FLORHAM CONSULTING CORP - FORM 10-Q

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EX-31.1 - FLORHAM CONSULTING CORP	v222562_ex31-1.htm
EX-32.2 - FLORHAM CONSULTING CORP	v222562_ex32-2.htm
EX-32.1 - FLORHAM CONSULTING CORP	v222562_ex32-1.htm
EX-31.2 - FLORHAM CONSULTING CORP	v222562_ex31-2.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2011

¨	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from _________ to _________

Commission file number 000-52634

OAK TREE EDUCATIONAL PARTNERS, INC.

(Exact name of registrant as specified in its charter)

Delaware	20-2329345
(State or other jurisdiction of incorporation or organization)	(IRS Employee Identification No.)

424 West 33rd Street, Suite 360, New York, New York 10001

(Address of principal executive offices)

(212) 243-5081

(Registrant's telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

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 the filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, 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 o No 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 definitions 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	Smaller reporting company x

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

Yes o No x

Number of outstanding shares of the registrant's par value $0.0001 common stock, as of May 16, 2011: 22,938,540, of which 179,641 shares are held in escrow subject to future earnings attainment.

Oak Tree Educational Partners, Inc.

Quarterly Report on Form 10-Q

Table of Contents

		PAGE

PART I	FINANCIAL INFORMATION	5

Item 1.	Consolidated Balance Sheets at March 31, 2011 (unaudited) and December 31, 2010 (audited).	6

	Consolidated Statements of Operations (unaudited) for the three month periods ended March 31, 2011 and 2010.	7

	Consolidated Statement of Changes in Shareholders' Equity (unaudited) for the three month period ended March 31, 2011.	8

	Consolidated Statements of Cash Flows (unaudited) for the three month periods ended March 31, 2011 and 2010.	9

	Notes to Consolidated Financial Statements (unaudited).	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	14

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	17

Item 4.	Controls and Procedures.	17

PART II	OTHER INFORMATION	18

Item 1.	Legal Proceedings.	18

Item 1A.	Risk Factors.	18

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	18

Item 3.	Defaults Upon Senior Securities.	18

Item 4.	(Removed and Reserved).	18

Item 5.	Other Information.	18

Item 6.	Exhibits.	18

	Signatures	19

Cautionary Statement Concerning Forward-Looking Statements

Our representatives and we may from time to time make written or oral statements that are "forward-looking," including statements contained in this Quarterly Report on Form 10-Q and other filings with the Securities and Exchange Commission, reports to our stockholders and news releases. All statements that express expectations, estimates, forecasts or projections are forward-looking statements within the meaning of the Act. In addition, other written or oral statements which constitute forward-looking statements may be made by us or on our behalf. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," "projects," "forecasts," "may," "should," variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions which are difficult to predict. These risks may relate to, without limitation:

we are subject to risks relating to enrollment of students. If we are not able to continue to successfully recruit and retain our students, we will not be able to sustain our revenue growth rate;

we are subject to risks relating to tuition pricing, which could have a material adverse affect on our financial results;

our course offerings be no longer current;

our acquisition strategy may have an adverse effect on our ability to manage our business;

if we fail to maintain any of our state authorizations, we would lose our ability to operate in that state;

if any regulatory audit, investigation or other proceeding finds us not in compliance with the numerous laws and regulations applicable to the postsecondary education industry, we may not be able to successfully challenge such finding and our business could suffer;

if regulators do not approve our acquisitions, the acquired schools’ state licenses, accreditation, and ability to participate in Title IV programs (if applicable) may be impaired;

state licenses and accreditation requirements may adversely impact our ability to effect a sale of our company or any of our operating businesses;

we are dependent on the continued services of certain key executives;

government regulations relating to the Internet could increase our cost of doing business, affect our ability to grow or otherwise have a material adverse effect on our business, financial condition, results of operations and cash flows;

our financial performance depends, in part, on our ability to keep pace with changing market needs and technology; if we fail to keep pace or fail in implementing or adapting to new technologies, our business may be adversely affected;

we are subject to risks relating to our information technology, system applications and security systems, which could have a material adverse affect on our financial results;

our success depends on attracting and retaining qualified personnel;

we may not be able to adequately protect our intellectual property, and we may be exposed to infringement claims by third parties;

we may be subject to infringement and misappropriation claims in the future, which may cause us to incur significant expenses, pay substantial damages and be prevented from providing our services;

our limited operating history and the unproven long-term potential of our business model make evaluating our business and prospects difficult;

we may need additional capital and may not be able to obtain such capital on acceptable terms;

we are subject to the risk of being in default under our outstanding secured indebtedness;

we are subject to the risk of being in default under our outstanding secured obligations;

