National American University Holdings Inc (NAUH) SEC Annual Report (10-K) for 2015

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-K

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

THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended May 31, 2015

o 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 o 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 o 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 R No o

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 o

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. o

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 o		Accelerated filer o
Non-accelerated filer o (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 o No ☑

As of July 31, 2015, there were 25,193,733 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, 2014, the last business day of the registrant's most recently completed second fiscal quarter, was approximately $33.7 million.

DOCUMENTS INCORPORATED BY REFERENCE

Certain portions of the Registrant's Definitive Proxy Statement for its 2015 Annual Meeting of Stockholders (which is expected to be filed with the Commission within 120 days after the end of the Registrant's 2015 fiscal year) are incorporated by reference into Part III of this Report.

NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC AND SUBSIDIARIES

FORM 10-K

INDEX


	PART I	Page
Item 1.	Business	4
Item 1A.	Risk Factors	33
Item 1B.	Unresolved Staff Comments	47
Item 2.	Properties	47
Item 3.	Legal Proceedings	47
Item 4.	Mine Safety Disclosures	47
	PART II
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	48
Item 6.	Selected Financial Data	48
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	50
Item 7a.	Quantitative and Qualitative Disclosures about Market Risk	58
Item 8.	Financial Statements and Supplementary Data	58
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	78
Item 9A	Controls and Procedures	78
Item 9B.	Other information	78
	PART III
Item 10.	Directors, Executive Officers, and Corporate Governance	78
Item 11.	Executive Compensation	79
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	79
Item 13.	Certain Relationships and Related Transactions, and Director Independence	80
Item 14.	Principal Accounting Fees and Services	80

	PART IV
Item 15.	Exhibits and Financial Statement Schedules	80

PART I

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This document and the documents incorporated by reference herein contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. We may, in some cases, use words such as "project," "believe," "anticipate," "plan," "expect," "estimate," "intend," "should," "would," "could," "potentially," "will" or "may," or other words that convey uncertainty of future events, future financial performance, expectations, regulation or outcomes to identify these forward-looking statements. These forward-looking statements include, without limitation, statements regarding proposed new programs, statements concerning projections, predictions, expectations, estimates or forecasts as to our business, financial and operational results and future economic performance, and statements of management's goals and objectives and other similar expressions concerning matters that are not historical facts.

Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications that such performance or results will be achieved. Forward-looking statements are based on information available at the time those statements are made or management's good faith belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include:

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our ability to comply with the extensive and changing regulatory framework applicable to our industry, including Title IV, state laws and regulatory requirements and accrediting agency requirements;

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the ability of our students to obtain Title IV funds, state financial aid, and private financing;

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the pace of growth of our enrollment;

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our conversion of prospective students to enrolled students and our retention of active students;

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our ability to update and expand the content of existing programs and the development of new programs in a cost-effective manner or on a timely basis;

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the competitive environment in which we operate;

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our cash needs and expectations regarding cash flow from operations;

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our ability to manage and grow our business and execution of our business and growth strategies;

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our ability to maintain and expand existing commercial relationships with various corporations and U.S. Armed Forces and develop new commercial relationships;

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our ability to adjust to the changing economic conditions;

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our ability to use advances in technology that could enhance the online experience for our students;

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our ability to sell the condominium units we own, and the general condition of the real estate market, in Rapid City, South Dakota;

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our estimated future financial results or performance;

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our actual financial performance generally; and

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other factors discussed in this annual report under the captions "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business," and "Regulatory Matters."

Forward-looking statements speak only as of the date the statements are made. You should not put undue reliance on any forward-looking statements. We undertake no obligation to publicly update any forward-looking statements after the date of this annual report to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable laws. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

Unless the context otherwise requires, the terms "we", "us", "our" and the "Company" used throughout this document refer to National American University Holdings, Inc.; its wholly owned subsidiary, Dlorah, Inc.; and National American University, sometimes referred to as "NAU" or the "university", which is owned and operated by Dlorah, Inc.

Item 1. Business.

Overview

We are a provider of postsecondary education primarily focused on the needs of working adults and other non-traditional students. We own and operate National American University, a regionally accredited, proprietary, multi-campus institution of higher learning founded in 1941. Since 1998, we have been offering academic and degree programs online. Using both campus-based and online instruction, we provide associate, bachelor's, master's and doctoral degree and diploma programs in business-related disciplines, such as accounting, management, business administration, information technology and healthcare-related disciplines, such as nursing and healthcare management. Our mission is to prepare students of diverse interests, cultures and abilities for careers in our core fields in a caring and supportive environment.

As of May 31, 2015 we had 37 locations, including educational sites in the states of Colorado, Indiana, Kansas, Minnesota, Missouri, Nebraska, New Mexico, Oklahoma, Oregon, South Dakota and Texas; a distance learning service center in Texas; and distance learning operations and central administration offices in Rapid City, South Dakota. Several of our locations utilize small physical facilities in strategic geographic areas, allowing our students to meet face-to-face with staff for assistance with their educational choices and related services while completing the majority of their coursework online. Working adults and other non-traditional students are attracted to the flexibility of our online programs and the personal attention provided at our physical facilities.

In addition to our university operations, we operate a real estate business known as Fairway Hills Developments, or Fairway Hills. Our real estate business rents apartment units and develops and sells condominium units in the Fairway Hills Planned Residential Development area of Rapid City, South Dakota.

Our enrollment declined from 11,470 students as of May 31, 2013 to 10,850 students as of May 31, 2014, and then decreased to 9,519 students as of May 31, 2015, representing a decrease of approximately 5.4% from 2013 to 2014 and a decrease of 12.3% from 2014 to 2015. We believe our recent decline in student enrollment and revenue is the result of the current economic environment in which we operate and similar to our peers, many working adults have chosen not to attend school.

Notwithstanding the unfavorable economic environment, we believe we have an opportunity to increase profit by controlling costs and further leveraging our online offerings and physical locations. During the same periods, our revenue declined from $129.2 million for the fiscal year ended May 31, 2013, to $127.8 million for fiscal year ended May 31, 2014, and then decreased to $117.9 million for the fiscal year ended May 31, 2015, representing annual decreases of 1.1% and 7.7%, respectively. Income before income taxes for the fiscal year ended May 31, 2013 was $9.2 million, compared to $5.8 million for the fiscal year ended May 31, 2014, and $11.2 million for the fiscal year ended May 31, 2015.

Revenue for the NAU segment declined from $127.9 million in fiscal year 2013 to $126.2 million in fiscal year 2014 and decreased to $116.3 million in fiscal year 2015, representing a decrease of 1.3% between 2013 and 2014 and a decrease of 7.8% from 2014 to 2015. Income before income taxes for the NAU segment was $9.7 million in fiscal year 2013, decreasing to $5.9 million in fiscal year 2014 and then increasing to $9.5 million in fiscal year 2015. Total assets for the NAU segment grew from $75.1 million in fiscal year 2013 to $76.4 million in fiscal year 2014, and to $78.1 million in fiscal year 2015.

Revenue for the other segment, consisting of our real estate business, increased from $1.3 million in fiscal year 2013 to $1.6 million in fiscal year 2014 and maintained at $1.6 million in fiscal year 2015, representing an increase of 23.1% between 2013 and 2014 and 0% from 2014 to 2015. Loss before taxes for the other segment decreased from $0.5 million in fiscal year 2013 to $0.1 million in fiscal year 2014 and then increased to $1.7 million profit in fiscal year 2015. Total assets for the other segment decreased from $13.0 million in fiscal year 2013 to $12.1 million in fiscal year 2014 and then decreased to $8.5 million in fiscal year 2015.

University History

Originally founded in 1941, NAU, then operating under the name National School of Business, offered specialized business training to college students. During the late 1960s and early 1970s, the university progressed from a two-year business school to a four-year college of business and embarked on a recruitment of qualified graduates of one- and two-year programs from accredited business schools in the eastern United States. Such programs allowed students to continue their education and receive appropriate transfer credit for their previous academic achievements. In 1974, the university, then known as National College, added its first branch educational site in Sioux Falls, South Dakota, followed later that year by educational sites in Denver and Colorado Springs, Colorado, and Minneapolis and St. Paul, Minnesota. The university offered conveniently scheduled courses that would lead to a degree appealing to working adults and other non-traditional students.

Since 1974, we have continued to expand educational sites, add online education programs and develop graduate degree programs. We have also developed professional programs in nursing and allied health that allow students to pursue degrees in these areas in a flexible learning environment. In addition, we have leveraged our online expertise into affiliations with other educational institutions that lack such online capabilities. Through these affiliations, which have resulted in increased revenue with little additional cost, we provide other institutions with curricula development, faculty, consulting and technology support services to enable them to deliver academic programs online.

Corporate Information

National American University Holdings, Inc., formerly known as Camden Learning Corporation, was organized under the laws of the State of Delaware on April 10, 2007, as a blank check company to acquire one or more domestic or international assets of an operating business in the education industry. On November 23, 2009, as a result of the merger transaction with Dlorah, Inc., a South Dakota corporation, which owns and operates NAU, Dlorah became our wholly owned subsidiary. For accounting purposes, Dlorah was the acquirer and accounted for the transaction as a recapitalization. Accordingly, the consolidated financial statements included in this annual report on Form 10-K reflect the results of Dlorah. We conduct substantially all of our business and generate substantially all of our revenue through Dlorah. Our primary business is the operation of National American University, which generated 98.6% of our revenue in fiscal year 2015. We also have multi-family residential real estate operation in Rapid City, South Dakota, which generated 1.4% of our revenue in fiscal year 2015. We maintain a website at www.national.edu . The information on our website is not incorporated by reference in this Annual Report on Form 10-K. We make available on our website our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission.

Our Core Values

Since our inception, we have been guided by the following core values, which we believe have contributed to our success in obtaining and retaining students and faculty:

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provide a caring and supportive learning environment;

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offer high quality instructional programs and services; and

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offer technical and professional career programs.

These core values have remained our foundation as we expanded from a single education site offering specialized business training to a multi-state diversified educational institution. We promote understanding and support of our mission and core values through participation of students, faculty, staff administrators and the board of governors in the governance and administrative structures of the university. We have adopted and implemented policies and procedures within these structures to ensure that we adhere to our core values and operate with integrity as we fulfill our mission.

Our commitment to these core values is evidenced in the daily interactions among our students, faculty, staff and administrators. A recent comprehensive institutional student survey found that the four characteristics receiving the highest student satisfaction rating cumulatively across the university were:

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the overall ease of the registration process;

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the ability to learn on your own;

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the caring and supportive attitude by faculty toward students; and

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the opportunity to develop knowledge of subjects in the program's emphasized areas.

Approach to Academic Quality

We have identified a number of key elements to promote a high level of academic quality, and they include:

Performance-based, career-oriented curricula. We create performance-based curricula designed to enable all students to gain the foundational knowledge, professional competencies and demonstrable skills, including technical and technological skills, required to be successful in their chosen fields. We design our curricula to address specific career-oriented objectives we believe working adult and other non-traditional students are seeking. We have invested significant human and financial resources in the implementation of this curricula development to support faculty and students in achieving prescribed student learning outcomes. Our performance-based curricula is designed and delivered by our faculty members who are committed to delivering a high quality, current and relevant education to prepare our students for their careers.

Qualified faculty. We seek to hire and retain qualified faculty members with relevant practical experience and the necessary skills to provide a high-quality education for our students. A substantial percentage of our faculty members hold graduate degrees. We seek faculty members who are able to integrate relevant, practical experiences from their professional careers into the courses they teach. We also invest in the professional development of our faculty members by providing training in campus and online teaching techniques, hosting events and discussion forums that foster sharing of best practices and continually assessing teaching effectiveness through administrative reviews and student evaluations.

Standardized course design. We employ a standardized curriculum development process to promote consistent active learning experiences in our online courses, and are implementing this curriculum through blended instructional delivery at the campus locations. We continue to review our programs in an effort to ensure they remain consistent, up-to-date and effective in producing the desired student learning outcomes. We also regularly review student survey data to identify opportunities for course modifications and enhancements.

Effective student services. We establish teams of academic and administrative personnel who act as the primary support for our students, beginning at the application stage and continuing through graduation. In recent years, we have also concentrated on improving the technology used to support student learning, including enhancing our online learning platform and student services. As a result, many of our support services, including academic, administrative, library and career services are accessible online, generally allowing users to access these services at a time and in a manner convenient to them.

Continual academic oversight. The academic oversight and assessment functions for all of our programs are conducted through the provost's office and other academic offices, which periodically evaluate the content, delivery method, faculty performance and desired student learning outcomes for our academic programs. We continually assess outcomes data to determine whether our students graduate with the knowledge and skills necessary to succeed in the workplace. Our provost also initiates and manages periodic examinations of our curricula to evaluate and verify academic program quality and workplace applicability. Based on these processes and student feedback, we determine whether to modify or discontinue programs that do not meet our standards or market needs, or to create new programs.

Board of Governors. We maintain a separate board of governors to oversee the academic mission of the university. Among other things, the board of governors is responsible for determining the mission and purposes of the university, approving educational programs and ensuring the well-being of students, faculty and staff. A majority of the members of the board of governors are independent, and many have been members of our board of governors for a number of years. The oversight and guidance of our board of governors has been critical to our growth and the maintenance of our academic standards.

Industry and Outlook

We operate in the same market as for-profit and non-profit career-oriented schools, two-year junior colleges and community colleges. Competition is generally based on location, program offerings, modality, the quality of instruction, placement rates, selectivity of admissions, recruiting and tuition rates. We compete for enrollments by offering more frequent start dates, more flexible hours, better instructional resources, more hands on training, shorter program length and greater assistance with job placement. We also compete with other career schools by focusing on offering high demand, career-oriented programs, providing individual attention to students and focusing on flexible degrees for working adults and other non-traditional students. We believe we are able to compete effectively in our respective local markets because of the diversity of our program offerings, quality of instruction, strength of our brand, reputation and success in placing students with employers.

We also compete with other institutions that are eligible to receive Title IV program funding. These include four-year, non-profit and for-profit colleges and universities, and community colleges, whether they offer programs that are four years, two years or less. Our competition differs in each market depending on the curriculum offered. Also, because schools can add new programs in a relatively short period of time, typically within six to 12 months, new competitors within an academic program area can emerge quickly.

Certain institutions have competitive advantages over us. Non-profit and public institutions receive substantial government subsidies, government and foundation grants and tax-deductible contributions and have other financial resources generally not available to for-profit schools. In addition, some of our for-profit competitors have a more extended or dense network of schools and campuses, which may enable them to recruit students more efficiently from a wider geographic area. Furthermore, some of our competitors, including both traditional colleges and universities and other for-profit schools, have substantially greater financial and other resources and name recognition than we have, which may enable them to compete more effectively for potential students. We also expect to face continued competition as a result of new entrants to the online education market with similar programmatic offerings.

Competitive Strengths

We believe the following strengths enable us to compete effectively in the postsecondary education market:

Our physical locations and program and delivery mix allow for greater leverage of assets. Our locations provide students face-to-face, blended and online learning as well as a range of student services. In addition, these locations provide an opportunity for students to take certain courses at our educational sites while taking the majority of their classes online. This approach provides students with a more flexible class experience and us with an opportunity to further leverage our fixed assets.

Our diversified, career-related program mix. Programs target high-need associate, baccalaureate, and master's programs in professional and technical areas, including business, accounting, information technology, legal studies, allied health, and nursing. Program evaluation and development processes allow for academic offerings to be continually updated and relevant to the field, as well as design new programs to meet current industry needs

Our Doctorate in Education (Ed.D.) with nationally recognized leadership. Our Ed.D. program includes nationally renowned community college leaders; leaders and faculty who have served as presidents and chief officers of community colleges for more than 40 years and who have published numerous books and articles on leadership of community colleges in the last several decades. The addition of the program and its recognized faculty brings great visibility to the university and has produced partnerships with community colleges and enrollments comparable to the largest community college leadership programs in the country.

Our multiple accreditations and regulatory approvals. We are regionally accredited through the Higher Learning Commission ("HLC"). In addition, many of our programs maintain specialized or professional accreditation and approvals.

Our affiliations with other educational institutions. We began offering online academic programs in 1998, and since then we have developed significant expertise in curricula and technology related to online education. We have leveraged this knowledge by establishing a number of affiliations with other educational institutions. Through these relationships, we provide curriculum development services and technology support services to these other institutions. We believe these affiliations offer opportunities for revenue diversification, asset leverage and revenue growth.

Our commitment to high demand professional and technical programs. We are committed to offering quality, performance-based educational programs to meet the needs of employers. Our programs are designed to help our students achieve their career objectives in a competitive job market. Our programs are taught by qualified faculty members, who often have practical experience in their respective fields, offering students their "real-world experience" perspectives. We periodically review and assess our programs and faculty to ensure that our programs are current and meet the changing demands of employers.

Our focus on individual attention to students. We believe in providing individual attention to our students to ensure an excellent educational experience. We provide a number of student support services, including administrative, financial aid, library, career and technology support, to help maximize the success of our students. We also provide personal guidance to our students during the admissions process, academic advising, financial services, learner support and career services.

Our focus on flexible scheduling. We have designed our program offerings and our online delivery platform with flexible scheduling to meet the needs of working adults and other non-traditional students. We offer on-site day, evening and weekend classes, as well as online and blended degree and diploma programs. We believe working adults and other non-traditional students are attracted to the convenience and flexibility of our programs because they can study and interact with faculty and classmates during times and at places that suit their needs.

Our experienced executive management team with strong operating history. Our executive management team possesses extensive experience in the management and operation of postsecondary education institutions. Our chief executive officer, Dr. Ronald Shape, began his career in higher education with us in 1991. He began teaching courses in accounting, auditing and finance in 1995. Dr. Shape became our chief fiscal officer in 2002 and our chief executive officer in April 2009. Dr. Lynn Priddy is our provost and chief academic officer of the university. Dr. Priddy joined NAU in 2013; she began her career in education in 1986, serving as English faculty, director, dean, and vice president of institutions. In 1999, she joined the largest regional accreditor, the Higher Learning Commission, where she served fourteen years, the last five as vice president. Dr. David Heflin is the chief financial officer and joined NAU in June 2015. Dr. Heflin began his career in education in 2001. From 2001 to 2005, Dr. Heflin served as Chief Financial Officer and Chief Operating Officer at the University of Sioux Falls. From 2005 to 2008, Dr. Heflin served Clayton State University as Vice President of Business and Operations. From 2008 to 2014, Dr. Heflin led the Colorado Technical University of Sioux Falls as Campus President. Dr. Heflin is a licensed Certified Public Accountant and has been a member of the American Institute of Certified Public Accountants since 1983. Dr. Robert A. Paxton was appointed president of online learning operations in January 2009 and is currently the president of external relations and strategic initiatives. From January 1995 to August 2008, Dr. Paxton served as president of Iowa Central Community College. Dr. Paxton served as vice president of instruction of Cowley County Community College and Area Vocational-Technical School, Arkansas City, Kansas, from June 1990 to December 1994 and as dean of student services from July 1988 to June 1990. Michael Buckingham was appointed president of our real estate operations in November 2009. Mr. Buckingham oversees the maintenance of all the facilities in the NAU system, as well as properties being developed by our real estate operations. Mr. Buckingham served as corporate vice president of Dlorah from 1992, and the president of Dlorah's real estate operations from 1988, until the closing of the Dlorah merger in 2009.

Business Development and Expansion

Our expansion of academic program offerings demonstrate continued investment in current and future growth. In response to workforce and student demand, we have expanded our undergraduate and graduate programming in healthcare, business, education, and management. More than 17 new academic programs were launched from 2009 to 2014, another 32 new programs, program concentrations, and post-baccalaureate certificates are planned to be launched in 2016. Program expansion focuses on areas that demonstrate anticipated employment growth of 15% or higher by 2020, with most focused on allied health, information technology, security, logistics, aviation, and supply chain management. Our new program offerings typically build on existing programs and incorporate additional specialized courses, which offer students the opportunity to pursue programs that address their specific educational objectives while allowing us to expand our program offerings with modest incremental investment.

Since opening our first branch campus in Sioux Falls, South Dakota, in 1974, a central part of our growth strategy has been developing and opening educational sites in vibrant and growing communities with expanding workforces. In 2009, we opened our first hybrid learning center in Minnetonka, Minnesota, which offers blended online and on-campus degree programs. Since that time, we have opened several new hybrid learning centers. Although smaller than our traditional educational sites, these hybrid learning centers, in collaboration with our online operations, offer complete programs and services to our students. We believe our significant experience and success in expanding and supporting new educational sites and hybrid learning centers positions us well for continued expansion to meet market demand.

We began offering academic degree and diploma programs online in 1998, through what we refer to as our online campus. We were one of the first regionally accredited universities to be approved by the HLC to offer full degree programs under an Internet-based delivery methodology. We have invested heavily in the creation and evolution of a sophisticated and reliable online delivery system. The online campus has grown as an organizational structure, providing a scope of service consistent with the university's other campuses. Careful consideration was afforded to preserving the student-centered philosophy of the university while capitalizing on the technological advancements in online delivery. The organization of the online campus continues to evolve in response to increasing enrollment and the expanding sphere of quality services available to our students.

Recognizing the current and future impact of globalization on higher education, we have worked actively to enroll international students. During the late 1990s, we started developing international affiliations with foreign colleges and universities. Such affiliations provide students from other countries the opportunity to study at universities in the United States to complete their studies. Many academically capable and motivated students from foreign countries desire to take coursework at American colleges or universities but are not able to do so for various reasons, including inadequate financial resources, family and work obligations in their home countries and immigration restrictions. To meet the needs of these students, we have developed relationships with foreign colleges and universities to offer their students an option to combine the curricula of their home country institution with our curricula offered through our online distance learning program so that those students can remain in their home country and attend a local college or university while taking courses offered by an accredited American university, without having to travel to the United States. We currently have affiliations with educational institutions in Greece.

Growth Strategies

Expand academic program offerings. We continue to focus on offering a variety of in-demand degree programs in multiple locations and delivery formats. On all levels, we consider changes in student demographics, demand for degree programs and employment outlook in our business development decision-making processes. Our planning process includes long-range planning, feasibility studies, market research and a variety of other research projects involving changing job markets. In that regard, we continue to focus on addressing current societal and economic trends and engaging in appropriate analysis and planning for the programs and markets we seek to develop. Our new program offerings typically build on existing programs and incorporate additional specialized courses, which offer students the opportunity to pursue programs that address their specific educational objectives while allowing us to expand our program offerings with modest incremental investment.

Increase our online academic program offering. We will continue leveraging our physical assets by offering additional academic programs online and encouraging existing and new students to use online services. For instance, in 2014 we launched a continuing education division to offer courses for personal and professional development.

Increase enrollment in existing academic programs. We will continue focusing on increasing enrollment in our core academic programs by continuing to refine our marketing and recruiting efforts to identify, enroll and retain students seeking degrees or diplomas in the academic programs we offer. We also will continue focusing on retaining students, so they may achieve their educational goals. We believe that the depth and quality of our existing core programs will provide opportunity for additional growth.

Expand relationships with private sector and government employers. We will seek additional relationships with healthcare systems, businesses and other employers, including governmental and military employers, through which we can market our program offerings to their respective employees. In that effort, we have established a national account with CuNet, a company consisting of professionals with significant sales and marketing experience that seeks to develop strategic relationships on a regional, national and international basis. These relationships provide enrollment opportunities for the university's programs, build recognition among employers in our core disciplines and enable us to identify new degree and diploma programs that are in demand by students and employers.

Leverage infrastructure. We intend to continue investing in our people, processes and technology infrastructure. We believe these investments have prepared us to deliver our academic programs to a larger student population with only modest incremental investment. We intend to leverage these investments as we seek to grow enrollment, which we believe will allow us to increase our operating margins over time.

Continue to expand affiliations with other educational institutions. NAU provides online course hosting and technical assistance to approximately 2,000 students through affiliated institutions. We will continue seeking to expand the number of affiliations with other educational institutions to provide online program services. These services can meet the needs of other institutions while providing additional sources of revenue.

Pursue strategic acquisitions. We will consider acquisitions of educational institutions with the potential for program replication, new areas of study, new markets with attractive growth opportunities, further expansion of our online delivery capability and advanced degree programs.

Accreditation and Program Approvals

The quality of our academic programs is evidenced by our institutional and program-specific accreditations and approvals. We received initial accreditation from the HLC in 1985. Since then, we have continued to grow and expand by obtaining HLC approval for new geographic sites and graduate degree programs, and by expanding program delivery in international locations in cooperation with the institutions of higher learning that are located in such international locations.

In addition to institution-wide accreditation, numerous specialized commissions accredit or approve specific programs or schools, particularly in healthcare and professional fields. Accreditation or approval of specific programs by one of these specialized commissions signifies that those programs have met the additional standards of those agencies. For a list of our institutional and specialized or professional accreditation see "Regulatory Matters - Accreditation."

We are approved for veterans training and for administering various educational programs sponsored by federal and state agencies, such as the Bureau of Indian Affairs, the Social Security Administration and various state rehabilitation services.

Programs and Areas of Study

We offer Doctor of Education, Master of Business Administration, Master of Management, Master of Science in Nursing, Bachelor of Science, Associate of Applied Science and Associate of Science degrees, with a variety of program options leading to each of these degrees. Many of the degree programs offer the opportunity to focus on one or more emphasis areas. We also offer diploma programs consisting of a series of courses focused on a particular area of study for students seeking to enhance their skills and knowledge in the areas of information technology and allied health.

As of May 31, 2015, we offered the following degree and diploma programs:

Graduate Degrees

Associate Degrees

Doctor of Education

Master of Business Administration

Master of Management

Master of Science in Nursing

Bachelor's Degrees

Accounting

Business Administration

Business Administration with:

• Emphasis in Accounting

• Emphasis in Entrepreneurship

•Emphasis in Financial Management

•Emphasis in Human Resource Management

•Emphasis in Information Systems

•Emphasis in International Business

•Emphasis in Management

•Emphasis in Marketing

•Emphasis in Pre-Law

• Emphasis in Supply Chain Management

•Emphasis in Tourism and Hospitality Management

Criminal Justice

Healthcare Management

Information Technology

Information Technology with:

• Emphasis in Computer Security and Forensics

• Emphasis in Database Administration

• Emphasis in Internet Systems Development

• Emphasis in Management Information Systems

• Emphasis in Network Administration/Microsoft

• Emphasis in Network Management/Microsoft

Licensed Practical Nursing to Bachelor of Science in Nursing

Management

Bachelor of Science in Nursing

Registered Nurse to Bachelor of Science in Nursing

Organizational Leadership

Paralegal Studies

Accounting

Applied Information Technology

Business Administration

Business Logistics

Clinical Laboratory Technician

Computer Security

Criminal Justice

Electronic Health Record Support Specialist

Health and Beauty Management

Health Information Technology

Information Technology

Invasive Cardiovascular Technology

Management

Medical Administrative Assistant

Medical Assisting

Medical Staff Services Management

Occupational Therapy Assistant

Associate of Science in Nursing

Paralegal Studies

Pharmacy Technician

Small Business Management

Therapeutic Massage

Veterinary Technology

Diplomas

Computer Support Specialist

Healthcare Coding

MCITP Network Management

Network and Server Administrator

Therapeutic Massage

Veterinary Assisting

As an extension of our mission and historical foundation of offering business and business related programming, we began offering our Master of Business Administration, or MBA, program at the Rapid City campus in 2000. We expanded the MBA program through online delivery upon HLC approval in 2001. In 2004, we received HLC approval to offer the MBA program through our Best of Both Worlds-Instructional Delivery Platform™ program format in Bolivia, United Arab Emirates, and Chile. In 2006, we received HLC approval to offer the Master of Management degree. In 2009, we received HLC approval to offer a Master of Science in Nursing degree program, and in 2015 we received confirmation from the HLC for three new areas of emphasis to address emerging areas of need, including informatics, care coordination, and nursing administration. In 2013, we launched the Doctorate in Education (Ed.D.) with a customized cohort model offered by no other community college leadership program. With nationally recognized faculty in higher education and an anticipated gap in senior leadership in higher education institutions, particularly community colleges, we plan to continue to seek opportunities to expand our graduate programming in these areas.

In addition to the new program offerings approved from 2012 through 2015, we are seeking to expand further our programming in healthcare-related fields. The recent expansion in concentrations within the Master of Science in Nursing, the expansion of undergraduate nursing and the addition and newly secured accreditation for the Clinical Laboratory Technician, Invasive Cardiovascular Technology, and Occupational Therapy Assistant programs reflect this plan. Specifically, we have developed the Associate of Applied Science in Clinical Laboratory Technician at our Zona Rosa, Missouri site; the Associate of Applied Science programs in Occupational Therapy Assistant at the Denver, Colorado, and Independence, Missouri locations, and the Associate of Applied Science in Invasive Cardiovascular Technology at the Austin, Texas location to meet healthcare needs. Further expansion focuses on expanding these programs to additional campuses. We offer an Associate of Science in Nursing degree at our Zona Rosa, Missouri campus. In addition, we offer a Licensed Practical Nursing to Bachelor of Science in Nursing program at our Overland Park and Wichita education sites and the Bachelor of Science in Nursing at our Albuquerque, New Mexico; Bloomington, Minnesota; Austin, Texas, and Sioux Falls and Rapid City, South Dakota, educational sites to respond to the growing nationwide shortage of qualified nurses. An online Registered Nurse to Bachelor of Science in Nursing program is offered through the distance learning campus. Additional allied health programs at the associate degree level are offered throughout the university based on local demand and workforce needs. With the expansion of undergraduate enrollment in healthcare-related programs and the emerging demand observed from our alumni and other constituencies, we plan to expand our healthcare-related graduate programs. The burgeoning national need for master's qualified nursing administrators and nursing faculty, along with our experience in developing and delivering nursing programs at the associate and bachelor's degree levels, led us to develop a Master of Science in Nursing degree, which was approved by the HLC in 2009. In 2015, three new concentrations in the Master of Science in Nursing were approved and will launch in 2016.

