INVESTMENT IN AFFILIATES:

Empire Education Group, Inc. (EEG)

As of March 31, 2016, the Company had a 54.6% ownership interest in EEG and no remaining investment value.

The table below summarizes losses recorded by the Company related to EEG:



	For the Three Months Ended March 31,					For the Nine Months Ended March 31,
	2016		2015			2016			2015
	(Dollars in thousands)
Equity losses (1)	$	—	$	(282	)	$	(1,832	)	$	(7,207	)
Other than temporary impairment	—		—			(12,954		)	(4,654		)
Total losses related to EEG	$	—	$	(282	)	$	(14,786	)	$	(11,861	)

_____________________________


(1)	For the nine months ended March 31, 2015, includes $6.9 million of expense related to a non-cash deferred tax valuation allowance recorded by EEG.

The fiscal year 2016 impairment charge resulted from EEG's 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 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 March 31,						For the Nine Months Ended March 31,
	2016			2015			2016			2015
(Unaudited)	(Dollars in thousands)
Gross revenues	$	31,573		$	38,419		$	101,237		$	117,220
Gross profit	2,851			10,078			18,257			29,419
Operating (loss) income	(3,288		)	301			(6,578		)	(403		)
Net loss	(2,784		)	(358		)	(6,142		)	(13,365		)