aspu_10q.htm

0001354488-12-004436.txt : 20120820 0001354488-12-004436.hdr.sgml : 20120818 20120820165703 ACCESSION NUMBER: 0001354488-12-004436 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 20120630 FILED AS OF DATE: 20120820 DATE AS OF CHANGE: 20120820 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ASPEN GROUP, INC. CENTRAL INDEX KEY: 0001487198 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EDUCATIONAL SERVICES [8200] IRS NUMBER: 271933597 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-165685 FILM NUMBER: 121045781 BUSINESS ADDRESS: STREET 1: 720 SOUTH COLORADO BOULEVARD STREET 2: SUITE 1150N CITY: DENVER STATE: CO ZIP: 95765 BUSINESS PHONE: 646-450-1843 MAIL ADDRESS: STREET 1: 720 SOUTH COLORADO BOULEVARD STREET 2: SUITE 1150N CITY: DENVER STATE: CO ZIP: 95765 FORMER COMPANY: FORMER CONFORMED NAME: Elite Nutritional Brands, Inc. DATE OF NAME CHANGE: 20111011 FORMER COMPANY: FORMER CONFORMED NAME: Hidden Ladder, Inc. DATE OF NAME CHANGE: 20100315 10-Q 1 aspu_10q.htm QUARTERLY REPORT aspu_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2012

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 number: 333-165685

Aspen Group, Inc.

(Exact name of registrant as specified in its charter)

Delaware		27-1933597
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

720 South Colorado Boulevard, Suite 1150N Denver, CO		80246
(Address of principal executive offices)		(Zip Code)

Registrants telephone number: (646) 450-1843

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 þ 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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ 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 (Do not check if a smaller reporting company)	Smaller reporting company	þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Class		Outstanding as of August 20, 2012
Common Stock, $0.001 par value per share		35,295,204 shares

Index

PART I – FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets	F-2

	Condensed Consolidated Statements of Operations (Unaudited)	F-3

	Condensed Consolidated Statements of Changes in Stockholders Deficiency (Unaudited)	F-4

	Condensed Consolidated Statements of Cash Flows (Unaudited)	F-5

	Notes to Condensed Consolidated Financial Statements (Unaudited)	F-6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	4

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	10

Item 4.	Controls and Procedures.	10

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings.	11

Item 1A.	Risk Factors.	11

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	11

Item 3.	Defaults Upon Senior Securities.	11

Item 4.	Mine Safety Disclosures.	11

Item 5.	Other Information.	11

Item 6.	Exhibits.	11

SIGNATURES		12

Aspen Group, Inc. and Subsidiaries Index to Condensed Consolidated Financial Statements

	Page
Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 2012 (unaudited ) and December 31, 2011		F-2
Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2012 and 2011 (unaudited)		F-3
Condensed Consolidated Statement of Changes in Stockholders' Deficiency for the six months ended June 30, 2012 (unaudited)		F-4
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2012 and 2011 (unaudited)		F-5
Notes to Condensed Consolidated Financial Statements (unaudited)		F-6

F-1

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ASPEN GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30, 2012			December 31, 2011
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	265,570		$	766,602
Restricted cash		105,932			-
Accounts receivable, net of allowance of $84,541 and $47,595, respectively		1,094,448			847,234
Accounts receivable, secured - related party		-			772,793
Note receivable from officer, secured - related party		-			150,000
Prepaid expenses and other current assets		116,561			103,478
Total current assets		1,582,511			2,640,107

Property and equipment, net		112,201			129,944
Intangible assets, net		1,372,524			1,236,996
Debt issuance costs, net		180,908			-
Accounts receivable, secured - related party, net of allowance of $309,117 and $0, respectively		463,676			-
Other assets		6,559			6,559

Total assets	$	3,718,379		$	4,013,606

Liabilities and Stockholders’ Deficiency
Current liabilities:
Accounts payable	$	1,457,889		$	1,094,029
Accrued expenses		703,406			167,528
Deferred revenue		932,366			835,694
Convertible notes payable, current portion (includes $300,000 to related parties)		2,055,825			-
Notes payable, current portion		22,000			6,383
Loan payable to stockholder		491			-
Deferred rent, current portion		5,274			4,291
Total current liabilities		5,177,251			2,107,925

Line of credit		222,703			233,215
Loans payable (includes $50,000 to related parties)		-			200,000
Convertible notes payable (includes $50,000 to related parties)		200,000			-
Notes payable		-			8,768
Deferred rent		18,146			21,274
Total liabilities		5,618,100			2,571,182

Commitments and contingencies - See Note 7

Temporary equity:
Series A preferred stock, $0.001 par value; 850,500 shares designated,
none and 850,395 shares issued and outstanding, respectively		-			809,900
Series D preferred stock, $0.001 par value; 3,700,000 shares designated,
none and 1,176,750 shares issued and outstanding, respectively
(liquidation value of $1,176,750)		-			1,109,268
Series E preferred stock, $0.001 par value; 2,000,000 shares designated,
none and 1,700,000 shares issued and outstanding, respectively
(liquidation value of $1,700,000)		-			1,550,817
Total temporary equity		-			3,469,985

Stockholders’ deficiency:
Preferred stock, $0.001 par value; 10,000,000 shares authorized
Series C preferred stock, $0.001 par value; 11,411,400 shares designated,
none and 11,307,450 shares issued and outstanding, respectively
(liquidation value of $11,307)		-			11,307
Series B preferred stock, $0.001 par value; 368,421 shares designated,
none and 368,411 shares issued and outstanding, respectively		-			368
Common stock, $0.001 par value; 120,000,000 shares authorized,
35,295,204 and 11,837,930 issued and outstanding, respectively		35,295			11,838
Additional paid-in capital		6,845,754			3,275,296
Accumulated deficit		(8,780,770	)		(5,326,370	)
Total stockholders’ deficiency		(1,899,721	)		(2,027,561	)

Total liabilities and stockholders’ deficiency	$	3,718,379		$	4,013,606

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

F-2

ASPEN GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	For the Three			For the Three			For the Six			For the Six
	Months Ended			Months Ended			Months Ended			Months Ended
	June 30, 2012			June 30, 2011			June 30, 2012			June 30, 2011

Revenues	$	1,407,282		$	950,592		$	2,765,101		$	1,958,464
Costs and expenses:
Instructional costs and services		924,189			465,415			1,828,886			996,674
Marketing and promotional		446,652			60,796			883,957			140,390
General and adminstrative		1,168,168			675,626			2,887,494			1,044,123
Receivable collateral valuation reserve		309,117			-			309,117			-
Depreciation and amortization		96,188			53,959			185,937			106,404
Total costs and expenses		2,944,314			1,255,796			6,095,391			2,287,591

Operating loss		(1,537,032	)		(305,204	)		(3,330,290	)		(329,127	)

Other income (expense):
Interest income		85			4			729			8
Interest expense		(127,687	)		(3,479	)		(130,718	)		(6,826	)
Gain on disposal of property and equipment		-			-			5,879			-
Loss due to unauthorized borrowing		-			-			-			(14,876	)
Total other income (expense)		(127,602	)		(3,475	)		(124,110	)		(21,694	)

Loss before income taxes		(1,664,634	)		(308,679	)		(3,454,400	)		(350,821	)

Income tax expense (benefit)		-			-			-			-

Net loss		(1,664,634	)		(308,679	)		(3,454,400	)		(350,821	)

Cumulative preferred stock dividends		-			(11,969	)		(37,379	)		(15,534	)

Net loss allocable to common stockholders	$	(1,664,634	)	$	(320,648	)	$	(3,491,779	)	$	(366,355	)

Loss per share:
Basic and diluted	$	(0.05	)	$	(0.02	)	$	(0.13	)	$	(0.02	)

Weighted average number of common shares outstanding:
Basic and diluted		35,289,204			16,860,212			25,881,462			18,941,542

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

F-3

ASPEN GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIENCY

FOR THE SIX MONTHS ENDED JUNE 30, 2012

(Unaudited)

	Preferred Stock																Additional						Total
	Series B						Series C						Common Stock				Paid-In			Accumulated			Stockholders'
	Shares			Amount			Shares			Amount			Shares		Amount		Capital			Deficit			Deficiency

Balance at December 31, 2011		368,411		$	368			11,307,450		$	11,307			11,837,930	$	11,838	$	3,275,296		$	(5,326,370	)	$	(2,027,561	)
Conversion of all preferred shares into common shares		(368,411	)		(368	)		(11,307,450	)		(11,307	)		13,677,274		13,677		3,467,983			-			3,469,985
Recapitalization		-			-			-			-			9,760,000		9,760		(30,629	)		-			(20,869	)
Conversion of convertible notes into common shares		-			-			-			-			20,000		20		19,980			-			20,000
Stock-based compensation		-			-			-			-			-		-		113,124			-			113,124
Net loss		-			-			-			-			-		-		-			(3,454,400	)		(3,454,400	)
Balance at June 30, 2012		-		$	-			-		$	-			35,295,204	$	35,295	$	6,845,754		$	(8,780,770	)	$	(1,899,721	)

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

F-4

ASPEN GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the Six			For the Six
	Months Ended			Months Ended
	June 30, 2012			June 30, 2011
Cash flows from operating activities:
Net loss	$	(3,454,400	)	$	(350,821	)
Adjustments to reconcile net loss to net cash used in operating activities:
Provision for bad debts		84,476			10,060
Receivable collateral valuation reserve		309,117			-
Amortization of debt issuance costs		85,565			-
Gain on disposal of property and equipment		(5,879	)		-
Depreciation and amortization		185,937			106,404
Issuance of convertible notes in exchange for services rendered		38,175			22,000
Stock-based compensation		113,124			-
Changes in operating assets and liabilities, net of effects of acquisition:
Accounts receivable		(331,690	)		(83,309	)
Accounts receivable, secured - related party		-			7,376
Prepaid expenses and other current assets		(13,083	)		(29,489	)
Accounts payable		375,510			258,189
Accrued expenses		535,163			(70,161	)
Deferred rent		(2,145	)		(1,162	)
Deferred revenue		96,672			4,969
Net cash (used in) operating activities		(1,983,458	)		(125,944	)

Cash flows from investing activities:
Cash acquired as part of merger		337			3,200
Purchases of property and equipment		(6,005	)		(115,046	)
Purchases of intangible assets		(306,989	)		(427,603	)
Increase in restricted cash		(105,932	)		-
Proceeds received from officer loan repayments		150,000			-
Net cash (used in) investing activities		(268,589	)		(539,449	)

Cash flows from financing activities:
Proceeds from (repayments on) line of credit, net		(10,512	)		(4,293	)
Principal payments on notes payable		-			(2,874	)
Proceeds from note payable		22,000			-
Proceeds received from issuance of convertible notes and warrants		2,006,000			328,000
Disbursements for debt issuance costs		(266,473	)		-
Proceeds from issuance of Series A and D preferred stock		-			1,169,419
Repayments of convertible notes payable		-			(10,000	)
Disbursements to purchase treasury shares		-			(740,000	)
Net cash provided by financing activities		1,751,015			740,252

Net (decrease) increase in cash and cash equivalents		(501,032	)		74,859

Cash and cash equivalents at beginning of period		766,602			294,838

Cash and cash equivalents at end of period	$	265,570		$	369,697

Supplemental disclosure of cash flow information:
Cash paid for interest	$	89,942		$	13,058
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 loans payable to convertible notes payable	$	200,000		$	-
Liabilities assumed in recapitalization	$	21,206		$	-
Conversion of convertible notes payable into common shares	$	20,000		$	-
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
Recognition of accrual to rescing common shares	$	-		$	165,000

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

F-5

ASPEN GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2012

(Unaudited)

Note 1. Nature of Operations and Going Concern

Overview

Aspen Group, Inc. (together with its subsidiaries, the “Company” or “Aspen”) was founded in Colorado in 1987 as the International School of Information Management. On September 30, 2004, it was acquired by Higher Education Management Group, Inc. (“HEMG”) and changed its name to Aspen University Inc. On May 13, 2011, the Company formed in Colorado a subsidiary, Aspen University Marketing, LLC, which is currently inactive. On March 13, 2012, the Company was recapitalized in a reverse merger (See Note 9). All references to the Company or Aspen before March 13, 2012 are to Aspen University Inc.

Aspen’s mission is to become an institution of choice for adult learners by offering cost-effective, comprehensive, and relevant online education. One of the key differences between Aspen and other publicly-traded, exclusively online, for-profit universities is that approximately 88% of our degree-seeking students (as of June 30, 2012) were enrolled in graduate degree programs (Master or Doctorate degree program). Since 1993, we have been nationally accredited by the Distance Education and Training Council (“DETC”), a national accrediting agency recognized by the U.S. Department of Education (the “DOE”).

Basis of Presentation

The interim condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). In the opinion of the Company’s management, all adjustments (consisting of normal recurring adjustments and reclassifications and non-recurring adjustments) necessary to present fairly our results of operations for the three and six months ended June 30, 2012 and 2011, our cash flows for the six months ended June 30, 2012 and 2011 and our financial position as of June 30, 2012 have been made. The results of operations for such interim periods are not necessarily indicative of the operating results to be expected for the full year.

Certain information and disclosures normally included in the notes to the annual consolidated financial statements have been condensed or omitted from these interim consolidated financial statements. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Report on Form 8-K/A for the year ended December 31, 2011, as filed with the SEC on August 20, 2012. The December 31, 2011 balance sheet is derived from those statements.

Going Concern

The Company had a net loss allocable to common stockholders of $3,491,779 and negative cash flows from operations of $1,983,458 for the six months ended June 30, 2012. The Company’s ability to continue as a going concern is contingent on securing additional debt or equity financing from outside investors. These matters raise substantial doubt about the Company's ability to continue as a going concern. Management plans to continue to implement its business plan and to fund operations by raising additional capital through the issuance of debt and equity securities. The Company has presently engaged a placement agent, Laidlaw & Company (UK) Ltd., to assist with raising up to $7,200,000 in additional debt and equity capital subsequent to the close of the merger with Aspen Group, Inc. Since the beginning of 2012, the Company has raised $2,306,000 in gross funding including $1,706,000 from the sale of convertible notes and warrants under the Laidlaw arrangement (see Note 6) and $600,000 from the sale of convertible notes to the Company's CEO (See Notes 6 and 12).

The financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

F-6

ASPEN GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2012

(Unaudited)

Note 2. Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of Aspen Group, Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of the unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts in the unaudited condensed consolidated financial statements. Actual results could differ from those estimates. Significant estimates in the accompanying unaudited condensed consolidated financial statements include the allowance for doubtful accounts and other receivables, the valuation of collateral on certain receivables, the valuation and amortization periods of intangible assets, valuation of stock-based compensation and the valuation allowance on deferred tax assets.

Restricted Cash

Restricted cash represents amounts pledged as security for transactions involving Title IV programs. Upon the DOE’s completion of its review of the Company’s application to participate in Title IV programs, the funds are expected to be released and available for use by the Company.

