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Annual report pursuant to section 13 and 15(d)

CONSOLIDATED STATEMENTS OF CASH FLOWS

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
 12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Cash flows from operating activities:    
Net loss $ (6,010,734) $ (2,135,573)
Adjustments to reconcile net loss to net cash used in operating activities:    
Bad debt expense 302,952 21,200
Receivable collateral valuation service 502,315   
Amortization of debt issuance costs 266,473   
Gain on disposal of property and equipment (5,879)   
Depreciation and amortization 397,923 264,082
Loss on settlement of accrued interest 3,339   
Issuance of convertible notes in exchange for service rendered 38,175 22,000
Stock-based compensation 347,657   
Common shares and warrants issued for services rendered 113,000   
Changes in operating assets and libilities, net of effects of acquisition:    
Accounts receivable (17,415) 196,229
Accounts receivable, secured-related party    7,376
Prepaid expenses (89,055) (97,474)
Other current assets (72,438) (210)
Other assets (18,622)   
Accounts payable (865,405) 780,703
Accrued expenses 398,941 (98,588)
Deferred rent (4,291) (2,324)
Deferred revenue 240,703 (54,510)
Other current liabilities 69,000   
Net cash used in operating activities (4,403,361) (1,097,089)
Cash flow from investing activities:    
Cash acquired as part of merger 337 3,200
Purchases of property and equipment (479,846) (1,060,887)
Purchases of courseware (25,300) (54,090)
Increase in restricted cash (264,992)   
Advances to officer for note receivable    (388,210)
Proceeds received from officer loan repayment 150,000 238,210
Net cash used in investing activities (619,801) (1,261,777)
Cash flows from financing activities:    
Proceeds from (repayments on) line of credit, net 16,785 (10,284)
Proceeds from issuance of common shares and warrants, net 3,025,236   
Principal payment on note payable    (30,871)
Proceeds received from issuance of convertible notes and warrants 1,706,000 255,000
Proceeds from related party for convertible notes 600,000 73,000
Disbursemenents for debt issuance costs (266,473)   
Proceeds from issuance of Series A, D and E preferred stock    3,469,985
Payments for stockholder rescissions    (165,000)
Proceeds from note payable 22,000   
Disbursements to purchase treasury shares (202,000) (761,200)
Net cash provided by financing activities 4,901,548 2,830,630
Net increase (decrease) in cash and cash equivalents (121,614) 471,764
Cash and cash equivalents at beginning of year 766,602 294,838
Cash and cash equivalents at end of year 644,988 766,602
Supplemental disclosure of cash flow information:    
Cash paid for interest 273,718 34,804
Cash paid for income taxes      
Supplemental disclosure of non-cash investing and financing activities:    
Conversion of all preferred shares into common shares 3,469,985   
Conversion of convertible notes payable into common shares 1,775,825   
Issuance of stock options to officers to settle accrued payroll 238,562   
Conversion of loans payable to convertible notes payable 200,000   
Issuance of common shares and warrants to settle accrued interest 70,654   
Issuance of stock options to officers to settle note payable 22,000   
Liabilities assumed in recapitalization 21,206   
Settlement of notes payable by disposal of property and equipment 15,151   
Issuance of convertible notes payable to pay accounts payable 11,650   
Conversion of convertible notes payable into Preferred Series B shares    $ 350,000