Our business may be adversely affected by a further economic slowdown in the U.S. or abroad or by an economic recovery in the U.S.;

we may not be able to sustain our recent growth rate or profitability, and we may not be able to manage future growth effectively;

insiders have substantial control over us, and they could delay or prevent a change in our corporate control even if our other stockholders wanted it to occur;

there may not be sufficient liquidity in the market for our common stock;

the market price of our common stock may be volatile;

our outstanding options and warrants may adversely affect us in the future and cause substantial dilution to existing shareholders;

our common stock may be considered a “penny stock” and may be difficult to sell;

the market for penny stocks has experienced numerous frauds and abuses which could adversely impact investors in our stock; and

we have not paid dividends in the past and do not expect to pay dividends in the future, and any return on investment may be limited to the value of our stock.

Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in or suggested by such forward-looking statements. We undertake no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof. Readers should carefully review the factors described herein and in other documents we file from time to time with the Securities and Exchange Commission, including our Quarterly Reports on Form 10-Q, Annual Reports on Form 10-K, and any Current Reports on Form 8-K filed by us.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

OAK TREE EDUCATIONAL PARTNERS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets



	March 31, 2011
	(Unaudited)			December 31, 2010
ASSETS
Current Assets
Cash	$	377,512		$	604,401
Accounts receivable, net of allowance for uncollectable accounts of $22,054
as of March 31, 2011 and $16,246 as of December 31, 2010		1,773,766			1,539,778
Inventory		20,670			50,762
Other current assets		111,453			40,463
		2,283,401			2,235,404

Fixed Assets, net		242,169			237,832

Other Non-Current Assets
Intangible assets, net of accumulated amortization of $758,527 as of
March 31, 2011 and $617,661 as of December 31, 2010		5,610,473			5,751,339
Deferred tax asset		13,618			13,618
Financing costs, net of accumulated amortization of $37,049 as of
March 31, 2011 and $9,262 as of December 31, 2010		518,692			546,478
Other		119,381			106,126
Goodwill		617,506			617,506
		6,879,670			7,035,067

	$	9,405,240		$	9,508,303

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current maturities of notes payable and capital lease obligations	$	449,150		$	336,823
Promissory note payable		437,501			437,501
Accounts payable		230,533			146,047
Accrued liabilities		235,185			177,952
Income taxes payable		-			5,533
Deferred revenue		1,414,947			1,361,528
		2,767,316			2,465,384

Other Liabilities
Note payable, net of current portion		1,271,002			1,355,531
Senior secured note payable, net of current portion and discount		2,142,971			2,191,201
Capital lease obligations, net of current portion		7,234			11,071
Earnout liabilities		648,705			648,705
		4,069,912			4,206,508

		6,837,228			6,671,892

Commitments and Contingencies

Shareholders' Equity
Preferred stock - 2,000,000 shares authorized, $.0001 par value, 250,000
shares designated as Series A shares issued and outstanding; none
as of March 31, 2011 and December 31, 2010		-			-
Common stock - 50,000,000 shares, $.0001 par value, authorized at
March 31, 2011 and December 31, 2010; issued and outstanding
22,938,540 as of March 31, 2011 and December 31, 2010		2,294			2,294
Additional paid In capital		5,395,673			5,363,510
Accumulated deficit		(2,689,146	)		(2,388,784	)
Shares held in escrow		(119,505	)		(119,505	)
Notes receivable		(21,304	)		(21,104	)
		2,568,012			2,836,411

	$	9,405,240		$	9,508,303

See notes to consolidated financial statements

OAK TREE EDUCATIONAL PARTNERS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations
(Unaudited)



	Three Months			Three Months
	Ended			Ended
	March 31, 2011			March 31, 2010

Revenue, net	$	1,442,670		$	797,764

Operating Expenses
Cost of revenue		571,486			311,951
Selling and administrative expenses		803,993			395,244
Stock based compensation		32,163			86,065
Depreciation and amortization		150,815			122,876
		1,558,457			916,136

Loss from Operations		(115,787	)		(118,372	)

Other Income (Expense)
Interest income		284			362
Interest expense		(184,859	)		(31,320	)
		(184,575	)		(30,958	)

Loss Before Income Taxes		(300,362	)		(149,330	)

Income Taxes		-			-

Net Loss	$	(300,362	)	$	(149,330	)