Consistent with the Higher Education Act, Aspen’s certification to participate in Title IV programs terminated after closing of the reverse merger, and Aspen must apply to DOE to reestablish its eligibility and certification to participate in the Title IV programs. However, in order to avoid significant disruption in disbursements of Title IV funds, the DOE may temporarily and provisionally certify an institution that is seeking approval of a change in ownership, like Aspen, under certain circumstances while the DOE reviews the institution’s application. On March 15, 2012 the DOE asked Aspen to provide to the DOE by March 28, 2012 a letter of credit in the amount of $105,865, which is 10% of Aspen’s Title IV receipts in 2011. On March 27, 2012, the Company opened a 12-month money market account, maturing March 28, 2013, with its banking institution in the amount of $105,865 and pledged that to the letter of credit. The Company shall consider $105,932 (includes accrued interest of $67) as restricted cash until such letter of credit expires. As of June 30, 2012, the account bears interest of 0.25%.

Fair Value Measurements

Fair value is 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. The Company classifies assets and liabilities recorded at fair value under the fair value hierarchy based upon the observability of inputs used in valuation techniques. Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed market assumptions. The fair value measurements are classified under the following hierarchy:

●	Level 1—Observable inputs that reflect quoted market prices (unadjusted) for identical assets and liabilities in active markets;

●

Level 2—Observable inputs, other than quoted market prices, that are either directly or indirectly observable in the marketplace for identical or similar assets and 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 and liabilities; and

●	Level 3—Unobservable inputs that are supported by little or no market activity that are significant to the fair value of assets or liabilities.

The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.

F-7

ASPEN GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2012

(Unaudited)

Net Loss Per Share

Net loss per common share is based on the weighted average number of shares of common stock outstanding during each period. Common stock equivalents, including 1,925,000 and 0 stock options, 882,500 and 400,000 stock warrants, and a variable amount of shares underlying $2,255,825 (a minimum of 2,255,825 common shares as of June 30, 2012) and $15,000 of convertible notes payable for the six months ended June 30, 2012 and 2011, respectively, are not considered in diluted loss per share because the effect would be anti-dilutive.

Recent Accounting Pronouncements

In June 2011, the FASB, issued ASU 2011-05, which amends ASC Topic 220, Comprehensive Income, which requires an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. It eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders' equity. The ASU does not change the items which must be reported in other comprehensive income, how such items are measured or when they must be reclassified to net income. This ASU is effective for interim and annual periods beginning after December 15, 2011. The Company adopted ASU 2011-05 effective January 1, 2012, and such adoption did not have a material effect on the Company's financial statements.

Note 3. Secured Note and Accounts Receivable – Related Parties

Note Receivable, Secured – Related Party

On December 14, 2011, the Company loaned $150,000 to an officer of the Company in exchange for a promissory note bearing 3% per annum. As collateral, the note was secured by 500,000 shares of the Company’s common stock owned personally by the officer. The note along with accrued interest was due and payable on September 14, 2012. For the six months ended June 30, 2012, interest income of $594 was recognized on the note receivable. As of December 31, 2011, the balance due on the note receivable was $150,000, all of which is short-term. On February 16, 2012, the note receivable from an officer was repaid along with accrued interest (See Note 11).

Accounts Receivable, Secured – Related Party

On March 30, 2008 and December 1, 2008, the Company sold course curricula pursuant to marketing agreements to Higher Education Group Management, Inc. (“HEMG”), a related party and principal stockholder of the Company whose president is Mr. Patrick Spada, the former Chairman of the Company, in the amount of $455,000 and $600,000, respectively; UCC filings were filed accordingly. Under the marketing agreements, the receivables are due net 60 months. On September 16, 2011, HEMG pledged 772,793 Series C preferred shares (automatically converted to 654,850 common shares on March 13, 2012) of the Company as collateral for this account receivable. On March 8, 2012, due to the impending reduction in the value of the collateral as the result of the Series C conversion ratio and the Company’s inability to engage Mr. Spada in good faith negotiations to increase HEMG’s pledge, Michael Mathews, the Company’s CEO, pledged 117,943 common shares of the Company, owned personally by him, valued at $1.00 per share based on recent sales of capital stock as additional collateral to the accounts receivable, secured – related party. On March 13, 2012, the Company deemed the receivables stemming from the sale of courseware curricula to be in default.

F-8

ASPEN GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2012

(Unaudited)

On April 4, 2012, the Company entered into an agreement with: (i) an individual, (ii) Higher Education Group Management, Inc. (“HEMG”), a related party and principal stockholder of the Company whose president is Mr. Patrick Spada, the former Chairman of the Company and (iii) Mr. Patrick Spada. Under the agreement, (a) the individual shall purchase and HEMG shall sell to the individual 400,000 common shares of the Company at $0.50 per share by April 10, 2012; (b) the Company guaranteed it would purchase at least 600,000 common shares of the Company at $0.50 per share within 90 days of the agreement and the Company would use its best efforts to purchase from HEMG and resell to investors an additional 1,400,000 common shares of the Company at $0.50 per share within 180 days of the agreement; (c) provided HEMG and Mr. Patrick Spada fulfill their obligations under (a) and (b) above, the Company shall consent to additional private transfers by HEMG and/or Mr. Patrick Spada of up to 500,000 common shares of the Company on or before March 13, 2013; (d) HEMG agrees to not sell, pledge or otherwise transfer 142,500 common shares of the Company pending resolution of a dispute regarding the Company’s claim that HEMG sold 131,500 common shares of the Company without having enough authorized shares and a stockholder did not receive 11,000 common shares of the Company owed to him as a result of a stock dividend; and (e) the Company shall waive any default of the accounts receivable, secured - related party and extend the due date to September 30, 2014. A group of predominantly existing shareholders implemented the purchase of 400,000 common shares at $0.50 per share per section (a) above on or before the April 10, 2012 deadline. Subsequent to June 30, 2012, third party investors placed $168,000 in escrow to purchase 336,000 shares per section (b) above (See Note 7). Based on the Company plans to raise additional capital from the sale of its common stock, and the estimated price per share from such offering, the value of the aforementioned collateral shall decrease. Accordingly, as of June 30, 2012, the Company has recognized an allowance of $309,117 for this account receivable. As of June 30, 2012 and December 31, 2011, the balance of the account receivable, net of allowance, was $463,676 and $772,793 and is shown as accounts receivable, secured – related party, net (See Note 11).

Note 4. Intangible Assets

Intangible assets consisted of the following at June 30, 2012 and December 31, 2011:

	June 30, 2012			December 31, 2011
Course curricula	$	2,092,638		$	2,072,238
Call center		1,214,044			927,455
		3,306,682			2,999,693
Accumulated amortization		(1,934,158	)		(1,762,697	)
Intangible assets, net	$	1,372,524		$	1,236,996

The following is a schedule of estimated future amortization expense of intangible assets as of June 30, 2012:

Year Ending December 31,
2012	$	378,257
2013		339,902
2014		300,484
2015		262,242
2016		91,639
Total	$	1,372,524

Amortization expense for the six months ended June 30, 2012 and 2011 was $171,461 and $98,456, respectively.

F-9

ASPEN GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2012

(Unaudited)

Note 5. Loans Payable

During 2009, the Company received advances aggregating $200,000 from three individuals. Of the total funds received, $50,000 was received from a related party. From the date the funds were received through the date the loans were converted into convertible promissory notes payable, the loans were non-interest bearing demand loans and, therefore, no interest expense was recognized or due. As of December 31, 2011, the entire balance of the loans payable is included in long-term liabilities as the Company, in February 2012, has converted the loans into long-term convertible notes payable (See Notes 6 and 11).

Note 6. Convertible Notes Payable

As part of the recapitalization that occurred on March 13, 2012, the Company assumed from the public entity an aggregate of $20,000 of convertible notes bearing interest at 10% per annum. Each note holder had the right, at its option and simultaneously with the first closing thereof, to convert all or a portion of the principal amount of the note into shares of the Company’s common stock at the conversion price of the next equity offering of the Company. The notes meet the criteria of stock settled debt under ASC 480, “Distinguishing Liabilities from Equity”, and accordingly are presented at their fixed monetary amount of $20,000. The convertible notes were past due as of the date of assumption and, accordingly, the Company was in default. In April 2012, the convertible notes payable of $20,000 were converted into 20,000 common shares of the Company and, accordingly, the default was cured (See Note 9).

On February 25, 2012, February 27, 2012 and February 29, 2012, loans payable to an individual, another individual and a related party (the brother of Patrick Spada, the former Chairman of the Company), of $100,000, $50,000 and $50,000, respectively, were converted into two-year convertible promissory notes, bearing interest of 0.19% per annum. Beginning March 31, 2012, the notes are convertible into common shares of the Company at the rate of $1.00 per share. The Company evaluated the convertible notes and determined that, for the embedded conversion option, there was no beneficial conversion value to record as the conversion price is considered to be the fair market value of the common shares on the note issue dates. As these loans (now convertible promissory notes) are not due for at least 12 months after the balance sheet, they have been included in long-term liabilities as of June 30, 2012 (See Notes 5 and 11).

On March 13, 2012, the Company’s CEO made an investment of $300,000 in a convertible promissory note due March 31, 2013, bearing interest at 0.19% per annum. The note is convertible into common shares of the Company at the rate of $1.00 per share upon five days written notice to the Company. The Company evaluated the convertible notes and determined that, for the embedded conversion option, there was no beneficial conversion value to record as the conversion price is considered to be the fair market value of the common shares on the note issue date (See Note 11).

On February 29, 2012, (the "Effective Date") (and as amended on March 30, 2012) the Company retained the investment bank of Laidlaw & Company (UK) Ltd. ("Laidlaw") on an exclusive basis with certain "carve-out" provisions for the purpose of raising up to $6,000,000 (plus up to an additional $1,200,000 million to cover over-allotments at the option of Laidlaw) through two successive best-efforts private placements of the Company's securities. The Phase One financing was an offering of up to 40 Units of $50,000 each and was to be completed by March 31, 2012, but was extended to May 31, 2012 (extended to June 30, 2012 per the March 30, 2012 amendment). Each Unit consists of: (i) senior secured convertible notes (the "Convertible Notes"), bearing 10% interest, convertible into the Company's common shares at the lower of (a) $1.00 or (b) 95% of the per share purchase price of any shares of common stock (or common stock equivalents) issued on or after the original issue date of the note and (ii) five-year warrant to purchase that number of the Company's common shares equal to 25% of the number of shares issuable upon conversion of the Convertible Notes. Mandatory conversion will occur on the initial closing of the Phase Two financing. The Convertible Notes mature on June 30, 2012 (extended to September 30, 2012 per the March 30, 2012 amendment), carry provisions for price protection and require the Company to file a registration statement for the resale of the underlying common stock nine months after closing of the Phase Two offering. For the Phase One financing, Laidlaw received a cash fee of 10% of aggregate funds raised along with a five-year warrant (the "Laidlaw Warrant") equal to 10% of the common stock reserved for issuance in connection with the Units. Separately, Laidlaw required an activation fee of $25,000, of which $15,000 was paid upon execution of the agreement and the remaining $10,000 was paid as of May 18, 2012. As of June 30, 2012, the Company, without the assistance of any broker dealer, raised $150,000 from the sale of 3.0 Units (including convertible notes payable and an estimated 37,500 warrants) from the Phase One financing and, raised another $1,289,527 (net of debt issuance costs of $266,473) from the sale of 31.12 Units (including convertible notes payable and an estimated 389,000 warrants) through Laidlaw. The convertible note embedded conversion options did not qualify as derivatives since the conversion shares were not readily convertible to cash due to an inactive trading market and there was no beneficial conversion value since the conversion price equaled the fair value of the shares.

F-10

ASPEN GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2012

(Unaudited)

On May 1, 2012, the Company issued a convertible promissory note payable to a consultant in the amount of $49,825 in exchange for past services rendered, of which $38,175 pertains to the six months ended June 30, 2012. The note bears interest at 0.19% per annum, matures September 30, 2012, and is convertible into the Company’s common shares at the lower (a) $1.00 or (b) the per share purchase price of any shares of common stock (or common stock equivalents) issued on or after the original issue date of the note. The convertible note embedded conversion options did not qualify as derivatives since the conversion shares were not readily convertible to cash due to an inactive trading market and there was no beneficial conversion value since the conversion price equaled the fair value of the shares.

Convertible notes payable consisted of the following at June 30, 2012:

	June 30, 2012

Notes payable - originating March 15, 2012 through March 23, 2012; no monthly payments required; bearing interest at 10%; maturing at September 30, 2012 [A]		150,000

Notes payable - originating April 27, 2012 through June 15, 2012; no monthly payments required; bearing interest at 10%; maturing at September 30, 2012		1,556,000

Note payable - originating May 1, 2012; no monthly payments required; bearing interest at 0.19%; maturing at September 30, 2012		49,825

Note payable - related party originating March 13, 2012; no monthly payments required; bearing interest at 0.19%; maturing at March 31, 2013		300,000

Note payable - originating February 25, 2012; no monthly payments required; bearing interest at 0.19%; maturing at February 25, 2014		100,000

Note payable - originating February 27, 2012; no monthly payments required; bearing interest at 0.19%; maturing at February 27, 2014		50,000

Note payable - related party originating February 29, 2012; no monthly payments required; bearing interest at 0.19%; maturing at February 29, 2014		50,000

Total		2,255,825

Less: Current maturities (includes $300,000 to related parties)		(2,055,825	)

Amount due after one year (includes $50,000 to related parties)	$	200,000

[A] - maturity date extended from June 30, 2012 to September 30, 2012.

Future maturities of the convertible notes payable are as follows:

Year Ending December 31,
2012	$	1,755,825
2013		300,000
2014		200,000
	$	2,255,825

F-11

ASPEN GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2012

(Unaudited)

Note 7. Commitments and Contingencies

Line of Credit

The Company maintains a line of credit with a bank, up to a maximum credit line of $250,000. The line of credit bears interest equal to the prime rate plus 0.50% (overall interest rate of 3.75% at June 30, 2012). The line of credit requires minimum monthly payments consisting of interest only. The line of credit is secured by all business assets, inventory, equipment, accounts, general intangibles, chattel paper, documents, instruments and letter of credit rights of the Company. The line of credit is for an unspecified time until the bank notifies the Company of the Final Availability Date, at which time payments on the line of credit become the sum of: (a) accrued interest and (b) 1/60th of the unpaid principal balance immediately following the Final Availability Date. The balance due on the line of credit as of June 30, 2012 was $222,703. Since the earliest the line of credit is due and payable is over a five year period and the Company believes that it could obtain a comparable replacement line of credit elsewhere, the entire line of credit is included in long-term liabilities. The unused amount under the line of credit available to the Company at June 30, 2012 was $27,297.

Legal Matters

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of June 30, 2012, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations.

