the month.

In addition, the Company has an approved Senior Executive Level Officer Compensation Plan and a Named Executive Officer Compensation Plan. Each compensation plan has a base salary component, quarterly achievement award component and an annual achievement award component as defined in the agreements.

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12.

SELF-INSURED HEALTH INSURANCE

The Company maintains a self-insured health insurance plan for employees. Under this plan, the Company pays a monthly fee to its administrator, as well as claims submitted by its participants. As there generally is a lag between the time a claim is incurred by a participant and the time the claim is submitted, the Company has recorded a liability for outstanding claims of $381 and $340 at May 31, 2016 and 2015, respectively. Such liability is reported within accrued and other liabilities in the consolidated balance sheets.

13.

INCOME TAXES

Components of the provision for income taxes for the years ended May 31, 2016, 2015 and 2014, were as follows:

	2016	2015	2014
Current tax (benefit) expense:
Federal	$(1,579)	$5,216	$3,678
State	64	751	509
	(1,515)	5,967	4,187

Deferred tax (benefit):
Federal	(1,183)	(1,396)	(1,740)
State	(196)	(138)	(141)
	(1,379)	(1,534)	(1,881)
Total tax (benefit) expense	$(2,894)	$4,433	$2,306

The effective tax rate varies from the statutory federal income tax rate for the following reasons:

	2016			2015			2014

Statutory		(34.0	)%		34.0	%		34.0	%
State income taxes — net of federal benefit		(1.9	)		3.6			4.2
Permanent differences and other		0.6			2.0			1.7
Effective income tax rate		(35.3	)%		39.6	%		39.9	%

Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred assets (liabilities) as of May 31 were as follows:

108

	2016	2015
Deferred income tax assets:
Account receivable allowances	$317	$616
Bad debt write-offs	2,131	1,544
Other	60	130
Accrued salaries	623	717
Start up costs	246	276
Capital lease obligations	4,445	4,536
Net operating loss carryforwards - expires 2021-2036	155	-
Deferred rent	2,037	2,268
Total deferred income tax assets	10,014	10,087
Deferred income tax liabilities:
Fixed assets and course development	(9,133)	(10,493)
Prepaid expenses	(450)	(542)
Total deferred income tax liabilities	(9,583)	(11,035)
Net deferred income tax assets (liabilities)	$431	$(948)

The Company considered a valuation allowance for the deferred income tax assets. No valuation allowance was recorded for the past three years because we believe it is more likely than not that all deferred tax asset will be realized.

The Company follows the guidance of ASC Topic 740, Income Taxes, Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109, which requires that income tax positions must be more likely than not to be sustained based solely on their technical merits in order to be recognized. The Company has recorded no liability for uncertain tax positions. In the event the Company had uncertain tax positions, the Company would elect to record interest and penalties from unrecognized tax benefits in the tax provision.

The Company files income tax returns in the U.S. federal jurisdiction and various states. Because of closure of an Internal Revenue Service examination, the Company is generally no longer subject to U.S. federal income tax or state and local tax examinations for years before 2012.

14.

EARNINGS PER SHARE

Basic earnings per share (“EPS”) is computed by dividing net income attributable to the Company by the weighted average number of shares of common stock outstanding during the applicable period. Diluted earnings per share reflect the potential dilution that could occur assuming vesting, conversion or exercise of all dilutive unexercised options and restricted stock.

The following is a reconciliation of the numerator and denominator for the basic and diluted EPS computations:

109

	For the year ended May 31,
	2016	2015	2014
Numerator:
Net (loss) income attributable to National American
University Holdings, Inc.	$(5,349)	$6,718	$3,475
Denominator:
Weighted average shares outstanding used to compute
basic net income per common share	24,651,521	25,160,729	25,093,096
Incremental shares issuable upon the assumed exercise of
stock options	-	-	-
Incremental shares issuable upon the assumed vesting of
restricted shares	-	5,003	1,265
Common shares used to compute diluted net income per
share	24,651,521	25,165,732	25,094,361
Basic net (loss) income per common share	(0.22)	$0.27	$0.14

Diluted net (loss) income per common share	$(0.22)	$0.27	$0.14

A total of 192,350, 78,750 and 75,750 shares of common stock subject to issuance upon exercise of stock options for the years ended May 31, 2016, 2015 and 2014, respectively, have been excluded from the calculation of diluted EPS as the effect would have been anti-dilutive.

A total of 82,640 shares of common stock subject to vesting and issuance upon exercise of restricted stock for the year ended May 31, 2016 (7,446 of these shares had potential dilutive impact for the year ended May 31, 2016), have been excluded from the calculation of diluted EPS as the effect would have been antidilutive.