Net Loss Per Common Share - basic and diluted:	$	(0.01	)	$	(0.02	)

Weighted Average Number of Shares Oustanding -
basic and diluted		22,938,540			6,525,981

See notes to consolidated financial statements

OAK TREE EDUCATIONAL PARTNERS, INC. AND SUBSIDIARIES

Consolidated Statement of Changes in Shareholders' Equity
Three Months Ended March 31, 2011
(Unaudited)



									Additional											Total
	Preferred Stock				Common Stock				Paid In		Accumulated			Shares Held			Notes			Shareholders'
	Shares		Amount		Shares		Amount		Capital		Deficit			in Escrow			Receivable			Equity

Balance - December 31, 2010		-	$	-		22,938,540	$	2,294	$	5,363,510	$	(2,388,784	)	$	(119,505	)	$	(21,104	)	$	2,836,411

Stock based compensation		-		-		-		-		32,163		-			-			-			32,163

Interest on notes receivable		-		-		-		-		-		-			-			(200	)		(200	)

Net Loss		-		-		-		-		-		(300,362	)					-			(300,362	)

Balance - March 31, 2011		-	$	-		22,938,540	$	2,294	$	5,395,673	$	(2,689,146	)	$	(119,505	)	$	(21,304	)	$	2,568,012

See notes to consolidated financial statements

OAK TREE EDUCATIONAL PARTNERS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows
(Unaudited)



	Three Months			Three Months
	Ended			Ended
	March 31, 2011			March 31, 2010

Cash Flows Used In Operating Activities
Net loss	$	(300,362	)	$	(149,330	)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization		150,815			122,876
Amortization of debt discount and financing costs		57,369			-
Accrued interest income added to note receivable		(200	)		(200	)
Accrued interest expense added to note payable		27,353			28,951
Stock based compensation		32,163			86,065
(Increase) Decrease in:
Accounts Receivable		(233,988	)		(47,732	)
Inventory		30,092			33,833
Other current assets		(70,990	)		(38,229	)
Increase (Decrease) in:
Accounts payable		84,486			(16,987	)
Accrued liabilities		57,233			(6,123	)
Income taxes payable		(5,533	)		(22,138	)
Deferred revenue		53,419			(30,149	)
Net cash used in operating activities		(118,143	)		(39,163	)

Cash Flows Used In Investing Activities
Purchase of fixed assets		(14,286	)		(3,729	)
Payments for other assets		(13,255	)		(35	)
Net cash used in investing activities		(27,541	)		(3,764	)

Cash Flows Used In Financing Activities
Payments of senior debt		(75,000	)		-
Payments of capital lease obligations		(6,205	)		(5,746	)
Net cash used in financing activities		(81,205	)		(5,746	)

Net Decrease In Cash		(226,889	)		(48,673	)

Cash - beginning of period		604,401			560,497

Cash - end of period	$	377,512		$	511,824


Supplemental Disclosure of Cash Flow Information
Cash paid during the period for:
Interest	$	101,007		$	2,368
Income taxes	$	30,643		$	14,313

See notes to consolidated financial statements

OAK TREE EDUCATIONAL PARTNERS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2011 and 2010

(Unaudited)

1 - ORGANIZATION AND NATURE OF BUSINESS

Florham Consulting Corp. (“Florham”) was formed on February 9, 2005, as a Delaware Corporation and has its corporate offices located in New York, NY. On October 13, 2010 Florham amended its Certificate of Incorporation to, among other things, change its name to Oak Tree Educational Partners, Inc. (“Oak Tree”). The Company’s subsidiaries include Educational Investors, Inc. (“EII”), Valley Anesthesia, Inc. (“Valley”), Training Direct, LLC (“Training Direct”), Educational Training Institute, Inc. (“ETI”), Culinary Technical Center, LLC (“CTC”) and Professional Culinary Academy, LLC (“PCA”). Valley provides comprehensive review and update courses and study materials to Student Registered Nurse Anesthetists in preparation for the National Certifying Exam throughout the continental United States. Training Direct, a state licensed vocational training school, provides “distance learning” and “residential training” educational programs for students to become eligible for entry-level employment in a variety of fields and industries. ETI provides vocational education and training programs to students under funded programs by various school districts at various training sites located in New York State. ETI also provides Job Readiness and Direct Placement Services under a New York State contract. CTC owns and operates three state licensed vocational training schools. Each licensed vocational training school provides its vocational education and training programs to students primarily for two New York State agencies. PCA owns and operates three state licensed vocational training schools. Each licensed vocational training school provides vocational education and training programs to students primarily for a New York State agency. The above entities are collectively referred to as Oak Tree Educational Partners, Inc. and Subsidiaries (collectively the “Company”).