There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

Regulatory Matters

The University is subject to extensive regulation by Federal and State governmental agencies and accrediting bodies. In particular, the HEA and the regulations promulgated thereunder by the DOE subject the University to significant regulatory scrutiny on the basis of numerous standards that schools must satisfy to participate in the various types of federal student financial assistance programs authorized under Title IV of the HEA. The University has had provisional certification to participate in the Title IV programs. That provisional certification imposes certain regulatory restrictions including, but not limited to, a limit of 500 student recipients for Title IV funding for the duration of the provisional certification. During 2011, the University’s provisional certification was scheduled to expire, but the University timely filed its application for recertification with the DOE, which extended the term of the University’s certification pending DOE review. The provisional certification restrictions continue with regard to the University’s participation in Title IV programs.

To participate in the Title IV programs, an institution must be authorized to offer its programs of instruction by the relevant agencies of the State in which it is located, and since July 2011, potentially in the States where an institution offers postsecondary education through distance education. In addition, an institution must be accredited by an accrediting agency recognized by the DOE and certified as eligible by the DOE. The DOE will certify an institution to participate in the Title IV programs only after the institution has demonstrated compliance with the HEA and the DOE’s extensive academic, administrative, and financial regulations regarding institutional eligibility and certification. An institution must also demonstrate its compliance with these requirements to the DOE on an ongoing basis. The University performs periodic reviews of its compliance with the various applicable regulatory requirements. If we were ineligible to receive Title IV funding, given Title IV cash receipts represented approximately 7% of total revenues in 2011, our operations and liquidity would be minimally impacted.

F-12

ASPEN GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2012

(Unaudited)

As a result of certain events in 2012, the Company has been requested by DOE to provide a letter of credit in the amount of $105,865, which is 10% of Aspen’s Title IV receipts in 2011, by March 28, 2012. On March 27, 2012, the Company provided the DOE with the requested letter of credit expiring March 28, 2013. On June 18, 2012, the DOE, having reviewed Aspen’s same-day balance sheet filing and application for approval of the change in ownership and control, notified Aspen of the DOE’s requirement that Aspen increase its letter of credit by August 31, 2012 from 10% to 25% of Aspen’s Title IV receipts in 2011. Aspen has timely informed the DOE that it will provide the additional letter of credit in the amount of $158,800 by August 31, 2012. The DOE may impose additional or different terms and conditions in any final provisional program participation agreement that it may issue.

The HEA requires accrediting agencies to review many aspects of an institution's operations in order to ensure that the education offered is of sufficiently high quality to achieve satisfactory outcomes and that the institution is complying with accrediting standards. Failure to demonstrate compliance with accrediting standards may result in the imposition of probation, the requirements to provide periodic reports, the loss of accreditation or other penalties if deficiencies are not remediated.

Because the Company operates in a highly regulated industry, it may be subject from time to time to audits, investigations, claims of noncompliance or lawsuits by governmental agencies or third parties, which allege statutory violations, regulatory infractions or common law causes of action.

Delaware Approval to Confer Degrees

Aspen is a Delaware corporation. Delaware law requires an institution to obtain approval from the Delaware Department of Education (“Delaware DOE”) before it may incorporate with the power to confer degrees. Aspen did not obtain such approval prior to the period ended June 30, 2012. On July 3, 2012, Aspen received notice from the Delaware DOE that it is granted provisional approval status effective until June 30, 2015. Aspen is authorized by the Colorado Commission on Education to operate in Colorado as a degree granting institution.

Guarantee to Purchase Common Shares

Note 8. Temporary Equity

Prior to their conversion to common shares on March 13, 2012, the Series A, Series D and Series E preferred shares were classified as temporary equity. During 2012 through March 13, 2012, the preferred shares accumulated additional dividends of $37,379 and as of March 13, 2012, total cumulative preferred dividends were $124,705. On March 13, 2012, all preferred shares were automatically converted into common shares and, based on the terms of the preferred shares, none of the cumulative dividends shall ever be paid (See Note 9).

Note 9. Stockholders’ Equity

Stock Dividend and Reverse Split

On February 23, 2012, the Company approved a stock dividend of one new share of the Company for each share presently held. Following the stock dividend, the Company approved a one-for-two reverse stock split as of the close of business on February 24, 2012 in which each two shares of common stock shall be combined into one share of common stock. This was done in order to reduce the conversion ratio of the convertible preferred stock for all Series to 1 for 1 except for Series C, which had a conversion ratio of 0.8473809.

F-13

ASPEN GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2012

(Unaudited)

Common Stock

On March 13, 2012, all of the outstanding preferred shares of the Company were automatically converted into 13,677,274 common shares of Aspen Group, Inc. (See Note 8).

Pursuant to the recapitalization discussed below, the Company is deemed to have issued 9,760,000 common shares to the original stockholders of the publicly-held entity.

In April 2012, the Company issued 20,000 common shares upon the conversion of $20,000 of convertible notes payable (See Note 6).

Recapitalization

On March 13, 2012 (the “recapitalization date”), the Company was acquired by Aspen Group, Inc., an inactive publicly-held company, in a reverse merger transaction accounted for as a recapitalization of the Company (the “Recapitalization” or the “Reverse Merger”). The common and preferred stockholders of the Company received 25,515,204 common shares of Aspen Group, Inc. in exchange for 100% of the capital stock of Aspen University Inc. For accounting purposes, Aspen University Inc. is the acquirer and Aspen Group, Inc. is the acquired company because the stockholders of Aspen University Inc. acquired both voting and management control of the combined entity. The Company is deemed to have issued 9,760,000 common shares to the original stockholders of the publicly-held entity. Accordingly, after completion of the recapitalization, the historical operations of the Company are those of Aspen University Inc. and the operations since the recapitalization date are those of Aspen University Inc. and Aspen Group, Inc. The assets and liabilities of both companies are combined at historical cost on the recapitalization date. As a result of the recapitalization and conversion of all Company preferred shares into common shares of the public entity, all redemption and dividend rights of preferred shares were terminated. As a result of the recapitalization, the Company now has 120,000,000 shares of common stock, par value $0.001 per share, and 10,000,000 shares of preferred stock, par value $0.001 per share authorized. The assets acquired and liabilities assumed from the publicly-held company were as follows:

Cash and cash equivalents	$	337
Liabilities assumed		(21,206	)
Net	$	(20,869	)

Stock Warrants

All outstanding warrants issued by the Company to date have been related to capital raises. Accordingly, the Company has not recognized any stock-based compensation for warrants issued during the periods presented.

A summary of the Company’s warrant activity during the six months ended June 30, 2012 is presented below:

					Weighted
			Weighted		Average
			Average		Remaining		Aggregate
	Number of		Exercise		Contractual		Intrinsic
Warrants	Shares		Price		Term		Value

Balance Outstanding, December 31, 2011		456,000	$	1.00
Granted		426,500	$	1.00
Exercised		-		-
Forfeited		-		-
Expired		-		-
Balance Outstanding, June 30, 2012		882,500	$	1.00		4.4	$	-

Exercisable, June 30, 2012		882,500	$	1.00		4.4	$	-

All of the Company’s warrants contain price protection. The Company evaluated whether the price protection provision of the warrant would cause derivative treatment. In its assessment, the Company determined that since its shares are not readily convertible to cash due to no active public market existing, the warrants are excluded from derivative treatment.

F-14

ASPEN GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2012

(Unaudited)

Stock Incentive Plan and Stock Option Grants to Employees and Directors

Immediately following the closing of the Reverse Merger, on March 13, 2012, the Company adopted the 2012 Equity Incentive Plan (the “Plan”) that provides for the grant of 2,500,000 shares in the form of incentive stock options, non-qualified stock options, restricted shares, stock appreciation rights and restricted stock units to employees, consultants, officers and directors. As of June 30, 2012, 575,000 shares were remaining under the Plan for future issuance.

During the six months ended June 30, 2012, the Company granted 1,895,000 stock options to employees, all of which were under the Plan, having an exercise price of $1.00 per share. The options vest pro rata over three years on each anniversary date; all options expire five years from the grant date. The total fair value of stock options granted to employees during the six months ended June 30, 2012 was $625,350, which is being recognized over the respective vesting periods. The Company recorded compensation expense of $55,374 for the six months ended June 30, 2012, in connection with employee stock options.

The Company estimates the fair value of share-based compensation utilizing the Black-Scholes option pricing model, which is dependent upon several variables such as the expected option term, expected volatility of the Company’s stock price over the expected term, expected risk-free interest rate over the expected option term, expected dividend yield rate over the expected option term, and an estimate of expected forfeiture rates. The Company believes this valuation methodology is appropriate for estimating the fair value of stock options granted to employees and directors which are subject to ASC Topic 718 requirements. These amounts are estimates and thus may not be reflective of actual future results, nor amounts ultimately realized by recipients of these grants. The Company recognizes compensation on a straight-line basis over the requisite service period for each award. The following table summarizes the assumptions the Company utilized to record compensation expense for stock options granted to employees during the six months ended June 30, 2012 and 2011:

	For the Six			For the Six
	Months Ended			Months Ended
Assumptions	June 30, 2012			June 30, 2011
Expected life (years)		3.5			N/A
Expected volatility		44.2	%		N/A
Weighted-average volatility		44.2	%		N/A
Risk-free interest rate		0.56% - 0.60	%		N/A
Dividend yield		0.00	%		N/A
Expected forfeiture rate		2.0	%		N/A

The Company utilized the simplified method to estimate the expected life for stock options granted to employees. The simplified method was used as the Company does not have sufficient historical data regarding stock option exercises. The expected volatility is based on the average of the expected volatilities from the most recent audited financial statements available for comparative public companies that are deemed to be similar in nature to the Company. The risk-free interest rate is based on the U.S. Treasury yields with terms equivalent to the expected life of the related option at the time of the grant. Dividend yield is based on historical trends. While the Company believes these estimates are reasonable, the compensation expense recorded would increase if the expected life was increased, a higher expected volatility was used, or if the expected dividend yield increased.

F-15

ASPEN GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2012

(Unaudited)

A summary of the Company’s stock option activity for employees and directors during the three months ended June 30, 2012 is presented below:

						Weighted
				Weighted		Average
				Average		Remaining		Aggregate
	Number of			Exercise		Contractual		Intrinsic
Options	Shares			Price		Term		Value
Balance Outstanding, December 31, 2011		-		-
Granted		1,895,000		$	1.00
Exercised		-
Forfeited		(145,000	)	$	1.00
Expired		-
Balance Outstanding, June 30, 2012		1,750,000		$	1.00		4.7	$	-

Expected to vest, June 30, 2012		1,714,500		$	1.00		4.7	$	-

Exercisable, June 30, 2012		-			N/A		N/A		N/A

The weighted-average grant-date fair value of options granted to employees during the six months ended June 30, 2012 was $0.33.

As of June 30, 2012, there was $511,095 of total unrecognized compensation costs related to nonvested share-based compensation arrangements. That cost is expected to be recognized over a weighted-average period of 1.5 years.

Stock Option Grants to Non-Employees

During the six months ended June 30, 2012, the Company granted 175,000 stock options to non-employees, all of which were under the Plan, having an exercise price of $1.00 per share. The options vest pro rata over three years on each anniversary date; all options expire five years from the grant date. The total fair value of stock options granted to non-employees during the six months ended June 30, 2012 was $57,750, all of which was recognized immediately as these stock options were issued for prior services rendered. The Company recorded compensation expense of $57,750 for the six months ended June 30, 2012, in connection with non-employee stock options.

The following table summarizes the assumptions the Company utilized to record compensation expense for stock options granted to non-employees during the six months ended June 30, 2012 and 2011:

	For the Six			For the Six
	Months Ended			Months Ended
Assumptions	June 30, 2012			June 30, 2011
Expected life (years)		3.5			N/A
Expected volatility		44.2	%		N/A
Weighted-average volatility		44.2	%		N/A
Risk-free interest rate		0.60	%		N/A
Dividend yield		0.00	%		N/A

F-16

ASPEN GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2012

(Unaudited)

A summary of the Company’s stock option activity for non-employees during the six months ended June 30, 2012 is presented below:

					Weighted
			Weighted		Average
			Average		Remaining		Aggregate
	Number of		Exercise		Contractual		Intrinsic
Options	Shares		Price		Term		Value
Balance Outstanding, December 31, 2011		-	-
Granted		175,000	$	1.00
Exercised		-
Forfeited		-
Expired		-
Balance Outstanding, June 30, 2012		175,000	$	1.00		4.7	$	-

Expected to vest, June 30, 2012		175,000	$	1.00		4.7	$	-

Exercisable, June 30, 2012		-		N/A		N/A		N/A

The weighted-average grant-date fair value of options granted to non-employees during the three months ended June 30, 2012 was $0.33.

Note 10. Concentrations

Concentration of Revenues, Accounts Receivable and Costs and Expenses

For the three and six months ended June 30, 2012 and 2011, the Company had significant customers with individual percentage of total revenues equaling 10% or greater as follows:

	For the Three			For the Three			For the Six			For the Six
	Months Ended			Months Ended			Months Ended			Months Ended
	June 30, 2012			June 30, 2011			June 30, 2012			June 30, 2011
Customer 1		33.3	%		43.9	%		39.7	%		45.5	%
Customer 2		16.3	%		-			17.9	%		-
Totals		49.6	%		43.9	%		57.6	%		45.5	%

F-17

ASPEN GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2012

(Unaudited)

At June 30, 2012 and December 31, 2011, concentration of accounts receivable with significant customers representing 10% or greater of accounts receivable was as follows:

	June 30, 2012			December 31, 2011
Customer 1		58.4	%		53.4	%
Customer 2		17.0	%		17.3	%
Totals		75.4	%		70.7	%

For the three and six months ended June 30, 2012 and 2011, the Company had significant vendors representing 10% or greater of cost and expense as follows:

	For the Three			For the Three			For the Six			For the Six
	Months Ended			Months Ended			Months Ended			Months Ended
	June 30, 2012			June 30, 2011			June 30, 2012			June 30, 2011

Vendor 1		12.1	%		27.1	%		14.3	%		31.8	%

Totals		12.1	%		27.1	%		14.3	%		31.8	%

Note 11. Related Party Transactions

On December 14, 2011, the Company loaned $150,000 to an officer of the Company in exchange for a promissory note bearing 3% per annum. As collateral, the note was secured by 500,000 shares of the Company’s common stock owned personally by the officer. The note along with accrued interest was due and payable on September 14, 2012. For the three months ended June 30, 2012, interest income of $594 was recognized on the note receivable. As of December 31, 2011, the balance due on the note receivable was $150,000, all of which is short-term. On February 16, 2012, the note receivable from an officer was repaid along with accrued interest (See Note 3).