Third-Party Relationships

Collaborations

We work with local businesses and corporations in the geographic areas where our educational sites are located to offer a variety of courses and schedule formats to assist busy professionals. For certain programs, we offer customized courses and schedules and on-site classes. For example, for the nursing programs, we offer clinical experiences on-site at hospitals and other healthcare centers with which we have relationships to allow students to complete their clinical work on-site.

We also collaborate with a number of local and national entities to provide educational programs that they desire. Examples of these collaborations include military memoranda of understanding and governmental and educational alliances. Among these alliances is our affiliation with the Serviceman's Opportunity College, which was developed in response to the special needs of adult continuing education for people in the armed forces.

Affiliations

We have utilized our expertise in curricula and online education technology to develop affiliations with a number of higher education institutions to develop and deliver online courses and programming for their students. We provide courseware development, technical support and online class hosting services to various colleges, technical schools and training institutions in the United States and Canada who do not have the capacity to develop and operate their own online curriculum for their students. We do not share revenues with these institutions, but charge fees for our services, enabling us to generate additional revenue by leveraging our current online program infrastructure.

Associate to Bachelor's Degree Completion Program

Our associate to bachelor's degree completion programs, also called the 2 + 2 degree completion programs, are based on strategic affiliations with various higher education institutions in the United States. These programs allow students with an associate degree to transfer into a bachelor's degree.

Educational and Administrative Sites

Our central administration is located in Rapid City, South Dakota. We lease all of our educational and administrative sites from third parties. As of May 31, 2015, we provided educational offerings and support services in the following locations:

State	Address	Approximate Size
Colorado:	8242 S. University Blvd., Suite 100	4,600 sq. ft.
	Centennial, CO 80122-3178

	1079 Space Center Dr.	5,500 sq. ft.
	Colorado Springs, CO 80915-3612

	1915 Jamboree Dr., Suite 185	9,300 sq. ft.
	Colorado Springs, CO 80920-5378

	1325 S. Colorado Blvd. Suite 100	17,900 sq. ft.
	Denver, CO 80222-3308

Indiana:	3600 Woodview Trace, Suite 200	16,375 sq. ft.
	Indianapolis, IN 46268-3167

Kansas:	10310 Mastin St.	25,500 sq. ft.
	Overland Park, KS 66212-5451

	7309 E. 21st St. North, Suite G40	10,100 sq. ft.
	Wichita, KS 67206-1179

	8428 W. 13 th St. N., Suite 120	6,600 sq. ft.
	Wichita, KS 67212-2980

Minnesota:	7801 Metro Parkway, Suite 200		20,400 sq. ft.
	Bloomington, MN 55425-1536

	6200 Shingle Creek Parkway, Suite 130		14,300 sq. ft.
	Brooklyn Center, MN 55430-2131

	1550 W. Highway 36		14,800 sq. ft.
	Roseville, MN 55113-4035

	3906 E Frontage Highway 52 Rd. NW		7,150 sq. ft.
	Rochester, MN 55901-0108

	10901 Red Circle Dr., Suite 150		5,200 sq. ft.
	Minnetonka, MN 55343-4545

	513 W. Travelers Trail			6,000 sq. ft.
	Burnsville, MN 55337-2548

Missouri:	3620 Arrowhead Ave.		18,300 sq. ft.
	Independence, MO 64057-1791

	7490 NW 87th St.		16,700 sq. ft.
	Kansas City, MO 64153-1934

	401 NW Murray Rd.		7,000 sq. ft.
	Lee's Summit, MO 64081-1425

	1030 Wolfrum Rd.		8,000 sq. ft.
	Weldon Spring, MO 63304-7795

Nebraska:	3604 Summit Plaza Dr.		9,500 sq. ft.
	Bellevue, NE 68123-1065

New Mexico:	4775 Indian School Rd. NE, Suite 200		24,400 sq. ft.
	Albuquerque, NM 87110-3976

	10131 Coors Blvd., NW Suite I-01		6,200 sq. ft.
	Albuquerque, NM 87114-4045

Oklahoma:	8040 S. Sheridan Rd.		8,600 sq. ft.
	Tulsa, OK 74133-8945

Oregon:	13333 SW 68 th Parkway, Suite 010	14,400 sq. ft.
	Tigard, OR 97223-8304

South Dakota:	5301 S. Highway 16 *		99,600 sq. ft.
	Rapid City, SD 57701-8931

	1000 Ellsworth St., Suite 2400B		6,700 sq. ft.
	Ellsworth AFB, SD 57706-4943

	5801 S. Corporate		22,400 sq. ft.
	Sioux Falls, SD 57108-5027

	925 29th St. SE		4,700 sq. ft.
	Watertown, SD 57201-9123

Texas:	13801 Burnet Rd. , Suite 300	20,400 sq. ft.
	Austin, TX 78727-1281

	6836 Austin Center Blvd, Suite 270	10,300 sq. ft.
	Austin, TX 78731-3188

	1101 Central Expressway S., Suite 100 **	4,400 sq. ft.
	Allen, TX 75013-8062

	1015 West University Ave. Suite 700	7,170 sq. ft.
	Georgetown, TX 78628-5355

	300 N. Coit Road, Suite 225	4,700 sq. ft.
	Richardson, TX 75080-5400

	475 State Highway 121 S. By-pass, Suite 150	5,500 sq. ft.
	Lewisville, TX 75067-8193

	18600 LBJ Freeway	16,800 sq. ft.
	Mesquite, TX 75150-5628

	6800 Westgate Blvd., Suite 101	6,300 sq. ft.
	Austin, TX 78745-4868

	11511 Katy Freeway, Suite 200	3,007 sq. ft.
	Houston, TX 77079-1744

* Rapid City Campus, Distance Learning Operations & Central Administration

** Distance Learning Service Center

The university periodically offers credit and non-credit offerings in other locations. Our on-site programs not only offer students, faculty and staff an opportunity to participate in a more traditional college experience, but also provide online students, faculty and staff with a sense of connection to the university.

Faculty and Other Employees

Our faculty includes full-time faculty members, and part-time campus-based and online faculty members. Approximately 75% of our current faculty members hold a master's degree in their respective field and approximately 18% of our faculty members hold a doctoral degree or first professional degree. During fiscal year 2015, the university employed approximately 70 full-time and 670 part-time faculty members. These numbers reflect an effort by the institution to more effectively manage redundant course offerings and to maintain academically sound class sizes. Average class size ranges from 10 to 20 depending on the academic program

We follow a specific process for hiring faculty in accordance with published standards for faculty members based on state regulations, HLC requirements and specialized standards.

We recruit qualified faculty through postings on the university's website, as well as placement of advertisements in local and national media. We review official transcripts to validate academic qualifications and faculty vitae to verify academic preparation consistent with the university's qualification guidelines, as well as engagement in relevant professional activities.

We recognize that most efforts to train, evaluate and recognize faculty members must originate at the individual campus level. All faculty members complete an online faculty orientation, coordinated by the system academics office, which consists of seven modules addressing the university's mission and core values, the instructor's role at the university, learning concepts and theories, good practices in teaching and assessment, classroom management, and accreditation standards and regulatory requirements related to academics. Regularly scheduled webinars are also available for faculty development each quarter. In addition, the campus academic deans are responsible for local orientation and in-service programs for faculty, schedules for faculty appraisal, promotions and merit increase recommendations, as well as formal and informal efforts to retain faculty members. Central academics and regional and campus deans establish and uphold the university's policies and practices for faculty appraisal. We provide ongoing and meaningful feedback on individual performance to our faculty members for their professional growth and for the continued advancement of the university.

Retention of quality adjunct faculty is a priority for us. To promote continuity within this vital teaching core, we have undertaken a number of initiatives to retain adjunct faculty. We have made strides in improving faculty compensation over the last several years, and we recognize that additional improvements may be required to attract and retain a qualified faculty.

Faculty and staff are encouraged to actively participate in a variety of academic and non-academic organizations. Faculty members participate in a wide variety of professional associations and activities at the local, state and regional level. We encourage our faculty to stay current on changes and trends within higher education, as well as their respective industries. Participation in professional organizations by faculty and staff bring current information relevant to the university's mission and programming to students and the workplace.

In addition to our faculty, as of May 31, 2015, we employed 808 staff and administrative personnel in university services, academic advising and support, enrollment services, university administration, financial aid, information technology, human resources, corporate accounting, finance and other administrative functions. None of our employees is a party to any collective bargaining or similar agreement with the university.

Marketing, Recruitment and Retention

Marketing. We engage in a range of activities designed to generate awareness among prospective students. Such activities include building brand awareness via internet platforms, television and radio advertising, direct mail, email, and print. The goal of the marketing department is to distribute relevant content to our target audiences in order to gain brand awareness, create a desire to attend NAU by engaging our audiences, and support admissions in enrollment growth. NAU's audience is primarily adult learners choosing to advance their education for personal and career-related goals.

Recruitment. Once a prospective student has indicated an interest in enrolling in one of our programs, the university's lead management system identifies and directs an admissions representative to initiate prompt communication. The Enrollment and Completion Advisor serves as the primary, direct contact for the prospective student, and the advisor's goal is to help the student gain sufficient knowledge and understanding of the university's programs so the prospective student can assess whether the university's offerings satisfy his or her goals.

Retention. We utilize our Enrollment and Completion Advisors and a Director of Student Success at each location to support students in advancing from matriculation through attainment of educational goals. The team members monitor various risk factors, such as the failure to buy books for a registered course, lack of attendance or failure to participate in online orientation exercises. Upon identifying an at-risk student, the university can interact with the student to assist him or her in continuing his or her program of study.

Student Support Services

Encouraging students to complete their degree programs is critical to our success. We invest great effort in developing and providing resources that simplify the student enrollment process, acclimate students to our programs and online environment, and support the student educational experience. Many of our support services, including academic, administrative and library services, are accessible online, allowing users to access these services at a time and in a manner convenient for them.

The student support services we provide include:

Academic and learner support services. We provide students with a variety of services designed to support their academic studies. We offer students entrance orientation, academic advising, technical support, research services, writing services, ADA accommodations, access to counseling, and tutoring.

Administrative services. We provide students access to a variety of administrative services in person as well as telephonically and via the Internet. For example, students can review class schedules, apply for financial aid, pay tuition and access their unofficial transcripts online. The university's financial service representatives provide personalized online and telephonic support to the students.

Library services. We provide a mix of online and on-campus library resources, services and instruction to support the educational and research endeavors of our students, faculty and staff, including physical and online libraries and online library resources available 24/7.

Career services. For those students seeking to change careers or explore new career opportunities, we offer career services support, including resume review and evaluation, career planning workshops and access to career services information for advice and support.

Technology support services. We provide online technical support to help students remedy technology-related issues. We also provide online tutorials and "Frequently Asked Questions" for students who are new to online coursework.

Admissions

Prospective students are required to complete an application to enroll in our programs. Upon the prospective student's submission of an application, the admissions representative and student services personnel assist the applicant through the admissions process, arranging financial aid by financial services representatives, if needed, and registering for courses and preparing for matriculation. Prospective students also are required to complete placement tests, which enable the university to best serve the student by enrolling him/her in classes to build any missing skills, thereby increasing his/her chances of success.

Applicants to the university's graduate programs must have an undergraduate degree from an accredited institution of higher learning in the United States or from an international institution of higher learning recognized by the ministry of education or other appropriate government agency, and

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a minimum grade point average of 2.75 achieved for all undergraduate work or

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a minimum grade point average of 2.9 achieved for the last one-half of the credits earned toward a Bachelor's degree; or

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a minimum grade point average of 3.0 in two or more graduate level courses taken at a regionally accredited institution of higher learning or recognized foreign equivalent.

Undergraduate applicants must have graduated from a recognized high school (or the Department of Education or state-required accepted equivalent) or submit an official transcript from an accredited higher education institution in the United States indicating completion of a postsecondary education program of at least two years that is acceptable for full credit toward a Bachelor's degree, with a minimum cumulative grade point average of 2.0.

Enrollment

Enrollments have decreased from 10,857 students as of May 31, 2014 to 9,519 students as of May 31, 2015, representing an annual decrease of approximately 12.3%. As of May 31, 2015, we had 5,929 students enrolled in our online programs, 2,182 students enrolled on-campus, and 1,408 students enrolled through our hybrid learning centers. The average age of our students is approximately 36 years.

The following is a summary of our student enrollment at May 31, 2015, and May 31, 2014, by degree type and by instructional delivery method:

	May 31, 2015					May 31, 2014
	No. of Students		% of Total			No. of Students		% of Total
Continuing Education		519		5.4	%		12		0.1	%
Doctoral		78		0.8	%		37		0.3	%
Graduate		253		2.7	%		322		3.0	%
Undergraduate and Diploma		8,669		91.1	%		10,486		96.6	%

Total		9,519		100.0	%		10,857		100.0	%

	May 31, 2015					May 31, 2014
	No. of Students		% of Total			No. of Students		% of Total
Online		5,929		62.3	%		6,481		59.7	%
On-Campus		2,182		22.9	%		2,686		24.7	%
Hybrid		1,408		14.8	%		1,690		15.6	%

Total		9,519		100.0	%		10,857		100.0	%

Tuition and Fees

Our tuition rates vary by educational site. Total tuition varies based upon several factors, including the number of credit hours for each program, the degree level of the program, and geographic location.

Our students finance their education through a variety of sources, including government sponsored financial aid, private and NAU provided scholarships, employer provided tuition assistance, veteran's benefits, private loans and cash payments. A substantial portion of our students rely on funds received under various government sponsored student financial aid programs, predominately Title IV programs. In the fiscal years ended May 31, 2015, 2014, and 2013, approximately 89.2%, 89.3%, and 89.7%, respectively, of our revenues (calculated on a cash basis) were attributable to funds derived from Title IV programs. In the future, we expect to continue our current initiatives to increase revenue from sources other than Title IV programs, such as our non-Title IV continuing education programming.

We have a refund policy for tuition and fees based upon quarterly start dates. If a student drops or withdraws from a course during the first week of classes, 100% of the charges for tuition and fees are refunded. After the first week but during the first 60% of scheduled classes the percentage of tuition charges refunded for a student who totally withdraws from NAU is based on a daily proration based on a percent of the term completed thru the last day of attendance (LDA)**. If the last day of attendance is beyond 60% of the scheduled classes, tuition and fees are not refunded. Fees charged include specialty and program fees ranging from $25 to $551, depending on the program. A $75 administrative fee is assessed against each prorated refund. A refund minus a $75 administrative fee is made within 45 days of the day the student's withdrawal is determined. If the student was a financial aid recipient, federal regulations establish a methodology for determining the amount of Title IV funds that must be returned to the financial aid programs for students not completing 60% of the enrollment period.

**Those students attending in the state of Oregon receive a prorated refund based on the LDA in each class.

Technology Systems

We remain focused on leveraging the use of technology to increase efficiencies in our academic programs and our general administrative operations. This commitment requires not only institutional budget expenditures, but also orientation and training in the use of this technology.

To service our online teaching we utilize Desire2Learn TM , or D2L, an Internet-based learning management system. The features of this product include content display and organization, synchronous and asynchronous chat, private messaging, quizzing, student surveys and assignment submission and student tracking and grading. The system is used to present online courses to both domestic and international students.

We have also developed and deployed an Internet-based application called TEAMS to meet the growing needs of our online course delivery. TEAMS closely integrates with the D2L learning management system to allow for automated loading of students into D2L courses and provides a single point to determine student and staff participation in the online courses. This application is designed to utilize the storage capability of a relational database to provide historical and real time information.

Recognizing the need to manage content used in the D2L learning management system, we implemented the Desire2Learn Learning Object Repository™ application to input, organize, manage and display course materials. This application provides an Internet-based, content entry and editing interface that allows content experts to create and edit course content. Additionally, it organizes text, images, documents and multimedia resources in a relational database, allowing the university to more easily identify and re-task existing content for new projects and courses through the use of Meta data. Finally, the application is integrated with the learning management system and is used to display and deliver content seamlessly through D2L to students.

Intellectual Property

We rely on a combination of copyrights, trademarks, service marks, trade secrets, domain names and agreements with third parties to protect our proprietary rights. Through our extensive development of electronic instructional materials, on-campus and online courseware and related processes, we continue to accumulate intellectual property that has provided the basis for improving quality of instruction, programs and services to our students.

We rely on trademark and service mark protections in the United States and other countries for our name and distinctive logos, along with various other trademarks and service marks related to specific offerings. We own federal registrations for our principal trademarks, National American University ® and NAU ® in the United States. These marks are important symbols for us and are used on our educational services and educational materials and a range of other items, including clothing and other memorabilia. These brands appear in our advertising and are seen by members of the general public as well as our direct constituents. We also own domain name rights to "national.edu" and other derivatives of that name, as well as a number of "nau" related domain names.

We publish intellectual property policies in our faculty handbook and our employee handbook that outline the ownership of creative works and inventions produced by employees within the scope of their employment, compliance with copyright law and the use of our copyrighted materials. When we hire content experts to develop curriculum, we require them to execute our standard agreement to confirm that all materials created under the scope of the work become our exclusive intellectual property. These agreements also require the content experts to comply with all laws related to copyright and the use of copyrighted materials.

Real Estate Operations

Our real estate operations conduct business through various projects and associations, including Fairway Hills I and II, Park West, Vista Park, Fairway Hills Park and Recreational Association, the Vista Park Homeowners' Association and the Park West Homeowners' Association. Fairway Hills I and Fairway Hills II are apartment buildings consisting of a total of 52 rental apartments of which 99% were leased as of May 31, 2015. Park West consists of 48 apartment units and is owned by a partnership that is 50% owned by NAUH and 50% owned by members of the Buckingham family (including Robert Buckingham, chairman of our board of directors, and his siblings and the spouses and estates of his siblings). Park West is 95% leased with 6 units currently owned as of May 31, 2015. Vista Park condominiums has currently sold 16 units. Prices for Vista Park condominium units start at $160,000.

In connection with the development of Vista Park and the Park West apartments, Fairway Hills has created two homeowners' associations, the Vista Park Homeowner's Association and the Park West Homeowner's Association, each of which is a non-profit corporation, to manage and sell the condominiums. In addition, the Fairway Hills Park and Recreational Association, which is also a non-profit corporation, was created to operate as a homeowner's association covering substantially all of the Fairway Hills development.

Environmental

Our facilities and operations are subject to a variety of environmental laws and regulations governing, among other things, the use, storage and disposal of solid and hazardous substances and waste, and the clean-up of contamination at our facilities or off-site locations to which we send or have sent waste for disposal. If we do not maintain compliance with any of these laws and regulations, or are responsible for a spill or release of hazardous materials, we could incur costs for clean-up, damages, and fines or penalties.

Compliance with Applicable Laws

We strive to comply with applicable federal, state, and local laws and regulations. We have a designated university compliance officer and maintain an institutional compliance program that:

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has a university compliance committee made up of representatives of departments and is chaired by the university compliance officer;

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monitors compliance and, when gaps or violations occur, develops responses to correct deficiencies in a timely manner; and

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communicates institutional principles designed to deter wrongdoing and to promote ethical conduct.

Further, audits are periodically conducted to ensure compliance with applicable laws, including the following:

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Federal Title IV student financial assistance program compliance attestation examinations are conducted annually to determine compliance and to identify any deficiencies requiring correction;

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an audit of 401(k) retirement plans is conducted annually for compliance with applicable laws and fiduciary duties; and

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annual financial statements audited by an independent auditor.

REGULATORY MATTERS

We are subject to extensive regulation by state education agencies, accrediting commissions and the United States federal government through the U.S. Department of Education (the "Department of Education") under the Higher Education Act of 1965, as amended, (the "Higher Education Act"). The regulations, standards and policies of these agencies cover substantially all of our operations, including the educational programs, facilities, instructional and administrative staff, administrative procedures, marketing, recruiting, finances, results of operations and financial condition.

As an institution of higher education that grants degrees and diplomas, we are required to comply with the requirements of state education authorities. In addition, to participate in the federal programs of student financial assistance for our students, we are required to be accredited by an accrediting commission recognized by the Department of Education. Accreditation is a non-governmental process through which an institution submits to qualitative review by an organization of peer institutions, based on the standards of the accrediting commission and the stated aims and purposes of the institution. The Higher Education Act requires accrediting commissions recognized by the Department of Education to review and monitor many aspects of an institution's operations and to take appropriate action if the institution fails to meet the accrediting commission's standards.

Our operations are also subject to regulation by the Department of Education due to our participation in Title IV programs. To participate in Title IV programs, a school must receive and maintain authorization by the appropriate state education agency or agencies, be accredited by an accrediting commission recognized by the Department of Education and be certified as an eligible institution by the Department of Education. Prior to July 1, 2010, Title IV programs included educational loans provided directly by the federal government, grant programs for students with demonstrated financial need, and educational loans issued by private banks with below-market interest rates that were guaranteed by the federal government in the event of a student's default on repayment of the loan. As of July 1, 2010, all educational loans under Title IV are provided directly by the federal government.

We plan and implement our business activities to comply with the standards of these regulatory agencies. Our chief executive officer and chief financial officer, also provide oversight designed to ensure that we meet the requirements of this regulatory environment.

State Authorization and Regulation

We are subject to extensive regulations by the states in which we are authorized or licensed to operate. State laws and regulations typically establish standards in areas such as instruction, qualifications of faculty, administrative procedures, marketing, recruiting, financial operations and other operational matters, which can be different than and conflict with the requirements of the Department of Education and other applicable regulatory bodies. State laws and regulations may limit our ability to offer educational programs and offer certain degrees. Some states may also prescribe financial regulations that are different from those of the Department of Education and many require the posting of surety bonds.

In addition, several states have sought to assert jurisdiction over educational institutions offering online degree programs that have no physical location or other presence in the state but that have some activity in the state, such as enrolling or offering educational services to students who reside in the state, employing faculty who reside in the state or advertising or recruiting prospective students in the state. State regulatory requirements for online education vary among the states, are not well developed in many states, are imprecise or unclear in some states and can change frequently. We have determined that our activities in certain states constitute a presence requiring licensure or authorization under the current requirements of the state education agency in these states, and in other states we have approvals as we have determined necessary in connection with our marketing and recruiting activities. We review the licensure requirements of other states to determine whether our activities in those states constitute a presence or otherwise require licensure or authorization by the applicable state education agency and submit additional applications for licensure or authorization when necessary. We are required by the Higher Education Act to be authorized by applicable state educational agencies in South Dakota and other states where we are located to participate in Title IV programs. See "Regulatory Matters – Regulation of Federal Student Financial Aid Programs – State Authorization." We do not believe that any of the states in which we are currently licensed or authorized, other than South Dakota, Colorado, Indiana, Kansas, Minnesota, Missouri, Nebraska, New Mexico, Oklahoma, Oregon and Texas, are individually material to our operations. If we fail to comply with state licensing requirements, we may lose our state licensure or authorizations. If we lose state licensure in a state in which we have a physical location, or in a state where we are required to maintain authorization for online education activities, we would also lose Title IV eligibility in that state. If we are found not to be in compliance with state requirements for online learning, and a state seeks to restrict one or more of our business activities within its boundaries, we may not be able to recruit students from that state and may have to cease providing educational programs to students in that state or may be subject to other sanctions, including fines or penalties. Compliance with these new and changing laws, regulations or interpretations related to state authorization and offering programs via online delivery could increase our cost of doing business and affect our ability to recruit students in particular states, which could, in turn, adversely affect enrollments, revenues and our business.

State Professional Licensure

Many states have specific licensure requirements that an individual must satisfy to be licensed as a professional in specified fields, including fields such as education and healthcare. These requirements vary by state and by field. A student's success in obtaining licensure following graduation typically depends on several factors, including the background and qualifications of the individual graduate, as well as the following factors, among others:

● whether the institution and the program were approved by the state in which the graduate seeks licensure, or by a professional association;

● whether the program from which the student graduated meets all requirements for professional licensure in that state;

● whether the institution and the program are accredited and, if so, by what accrediting commissions; and

● whether the institution's degrees are recognized by other states in which a student may seek to work.

Many states also require that graduates pass a state test or examination as a prerequisite to becoming certified in certain fields, such as nursing. Many states also may require a criminal background clearance before granting certain professional licensures or certifications. Our catalog informs students that it is incumbent upon the student to verify whether a specific criminal background clearance is required in their field of study prior to beginning course work.

Accreditation

We have been institutionally accredited since 1985 by the HLC, a regional accrediting commission recognized by the Department of Education. In January 2015, the HLC notified us that our accreditation has been continued. Accreditation is a private, non-governmental process for evaluating the quality of educational institutions and their programs in areas, including student performance, governance, integrity, educational quality, faculty, physical resources, administrative capability and resources and financial stability. To be recognized by the Department of Education, accrediting commissions must comply with Department of Education regulations, which require, among other things, that accrediting agencies adopt specific criteria for their review of educational institutions, conduct peer review evaluations of institutions and publicly designate those institutions that meet their criteria. An accredited institution is subject to periodic review by its accrediting commissions to determine whether it continues to meet the performance, integrity and quality required for accreditation.

There are six regional accrediting commissions recognized by the Department of Education, each with a specified geographic scope of coverage, which together cover the entire United States. Most traditional, public and private non-profit, degree-granting colleges and universities are accredited by one of these six regional accrediting commissions. The HLC, which accredits us, accredits other degree-granting public and private colleges and universities in the states of Arizona, Arkansas, Colorado, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, New Mexico, North Dakota, Ohio, Oklahoma, South Dakota, West Virginia, Wisconsin and Wyoming.

Accreditation by the HLC is important for several reasons, one being that it enables students to receive Title IV financial aid. Other colleges and universities depend, in part, on an institution's accreditation in evaluating transfers of credit and applications to graduate schools. Employers rely on the accredited status of institutions when evaluating candidates' credentials, and students and corporate and government sponsors under tuition reimbursement programs consider accreditation as assurance that an institution maintains quality educational standards. If we fail to satisfy the criteria of the HLC, we could lose our accreditation by that commission, which would cause us to lose our eligibility to participate in Title IV programs.

The reauthorization of the Higher Education Act in 2008, and Department of Education regulations that became effective July 1, 2010, require accrediting commissions to monitor the growth of institutions that they accredit. The HLC requires all affiliated institutions, including us, to complete an annual data report. If the non-financial data, particularly enrollment information, and any other information submitted by the institution indicate problems, rapid change or significant growth, the HLC staff may require that the institution address any concerns arising from the data report in the next self-study and visit process or may recommend additional monitoring. In addition, the Department of Education regulations that became effective July 1, 2010 require the HLC to notify the Department of Education if an institution accredited by the HLC that offers distance learning programs, such as the Company, experiences an increase in its headcount enrollment of 50% or more in any fiscal year. The Department of Education may consider that information in connection with its own regulatory oversight activities.

In addition to institution-wide accreditation, there are numerous specialized accrediting commissions that accredit specific programs or schools within their jurisdiction, many of which are in healthcare and professional fields. Accreditation of specific programs by one of these specialized accrediting commissions signifies that those programs have met the additional standards of those agencies. In addition to being accredited by the HLC at the institutional level, we also had the following specialized accreditations as of May 31, 2015:

Specialized or Programmatic Accreditation or Approval	Accrediting or Approving Body
Selected Business Degree Programs (Associate of Applied Science, Bachelor of Science, Master of Management, Master of Business Administration degrees)	International Assembly for Collegiate Business Education
Clinical Laboratory Technician (Kansas City (Zona Rosa), Missouri campus)	National Accrediting Agency for Clinical Laboratory Sciences Serious Applicant Status
Health Information Technology (online program)	Commission on Accreditation for Health Informatics and Information Management Initial Accreditation
Medical Assisting (Albuquerque, New Mexico; Austin, Texas; Bloomington, Brooklyn Center, and Roseville, Minnesota; Colorado Springs, and Denver, Colorado; Independence, Kansas City (Zona Rosa), Missouri; Overland Park, and Wichita, Kansas; Sioux Falls, South Dakota, campuses)	Commission on Accreditation of Allied Health Education Programs on the recommendation of the Medical Assisting Education Review Board
Occupational Therapy Assistant (Denver, Colorado)	Accreditation Council for Occupational Therapy Education
Paralegal Studies (Rapid City and Sioux Falls, South Dakota; Bloomington, Brooklyn Center, Burnsville, Roseville and Minnetonka, Minnesota, campuses)	American Bar Association
Pharmacy Technician (Bloomington, Brooklyn Center, and Roseville, Minnesota; Independence and Kansas City (Zona Rosa), Missouri; Sioux Falls, South Dakota campuses)	American Society of Health-System Pharmacists
Veterinary Technology (Rapid City, South Dakota campus)	Committee on Veterinary Technician Education and Activities
Associate of Science Nursing Program (Kansas City (Zona Rosa), Missouri campus)	Missouri Board of Nursing Full Approval
Bachelor of Science in Nursing Program (Albuquerque, New Mexico campus)	New Mexico Board of Nursing Initial Approval
Bachelor of Science in Nursing Program (Bloomington, Minnesota campus)	Minnesota Board of Nursing Approval
Bachelor of Science in Nursing Program (Rapid City, and Sioux Falls, South Dakota campuses)	South Dakota Board of Nursing Interim Approval
Bachelor of Science in Nursing Program (Austin, Texas campus)	Texas Board of Nursing Initial Approval
Bachelor of Science in Nursing and Licensed Practical Nurse Bridge to Bachelor of Science in Nursing Program (Overland Park, and Wichita West, Kansas campuses)	Kansas State Board of Nursing Initial Approval
Bachelor of Science and Master of Science in Nursing Programs	Commission on Collegiate Nursing Education Initial Accreditation
Online Registered Nurse to Bachelor of Science in Nursing Program (Distance Learning)	South Dakota Board of Nursing Approval
Associate of Science in Nursing Program (Kansas City (Zona Rosa), Missouri campus)	Accreditation Commission for Education in Nursing Continuing Accreditation
Online Registered Nurse to Bachelor of Science in Nursing Program (Distance Learning) (all states except Tennessee)	Commission on Collegiate Nursing Education Initial Accreditation

If we fail to satisfy the standards of any of these specialized accrediting commissions, we could lose the specialized accreditation for the affected programs, which could result in materially reduced student enrollments in those programs.