2 - BASIS OF PRESENTATION

The condensed consolidated financial statements included herein are unaudited. In addition, certain information and footnote disclosures normally included in financial statements prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) have been condensed or omitted. The condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation in conformity with GAAP. The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Form 10-K for the year ended December 31, 2010. The results of operations for the interim period should not be considered indicative of results to be expected for the full year.

Recent Accounting Pronouncements

Management does not believe that any recently issued, but not yet effective accounting pronouncements; if adopted, would have a material effect on the accompanying financial statements.

Income Taxes

The Company’s potential benefit from income taxes differs from applying the statutory U. S. federal and applicable state income tax rates to the loss before income taxes. The primary difference results from the Company providing for full valuation allowances on any benefits from income taxes resulting from the application of statutory tax rates to the current period operating loss and losses generated in previous periods. The deferred tax asset valuation allowance represents the Company’s estimate that it is more-likely-than-not that the tax benefit from its net operating losses will not be realized.

3 – FIXED ASSETS

The Company’s fixed assets consist of the following at March 31, 2011 and December 31, 2010:

	2011		2010
Furniture and equipment	$	213,371	$	199,085
Leasehold improvements		88,986		88,986
		302,357		288,071
Less: Accumulated depreciation		60,188		50,239
Fixed assets at net book value	$	242,169	$	237,832

Depreciation expense was $9,949 and $5,317 for the three month periods ended March 31, 2011 and 2010, respectively.

4 – EARNOUT LIABILITIES

Included in earnout liabilities is an obligation to the sellers of certain assets of Valley Anesthesia Educational Programs, Inc. to receive 40% of the future net revenues, as defined, from two new revenue sources for the three year periods ended December 31, 2012. The present value of the estimated net revenues the sellers are expected to receive is $79,990.

Included in earnout liabilities is an obligation to the selling members of Training Direct which provides for the issuance of 179,641 shares of the Company’s Common Stock having a then current market value of $300,000 (the “Escrow Shares”). The Escrow Shares were issued on March 3, 2010 and are being held in escrow and will be released therefrom subject to the Company achieving certain performance targets as set for in the Interest Purchase Agreement. The present value of the Escrow Shares the selling members are expected to receive is $119,505 as of the acquisition date.

Also included in earnout liabilities is an obligation to the sellers of the Culinary Group which provides for the issuance of shares of the Company’s Common Stock having a then current market value of $500,000. The present value of the shares expected to be issued is $449,210 as of the date of the consummation of the transactions with the sellers of the Culinary Group.

5 – CAPITAL TRANSACTIONS

On January 6, 2011, the Company issued 5-year options to purchase an aggregate of 150,000 shares of common stock to three employees of the Company at an exercise price of $2.75, as compensation for services performed on behalf of the Company. These options are exercisable as to 50,001 shares on January 6, 2011, as to 50,001 shares on January 6, 2012, and as to 49,998 shares on January 6, 2013. On February 7, 2011, the Company issued 5-year options to purchase an aggregate of 50,000 shares of common stock to an employee of the Company at an exercise price of $2.75, as compensation for services performed on behalf of the Company. These options are exercisable as to 16,667 shares on February 7, 2011, as to 16,667 shares on February 7, 2012, and as to 16,666 shares on February 7, 2013. The fair value of the options was charged to operations as compensation in the amount of $3,307 for the period ended March 31, 2011. The fair value of the options was determined by the Black-Scholes option pricing model using the following assumptions: forfeiture rate 0%, risk free interest rate 1.46%, volatility 70%, expected term 2 years, and dividend rate 0%. At March 31, 2011, there was $4,833 of total unrecognized compensation cost related to the non-vested stock option awards which is expected to be recognized over a weighted-average period ending February 28, 2013. There are 472,640 options available under the 2009 Stock Incentive Plan for future grant.

6 – COMMITMENTS AND CONTINGENCIES

Leases

The Company conducts its operations from leased and rented facilities. The Company’s leases expire at various times through October 8, 2019, with an option to renew one lease for an additional five years. Terms of this lease requires minimum monthly payments of $6,026 plus annual increases of three percent or the CPI annual increase, if greater. The Company must pay for repairs, maintenance and insurance under this lease.

The Company also rents office space from one of its officers for $725 per month and reimburses another officer $2,992 per month for rent of office space on a month-to-month basis.