F-18

ASPEN GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2012

(Unaudited)

On March 13, 2012, the Company’s CEO made an investment of $300,000 in a convertible promissory note due March 31, 2013, bearing interest at 0.19% per annum. The note is convertible into common shares of the Company at the rate of $1.00 per share upon five days written notice to the Company. The Company evaluated the convertible note and determined that, for the embedded conversion option, there was no beneficial conversion value to record as the conversion price is considered to be the fair market value of the common shares on the note issue date (See Note 6).

Note 12. Subsequent Events

On August 14, 2012, the Company’s CEO loaned the Company $300,000 in exchange for a convertible demand note bearing interest at 5% per annum. The note is convertible at the lesser of: (i) $0.60 per share or (ii) the same conversion price of the convertible notes issued in the Company’s current private placement. The Company evaluated the convertible note and determined that, for the embedded conversion option, there was no beneficial conversion value to record as the conversion price is considered to be the fair market value of the common shares on the note issue date.

On August 16, 2012, as a direct result of removing the receivable from stockholder of approximately $2.2 million from the balance sheet and restating the March 31, 2012 and the December 31, 2011 and 2010 consolidated financial statements, the Company rescinded the pledge agreements guaranteeing the receivable and returned the pledged shares to the three directors.

F-19

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

You should read the following discussion in conjunction with our consolidated financial statements, which are included elsewhere in this Form 10-Q. Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed in the Risk Factors contained in the Form 8-K/A (the "Super 8-K") filed on August 20, 2012 with the Securities and Exchange Commission ("SEC").

Company Overview

Our mission is to become an institution of choice for adult learners by offering cost-effective, comprehensive, and relevant online education. We are dedicated to helping our students exceed their personal and professional objectives in a socially conscious and economically sensible way. One of the key differences between Aspen and other publicly-traded, exclusively online, for-profit universities is that 88% of our full-time degree-seeking students are enrolled in a graduate degree program (master or doctorate degree program). According to publicly available information, Aspen enrolls a larger percentage of its full-time degree-seeking students in graduate degree programs than its publicly-traded competitors.

Enrollment Trends

Aspen’s total student body increased 6.2% during the second quarter of 2012, to 2,242 from 2,112 students at March 31, 2012. Aspen’s degree-seeking student body increased 5.2% in second quarter 2012, to 1,736 students from 1,650 at March 31, 2012.

Highlights of the enrollment growth include the Master of Nursing program, up 14% in the second quarter. The Master of Nursing program now represents 9% of the full-time, degree-seeking student body of Aspen. Aspen enrolled 201 new degree-seeking students in the second quarter of 2012, and conferred degrees to 71 graduating students.

Note that at June 30, 2012, 903 degree-seeking students are enrolled under the legacy tuition pre-payment program that ended on July 15, 2011, versus 963 at March 31, 2012, a decrease of 6.2%. However, as these students currently represent 52% of degree-seeking students, the effect of the minimal revenue and gross profit contribution of the legacy tuition pre-payment program continues to restrain the overall financial performance discussed subsequently.

Results of Operations

Quarter Ended June 30, 2012 Compared with June 30, 2011

Revenue

Revenue for the quarter ended June 30, 2012 rose to $1,407,282 from $950,592 in the prior year quarter, for a year-over-year increase of 48%, The increase is primarily attributable to the increase in Aspen degree-seeking enrollments and the elimination of the legacy tuition pre-payment program on July 15, 2011 (which provided less revenues per student), as tuition revenues from degree seeking students rose to $938,607 from $533,542 for the quarter ended June 30, 2011, an increase of 76% year-over-year.

Costs and Expenses

Instructional Costs and Services

Instructional costs and services for the quarter ended June 30, 2012 rose to $924,189 from $465,415, an increase of 99%. A component of instructional costs and services, bad debt expense for the quarter ended June 30, 2012 rose to $51,521 from ($26,772), an increase of 192% reflecting the write-down of a long-dated receivable. Excluding the bad debt increase, instructional costs and services rose to $872,668 from $492,187, an increase of 77%. Notwithstanding the variability in bad debt expense, the increase in instructional costs and services is primarily attributable to higher charges associated with purchased courseware and payments to faculty due to the increase in course completions. Prospectively, as student enrollment levels increase, instructional costs and services should rise commensurately. However, as Aspen increases its degree-seeking student enrollments, the higher gross margins associated with such students should lead the growth rate in instructional costs and services to lag that of overall revenues.

Revenues less instructional costs and services, a measure of the gross profit of Aspen operations, for the quarter ended June 30, 2012 and 2011 were level at $483,093 versus $485,177, respectively. Adjusted for bad debt expenses, gross profit for the quarter ended June 30, 2012 rose to $534,614 from $458,405, a 17% increase. For reasons discussed above, increased degree-seeking student enrollments are expected prospectively to result in gross profit growth in excess of overall tuition growth.

Marketing and Promotional

Marketing and promotional costs for the quarter ended June 30, 2012 rose to $446,652 from $60,796, an increase of 635%. The increase is primarily attributable to expenses related to the operation of the marketing and student enrollment program that Aspen launched in the third quarter of 2011. The rate of marketing spend is expected to continue to increase over the course of 2012 as Aspen seeks to increase enrollment of degree-seeking students, particularly enrollments in its MBA and MSN Master-level degree programs.

General and Administrative

General and administrative costs for the quarter ended June 30, 2012 rose to $1,168,168 from $675,626, an increase of 73%. The most significant factor is the higher employment level as the Company increased staffing to support its growth objectives. To that end, payroll costs for the quarter rose to $630,803 from the prior year period’s $206,621, an increase of 205%. Separately, professional fees for the quarter decreased to $154,821 from $161,908, a decrease of 4%. Within professional fees, accounting fees for the quarter rose to $174,963 from $20,864, a 739% increase, and legal fees for the quarter decreased to ($20,142)from $141,044. Activities supported by the increased level of professional fees were post-reverse merger regulatory filings with the Department of Education (the “DoE”), the filing of the Form 10-Q with the SEC, along with the Company’s current capital raising activities. Relative to the professional fees incurred a total of $91,138 is non-recurring. Aspen expects professional fees to decline over the balance of 2012. Excluding payroll and professional fees, general and 2012 administrative costs for the quarter ended June 30, 2012 rose to $382,544 from $307,097, an increase of 25%.

Separately, general and administrative costs in the 2012 quarter reflected non-cash stock-based compensation expense of $47,020 as Aspen’s board of directors approved an option program on March 13, 2012. Based on grants made to date, non-cash stock-based compensation expense will average $47,536 per quarter over the balance of 2012.

Receivable Collateral Valuation Reserve

Due to a change in the estimated value of the collateral supporting the Account Receivable, secured – related party from $1.00/share to $0.60/share based on a pending financing by the Company, a non-cash valuation reserve expense of $309,117 has been recorded for the quarter ended June 30, 2012.

Depreciation and Amortization

Depreciation and amortization costs for the quarter ended June 30, 2012 rose to $96,188 from $53,959, an increase of 78%. The increase is primarily attributable to interest expense relating to higher levels of capitalized technology costs as Aspen continues the infrastructure build-out initiated in 2011.

Other Income (Expense)

Other income (expense) for the quarter ended June 30, 2012 declined to an expense of ($127,602) from an expense of ($3,475), a decrease of $124,127. The decrease is primarily attributable to interest expense related to the issuance of $1,585,825 in convertible notes payable during the period along with the amortization of debt issue costs.

Income Taxes

For the quarter ended June 30, 2012 there was no income tax expense as Aspen’s operations produced a pre-tax loss of ($1,664,634) as compared with the prior year quarter’s pre-tax loss of ($308,679).

Net Loss

For the quarter ended June 30, 2012, Aspen’s operations produced a net loss of ($1,664,634) as compared with the prior year second quarter’s net loss of ($308,679). The increase in the net loss is primarily attributable to the higher levels of marketing and promotional costs, instructional costs and services, and general and administrative costs.

Six Months Ended June 30, 2012 Compared with June 30, 2011

Revenue

Revenue for the six months ended June 30, 2012 rose to $2,765,101 from $1,958,464 in the prior year period, an increase of 41%, The increase is primarily attributable to the increase in Aspen degree-seeking enrollments and the elimination of the legacy tuition pre-payment program on July 15, 2011(which provided less revenues per student), as tuition revenues from degree seeking students rose to $1,667,101 from $1,049,339 for the six months ended June 30, 2011, an increase of 59%.

Costs and Expenses

Instructional Costs and Services

Instructional costs and services for the six months ended June 30, 2012 rose to $1,828,886 from $996,674, an increase of 84%. A component of instructional costs and services, bad debt expense for the six months ended June 30, 2012 rose to $84,476 from $10,060, an increase of 740% which reflected the write-down of long-dated receivables. Excluding the bad debt increase, instructional costs and services rose to $1,744,410 from $986,614, an increase of 77%. The increase is primarily attributable to higher charges associated with purchased courseware and payments to faculty due to the increase in course completions. As student enrollment levels increase, instructional costs and services should rise proportionately. However, as Aspen increases its degree-seeking student enrollments, the higher gross margins associated with such students should lead the growth rate in instructional costs and services to lag that of overall revenues.

Revenues less instructional costs and services, a measure of the gross profit of Aspen operations, for the six months ended June 30, 2012 and 2011 were $936,215 versus $961,790 respectively, a decline of 3%. Adjusted for bad debt expense, gross profits for the six months ended June 30, 2012 rose to $1,020,691 from $971,850, a 5% increase. For reasons discussed above, increased degree-seeking student enrollments are expected prospectively to result in gross profit growth in excess of overall tuition growth.

Marketing and Promotional

Marketing and promotional costs for the six months ended June 30, 2012 rose to $883,957 from $140,390, an increase of 530%. The increase is primarily attributable to expenses related to the operation of the marketing and student enrollment program that Aspen launched in the third quarter of 2011. The rate of marketing spend is expected to continue to increase over the course of 2012 as Aspen seeks to increase enrollment of degree-seeking students, particularly enrollments in its MBA and MSN Master-level degree programs.

General and Administrative

General and administrative costs for the six months ended June 30, 2012 rose to $2,887,494 from $1,044,123, an increase of 177%. The most significant factor is the higher employment level as the Company increased staffing to support its growth objectives. To that end, payroll costs for the six months rose to $1,559,425 from the prior year period’s $411,211, an increase of 279%. Separately, professional fees for the period rose to $673,400 from $189,438, an increase of 255%. Within professional fees, accounting fees for the period rose to $352,928 from $22,919, a 1,440% increase, and legal fees for the six months rose to $320,472 from $165,044, a 94% increase. Activities supported by the increased level of professional fees were reverse merger regulatory filings with the DoE and the DETC, post-reverse merger regulatory filings with the DoE, the filing of the Super 8-K and Form 10-Q with the SEC, along with the Company’s current capital raising activities. Relative to the 2012 professional fees incurred a total of $566,275 is non-recurring (accounting, $281,954; legal $284,321). Aspen expects professional fees to decline over the balance of 2012. Excluding payroll and professional fees, general and administrative costs for the period ended June 30, 2012 rose to $654,669 from $443,474, an increase of 48%.

Separately, general and administrative costs in the 2012 period reflected non-cash stock-based compensation expense of $113,124 as Aspen’s board of directors approved an option program on March 13, 2012. Based on grants made to date, non-cash stock-based compensation expense will average $47,536 per quarter over the balance of 2012.

Receivable Collateral Valuation Reserve

Depreciation and Amortization

Depreciation and amortization costs for the six months ended June 30, 2012 rose to $185,937 from $106,404, an increase of 75%. The increase is primarily attributable to interest expense relating to higher levels of capitalized technology costs as Aspen continues the infrastructure build-out initiated in 2011.

Other Income (Expense)

Other income (expense) for the six months ended June 30, 2012 declined to an expense of ($124,110) from an expense of ($21,694), a decrease of $102,416. The decrease is primarily attributable to interest expense related to the issuance of $2,006,000 in convertible notes payable during the period along with amortization of debt issue costs.

Income Taxes

For the six months ended June 30, 2012 there was no income tax expense as Aspen’s operations produced a pre-tax loss of ($3,454,400) as compared with the prior year period’s pre-tax loss of ($350,821).

Net Loss

For the six months ended June 30, 2012, Aspen’s operations produced a net loss of ($3,454,400) as compared with the prior year period loss of ($350,821). The increase in the net loss is attributable to the higher levels of marketing and promotional costs, instructional costs and services, payroll expenses along with the increase in professional fees discussed above.

Capital Resources and Liquidity

Net cash used in operating activities during the six months ended June 30, 2012 totaled ($1,983,458) which resulted from a net loss of ($3,454,400) offset by non-cash items of $810,515 and a net change in operating assets and liabilities of $660,427.

Net cash used in investing activities during the six months ended June 30, 2012 totaled ($268,589) which resulted primarily from capitalized technology expenditures of ($306,989) and an increase in restricted cash of ($105,932), offset by officer loan repayments received of $150,000.

Net cash provided by financing activities during the six months ended June 30, 2012 totaled $1,751,015 which resulted primarily from proceeds from the issuance of convertible notes payable of $2,006,000 offset by issuance costs of ($266,473).

We have limited working capital and our current cash position is not sufficient to satisfy our short-term working capital needs. Additionally, we do not anticipate cash from operations will support our working capital needs until approximately July 2013. This assumption is predicated on our raising at least $3,000,000 from the financings described below and successful implementation of our marketing program. As of the date of this report, we had $556,371 in available cash. As discussed above, we anticipate our marketing costs will increase.

To meet our working capital needs, we plan to raise additional working capital. In March 2012, we entered into an Agreement with Laidlaw & Company (UK) Ltd. which agreed to use its best efforts to raise up to $6,000,000 (with an option to sell up to an additional $1,200,000). In March 2012, under phase 1 of the Laidlaw agreement, we commenced an offering to retail investors to sell $2,000,000 of convertible notes due September 30, 2012, together with approximately 500,000 five-year warrants. As of the date of this report, we have raised $2,006,000 (of which we received $1,739,527 in net proceeds) in this offering. Pursuant to the Laidlaw Agreement, we have been seeking to raise the remainder under phase 2 of the Laidlaw agreement from institutional investors.

Pending completion of the Laidlaw offering, we are negotiating an Agreement with another broker-dealer as of August 20, 2012 to raise up to $4,000,000 of securities on a non-exclusive basis from retail investors. We expect that the broker-dealer will seek to sell, as our agent, $4,000,000 of convertible notes on similar terms and conditions as the initial retail sales through Laidlaw. If we do not raise a substantial portion of this new offering, we will not be able to expand as planned and not be able to increase our marketing budget. Additionally, if we are not able to raise $3,000,000 in financings, we may not have enough capital to remain operational in 12 months.

On August 14, 2012, the Company’s Chief Executive Officer loaned the Company $300,000 in exchange for a convertible demand note bearing interest at 5% per annum. The note is convertible at the lesser of: (i) $0.60 per share or (ii) the same conversion price of the convertible notes issued in the Company’s current private placement.