Regulation of Federal Student Financial Aid Programs

To be eligible to participate in Title IV programs, an institution must comply with specific requirements contained in the Higher Education Act and the regulations issued thereunder by the Department of Education. An institution must, among other things, be licensed or authorized to offer its educational programs by the state or states in which it is physically located (in our case, South Dakota, Colorado, Indiana, Kansas, Minnesota, Missouri, Nebraska, New Mexico, Oklahoma, Oregon and Texas) and maintain institutional accreditation by an accrediting commission recognized by the Department of Education.

The substantial amount of federal funds disbursed to schools through Title IV programs, the large number of students and institutions participating in these programs and allegations of fraud and abuse by certain for-profit educational institutions have caused Congress to require the Department of Education to exercise considerable regulatory oversight over for-profit educational institutions. As a result, for-profit educational institutions, including ours, are subject to extensive oversight and review. Because the Department of Education periodically revises its regulations and changes its interpretations of existing laws and regulations, we cannot predict with certainty how the Title IV program requirements will be applied in all circumstances.

Significant factors relating to Title IV programs that could adversely affect us include the following:

Congressional Action. Congress must reauthorize the Higher Education Act on a periodic basis, usually every five to six years. The most recent reauthorization of the Higher Education Act occurred in August 2008, which means that the next reauthorization was due in 2013. Congress failed to pass a one-time reauthorization bill; therefore, an automatic one-year extension to December 2014 was established. In late 2014, Congress passed an extension to further delay reauthorization. Congress must continue to pass legislation to extend the Act until a reauthorization can occur. We cannot predict when or whether Congress may reauthorize the Higher Education Act, but it is possible that Congress may work to either reauthorize the Higher Education Act in its entirety or pass a series of smaller bills that focus on individual parts of the Higher Education Act, primarily Title IV programs.

In addition, Congress must determine funding levels for Title IV programs on an annual basis and can change the laws governing Title IV programs at any time. Apart from Title IV programs, eligible veterans and military personnel may receive educational benefits for the pursuit of higher education. A reduction in federal funding levels for Title IV programs, or for programs providing educational benefits to veterans and military personnel, could reduce the ability of some students to finance their education. Any action by Congress that significantly reduces Title IV program funding or the ability of our students to participate in Title IV programs could have a material effect on our enrollments, business, financial condition and results of operations. Congressional action also may require us to modify our practices in ways that could increase administrative costs and reduce profit margins, which could have a material effect on our business, financial condition and results of operations.

Industry-Wide Focus on Private, Postsecondary Education. In recent years, Congress, the Department of Education, states, accrediting agencies, attorneys general and the media have increased their focus on the private, postsecondary education sector. This focus includes scrutiny of student debt levels undertaken to pursue higher education, as well as student outcomes measures. In addition, in recent years, the Government Accountability Office (the "GAO") has reviewed various aspects of the proprietary sector, including recruitment practices, educational quality, student outcomes, the sufficiency of integrity safeguards against waste, fraud and abuse in federal student aid programs and the degree to which proprietary institutions' revenue is composed of Title IV and other federal funding sources. These hearings and the GAO review are not formally related to any rulemaking by the Department of Education, but could lead to new or additional regulatory focus on proprietary educational institutions.

Various Congressional hearings and roundtable discussions have been held, beginning in 2010, by the U.S. Senate Committee on Health, Education, Labor and Pensions ("HELP Committee") and other Congressional members and committees regarding various aspects of the education industry, including student debt, student recruiting, student outcomes and accreditation matters. In July 2012, the majority staff of the HELP Committee released a report analyzing information requested from 30 companies operating proprietary institutions (including us and other publicly traded companies providing proprietary postsecondary education services). While stating that proprietary colleges and universities have an important role to play in higher education and should be well-equipped to meet the needs of non-traditional students who now constitute the majority of the postsecondary educational population, the report was highly critical of these institutions. Further, in July 2014, the majority staff of the HELP Committee released a report claiming that eight of the ten top recipients of post-9/11 GI Bill funds are for-profit companies.

In recent years, various pieces of legislation has been proposed in Congress that, if adopted, would affect our business. For example, in June 2014, legislation was introduced in the Senate that would amend the Higher Education Act in a number of significant ways, including to make a proprietary institution ineligible to participate in Title IV programs if it derives more than 85% of its revenues from federal funds, including Title IV programs, revenues from the GI Bill and Department of Defense Tuition Assistance funds. The legislation would also prohibit proprietary institutions, including us, from using federally-derived funds for marketing, advertising and recruiting expenses. This and similar proposals could be used as a basis of discussion during the reauthorization of the Higher Education Act. We anticipate that reauthorization of the Higher Education Act will be a priority for the relevant Congressional committees during 2015 and 2016. Any actions that change the requirements for our participation in Title IV Programs or the amount of student financial aid for which our students are eligible would negatively impact our business.

U.S. Military Tuition Assistance. Service members of the United States Armed Forces are eligible to receive tuition assistance from their branch of service through the Uniform Tuition Assistance Program (the "tuition assistance program") of the Department of Defense. Service members may use this tuition assistance to pursue postsecondary degrees at postsecondary institutions that are accredited by accrediting agencies that are recognized by the Department of Education. Each branch of the armed forces has established its own rules for the tuition assistance programs of the Department of Defense. Institutions cannot enroll service members under tuition assistance program unless they have signed a Memorandum of Understanding, which, among other things, requires an institution to agree to support Department of Defense regulatory guidance, adhere to a bill of rights that is specified in the regulations, and participate in the proposed Military Voluntary Education Review program. In addition, institutions must also agree to adhere to the principles and criteria established by the Service Members Opportunity Colleges Degree Network System regarding the transferability of credit and the awarding of credit for military training and experience.

In 2010, Congress and the Department of Defense increased their focus on Department of Defense tuition assistance that is used for distance education and programs at proprietary institutions. In 2012, President Obama issued an Executive Order regarding the establishment of "Principles of Excellence" for educational institutions receiving funding from the tuition assistance programs administered by the Department of Defense and veterans educational benefits programs administered by the Department of Veterans Affairs. The goals of the Principles of Excellence are broadly stated and relate to disclosures on costs and amounts of costs covered by federal educational benefits, marketing standards, state authorization, accreditation approvals, standard institutional refund policies, educational plans and academic and financial advising. In August 2013, the Department of Defense began incorporating the Principles of Excellence outlined in the President's 2012 Executive Order into their current Memorandum of Understanding.

We cannot predict whether further focus on military tuition assistance will result in legislation or further rulemaking affecting our participation in Title IV programs. To the extent that any laws or regulations are adopted that limit our participation in Title IV programs or the amount of student financial aid for which the students at our institutions are eligible, our enrollments, revenues and results of operation could be materially affected.

Changes in Department of Education Regulations. As part of its negotiated rulemaking process, the Department of Education consults with members of the postsecondary education community to identify issues of concern and attempts to agree on proposed regulatory revisions to address those issues before formally proposing regulations. If the Department of Education and negotiators cannot reach consensus on the entire package of draft regulations, the Department of Education is authorized to propose regulations without being bound by any agreements made in the negotiation process.

Beginning in February 2014, the Department of Education held negotiated rulemaking sessions related to proposed regulations to address program integrity and improvement issues for the Title IV programs, including but not limited to, cash management of Title IV program funds and the use of debit cards and the handling of Title IV credit balances, state authorization for programs offered through distance education or correspondence education, state authorization for foreign locations of institutions, clock to credit hour conversion requirements, the definition of "adverse credit" for borrowers of certain loans, and the application of repeat coursework provisions to graduate and undergraduate programs. On October 23, 2014, the Department published final regulations regarding the definition of "adverse credit" for borrowers of certain loans. On May 18, 2015, the Department of Education published proposed regulations for comment regarding cash management of Title IV funds, the eligibility of repeated coursework for purposes of a student's enrollment status and receipt of Title IV funds, and the measurement of programs in credit hours versus clock hours for Title IV purposes. As no proposed rules have yet been issued regarding state authorization for programs offered through distance education and state authorization for foreign locations of institutions, final regulations on those matters are not likely to be issued until sometime in late 2015, at the earliest, and must be issued be in final form by November 1, 2015 to be effective July 1, 2016.

On October 20, 2014, the Department of Education published final regulations implementing changes to the Jeanne Clery Disclosure of Campus Security Policy and Campus Crime Statistics Act (20 U.S.C. § 1092(f)), or the Clery Act, required by March 2013 amendments to the Violence Against Women Act, or VAWA. The final regulations became effective July 1, 2015. Among other things, VAWA and the revised Clery Act regulations require institutions to compile statistics on additional categories of crimes reported to campus security authorities or local police agencies, to implement ongoing crime awareness and prevention programs for students and employees, and to ensure that institutional disciplinary proceedings for certain enumerated crimes meet specific standards.

On October 30, 2014, the Obama administration announced that the Department of Education will lead an effort to formalize an interagency task force to conduct oversight of for-profit institutions of higher education, especially regarding alleged unfair, deceptive, and abusive policies and practices. The task force will include the Departments of Justice, Treasury and Veterans Affairs, as well as the Consumer Financial Protection Bureau, Federal Trade Commission, the Securities and Exchange Commission, and state Attorneys General. The stated purpose of the task force is to "coordinate...activities and promote information sharing to protect students from unfair, deceptive, and abusive policies and practices."

On July 9, 2015, the Department of Education published proposed regulations to establish a new Pay As You Earn Repayment Plan for those not covered by the existing Pay As You Earn Repayment Plan in the Federal Direct Loan Program, and also to establish procedures for Federal Family Education Loan Program loan holders to use to identify U.S. military servicemembers who may be eligible for a lower interest rate on their federal student loans under the Servicemembers Civil Relief Act. Final regulations are anticipated by November 1, 2015, and would be effective July 1, 2016.

Any regulations that reduce or eliminate our students' access to Title IV program funds, that require us to change or eliminate programs or that increase our costs of compliance could have an adverse effect on our business.

Gainful Employment. Under the Higher Education Act, proprietary schools are eligible to participate in Title IV programs in respect of educational programs that lead to "gainful employment in a recognized occupation." Historically, this concept has not been defined in detail.

On October 31, 2014, the Department published final regulations to define whether certain educational programs, including all programs offered by NAU, comply with the Higher Education Act's requirement of preparing students for "gainful employment" in a recognized occupation. The final gainful employment regulations require each educational program offered by proprietary institutions to achieve threshold rates in two debt measure categories: an annual debt-to-annual earnings ("DTE") ratio and an annual debt-to-discretionary income ("DTI") ratio.

The various formulas are calculated under complex methodologies and definitions outlined in the final regulations and, in some cases, are based on data that may not be readily accessible to institutions. The DTE ratio is calculated by comparing (i) the annual loan payment required on the median student loan debt incurred by students receiving Title IV Program funds who completed a particular program and (ii) the higher of the mean or median of those students' annual earnings approximately two to four years after they graduate, to arrive at a percentage rate. The DTI rate is calculated by comparing (x) the annual loan payment required on the median student loan debt incurred by students receiving Title IV Program funds who completed a particular program and (y) the higher of the mean or median of those students' discretionary income approximately two to four years after they graduate to arrive at a percentage rate. The Department receives the earnings data used to calculate these ratios from the Social Security Administration ("SSA"), but institutions do not have access to the SSA earnings information.

The final regulations outline various scenarios under which programs could lose Title IV eligibility for failure to achieve threshold ratios over certain periods of time. A program must achieve a DTE ratio at or below 8%, or a DTI ratio at or below 20%, to be considered "passing." A program with a DTE rate greater than 8% but less than or equal to 12%, or a DTI rate greater than 20% but less than or equal to 30%, is considered "in the zone." A program with a DTE rate greater than 12% and a DTI rate greater than 30% is considered "failing." A program will cease to be eligible for students to receive Title IV Program funds if its DTE and DTI ratios are failing in two out of any three consecutive award years or if both of those rates are either failing or in the zone for four consecutive award years for which the Department calculates debt-to earnings rates. The Department has indicated that the official 2014 gainful employment DTE ratios will be issued sometime during calendar year 2016. The expected timing of the issuance of the 2015 ratios is unknown at this time.

The final regulations also require an institution to provide warnings to current and prospective students in programs which may lose Title IV eligibility at the end of an award or fiscal year. If a program could become ineligible for students to use Title IV Program funds based on its ratios for the next award year, which could occur based on the program's DTE ratios for a single year, the institution must: (1) deliver a warning to current and prospective students in that program at the prescribed time and by a prescribed method which, among other things, states that students may not be able to use Title IV Program funds to attend or continue to attend the program ("Warning"); and (2) not enroll, register or enter into a financial commitment with a prospective student in the program, until three business days after (a) a Warning is provided to the prospective student or (b) a subsequent Warning is provided to the prospective student, if more than 30 days have passed since the Warning was first provided to the prospective student.

If a program becomes ineligible for students to use Title IV Program funds, the institution cannot seek to reestablish the eligibility of that program, or establish the eligibility of a similar program, based on having a classification of instructional program ("CIP") code that has the same first four digits as the CIP code of the ineligible program, until three years following the date on which the program became ineligible.

Additionally, the final regulations require an institution to certify to the Department of Education by December 31, 2015 that its educational programs subject to the gainful employment requirements, which include all programs offered by NAU, meet the applicable requirements for graduates to be professionally or occupationally certified in the state in which the institution is located. The final regulations also impose extensive reporting and disclosure obligations on institutions offering gainful employment programs. The final regulations were effective on July 1, 2015.

We are in the process of evaluating the effect of the final gainful employment regulations. If a particular educational program ceased to become eligible for Title IV program funds, either because it fails to prepare students for gainful employment in a recognized occupation or due to other factors, we could be required to cease offering the program. It is possible that several programs offered by our schools may be adversely impacted by the regulations due to lack of specialized program accreditation or certification or in the states in which such institutions are based. Compliance with the final regulations could increase our cost of doing business, reduce our enrollments and have a material adverse effect on our business, financial condition, results of operations and cash flows.

Incentive Compensation. An educational institution that participates in Title IV programs may not make any commission, bonus or other incentive payments to any persons or entities involved in recruitment or admissions activities or in the awarding of financial aid. The prohibition against incentive compensation applies to any person engaged in student recruitment or admissions activities or in making financial aid award decisions, and any higher level employees with responsibility for such activities. The Department of Education's Program Integrity Regulations issued in October 2010, most of which became effective as of July 1, 2011 (which we refer to herein as the "Program Integrity Regulations"), rescinded previously issued Department of Education guidance and twelve recognized "safe harbor" provisions that specified certain activities and arrangements that were deemed to be permissible incentive compensation. The Department of Education effectively took the position that any commission, bonus or other incentive compensation based in any part, directly or indirectly, on securing enrollment or awarding financial aid is inconsistent with the prohibition against incentive compensation payment in the Higher Education Act. The Department of Education also issued a "Dear Colleague" letter in March 2011 providing additional guidance regarding the scope of the prohibition on incentive compensation and to what employees and types of activities the prohibition applies.

We modified some of our compensation practices as a result of the elimination of the safe harbors. These changes in our compensation practices could (1) reduce the effectiveness of our employees, and make it more difficult for us to attract and retain staff with the desired talent and motivation to succeed and (2) impair our ability to sustain and grow our business. This could also increase marketing costs and reduce revenues if we are unable to maintain or increase student enrollments.

Whistleblower Claims. In recent years, several for-profit education companies have been faced with whistleblower lawsuits under the Federal False Claims Act, known as "qui tam" cases, by current or former employees alleging violations of the prohibition against incentive compensation. In such cases, the whistleblower's claims are reviewed under seal by the Department of Justice for potential intervention. If the Department of Justice elects to intervene, it assumes primary control over the litigation. These types of claims against for-profit educational companies, and the Department of Justice's interest in intervention, are expected to increase in the future. If the Department of Education were to determine that we violated any requirement of Title IV programs, or if we were to be found liable in a False Claims action, or if any third parties we have engaged were to violate this law, we could be fined or sanctioned by the Department of Education or subjected to other monetary liability or penalties that could be substantial, including the possibility of treble damages under a False Claims action, any of which could harm our reputation, impose significant costs and have a material effect on our business, financial condition and results of operations.

State Authorization. To be eligible to participate in Title IV programs, an institution must be licensed or authorized to offer its educational programs by the states in which it is physically located, in accordance with the Department of Education's regulations. The Program Integrity Regulations described above pertain to certain aspects of the administration of Title IV programs, including, but not limited to, state authorization. Among other things, the Program Integrity Regulations require that institutions demonstrate specific state authorization to operate educational programs beyond secondary education and clarify what is required for an institution to be considered "legally authorized" in a state for purpose of participation in Title IV programs. Specifically, the Program Integrity Regulations provide that, effective July 1, 2011, the Department of Education would consider an institution to be legally authorized by a state if the state has a process, applicable to all institutions except tribal and federal institutions, to review and appropriately act on complaints concerning the institution and to enforce applicable state laws, and the institution further satisfies one of the following requirements:

●

the state establishes the institution by name as an educational institution by charter, statute, constitutional provision or other action issued by an appropriate state agency or state entity, and the institution is authorized to operate educational programs beyond secondary education, including programs leading to a certificate or degree;

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the institution complies with applicable state approval or licensure requirements, except that a state may exempt an institution from any such requirement based on (1) the institution's accreditation by one or more accrediting agencies recognized by the Department of Education or (2) the institution being in operation for at least 20 years; and

●	the state has a process, applicable to all institutions except federal and tribal institutions, to review and appropriately act on complaints concerning the institution and applicable state laws.

We operate physical facilities offering educational programs in South Dakota, Colorado, Indiana, Kansas, Minnesota, Missouri, Nebraska, New Mexico, Oklahoma, Oregon, and Texas. In each of these states, we maintain the required authorizations to offer our educational programs under state law. Where required under applicable law, these authorizations from state educational agencies are very important to us. To maintain requisite state authorizations, we are required to continuously meet standards relating to, among other things, educational programs, facilities, instructional and administrative staff, marketing and recruitment, financial operations, addition of new locations and educational programs and various operational and administrative procedures. Failure to comply with applicable requirements of the state educational agencies in South Dakota, Colorado, Kansas, Indiana, Minnesota, Missouri, Nebraska, New Mexico, Oklahoma, Oregon, and Texas could result in us losing our authorization to offer educational programs in those states. If that were to occur, the applicable state educational agency could force us to cease operations in that state. Even if the applicable state educational agency does not require the university to cease operations on an immediate basis, the loss of authorization by the state educational agency in such state would then cause our campuses in such state to lose eligibility to participate in Title IV programs, and such loss of Title IV program eligibility could force us to cease operations in such state. Alternatively, the state educational licensing agencies could restrict our ability to offer certain degree programs. Additionally, if the Department of Education were to determine that our authorizations in South Dakota, Colorado, Indiana, Kansas, Minnesota, Missouri, Nebraska, New Mexico, Oklahoma, Oregon and Texas did not satisfy the Department of Education's state authorization requirements, the campuses in the relevant states could lose their eligibility to participate in Title IV programs, and such loss of Title IV program eligibility could force us to cease operations in such state.

The Program Integrity Regulations also included a requirement that an institution meet any state authorization requirements in a state in which it has distance education students, but in which it is not physically located or otherwise subject to state jurisdiction as a condition of awarding Title IV funds to students in that state. In July 2011, a Federal District Court issued an order vacating the regulation, which was sustained in June 2012 by the United States Court of Appeals for the District of Columbia Circuit. As described above under "Changes in Department of Education Regulations," the Department of Education is again considering Title IV program regulations requiring state authorization for programs offered through distance education or correspondence education. We therefore cannot predict with any certainty the impact of that rulemaking or any future regulation.

Independent of this matter of federal regulation, several states have asserted jurisdiction over educational institutions offering online programs that have no physical location or other presence in the state, but that have some activity in the state, such as enrolling or offering educational services to students who reside in the state, conducting practicaor sponsoring internships in the state, employing faculty who reside in the state or advertising to or recruiting prospective students in the state. Thus, our activities in certain states constitute a presence requiring licensure or authorization under requirements of state law, regulation or policy of the state educational agency, even though we do not have a physical facility in such states. Therefore, in addition to the states where we maintain physical facilities, we have either obtained approvals or exemptions, or are currently in the process of obtaining such approvals or exemptions, that we believe are necessary in connection with our activities that may constitute a presence in such states requiring licensure or authorization by the state educational agency based on the laws, rules or regulations of that state. Notwithstanding our efforts to obtain approvals or exemptions, state regulatory requirements for online education vary among the states, are not well developed in many states, are imprecise or unclear in some states and can change frequently. Because we enroll students in online programs in all 50 states and the District of Columbia, we expect that regulatory authorities in other states where we are not currently licensed or authorized may request that we seek additional licenses or authorizations for these institutions in their states in the future. If we fail to comply with state licensing or authorization requirements for a state, or fail to obtain licenses or authorizations when required, we could lose state licensure or authorization by that state, which could prohibit us from recruiting prospective students or offering services to current students in that state. We could also be subject to other sanctions, including restrictions on activities in that state, fines and penalties. We review the licensure requirements of other states when we believe that it is appropriate to determine whether our activities in those states may constitute a presence or otherwise may require licensure or authorization by the respective state education agencies. New laws, regulations or interpretations related to offering educational programs online could increase our cost of doing business and affect our ability to recruit students in particular states, which could, in turn, adversely affect our enrollments and revenues and have a material effect on our business.

Misrepresentation. An institution participating in Title IV programs is prohibited from making misrepresentations regarding the nature of its educational programs, the nature of financial charges and availability of financial assistance, or the employability of graduates. A misrepresentation is defined in the regulations as any false, erroneous or misleading statement to any student or prospective student, any member of the public, an accrediting agency, a state agency or the Department of Education, and, significantly, the Program Integrity Regulations defined misleading statements to broadly include any statements that have a likelihood or tendency to deceive or confuse. However, in June 2012, the United States Court of Appeals for the District of Columbia Circuit vacated the regulation insofar as it defined misrepresentation to include true and non-deceitful statements that have only the tendency or likelihood to confuse. If we – or any entity, organization, or person with whom we have an agreement to provide educational programs or to provide marketing, advertising, recruiting, or admissions services – commit a misrepresentation for which a person could reasonably be expected to rely, or has reasonably relied, to that person's detriment, the Department of Education could initiate proceedings to revoke our institutions' Title IV eligibility, deny applications made by our institutions, impose fines, or initiate a limitation, suspension or termination proceeding against us. Further, although the Department of Education claims not to have created any private right of action, the misrepresentation regulations could increase risk of qui tam actions under the False Claims Act.

Clery Act. On October 20, 2014, the Department of Education published final regulations implementing changes to the Jeanne Clery Disclosure of Campus Security Policy and Campus Crime Statistics Act (20 U.S.C. § 1092(f)), or the Clery Act, required by March 2013 amendments to the Violence Against Women Act, or VAWA. The final regulations became effective July 1, 2015. Among other things, VAWA and the revised Clery Act regulations require institutions to compile statistics on additional categories of crimes reported to campus security authorities or local police agencies, to implement ongoing crime awareness and prevention programs for students and employees, and to ensure that institutional disciplinary proceedings for certain enumerated crimes meet specific standards.

Eligibility and certification procedures. Each institution must apply periodically to the Department of Education for continued certification to participate in Title IV programs. Such recertification generally is required every six years, but may be required earlier, including when an institution undergoes a change in control. An institution may also come under the Department of Education's review when it expands its activities in certain ways, such as opening an additional location, adding a new educational program or modifying the academic credentials it offers. The Department of Education may place an institution on provisional certification status if it finds that the institution does not fully satisfy all of the eligibility and certification standards and in certain other circumstances, such as when an institution is certified for the first time or undergoes a change in control. During the period of provisional certification, the institution must comply with any additional conditions included in the school's program participation agreement with the Department of Education. In addition, the Department of Education may more closely review an institution that is provisionally certified if it applies for recertification or approval to open a new location, add an educational program, acquire another school or make any other significant change. If the Department of Education determines that a provisionally certified institution is unable to meet its responsibilities under its program participation agreement, it may seek to revoke the institution's certification to participate in Title IV programs without advance notice or opportunity for the institution to challenge the action. Students attending provisionally certified institutions remain eligible to receive Title IV program funds. Our current certification to participate in the Title IV programs, which is not provisional, was effective in June 2013 and extends through March 31, 2019.

Administrative capability. Department of Education regulations specify extensive criteria by which an institution must establish that it has the requisite "administrative capability" to participate in Title IV programs. To meet the administrative capability standards, an institution must, among other things:

●	comply with all applicable Title IV program requirements;

●	have an adequate number of qualified personnel to administer Title IV programs;

●	have acceptable standards for measuring the satisfactory academic progress of its students;

●	not have student loan cohort default rates above specified levels;

●	have various procedures in place for awarding, disbursing and safeguarding Title IV program funds and for maintaining required records;

●	administer Title IV programs with adequate checks and balances in its system of internal controls;

●	not be, and not have any principal or affiliate who is, debarred or suspended from federal contracting or engaging in activity that is cause for debarment or suspension;

●	provide financial aid counseling to its students;

●	refer to the Department of Education's Office of Inspector General any credible information indicating that any student, parent, employee, third-party servicer or other agent of the institution has engaged in any fraud or other illegal conduct involving Title IV programs;

●	submit all required reports and financial statements in a timely manner; and

●	not otherwise appear to lack administrative capability.

If an institution fails to satisfy any of these criteria, the Department of Education may:

●	require the institution to repay Title IV funds its students previously received;

●	transfer the institution from the advance method of payment of Title IV funds to heightened cash monitoring status or the reimbursement method of payment;

●	place the institution on provisional certification status; or

●	commence a proceeding to impose a fine or to limit, suspend or terminate the institution's participation in Title IV programs.

If the Department of Education determines that we failed to satisfy its administrative capability requirements, then our students could lose, or be limited in their access to, Title IV program funding.

Financial responsibility. The Higher Education Act and Department of Education regulations establish extensive standards of financial responsibility that institutions such as us must satisfy to participate in Title IV programs. The Department of Education evaluates institutions for compliance with these standards on an annual basis based on the institution's annual audited financial statements as well as when the institution applies to the Department of Education to have its eligibility to participate in Title IV programs recertified. The most significant financial responsibility standard is the institution's composite score, which is derived from a formula established by the Department of Education based on three financial ratios:

●	equity ratio, which measures the institution's capital resources, financial viability and ability to borrow;

●	primary reserve ratio, which measures the institution's ability to support current operations from expendable resources; and

●	net income ratio, which measures the institution's ability to operate at a profit or within its means.

The Department of Education assigns a strength factor to the results of each of these ratios on a scale from negative 1.0 to positive 3.0, with negative 1.0 reflecting financial weakness and positive 3.0 reflecting financial strength. The Department of Education then assigns a weighting percentage to each ratio and adds the weighted scores for the three ratios together to produce a composite score for the institution. The composite score must be at least 1.5 for the institution to be deemed financially responsible without the need for further Department of Education oversight. In addition to having an acceptable composite score, an institution must, among other things, provide the administrative resources necessary to comply with Title IV program requirements, meet all of its financial obligations including required refunds to students and any Title IV liabilities and debts, be current in its debt payments and not receive an adverse, qualified or disclaimed opinion by its accountants in its audited financial statements.

If the Department of Education determines that an institution does not meet the financial responsibility standards due to a failure to meet the composite score or other factors, the institution should be able to establish financial responsibility on an alternative basis permitted by the Department of Education. This alternative basis could include, in the Department of Education's discretion, posting a letter of credit, accepting provisional certification, complying with additional Department of Education monitoring requirements, agreeing to receive Title IV program funds under an arrangement other than the Department of Education's standard advance funding arrangement, such as the reimbursement method of payment or heightened cash monitoring, or complying with or accepting other limitations on the institution's ability to increase the number of programs it offers or the number of students it enrolls.

Our audited financial statements for the fiscal years ended May 31, 2015 and May 31, 2014 indicated our composite scores for such fiscal years were 3.0 and 2.3, respectively, which are sufficient to be deemed financially responsible under the Department of Education's requirements. If we are unable to meet the minimum composite score or comply with the other standards of financial responsibility, and could not post a required letter of credit or comply with the alternative bases for establishing financial responsibility, then our students could lose their access to Title IV program funding.