Rent expense for the three months ended March 31, 2011 and 2010 was $106,572 and $28,700, respectively.

Commitment for Conference Facilities

Certain of the Company’s courses are presented in conference facilities located in hotels in various cities throughout the continental United States. The Company enters into contracts with the various hotels well in advance of these upcoming courses. These contracts provide, among other matters, that the Company guarantee a stated minimum number of attendees and/or guest rooms, and may hold the Company to stated percentages of the amounts in the event of course cancellation.

Employment and Consulting Agreements

The Company has entered into various employment contracts with its executives. In addition to base compensation, the contracts provide for compensation adjustments, as described in the agreements, plus stock options. The total base compensation commitment of the contracts is as follows:

For the period from April 1
through December 31, 2011	$	858,427

For the years ended December 31,
2012		965,000
2013		500,000
	$	2,323,427

Off Balance Sheet Arrangement

The Company, through its bank, issued an irrevocable letter of credit in the amount of $40,000, as required by the State of Connecticut Department of Higher Education. This letter of credit may not be extended beyond December 31, 2021. As collateral for the letter of credit, the Company purchased a Certificate of Deposit with the bank in the amount of $40,000, which is included in Other Assets.

Licenses

The Culinary Group and Training Direct, as holders of state department of education licenses, are required to remain compliant with regulations relating to curriculum, faculty, facilities, placement rates and finances. In addition, both have to maintain different approvals from industry associations and governing bodies which require compliance procedures.

7 – LOSS PER SHARE

For the three month periods ended March 31, 2011 and 2010, the exercise of warrants, stock options, and escrow shares were excluded in the computations of the Company’s diluted loss per share because the Company reported net losses in these interim periods. In addition, the conversion of the Series A Preferred Stock for the period from January 1, 2010 through October 18, 2010 was excluded in the computation of the Company’s diluted loss per share because the Company reported net losses. These preferred shares were issued because the Company did not have sufficient authorized and unissued common shares to issue to the former EII stockholders on the date of merger. On October 13, 2010 the Company amended its Certificate of Incorporation to, among other things, increase the number of authorized shares of common stock to 50,000,000 shares. Accordingly, the preferred shares were exchanged for 12,278,333 shares of common stock. Anti-dilutive common share equivalents excluded from diluted loss per share were as follows:

	2011		2010

Conversion of preferred stock		-		12,278,333
Exercise of warrants		895,357		930,000
Vested stock options		779,522		548,350
Nonvested stock options		2,856,806		2,887,978
Escrow shares issued in purchase of subsidiary		179,641		179,641

8 – SUBSEQUENT EVENT

On April 11, 2011, the Company obtained short term loans in the aggregate amount of $360,000. The loans are evidenced by unsecured 13.5% promissory notes payable on September 30, 2011; provided, that neither the notes nor any interest thereon may be repaid unless, at the scheduled repayment date, the Company is in compliance with certain covenants of the senior secured note payable, including financial covenants. In consideration for the loans, the Company issued warrants to purchase an aggregate of 169,250 of shares of the Company’s common stock at an exercise price of $2.50 per share, subject to certain adjustments.

In the first quarter of 2011, the Company defaulted in performance of certain of financial covenants under the Senior Loan Agreement. On May 16, 2011, the senior lender waived such defaults. In the event that any such covenant defaults exist in subsequent fiscal periods, we intend to commence discussions with the senior lender to seek to amend these loan covenants. However, there is no assurance that our senior lender will agree to amend such covenants in a manner favorable to us, or that, even if such covenants are amended, that we will not default in performance of these revised covenants in the future.”

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

WE URGE YOU TO READ THE FOLLOWING DISCUSSION IN CONJUNCTION WITH OUR CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES THERETO BEGINNING ON PAGE F-1. THIS DISCUSSION MAY CONTAIN FORWARD-LOOKING STATEMENTS THAT INVOLVE SUBSTANTIAL RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS COULD DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED BY THE FORWARD-LOOKING STATEMENTS AS A RESULT OF A NUMBER OF FACTORS, INCLUDING BUT NOT LIMITED TO THE RISKS AND UNCERTAINTIES DISCUSSED UNDER THE HEADING “RISK FACTORS” IN OUR FORM 10-K FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 12, 2011 AND IN OUR OTHER FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION. IN ADDITION, SEE “CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS” SET FORTH IN THIS REPORT.