We expect to spend $1,500,000 in capital expenditures over the next 12 months. These capital expenditures will be allocated across growth initiatives including expansion of Aspen’s call center activities, academic courseware development and further improvements in Aspen’s technology infrastructure. Depending on management’s efforts to realize efficiencies in technology development and the amount of capital raised, it is entirely possible Aspen’s capital expenditures may not reach $1,500,000.

Related Party Transactions

At June 30, 2012, we included as an asset an account receivable of $463,676 net of an allowance of $309,117 from our principal shareholder. Although it is secured by stock pledges, there is a risk that we may not collect all or any of this sum.

In March 2012, we issued a $300,000 convertible promissory note (the "Note") to Mr. Michael Mathews, our Chief Executive Officer in exchange for a cash loan. The Note is due March 31, 2013, bearing interest at 0.19% per annum and is convertible at $1.00 per share. On August 14, 2012, the Company’s CEO lent the Company $300,000, and the Company issued him a $300,000 convertible demand note at 5% per year. The note is convertible at the lesser of (i) $0.60 per share or (ii) the same price of the convertible notes issued in the Company’s current private placement.

See Note 11 to our condensed consolidated financial statements included in this report for additional description of related party transactions that had a material affect on our condensed consolidated financial statements.

New Accounting Pronouncements

See Note 2 to our condensed consolidated financial statements included in this report for discussion of recent accounting pronouncements.

Off Balance Sheet Arrangements

We do not engage in any activities involving variable interest entities or off-balance sheet arrangements.

Critical Accounting Policies and Estimates

Our critical accounting policies and estimates are disclosed in the Super 8-K/A. During the three months ended June 30, 2012, there have been no significant changes to our critical accounting policies and estimates.

Cautionary Note Regarding Forward Looking Statements

This report contains forward-looking statements including gross profit growth, increase in marketing spend, capital expenditures, and liquidity. All statements other than statements of historical facts contained in this report, including statements regarding our future financial position, liquidity, business strategy and plans and objectives of management for future operations, are forward-looking statements. The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “could,” “target,” “potential,” “is likely,” “will,” “expect” and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs.

The results anticipated by any or all of these forward-looking statements might not occur. Important factors that could cause actual results to differ from those in the forward-looking statements include competition, failure to maintain the relationship with our business development partner, failure to generate sufficient revenue, the condition of the capital markets or raise enough money to meet our working capital needs. Further information on our risk factors is contained in our filings with the SEC, including the Super 8-K. Any forward-looking statement made by us in this report speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update or revise any forward-looking statements, whether as the result of new information, future events or otherwise.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable to smaller reporting companies.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures. Our management carried out an evaluation, with the participation of our Principal Executive Officer and Principal Financial Officer, required by Rule 13a-15 of the Securities Exchange Act of 1934 (the “Exchange Act”) of the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act. Based on their evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures are effective as of the end of the period covered by this report to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting. There were no changes in our internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we are party to certain legal proceedings that arise in the ordinary course and are incidental to our business. There are currently no such pending proceedings to which we are a party that our management believes will have a material adverse effect on the Company’s consolidated financial position or results of operations. However, future events or circumstances, currently unknown to management, will determine whether the resolution of pending or threatened litigation or claims will ultimately have a material effect on our consolidated financial position, liquidity or results of operations in any future reporting periods. See Note 7 to the financial statements contained in this report for information on specific matters.

ITEM 1A. RISK FACTORS

Not applicable to smaller reporting companies.

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

In addition to those unregistered securities previously disclosed in reports filed with the SEC, we have sold securities without registration under the Securities Act of 1933, which we refer to as the “Securities Act.”

Name or Class of Investor	Date Sold	No. of Securities	Consideration/Use of Proceeds
Consultant (1)	05/01/12	$49,825 convertible note due September 30, 2012 (2)	Services rendered

(1) The securities were issued in reliance upon the exemption provided by Section 4(2) under the Securities Act.

(2) The note is convertible at the lesser of: (i) $1.00 and (ii) the offering price per share of common stock or common stock equivalent in the next private placement offering (“Next Financing”). The note automatically converts on the earlier of: (i) September 30, 2012 and (ii) the closing of the Next Financing.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION

On August 14, 2012, Michael Mathews, the Company’s Chief Executive Officer, lent the Company $300,000, and the Company issued him a $300,000 convertible demand note at 5% per year. The note is convertible at the lesser of (i)$0.60 per share or (ii) the same price of the convertible notes issued in the Company’s current private placement.

ITEM 6. EXHIBITS

See the Exhibit Index at the end of this report.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		Aspen Group, Inc.

August 20, 2012		/s/ Michael Mathews
		Michael Mathews
		Chief Executive Officer
		(Principal Executive Officer)

August 20, 2012		/s/ David Garrity
		David Garrity
		Chief Financial Officer
		(Principal Financial Officer)

Exhibit Index

Incorporated by Reference

Filed or Furnished

Exhibit #

Exhibit Description

Form

Date

Number

Herewith

2.1

Certificate of Merger

8-K

3/19/12

2.1

2.2

Agreement and Plan of Merger*

8-K

3/19/12

2.2

2.3

Agreement and Plan of Merger – DE Reincorporation

8-K

3/19/12

2.3

2.4

Articles of Merger – DE Reincorporation

8-K

3/19/12

2.4

2.5

Certificate of Merger – DE Reincorporation

8-K

3/19/12

2.5

3.1

Certificate of Incorporation, as amended

8-K

3/19/12

2.6

3.2

Bylaws

8-K

3/19/12

2.7

3.3

Certificate of Incorporation – Acquisition Sub

8-K

3/19/12

2.8

3.4

Articles of Amendment to FL Articles of Incorporation

8-K

3/19/12

2.9

3.5

Articles of Amendment to FL Articles of Incorporation

8-K

6/20/11

3.3

3.6

FL Articles of Incorporation

S-1/A

5/5/10

3.1

10.1

Stock Pledge Agreement - Mathews dated March 8, 2012

8-K

3/19/12

10.12

10.2

Stock Pledge Agreement - Mathews dated March 16, 2012

8-K

3/19/12

10.16

10.3

Stock Pledge Agreement - Directors

8-K

3/19/12

10.11

10.4

Form of Convertible Note – Mathews

10-Q

5/15/12

10.3

10.5

Form of Convertible Note – Private Placement

Filed

10.6

Form of Warrant – Private Placement

Filed

31.1

CEO Certification (302)

Filed

31.2

CFO Certification (302)

Filed

32.1

CEO and CFO Certifications (906)

Furnished*

101 INS

XBRL Instance Document

Furnished**

101 SCH

XBRL Taxonomy Extension Schema

Furnished**

101 CAL

XBRL Taxonomy Extension Calculation Linkbase

Furnished**

101 LAB

XBRL Taxonomy Extension Label Linkbase

Furnished**

101 PRE

XBRL Taxonomy Extension Presentation Linkbase

Furnished**

101 DEF

XBRL Taxonomy Extension Definition Linkbase

Furnished**

*This exhibit is being furnished rather than filed and shall not be deemed incorporated by reference into any filing, in accordance with Item 601 of Regulation S-K.

** Attached as Exhibit 101 to this report are the Company’s financial statements for the three and six months ended June 30, 2012 and 2011 formatted in XBRL (eXtensible Business Reporting Language). The XBRL-related information in Exhibit 101 to this report shall not be deemed “filed” or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act, and is not filed for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of those sections.

Copies of the exhibits referred to above will be furnished at no cost to our shareholders who make a written request to Aspen Group, Inc., 224 West 30th Street, Suite 604 New York, New York 10001 Attention: Corporate Secretary.

EX-10.5 2 aspu_note.htm RETAIL FORM OF NOTE aspu_note.htm

EXHIBIT 10.5

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

Original Issue Date: __________, 2012

$_______________

10% SECURED CONVERTIBLE NOTE

DUE SEPTEMBER 30, 2012

THIS 10% SENIOR SECURED CONVERTIBLE NOTE is one of a series of duly authorized and validly issued 10% Secured Convertible Notes of Aspen Group, Inc., a Delaware corporation, (the “Company”), having its principal place of business at 720 South Colorado Boulevard, Suite 1150N, Denver, CO 80246, designated as its 10% Secured Convertible Note due September 30, 2012 (this Note, the “Note” and, collectively with the other Notes of such series, the “Notes”).

FOR VALUE RECEIVED, the Company promises to pay to ________________________ or its registered assigns (the “Holder”), or shall have paid pursuant to the terms hereunder, the principal sum of $_______________ on September 30, 2012 (the “Maturity Date”) or such earlier date as this Note is required or permitted to be repaid as provided hereunder, and to pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Note in accordance with the provisions hereof. This Note is subject to the following additional provisions:

Section 1. Definitions. For the purposes hereof, in addition to the terms defined elsewhere in this Note, (a) capitalized terms not otherwise defined herein shall have the meanings set forth in the Purchase Agreement and (b) the following terms shall have the following meanings:

"Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.

“Alternate Consideration” shall have the meaning set forth in Section 5(b).

“Bankruptcy Event” means any of the following events: (a) the Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company or any Significant Subsidiary thereof, (b) there is commenced against the Company or any Significant Subsidiary thereof any such case or proceeding that is not dismissed within 60 days after commencement, (c) the Company or any Significant Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered, (d) the Company or any Significant Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 60 calendar days after such appointment, (e) the Company or any Significant Subsidiary thereof makes a general assignment for the benefit of creditors, (f) the Company or any Significant Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts or (g) the Company or any Significant Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.

“Beneficial Ownership Limitation” shall have the meaning set forth in Section 4(c).

“Business Day” means any day except any Saturday, any Sunday, any day which shall be a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

“Buy-In” shall have the meaning set forth in Section 4(d)(v).

“Change of Control Transaction” means the occurrence after the date hereof of any of (a) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise) of in excess of 50% of the voting securities of the Company (other than by means of conversion or exercise of the Notes and the Securities issued together with the Notes), (b) the Company merges into or consolidates with any other Person, or any Person merges into or consolidates with the Company and, after giving effect to such transaction, the stockholders of the Company immediately prior to such transaction own less than 50% of the aggregate voting power of the Company or the successor entity of such transaction, or (c) the Company sells or transfers all or substantially all of its assets to another Person and the stockholders of the Company immediately prior to such transaction own less than 50% of the aggregate voting power of the acquiring entity immediately after the transaction, (d) a replacement at one time or within a three year period of more than one-half of the members of the Board of Directors which is not approved by a majority of those individuals who are members of the Board of Directors on the date hereof (or by those individuals who are serving as members of the Board of Directors on any date whose nomination to the Board of Directors was approved by a majority of the members of the Board of Directors who are members on the date hereof), or (e) the execution by the Company of an agreement to which the Company is a party or by which it is bound, providing for any of the events set forth in clauses (a) through (d) above.

“Common Stock” means the common stock of the Company, par value $0.001 per share, and any other class of securities into which such securities may hereafter be reclassified or changed.

“Common Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

“Conversion” shall have the meaning ascribed to such term in Section 4.

“Conversion Date” shall have the meaning set forth in Section 4(a).

“Conversion Price” shall have the meaning set forth in Section 4(b).

“Conversion Schedule” means the Conversion Schedule in the form of Schedule 1 attached hereto.

“Conversion Shares” means the shares of Common Stock of the Company, as applicable, issuable upon conversion of this Note in accordance with the terms hereof.

“Event of Default” shall have the meaning set forth in Section 8(a).

“Exempt Issuance” means the issuance of (a) shares of Common Stock or options to employees, officers, consultants, advisors or directors of the Company pursuant to any stock or option plan duly adopted for such purpose by a majority of the existing members of the Board of Directors or a majority of the members of a committee of directors established for such purpose, (b) securities upon the exercise or exchange of or conversion of any Securities issued hereunder and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of this Agreement, provided that such securities have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise, exchange or conversion price of such securities, (c) shares of Common Stock upon any anti-dilution adjustment to Common Stock and Common Stock Equivalents held by current unaffiliated shareholders of Aspen Group as of March 13, 2012 and (d) securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Company, provided that any such issuance shall only be to a Person which is, itself or through its subsidiaries, an operating company in a business synergistic with the business of the Company and in which the Company receives benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities.

“Fundamental Transaction” shall have the meaning set forth in Section 5(b).

“Interest Notice Period” shall have the meaning set forth in Section 2(a).

“Interest Payment Date” shall have the meaning set forth in Section 2(a).

“Interest Share Amount” shall have the meaning set forth in Section 2(a).

"Interest Rate" shall mean ten percent (10%) per annum.

“Late Fees” shall have the meaning set forth in Section 2(d).

“Liens” means a lien, charge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.

“Mandatory Conversion Price” means ninety-five percent (95%) of the per share purchase price of any shares of Common Stock or Common Stock Equivalents issued in the next private placement by the Company.

“Mandatory Default Amount” means the sum of (a) 125% of the outstanding principal amount of this Note, plus 100% of accrued and unpaid interest hereon, and (b) all other amounts, costs, expenses and liquidated damages due in respect of this Note.

“Mandatory Conversion” shall have the meaning set forth in Section 6(a) hereof.

“Mandatory Conversion Event” m shall have the meaning set forth in Section 6(a) hereof.

“New York Courts” shall have the meaning set forth in Section 9(d).

“Note Register” shall have the meaning set forth in Section 2(c).

“Notice of Conversion” shall have the meaning set forth in Section 4(a).

“Original Issue Date” means the date of the first issuance of the Notes, regardless of any transfers of any Note and regardless of the number of instruments which may be issued to evidence such Notes.

“Permitted Indebtedness” means (a) the indebtedness evidenced by the Notes (b) lease obligations and purchase money indebtedness of up to $150,000, in the aggregate, incurred in connection with the acquisition of capital assets and lease obligations with respect to newly acquired or leased assets, (c) indebtedness that is expressly subordinate to the Notes pursuant to a written subordination agreement with the Subscribers that is acceptable to each Subscriber in its sole and absolute discretion, and (d) the Company’s Business Line of Credit with JP Morgan Chase, NA in the principal amount of $250,000.

“Permitted Lien” means the individual and collective reference to the following: (a) Liens for taxes, assessments and other governmental charges or levies not yet due or Liens for taxes, assessments and other governmental charges or levies being contested in good faith and by appropriate proceedings for which adequate reserves (in the good faith judgment of the management of the Company) have been established in accordance with GAAP; (b) Liens imposed by law which were incurred in the ordinary course of the Company’s business, such as carriers’, warehousemen’s and mechanics’ Liens, statutory landlords’ Liens, and other similar Liens arising in the ordinary course of the Company’s business, and which (x) do not individually or in the aggregate materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business of the Company and its consolidated Subsidiaries or (y) are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing for the foreseeable future the forfeiture or sale of the property or asset subject to such Lien; and (c) Liens incurred in connection with Permitted Indebtedness under clauses (a) and (d) thereunder; and (d) Liens incurred in connection with Permitted Indebtedness under clause (b) thereunder, provided that such Liens are not secured by assets of the Company or its Subsidiaries other than the assets so acquired or leased.