15.

COMMITMENTS AND CONTINGENCIES

From time to time, NAU is a party to various claims, lawsuits or other proceedings relating to the conduct of its business. Although the outcome of litigation cannot be predicted with certainty and some claims, lawsuits or other proceedings may be disposed of unfavorably, management believes, based on facts presently known, that the outcome of such legal proceedings and claims, lawsuits or other proceedings will not have a material effect on the Company’s consolidated financial position, cash flows or future results of operations.

On November 21, 2014, the U.S. Department of Education notified NAU of its final audit determination with respect to the Title IV compliance audit for the period June 1, 2012 through May 31, 2013. The final audit determination asserts that NAU improperly disbursed Title IV program funds to students at the Wichita West campus location before it was approved as an additional location for Title IV program participation requirements by the Department in August 2013. This resulted in a requirement to return approximately $664 in Title IV funds and assessed interest to the Department, as it is deemed a return of previously recorded revenue. This amount was timely remitted and is shown as a direct reduction of academic revenue during the year ended May 31, 2015.

110

16.

FAIR VALUE MEASUREMENTS

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Following is a description of each category in the fair value hierarchy and the financial assets and liabilities of the Company that are included in each category at May 31, 2016 and 2015:

Level 1 – Quoted prices in active markets for identical assets or liabilities. The types of assets and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted market prices.

Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. The type of assets and liabilities included in Level 2 are typically either comparable to actively traded securities or contracts or priced with models using observable inputs. Level 2 assets consist of certificates of deposit that are valued at cost, which approximates fair value. Level 2 instruments require more management judgment and subjectivity as compared to Level 1 instruments. For instance:

Determining which instruments are most similar to the instrument being priced requires management to identify a sample of similar securities based on the coupon rates, maturity, issuer, credit rating and instrument type, and subjectively selecting an individual security or multiple securities that are deemed most similar to the security being priced; and

Determining whether a market is considered active requires management judgment.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The type of assets and liabilities included in Level 3 are those with inputs requiring significant management judgment or estimation. The Company does not have any Level 3 assets or liabilities.

The following table summarizes certain information for assets and liabilities measured at fair value on a recurring basis:

	Quoted prices in active markets (level 1)	Other observable inputs (level 2)	Unobservable inputs (level 3)	Fair value
May 31, 2016
Investments: Certificates of deposit	$0	$4,117	$0	$4,117
Money market accounts included in cash equivalents	38	0	0	38
Total assets at fair value	$38	$4,117	$0	$4,155

May 31, 2015

Investments: Certificates of deposit	$244	$3,858	$0	$4,102
Money market accounts included in cash equivalents	269	0	0	269
Total assets at fair value	$513	$3,858	$0	$4,371

111

Following is a summary of the valuation techniques for assets and liabilities recorded in the consolidated balance sheets at fair value on a recurring basis:

Certificates of Deposit (“CD’s”) and money market accounts: Investments which have closing prices readily available from an active market are used as being representative of fair value. The Company classifies these investments as level 1. Market prices for certain CD’s are obtained from quoted prices for similar assets. The Company classifies these investments as level 2.

Fair value of financial instruments: The Company’s financial instruments include cash and cash equivalents, CD’s and money market accounts, receivables, payables, and capital lease payables. The carrying values approximated fair values for cash and cash equivalents, receivables, and payables because of the short term nature of these instruments. CD’s and money market accounts are recorded at fair values as indicated in the preceding disclosures. The estimated fair value of capital lease obligations is $11,852 and $12,097 at May 31, 2016 and 2015, respectively, which approximates book value.

17.

SEGMENT REPORTING

Operating segments are defined as business areas or lines of an enterprise about which financial information is available and evaluated on a regular basis by the chief operating decision makers, or decision-making groups, in deciding how to allocate capital and other resources to such lines of business.

The Company operates two reportable segments: NAU and other. The NAU segment contains the revenues and expenses associated with the University operations. The Company considers each campus location to be an operating segment, and they are aggregated into the NAU segment for financial reporting purposes. The Other segment contains primarily real estate. General administrative costs of the Company are allocated to specific divisions of the Company. The following table presents the reportable segment financial information, in thousands:

112

	For the year ended May 31,			For the year ended May 31,			For the year ended May 31,
	2016			2015			2014
			Consolidated			Consolidated			Consolidated
	NAU	Other	Total	NAU	Other	Total	NAU	Other	Total