Return of Title IV funds for students who withdraw. When a student who has received Title IV funds withdraws from school, the institution must determine the amount of Title IV program funds the student has "earned." If the student withdraws during the first 60% of any period of enrollment or payment period, the amount of Title IV program funds that the student has earned is equal to a pro rata portion of the funds the student received or for which the student would otherwise be eligible. If the student withdraws after the 60% threshold, then the student is deemed to have earned 100% of the Title IV program funds he or she received. The institution must then return the unearned Title IV program funds to the appropriate lender or the Department of Education in a timely manner, which is generally no later than 45 days after the date the institution determined that the student withdrew. If such payments are not timely made, the institution will be required to submit a letter of credit to the Department of Education equal to 25% of the Title IV funds that the institution should have returned for withdrawn students in its most recently completed fiscal year. Under Department of Education regulations, late returns of Title IV program funds for 5% or more of the withdrawn students in the audit sample in the institution's annual Title IV compliance audit for either of the institution's two most recent fiscal years or in a Department of Education program review triggers this letter of credit requirement. We did not exceed this 5% threshold in our annual Title IV compliance audit for either of our two most recent fiscal years.

The "90/10" Rule. A requirement of the Higher Education Act, commonly referred to as the "90/10 Rule," provides that an institution will be placed on provisional certification and may be subject to other conditions from the Department of Education if, under a complex regulatory formula that requires cash basis accounting and other adjustments to the calculation of revenue, the institution derives more than 90% of its revenues for any fiscal year from Title IV program funds, and, further, the institution is subject to loss of eligibility to participate in Title IV programs if it exceeds the 90% threshold for two consecutive fiscal years. This rule applies only to for-profit postsecondary educational institutions, including NAU.

Using the Department of Education's formula under the 90/10 Rule, for our 2015, 2014 and 2013 fiscal years, we derived approximately 89.2%, 89.3% and 89.7%, respectively, of our revenues (calculated on a cash basis) from Title IV program funds. Recent changes in federal law that increased Title IV grant and loan limits, and any additional increases in the future, may result in an increase in the revenues NAU receives from Title IV programs, which could make it more difficult for us to satisfy the 90/10 Rule. In addition, economic downturns that adversely affect students' employment circumstances could also increase their reliance on Title IV programs. We are exploring the feasibility of various potential measures that would be intended to reduce the percentage of NAU's cash basis revenue attributable under the 90/10 Rule to Title IV Program funds. Among other things, we expect to expand our non-Title IV continuing education programming.

Student loan defaults. Under the Higher Education Act, an educational institution may lose its eligibility to participate in some or all Title IV programs if defaults by its students on the repayment of loans received through either the Federal Family Education Loan ("FFEL") Program or the Federal Direct Loan programs exceed certain levels. For each federal fiscal year, the Department of Education calculates a rate of student defaults on such loans for each institution, known as a "cohort default rate." An institution's cohort default rate for a federal fiscal year is calculated by determining the rate at which borrowers that became subject to their repayment obligation in that federal fiscal year defaulted by the end of the following federal fiscal year. Before July 1, 2010, we participated in both the FFEL and Federal Direct Loan programs. As of July 1, 2010, following the elimination of the FFEL program under federal law, we participate only in the Federal Direct Loan program. Defaults by students on the repayment of loans received through the FFEL program still will be counted; however, in the calculation to determine our eligibility to participate in the Federal Direct Loan program.

If the Department of Education notifies an institution that its cohort default rates for each of the three most recent federal fiscal years are 30% or greater, the institution's participation in the Federal Direct Loan and Pell Grant programs ends 30 days after that notification, unless the institution appeals that determination in a timely manner on specified grounds and according to specified procedures. In addition, an institution's participation in the Federal Direct Loan programs ends 30 days after notification by the Department of Education that the institution's most recent cohort default rate is greater than 40%, unless the institution timely appeals that determination on specified grounds and according to specified procedures. An institution whose participation ends under either of these provisions may not participate in the Federal Direct Loan and Pell Grant programs, as applicable, for the remainder of the fiscal year in which the institution receives the notification and for the next two federal fiscal years.

If an institution's cohort default rate equals or exceeds 30% in any single federal fiscal year or any subsequent fiscal year, the institution may be placed on provisional certification status. Provisional certification does not limit an institution's access to Title IV program funds, but it does subject an institution to closer review by the Department of Education if the institution applies for recertification or approval to open a new location, add an educational program, acquire another school or make any other significant change. Additionally, the Department of Education may revoke the certification of a provisionally-certified institution without advance notice if the Department of Education determines that the institution is not fulfilling material Title IV program requirements. We were approved to participate in the FFEL program before its expiration on July 1, 2010, and we currently are approved to participate in the Federal Direct Loan program. The potential sanctions discussed in this section are based on the combined cohort default rate for loans issued to students under both the FFEL program and the Federal Direct Loan program.

Our official cohort default rate for federal fiscal years 2011, 2010 and 20009 as measured over three federal fiscal years of borrower repayment were 21.4%, 24.6% and 22.9%, respectively.

The Department of Education generally publishes draft cohort default rates in February of each year for the repayment period that ended the prior September 30. In February 2015 we received notice from the Department of Education that our draft cohort rate for students who entered repayment during the federal fiscal year ended September 30, 2012, measured over three federal fiscal years of borrower repayment, was 20.8%. Draft cohort default rates do not result in sanctions, are subject to subsequent data corrections and appeals by an institution, and can change between their issuance to institutions and the Department of Education's release of official cohort default rates, which are typically issued annually in September.

Compliance reviews. We are subject to announced and unannounced compliance reviews and audits by various external agencies, including the Department of Education, its Office of Inspector General, institutional and programmatic accreditors, state licensing agencies, agencies that have previously guaranteed FFEL loans, various state approving agencies for financial assistance to veterans and accrediting commissions. As part of the Department of Education's ongoing monitoring of institutions' administration of Title IV programs, the Higher Education Act also requires institutions to annually submit to the Department of Education a Title IV compliance audit conducted by an independent certified public accountant in accordance with applicable federal and Department of Education audit standards. In addition, to enable the Department of Education to make a determination of an institution's financial responsibility, each institution must annually submit audited financial statements prepared in accordance with Department of Education regulations.

From August 18, 2014 to August 22, 2014, the U.S. Department of Education conducted a program review of our administration of Title IV programs for the 2013-2014 award year, as well as our administration of the Clery Act and related regulations and our compliance with the Drug-Free Schools and Communities Act and related regulations. The on-site activities of the program review occurred at our Rapid City and Lee's Summit campuses. The Department issued its preliminary program review report on November 5, 2014, containing findings and requesting additional information with respect to our implementation of requirements for returns of Title IV funds for withdrawn students, measurement of students' satisfactory academic progress, verification of student eligibility for federal student aid, gainful employment program information disclosures, and enrollment data reporting. We responded to the Department of Education's preliminary findings and information requests on March 10, 2015. On May 29, 2015, the Department of Education issued a final program review determination letter considering the review to be closed with no further action required.

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 thousand in Title IV funds and assessed interest to the Department. The Company has recorded this amount as a return of previously recorded revenue. This amount was timely remitted during the third quarter of fiscal 2015 and is shown as a direct reduction of academic revenue.

Privacy of student records. The Family Educational Rights and Privacy Act of 1974, or FERPA, and the Department of Education's FERPA regulations require educational institutions to protect the privacy of students' educational records by limiting an institution's disclosure of a student's personally identifiable information without the student's prior written consent. FERPA also requires institutions to allow students to review and request changes to their educational records maintained by the institution, to notify students at least annually of this inspection right and to maintain records in each student's file listing requests for access to and disclosures of personally identifiable information and the interest of such party in that information. If an institution fails to comply with FERPA, the Department of Education may require corrective actions by the institution or may terminate an institution's receipt of further federal funds. In addition, educational institutions are obligated to safeguard student information pursuant to the Gramm-Leach-Bliley Act, or GLBA, a federal law designed to protect consumers' personal financial information held by financial institutions and other entities that provide financial services to consumers. GLBA and the applicable GLBA regulations require an institution to, among other things, develop and maintain a comprehensive, written information security program designed to protect against the unauthorized disclosure of personally identifiable financial information of students, parents or other individuals with whom such institution has a customer relationship. If an institution fails to comply with the applicable GLBA requirements, it may be required to take corrective actions, be subject to monitoring and oversight by the Federal Trade Commission, or FTC, and be subject to fines or penalties imposed by the FTC. For-profit educational institutions are also subject to the general deceptive practices jurisdiction of the FTC with respect to their collection, use and disclosure of student information. The institution must also comply with the FTC Red Flags Rule, a section of the federal Fair Credit Reporting Act, that requires the establishment of guidelines and policies regarding identity theft related to student credit accounts.

Potential effect of regulatory violations. If we fail to comply with the regulatory standards governing Title IV programs, the Department of Education could impose one or more sanctions, including transferring NAU to the reimbursement or cash monitoring method of payment, requiring us to repay Title IV program funds, requiring us to post a letter of credit in favor of the Department of Education as a condition for continued Title IV certification, taking emergency action against us, initiating proceedings to impose a fine or to limit, suspend or terminate our participation in Title IV programs or referring the matter for civil or criminal prosecution. If such sanctions or proceedings were imposed against us and resulted in a substantial curtailment or termination of our participation in Title IV programs, our enrollments, revenues and results of operations could be materially affected.

In addition to the actions that may be brought against us as a result of our participation in Title IV programs, we are also subject to complaints and lawsuits relating to regulatory compliance brought not only by regulatory agencies, but also by other government agencies and third parties, such as current or former students or employees and other members of the public.

Regulatory Standards that May Restrict Institutional Expansion or Other Changes

Many actions that we may wish to take in connection with expanding our operations or other changes are subject to review or approval by the applicable regulatory agencies.

Adding teaching locations, implementing new educational programs and increasing enrollment. The requirements and standards of state education agencies, accrediting commissions and the Department of Education limit our ability in certain instances to establish additional teaching locations, implement new educational programs or increase enrollment in certain programs. Many states require review and approval before institutions can add new locations or programs. The state educational agencies, the HLC and the specialized accrediting commissions that authorize or accredit us and our programs generally require institutions to notify them in advance of adding new locations or implementing new programs, and upon notification may undertake a review of the quality of the facility or the program and the financial, academic and other qualifications of the institution.

Under regulations adopted by the Department of Education that were effective July 1, 2011, any educational institution that seeks to provide Title IV program funds to students enrolled in a new program that prepares students for gainful employment in a recognized occupation, which includes all programs offered by NAU, must submit a notice to the Department of Education at least 90 days before the expected first day of class. These requirements were vacated by a Federal District Court on June 30, 2012, and thus are not presently in effect. However, as a separate condition for an institution to participate in Title IV programs on a provisional basis, the Department of Education can require prior approval of such programs or otherwise restrict the number of programs an institution may add or the extent to which an institution can modify existing educational programs. If an institution that is required to obtain the Department of Education's advance approval for the addition of a new program or new location fails to do so, the institution may be liable for repayment of the Title IV program funds received by the institution or students in connection with that program or enrolled at that location. Additionally, any delay in obtaining a required Department of Education approval could delay the introduction of the program, which could negatively impact our enrollment growth.

Provisional certification. Each institution must apply to the Department of Education for continued certification to participate in Title IV programs at least every six years and when it undergoes a change in control. An institution may also come under the Department of Education's review when it expands its activities in certain ways, such as opening an additional location, adding an educational program or modifying the academic credentials that it offers.

The Department of Education may place an institution on provisional certification status if it finds that the institution does not fully satisfy all of the eligibility and certification standards. In addition, if a company acquires a school from another entity, the acquired school will automatically be placed on provisional certification when the Department of Education approves the transaction. During the period of provisional certification, the institution must comply with any additional conditions or restrictions included in its program participation agreement with the Department of Education. Students attending provisionally certified institutions remain eligible to receive Title IV program funds, but if the Department of Education finds that a provisionally certified institution is unable to meet its responsibilities under its program participation agreement, it may seek to revoke the institution's certification to participate in Title IV programs without advance notice or advance opportunity for the institution to challenge that action. In addition, the Department of Education may more closely review an institution that is provisionally certified if it applies for recertification or approval to open a new location, add an educational program, acquire another school or make any other significant change.

Acquiring other schools. While we have not acquired any other schools in the past, we may seek to do so in the future. The Department of Education and virtually all state education agencies and accrediting commissions require a company to obtain their approval if it wishes to acquire another school. The level of review varies by individual state and accrediting commission, with some requiring approval of such an acquisition before it occurs while others only consider approval after the acquisition has occurred. The approval of the applicable state education agencies and accrediting commissions is a necessary prerequisite to the Department of Education certifying the acquired school to participate in Title IV programs. The restrictions imposed by any of the applicable regulatory agencies could delay or prevent our acquisition of other schools in some circumstances.

Change in ownership resulting in a change in control. Many states and accrediting commissions require institutions of higher education to report or obtain approval of certain changes in control and changes in other aspects of institutional organization or control. The types of and thresholds for such reporting and approval vary among the states and accrediting commissions. The HLC provides that an institution must obtain its approval in advance of a change in control, structure or organization for the institution to retain its accredited status. In addition, in the event of a change in control, structure or organization, the HLC requires a post-transaction focused visit or other evaluation to review the appropriateness of its approval of the change and whether the institution has met the commitment it made to the HLC prior to the approval. Other specialized accrediting commissions also require an institution to obtain similar approval before or after the event that constitutes a change in control under their standards.

Many states include the transfer of a controlling interest of common stock in the definition of a change in control requiring approval, but their thresholds for determining a change in control vary widely. A change in control under the definition of one state educational agency that regulates us might require us to obtain approval of the change in control to maintain authorization to operate in that state, and in some cases such states could require us to obtain advance approval of the change in control.

Under Department of Education regulations, an institution that undergoes a change in control loses its eligibility to participate in Title IV programs and must apply to the Department of Education to reestablish such eligibility. If an institution files the required application and follows other procedures, the Department of Education may temporarily certify the institution on a provisional basis following the change in control, so that the institution's students retain access to Title IV program funds until the Department of Education completes its full review. In addition, the Department of Education will extend such temporary provisional certification if the institution timely files other required materials, including the approval of the change in control by its state authorizing agency and accrediting commission and an audited balance sheet showing the financial condition of the institution or its parent corporation as of the date of the change in control. If the institution fails to meet any of these applications and other deadlines, its certification will expire and its students will not be eligible to receive Title IV program funds until the Department of Education completes its full review, which commonly takes several months and may take longer. If the Department of Education approves the application after a change in control, it will certify the institution on a provisional basis for a period of up to approximately three years.

Any failure by us to comply with the requirements of the Department of Education, the HLC or the state educational agencies from which we have a license or authorization, or a failure to obtain their approval of the change in control, could result in loss of authorization, accreditation or eligibility to participate in Title IV programs and cause a significant decline in our student enrollments.

A change in control also could occur as a result of future transactions in which we are involved. Some corporate reorganizations and some changes in the board of directors are examples of such transactions. In addition, Department of Education regulations provide that a change in control occurs for a publicly traded corporation if either: (a) there is an event that would obligate the corporation to file a Current Report on Form 8-K with the Securities and Exchange Commission disclosing a change in control, or (b) the corporation has a stockholder that owns at least 25% of the total outstanding voting stock of the corporation and is the largest stockholder of the corporation, and that stockholder ceases to own at least 25% of such stock or ceases to be the largest stockholder. These standards are subject to interpretation by the Department of Education. A significant purchase or disposition of our voting stock in the future, including a disposition of our voting stock by Robert Buckingham's partnership or living trust, could be determined by the Department of Education to be a change in control under this standard. The potential adverse effects of a change in control could influence future decisions by us and our stockholders regarding the sale, purchase, transfer, issuance or redemption of stock. In addition, the adverse regulatory effect of a change in control also could discourage bids for our common stock and could have an adverse effect on the market price of our common stock.

Item 1A. Risk Factors.

The following risk factors and other information included in this Form 10-K should be carefully considered. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently believe are not material may also adversely affect our business, financial condition, operating results, cash flows and prospects.

Risks Related to the Extensive Regulation of our Business

If we fail to comply with the extensive regulatory requirements governing our university, we could incur significant monetary liabilities, fines and penalties, including loss of access to federal student loans and grants for our students, on which we are substantially dependent.

For our fiscal year ended May 31, 2015, we derived approximately 89.2% of our revenues (calculated on a cash basis) from federal student financial aid programs, known as Title IV programs, administered by the United States Department of Education, or the Department of Education. A significant percentage of our students rely on the availability of Title IV program funds to finance their cost of attending NAU. To participate in Title IV programs, a postsecondary institution must be authorized by the appropriate state education agency or agencies, be accredited by an accrediting commission recognized by the Department of Education, and be certified as an eligible institution by the Department of Education. In addition, NAU's operations and programs are regulated by other state education agencies and additional accrediting commissions. We are subject to extensive regulation by the education agencies of multiple states, the HLC, which is our institutional accrediting commission, various specialized accrediting commissions, and the Department of Education. These regulatory requirements cover the vast majority of our operations, including our educational programs, instructional and administrative staff, administrative procedures, marketing, student recruiting and admissions, and financial operations. These regulatory requirements also affect our ability to open additional schools and locations, add new educational programs, change existing educational programs and change our ownership structure.

The agencies and commissions that regulate our operations periodically revise their requirements and modify their interpretations of existing requirements. Regulatory requirements are not always precise and clear, and regulatory agencies may sometimes disagree with the way we interpret or apply these requirements. Any misinterpretation by us of regulatory requirements could adversely affect our business, financial condition and results of operations. If we fail to comply with any of these regulatory requirements, we could suffer financial penalties, limitations on our operations, loss of accreditation, termination of or limitations on our ability to grant degrees and certificates, or limitations on or termination of our eligibility to participate in Title IV programs, each of which could materially affect our business, financial condition and results of operations. In addition, if we are charged with regulatory violations, our reputation could be damaged, which could have a negative impact on our enrollments and materially affect our business, financial condition and results of operations. We cannot predict with certainty how all of these regulatory requirements will be applied, or whether we will be able to comply with all of the applicable requirements in the future.

If we lose our eligibility to participate in Title IV programs for any reason, we would experience a dramatic and adverse decline in revenue, financial condition, results of operations and future growth prospects. Furthermore, we would be unable to continue our business as it currently is conducted, which would be expected to have a material effect on our ability to continue as a going concern.

Congress may revise the laws governing Title IV programs or reduce funding for those programs which could reduce our enrollment and revenue and increase costs of operations.

Political and budgetary concerns significantly affect Title IV programs. The Higher Education Act of 1965, as amended, which is a federal law that governs Title IV programs, must be periodically reauthorized by Congress and was most recently reauthorized in August 2008. Congress also must determine funding levels for Title IV programs on an annual basis and can change the laws governing Title IV programs at any time. Apart from Title IV programs, eligible veterans and military personnel may receive educational benefits for the pursuit of higher education. A reduction in federal funding levels for Title IV programs, or for programs providing educational benefits to veterans and military personnel, could reduce the ability of some students to finance their education. We cannot predict with certainty the nature of any new regulatory requirements, other future revisions to the law or funding levels for Title IV programs. Because a significant percentage of our revenue is and is expected to be derived from Title IV programs, any action by Congress that significantly reduces Title IV program funding or the ability of us or our students to participate in Title IV programs could have a material effect on our enrollments, business, financial condition and results of operations. Congressional action also may require us to modify our practices in ways that could increase administrative costs and reduce profit margins, which could have a material effect on our business, financial condition and results of operations.

If Congress significantly reduced the amount of available Title IV program funding, we would attempt to arrange for alternative sources of financial aid for our students, such as private sources. We cannot provide assurance that one or more private organizations would be willing or able to provide sufficient loans to students attending one of our schools or programs, or that the interest rate and other terms of such loans would be as favorable as Title IV program loans or acceptable to our students or that such private sources would be adequate to replace the full amount of the reduction in Title IV program funding. Therefore, even if some form of private financing sources becomes available, our enrollment could be materially affected. In addition, private organizations could require us to guarantee all or part of this assistance resulting in additional costs to us. If we were to provide more direct financial assistance to our students, we would assume increased credit risks and incur additional costs, which could have a material effect on our business, financial condition and results of operations.

New rulemaking by the Department of Education could result in regulatory changes that could reduce our enrollment and revenue, increase costs of operations, and adversely affect our business.

Negotiated rulemaking is a process whereby the Department of Education consults with members of the postsecondary education community to identify issues of concern and attempts to agree on proposed regulatory revisions to address those issues before the Department of Education formally proposes any regulations. If the Department of Education and negotiators cannot reach consensus on the entire package of draft regulations, the Department of Education is authorized to propose regulations without being bound by any agreements made in the negotiation process. In recent years, the Department of Education has held negotiated rulemaking sessions and published regulations on various topics, as described further in "Item 1 – Business – Regulatory Matters – Changes in Department of Education Regulations."

We cannot predict with certainty when or whether the Department of Education will propose or finalize regulations on topics that may impact us, or the impact of any regulations resulting from the Department of Education's current or future rulemaking activities. In addition, Congress may promulgate legislation, and the executive branch may issue executive orders which would impact us. Any such actions could reduce our enrollments, increase our cost of doing business, and have a material effect on our business. In addition, any regulations that reduce or eliminate our students' access to Title IV program funds, that require us to change or eliminate programs or that increase our costs of compliance could have an adverse effect on our business.

The recently increased focus by Congress on the for-profit education sector could result in legislation or further Department of Education rulemaking restricting Title IV program participation by proprietary schools in a manner that could materially affect our business.

Recently, Congress has placed increased focus on the role that for-profit educational institutions play in higher education, which is described further in Item 1 – Business – Regulatory Matters – Changes in Department of Education Regulations." As described above, the HELP Committee and other Congressional members and committees have scrutinized various aspects of the education industry, including student debt, student recruiting, student outcomes and accreditation matters. The HELP Committee held a series of hearings on the proprietary education sector and released a report in July 2012, which could lead to further investigations of proprietary schools and additional regulations promulgated by the Department of Education. The executive branch and the Department of Defense have also increased their focus on the provision of educational benefits for military personnel and veterans.

We cannot predict whether, or the extent to which, these hearings, reports and review will result in legislation or further rulemaking affecting our participation in Title IV programs. To the extent that any laws or regulations are adopted that limit our participation in Title IV programs or the amount of student financial aid for which the students at our institutions are eligible, our enrollments, revenues and results of operation could be materially affected. In addition, we anticipate that reauthorization of the Higher Education Act will be a priority for the relevant Congressional committees during 2015 and 2016. Any actions that change the requirements for our participation in Title IV Programs or the amount of student financial aid for which our students are eligible would negatively impact our business.

Recent statutory and regulatory changes substantially increased reporting and other requirements that could impair our reputation and adversely affect our enrollments. Our failure to comply with or accurately interpret pertinent disclosure requirements may subject us to penalties and other sanctions.

The most recent reauthorization of the Higher Education Act, in August 2008, contains numerous revisions to the requirements governing Title IV programs. Among other things, institutions participating in Title IV programs are subject to extensive additional reporting and disclosure requirements. The Program Integrity Regulations require a number of specific disclosures to students and prospective students regarding our educational programs. Such disclosures include the occupations that NAU's educational programs prepare students to enter upon completing their program, total program costs and median student debt incurred for our programs, along with program completion and placement rates for our programs. Any failure by us to properly interpret these new requirements could subject us to limitation, suspension or termination of our eligibility to participate in Title IV programs, the imposition of conditions on our participation in Title IV programs, monetary liabilities, fines and penalties or other sanctions imposed by the Department of Education, which could have a material effect on our business, financial condition and results of operations. The prospect of such sanctions may cause us to conservatively interpret the new reporting requirements of Title IV programs by the Department of Education, which may limit our flexibility in operating our business.

If any of the education regulatory agencies or commissions that regulate us do not approve or delay any required approvals of transactions involving a change of control, our ability to operate or participate in Title IV programs may be impaired.

If we experience a change in control under the standards of the Department of Education, the HLC, any applicable state educational licensing agency, or any specialized accrediting agency commission, we must notify or seek the approval of each such agency. These agencies do not have uniform criteria for what constitutes a change in control. Transactions or events that typically constitute a change in control include significant acquisitions or dispositions of the voting stock of an institution or its parent company, and significant changes in the composition of the board of directors of an institution or its parent company. Some of these transactions or events may be beyond our control. Our failure to obtain, or a delay in receiving, approval of any change in control from the Department of Education, the HLC or applicable state educational licensing agencies could impair our ability to operate or participate in Title IV programs, which could have a material effect on our business, financial condition and results of operations. Failure to obtain, or a delay in receiving, approval of any change in control from any state in which we are currently licensed or authorized, or from any of our specialized accrediting commissions, could require us to suspend our activities in that state or suspend offering the applicable programs until we receive the required approval, or could otherwise impair our operations. The potential adverse effects of a change in control could influence future decisions by us and our stockholders regarding the sale, purchase, transfer, issuance or redemption of our stock, which could discourage bids for outstanding shares of the stock and could have an adverse effect on the market price of our shares.

We cannot offer new programs, expand our operations into certain states or acquire additional schools if such actions are not approved by the applicable regulatory and accrediting agencies, and we may have to repay Title IV funds disbursed to students enrolled in any such programs, schools or states if we do not obtain prior approval.

Our expansion plans include offering new educational programs, expanding operations in additional states and potentially acquiring existing schools from other companies. If we are unable to obtain the necessary approvals for such new programs, operations or acquisitions from the Department of Education, the HLC or any applicable state educational licensing agency or accrediting commission, or if we are unable to obtain such approvals in a timely manner, our ability to consummate the planned actions and provide Title IV program funds to any affected students would be impaired, which could have a material effect on our expansion plans and growth. If we were to determine erroneously that any such action did not need approval or that we had obtained all required approvals, including all required approvals for each of our current programs and locations, we could be liable for repayment of Title IV program funds provided to students in that program or at that location.

If the Department of Education does not recertify us to continue participating in Title IV programs, our students would lose their access to Title IV program funds, or we could be recertified but required to accept significant limitations as a condition of our continued participation in Title IV programs.

The Department of Education certification to participate in Title IV programs lasts a maximum of six years, and institutions are required to seek recertification from the Department of Education on a regular basis to continue their participation in Title IV programs. An institution must also apply for recertification by the Department of Education if it undergoes a change in control, as defined by Department of Education regulations, and may be subject to similar review if it expands its operations or educational programs in certain ways. Generally, the recertification process includes a review by the Department of Education of the institution's educational programs and locations, administrative capability, financial responsibility and other oversight categories. The Department of Education could limit, suspend or terminate an institution's participation in Title IV programs for violations of the Higher Education Act or Title IV regulations. Our current certification to participate in the Title IV programs was effective in June 2013 and extends through March 31, 2019. There can be no assurance that the Department of Education will recertify us after our current period of certification or that it would not impose restrictions in connection with any such recertification. In addition, the Department of Education may take emergency action to suspend our certification without advance notice if it receives reliable information that we are violating Title IV requirements and it determines that immediate action is necessary to prevent misuse of Title IV funds. If the Department of Education does not renew or withdraws our certification to participate in Title IV programs at any time, our students would no longer be able to receive Title IV program funds. Similarly, the Department of Education could renew our certification, but restrict or delay our students' receipt of Title IV funds, limit the number of students to whom it could disburse such funds or impose other restrictions. Any of these outcomes could have a material effect on NAU's enrollments and our business, financial condition and results of operations.

We would lose our ability to participate in Title IV programs if we fail to maintain our institutional accreditation, and our student enrollments could decline if we fail to maintain any of our accreditations or approvals.

An institution must be accredited by an accrediting commission recognized by the Department of Education to participate in Title IV programs. We have been granted institutional accreditation by the HLC, which is a regional accrediting commission recognized by the Department of Education. To remain accredited, we must continuously meet accreditation standards relating to, among other things, performance, governance, institutional integrity, educational quality, faculty, administrative capability, resources and financial stability. In January 2015, the HLC notified us that our accreditation has been continued. In addition, many of our individual educational programs are also accredited by specialized accrediting commissions or approved by specialized state agencies. If we fail to satisfy the standards of any of those specialized accrediting commissions or state agencies, we could lose the specialized accreditation or approval for the affected programs, which could result in materially reduced student enrollments in those programs and have a material effect on our business, financial condition and results of operations.

If we fail to maintain any of our state authorizations, we would lose our ability to operate in that state and for campuses in the state to participate in Title IV programs.

An institution must be authorized by each state in which it physically operates to participate in Title IV programs. The Department of Education historically has determined that an institution is authorized for the purpose of eligibility to participate in Title IV program eligibility if the institution's state does not require the institution to obtain licensure or authorization to operate in the state. Under the Program Integrity Regulations, the Department of Education considers an institution to be "legally authorized in a state" if, among other things:

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●	the state has a process, applicable to all institutions except federal and tribal institutions, to review and appropriately act on complaints concerning the institution and applicable state laws.