“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

“Purchase Agreement” means the Securities Purchase Agreement, dated as of _________, 2012 among the Company and the original Holders, as amended, modified or supplemented from time to time in accordance with its terms.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Share Delivery Date” shall have the meaning set forth in Section 4(d)(ii).

“Subsidiary” shall have the meaning set forth in the Purchase Agreement.

“Trading Day” means a day on which the New York Stock Exchange is open for business.

“Trading Market” means the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE AMEX LLC, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange or the OTC Bulletin Board.

“Transaction Documents” shall have the meaning set forth in the Purchase Agreement.

Section 2. Interest.

a) Payment of Interest in Cash. The Company shall pay interest to the Holder at the Interest Rate on the aggregate principal amount of the principal being converted, payable quarterly on January 1, April 1, July 1 and October 1, beginning on June 30, 2012 on any Conversion Date (as to that principal amount then being converted), and on the Maturity Date (each such date, an “Interest Payment Date”) (if any Interest Payment Date is not a Business Day, then the applicable payment shall be due on the next succeeding Business Day), in cash.

b) Interest Calculations. Interest on the principal balance of this Note shall be calculated on the basis of a 360-day year, consisting of twelve 30 calendar day periods, and shall accrue daily commencing on the Original Issue Date until payment in full of the outstanding principal, together with all accrued and unpaid interest, liquidated damages and other amounts which may become due hereunder, has been made. Interest shall cease to accrue with respect to any principal amount converted, provided that, the Company actually delivers the Conversion Shares within the time period required by Section 4(d)(ii) herein. Interest hereunder will be paid to the Person in whose name this Note is registered on the records of the Company regarding registration and transfers of this Note (the “Note Register”). Except as otherwise provided herein, if at any time the Company pays interest partially in cash and partially in shares of Common Stock to the holders of the Notes, then such payment of cash shall be distributed ratably among the holders of the then-outstanding Notes based on their (or their predecessor’s) initial purchases of Notes pursuant to the Purchase Agreement.

c) Late Fee. All overdue accrued and unpaid interest to be paid hereunder shall entail a late fee at an interest rate equal to the lesser of 18% per annum or the maximum rate permitted by applicable law (the “Late Fees”) which shall accrue daily from the date such interest is due hereunder through and including the date of actual payment in full.

d) Prepayment. Except as otherwise set forth in this Note, the Company may not prepay any portion of the principal amount of this Note without the prior written consent of the Holder.

Section 3. Registration of Transfers and Exchanges.

a) Different Denominations. This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the Holder surrendering the same. No service charge will be payable for such registration of transfer or exchange.

b) Investment Representations. This Note has been issued subject to certain investment representations of the original Holder set forth in the Purchase Agreement and may be transferred or exchanged only in compliance with the Purchase Agreement and applicable federal and state securities laws and regulations.

c) Reliance on Note Register. Prior to due presentment for transfer to the Company of this Note, the Company and any agent of the Company may treat the Person in whose name this Note is duly registered on the Note Register as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Note is overdue, and neither the Company nor any such agent shall be affected by notice to the contrary.

Section 4. Conversion.

a) Voluntary Conversion. At any time after the Original Issue Date until this Note is no longer outstanding, this Note shall be convertible, in whole or in part, into shares of Common Stock at the option of the Holder, at any time and from time to time (subject to the conversion limitations set forth in Section 4(c) hereof). The Holder shall effect conversions by delivering to the Company a Notice of Conversion, the form of which is attached hereto as Annex A (each, a “Notice of Conversion”), specifying therein the principal amount of this Note to be converted and the date on which such conversion shall be effected (such date, the “Conversion Date”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion is actually delivered hereunder. To effect conversions hereunder, the Holder shall be required to physically surrender this Note to the Company. The Holder and the Company shall maintain records showing the principal amount(s) converted and the date of such conversion(s). The Company may deliver an objection to any Notice of Conversion within 1 Business Day of delivery of such Notice of Conversion. In the event of any dispute or discrepancy, the records of the Holder shall be controlling and determinative in the absence of manifest error.

b) Conversion Price. The conversion price in effect on any Conversion Date shall be equal to lesser of (i) $1.00 or (ii) the Mandatory Conversion Price, subject to adjustment herein (the “Conversion Price”).

c) Intentionally Omitted.

d) Mechanics of Conversion.

i. Conversion Shares Issuable Upon Conversion of Principal and Interest Amount. The number of Conversion Shares issuable upon a conversion hereunder shall be determined by the quotient obtained by dividing (x) the outstanding principal amount and accrued but unpaid interest of this Note to be converted by (y) the Conversion Price.

ii. Delivery of Certificate Upon Conversion. Not later than four Trading Days after each Conversion Date (the “Share Delivery Date”), the Company shall deliver, or cause to be delivered, to the Holder (A) a certificate or certificates representing the Conversion Shares which, when eligible for resale under Rule 144 promulgated under the Securities Act (“Rule 144”), shall be free of restrictive legends and trading restrictions (other than those which may then be required by the Purchase Agreement) representing the number of Conversion Shares being acquired upon the conversion of this Note and (B) a bank check in the amount of accrued and unpaid interest (if the Company has elected or is required to pay accrued interest in cash). When eligible for resale under Rule 144, the Company shall use its best efforts to deliver any certificate or certificates required to be delivered by the Company under this Section 4(d) electronically through the Depository Trust Company or another established clearing corporation performing similar functions.

iii. Failure to Deliver Certificates. If in the case of any Notice of Conversion such certificate or certificates are not delivered to or as directed by the applicable Holder by the fourth Trading Day after the Conversion Date, the Holder shall be entitled to elect by written notice to the Company at any time on or before its receipt of such certificate or certificates, to rescind such Conversion, in which event the Company shall promptly return to the Holder any original Note delivered to the Company and the Holder shall promptly return to the Company the Common Stock certificates representing the principal amount of this Note unsuccessfully tendered for conversion to the Company.

iv. Obligation Absolute; Partial Liquidated Damages. The Company’s obligations to issue and deliver the Conversion Shares upon conversion of this Note in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of such Conversion Shares; provided, however, that such delivery shall not operate as a waiver by the Company of any such action the Company may have against the Holder. In the event the Holder of this Note shall elect to convert any or all of the outstanding principal amount hereof, the Company may not refuse conversion based on any claim that the Holder or anyone associated or affiliated with the Holder has been engaged in any violation of law, agreement or for any other reason, unless an injunction from a court, on notice to Holder, restraining and or enjoining conversion of all or part of this Note shall have been sought and obtained, and the Company posts a surety bond for the benefit of the Holder in the amount of 130% of the outstanding principal amount of this Note, which is subject to the injunction, which bond shall remain in effect until the completion of arbitration/litigation of the underlying dispute and the proceeds of which shall be payable to the Holder to the extent it obtains judgment. In the absence of such injunction, the Company shall issue Conversion Shares or, if applicable, cash, upon a properly noticed conversion. If the Company fails for any reason to deliver to the Holder such certificate or certificates pursuant to Section 4(d)(ii) by the fifth Trading Day after the Conversion Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of principal amount being converted, $10 per Trading Day (increasing to $20 per Trading Day on the seventh (7th) Trading Day after such liquidated damages begin to accrue) for each Trading Day after such fourth (4th) Trading Day until such certificates are delivered. Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section 8 hereof for the Company’s failure to deliver Conversion Shares within the period specified herein and the Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.

v. Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Conversion. In addition to any other rights available to the Holder, if the Company fails for any reason to deliver to the Holder such certificate or certificates by the Share Delivery Date pursuant to Section 4(d)(ii), and if after such Share Delivery Date the Holder is required by its brokerage firm to purchase (in an open market transaction or otherwise), or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Conversion Shares which the Holder was entitled to receive upon the conversion relating to such Share Delivery Date (a “Buy-In”), then the Company shall (A) pay in cash to the Holder (in addition to any other remedies available to or elected by the Holder) the amount by which (x) the Holder’s total purchase price (including any brokerage commissions) for the Common Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of Common Stock that the Holder was entitled to receive from the conversion at issue multiplied by (2) the actual sale price at which the sell order giving rise to such purchase obligation was executed (including any brokerage commissions) and (B) at the option of the Holder, either reissue (if surrendered) this Note in a principal amount equal to the principal amount of the attempted conversion or deliver to the Holder the number of shares of Common Stock that would have been issued if the Company had timely complied with its delivery requirements under Section 4(d)(ii). For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of this Note with respect to which the actual sale price of the Conversion Shares (including any brokerage commissions) giving rise to such purchase obligation was a total of $10,000 under clause (A) of the immediately preceding sentence, the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock upon conversion of this Note as required pursuant to the terms hereof.

vi. Reservation of Shares Issuable Upon Conversion. The Company covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock for the sole purpose of issuance upon conversion of this Note and payment of interest on this Note, each as herein provided, free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holder (and the other holders of the Notes), not less than such aggregate number of shares of the Common Stock as shall (subject to the terms and conditions set forth in the Purchase Agreement) be issuable (taking into account the adjustments and restrictions of Section 5) upon the conversion of the outstanding principal amount of this Note and payment of interest hereunder. The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable.

vii. Fractional Shares. No fractional shares or scrip representing fractional shares shall be issued upon the conversion of this Note. As to any fraction of a share which Holder would otherwise be entitled to purchase upon such conversion, the Company shall at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Conversion Price or round up to the next whole share.

viii. Transfer Taxes. The issuance of certificates for shares of the Common Stock on conversion of this Note shall be made without charge to the Holder hereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificates, provided that, the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of this Note so converted and the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.

Section 5. Certain Adjustments.

a) Stock Dividends and Stock Splits. If the Company, at any time while this Note is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any Common Stock Equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon conversion of, or payment of interest on, the Notes), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Company, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of the Company) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

b) Subsequent Equity Sales. If, at any time while this Note is outstanding, the Company sells or grants any option to purchase or sells or grants any right to reprice, or otherwise disposes of or issues (or announces any sale, grant or any option to purchase or other disposition), any Common Stock or Common Stock Equivalents entitling any Person to acquire shares of Common Stock at an effective price per share that is lower than the then Conversion Price (such lower price, the “Base Conversion Price” and such issuances, collectively, a “Dilutive Issuance”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is lower than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price on such date of the Dilutive Issuance), then the Conversion Price shall be reduced to equal the Base Conversion Price. Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued. Notwithstanding the foregoing, no adjustment will be made under this Section 5(b) in respect of an Exempt Issuance. The Company shall notify the Holder in writing, no later than the Trading Day following the issuance of any Common Stock or Common Stock Equivalents subject to this Section 5(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice, the “Dilutive Issuance Notice”). For purposes of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant to this Section 5(b), upon the occurrence of any Dilutive Issuance, the Holder is entitled to receive a number of Conversion Shares based upon the Base Conversion Price on or after the date of such Dilutive Issuance, regardless of whether the Holder accurately refers to the Base Conversion Price in the Notice of Conversion.

c) Fundamental Transaction. If, at any time while this Note is outstanding, (i) the Company effects any merger or consolidation of the Company with or into another Person, (ii) the Company effects any sale of all or substantially all of its assets in one transaction or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (iv) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (in any such case, a “Fundamental Transaction”), then, upon any subsequent conversion of this Note, the Holder shall have the right to receive, for each Conversion Share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction, the same kind and amount of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of 1 share of Common Stock (the “Alternate Consideration”). For purposes of any such conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of 1 share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Note following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder a new Note consistent with the foregoing provisions and evidencing the Holder’s right to convert such Note into Alternate Consideration. The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this Section 5(c) and insuring that this Note (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction.

d) Calculations. All calculations under this Section 5 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 5, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding any treasury shares of the Company) issued and outstanding.

e) Notice to the Holder.

i. Adjustment to Conversion Price. Whenever the Conversion Price is adjusted pursuant to any provision of this Section 5, the Company shall promptly deliver to each Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

ii. Notice to Allow Conversion by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of this Note, and shall cause to be delivered to the Holder at its last address as it shall appear upon the Note Register, at least twenty (20) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange, provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. The Holder is entitled to convert this Note during the 20-day period commencing on the date of such notice through the effective date of the event triggering such notice.

Section 6. Mandatory Conversion.

a) Mandatory Conversion. If at any time after the Original Issue Date the Company raises aggregate gross proceeds of $4,000,000 from the sale of Securities pursuant to this Offering and and (ii) the next offering of the Company’s equity and/or debt securities to be consummated after the Final Closing of this Offering (the “Institutional Offering”) (a “Mandatory Conversion Event”), the aggregate principal amount remaining under this Note plus all accrued but unpaid interest thereon shall automatically be converted into shares of Common Stock at the Conversion Price (subject to the provisions of Section 4(c) hereunder) (a “Mandatory Conversion”). No fractional shares of Common Stock are to be issued upon the conversion of this Note, but rather the number of shares of Common Stock to be issued shall be rounded to the nearest whole number. To the extent that rounding up to the nearest whole number would result in a violation of Section 4(d)(vi), the Company shall pay the applicable converting Holder an amount in cash equal to the fractional share amount multiplied by the Conversion Price in effect on the Conversion Date. Any Conversion Shares not converted upon a Mandatory Redemption Event as a result of the application of the provisions of Section 4(c) hereof, shall automatically be converted in shares of Common Stock at the Conversion Price on the six-month anniversary of the Mandatory Conversion Event.

b) Conversion Procedure. The payment of cash or issuance of Common Stock, as applicable, pursuant to a Mandatory Conversion Event shall be made on the Mandatory Conversion Date, as applicable.

Section 7. Negative Covenants. As long as 25% of the principal amount of all Notes issued by the Company remains outstanding,, the Company shall not, and shall not permit any of its subsidiaries (whether or not a Subsidiary on the Original Issue Date) to, directly or indirectly:

a) other than Permitted Indebtedness, enter into, create, incur, assume, guarantee or suffer to exist any indebtedness for borrowed money of any kind, including, but not limited to, a guarantee, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom which is senior to the Notes;

b) other than Permitted Liens, enter into, create, incur, assume or suffer to exist any Liens of any kind, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom;

c) amend its charter documents, including, without limitation, its certificate of incorporation and bylaws, in any manner that materially and adversely affects any rights of the Holder;

d) repay, repurchase or offer to repay, repurchase or otherwise acquire more than a de minimis number of shares of its Common Stock or Common Stock Equivalents other than as to (i) the Conversion Shares or Warrant Shares as permitted or required under the Transaction Documents and (ii) repurchases of Common Stock or Common Stock Equivalents of departing officers and directors of the Company, provided that such repurchases shall not exceed an aggregate of $100,000 for all officers and directors during the term of this Note;

e) repay, repurchase or offer to repay, repurchase or otherwise acquire any Indebtedness, other than the Notes if on a pro-rata basis, other than regularly scheduled principal and interest payments as such terms are in effect as of the Original Issue Date, provided that such payments shall not be permitted if, at such time, or after giving effect to such payment, any Event of Default exist or occur;

f) pay cash dividends or distributions on any equity securities of the Company; or

g) enter into any agreement with respect to any of the foregoing.