Overview

Oak Tree Educational Partners, Inc. (‘Oak Tree” or the “Company” or “we”) was formed on February 9, 2005 as a Delaware corporation. We have included elsewhere herein the condensed consolidated financial statements of Oak Tree Educational Partners, Inc. and Subsidiaries as of March 31, 2011 and December 31, 2010 and for the three months ended March 31, 2011 and 2010.

Educational Investors, Inc. (“EII”), a wholly-owned subsidiary of Oak Tree, was incorporated on July 20, 2009. EII through its wholly-owned subsidiary, Valley Anesthesia, Inc. (“Valley”), purchased certain assets and assumed certain liabilities of Valley Anesthesia Educational Programs, Inc. (“VAEP”) effective August 20, 2009. EII acquired the Membership Interests in Training Direct LLC (“Training Direct”) effective December 31, 2009. On December 1, 2010, certain transactions were consummated effective November 30, 2010, whereby Educational Training Institute, Inc. (“ETI”) became a wholly-owned subsidiary of Oak Tree and Culinary Tech Center, LLC (“CTC”) and Professional Culinary Academy (“PCA”) became wholly-owned subsidiaries of ETI.

The following discussion and analysis of financial condition and results of operations relates to the operations and financial condition reported in the condensed consolidated financial statements of Oak Tree and Subsidiaries as of March 31, 2011 and December 31, 2010 and for the three months ended March 31, 2011 and 2010, and should be read in conjunction with such financial statements and related notes included herein.

EII was incorporated for the purpose of acquiring vocational, training and technical schools, with an initial emphasis on the health care and medical industries. Through its Valley Anesthesia, Inc. subsidiary, EII provides comprehensive review and update courses and study materials that aid Student Registered Nurse Anesthetists (“SRNA”) and Graduate Registered Nurse Anesthetists (“GRNA”) in preparation for the National Certifying Exam (“NCE”) throughout the continental United States. Through its Training Direct subsidiary, EII provides “distance learning” and “residential training” educational programs for students to become eligible for entry-level employment in a variety of fields and industries. The company strives to assist those who may not have realized their full potential in the workplace in finding a new career direction and progressing in learning skills necessary to reach their earning and personal development possibilities and goals. Training Direct maintains approvals from the Connecticut Commissioner of Higher Education, the Connecticut Department of Health Services and the National Health Career Association, and is an Eligible Training Provider under the Workforce Investment Act. Such approvals require that the company have a competent faculty, offer educationally sound and up to date courses and course materials, and be subject to inspections and approvals by outside examining committees. The Company through ETI provides vocational education and training programs to students under funded programs by various school districts at various training sites located in New York State. The Company also provides Job Readiness and Direct Placement Services under a New York State contract. The Company through CTC owns and operates three vocational training schools licensed by the New York State Department of Education. Each licensed vocational training school provides its vocational education and training programs to students primarily for two New York State agencies. The Company through PCA owns and operates three vocational training schools licensed by the New York State Department of Education. Each licensed vocational training school provides vocational education and training programs to students primarily for a New York State agency.

Summary of Significant Accounting Policies and Estimates

A detailed discussion of the accounting policies and estimates that we believe are most critical to our financial condition and results of operations that require management’s most subjective and complex judgments in estimating the effect of inherent uncertainties is included under the caption “Critical Accounting Policies and Estimates” included in Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2010. Note 2, “Summary of Significant Accounting Policies”, of the notes to our audited consolidated financial statements of our Annual Report on Form 10-K, for the year ended December 31, 2010, also includes a discussion of these and other significant accounting policies.

Liquidity and Capital Resources

As of March 31, 2011, we had a working capital deficit of approximately $484,000 after taking into account all current assets and all current liabilities, which liabilities include approximately $1,415,000 of deferred revenue that will be earned during the following year.

Net cash used in operating activities was approximately $118,000. While the Company incurred a loss during the three months ended March 31, 2011 in the approximate amount of $300,000, included in expenses was approximately $151,000 of depreciation and amortization, $57,000 of amortization of debt discount and $32,000 of stock based compensation, which amounts are non-cash, and had an increase in deferred revenue of approximately $53,000.

Net cash used in investing activities of approximately $57,000 was primarily related to the cash used for the purchase of fixed assets and other assets.

Net cash used by financing activities of approximately $81,000 was primarily related to the payments of notes and capital lease obligations.