We operate physical facilities offering educational programs in South Dakota, Colorado, Indiana, Kansas, Minnesota, Missouri, Nebraska, New Mexico, Oklahoma, Oregon and Texas. To maintain our state authorizations, we must continuously meet standards relating to, among other things, educational programs, facilities, instructional and administrative staff, marketing and recruitment, financial operations, addition of new locations and educational programs and various operational and administrative procedures. We may need to apply for additional authorization in these or other states in which we are authorized in order to comply with the Department of Education's state authorization requirements, and the authorization process could result in unexpected delays or other setbacks that could jeopardize our Title IV eligibility. If we fail to satisfy any of these standards, we could lose our authorization from the applicable state educational agency to offer educational programs and could be forced to cease operations in such state. Such a loss of authorization would also cause our physical campus in the state to lose eligibility to participate in Title IV programs. Some states may also prescribe financial regulations that are different from those of the Department of Education and many require the posting of surety bonds. If we fail to comply with state licensing requirements, we may lose our state licensure or authorizations. If we lose state licensure in a state in which we have a physical location, we would also lose Title IV eligibility in that state. Any such event could have a material effect on our business, financial condition and results of operations.

The Program Integrity Regulations also included a requirement that an institution meet any state authorization requirements in a state in which it has distance education students, but in which it is not physically located or otherwise subject to state jurisdiction, as a condition of awarding Title IV funds to students in that state. In July 2011, a Federal District Court issued an order vacating the regulation, which was sustained in June 2012 by the United States Court of Appeals for the District of Columbia Circuit. As described above under "Changes in Department of Education Regulations," the Department of Education is again considering Title IV program regulations requiring state authorization for programs offered through distance education or correspondence education.

We therefore cannot predict with any certainty the impact of that rulemaking or any future regulation. Independent of this matter of federal regulation, several states have asserted jurisdiction over educational institutions offering online programs that have no physical location or other presence in the state, but that have some activity in the state, such as enrolling or offering educational services to students who reside in the state, conducting practice or sponsoring internships in the state, employing faculty who reside in the state or advertising to or recruiting prospective students in the state. Thus, our activities in certain states constitute a presence requiring licensure or authorization under requirements of state law, regulation or policy of the state educational agency, even though we do not have a physical facility in such states. Therefore, in addition to the states where we maintain physical facilities, we have either obtained approvals or exemptions, or are currently in the process of obtaining such approvals or exemptions, that we believe are necessary in connection with our activities that may constitute a presence in such states requiring licensure or authorization by the state educational agency based on the laws, rules or regulations of that state. Notwithstanding our efforts to obtain approvals or exemptions, state regulatory requirements for online education vary among the states, are not well developed in many states, are imprecise or unclear in some states and can change frequently. Because we enroll students in online programs in all 50 states and the District of Columbia, we expect that regulatory authorities in other states where we are not currently licensed or authorized may request that we seek additional licenses or authorizations for these institutions in their states in the future. If we fail to comply with state licensing or authorization requirements for a state, or fail to obtain licenses or authorizations when required, we could lose state licensure or authorization by that state, which could prohibit us from recruiting prospective students or offering services to current students in that state. We could also be subject to other sanctions, including restrictions on activities in that state, fines and penalties. We review the licensure requirements of other states when we believe that it is appropriate to determine whether our activities in those states may constitute a presence or otherwise may require licensure or authorization by the respective state education agencies. New laws, regulations or interpretations related to offering educational programs online could increase our cost of doing business and affect our ability to recruit students in particular states, which could, in turn, adversely affect our enrollments and revenues and have a material effect on our business.

If we do not comply with the Department of Education's "administrative capability" standards, we could suffer financial penalties, be required to accept other limitations to continue participating in Title IV programs or lose our eligibility to participate in Title IV programs.

Department of Education regulations specify extensive criteria an institution must satisfy to establish that it has the requisite "administrative capability" to participate in Title IV programs. These criteria require, among other things, that we:

●	comply with all applicable Title IV program regulations;

●	have capable and sufficient personnel to administer the federal student financial aid programs;

●	not have student loan cohort default rates in excess of specified levels;

●	have acceptable methods of defining and measuring the satisfactory academic progress of our students;

●	have various procedures in place for safeguarding federal funds;

●	not be, and not have any principal or affiliate who is, debarred or suspended from federal contracting or engaging in activity that is cause for debarment or suspension;

●	provide financial aid counseling to our students;

●	refer to the Department of Education's Office of Inspector General any credible information indicating that any applicant, student, employee or agent of the institution has been engaged in any fraud or other illegal conduct involving Title IV programs;

●	submit in a timely manner all reports and financial statements required by Title IV regulations; and

●	not otherwise appear to lack administrative capability.

If an institution fails to satisfy any of these criteria or comply with any other Department of Education regulations, the Department of Education may:

●	require the institution to repay Title IV program funds;

●	transfer the institution from the "advance" system of payment of Title IV program funds to cash monitoring status or to the "reimbursement" system of payment;

●	place the institution on provisional certification status; or

●	commence a proceeding to impose a fine or to limit, suspend or terminate the participation of the institution in Title IV programs.

If we were found not to have satisfied the Department of Education's "administrative capability" requirements, we could be limited in our access to, or lose, Title IV program funding, which could significantly reduce our enrollments and have a material effect on our business, financial condition and results of operations.

If we do not meet specific financial responsibility standards established by the Department of Education, we may be required to post a letter of credit or accept other limitations to continue participating in Title IV programs, or we could lose our eligibility to participate in Title IV programs.

To participate in Title IV programs, an eligible institution must satisfy specific measures of financial responsibility prescribed by the Department of Education, or post a letter of credit in favor of the Department of Education and possibly accept other conditions on its participation in Title IV programs. These financial responsibility tests are applied to each institution on an annual basis based on the institution's audited financial statements, and may be applied at other times, such as if the institution undergoes a change in control. The Department of Education may also apply such measures of financial responsibility to the operating company and ownership entities of an eligible institution and, if such measures are not satisfied by the operating company or ownership entities, require the institution to post a letter of credit in favor of the Department of Education and possibly accept other conditions on its participation in Title IV programs. The operating restrictions that may be placed on an institution that does not meet the quantitative standards of financial responsibility include being transferred from the "advance payment" method of receiving Title IV program funds to either the "reimbursement" or the "heightened cash monitoring" system, which could result in a significant delay in the institution's receipt of those funds. Limitations on, or termination of, our participation in Title IV programs as a result of our failure to demonstrate financial responsibility would limit our students' access to Title IV program funds, which could significantly reduce enrollments and have a material effect on our business, financial condition and results of operations.

As described in more detail under "Regulatory Matters - Regulation of Federal Student Aid Programs - Financial Responsibility," the Department of Education annually assesses our financial responsibility through a composite score determination. Our audited financial statements for the fiscal years ended May 31, 2015 and May 31, 2014 indicated our composite scores for such fiscal years were 3.0 and 2.3, respectively, which are sufficient to be deemed financially responsible under the Department of Education's requirements. If we are unable to meet the minimum composite score or comply with other standards of financial responsibility, and could not post a required letter of credit or comply with alternative basis for establishing financial responsibility, then our students could lose their access to Title IV programs, which can be expected to have a material effect on our business, financial condition and results of operations. In addition, any requirement to post a letter of credit in the future could increase our costs of regulatory compliance.

We may lose our eligibility to participate in the federal student financial aid programs if the percentage of our revenues derived from Title IV programs is too high.

A provision of the Higher Education Act commonly referred to as the 90/10 Rule, as amended in August 2008, provides that a for-profit educational institution loses its eligibility to participate in Title IV programs if, under a complex regulatory formula that requires cash basis accounting and other adjustments to the calculation of revenue, the institution derives more than 90% of its revenues from Title IV program funds for any two consecutive fiscal years. An institution that derives more than 90% of its revenue (on a cash basis) from Title IV programs for any single fiscal year will be placed on provisional certification for at least two fiscal years and may be subject to additional conditions or sanctions imposed by the Department of Education. During the period of provisional certification, the institution must comply with any additional conditions included in the institution's program participation agreement with the Department of Education. In addition, the Department of Education may more closely review an institution that is provisionally certified if it applies for recertification or approval to open a new location, add an educational program, acquire another school or make any other significant change. If the Department of Education determines that a provisionally certified institution is unable to meet its responsibilities under its program participation agreement, the Department of Education may seek to revoke the institution's certification to participate in Title IV programs without advance notice or opportunity for the institution to challenge the action. If we were to violate the 90/10 Rule, we 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 we exceeded the 90% threshold and would be unable to regain eligibility for two fiscal years thereafter. Under regulations that were published by the Department of Education in October 2009, a proprietary institution must disclose in a footnote to its annual audited financial statements its 90/10 calculation and the amounts of the federal and non-federal revenues, by source, included in its 90/10 calculation. The certified public accountant that prepares the institution's audited financial statements is required to review that information and test the institution's calculation. For our 2015, 2014 and 2013 fiscal years, we derived approximately 89.2%, 89.3% and 89.7%, respectively, of our revenues (calculated on a cash basis) from Title IV program funds. If we violate the 90/10 Rule and continue to disburse Title IV program funds to students after the effective date of our loss of eligibility to participate in Title IV programs, we would be required to return those funds to the Department of Education. We are exploring the feasibility of various potential measures that would be intended to reduce the percentage of NAU's cash basis revenue attributable under the 90/10 Rule to Title IV Program funds. Among other things, we expect to expand our non-Title IV continuing education programming. If we were to violate the 90/10 Rule, we 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 we exceeded the 90% Title IV program funds threshold and would be unable to regain eligibility for two fiscal years thereafter.

Increases in Title IV grant and loan limits currently or in the future may result in an increase in the revenues we receive from Title IV programs. Further, a significant number of states in which we operate have faced budget constraints, which have caused or may cause them to reduce state appropriations in a number of areas, including with respect to the amount of financial assistance provided to postsecondary students, which could further increase our percentage of revenues derived from Title IV program funds. Also, the employment circumstances of our students or their parents could also increase reliance on Title IV program funds. We are exploring the feasibility of various potential measures that would be intended to reduce the percentage of NAU's cash basis revenue attributable under the 90/10 Rule to Title IV Program funds. Certain measures that could be taken to maintain compliance with the 90/10 Rule may reduce our revenues, increase our operating expenses, or both, perhaps significantly. If we become ineligible to participate in Title IV programs as a result of noncompliance with the 90/10 Rule, it can be expected to have a material effect on our business, financial condition and results of operations.

We may lose our eligibility to participate in Title IV programs if our student loan default rates are too high.

An educational institution may lose its eligibility to participate in Title IV programs if, for three consecutive years, 30% or more of its students who were required to begin repayment on their student loans in the relevant fiscal year default on their payment by the end of the next federal fiscal year or the subsequent fiscal year. In addition, an institution may lose its eligibility to participate in Title IV programs if the default rate of its students exceeds 40% for any single year. Our official cohort default rate for federal fiscal years 2011, 2010 and 2009 as measured over three federal fiscal years of borrower repayment were 21.4%, 24.6% and 22.9% respectively.

The Department of Education generally publishes draft cohort default rates in February of each year for the prepayment period that ended the prior September. In February 2015, we received notice from the Department of Education that our draft cohort rate for students who entered repayment during the federal fiscal year ended September 30, 2012, measured over three federal fiscal years of borrower repayment, was 20.8%. Draft cohort default rates do not result in sanctions, are subject to subsequent data corrections and appeals by an institution, and can change between their issuance to institutions and the Department of Education's release of official cohort default rates, which are typically issued annually in September. Any increase in interest rates or reliance on "self-pay" students, as well as declines in income or job losses for our students, could contribute to higher default rates on student loans. Exceeding the student loan default rate thresholds and losing eligibility to participate in Title IV programs would have a material effect on our business, financial condition and results of operations. Any future changes in the formula for calculating student loan default rates, economic conditions or other factors that cause our default rates to increase, could place us in danger of losing our eligibility to participate in Title IV programs, which would have a material effect on our business, financial condition and results of operations.

We would be subject to sanctions if we were to pay impermissible commissions, bonuses or other incentive payments to individuals involved in certain recruiting, admission or financial aid activities.

The Higher Education Act prohibits an educational institution that participates in Title IV programs from making any commission, bonus or other incentive payments based directly or indirectly on securing enrollments or financial aid to any persons or entities involved in student recruiting or admissions activities, or in making decisions about the award of student financial assistance. The prohibition against incentive compensation applies to any person engaged in student recruitment or admissions activities or in making financial aid award decisions, and any higher level employees with responsibility for such activities. Under Department of Education regulations in effect prior to July 1, 2011, there were twelve "safe harbor" provisions which specify certain activities and arrangements that an institution may carry out without violating the prohibition against incentive compensation reflected in the Higher Education Act, including the following:

●

an institution could make up to two adjustments (upward or downward) to a covered employee's salary or fixed hourly wage rate within any 12-month period without the adjustment being considered an incentive payment, provided that no adjustment is based solely on the number of students recruited, admitted, enrolled or awarded financial aid;

●	a covered employee could be compensated based upon students successfully completing their educational programs; and

●	the incentive payment prohibition in the Higher Education Act did not apply to managerial and supervisory employees who do not directly manage or supervise employees who are directly involved in recruiting or admissions activities, or the awarding of Title IV funds.

While we believe that our compensation policies and practices have not been based on success in enrolling students in violation of applicable law, the Department of Education's regulations and interpretations of the incentive compensation law do not establish clear criteria for compliance in all circumstances and, in a limited number of instances, our past actions may not have been within the scope of any historic safe harbor provided in the compensation regulations.

Under the Program Integrity Regulations, all of the previous safe harbor provisions were eliminated effective July 1, 2011. The Department of Education effectively has taken the position that any commission, bonus or other incentive compensation based in any part, directly or indirectly, or securing enrollment or awarding financial aid is inconsistent with the prohibition against incentive compensation payment in the Higher Education Act. The Department of Education also issued a "Dear Colleague Letter" in March 2011, providing additional guidance regarding the scope of the prohibition on incentive compensation and to what employees and types of activities the prohibition applies. We modified some of our compensation practices as a result of the elimination of the safe harbors. These changes in our compensation practices could (1) reduce the effectiveness of our employees, and make it more difficult for us to attract and retain staff with the desired talent and motivation to succeed and (2) impair our ability to sustain and grow our business. This could also increase marketing costs and reduce revenues if we are unable to maintain or increase student enrollments.

In addition, in recent years, other postsecondary educational institutions have been named as defendants to whistleblower lawsuits, known as "qui tam" cases, brought by current or former employees pursuant to the Federal False Claims Act, alleging that their institution's compensation practices did not comply with the incentive compensation rule. A qui tam case is a civil lawsuit brought by one or more individuals, referred to as a relator, on behalf of the federal government for an alleged submission to the government of a false claim for payment. The relator, often a current or former employee, is entitled to a share of the government's recovery in the case, including the possibility of treble damages. A qui tam action is always filed under seal and remains under seal until the government decides whether to intervene in the case. If the government intervenes, it takes over primary control of the litigation. If the government declines to intervene in the case, the relator may nonetheless elect to continue to pursue the litigation at his or her own expense on behalf of the government. Any such litigation could be costly and could divert management's time and attention away from the business, regardless of whether a claim has merit.

We are subject to sanctions if we fail to correctly calculate and timely return Title IV program funds for students who withdraw before completing their educational program.

An institution participating in Title IV programs must calculate the amount of unearned Title IV program funds that it has disbursed to students who withdraw from their educational programs before completing such programs and must return those unearned funds to the appropriate lender or the Department of Education in a timely manner, generally within 45 days of the date the institution determines that the student has withdrawn. If the unearned funds are not properly calculated and timely returned for a sufficient percentage of students, we may have to post a letter of credit in favor of the Department of Education equal to 25% of Title IV program funds that should have been returned for such students in the prior fiscal year, and we could be fined or otherwise sanctioned by the Department of Education. If we do not correctly calculate and timely return unearned Title IV program funds, we may have to post letters of credit in favor of the Department of Education, may be liable for repayment of Title IV funds and related interest and may otherwise be subject to adverse actions by the Department of Education, including termination of our participation in Title IV programs, any of which could increase our cost of regulatory compliance and have a material effect on our business, financial condition and results of operations.

If any of our educational programs fail to qualify as programs that lead to gainful employment in a recognized occupation, it could reduce our enrollment and revenue, increase costs of operations, and adversely affect our business.

Under the Higher Education Act, proprietary schools are generally eligible to participate in Title IV programs only to the extent that their educational programs lead to "gainful employment" in a recognized occupation. On October 31, 2014, the Department published final regulations to define whether certain educational programs, including all programs offered by NAU, comply with the Higher Education Act's requirement of preparing students for "gainful employment" in a recognized occupation. The final regulations require each educational program offered by proprietary institutions to achieve threshold rates in two debt measure categories: an annual debt-to-annual earnings ratio and an annual debt-to-discretionary income ratio. The various formulas are calculated under complex methodologies and definitions outlined in the final regulations and, in some cases, are based on data that may not be readily accessible to institutions. Additionally, the final regulations require an institution to certify to the Department of Education by December 31, 2015 that its educational programs subject to the gainful employment requirements, which include all programs offered by our U.S. Institutions, meet the applicable requirements for graduates to be professionally or occupationally certified in the state in which the institution is located. The final regulations also require institutions to provide certain warnings to current and prospective students and impose extensive reporting and disclosure obligations. The final gainful employment regulations are described in greater detail in "Item 1. Business – Regulatory Matters."

We are in the process of evaluating the effect of the final gainful employment regulations and the other new regulations on us. If a particular educational program ceased to become eligible for Title IV program funds, either because it fails to prepare students for gainful employment in a recognized occupation or due to other factors, we could be required to cease offering the program. It is possible that several programs offered by our schools may be adversely impacted by the regulations due to lack of specialized program accreditation or certification or in the states in which such institutions are based. It is possible that any new gainful employment regulations could render a significant number of our programs, and many programs offered by other proprietary educational institutions, ineligible for Title IV funding. In addition, the continuing eligibility of our educational programs for Title IV funding would be at risk due to factors beyond our control, such as changes in the income levels of our former students, increases in interest rates, changes in student mix to persons requiring higher amounts of student loans to complete their programs, changes in student loan delinquency rates and other factors. If a particular program ceased to be eligible for Title IV funding, either because it fails to prepare students for gainful employment in a recognized occupation or due to other factors, we may be required to cease offering that program. We may have to substantially increase our efforts to promote student loan repayment to ensure continued eligibility for certain programs to remain eligible for Title IV funding. We could also be required to increase disclosures to our students and prospective students, and our program growth could be restricted or compromised. Any of these events could materially increase our costs of doing business, cause decreased enrollments, and have a material effect on our business, financial condition, results of operations and cash flows.

We could be held liable for any misrepresentation regarding the nature of our educational programs, financial charges and financial assistance or the employability of our graduates.

An institution participating in Title IV programs is prohibited from making misrepresentations regarding the nature of its educational programs, the nature of financial charges and availability of financial assistance, or the employability of graduates. A misrepresentation is defined in the regulations as any false, erroneous or misleading statement to any student or prospective student, any member of the public, an accrediting agency, a state agency or the Department of Education, and, significantly, the Program Integrity Regulations defined misleading statements to broadly include any statements that have a likelihood or tendency to deceive or confuse. However, in June 2012, the United States Court of Appeals for the District of Columbia Circuit vacated the regulation insofar as it defined misrepresentation to include true and non-deceitful statements that have only the tendency or likelihood to confuse. If we – or any entity, organization, or person with whom we have an agreement to provide educational programs or to provide marketing, advertising, recruiting, or admissions services – commit a misrepresentation for which a person could reasonably be expected to rely, or has reasonably relied, to that person's detriment, the Department of Education could initiate proceedings to revoke our Title IV eligibility, deny applications made by us, impose fines, or initiate a limitation, suspension or termination proceeding against us. Further, although the Department of Education claims not to have created any private right of action, the Program Integrity Regulations' modifications to the misrepresentation regulations could increase risk of qui tam actions under the False Claims Act.

If our students experience a loss or reduction of state financial aid, we could be materially affected.

Some of our students rely on state financial aid to fund a portion of their education. For example, in fiscal year ended May 31, 2015, certain students enrolled at our Minnesota locations received financial assistance through a state financial aid program. Many states in which we operate have faced budget constraints, which have caused or may cause them to reduce or eliminate state appropriations, including with respect to the amount of financial assistance provided to postsecondary students, and additional states may reduce or eliminate such appropriations in the future. In addition, state financial aid programs generally are subject to annual appropriation by the state legislatures, which may eliminate or significantly decrease the amount of state financial aid available to students. We cannot predict whether future reductions in state financial aid programs will occur or how long such reductions will persist. For fiscal year ended May 31, 2015, we derived approximately 1% of our total revenue from state financial aid programs, although the percentage derived by each of our campus locations may vary on an individual basis. The loss or reduction of state financial aid could decrease our student enrollment and could have a material effect on our business.

A substantial decrease in private student financing options or a significant increase in financing costs for our students could have a material effect on us.

Some of our eligible students have used private (i.e., non-Title IV) loan programs to fund a portion of their education costs not covered by Title IV program funds or state financial aid sources. Recent adverse market conditions for consumer and federally guaranteed student loans (including lenders' increasing difficulties in reselling or syndicating student loan portfolios) have resulted, and could continue to result, in providers of private loans reducing the availability of or increasing the costs associated with providing private loans to postsecondary students. In particular, loans to students with low credit scores who would not otherwise be eligible for credit-based private loans have become increasingly difficult to obtain. Prospective students may find that these increased financing costs make borrowing prohibitively expensive and abandon or delay enrollment in postsecondary education programs. If our students' are unable to finance their education our student population could decrease, which would have a material effect on our business, financial condition and results of operations.

Government and regulatory agencies and third parties may conduct compliance reviews, bring claims or initiate litigation against us.

Because we operate in a highly regulated industry, we may be subject to compliance reviews and claims of non-compliance and lawsuits by government agencies, regulatory agencies and third parties, including claims brought by third parties on behalf of the federal government. If the results of these reviews or proceedings are unfavorable to us, or if we are unable to defend successfully against lawsuits or claims, we may be required to pay money damages or be subject to fines, limitations, loss of eligibility for Title IV funding, injunctions or other penalties. Even if we adequately address issues raised by an agency review or successfully defend a lawsuit or claim, we may have to divert significant financial and management resources from our ongoing business operations to address issues raised by those reviews or to defend against those lawsuits or claims. Additionally, we may experience adverse collateral consequences as a result of any negative publicity associated with such claims, including declines in student enrollments and lessened willingness of third parties to do business with us. Claims and lawsuits brought against us may damage our reputation or cost us to incur expenses, even if such claims and lawsuits are without merit.

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 $664,000 in Title IV funds and assessed interest to the Department. The Company has recorded this amount as a return of previously recorded revenue. This amount was timely remitted during the third quarter of fiscal 2015 and is shown as a direct reduction of academic revenue.

Our regulatory environment and our reputation may be negatively influenced by the actions of other postsecondary institutions.

In recent years, regulatory investigations and civil litigation have been commenced against several postsecondary educational institutions. These investigations and lawsuits have alleged, among other things, deceptive trade practices and non-compliance with Department of Education regulations. These allegations have attracted adverse media coverage and have been the subject of federal and state legislative hearings. Although the media, regulatory and legislative focus has been primarily on the allegations made against these specific companies, broader allegations against the overall postsecondary sector may negatively impact public perceptions of postsecondary educational institutions, including us. Such allegations could result in increased scrutiny and regulation by the Department of Education, U.S. Congress, accrediting bodies, state legislatures or other governmental authorities on all postsecondary institutions.

Risks Related to Our Business

We operate in a highly competitive industry, and competitors with greater resources could harm our business, decrease market share and put downward pressure on our tuition rates.

The postsecondary education market is highly fragmented and competitive. We compete for students with traditional public and private two-year and four-year colleges and universities, and other for-profit schools, including those that offer online learning programs, and alternatives to higher education, such as employment and military service. Many public and private schools, colleges and universities, including most major colleges and universities, offer online programs. We expect to experience additional competition in the future as more colleges, universities and for-profit schools offer an increasing number of online programs. Public institutions receive substantial government subsidies, and public and private non-profit institutions have access to government and foundation grants, tax-deductible contributions and other financial resources generally not available to for-profit schools. Accordingly, public and private nonprofit institutions may have instructional and support resources superior to those in the for-profit sector, and public institutions can offer substantially lower tuition prices. Some of our competitors in both the public and private sectors also have substantially greater financial and other resources than us. We may not be able to compete successfully against current or future competitors and may face competitive pressures that could have a material effect on our business, financial condition and results of operations.

Our online and distance learning programs operate in a highly competitive market with rapid technological changes.

Online education is a highly fragmented and competitive market subject to rapid technological change. Competitors vary in size and organization from traditional colleges and universities, many of which offer some form of online education programs, to for-profit schools and software companies providing online education and training software. We expect the online education and training market to be subject to rapid changes in delivery, interaction and other future innovation and advancement. Our success will depend, in part, on our ability to adapt to changing technologies in online and distance learning and offer an attractive online/distance education option while maintaining competitive pricing. Furthermore, the expansion of our online programs and the development of new programs may not be accepted by the online education market. In addition, a general decline in Internet use for any reason, including due to security or privacy concerns, the cost of Internet service or changes in government regulation of Internet use, may result in less demand for online educational services, in which case we may not be able to recruit and retain students and grow our online programs as planned. Accordingly, if we are unable to keep pace with changes in technology or maintain technological relevance, or if the use of the Internet changes, our business, financial condition and results of operations may be adversely affected.

If our graduates are unable to obtain professional licenses or certifications in their chosen field of study, we may face declining enrollments and revenues or be subject to student litigation.

Certain of our students, particularly in the healthcare programs, require or desire professional licenses or certifications after graduation to obtain employment in their chosen fields. Their success in obtaining such licensure depends on several factors, including the individual merits of the student, whether the institution and the program were approved by the state or by a professional association, whether the program from which the student graduated meets all state requirements and whether the institution is accredited. If one or more states refuses to recognize our graduates for professional licensure in the future based on factors relating to us or our programs, the potential growth of our programs would be negatively impacted, which could have a material effect on our business, financial condition and results of operations. In addition, we could be exposed to litigation that would force us to incur legal and other expenses that could have a material effect on our business, financial condition and results of operations.

If we continue to decline in revenue and profitability, our stock price may decline and we may not have adequate financial resources to execute our business plan.

Our revenue decreased from approximately $129.2 million in fiscal 2013 to approximately $127.8 million in fiscal 2014 and then decreased to approximately $117.9 million in fiscal 2015. During the same period, our income before income taxes for fiscal 2013 was $9.2 million, compared to $5.8 million for fiscal 2014 and $11.2 million for fiscal 2015. If we are unable to maintain adequate revenue growth and profitability, our stock price may decline and we may not have adequate financial resources to execute our business plan. We have experienced losses in the past and it is possible we will experience losses in the future. In addition, we expect that our operating expenses and business development expenses will increase as we enroll more students, open new education locations and develop new programs. As a result, there can be no assurance that we will be able to generate sufficient revenues to maintain profitability. In addition, you should not rely on the results of any prior periods as an indication of our future operating performance.

Our financial performance depends on our ability to continue to develop awareness among, and attract and retain, new students.

Building awareness of NAU and the programs and services we offer is critical to our ability to attract prospective students. If we are unable to successfully market and advertise our educational programs, our ability to attract and enroll students could be adversely affected, and, consequently, our ability to increase revenue or maintain profitability could be impaired. It is also critical to our success that we convert prospective students to enrolled students in a cost-effective manner and that these enrolled students remain active in our programs. Some of the factors that could prevent us from successfully enrolling and retaining students include:

●	the reduced availability of, or higher interest rates and other costs associated with, Title IV loan funds or other sources of financial aid;

●	the emergence of more successful competitors;

●	factors related to our marketing, including the costs and effectiveness of Internet advertising and broad-based branding campaigns and recruiting efforts;

●	performance problems with our online systems;

●	failure to maintain institutional and specialized accreditations;

●	failure to obtain and maintain required state authorizations;

●	the requirements of the education agencies that regulate us that restrict the initiation of new locations, new programs and modification of existing programs;

●	the requirements of the education agencies that regulate us that restrict the ways schools can compensate their recruitment personnel;

●	increased regulation of online education, including in states in which we do not have a physical presence;

●	restrictions that may be imposed on graduates of online programs that seek certification or licensure in certain states;

●	student dissatisfaction with our services and programs;

●	adverse publicity regarding us, our competitors, or online or for-profit education generally;

●	price reductions by competitors that we are unwilling or unable to match;

●	a decline in the acceptance of online education;

●	an adverse economic or other development that affects job prospects in our core disciplines;

●	a decrease in the perceived or actual economic benefits that students derive from our programs;

●	litigation or regulatory investigations that may damage our reputation; and

●	changes in the general economy, including employment.

If, for any reason or reasons, including those presented above, we are unable to maintain and increase our awareness among prospective students, recruit students and convert prospective students into enrolled students, our business, financial condition and results of operations could be adversely affected.

Our growth may place a strain on our resources that could adversely affect our systems, controls and operating efficiency.

Our ability to sustain our current rate of growth or profitability depends on a number of factors, including our ability to obtain and maintain regulatory approvals, our ability to maintain operating margins, our ability to recruit and retain high quality academic faculty and administrative personnel and other competitive factors. In recent years, a majority of our growth has resulted from an increase in students enrolling in our Associate degree programs; however, we believe that future growth will be based upon an expansion of our current programs, the addition of new programs, an increase in our physical and online presence, affiliation agreements and increasing enrollments. The growth and expansion of our domestic and international operations may place a significant strain on our resources and increase demands on our management information and reporting systems, financial management controls and personnel. Any failure to effectively manage or maintain growth could have a material effect on our business, financial condition and results of operations.

If we cannot maintain student enrollments, our results of operations may be adversely affected.