Section 8. Events of Default.

a) “Event of Default” means, wherever used herein, any of the following events (whatever the reason for such event and whether such event shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

i. any default in the payment of (A) the principal amount of any Note or (B) interest, liquidated damages and other amounts owing to a Holder on any Note, as and when the same shall become due and payable (whether on a Conversion Date or the Maturity Date or by acceleration or otherwise) which default, solely in the case of an interest payment or other default under clause (B) above, is not cured within 5 Trading Days;

ii. the Company shall fail to observe or perform any other covenant or agreement contained in the Notes (other than a breach by the Company of its obligations to deliver shares of Common Stock to the Holder upon conversion, which breach is addressed in clause (xi) below) which failure is not cured, if possible to cure, within the earlier to occur of (A) 7 Trading Days after notice of such failure sent by the Holder or by any other Holder to the Company and (B) 12 Trading Days after the Company has become or should have become aware of such failure;

iii. a default or Event of Default (subject to any grace or cure period provided in the applicable agreement, document or instrument) shall occur under (A) any of the Transaction Documents or (B) any other material agreement, lease, document or instrument to which the Company or any Subsidiary is obligated (and not covered by clause (vi) below);

iv. any representation or warranty made in this Note, any other Transaction Documents, any written statement pursuant hereto or thereto or any other report, financial statement or certificate made or delivered to the Holder or any other Holder shall be untrue or incorrect in any material respect as of the date when made or deemed made;

v. the Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) shall be subject to a Bankruptcy Event;

vi. the Company or any Subsidiary shall default on any of its obligations under any mortgage, credit agreement or other facility, indenture agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced, any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement that (a) involves an obligation greater than $150,000, whether such indebtedness now exists or shall hereafter be created, and (b) results in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise become due and payable;

vii. the Common Stock shall not be eligible for listing or quotation for trading on a Trading Market and shall not be eligible to resume listing or quotation for trading thereon within seven Trading Days;

viii. the Company shall be a party to any Change of Control Transaction or Fundamental Transaction or shall agree to sell or dispose of all or in excess of 40% of its assets in one transaction or a series of related transactions (whether or not such sale would constitute a Change of Control Transaction);

ix. the Company shall fail for any reason to deliver certificates to a Holder prior to the fifth Trading Day after a Conversion Date pursuant to Section 4(d) or the Company shall provide at any time notice to the Holder, including by way of public announcement, of the Company’s intention to not honor requests for conversions of any Notes in accordance with the terms hereof; or

x. any monetary judgment, writ or similar final process shall be entered or filed against the Company, any subsidiary or any of their respective property or other assets for more than $50,000, and such judgment, writ or similar final process shall remain unvacated, unbonded or unstayed for a period of 45 calendar days.

b) Remedies Upon Event of Default. If any Event of Default occurs, the outstanding principal amount of this Note, plus accrued but unpaid interest, liquidated damages and other amounts owing in respect thereof through the date of acceleration, shall become, at the Holder’s election, immediately due and payable in cash at the Mandatory Default Amount. Commencing 5 days after the occurrence of any Event of Default that results in the eventual acceleration of this Note, the interest rate on this Note shall accrue at an interest rate equal to the lesser of 18% per annum or the maximum rate permitted under applicable law. Upon the payment in full of the Mandatory Default Amount, the Holder shall promptly surrender this Note to or as directed by the Company. In connection with such acceleration described herein, the Holder need not provide, and the Company hereby waives, any presentment, demand, protest or other notice of any kind, and the Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such acceleration may be rescinded and annulled by Holder at any time prior to payment hereunder and the Holder shall have all rights as a holder of the Note until such time, if any, as the Holder receives full payment pursuant to this Section 8(b). No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.

Section 9. Miscellaneous.

a) Notices. Any and all notices or other communications or deliveries to be provided by the Holder hereunder, including, without limitation, any Notice of Conversion, shall be in writing and delivered personally, by facsimile, by electronic communication or sent by a nationally recognized overnight courier service, addressed to the Company, at the address set forth above, or such other facsimile number or address as the Company may specify for such purpose by notice to the Holder delivered in accordance with this Section 9(a). Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile, by electronic communication or sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile number or address of the Holder appearing on the books of the Company, or if no such facsimile number or address appears, at the principal place of business of the Holder. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile or electronic communication prior to 5:30 p.m. (New York City time), (ii) the date immediately following the date of transmission, if such notice or communication is delivered via facsimile or electronic communication between 5:30 p.m. (New York City time) and 11:59 p.m. (New York City time) on any date, (iii) the second Business Day following the date of mailing, if sent by nationally recognized overnight courier service or (iv) upon actual receipt by the party to whom such notice is required to be given.

b) Absolute Obligation. Except as expressly provided herein, no provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, liquidated damages and accrued interest, as applicable, on this Note at the time, place, and rate, and in the coin or currency, herein prescribed. This Note is a direct debt obligation of the Company. This Note ranks pari passu with all other Notes now or hereafter issued under the terms set forth herein.

c) Lost or Mutilated Note. If this Note shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen or destroyed Note, a new Note for the principal amount of this Note so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such Note, and of the ownership hereof, reasonably satisfactory to the Company.

d) Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Note shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflict of laws thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the City of New York, Borough of Manhattan (the “New York Courts”). Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such New York Courts, or such New York Courts are improper or inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Note or the transactions contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of this Note, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.

e) Waiver. Any waiver by the Company or the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Note. The failure of the Company or the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note. Any waiver by the Company or the Holder must be in writing.

f) Severability. If any provision of this Note is invalid, illegal or unenforceable, the balance of this Note shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of or interest on this Note as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this indenture, and the Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such as though no such law has been enacted.

g) Next Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

h) Headings. The headings contained herein are for convenience only, do not constitute a part of this Note and shall not be deemed to limit or affect any of the provisions hereof.

i) Assumption. Any successor to the Company or any surviving entity in a Fundamental Transaction shall (i) assume, prior to such Fundamental Transaction, all of the obligations of the Company under this Note and the other Transaction Documents pursuant to written agreements in form and substance satisfactory to the Holder (such approval not to be unreasonably withheld or delayed) and (ii) issue to the Holder a new Note of such successor entity evidenced by a written instrument substantially similar in form and substance to this Note, including, without limitation, having a principal amount and interest rate equal to the principal amount and the interest rate of this Note and having similar ranking to this Note, which shall be satisfactory to the Holder (any such approval not to be unreasonably withheld or delayed). The provisions of this Section 9(i) shall apply similarly and equally to successive Fundamental Transactions and shall be applied without regard to any limitations of this Note.

j) Secured Obligation. The obligations of the Company under this Note are secured by substantially all assets of the Company and each Subsidiary pursuant to the Security Agreement, dated as of ________, 2012 between the Company, the Subsidiaries of the Company and the Secured Parties (as defined therein).

*********************

IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by a duly authorized officer as of the date first above indicated.

	ASPEN GROUP, INC.

	By:	/s/ Michael D. Mathews
		Name: Michael D. Mathews
		Title: Chief Executive Officer
	Facsimile No. for delivery of Notices: (347) 868-6229

ANNEX A

NOTICE OF CONVERSION

The undersigned hereby elects to convert principal under the 10% Secured Convertible Note due September 30, 2012 of Aspen Group, Inc., a Delaware corporation (the “Company”), into shares of common stock (the “Common Stock”), of the Company according to the conditions hereof, as of the date written below. If shares of Common Stock are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith. No fee will be charged to the holder for any conversion, except for such transfer taxes, if any.

By the delivery of this Notice of Conversion the undersigned represents and warrants to the Company that its ownership of the Common Stock does not exceed the amounts specified under Section 4 of this Note, as determined in accordance with Section 13(d) of the Exchange Act.

The undersigned agrees to comply with the prospectus delivery requirements under the applicable securities laws in connection with any transfer of the aforesaid shares of Common Stock.

Conversion calculations:
	Date to Effect Conversion: Principal Amount of Note to be Converted: Payment of Interest in Common Stock __ yes __ no If yes, $_____ of Interest Accrued.

	Number of Conversion Shares payable on Principal or Interest that would exceed the limits set forth in Section 4(c) of the Note:

	Number of shares of Common Stock to be issued: Signature: Name: Address for Delivery of Common Stock Certificates:

Schedule 1

CONVERSION SCHEDULE

The 10% Secured Convertible Note due on September 30, 2012 in the original principal amount of $____________ is issued by Aspen Group, Inc., a Delaware corporation. This Conversion Schedule reflects conversions made under Section 4 of the above referenced Note.

Dated:

Date of Conversion (or for first entry, Original Issue Date)	Amount of Conversion	Aggregate Principal Amount Remaining Subsequent to Conversion (or original Principal Amount)	Company Attest

EX-10.6 3 aspu_warrant.htm RETAIL FORM OF WARRANT aspu_warrant.htm

EXHIBIT 10.6

NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

COMMON STOCK PURCHASE WARRANT

ASPEN GROUP, INC.

Warrant Shares: [_______]

Initial Exercise Date: __________, 2012

THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, _____________ (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date hereof (the “Initial Exercise Date”) and on or prior to the close of business on the five year anniversary of the Initial Exercise Date (the “Termination Date”) but not thereafter, to subscribe for and purchase from Aspen Group, Inc., a Delaware corporation (the “Company”), up to ______1 shares (the “Warrant Shares”) of Common Stock. The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).

Section 1. Definitions. Definitions. For the purposes hereof, in addition to the terms defined elsewhere in this Warrant, (a) capitalized terms not otherwise defined herein shall have the meanings set forth in the Purchase Agreement and (b) the following terms shall have the following meanings:

___________________________

1 Equal to 25% of the number of shares issuable upon conversion of the note.

“Common Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive Common Stock.

“Exempt Issuance” means the issuance of (a) shares of Common Stock or options to employees, officers, consultants, advisors or directors of the Company pursuant to any stock or option plan duly adopted for such purpose by a majority of the existing members of the Board of Directors or a majority of the members of a committee of directors established for such purpose, (b) securities upon the exercise or exchange of or conversion of any Securities issued hereunder and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of this Agreement, provided that such securities have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise, exchange or conversion price of such securities, (c) shares of Common Stock upon any anti-dilution adjustment to Common Stock and Common Stock Equivalents held by current unaffiliated shareholders of Aspen Group as of March 13, 2012, and (d) securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Company, provided that any such issuance shall only be to a Person which is, itself or through its subsidiaries, an operating company in a business synergistic with the business of the Company and in which the Company receives benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities.

“Notes” mean the 10% Secured Convertible Notes of the Company issued pursuant to the Purchase Agreement together with this Warrant.

“Purchase Agreement” means the Securities Purchase Agreement, dated as of _____ __, 2012 among the Company and the original Holders, as amended, modified or supplemented from time to time in accordance with its terms, pursuant to which the Holders purchased the Notes and Warrants.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Subsidiary” shall have the meaning set forth in the Purchase Agreement.

“Trading Day” means a day on which the New York Stock Exchange is open for business.

“Transaction Documents” shall have the meaning set forth in the Purchase Agreement.

“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a national securities exchange, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the trading market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. New York City time to 4:02 p.m. New York City time); (b) if the Common Stock is quoted on the OTC Bulletin Board, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board; (c) if the Common Stock is not then listed or quoted for trading on the OTC Bulletin Board and if prices for the Common Stock are then reported in the “Pink Sheets” published by OTC Markets Group Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported; or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Subscribers of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company; provided that in each case where Bloomberg L.P. data is being relied upon, Holder shall provide to the Company a copy of such information for the Company's records.

Section 2. Exercise.

a) Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of the Holder appearing on the books of the Company) of a duly executed facsimile copy of the Notice of Exercise Form annexed hereto; and, within 3 Trading Days of the date said Notice of Exercise is delivered to the Company, the Company shall have received payment of the aggregate Exercise Price of the shares thereby purchased by wire transfer or cashier’s check drawn on a United States bank. The Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within 3 Trading Days of the date the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. In the event of any dispute or discrepancy, the records of the Holder shall be controlling and determinative in the absence of manifest error.

b) Exercise Price. The exercise price per share of the Common Stock under this Warrant shall be the lower of (i) $1.00, or (ii) the Mandatory Conversion Price of the Notes, subject to adjustment hereunder (the “Exercise Price”).

c) Cashless Exercise. If at any time the Warrant Shares are eligble for resale under Rule 144 promulgated under the Securities Act and there is no effective registration statement registering, or no current prospectus available for, the resale of the Warrant Shares by the Holder, then this Warrant may also be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a certificate for the number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

(A) = the VWAP on the Trading Day immediately preceding the date of such election;

(B) = the Exercise Price of this Warrant, as adjusted; and

(X) = the number of Warrant Shares issuable upon exercise of this Warrant in accordance with the terms of this Warrant by means of a cash exercise rather than a cashless exercise.