On April 11, 2011, we obtained short term loans aggregating $360,000 from Venturetek LP, an unrelated entity (as to $240,000) and Black Bear Trading Corp., an entity owned by the sister of Joseph J. Bianco, our Chief Executive Officer (as to $120,000). The loans are evidenced by our unsecured 13.5% promissory notes payable on September 30, 2011; provided, that neither the notes nor any interest thereon may be repaid unless, as at the scheduled repayment date, we and our subsidiaries are in compliance with certain covenants in our loan agreement with Deerpath, including our financial covenants. In consideration for loans, we issued warrants to purchase an aggregate of 169,200 shares of our common stock at an exercise price of $2.50 per share, subject to certain adjustments provided therein. Mr. Bianco disclaims any interest in the securities, including 56,400 of the warrants, issued to Black Bear Trading Corp.

In the first quarter of 2011, we defaulted in performance of certain of our financial covenants under the Deerpath Loan Agreement. On May 16, 2011, Deerpath waived such defaults. In the event that any such covenant defaults exist in subsequent fiscal periods, we intend to commence discussions with Deerpath to seek to amend these loan covenants. However, there is no assurance that our senior lender will agree to amend such covenants in a manner favorable to us, or that, even if such covenants are amended, that we will not default in performance of these revised covenants in the future.”

Although we expect that our available funds and funds to be generated from our ongoing operations will be sufficient to meet our anticipated needs for 12 months, we may need to obtain additional capital to continue to grow our business. Our cash requirements may vary materially from those currently anticipated due to changes in our operations, including the timing of our receipt of revenues. Our ability to obtain additional financing in the future will depend in part upon the prevailing capital market conditions, as well as our business performance. There can be no assurance that we will be successful in our efforts to arrange additional financing on terms satisfactory to us or at all.

Results of Operations

The following table shows the results of our business for the three months ended March 31, 2011 and 2010:

THREE MONTHS ENDED MARCH 31, 2011 AND 2010

				% of						% of
				Revenue						Revenue
	2011			2011			2010			2010

NET REVENUE	$	1,442,670			100	%	$	797,764			100	%
COST OF REVENUE		571,486			40	%		311,951			39	%
SELLING AND ADMINISTRATIVE EXPENSES		803,993			56	%		395,244			50	%
STOCK BASED COMPENSATION		32,163			2	%		86,065			11	%
DEPRECIATION AND AMORTIZATION		150,815			10	%		122,876			15	%
TOTAL OPERATING EXPENSES		1,558,457			108	%		916,136			115	%
(LOSS) FROM OPERATIONS		(115,787	)		-8	%		(118,372	)		-15	%
INTEREST INCOME		284			0	%		362			0	%
INTEREST EXPENSE		(184,859	)		-13	%		(31,320	)		-4	%
TOTAL OTHER EXPENSE		(184,575	)		-13	%		(30,958	)		-4	%
(LOSS) BEFORE INCOME TAXES		(300,362	)		-21	%		(149,330	)		-19	%
INCOME TAXES					0	%		-			0	%
NET (LOSS)	$	(300,362	)		-21	%	$	(149,330	)		-19	%

Revenue. Net revenue for the three months ended March 31, 2011 was approximately $1,443,000, compared to approximately $798,000 for the three months ended March 31, 2010. For the three months ended March 31, 2011, revenue from distance learning and residential training educational programs was approximately $963,000 compared to approximately $298,000 for the three months ended March 31, 2010. The increase was primarily due to revenue from the Culinary Group, which was acquired effective November 30, 2010. Revenue from review and update courses was approximately $254,000 for the three months ended March 31, 2011 compared to approximately $274,000 for the three months ended March 31, 2010. Revenue from the sale of manuals and Memory MasterTM study guides was approximately $226,000 for the three months ended March 31, 2011 and for the three months ended March 31 2010.

Cost of Revenue. Cost of revenue for the three months ended March 31, 2011was approximately $571,000 compared to approximately $312,000 for the three months ended March 31, 2010. For the three months ended March 31, 2011costs associated with distance learning and residential training course was approximately $444,000 compared to approximately $166,000 for the three months ended March 31, 2010. The increase was primarily due to costs of the Culinary Group, which was acquired effective November 30, 2010. The cost of conference facilities for review and update courses was approximately $47,000 for the three months ended March 31, 2011 compared to approximately $49,000 for the three months ended March 31, 2010. The cost of printing and shipping of manuals and study guides was approximately $44,000 for the three months ended March 31, 2011 compared to approximately $61,000 for the three months ended March 31, 2010. Other costs were approximately $36,000 for each of the three month periods ended March 31, 2011 and 2010.