Our strategy for growth and profitability depends, in part, upon the retention of our students. While we provide certain services to our students (e.g., tutoring) in an effort to retain students and lower attrition rates, many of our students face financial, personal or family constraints that require them to withdraw within a term or at the end of a given term. Additionally, some students may decide to continue their education at a different institution. If for any reason, we are unable to predict and manage student attrition, our overall enrollment levels would likely decline, which could have a material effect on our business, financial condition and results of operations.

If the proportion of students who are enrolled in our Associate degree programs continues to increase, we may experience increased costs and reduced margins.

In recent years, the proportion of our enrollment composed of Associate degree students has increased. We have experienced certain effects from this shift, such as an increase in our student loan cohort default rate. If this shift towards Associate degree programs continues, we may experience additional consequences, such as higher costs per start, lower retention rates, higher student services costs, an increase in the percentage of our revenue derived from Title IV programs under the 90/10 Rule, more limited ability to implement tuition price increases and other effects that could have a material effect on our business, financial condition and results of operations.

An increase in interest rates could adversely affect our ability to attract and retain students.

For the fiscal years ended May 31, 2015, 2014, and 2013, NAU derived cash receipts equal to approximately 89.2%, 89.3%, and 89.7%, respectively, of its net revenue from tuition financed under Title IV programs, which include student loans with interest rates subsidized by the federal government. Additionally, some students finance their education through private loans that are not subsidized. If our students' employment circumstances are adversely affected by regional or national economic downturns, they may be more heavily dependent on student loans. Interest rates have reached relatively low levels in recent years, creating a favorable borrowing environment for students. However, if interest rates increase or Congress decreases the amount available for Title IV funding, our students may have to pay higher interest rates on their loans. Any future increase in interest rates will result in a corresponding increase in educational costs to our existing and prospective students, which could result in a significant reduction in our student population and revenues. Higher interest rates could also contribute to higher default rates with respect to our students' repayment of their education loans. Higher default rates may in turn adversely impact our eligibility to participate in some or all of the Title IV programs, which could result in a material effect on our enrollments and future growth prospects and our business, financial condition and results of operations.

Our reputation and the value of our stock may be negatively affected by the actions of other postsecondary educational institutions.

In recent years, regulatory proceedings and litigation have been commenced against various postsecondary educational institutions relating to, among other things, deceptive trade practices, false claims against the government and non-compliance with Department of Education requirements, state education laws and state consumer protection laws. These proceedings have been brought by students, the Department of Education, the United States Department of Justice, the United States Securities and Exchange Commission and state governmental agencies, among others. These allegations have attracted adverse media coverage and have been the subject of legislative hearings and regulatory actions at both the federal and state levels, focusing not only on the individual schools but in some cases on the larger for-profit postsecondary education sector as a whole. Adverse media coverage regarding other for-profit education companies or other educational institutions could damage our reputation, result in lower enrollments, revenues and results of operations and have a negative impact on the value of our stock. Such coverage could also result in increased scrutiny and regulation by the Department of Education, Congress, accrediting commissions, state legislatures, state attorneys general, state education agencies or other governmental authorities of all educational institutions, including us.

Our expansion into new markets outside the United States will subject us to risks inherent in international operations, are subject to significant start-up costs and will place strain on our management.

As part of our growth strategy, we intend to continue to establish markets outside the United States, subject to approvals from the HLC and other appropriate accrediting or regulatory agencies. Currently, we have affiliations with institutions in Greece. Our operations in each of the foreign jurisdictions may subject us to additional educational and other regulations of foreign jurisdictions, which may differ materially from the regulations applicable to our domestic operations. Such international expansion is expected to require a significant amount of start-up costs. Additionally, our management does not have significant experience in operating a business at the international level. As a result, we may be unsuccessful in carrying out our plans for international expansion, obtaining the necessary licensing, permits or market saturation, or in successfully navigating other challenges posed by operating an international business.

If we do not maintain existing and develop additional relationships with employers, our future growth may be impaired.

Currently, we have relationships with certain employers to provide their employees with an opportunity to enroll in classes and obtain degrees through us while maintaining their employment. These relationships are an important part of our strategy because they provide us with a steady source of potential working adult students for particular programs and increase our reputation among employers. If we are unable to develop new relationships or maintain our existing relationships, this source of potential students may be impaired and enrollments and revenue may decrease, any of which could have a material effect on our business, financial condition and results of operations.

If students fail to pay their outstanding balances, our business may be harmed.

From time to time, students may carry balances on portions of their education expense not covered by financial aid programs. These balances are unsecured and not guaranteed. Furthermore, disruptive economic events could adversely affect the ability or willingness of our former students to repay student loans, which may increase our student loan cohort default rate and require the devotion of increased time, attention and resources to manage these defaults. As a result, losses related to unpaid student balances in excess of the amounts we have reserved for bad debts, or the failure of students to repay their debt obligations, could have a material effect on our business, financial condition and results of operations.

Government regulations relating to the Internet could increase our cost of doing business and affect our ability to grow.

The increasing popularity and use of the Internet and other online services has led and may lead to the adoption of new laws and regulatory practices in the United States or foreign countries and to new interpretations of existing laws and regulations. These new laws and interpretations may relate to issues such as online privacy, copyrights, trademarks and service marks, sales taxes, fair business practices and the requirement that online education institutions qualify to do business as foreign corporations or be licensed in one or more jurisdictions where they have no physical location. As the proportion of our students who take online courses increases, new laws, regulations or interpretations related to doing business over the Internet could increase our costs of compliance or doing business and materially affect our ability to offer online courses, which would have a material effect on our business, financial condition and results of operations.

Our financial performance depends, in part, on our ability to keep pace with changing market needs.

Increasingly, prospective employers of NAU students require their new employees to possess appropriate technological skills and interpersonal skills, such as communication, critical thinking and teamwork skills. These skills evolve rapidly in a changing economic and technological environment. Accordingly, it is important for our programs to evolve in response to those economic and technological changes. The expansion of existing programs and the development of new programs may not be accepted by current or prospective students or the employers of our graduates. Even if NAU is able to develop acceptable new programs, we may not be able to begin offering those new programs as quickly as required by prospective employers or as quickly as our competitors offer similar programs. In addition, we may be unable to obtain specialized accreditations or licensures that may make certain programs desirable to students. To offer a new academic program, NAU may be required to obtain appropriate federal, state and accrediting agency approvals that may be conditioned or delayed in a manner that could significantly affect our growth plans. In addition, to be eligible for Title IV programs, a new academic program may need to be approved by the Department of Education, the HLC and state educational agencies. If we are unable to adequately respond to changes in market requirements due to regulatory or financial constraints, unusually rapid technological changes or other factors, our ability to attract and retain students could be impaired, the rates at which our graduates obtain jobs involving their fields of study could suffer and our reputation among students, prospective students and employers may be impaired, which could have a material effect on our business, financial condition and results of operations.

Establishing new academic programs or modifying existing programs requires us to invest in management and business development, incur marketing expenses and reallocate other resources. We may have limited experience with any courses in new academic areas and may need to modify our systems, strategy and delivery platform or enter into arrangements with other educational institutions to provide such programs effectively and profitably. If we are unable to offer new courses and programs in a cost-effective manner, or are otherwise unable to effectively manage the operations of newly established academic programs, it could have a material effect on our business, financial condition and results of operations.

Capacity constraints of our computer networks and changes to the acceptance and regulation of online programs could have a material effect on student retention and growth.

If we are successful in increasing student enrollments, additional resources in the forms of human, intellectual and financial capital, as well as information technology resources, will be necessary. We have invested and continue to invest significant resources in information technology when such technology systems and tools have become impaired or obsolete. In an attempt to utilize recent technology, we could install new information technology systems without accurately assessing its costs or benefits or experience delayed or ineffective implementation of new information technology systems. Similarly, we could fail to respond in a timely or sufficiently competitive way to future technological developments in our industry. As a result, this growth may place a significant strain on our operational resources, including our computer networks and information technology infrastructure, thereby restricting our ability to enroll and retain students and grow our online programs.

System disruptions and security threats to our computer networks could have a material effect on our ability to attract and retain students.

The performance and reliability of our computer network infrastructure is critical to our reputation and ability to attract and retain students. Any computer system error or failure, or a sudden and significant increase in traffic on our computer networks, including those that host our online programs, may cause network outages and disrupt our online and on-ground operations that may damage our reputation.

Additionally, we face a number of threats to our computer systems, including unauthorized access, computer hackers, computer viruses and other security problems and system disruptions. We have devoted and will continue to devote significant resources to the security of our computer systems, but they are still vulnerable to security threats. A user or hacker who circumvents security measures could misappropriate proprietary information or cause interruptions or malfunctions in operations. As a result, we expend significant resources to protect against the threat of these system disruptions and security breaches and may have to spend more to alleviate problems caused by these disruptions and breaches, which could have a material effect on our reputation, ability to retain and store data and our business, financial condition and results of operations.

A failure of our information systems to store, process and report relevant data may reduce management's effectiveness, interfere with regulatory compliance and increase operating expenses.

We are heavily dependent on the integrity of our data management systems. If these systems do not effectively collect, store, process and report relevant data for the operation of our business, whether due to equipment malfunction or constraints, software deficiencies or human error, our ability to plan, forecast and execute our business plan and comply with applicable laws and regulations, including the Higher Education Act, will be impaired. Any such impairment of our information systems could materially affect our reputation and our ability to provide student services or accurately budget or forecast operating activity, thereby adversely affecting our financial condition and results of operations.

The personal information that we collect may be vulnerable to breach, theft or loss, and could subject us to liability or adversely affect our reputation and operations.

Possession and use of personal information in our operations subjects us to risks and costs that could harm our business and reputation. We collect, use and retain large amounts of personal information regarding our students and their families, including social security numbers, tax return information, personal and family financial data and credit card numbers. We also collect and maintain personal information of our employees in the ordinary course of business. Some of this personal information is held and managed by certain of our vendors. Although we use security and business controls to limit access and use of personal information, a third party may be able to circumvent those security and business controls, which could result in a breach of student or employee privacy. In addition, errors in the storage, use or transmission of personal information could result in a breach of student or employee privacy. Possession and use of personal information in our operations also subjects us to legislative and regulatory burdens that could require us to implement certain policies and procedures, such as the procedures we adopted to comply with the Red Flags Rule that was promulgated by the Federal Trade Commission under the federal Fair Credit Reporting Act, which requires the establishment of guidelines and policies regarding identity theft related to student credit accounts, and could require us to make certain notifications of data breaches and restrict our use of personal information. A violation of any laws or regulations relating to the collection or use of personal information could result in the imposition of fines against us. As a result, we may be required to expend significant resources to protect against the threat of these security breaches or to alleviate problems caused by these breaches. While we believe we have taken appropriate precautions and safety measures, there can be no assurances that a breach, loss or theft of any such personal information will not occur. Any breach, theft or loss of such personal information could have a material effect on our reputation, could have a material effect on our business, financial condition and results of operations and could result in liability under state and federal privacy statutes and legal actions by state attorneys general and private litigants.

We may incur liability for the unauthorized duplication or distribution of class materials posted online for class discussions.

In some instances, our faculty members or students may distribute to students in class or post various articles or other third-party content on class discussion boards. We may incur liability for the unauthorized duplication or distribution of this material distributed in class or posted online for class discussions. As a for-profit organization, we may be subject to a greater risk of liability for the unauthorized duplication of materials under the Copyright Act than a non-profit institution of higher education. Third parties may raise claims against us for the unauthorized duplication of this material. Any such claims could subject us to costly litigation and impose a significant strain on financial resources and management personnel, regardless of whether the claims have merit. Our general liability insurance may not cover potential claims of this type adequately or at all, and we may be required to alter the content of our courses or pay monetary damages, which could have a material effect on our business, financial condition and results of operations.

We rely on exclusive proprietary rights and intellectual property that may not be adequately protected under current laws.

Our success depends, in part, on our ability to protect our proprietary rights and intellectual property. We rely on a combination of copyrights, trademarks, trade secrets, domain names and contractual agreements to protect our proprietary rights. We rely on trademark protection in both the United States and certain foreign jurisdictions to protect our rights to various marks, as well as distinctive logos and other marks associated with them. We also rely on agreements under which we obtain intellectual property or license rights to own or use content developed by faculty members, content experts and other third-parties. We cannot assure that these measures are adequate, that we have secured, or will be able to secure, appropriate protections for all of our proprietary rights in the United States or any foreign jurisdictions, or that third parties will not terminate license rights or infringe upon or otherwise violate our proprietary rights. Despite our efforts to protect these rights, unauthorized third parties may attempt to infringe our trademarks, use, duplicate or copy the proprietary aspects of our student recruitment and educational delivery methods, curricula, online resource material and other content. Our management's attention may be diverted by these attempts and we have in the past, and may in the future, need to use funds in litigation to protect our proprietary rights against any infringement or violation, which could have a material effect on our business, financial condition and results of operations.

We may be involved in disputes from time to time relating to our intellectual property and the intellectual property of third parties.

We have in the past, and may in the future, become parties to disputes from time to time over rights and obligations concerning intellectual property, and we may not always prevail in these disputes. Third parties may allege that we have not obtained sufficient rights in the content of a course or other intellectual property. Third parties may also raise claims against us alleging infringement or violation of the intellectual property of that third party. Some third party intellectual property rights may be extremely broad, and it may not be possible for us to conduct our operations in such a way as to avoid violating those intellectual property rights. Any such intellectual property claim could subject us to costly litigation and impose a significant strain on our financial resources and management personnel regardless of whether such claim has merit. Our general liability and cyber liability insurance, if any, may not cover potential claims of this type adequately or at all, and we may be required to alter the content of our courses or pay monetary damages or license fees to third parties, which could have a material effect on our business, financial condition and results of operations.

We may not be able to retain key personnel or hire and retain the personnel we need to sustain and grow our business.

Our success depends largely on the skills, efforts and motivations of our executive officers, who have significant experience with our business and within the education industry. Due to the nature of the education industry, we face significant competition in attracting and retaining personnel who possess the skills necessary to sustain and grow our business. The loss of the services of any of our key personnel, or failure to attract and retain other qualified and experienced faculty members and staff members on acceptable terms, could impair our ability to sustain and grow our business.

Our business may be affected by changing economic conditions.

The United States economy and the economies of other key industrialized countries currently have recessionary characteristics, including reduced economic activity, increased unemployment and substantial uncertainty about the financial markets. In addition, homeowners in the United States have experienced an unprecedented reduction in wealth due to the decline in residential real estate values across much of the country. The reduction in wealth, unavailability of credit and unwillingness of employers to sponsor non-traditional educational opportunities for their employees could have a material effect on our business, financial condition and results of operations.

Terrorist attacks and other acts of violence or war, natural disasters or breaches of security could have an adverse effect on our operations.

Terrorist attacks and other acts of violence or war, hurricanes, earthquakes, floods, tornadoes and other natural disasters or breaches of security at our educational sites could disrupt our operations. Terrorist attacks and other acts of violence or war, natural disasters or breaches of security that directly impact our physical facilities, online offerings or ability to recruit and retain students and employees could adversely affect our ability to deliver our programs to our students and, thereby, adversely affect our business, financial condition and results of operations. Furthermore, terrorist attacks and other acts of violence or war, natural disasters or breaches of security could adversely affect the economy and demographics of the affected region, which could cause significant declines in the number of our students in that region and could have a material effect on our business, financial condition and results of operations.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

We lease all of our educational sites and administrative facilities (including those that are pending regulatory approval) located in Colorado, Indiana, Kansas, Minnesota, Missouri, Nebraska, New Mexico, Oklahoma, Oregon, South Dakota, and Texas. Our corporate headquarters is located in Rapid City, South Dakota, as set forth under the heading "Educational and Administrative Sites" under Item 1. As of July 31, 2015, we leased 37 educational sites, distance learning service centers, and administrative facilities.

We evaluate current utilization of our facilities and projected enrollment growth to determine facility needs. We believe our existing facilities are adequate for current requirements and that additional space can be obtained on commercially reasonable terms to meet future requirements.

Our real estate business, Fairway Hills, rents apartment units and develops and sells condominium units in Rapid City, South Dakota, a further description of which is set forth under "Real Estate Operations" in Item 1.

Item 3. Legal Proceedings.

From time to time, we are a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of our business. We are not at this time a party, as plaintiff or defendant, to any legal proceedings that, individually or in the aggregate, would be expected to have a material effect on our business, financial condition or results of operation.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

Our common stock is traded on the Nasdaq Global Market under the symbol "NAUH".

The following table sets forth the high and low sales price, and dividends declared and paid per share of our common stock by quarter for our two most recent fiscal years.

	Fiscal 2015							Fiscal 2014
	Cash Dividends							Cash Dividends
	Declared		High		Low			Declared		High		Low
First Quarter	$	0.045	$	3.43		$	3.00	$	0.045	$	4.00	$	3.25
Second Quarter	$	0.045	$	3.29		$	2.86	$	0.045	$	4.09	$	3.30
Third Quarter	$	0.045	$	3.38		$	2.61	$	0.045	$	3.94	$	3.42
Fourth Quarter	$	0.045	$	3.47		$	2.96	$	0.045	$	3.99	$	3.25

Stockholders

As of August 7, 2015, there were approximately 33 holders of record of our common stock, including The Depository Trust Company, which holds shares of our common stock on behalf of an indeterminate number of beneficial owners.

Dividends

During our fiscal years 2015 and 2014, our board of directors has declared cash dividends on our common stock, and to the extent that funds are available, our board of directors currently intends to continue paying dividends on our common stock. The payment of any dividends in the future, however, will be at the discretion of our board of directors and will depend upon our financial condition, results of operations, earnings, capital requirements, contractual restrictions, outstanding indebtedness and other factors deemed relevant by our board of directors.

Stock Repurchases

The following table presents information about repurchases of our common stock made by us during the fourth quarter of fiscal 2015:

Period	Total Number of Shares Purchased (1)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publically Announced Plans or Programs	Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs
March 1, 2015 through March 31, 2015	820	$	3.29	-	-
April 1, 2015 through April 30, 2015	843	$	3.20	-	-
May 1, 2015 through May 31, 2015	554	$	3.06	-	-

Total-Fourth Quarter	2,217	$	3.19	-	-

(1)

All of the shares of common stock reported as purchased by the Company are attributable to shares of common stock that were withheld to satisfy tax withholding obligations in connection with award of common stock issued under National American University Holdings, Inc. 2009 Stock Option and Compensation Plan to Dr. Ronald Shape as part of his salary pursuant to his employment agreement.

Item 6. Selected Financial Data.

The following table shows our selected consolidated financial and operating data for each of the fiscal years ended May 31, 2015, 2014, 2013, 2012 and 2011. Dlorah was the accounting acquirer in our transaction as described in Item 1 – Business – Corporate Information on this Form 10-K. Accordingly, our historical financial information reflects the operations of Dlorah. The selected consolidated statements of financial data for the fiscal years ended May 31, 2015, 2014, 2013, 2012 and 2011 are derived from the Company's audited consolidated financial statements included in this document and those documents filed in prior years, prepared in accordance with accounting standards generally accepted in the United States. Our historical results are not necessarily indicative of our results for any future period.

This information should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes.

	Year Ended May 31,
	2015			2014			2013				2012				2011
	(dollars in thousands, except per share data)
Income Statement
Total revenues	$	117,891		$	127,753			$	129,176			$	118,894			$	106,808
Operating expenses:
Cost of educational services		28,551			29,478				29,188				27,831				22,575
Selling, general and administrative		73,301			85,286				82,906				77,476				64,474
Auxiliary expense		5,629			6,236				6,780				4,747				2,888
Cost of condominium sales		368			386				192				0				381
(Gain) loss on disposition of property and equipment		(1,710	)		114				100				(320	)			82

Total operating expenses		106,139			121,500				119,166				109,734				90,400
Operating income		11,752			6,253				10,100				9,160				16,408

Other (expense) income		(565	)		(479	)			(826	)			(340	)			271

Income before income taxes		11,187			5,774				9,184				8,820				16,679

Income tax expense		(4,433	)		(2,306	)			(3,698	)			(3,683	)			(6,375	)

Net income		6,754			3,468				5,486				5,137				10,304

Net loss (income) attributable to non-controlling interest		(38	)		17				(40	)			(88	)			(38	)

Net income attributable to National American University Holdings, Inc. and subsidiaries	$	6,716		$	3,485			$	5,446			$	5,049			$	10,266

Income from operations per Common Share
Basic		0.27			0.14				0.21				0.19				0.39
Diluted		0.27			0.14				0.21				0.19				0.38

Balance Sheet
Total assets	$	86,544		$	88,457			$	88,082			$	83,098			$	77,938
Long-term obligations	$	21,183		$	22,696			$	22,593			$	19,719			$	7,075
Cash Dividends declared per Common Share	$	0.18		$	0.18			$	0.16			$	0.13				0.12

	Year Ended May 31,
	2015		2014			2013			2012			2011
			(dollars in thousands, except per share data)
Weighted Average Shares
Basic EPS
Common		25,160,729		25,093,096		25,556,391			26,488,265			26,236,783
Diluted EPS
Common		25,165,732		25,094,361		25,561,468			26,638,427			26,836,039

Other Data (Unaudited)
Income (Loss) from Real Estate Operations Before Taxes	$	1,714	$	(134	)	$	(522	)	$	(255	)	$	(621	)
EBITDA 1	$	18,057	$	12,758		$	15,767		$	13,520		$	19,392
Student Headcount (for Spring quarter of the fiscal year) 2		9,519		10,857			11,472			11,221			10,015

Consists of income attributable to the Company plus income (loss) from non-controlling interest, minus interest income, plus interest expense, plus income taxes, plus depreciation and amortization. We use EBITDA as a measure of operating performance. However, EBITDA is not a recognized measurement under U.S. generally accepted accounting principles, or GAAP, and when analyzing our operating performance, investors should use EBITDA in addition to, and not as an alternative for, income as determined in accordance with GAAP. Because not all companies use identical calculations, our presentation of EBITDA may not be comparable to similarly titled measures of other companies and is therefore limited as a comparative measure. Furthermore, as an analytical tool, EBITDA has additional limitations, including that (a) it is not intended to be a measure of free cash flow, as it does not consider certain cash requirements such as tax payments; (b) it does not reflect changes in, or cash requirements for, our working capital needs; and (c) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized often will have to be replaced in the future, and EBITDA does not reflect any cash requirements for such replacements, or future requirements for capital expenditures or contractual commitments. To compensate for these limitations, we evaluate our profitability by considering the economic effect of the excluded expense items independently as well as in connection with our analysis of cash flows from operations and through the use of other financial measures.

We believe EBITDA is useful to an investor in evaluating our operating performance because it is widely used to measure a company's operating performance without regard to certain non-cash expenses (such as depreciation and amortization) and expenses that are not reflective of our core operating results over time. We believe EBITDA presents a meaningful measure of corporate performance exclusive of our capital structure, the method by which assets were acquired and non-cash charges, and provides us with additional useful information to measure our performance on a consistent basis, particularly with respect to changes in performance from period to period.

2	Student headcount is based on the headcount as of the last day of the university's Spring term, which runs from March to May.

The following table provides a reconciliation of net income attributable to the Company to EBITDA:

	Year Ended May 31,
	2015			2014			2013			2012			2011
	(dollars in thousands)
Net income attributable to the Company	$	6,716		$	3,485		$	5,446		$	5,049		$	10,266
Income (loss) attributable to non-controlling interest		38			(17	)		40			88			38
Interest income		(148	)		(142	)		(111	)		(133	)		(148	)
Interest expense		891			770			1,044			594			0
Income taxes		4,433			2,306			3,698			3,683			6,375
Depreciation and amortization		6,127			6,356			5,650			4,239			2,861

EBITDA	$	18,057		$	12,758		$	15,767		$	13,520		$	19,392

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion together with the financial statements and the related notes included elsewhere in this annual report. This discussion contains forward-looking statements that are based on management's current expectations, estimates and projections about our business and operations, and involves risks and uncertainties. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of a number of factors, including those we discuss under "Risk Factors," "Special Note Regarding Forward-Looking Statements" and elsewhere in this annual report.

Background

National American University, or NAU, is a regionally accredited, for-profit, multi-campus institution of higher learning offering associate, bachelor's, master's and doctoral degree programs in business-related disciplines, such as accounting, applied management, business administration and information technology, and in healthcare-related disciplines, such as nursing and healthcare management. Courses are offered through educational sites as well as online via the Internet. As of May 31, 2015, our operations had 37 locations, including educational sites located in Colorado, Indiana, Kansas, Minnesota, Missouri, Nebraska, New Mexico, Oklahoma, Oregon, South Dakota and Texas, a distance learning service center in Texas and distance learning operations and central administration offices in Rapid City, South Dakota.

As of May 31, 2015, NAU had 2,182 students enrolled at its physical locations, 5,929 students for its online programs, and 1,408 students at its hybrid learning centers that attended physical campus locations and also took classes online. NAU supports the instruction of 2,000 additional students at affiliated institutions for whom NAU provides online course hosting and technical assistance. NAU provides courseware development, technical support and online class hosting services to various colleges, technical schools and training institutions in the United States and Canada who do not have the capacity to develop and operate their own in-house online curriculum for their students. NAU does not share revenues with these institutions, but rather charges a fee for its services, enabling it to generate additional revenue by leveraging its current online program infrastructure.

The real estate operations consist of apartment facilities, condominiums and other real estate holdings in Rapid City, South Dakota. The real estate operations generated approximately 1.0% of our revenues for the fiscal year ended May 31, 2015.

Key Financial Results Metrics

Revenue. Revenue is derived mostly from NAU's operations. For fiscal year ended May 31, 2015, approximately 92.0% of our revenue was generated from NAU's academic revenue, which consists of tuition and fees assessed at the start of each term. The remainder of our revenue comes from NAU's auxiliary revenue from sources such as NAU's online bookstore and the real estate operations rental income and condominium sales. Tuition revenue is reported net of adjustments for refunds and scholarships and is recognized on a daily basis over the length of the term. Upon withdrawal, students generally are refunded tuition based on the uncompleted portion of the term. Auxiliary revenue is recognized as items are sold and services are performed.

Factors affecting revenue include:

●

the number of students who are enrolled and who remain enrolled in courses throughout the term;

●

the number of credit hours per student;

●

the student's degree and program mix;

●

changes in tuition rates;

●

the affiliates with which NAU is working as well as the number of students at the affiliates; and

●

the amount of scholarships for which students qualify.

We record unearned tuition for academic services to be provided in future periods. Similarly, we record a tuition receivable for the portion of the tuition that has not been paid. Tuition receivable at the end of any calendar quarter largely represents student tuition due for the prior academic quarter. Based upon past experience and judgment, we establish an allowance for doubtful accounts to recognize those receivables we anticipate will not be paid. Any uncollected account more than six months past due on students who have left NAU is charged against the allowance. Bad debt expense as a percentage of revenues for the fiscal years ended May 31, 2015, 2014, and 2013 was 5.1%, 3.0% and 3.5%, respectively.

We define enrollments for a particular reporting period as the number of students registered in a course on the last day of the reporting period. Enrollments are a function of the number of continuing students registered and the number of new enrollments registered during the specified period. Enrollment numbers are offset by inactive students, graduations and withdrawals occurring during the period. Inactive students for a particular period are students who are not registered in a class and, therefore, are not generating net revenue for that period.

We believe the principal factors affecting NAU's enrollments and net revenue are the number and breadth of the programs being offered; the effectiveness of our marketing, recruiting and retention efforts; the quality of our academic programs and student services; the convenience and flexibility of our online delivery platform; the availability and amount of federal and other funding sources for student financial assistance; and general economic conditions.

The following chart is a summary of our student enrollment on May 31, 2015, and May 31, 2014, by degree type and by instructional delivery method.

	May 31, 2015 (Spring '15 Qtr)		May 31, 2014 (Spring '14 Qtr)		% Change for same quarter over prior year
	Number of Students		Number of Students
Graduate		331		371		(7.8	%)
Undergraduate and Diploma		9,188		10,486		(12.5	%)

Total		9,519		10,857		(12.3	%)

On-Campus		2,182		2,686		(18.8	%)
Online		5,929		6,481		(8.5	%)
Hybrid		1,408		1,690		(16.7	%)

Total		9,519		10,857		(12.3	%)

We experienced a 12.3% decline in enrollment in spring term 2015 from spring term 2014. This decline was across all degree programs and course delivery methods. We believe our investment to grow our current physical locations and expand academic programming and our strategic plan will be critical in returning to the growth and results of operations that we have seen over the recent years.

We plan to continue expanding and developing our academic programming and potentially making acquisitions. This growth will be subject to applicable regulatory requirements and market conditions. With these efforts, we anticipate positive enrollment trends. To the extent the economic downturn has changed enrollment rates, our ability to maintain or increase enrollment will depend on how economic factors are perceived by our target student market in relation to the advantages of pursuing higher education. If current market conditions continue, we believe that the extent to which we are able to increase enrollment will be correlated with the opening of additional physical locations, the number of programs that are developed, the number of programs that are expanded to other locations, and, potentially, the number of locations and programs added through acquisitions. If market conditions decline or if we are unable to open new physical locations, develop or expand academic programming or make acquisitions, whether as a result of regulatory limitations or other factors, our enrollment rate will likely return to more historic levels.

