INVESTMENT IN AFFILIATES:

Empire Education Group, Inc. (EEG)

As of December 31, 2015, the Company had a 54.6% ownership interest in EEG and no remaining investment value, resulting from a full impairment of the Company's investment in EEG in December 2015. During the three months ended December 31, 2015 and 2014, the Company recorded $0.9 and $7.3 million, respectively, and during the six months ended December 31, 2015 and 2014, the Company recorded $1.8 and $6.9 million, respectively, of equity losses related to its investment in EEG.

During the three months ended December 31, 2015, the Company recorded a $13.0 million other than temporary non-cash impairment charge to fully impair its investment in EEG as a result of significantly lower financial projections due to continued declines in enrollment, revenue and profitability. The full impairment of the investment follows previous non-cash impairment charges, EEG's impairment of goodwill and its establishment of a deferred tax valuation allowance in prior quarters. While the Company could be responsible for certain liabilities associated with this venture, the Company does not currently expect them to have a material impact on the Company's financial position.

The equity losses for the three and six months ended December 31, 2014 included a non-cash impairment charge of $4.7 million and the Company's share of a non-cash deferred tax asset valuation allowance recorded by EEG of $6.9 million.

The Company utilized consolidation of variable interest entities guidance to determine whether or not its investment in EEG was a variable interest entity (VIE), and if so, whether the Company was the primary beneficiary of the VIE. The Company concluded that EEG was not a VIE based on the fact that EEG had sufficient equity at risk. The Company accounts for EEG as an equity investment under the voting interest model, as the Company has granted the other shareholder of EEG an irrevocable proxy to vote a certain number of the Company’s shares such that the other shareholder of EEG has voting control of 51.0% of EEG’s common stock, as well as the right to appoint four of the five members of EEG’s Board of Directors.

The table below presents the summarized Statement of Operations information for EEG:



	For the Three Months Ended December 31,						For the Six Months Ended December 31,
	2015			2014			2015			2014
(Unaudited)	(Dollars in thousands)
Gross revenues	$	33,724		$	38,208		$	69,664		$	78,801
Gross profit	7,365			8,734			15,406			19,341
Operating loss	(1,819		)	(1,184		)	(3,290		)	(704		)
Net loss	(1,805		)	(13,449		)	(3,358		)	(13,007		)