Selling and Administrative Expenses. Selling and administrative expenses for the three months ended March 31, 2011 was $804,000 compared to approximately $395,000 for the three months ended March 31, 2010. Included in selling and administrative expenses were salaries, payroll taxes and benefits in the approximate amount of $544,000 for the three months ended March 31, 2011 compared to approximately $253,000 for the three months ended March 31, 2010. The increase of approximately $290,000 was related to salaries, payroll taxes and benefits of approximately $239,000 of the Culinary Group, which was acquired effective November 30, 2010, and approximately $52,000 related to increased salaries, payroll taxes and benefits to existing employees. Costs associated with public company reporting was approximately $44,000 for the three months ended March 31, 2011 compared to approximately $12,000 for the three months ended March 31, 2010. Other selling and administrative expenses were approximately $216,000 for the three months ended March 31, 2011 compared to approximately $130,000 for the three month period ended March 31, 2010. The increase was primarily related to other selling and administrative costs of the Culinary Group.

Stock Based Compensation. The Company recorded stock based compensation in the amount of approximately $32,000 for the three months ended March 31, 2011 compared to approximately $86,000 for the three months ended March 31, 2010. The decrease was primarily as the result of the Company granting 329,010 options to management in December 2009, which is charged to expense over the vesting period ending December 31, 2011. The Company granted 200,000 options to management during the three month period ended March 31, 2011, which will be charged to compensation over the period ending February 2013.

Depreciation and Amortization. Depreciation and amortization was approximately $151,000 for the three months ended March 31, 2011 compared to approximately $123,000 for the three months ended March 31, 2010. These amounts are substantially attributable to the amortization of intangible assets allocated in the purchase of certain assets and assumption of certain liabilities from Valley Anesthesia Educational Programs, Inc. and allocated in the purchase of Training Direct for both periods, and the amortization of intangible assets allocated in the acquisition of the Culinary Group for the three months ended March 31, 2011.

Interest expense. Interest expense during the three months ended March 31, 2011 was approximately $185,000 compared to approximately $31,000 for the three months ended March 31, 2011. Interest expense, including amortization of debt discount and financing costs in the approximate amount of $57,000, for the three months ended March 31, 2011 was approximately $156,000 related to the borrowing under the senior secured note payable effective November 30, 2010. Interest expense in the approximate amounts of $27,000 and $29,000 for the three months ended March 31, 2011 and 2010, respectively, relates to the note issued to sellers in connection with the purchase of certain assets and assumption of certain liabilities from Valley Anesthesia Educational Programs, Inc.

Income taxes. The Company incurred losses for the three month periods ended March 31, 2011 and 2010, and therefore has not provided current income tax expense or deferred tax benefit since the Company cannot be assured that it is more likely than not that any such benefit would be fully utilized in the future.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES.

(a) Disclosure Controls and Procedures.

As of the end of the period covered by this report, management performed an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are effective.

(b) Internal Controls over Financial Reporting.

There have been no changes in our internal control over financial reporting that occurred during the period covered by this report that we believe have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

We are not a party to, nor is any of our property the subject of, any legal proceedings other than ordinary routine litigation incidental to their respective businesses. There are no proceedings pending in which any of our officers, directors or 5% shareholders are adverse to us or any of our subsidiaries or in which they are taking a position or have a material interest that is adverse to us or any of our subsidiaries.

Neither we nor any of our subsidiaries is a party to any administrative or judicial proceeding arising under federal, state or local environmental laws.

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business.

ITEM 1A. RISK FACTORS.

There have been no material changes to the risks to our business described in our Annual Report on Form-10-K for the year ended December 31, 2010 filed with the Securities and Exchange Commission on April 12, 2011.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. (REMOVED AND RESERVED).

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS.

The exhibits listed below are required by Item 601 of Regulation S-K. Each management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-Q has been identified.

Exhibit No.		Exhibit Name

31.1		Certification of Chief Executive Officer, pursuant to Rule 13a-14(a) of the Exchange Act, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer, pursuant to Rule 13a-14(a) of the Exchange Act, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer pursuant to 18 United States Code Section 1350, as enacted by Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Chief Financial Officer pursuant to 18 United States Code Section 1350, as enacted by Section 906 of the Sarbanes-Oxley Act of 2002.

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.

	OAK TREE EDUCATIONAL PARTNERS, INC.

	By:	/s/ Joseph J. Bianco
		Joseph J. Bianco Chief Executive Officer (Principal Executive Officer) Date: May 16, 2011

	By:	/s/ Kellis Veach
		Kellis Veach Chief Financial Officer (Principal Financial and Accounting Officer) Date: May 16, 2011

Attached files

FLORHAM CONSULTING CORP Reports

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