Expenses. Expenses consist of cost of educational services, selling, general and administrative, auxiliary expenses, the cost of condominium sales, and the loss on disposition of property and equipment. Cost of educational services expenses contains expenditures attributable to the educational activity of NAU. This expense category includes salaries and benefits of faculty and academic administrators, costs of educational supplies, faculty reference and support material and related academic costs, and facility costs. Selling, general and administrative expenses include the salaries of the learner services positions (and other expenses related to support of students), salaries and benefits of admissions staff, marketing expenditures, salaries of other support and leadership services (including finance, human resources, compliance and other corporate functions), as well as depreciation and amortization, bad debt expenses and other related costs associated with student support functions. Auxiliary expenses include expenses for the cost of goods sold, including costs associated with books. The cost of condominium sales is the expense related to condominiums that are sold during the reporting period. The gain or loss on disposition of property and equipment expense records the cost incurred or income received in the disposal of assets that are no longer used by us.

Factors affecting comparability

Set forth below are selected factors we believe have had, or which we expect to have, a significant effect on the comparability of our recent or future results of operations:

Introduction of new programs and specializations. We plan to develop additional degree and diploma programs and specializations over the next several years. When introducing new programs and specializations, we invest in curriculum development, support infrastructure and marketing research. Revenues associated with these new programs are dependent upon enrollments, which are lower during the periods of introduction. During this period of introduction and development, the rate of growth in revenues and operating income has been, and may be, adversely affected, in part, due to these factors. Historically, as the new programs and specializations mature, increases in enrollment are realized, cost-effective delivery of instructional and support services are achieved, economies of scale are recognized and more efficient marketing and promotional processes are gained.

Stock-based compensation. We expect to incur increased non-cash, stock based compensation expense in connection with existing and future issuances under our Stock Plan or other equity incentive plans as compared with prior years in an effort to create a consistent and comprehensive compensation package for management.

Seasonality. Our operations are generally subject to seasonal trends. While we enroll students throughout the year, summer and winter quarter new enrollments and revenue are generally lower than enrollments and revenue in other quarters due to the traditional custom of summer breaks and the holiday break in December and January. In addition, we generally experience an increase in enrollments in the fall of each year when most students seek to begin their postsecondary education.

Critical Accounting Policies and Estimates

The discussion of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures. Management evaluates its estimates and judgments, including those discussed below, on an ongoing basis. These estimates are based on historical experience and on various other assumptions that management believes to be reasonable under the circumstances. The results of our analysis form the basis for making assumptions about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions, and the impact of such differences may be material to the consolidated financial statements. We believe the following critical accounting policies involve more significant judgments and estimates than others used in the preparation of our consolidated financial statements:

Revenue recognition. Academic revenue represented approximately 92%, 92% and 91% of revenue for the fiscal years ended May 31, 2015, 2014, and 2013, respectively. 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 fees 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, students are refunded the portion of tuition and registration fees already paid, that pursuant to the Company's refund policy and applicable federal and state law and accrediting agency standards, the Company is not entitled to. 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).

Allowance for doubtful accounts. We maintain an allowance for doubtful accounts for estimated losses resulting from the inability, failure or refusal of the students to make required payments. We determine the adequacy of the allowance for doubtful accounts based on an analysis of aging of the accounts receivable and with regard to historical bad debt experience. Accounts receivable balances are generally written off when deemed uncollectible at the time the account is returned by an outside collection agency. However, accounts that are 180 days old are fully reserved and management continues collection efforts until it is determined that the possibility of collection is unlikely. Bad debt expense is recorded as a selling, general and administrative expense. As of May 31, 2015, and 2014, the allowance for doubtful accounts was approximately $1.5 million and $1.0 million, respectively. During the fiscal years ended May 31, 2015, 2014, and 2013, bad debt expense was $5.6 million, $3.9 million, and $4.5 million, respectively. The bad debt expense was 5.1%, 3.0%, and 3.5% of total revenue for the fiscal years ended May 31, 2015, 2014 and 2013, respectively.

Regulation and Oversight

We are subject to extensive regulation by state education agencies, accrediting commissions and federal government agencies, particularly by the Department of Education under the Higher Education Act and the regulations promulgated thereunder by the Department of Education. The regulations, standards and policies of these agencies cover substantially all of our operations. For a more complete description of this regulation and oversight, see "Item I – Business – Regulatory Matters."

Department of Education Rulemaking. On October 31, 2014, the Department published final regulations to define whether certain educational programs, including all programs offered by NAU, comply with the Higher Education Act's requirement of preparing students for "gainful employment" in a recognized occupation. The final gainful employment regulations became effective on July 1, 2015 and require each educational program offered by proprietary institutions to achieve threshold rates in two debt measure categories: an annual debt-to-annual earnings ("DTE") ratio and an annual debt-to-discretionary income ("DTI") ratio. Additionally, the final regulations require an institution to certify to the Department of Education by December 31, 2015 that its educational programs subject to the gainful employment requirements, which include all programs offered by our U.S. Institutions, meet the applicable requirements for graduates to be professionally or occupationally certified in the state in which the institution is located. The final gainful employment regulations are discussed in more detail in "Item I – Business – Regulatory Matters." We are in the process of evaluating the effect of the final gainful employment regulations. If a particular educational program ceased to become eligible for Title IV program funds, either because it fails to prepare students for gainful employment in a recognized occupation or due to other factors, we could be required to cease offering the program. It is possible that several programs offered by our schools may be adversely impacted by the regulations due to lack of specialized program accreditation or certification or in the states in which such institutions are based. Compliance with the final regulations could increase our cost of doing business, reduce our enrollments and have a material adverse effect on our business, financial condition, results of operations and cash flows.

Results of Operations - For the Year Ended May 31, 2015 Compared to the Year Ended May 31, 2014

National American University Holdings, Inc.

The following table sets forth statements of operations data as a percentage of total revenue for each of the periods indicated:


	Year-Ended May 31, 2015 In percentages			Year-Ended May 31, 2014 In percentages
Total revenues		100.0	%		100.0	%
Operating expenses:
Cost of educational services		24.2			23.1
Selling, general and administrative		62.2			66.8
Auxiliary expense		4.8			4.9
Cost of condominiums sales		0.3			0.3
(Gain) loss on disposition of property		(1.5	)		0.0

Total operating expenses		90.0			95.1

Operating income		10.0			4.9

Interest income		0.1			0.1
Interest expense		(0.8	)		(0.6	)
Other income - net		0.2			0.1

Income before income taxes		9.5			4.5
Income tax expense		(3.8	)		(1.8	)
Net income attributable to non-controlling interest		0.0			0.0

Net income attributable to the Company		5.7			2.7

For the year ended May 31, 2015, we generated $117.9 million in revenue, a decrease of 7.7% compared to the same period in 2014. This decrease was attributable to a decline in enrollment that was offset by an average tuition increase of 1.0% effective September 2014, fees billed to affiliated institutions for our courseware development, technical support and online class hosting services, and programmatic expansion. Our revenue for the year ended May 31, 2015 consisted of $116.3 million from our NAU operations and $1.6 million from our other operations. Total operating expenses were $106.1 million or 90.0% of total revenue for the year ended May 31, 2015, a decrease of 5.1% compared to the same period in 2014. Income before income taxes was $11.2 million or 9.5% of total revenue for the year ended May 31, 2015, an increase of 93.7% compared to the same period in 2014. Net income attributable to the Company was $6.8 million or 5.8% of total revenue for the year ended May 31, 2015, an increase of 94.8% compared to the same period in 2014. The additional details regarding these variances are described in greater detail below.

NAU

The following table sets forth statements of operations data as a percentage of total revenue for each of the periods indicated:

	Year-Ended May 31, 2015 In percentages			Year-Ended May 31, 2014 In percentages
Total revenues		100.0	%		100.0	%
Operating expenses:
Cost of educational services		24.6			23.4
Selling, general and administrative		61.6			66.3
Auxiliary expense		4.8			4.9
Loss on disposition of property		0.1			0.2
Total operating expenses		91.1			94.8

Operating income		8.9			5.2

Interest income		0.0			0.0
Interest expense		(0.8	)		(0.6	)
Income before non-controlling interest and taxes		8.1			4.6

Total revenue. The total revenue for NAU for the year ended May 31, 2015 was $116.3 million, a decrease of $9.9 million or 7.8%, as compared to total revenue of $126.2 million for the year ended May 31, 2014. The decrease was primarily due to the decreased enrollments of approximately 12.3%. The enrollment decrease can also be attributed, in part, to the current improving economic climate, in which many working adults have chosen not to attend school. The decreased enrollment rates were offset by an average tuition increase of 1.0% that was approved by NAU's board of governors and became effective in September 2014, and fees billed to affiliated institutions for our courseware development, technical support and online class hosting services.

The academic revenue for the year ended May 31, 2015 was $108.4 million, a decrease of $8.7 million or 7.4%, as compared to academic revenue of $117.1 million for the year ended May 31, 2014. The decrease was primarily due to the decreased enrollments over the prior year, as discussed above. The auxiliary revenue was $7.9 million, a decrease of $1.2 million or 13.2%, as compared to auxiliary revenue of $9.1 million for the year ended May 31, 2014. The decrease in auxiliary revenue was primarily driven by decreased enrollments that translated into decreased book sales.

Cost of educational services. The educational services expense as a percentage of academic segment revenue increased by 1.2% for the year ended May 31, 2015 to 24.6%, as compared to 23.4% for the year ended May 31, 2014. The educational services expenses for the year ended May 31, 2015 were $28.5 million, a decrease of $1.0 million, or 3.4%, as compared to educational expenses of $29.5 million for the year ended May 31, 2014. The 1.2% increase in the cost of educational services as a percent of total revenues for the year end May 31, 2015 as compared to the year ended May 31, 2014 was a result of fixed costs such as facility expenses on a decreasing revenue base.

Selling, general and administrative expenses. Selling, general and administrative expenses as a percentage of total academic segment revenue decreased by 4.7% for the year ended May 31, 2015 to 61.6%, as compared to 66.3% for the year ended May 31, 2014. The selling, general and administrative expenses for the year ended May 31, 2015 were $71.7 million, a decrease of $11.9 million, or 14.3% as compared to selling, general and administrative expenses of $83.6 million for the year ended May 31, 2014. This decrease includes $1.5 million of instructional expense decreases, $1.5 million of student services department decreases and $1.2 million in institutional support decreases. These decreases were made in association with our decrease in enrollments.

Auxiliary expenses. Auxiliary expenses for the year ended May 31, 2015 were $5.6 million, a decrease of $0.6 million, or 9.7%, as compared to auxiliary expenses of $6.2 million for the year ended May 31, 2014. This decrease was primarily the result of lower enrollments that translated into lower book sales and cost of books sold.

Income before non-controlling interest and taxes. The income before non-controlling interest and taxes for the year ended May 31, 2015, was $9.5 million, an increase of $3.6 million, or 60.3% compared to the year ended May 31, 2014. The impact is due to factors as explained above.

Results of Operations - For the Year Ended May 31, 2014 Compared to the Year Ended May 31, 2013

National American University Holdings, Inc.

The following table sets forth statements of operations data as a percentage of total revenue for each of the periods indicated:


	Year-Ended May 31, 2014 In percentages			Year-Ended May 31, 2013 In percentages
Total revenues		100.0	%		100.0	%
Operating expenses:
Cost of educational services		23.1			22.6
Selling, general and administrative		66.8			64.2
Auxiliary expense		4.9			5.2
Cost of condominiums sales		0.3			0.1
Loss on disposition of property		0.0			0.1

Total operating expenses		95.1			92.2

Operating income		4.9			7.8

Interest income		0.1			0.1
Interest expense		(0.6	)		(0.8	)
Other income - net		0.1			0.1

Income before income taxes		4.5			7.2
Income tax expense		(1.8	)		(2.9	)
Net income attributable to non-controlling interest		0.0			(0.1	)

Net income attributable to the Company		2.7			4.2

For the year ended May 31, 2014, we generated $127.8 million in revenue, a decrease of 1.1% compared to the same period in 2013. This decrease was attributable to a decline in enrollment that was offset by an average tuition increase of 3.5% effective September 2013, fees billed to affiliated institutions for our courseware development, technical support and online class hosting services, and continued geographic and programmatic expansion. Our revenue for the year ended May 31, 2014 consisted of $126.2 million from our NAU operations and $1.6 million from our other operations. Total operating expenses were $121.5 million or 95.1% of total revenue for the year ended May 31, 2014, an increase of 2.0% compared to the same period in 2013 due to increases of $0.8 million in admissions staffing, $0.6 million in depreciation expense; $0.5 million in new software costs and $0.5 million in insurance premiums. Income before income taxes was $5.8 million or 4.5% of total revenue for the year ended May 31, 2014, a decrease of 37.1% compared to the same period in 2013. Net income attributable to the Company was $3.5 million or 2.7% of total revenue for the year ended May 31, 2014, a decrease of 36.0% compared to the same period in 2013. The additional details regarding these variances are described in greater detail below.

NAU

The following table sets forth statements of operations data as a percentage of total revenue for each of the periods indicated:

	Year-Ended May 31, 2014 In percentages			Year-Ended May 31, 2013 In percentages
Total revenues		100.0	%		100.0	%
Operating expenses:
Cost of educational services		23.4			22.9
Selling, general and administrative		66.3			63.5
Auxiliary expense		4.9			5.3
Loss on disposition of property		0.2			0.0
Total operating expenses		94.8			91.7

Operating income		5.2			8.3

Interest income		0.0			0.1
Interest expense		(0.6	)		(0.8	)
Income before non-controlling interest and taxes		4.6			7.6

Total revenue. The total revenue for NAU for the year ended May 31, 2014 was $126.2 million, a decrease of $1.7 million or 1.3%, as compared to total revenue of $127.9 million for the year ended May 31, 2013. The decrease was primarily due to the decreased enrollments of approximately 5.4%. The enrollment decrease can also be attributed, in part, to the current improving economic climate, in which many working adults have chosen not to attend school. The decreased enrollment rates were offset by an average tuition increase of 3.5% that was approved by NAU's board of governors and became effective in September 2013, and fees billed to affiliated institutions for our courseware development, technical support and online class hosting services.

The academic revenue for the year ended May 31, 2014 was $117.1 million, a decrease of $0.5 million or 0.4%, as compared to academic revenue of $117.6 million for the year ended May 31, 2013. The decrease was primarily due to the decreased enrollments over the prior year, as discussed above. The auxiliary revenue was $9.1 million, a decrease of $1.2 million or 11.5%, as compared to auxiliary revenue of $10.3 million for the year ended May 31, 2013. The decrease in auxiliary revenue was primarily driven by decreased enrollments that translated into decreased book sales.

Cost of educational services. The educational services expense as a percentage of academic segment revenue increased by 0.5% for the year ended May 31, 2014 to 23.4%, as compared to 22.9% for the year ended May 31, 2013. The educational services expenses for the year ended May 31, 2014 were $29.5 million, an increase of $0.3 million, or 0.1%, as compared to educational expenses of $29.2 million for the year ended May 31, 2013. This increase was a result of fixed costs such as facility expenses on a decreasing revenue base.

Selling, general and administrative expenses. The selling, general and administrative expense as a percentage of total academic segment revenue increased by 2.8% for the year ended May 31, 2014 to 66.3%, as compared to 63.5% for the year ended May 31, 2013. The selling, general and administrative expenses for the year ended May 31, 2014 were $83.6 million, an increase of $2.4 million, or 3.0% as compared to selling, general and administrative expenses of $81.2 million for the year ended May 31, 2013. The increase is due to increases of $0.8 million in admissions staffing to attract prospective students, $0.6 million in depreciation expense as a result of recent expansion, $0.5 million in new software costs, and $0.5 million in insurance premiums.

Auxiliary. Auxiliary expenses for the year ended May 31, 2014 were $6.2 million, a decrease of $0.5 million, or 8.0%, as compared to auxiliary expenses of $6.8 million for the year ended May 31, 2013. This decrease was primarily the result of lower enrollments that translated into lower book sales and cost of books sold.

Income before non-controlling interest and taxes. The income before non-controlling interest and taxes for the year ended May 31, 2014 was $5.9 million, a decrease of $3.8 million, or 39.1% compared to the year ended May 31, 2013. The impact is due to additional expenses as explained above.

Liquidity and Capital Resources

Liquidity. At May 31, 2015, and May 31, 2014, cash, cash equivalents and marketable securities were $27.4 million and $19.6 million, respectively. Consistent with our cash management plan and investment philosophy, a portion of the excess cash was invested in United States securities directly or through money market funds, as well as in bank deposits and certificate of deposits. Of the amounts listed above, the marketable securities for May 31, 2015 and May 31, 2014 were $4.1 million and $15.4 million, respectively. During the year ended May 31, 2015, the $12.0 million of U.S. Treasury debt securities outstanding at May 31, 2014 were liquidated.

We retain a $3.0 million revolving line of credit with Great Western Bank. Advances under the line bear interest at a variable rate based on prime and are secured by the Company's checking, savings and investment accounts held by the bank. There were no advances outstanding against the line at May 31, 2015 and May 31, 2014.

Based on our current operations and anticipated growth, the cash flows from operations and other sources of liquidity are anticipated to provide adequate funds for ongoing operations and planned capital expenditures for the near future. These expenditures include our plans for continued expansion of physical locations and development of new programming, development of new hybrid learning centers and growth of our affiliate relationships. We believe that we are positioned to further supplement our liquidity with debt, if needed.

Operating Activities. Net cash provided by operating activities was $8.8 million for the year ended May 31, 2015 compared to net cash used in operating activities of $4.1 million for the year ended May 31, 2014. This increase is primarily due to an increase in cash from the change in timing of the collection of our accounts and other receivables over the prior year. In addition, our net income, as adjusted for non-cash items, increased due to cost cutting initiatives including a reduction in staffing to better align with the decreasing enrollments and needs of the Company resulting in decreased SG&A expenses. The increase in net income was offset by lower revenue resulting from decreased enrollment due to lower market demand among our targeted student demographic resulting, in part, to the current improving economic climate, in which many working adults have chosen not to attend school.

Net cash used in operating activities was $4.1 million for the year ended May 31, 2014 compared to net cash provided by operating activities of $16.0 million for the year ended May 31, 2013. This decrease is primarily the result of a $16.1 million increase in cash used for working capital, which includes a $10.7 million increase in accounts receivable due to spring term money being paid during the summer term and a $3.0 million decrease in accounts payable due primarily to the fact that no new locations were constructed that year. In addition, net income decreased by $2.0 million due to a decrease in enrollment rates as further described above in the "Results of Operations" section, and non-cash items included a $3.0 million decrease in the deferred tax liability offset by higher depreciation and amortization and stock-based compensation expense.

Investing Activities. Net cash provided by investing activities was $15.1 million for the year ended May 31, 2015, as compared to the net cash provided by investing activities of $1.7 million for the year ended May 31, 2014. The increase in the cash provided by investing activities was due, in part to the selling and buying of available-for-sale investments, which resulted in net proceeds of $11.3 million in fiscal 2015 as compared to net proceeds of $5.3 million in fiscal 2014. The increased source of cash from investments was supplemented by a $3.0 million increase in proceeds from the sale of property and equipment primarily related to settlement of the contract for deed on our former Rapid City campus.

Net cash provided by investing activities was $1.7 million for the year ended May 31, 2014, as compared to the net cash used in investing activities of $14.8 million for the year ended May 31, 2013. The increase in the cash provided by investing activities was primarily related to the selling and buying of available-for-sale investments in fiscal year 2014, which resulted in net cash provided of $5.3 million compared to net cash purchases of $5.9 million in fiscal year 2013. The company invests its cash reserves in government treasury bills and the difference is in the timing of the purchases and sales and the length the term of the security purchased. In addition, purchases of property and equipment were reduced by $4.1 million as the Company reduced the rate of growth and need for new physical locations. Additionally a payment of $400 thousand was received on the tenant improvement allowance receivable on the Rapid City Central Administration building.

Financing Activities. Net cash used in financing activities was $4.8 million for May 31, 2015 as compared to net cash used in financing activities of $4.6 million for the year ended May 31, 2014. The decrease is due to $32 thousand dollar decrease in stock repurchases in 2015 offset by $0.1 million increase in dividends paid.

Net cash used in financing activities was $4.6 million for May 31, 2014 as compared to net cash used in financing activities of $5.7 million for the year ended May 31, 2013. The decrease is due to $1.7 million decrease in stock repurchases in 2014 offset by $0.5 million increase in dividends paid.

The table below sets forth our contractual commitments as of May 31, 2015:

	Payments Due By Period (in thousands)
	Total		Within 1 year		1-3 Years		3-5 Years		More than 5 years
Operating leases	$	40,830	$	5,915	$	11,269	$	10,556	$	13,090
Capital leases	$	21,403	$	1,115	$	2,296	$	2,390	$	15,602

Off-Balance Sheet Arrangements

Other than operating leases, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Impact of Inflation

We increase tuition (usually once a year) to assist in offsetting inflationary impacts without creating a hardship for students. Consistent with our operating plan, a yearly salary increase in December (supported by evaluations and recommendations from supervisors) is considered to help alleviate the inflationary effects on staff. There can be no assurance that future inflation will not have an impact on operating results and financial condition.

Item 7A. Quantitative and Qualitative Disclosure About Risk.

Market risk. We have no derivative financial instruments or derivative commodity instruments. Cash in excess of current operating requirements is invested in short-term certificates of deposit and money market instruments.

Interest rate risk. Interest rate risk is managed by investing excess funds in cash equivalents and marketable securities bearing variable interest rates tied to various market indices. As such, future investment income may fall short of expectations due to changes in interest rates or losses in principal may occur if securities are forced to be sold which have declined in market value due to changes in interest rates. At May 31, 2015, a 10% increase or decrease in interest rates would not have a material impact on future earnings, fair values or cash flows. To date there have been no material drawings on the lines of credit.

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		59
Consolidated Balance Sheets as of May 31, 2015 and 2014		60
Consolidated Statements of Income and Comprehensive Income for the fiscal years ended May 31, 2015, 2014 and 201 3		61
Consolidated Statements of Stockholders' Equity for the fiscal years ended May 31, 2015, 2014 and 201 3		62
Consolidated Statements of Cash Flows for the fiscal years ended May 31, 2015, 2014 and 2013		63
Notes to Annual Consolidated Financial Statements		65
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, 2015 and 2014, 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, 2015. 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 consolidated 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 financial position of National American University Holdings, Inc. and subsidiaries as of May 31, 2015 and 2014, and the results of their operations and their cash flows for each of the three years in the period ended May 31, 2015, in conformity with accounting principles generally accepted in the United States of America.

/s/ Deloitte & Touche LLP

Minneapolis , Minnesota

August 7, 2015

NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
AS OF MAY 31, 2015 AND 2014
(In thousands, except share and per share amounts)
	May 31,			May 31,
	2015			2014
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	23,300		$	4,154
Available for sale investments		4,102			15,435
Student receivables - net of allowance of $1,583 and $1,026 at May 31, 2015 and
May 31, 2014, respectively		14,358			16,532
Other receivables		1,195			291
Deferred income taxes		2,335			1,688
Prepaid and other current assets		2,151			2,180
Total current assets		47,441			40,280
Total property and equipment - net		36,390			43,258
OTHER ASSETS:
Condominium inventory		385			744
Land held for future development		312			312
Course development - net of accumulated amortization of $2,760 and $2,421 at
May 31, 2015 and May 31, 2014, respectively		804			1,000
Note receivable - tenant improvements		0			1,308
Deposit on property and equipment		0			200
Other		1,212			1,355
Total other assets		2,713			4,919
TOTAL	$	86,544		$	88,457

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of capital lease payable	$	244		$	206
Accounts payable		3,246			3,411
Dividends payable		1,139			1,134
Income taxes payable		1			1,158
Deferred income		1,459			1,310
Accrued and other liabilities		6,746			7,347
Total current liabilities		12,835			14,566
DEFERRED INCOME TAXES		3,283			4,168
OTHER LONG-TERM LIABILITIES		6,047			6,431
CAPITAL LEASE PAYABLE, NET OF CURRENT PORTION		11,853			12,097
COMMITMENTS AND CONTINGENCIES (Note 15)
STOCKHOLDERS' EQUITY:
Common stock, $0.0001 par value (50,000,000 authorized; 28,262,241 issued and
25,191,414 outstanding as of May 31, 2015; 28,177,827 issued and 25,117,454
outstanding as of May 31, 2014)		3			3
Additional paid-in capital		58,336			59,191
Retained earnings		13,751			11,573
Treasury stock, at cost (3,070,827 shares at May 31, 2015 and 3,060,373
at May 31, 2014)		(19,455	)		(19,423	)
Accumulated other comprehensive loss, net of taxes - unrealized loss on available
for sale securities		(1	)		(3	)
Total National American University Holdings, Inc. stockholders' equity		52,634			51,341
Non-controlling interest		(108	)		(146	)
Total stockholders' equity		52,526			51,195
TOTAL	$	86,544		$	88,457

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

NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
FOR THE YEARS ENDED MAY 31, 2015, 2014, AND 2013
(In thousands, except share and per share amounts)

	2015			2014			2013
REVENUE:
Academic revenue	$	108,360		$	117,099		$	117,609
Auxiliary revenue		7,920			9,076			10,259
Rental income - apartments		1,164			1,138			1,098
Condominium sales		447			440			210

Total revenue		117,891			127,753			129,176

OPERATING EXPENSES:
Cost of educational services		28,551			29,478			29,188
Selling, general and administrative		73,301			85,286			82,906
Auxiliary expense		5,629			6,236			6,780
Cost of condominium sales		368			386			192
(Gain) loss on disposition of property		(1,710	)		114			100

Total operating expenses		106,139			121,500			119,166

OPERATING INCOME		11,752			6,253			10,010

OTHER INCOME (EXPENSE):
Interest income		148			142			111
Interest expense		(891	)		(770	)		(1,044	)
Other income - net		178			149			107

Total other expense		(565	)		(479	)		(826	)

INCOME BEFORE INCOME TAXES		11,187			5,774			9,184

INCOME TAX EXPENSE		(4,433	)		(2,306	)		(3,698	)

NET INCOME		6,754			3,468			5,486

NET (INCOME) LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST		(38	)		17			(40	)

NET INCOME ATTRIBUTABLE TO NATIONAL AMERICAN UNIVERSITY
HOLDINGS, INC. AND SUBSIDIARIES		6,716			3,485			5,446

OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX
Unrealized gains (losses) on investments, net of tax (expense) benefit of
$(2), $1, and $19 for 2015, 2014 and 2013, respectively		2			(10	)		(31	)
Reclassification to earnings of realized losses included in other income-net, net of tax of
$0, $0, and $(8) for 2015, 2014, and 2013, respectively		0			0			13
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX		2			(10	)		(18	)

COMPREHENSIVE INCOME ATTRIBUTABLE TO NATIONAL AMERICAN UNIVERSITY
HOLDINGS, INC.	$	6,718		$	3,475		$	5,428


Basic net earnings per share attributable to National American University Holdings, Inc.	$	0.27		$	0.14		$	0.21
Diluted net earnings per share attributable to National American University Holdings, Inc.	$	0.27		$	0.14		$	0.21
Basic weighted average shares outstanding		25,160,729			25,093,096			25,556,391
Diluted weighted average shares outstanding		25,165,732			25,094,361			25,561,468

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, 2015, 2014, AND 2013
(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, 2012	$	3	$	57,203		$	11,239		$	(17,589	)	$	25		$	(169	)	$	50,712
Purchase of 559,416 shares common stock for the treasury		0		0			0			(1,770	)		0			0			(1,770	)
Share based compensation expense		0		453			0			0			0			0			453
Dividends declared ($0.040 per share)		0		0			(4,075	)		0			0			0			(4,075	)
Net income		0		0			5,446			0			0			40			5,486
Other comprehensive loss, net of tax		0		0			0			0			(18	)		0			(18	)
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

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, 2015, 2014, AND 2013
(In thousands)


	2015			2014			2013

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	6,754		$	3,468		$	5,486
Adjustments to reconcile net income to net cash flows provided by (used in) operating activities:
Depreciation and amortization		6,127			6,356			5,650
(Gain) loss on disposition of property and equipment		(1,710	)		114			100
Realized loss on available for sale investments		0			0			21
Provision for uncollectable tuition		5,602			3,879			4,479
Noncash compensation expense		(855	)		1,535			453
Deferred income taxes		(1,534	)		(1,881	)		1,194
Changes in assets and liabilities:
Accounts and other receivables		(4,332	)		(16,383	)		(5,659	)
Student notes		(19	)		66			(87	)
Bookstore inventory		0			0			6
Condominium inventory		367			382			30
Prepaid and other current assets		(53	)		(1,257	)		(228	)
Accounts payable		230			(1,839	)		1,112
Deferred income		149			146			(41	)
Other long-term liabilities		(384	)		(48	)		2,318
Income tax receivable/payable		(1,157	)		1,280			852
Accrued and other liabilities		(337	)		92			249

Net cash flows provided by (used in) operating activities		8,848			(4,090	)		15,935

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of available for sale investments		(50,141	)		(36,980	)		(39,927	)
Proceeds from sale of available for sale investments		61,478			42,277			34,046
Purchases of property and equipment		(1,311	)		(4,532	)		(8,647	)
Proceeds from sale of property and equipment		3,628			503			21
Course development		(143	)		(247	)		(217	)
Payment of deposit on property and equipment		0			(200	)		0
Payments received on contract for deed		160			296			1
Payments received on note receivable		1,390			641			0
Other		8			(31	)		(19	)

Net cash flows provided by (used in) investing activities		15,069			1,727			(14,742	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of capital lease payable		(206	)		(157	)		(40	)
Purchase of treasury stock		(32	)		(64	)		(1,770	)
Dividends paid		(4,533	)		(4,392	)		(3,911	)

Net cash flows used in financing activities		(4,771	)		(4,613	)		(5,721	)

							(Continued)
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, 2015, 2014, AND 2013
(In thousands)

	2015		2014			2013

NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS	$	19,146	$	(6,976	)	$	(4,528	)

CASH AND CASH EQUIVALENTS - Beginning of year		4,154		11,130			15,658

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

SUPPLEMENTAL DISCLOSURE OF CASH FLOW AND
NON-CASH INFORMATION:
Cash paid for income taxes	$	7,124	$	2,907		$	1,653
Cash paid for interest	$	885	$	787		$	1,045
Tenant improvements on capital lease financed through
note receivable	$	-	$	2,000		$	-
Condominium inventory sold under contract for deed	$	-	$	-		$	162
Property and equipment purchases included in accounts
payable	$	24	$	419		$	670
Dividends declared at May 31, 2015, 2014 and 2013	$	1,139	$	1,134		$	1,004

						(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, 2015, 2014, AND 2013

(In thousands, except share and per share amounts)

1.	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 its 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 income and comprehensive income and appropriately presented the balances as non-controlling interest within the consolidated balance sheet. As of May 31, 2015 and 2014, the consolidated balance sheets include Partnership assets of $685 and $774, respectively, and Partnership liabilities of $94 and $101, respectively. The consolidated statements of income and comprehensive income include Partnership net income (loss) of $75, $(34), and $79, for the years ended May 31, 2015, 2014, and 2013, 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.