Revenue:
Academic	$88,697	$-	$88,697	$108,360	$-	$108,360	$117,099	$-	$117,099
Auxiliary	6,306	-	6,306	7,920	-	7,920	9,076	-	9,076
Rental income
apartments	-	1,110	1,110	-	1,164	1,164	-	1,138	1,138
Condominium
sales	-	-	-	-	447	447	-	440	440

Total revenue	95,003	1,110	96,113	116,280	1,611	117,891	126,175	1,578	127,753

Operating
expenses:
Cost of
educational
services	26,093	-	26,093	28,551	-	28,551	29,478	-	29,478
Selling, general
& administrative	70,819	1,392	72,211	71,681	1,620	73,301	83,627	1,659	85,286
Auxiliary	4,667	-	4,667	5,629	-	5,629	6,236	-	6,236
Cost of
condominium
sales	-	-	-	-	368	368	-	386	386
Loss (gain) on
disposition of
property	810	(75)	735	114	(1,824)	(1,710)	211	(97)	114
Total operating
expenses	102,389	1,317	103,706	105,975	164	106,139	119,552	1,948	121,500
(Loss) income
from
operations	(7,386)	(207)	(7,593)	10,305	1,447	11,752	6,623	(370)	6,253
Other income
(expense):
Interest inc	80	7	87	51	97	148	54	88	142
Interest exp	(870)	-	(870)	(883)	(8)	(891)	(769)	(1)	(770)
Other income
(loss) - net	-	178	178	-	178	178	-	149	149
Total other
(expense)
income	(790)	185	(605)	(832)	267	(565)	(715)	236	(479)
(Loss) income
before taxes	$(8,176)	$(22)	$(8,198)	$9,473	$1,714	$11,187	$5,908	$(134)	$5,774

As of and for the Year Ended				As of and for the Year Ended			As of and for the Year Ended
May 31, 2016				May 31, 2015			May 31, 2014
			Consolidated			Consolidated			Consolidated
NAU		Other	Total	NAU	Other	Total	NAU	Other	Total
Total assets	$61,694	$9,022	$70,716	$78,042	$8,502	$86,544	$76,383	$12,074	$88,457

Expenditures for
long-lived
assets	$710	$249	$959	$859	$452	$1,311	$3,094	$1,438	$4,532
Depreciation &
amortization	$5,058	$538	$5,596	$5,546	$581	$6,127	$5,765	$591	$6,356

113

18.

SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED)

The following table sets forth selected unaudited quarterly financial information for the last eight quarters.

	Quarter
	First	Second	Third	Fourth
Fiscal Year Ended May 31, 2016
Revenues	$24,649	$25,739	$22,678	$23,047
Operating loss	(1,916)	(1,358)	(2,844)	(1,475)
Net loss	(1,298)	(1,170)	(1,875)	(961)
Net loss attributable to
NAUH and Subsidiaries	(1,309)	(1,178)	(1,891)	(970)
Net loss per share (common):
Basic	(0.05)	(0.05)	(0.08)	(0.04)
Diluted	(0.05)	(0.05)	(0.08)	(0.04)

Fiscal Year Ended May 31, 2015
Revenues
Operating income	$29,304	$30,638	$29,083	$28,866
Net income	3,536	4,698	2,581	937
Net income attributable to	2,168	2,840	1,478	268
NAUH and Subsidiaries
Net income per share (common):	2,170	2,826	1,464	256
Basic	0.09	0.11	0.06	0.01
Diluted	0.09	0.11	0.06	0.01

19.

SUBSEQUENT EVENTS

We evaluated subsequent events after the balance sheet date through the date the consolidated financial statements were available to be reissued.

We did not identify any additional material events or transactions occurring during this subsequent event reporting period, that had not already been disclosed in our 10Qs and 8Ks subsequent to the original filing of the 10K on August 5, 2016, and that would require further recognition or disclosure in these reissued consolidated financial statements.

114

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	National American University Holdings, Inc.

	By:	/s/ Ronald L. Shape
	Name:	Ronald L. Shape, Ed. D.
	Title:	President and Chief Executive Officer

Dated: March 6, 2017

Exhibit Index

The following is a list of all exhibits filed as a part of this Annual Report on Form 10-K/A.

Exhibit No. Description of Exhibits

23.1

Consent of Independent Registered Public Accounting Firm

31.1

Certification of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-15(e) and 15d-15(e) asadopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-15(e) and 15d-15(e) asadopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 ofthe Sarbanes-Oxley Act of 2002

32.2

Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of theSarbanes-Oxley Act of 2002

National American University Holdings, Inc. - FORM 10-K/A - March 6, 2017

Attached files

National American University Holdings, Inc. Reports