2.	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 business-related disciplines, such as accounting, management, business administration and information technology, and in healthcare-related disciplines, such as nursing and healthcare management. In addition, in August 2013, NAU was approved by the Higher Learning Commission to offer an Education Doctorate (Ed.D) in Community College Leadership, which is offered in Austin, Texas. Courses are offered through educational sites and online. Operations include educational sites located in Colorado, Indiana, Kansas, Minnesota, Missouri, Nebraska, New Mexico, Oklahoma, Oregon, South Dakota, and Texas; a 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%, 92% and 91% of the Company's total revenues for the years ended May 31, 2015, 2014, and 2013, respectively, were derived from NAU's academic revenue.

3.	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 government-backed bonds and 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 income and comprehensive income. 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 $61,478, $42,277 and $34,046 for the years ended May 31, 2015, 2014 and 2013, respectively. The net realized gains on sales of investments totaled $0, $0, and $21 for the years ended May 31, 2015, 2014 and 2013, respectively.

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

	2015								2014
			Gross		Gross						Gross		Gross
			Unrealized		Unrealized						Unrealized		Unrealized
	Amortized		Holding		Holding		Fair		Amortized		Holding		Holding			Fair
	Cost		Gains		Losses		Value		Cost		Gains		Losses			Value

U.S. Treasury debt securities	$	-	$	-	$	-	$	-	$	11,995	$	-	$	-		$	11,995
Certificates of deposit		4,102		-		-		4,102		3,445		1		(6	)		3,440

Total	$	4,102	$	-	$	-	$	4,102	$	15,440	$	1	$	(6	)	$	15,435

As of May 31, 2015, the Company's investments all mature in less than one year.

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.

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. The University has determined that most accounts with an outstanding balance of 180 days after the start of the term are uncollectable. Bad debt expense is included in selling, general and administrative expense on the consolidated statements of income and comprehensive income.

Other Receivables - Other receivables are institutional receivables, which are amounts due from other educational institutions to which the University provides instruction and course materials, and are stated at net realizable value.

Note Receivable - Note receivable is stated at the unpaid principal balance. Payments not received in accordance with the terms of the note agreement are considered past due. Based on current payment status and an evaluation of the borrower's ability to make future payments, management has determined no allowance for uncollectible amounts is necessary and no impairment exists.

Interest income is recognized over the term of the note and is calculated using the simple-interest method at a rate of 6% on principal balances outstanding. Interest income was recognized only to the extent cash payments were received. The note receivable was paid in full during the year ended May 31, 2015 (see note 9).

Property and Equipment - Property and equipment are stated at cost. Renewals and improvements exceeding $500 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 operating income. For financial statement purposes, depreciation includes the depreciation of the capital lease asset in the amount of $530 for each of the fiscal years 2015, 2014 and 2013. Total depreciation and amortization expense in operating expenses was $6,127, $6,356, and $5,650 for the fiscal years 2015, 2014, and 2013, respectively. The amortization portion of these amounts relates to capitalized course development costs and was $339, $354, and $351 for the fiscal years 2015, 2014 and 2013, 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:

	2015			2014
Land	$	119		$	565
Land improvements		23			374
Buildings and building improvements		40,718			45,778
Furniture, vehicles, and equipment		28,171			28,293
Total gross property and equipment		69,031			75,010
Less accumulated depreciation		(32,641	)		(31,752	)
Total net property and equipment	$	36,390		$	43,258

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. 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.

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.

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. The Company had no impairments in 2015, 2014, or 2013.

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.

Non-Controlling Interest - The non-controlling interest presented on the consolidated statements of income 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 to have a legal obligation to fund such deficits and believes it is fully collectable at May 31, 2015.

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 fees 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, students are refunded the portion of tuition and registration fees already paid, that pursuant to the Company's refund policy and applicable federal and state law and accrediting agency standards, the Company is not entitled to. 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. Book 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 $6,047 and $6,431, deferred rent and tenant improvement liability at May 31, 2015 and 2014, respectively, is recorded in 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 $9,807, $12,077 and $12,390 for 2015, 2014 and 2013, respectively, are included in selling, general, and administrative expenses on the consolidated statements of income and comprehensive income.

4.	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 in the first quarter ending August 31, 2016. The adoption of this standard is not expected to have a significant impact on the Company's consolidated financial statements.

5.	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 we were to violate the 90/10 Rule, we 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 we 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, 2015, 2014 and 2013, as shown in the underlying calculation:

	2015			2014			2013
Title IV HEA
funds received	$	106,305		$	107,333		$	104,763
Academic revenue	$	119,200	=89.18%	$	120,169	=89.32%	$	116,745	=89.74%
(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 2015, 2014 and 2013 fiscal years, the University's calculations result in a composite score of 3.0, 2.3, and 2.4, respectively. Therefore the University currently meets the minimum composite score requirement as most recently required by the Department of Education.

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.

6.	CONDOMINIUM PROJECT

The Company built 24 condominium units to be sold to the general public. 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. Twelve units have been sold as of May 31, 2015. The unit sold in March 2013 was sold under a financing arrangement. The contract called for interest at 3% and required monthly payments of $0.9 through March 1, 2018. The contract was paid in full in November 2014. The outstanding balance of $154 at May 31, 2014, is recognized as other current assets of $6 and other long-term assets of $148 in the consolidated balance sheet.

7.	CONTRACT FOR DEED

The Company signed a contract for deed on its former Rapid City campus located at 321 Kansas City Street 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 considered consummated because the buyer's initial and continuing investment was not adequate in accordance with ASC 360-20-40, and the note receivable was not supported by specific evidence of collectability. As such, at May 31, 2014 the property remained on the consolidated balance sheet and continued to be depreciated because the asset had not met the held for sale criteria, the note receivable was not recorded, and interest income was recognized as received.

On July 11, 2014 the contract for deed was settled. The Company collected the outstanding proceeds, which included $3,230 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. Rent payments will be made directly to the lessor now that the contract for deed is paid in full.

8.	LINES OF CREDIT

The University maintains a $3,000 unsecured revolving line of credit with Great Western Bank that is subject to annual renewals and currently matures on May 31, 2016. Advances under the line bear interest at prime (3.25% at May 31, 2015). No advances had been made on this line of credit in 2013, 2014 or 2015.

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, 2015, 2014, and 2013, was $6,037, $6,025, and $5,429, respectively.

Future minimum lease payments on non-cancelable operating leases for the five years ending May 31 and thereafter are as follows:

2016	$	5,915
2017		5,640
2018		5,629
2019		5,490
2020		5,066
Thereafter		13,090

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. On June 30, 2014, the landlord of the property paid the $1,373 remaining balance of the note receivable and the balance is now paid in full.

The Company is obligated to make future payments under the capital lease obligation, which totaled $21.4 million, had a net present value of $12.1 million as of May 31, 2015, and was recognized as current and non-current capital lease payable of $244 and $11,853 at May 31, 2015 and $206 and $12,097 at May 31, 2014, respectively. The asset totals $10,600, and accumulated depreciation totals $1,899 and $1,369 at May 31, 2015 and 2014, respectively. The net amount is included in net property and equipment in the consolidated balance sheets.

The following is a schedule of future minimum commitments under the revised capital lease obligation as of May 31, 2015:

2016	$	1,115
2017		1,137
2018		1,159
2019		1,183
2020		1,207
Thereafter		15,602
Total future minimum lease obligation	$	21,403
Less: Imputed interest on capital leases		(9,306	)
Net present value of lease obligations	$	12,097

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, 25,191,414 and 25,117,454 shares of common stock were outstanding as of May 31, 2015 and 2014, respectively. No shares of preferred stock were outstanding at May 31, 2015 and 2014.

During the years ended May 31, 2015 and 2014, respectively, $32 and $64 of additions to treasury stock resulted from the settlement of stock-based compensation.

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, 2015, 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, 2015, 712,730 shares of common stock remain available for issuance under the Plan.

In April 2013, the Company's Board of Directors recommended shareholder approval, and approval was obtained at the October 2013 Shareholder Meeting, to establish 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, 2015, 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 quarter ended August 31, 2013, the Company issued 750,000 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 ending May 31, 2015. 446,500 RSUs were issued with a grant date of June 1, 2013 and a grant date fair value of $3.78 per share. The total fair value of these RSU's was to be amortized over the two year service period.

The remaining 303,500 RSUs were issued with a grant date of June 1, 2013 to certain holders of time based vesting stock options who surrendered a like number of stock options in exchange. This grant was accounted for as a modification of the original option awards. The incremental fair value at the time of the exchange of $890, calculated using the restricted stock unit grant date fair value of $3.78 per share, plus the remaining unamortized fair value associated with the options surrendered of $420, was to be amortized over the two year service period of the RSUs.

During the year ended May 31, 2014, 170,000 RSUs granted under the 2013 Plan were cancelled. During the year ended May 31, 2015, the remaining 580,000 RSUs granted under the 2013 Plan were cancelled and the related compensation expense previously recorded of $1,170 was reversed as the performance criteria was not attained.

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. Shares vest one year from the grant date and require board service for the entire year.

During the year ended May 31, 2014, the Company awarded 30,729 restricted stock awards with time based vesting at a grant date fair value of $3.54 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 expenses associated with restricted stock awards and restricted stock unit awards, respectively, totaled $122 and a reversal of $1,170 for the year ended May 31, 2015, $82 and $1,170 for the year ended May 31, 2014, and $48 and $55 for the year ended May 31, 2013. At May 31, 2015, unamortized compensation cost of restricted stock and restricted stock unit awards totaled $51. The unamortized cost is expected to be recognized over a weighted-average period of 0.4 years as of May 31, 2015.

A summary of restricted shares activity as of May 31, 2015 and 2014, and changes during the years then ended is presented below:

Restricted Shares	Shares			Weighted Average Grant Date Fair Value
Non-vested shares at May 31, 2013		13,442		$	4.46
Granted		477,229			3.76
Modified		303,500			4.31
Vested		(16,001	)		4.30
Forfeited		(170,000	)		3.87
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

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 income 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, 2015 and 2014, the following assumptions were used to determine fair value:

Assumptions used:	2015			2014
Expected term (in years)		5.50			5.75
Expected volatility		51.40	%		56.14	%
Weighted average risk free interest rate		1.52	%		1.92	%
Weighted average risk free interest rate range		1.52-1.52	%		1.90-1.96	%
Weighted average expected dividend		5.79	%		4.97	%
Weighted average expected dividend range		5.79-5.79	%		4.91-5.06	%
Weighted average fair value	$	0.88		$	1.24

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, 2015 and 2014, 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, 2013		368,000		$	7.67		8.4
Granted		25,000			3.63
Exercised		0			0
Modified		(303,500	)		7.46
Forfeited or canceled		(13,750	)		7.80
Outstanding at May 31, 2014		75,750		$	7.17		7.6	$	0
Exercisable at May 31, 2014		49,500		$	9.02		6.5	$	0

Outstanding at May 31, 2014		75,750		$	7.17
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

The Company recorded compensation expense for stock options of $27, $22 and $275 for the years ended May 31, 2015, 2014 and 2013, respectively, in the consolidated statements of operations. As of May 31, 2015, 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, 2015 or 2014.

On May 31, 2013, 303,500 options with a weighted average exercise price of $7.46 were surrendered and canceled in exchange for restricted stock units with a grant date of June 1, 2013.

Dividends

The following table presents details of the Company's fiscal 2015, 2014 and 2013 dividend payments:

Date declared	Record date	Payment date	Per share
April 30, 2012	June 30, 2012	July 9, 2012	$	0.0325
August 27, 2012	September 30, 2012	October 5, 2012	$	0.0400
October 29, 2012	December 14, 2012	December 28, 2012	$	0.0400
January 28, 2013	March 29, 2013	April 12, 2013	$	0.0400
April 29, 2013	June 28, 2013	July 12, 2013	$	0.0400
August 26, 2013	September 30, 2013	October 11, 2013	$	0.0450
October 28, 2013	December 30, 2013	January 10, 2014	$	0.0450
January 25, 2014	March 28, 2014	April 11, 2014	$	0.0450
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

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 $0, 0, and $735 for the years ended May 31, 2015, 2014 and 2013, respectively. At May 31, 2014, $653 was accrued for the University's match, but was later reversed due to a change in estimate. A matching contribution of $708 has been accrued for the year ended May 31, 2015.

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 and other liabilities in the consolidated financial statements, and total $390, $197 and $451 for 2015, 2014 and 2013, 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.

On May 21, 2012, the Company approved a Senior Executive Level Officer Compensation Plan, in connection with establishing the overall compensation levels for the executive management team of the Company for the 2013 fiscal year. Each compensation plan has a base salary component, quarterly achievement award component and an annual achievement award component as defined in the agreements. A similar Named Executive Officer Compensation Plan was announced on April 29, 2013 for the 2014 fiscal year and on April 7, 2014 for the 2015 fiscal year.

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 $340 and $641 at May 31, 2015 and 2014, respectively. Such liability is reported with 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, 2015, 2014 and 2013, were as follows:

	2015			2014			2013
Current tax expense:
Federal	$	5,216		$	3,678		$	2,053
State		751			509			451
		5,967			4,187			2,504

Deferred tax expense:
Federal		(1,396	)		(1,740	)		1,105
State		(138	)		(141	)		89
		(1,534	)		(1,881	)		1,194
Total tax expense	$	4,433		$	2,306		$	3,698

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

	2015			2014			2013

Statutory		34.0	%		34.0	%		34.0	%
State income taxes - net of federal benefit		3.6			4.2			4.2
Permanent differences and other		2.0			1.7			2.1
Effective income tax rate		39.6	%		39.9	%		40.3	%

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:

	2015			2014
Deferred income tax assets:
Accounts receivable allowances	$	616		$	407
Bad debt write-offs		1,544			384
Other		130			122
Accrued salaries		717			1,440
Start up costs		276			305
Capital lease obligations		4,536			4,614
Deferred rent		2,268			2,378
Total deferred income tax assets		10,087			9,650
Deferred income tax liabilities:
Fixed assets and course development		(10,493	)		(11,587	)
Prepaid expenses		(542	)		(543	)
Total deferred income tax liabilities		(11,035	)		(12,130	)
Net deferred income tax liabilities	$	(948	)	$	(2,480	)

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 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 National American University Holdings, Inc. 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:

	For the year ended May 31,
	2015		2014		2013
Numerator:
Net income attributable to National American University Holdings, Inc.	$	6,716	$	3,485	$	5,446
Denominator:
Weighted average shares outstanding used to compute basic net income per common share		25,160,729		25,093,096		25,556,391
Incremental shares issuable upon the assumed vesting of stock options		-		-		-

Incremental shares issuable upon the assumed vesting of restricted shares		5,003		1,265		5,077
Common shares used to compute diluted net income per share		25,165,732		25,094,361		25,561,468
Basic net income per common share	$	0.27	$	0.14	$	0.21

Diluted net income per common share	$	0.27	$	0.14	$	0.21

A total of 78,750, 75,750 and 368,000 shares of common stock subject to issuance upon vesting of stock options for the years ended May 31, 2015, 2014 and 2013, respectively, have been excluded from the calculation of diluted EPS as the effect would have been anti-dilutive.

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.

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, 2015 and 2014:

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, 2015
Investments	$	244	$	3,858	$	-	$	4,102
CD's and money market accounts		269		-		-		269
Money market accounts included in cash equivalents		-		-		-		-
US treasury bills and notes	$	513	$	3,858	$	-	$	4,371

May 31, 2014
Investments	$	243	$	3,197	$	-	$	3,440
CD's and money market accounts		910		-		-		910
Money market accounts included in cash equivalents		11,995		-		-		11,995
US treasury bills and notes	$	13,148	$	3,197	$	-	$	16,345

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

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.

U.S. treasury bills and notes: Closing prices are readily available from active markets and are used as being representative of fair value. The Company classifies these investments as level 1.

Fair value of financial instruments: The Company's financial instruments include cash and cash equivalents, CD's and money market accounts, US treasury bills and notes, 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, and treasury bills and notes are recorded at fair values as indicated in the preceding disclosures. The estimated fair value of capital lease obligations is $12,097 and $12,303 at May 31, 2015 and 2014, 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 operating and reportable segments: NAU and other. The NAU segment contains the revenues and expenses associated with the University operations and the allocated portion of corporate overhead. The other segment contains primarily real estate. These operating segments are divisions of the Company for which separate financial information is available and evaluated regularly by executive management in deciding how to allocate resources and in assessing performance. General administrative costs of the Company are allocated to specific divisions of the Company. The following table presents the reportable segment financial information:

	For the year ended May 31,									For the year ended May 31,									For the year ended May 31,
	2015									2014									2013
							Consolidated									Consolidated									Consolidated
	NAU			Other			Total			NAU			Other			Total			NAU			Other			Total

Revenue:
Academic	$	108,360		$	-		$	108,360		$	117,099		$	-		$	117,099		$	117,609		$	-		$	117,609
Auxiliary		7,920			-			7,920			9,076			-			9,076			10,259			-			10,259
Rental income apartments		-			1,164			1,164			-			1,138			1,138			-			1,098			1,098
Condominium sales		-			447			447			-			440			440			-			210			210

Total revenue		116,280			1,611			117,891			126,175			1,578			127,753			127,868			1,308			129,176

Operating expenses:
Cost of educational services		28,551			-			28,551			29,478			-			29,478			29,188			-			29,188
Selling, general & administrative		71,681			1,620			73,301			83,627			1,659			85,286			81,193			1,713			82,906
Auxiliary		5,629			-			5,629			6,236			-			6,236			6,780			-			6,780
Cost of condominium sales		-			368			368			-			386			386			-			192			192
Loss (gain) on disposition of property		114			(1,824	)		(1,710	)		211			(97	)		114			33			67			100
Total operating expenses		105,975			164			106,139			119,552			1,948			121,500			117,194			1,972			119,166
Income (loss) from operations		10,305			1,447			11,752			6,623			(370	)		6,253			10,674			(664	)		10,010
Other income (expense):
Interest inc		51			97			148			54			88			142			98			13			111
Interest exp		(883	)		(8	)		(891	)		(769	)		(1	)		(770	)		(1,044	)		-			(1,044	)
Other income (loss) - net		-			178			178			-			149			149			(22	)		129			107
Total other (expense) income		(832	)		267			(565	)		(715	)		236			(479	)		(968	)		142			(826	)
Income (loss) before taxes	$	9,473		$	1,714		$	11,187		$	5,908		$	(134	)	$	5,774		$	9,706		$	(522	)	$	9,184

	As of May 31, 2015						As of May 31, 2014						As of May 31, 2013
					Consolidated						Consolidated						Consolidated
	NAU		Other		Total		NAU		Other		Total		NAU		Other		Total
Total assets	$	78,042	$	8,502	$	86,544	$	76,383	$	12,074	$	88,457	$	75,115	$	12,967	$	88,082

Expenditures for long-lived assets	$	859	$	452	$	1,311	$	3,094	$	1,438	$	4,532	$	8,462	$	235	$	8,697
Depreciation & amortization	$	5,546	$	581	$	6,127	$	5,765	$	591	$	6,356	$	5,090	$	560	$	5,650

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

Fiscal Year Ended May 31, 2014
Revenues	$	30,929		$	33,182	$	31,674	$	31,968
Operating (loss) income		(362	)		2,315		1,898		2,402
Net (loss) income		(366	)		1,363		1,127		1,461
Net (loss) income attributable to
NAUH and Subsidiaries		(329	)		1,362		1,117		1,335
Net (loss) income per share
(common):
Basic		(0.01	)		0.05		0.04		0.05
Diluted		(0.01	)		0.05		0.04		0.05

19.	SUBSEQUENT EVENTS

We evaluated subsequent events after the balance sheet date through the date the consolidated financial statements were issued. We did not identify any additional material events or transactions occurring during this subsequent event reporting period that required further recognition or disclosure in these consolidated financial statements.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Disclosure Controls and Procedures

The Company's Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company's disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of May 31, 2015. Based upon such review, the Chief Executive Officer and Chief Financial Officer have concluded that the Company had in place, as of May 31, 2015, effective controls and procedures designed to ensure that information required to be disclosed by the Company (including consolidated subsidiaries) in the reports it files or submits under the Securities Exchange Act of 1934, as amended, and the rules thereunder, is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange C ommission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in reports it files or submits under the Exchange Act is accumulated and communicated to the Company's management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Management's Annual Report on Internal Control Over Financial Reporting

The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. The Company's internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements. Under the supervision and with the participation of management, including its Chief Executive Officer and Chief Financial Officer, the Company conducted an evaluation of the effectiveness of internal controls over financial reporting as of May 31, 2015. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework (2013). Based on management's assessment using this framework, management concluded that the Company's internal control over financial reporting was effective as of May 31, 2015.

Item 9B. Other Information

None.

PART III

The information required by Part III is incorporated by reference from our definitive Proxy Statement for the 2015 Annual Meeting of Stockholders (the "Proxy Statement"), which will be filed with the SEC pursuant to Regulation 14A within 120 days after May 31, 2015. Except for those portions specifically incorporated in this annual report on Form 10-K by reference to our Proxy Statement, no other portions of the Proxy Statement are deemed to be filed as part of this Form 10-K.

Item 10. Directors, Executive Officers and Corporate Governance.

The information required by this item is incorporated herein by reference to the information set forth in the Company's Proxy Statement for the 2015 Annual Meeting of Stockholders.

Item 11. Executive Compensation.

The information required by this item is incorporated herein by reference to the information set forth in the Company's Proxy Statement for the 2015 Annual Meeting of Stockholders.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by this item is incorporated herein by reference to the information set forth in the Company's Proxy Statement for the 2015 Annual Meeting of Stockholders.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table sets forth information about our common stock that may be issued upon the exercise of options, warrants and rights under all of the our compensation plans (including individual compensation arrangements) under which our equity securities are authorized for issuance as of May 31, 2015, which includes our 2009 Stock Option and Compensation Plan and our 2013 Restricted Stock Unit Plan.

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)		(b)
Equity compensation plans approved by stock holders (1)		120,905	$	6.34		1,462,730

Total		120,905	$	6.34		1,462,730

(1)	See Part II, Item 8, "Financial Statements and Supplementary Data"-"National American University Holdings, Inc. "Notes to Consolidated Financial Statements-Note 10-Stockholders' Equity" for further description of our equity compensation plans.

(a)

Includes grants of stock options, time-based restricted stock awards, and performance based restricted stock units. For purposes of the table above, the number of shares to be issued under performance based restricted stock units reflects the maximum number of shares that may be issued; the actual number of shares to be issued will depend on the results of operations during the fiscal year ending May 31, 2016, and beyond

(b)	Includes weighted average exercise price of stock options only.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

The information required by this item is incorporated herein by reference to the information set forth in the Company's Proxy Statement for the 2015 Annual Meeting of Stockholders.

Item 14. Principal Accountant Fees and Services.

The information required by this item is incorporated herein by reference to the information set forth in the Company's Proxy Statement for the 2015 Annual Meeting of Stockholders.

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a)(1) Financial Statements

All required financial statements of the registrant are set forth under Item 8 of this annual report on Form 10-K.

(a)(2) Financial Statement Schedules

None required.

(b) Exhibits

Exhibit No.		Description

2.1		Agreement and Plan of Reorganization, dated August 7, 2009, by and among Camden Learning Corporation, Dlorah Subsidiary, Inc. and Dlorah, Inc. *

2.2		Amended and Restated Agreement and Plan of Reorganization, dated August 11, 2009, by and among Camden Learning Corporation, Dlorah Subsidiary, Inc. and Dlorah, Inc. *

2.3		Amendment No. 1 to the Amended and Restated Agreement and Plan of Reorganization, dated October 26, 2009, by and among Camden Learning Corporation, Dlorah Subsidiary, Inc., and Dlorah, Inc. **

3.1		Second Amended and Restated Certificate of Incorporation ***

3.2		Amended Bylaws ####

4.1		Specimen Common Stock Certificate ***

10.1		Registration Rights Agreement, dated as of November 23, 2009, by and among Camden Learning Corporation and each of H. & E. Buckingham Limited Partnership and Robert D. Buckingham Living Trust. ***

10.2		Registration Rights Agreement, dated as of November 29, 2007, by and among Camden Learning Corporation and certain of the founding stockholders of Camden Learning Corporation. ****

10.3		Form of Restricted Stock Agreement under the registrant's 2009 Stock Option and Compensation Plan. *****

10.4		National American University Holdings, Inc. 2009 Stock Option and Compensation Plan., as amended. ###

10.5		Employment Agreement between Dlorah, Inc. and Jerry L. Gallentine, amended and restated September 9, 2003, and further amended by the First Amendment to Employment Agreement, dated November 18, 2009. ***

10.6		Employment Agreement between Dlorah, Inc. and Ronald Shape, dated effective as of June 1, 2012. ##

10.7		Joinder to Registration Rights Agreement, dated as of January 12, 2010 between National American University Holdings, Inc. and T. Rowe Price Associates, Inc. on behalf of its investment advisory clients T. Rowe Price Small-Cap Value Fund, Inc. and T. Rowe Price U.S. Equities Trust. #

10.8		Form of Director Indemnification Agreement ******

10.9		National American University Holdings, Inc. 2013 Restricted Stock Unit Plan ###

21.1		Subsidiaries of the Registrant

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) as adopted 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) as adopted 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 of the 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 the Sarbanes-Oxley Act of 2002

101 the following materials from National American University Holdings, Inc.'s Annual Report on Form 10-K for the fiscal year ended May 31, 2015, are formatted in XBRL (eXtensible Business Reporting Language): (a) Consolidated Balance Sheets, (b) Consolidated Statements of Operations, (c) Consolidated Statements of Stockholders Equity, (d) Consolidated Statements of Cash Flows, and (e) Notes to Annual Consolidated Financial Statements

*	Incorporated by reference to National American University Holdings, Inc.'s Current Report on Form 8-K filed on August 11, 2009.
**	Incorporated by reference to National American University Holdings, Inc.'s Current Report on Form 8-K filed on October 27, 2009.
***	Incorporated by reference to National American University Holdings, Inc.'s Current Report on Form 8-K filed on November 30, 2009.
****	Incorporated by reference to National American University Holdings, Inc.'s Current Report on Form 8-K filed on December 5, 2007.
*****	Incorporated by reference to National American University Holdings, Inc.'s Quarterly Report on Form 10-Q filed on January 12, 2010.
******	Incorporated by reference to National American University Holdings, Inc.'s Current Report on Form 8-K filed on May 11, 2010.
#	Incorporated by reference to National American University Holdings, Inc.'s Registration Statement on Form S-1 filed on March 23, 2010.
##	Incorporated by reference to National American University Holdings, Inc.'s Current Report on Form 8-K filed on September 6, 2012.
###	Incorporated by reference to National American University Holdings, Inc.'s proxy statement filed on September 27, 2013.
####	Incorporated by reference to National American University Holdings, Inc.'s Quarterly Report on Form 10-Q filed on October 4, 2013.

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:		Chief Executive Officer
		(principal executive officer)

By:		/s/ David K. Heflin
Name:		David K. Heflin, Ed. D.
Title:		Chief Financial Officer
		(principal financial officer and principal accounting officer)

Dated as of August 7, 2015.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated as of August 7, 2015.

Name		Title


/s/ Robert D. Buckingham		Chairman of the Board of Directors
Robert D. Buckingham

/s/ Jerry L. Gallentine		President and Vice Chairman of the Board of Directors
Jerry L. Gallentine, Ph.D.

/s/ Therese Crane		Director
Therese Crane, Ed.D.

/s/ Jeffery Berzina		Director
Jeffery Berzina

/s/ Thomas D. Saban, Ph.D.		Director
Thomas D. Saban

/s/ Jim Rowan		Director
Jim Rowan

/s/ Richard Halbert		Director
Richard Halbert

/s/ Ronald L. Shape		Chief Executive Officer and Director
Ronald L. Shape, Ed. D.