Notwithstanding anything herein to the contrary, on the Termination Date, this Warrant shall be automatically exercised via cashless exercise pursuant to this Section 2(c).

d) Exercise Limitations. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other person or entity acting as a group together with the Holder or any of the Holder’s Affiliates), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (A) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its affiliates. Except as set forth in the preceding sentence, for purposes of this Section 2(d), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 2(d) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 2(d), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report, as the case may be, (B) a more recent public announcement by the Company or (C) any other notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. The Holder, upon not less than 61 days’ prior notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2(d), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of this Warrant held by the Holder and the provisions of this Section 2(d) shall continue to apply. Any such increase or decrease will not be effective until the 61st day after such notice is delivered to the Company. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(d) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.

e) Mechanics of Exercise.

i. Delivery of Certificates Upon Exercise. Certificates for shares purchased hereunder shall be transmitted by the Company’s transfer agent (the “Transfer Agent”) to the Holder by crediting the account of the Holder’s prime broker with the Depository Trust Company through its Deposit Withdrawal Agent Commission (“DWAC”) system if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the resale of the Warrant Shares by the Holder or (B) the shares are eligible for resale without volume or manner-of-sale limitations pursuant to Rule 144, and otherwise by physical delivery of certificates to the address specified by the Holder in the Notice of Exercise within 4 Trading Days from the delivery to the Company of the Notice of Exercise Form, surrender of this Warrant (if required) and payment of the aggregate Exercise Price as set forth above (the “Warrant Share Delivery Date”). This Warrant shall be deemed to have been exercised on the date the Exercise Price is received by the Company. The Warrant Shares shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised by payment to the Company of the Exercise Price and all taxes required to be paid by the Holder, if any, pursuant to Section 2(e)(vi) prior to the issuance of such shares, have been paid. If the Company fails for any reason to deliver to the Holder certificates evidencing the Warrant Shares subject to a Notice of Exercise by the Warrant Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares subject to such exercise, $10 per Trading Day (increasing to $20 per Trading Day on the seventh Trading Day after such liquidated damages begin to accrue) for each Trading Day after such Warrant Share Delivery Date until such certificates are delivered.

ii. Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

iii. Rescission Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder a certificate or the certificates representing the Warrant Shares pursuant to Section 2(e)(i) by the Warrant Share Delivery Date, then, the Holder will have the right to rescind such exercise.

iv. Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Exercise. In addition to any other rights available to the Holder, if the Company fails for any reason to deliver to the Holder such certificate or certificates by the Warrant Share Delivery Date, and if after such Share Delivery Date the Holder is required by its brokerage firm to purchase (in an open market transaction or otherwise), or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder was entitled to receive upon the conversion relating to such Share Delivery Date (a “Buy-In”), then the Company shall (A) pay in cash to the Holder (in addition to any other remedies available to or elected by the Holder) the amount by which (x) the Holder’s total purchase price (including any brokerage commissions) for the Common Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of Common Stock that the Holder was entitled to receive from the conversion at issue multiplied by (2) the actual sale price at which the sell order giving rise to such purchase obligation was executed (including any brokerage commissions) and (B) at the option of the Holder, either reissue (if surrendered) this Warrant in a principal amount equal to the principal amount of the attempted conversion or deliver to the Holder the number of shares of Common Stock that would have been issued if the Company had timely complied with its delivery requirements under this Warrant. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of this Warrant with respect to which the actual sale price of the Warrant Shares (including any brokerage commissions) giving rise to such purchase obligation was a total of $10,000 under clause (A) of the immediately preceding sentence, the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock upon conversion of this Warrant as required pursuant to the terms hereof.

v. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.

vi. Charges, Taxes and Expenses. Issuance of certificates for Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event certificates for Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto.

vii. Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.

Section 3. Certain Adjustments.

a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise make a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

b) Subsequent Equity Sales. If the Company at any time while this Warrant is outstanding, shall sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock or Common Stock Equivalents entitling any Person to acquire shares of Common Stock, at an effective price per share less than the then Exercise Price (such lower price, the “Base Share Price” and such issuances collectively, a “Dilutive Issuance”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share which is less than the Exercise Price, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the Dilutive Issuance), then, the Exercise Price shall be reduced and only reduced to equal the Base Share Price. Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued. Notwithstanding the foregoing, no adjustments shall be made, paid or issued under this Section 3(b) in respect of an Exempt Issuance. The Company shall notify the Holder, in writing, no later than the Trading Day following the issuance of any Common Stock or Common Stock Equivalents subject to this Section 3(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice, the “Dilutive Issuance Notice”). For purposes of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant to this Section 3(b), upon the occurrence of any Dilutive Issuance, after the date of such Dilutive Issuance the Holder is entitled to receive the Base Share Price regardless of whether the Holder accurately refers to the Base Share Price in the Notice of Exercise.

c) Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company effects any merger or consolidation of the Company with or into another Person, (ii) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property or (iv) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (each “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such merger, consolidation or disposition of assets by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event. For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder a new warrant consistent with the foregoing provisions and evidencing the Holder’s right to exercise such warrant into Alternate Consideration. The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this Section 3(c) and insuring that this Warrant (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction. Notwithstanding anything to the contrary, in the event of a Fundamental Transaction that is (1) an all cash transaction, (2) a “Rule 13e-3 transaction” as defined in Rule 13e-3 under the Exchange Act, or (3) a Fundamental Transaction involving a Person not traded on a national securities exchange,the Company or any successor entity shall pay at the Holder’s option, exercisable at any time concurrently with or within 30 days after the consummation of the Fundamental Transaction, an amount of cash equal to the value of this Warrant as determined in accordance with the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg L.P. using (A) a price per share of Common Stock equal to the VWAP of the Common Stock for the Trading Day immediately preceding the date of consummation of the applicable Fundamental Transaction, (B) a risk-free interest rate corresponding to the U.S. Treasury rate for a 30 day period immediately prior to the consummation of the applicable Fundamental Transaction, (C) an expected volatility equal to the 100 day volatility obtained from the “HVT” function on Bloomberg L.P. determined as of the Trading Day immediately following the public announcement of the applicable Fundamental Transaction and (D) a remaining option time equal to the time between the date of the public announcement of such transaction and the Termination Date; provided that in each case where Bloomberg L.P. data is being relied upon, Holder shall provide to the Company a copy of such information for the Company's records.

d) Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.

e) Notice to Holder.

i. Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly mail to the Holder a notice setting forth the Exercise Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

ii. Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be mailed to the Holder at its last address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. The Holder is entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice.

Section 4. Transfer of Warrant.

a) Transferability. Subject to compliance with any applicable securities laws and the conditions set forth in Section 4(d) herein and to the provisions of the Purchase Agreement, this Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. The Warrant, if properly assigned, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.

b) New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the Initial Exercise Date and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.

c) Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

d) Transfer Restrictions. If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be either (i) registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws or (ii) eligible for resale without volume or manner-of-sale restrictions pursuant to Rule 144, the Company may require, as a condition of allowing such transfer, that the Holder or transferee of this Warrant, as the case may be, comply with the provisions of the Purchase Agreement.

Section 5. Miscellaneous.

a) No Rights as Stockholder Until Exercise. This Warrant does not entitle the Holder to any voting rights or other rights as a stockholder of the Company prior to the exercise hereof.

b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.

c) Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then, such action may be taken or such right may be exercised on the next succeeding Business Day.

d) Authorized Shares.

The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock one hundred (100%) of the number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. In case such amount of Common Stock is insufficient at any time, the Company shall call and hold a special meeting to increase the number of authorized common stock. Management of the Company shall recommend to shareholders to vote in favor of increasing the number of authorized common stock.

The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.

Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

e) Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the provisions of the Purchase Agreement.

f) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, will have restrictions upon resale imposed by state and federal securities laws.

g) Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice Holder’s rights, powers or remedies, notwithstanding the fact that all rights hereunder terminate on the Termination Date. If the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.

h) Notices. Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Purchase Agreement.

i) Limitation of Liability. No provision hereof, in the absence of any affirmative action by Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any liability of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

j) Remedies. The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.

k) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.

l) Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and Holders holding Warrants at least equal to a majority of the Warrant Shares issuable upon exercise of all then outstanding Warrants.

m) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

n) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

********************

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.

	ASPEN GROUP, INC.

	By:
		Name: Michael D. Mathews
		Title: Chief Executive Officer

NOTICE OF EXERCISE

TO: ASPEN GROUP, INC.

(1) The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

(2) Payment shall take the form of (check applicable box):

[ ] in lawful money of the United States; or

[ ] [if permitted] the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).

(3) Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below:

_______________________________

The Warrant Shares shall be delivered to the following DWAC Account Number or by physical delivery of a certificate to:

_______________________________

(4) Accredited Investor. The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended.

[SIGNATURE OF HOLDER]

Name of Investing Entity: _______________________________________________________________________

Signature of Authorized Signatory of Investing Entity: _________________________________________________

Name of Authorized Signatory: ___________________________________________________________________

Title of Authorized Signatory: ____________________________________________________________________

Date: _______________________________________________________________________________________

ASSIGNMENT FORM

(To assign the foregoing warrant, execute

this form and supply required information.

Do not use this form to exercise the warrant.)

FOR VALUE RECEIVED, [____] all of or [_______] shares of the foregoing Warrant and all rights evidenced thereby are hereby assigned to

_______________________________________________ whose address is

_____________________________________________________________.


_____________________________________________________________

		Dated: ______________, _______
	Holder’s Signature: _____________________________

	Holder’s Address: _____________________________

	______________________________

Signature Guaranteed: ___________________________________________

NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.

EX-31.1 4 aspu_ex311.htm CERTIFICATION aspu_ex311.htm

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Michael Mathews, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Aspen Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 20, 2012

/s/ Michael Mathews
Michael Mathews
Chief Executive Officer
(Principal Executive Officer)

EX-31.2 5 aspu_ex312.htm CERTIFICATION aspu_ex312.htm

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, David Garrity, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Aspen Group, Inc.;

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 20, 2012

/s/ David Garrity
David Garrity
Chief Financial Officer
(Principal Financial Officer)

EX-32.1 6 aspu_ex321.htm CERTIFICATION aspu_ex321.htm

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Aspen Group, Inc. (the “Company”) on Form 10-Q for the quarter ending June 30, 2012, as filed with the Securities and Exchange Commission on the date hereof, I, Michael Mathews, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1.	The quarterly report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and

2.	The information contained in the quarterly report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Michael Mathews
Michael Mathews
Chief Executive Officer
(Principal Executive Officer)
Dated: August 20, 2012

In connection with the quarterly report of Aspen Group, Inc. (the “Company”) on Form 10-Q for the quarter ending June 30, 2012, as filed with the Securities and Exchange Commission on the date hereof, I, David Garrity, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1.	The quarterly report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and

2.	The information contained in the quarterly report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ David Garrity
David Garrity
Chief Financial Officer
(Principal Financial Officer)
Dated: August 20, 2012

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Principles of Consolidation   The consolidated financial statements include the accounts of Aspen Group, Inc. and its wholly-owned subsidiaries.  All intercompany balances and transactions have been eliminated in consolidation.   Use of Estimates   The preparation of the unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts in the unaudited condensed consolidated financial statements.  Actual results could differ from those estimates.  Significant estimates in the accompanying unaudited condensed consolidated financial statements include the allowance for doubtful accounts and other receivables, the valuation of collateral on certain receivables, the valuation and amortization periods of intangible assets, valuation of stock-based compensation and the valuation allowance on deferred tax assets.   Restricted Cash   Restricted cash represents amounts pledged as security for transactions involving Title IV programs.  Upon the DOEs completion of its review of the Companys application to participate in Title IV programs, the funds are expected to be released and available for use by the Company.   Consistent with the Higher Education Act, Aspens certification to participate in Title IV programs terminated after closing of the reverse merger, and Aspen must apply to DOE to reestablish its eligibility and certification to participate in the Title IV programs.  However, in order to avoid significant disruption in disbursements of Title IV funds, the DOE may temporarily and provisionally certify an institution that is seeking approval of a change in ownership, like Aspen, under certain circumstances while the DOE reviews the institutions application.  On March 15, 2012 the DOE asked Aspen to provide to the DOE by March 28, 2012 a letter of credit in the amount of $105,865, which is 10% of Aspens Title IV receipts in 2011.  On March 27, 2012, the Company opened a 12-month money market account, maturing March 28, 2013, with its banking institution in the amount of $105,865 and pledged that to the letter of credit.  The Company shall consider $105,932 (includes accrued interest of $67) as restricted cash until such letter of credit expires.  As of June 30, 2012, the account bears interest of 0.25%.   Fair Value Measurements   Fair value is 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.  The Company classifies assets and liabilities recorded at fair value under the fair value hierarchy based upon the observability of inputs used in valuation techniques.  Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed market assumptions. The fair value measurements are classified under the following hierarchy:   <table cellspacing="0" cellpadding="0" style="width: 100%"> <tr style="vertical-align: top"> <td style="width: 5%; font: 8pt/115% Times New Roman, Times, Serif">●</td> <td style="width: 95%; font: 8pt/115% Times New Roman, Times, Serif">Level 1Observable inputs that reflect quoted market prices (unadjusted) for identical assets and liabilities in active markets;</td></tr> </table>   <table cellspacing="0" cellpadding="0" style="width: 100%"> <tr style="vertical-align: top"> <td style="width: 5%; font: 8pt/115% Times New Roman, Times, Serif">●</td> <td style="width: 95%; font: 8pt/115% Times New Roman, Times, Serif">Level 2Observable inputs, other than quoted market prices, that are either directly or indirectly observable in the marketplace for identical or similar assets and 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 and liabilities; and</td></tr> </table>   <table cellspacing="0" cellpadding="0" style="width: 100%"> <tr style="vertical-align: top"> <td style="width: 5%; font: 8pt/115% Times New Roman, Times, Serif">●</td> <td style="width: 95%; font: 8pt/115% Times New Roman, Times, Serif">Level 3Unobservable inputs that are supported by little or no market activity that are significant to the fair value of assets or liabilities.</td></tr> </table>   The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.     Net Loss Per Share   Net loss per common share is based on the weighted average number of shares of common stock outstanding during each period. Common stock equivalents, including 1,925,000 and 0 stock options, 882,500 and 400,000 stock warrants, and a variable amount of shares underlying $2,255,825 (a minimum of 2,255,825 common shares as of June 30, 2012) and $15,000 of convertible notes payable for the six months ended June 30, 2012 and 2011, respectively, are not considered in diluted loss per share because the effect would be anti-dilutive.   Recent Accounting Pronouncements   In June 2011, the FASB, issued ASU 2011-05, which amends ASC Topic 220, Comprehensive Income, which requires an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements.  It eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders' equity.  The ASU does not change the items which must be reported in other comprehensive income, how such items are measured or when they must be reclassified to net income.  This ASU is effective for interim and annual periods beginning after December 15, 2011.  The Company adopted ASU 2011-05 effective January 1, 2012, and such adoption did not have a material effect on the Company's financial statements.

Principles of Consolidation   The consolidated financial statements include the accounts of Aspen Group, Inc. and its wholly-owned subsidiaries.  All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates   The preparation of the unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts in the unaudited condensed consolidated financial statements.  Actual results could differ from those estimates.  Significant estimates in the accompanying unaudited condensed consolidated financial statements include the allowance for doubtful accounts and other receivables, the valuation of collateral on certain receivables, the valuation and amortization periods of intangible assets, valuation of stock-based compensation and the valuation allowance on deferred tax assets.

Restricted Cash   Restricted cash represents amounts pledged as security for transactions involving Title IV programs.  Upon the DOEs completion of its review of the Companys application to participate in Title IV programs, the funds are expected to be released and available for use by the Company.   Consistent with the Higher Education Act, Aspens certification to participate in Title IV programs terminated after closing of the reverse merger, and Aspen must apply to DOE to reestablish its eligibility and certification to participate in the Title IV programs.  However, in order to avoid significant disruption in disbursements of Title IV funds, the DOE may temporarily and provisionally certify an institution that is seeking approval of a change in ownership, like Aspen, under certain circumstances while the DOE reviews the institutions application.  On March 15, 2012 the DOE asked Aspen to provide to the DOE by March 28, 2012 a letter of credit in the amount of $105,865, which is 10% of Aspens Title IV receipts in 2011.  On March 27, 2012, the Company opened a 12-month money market account, maturing March 28, 2013, with its banking institution in the amount of $105,865 and pledged that to the letter of credit.  The Company shall consider $105,932 (includes accrued interest of $67) as restricted cash until such letter of credit expires.  As of June 30, 2012, the account bears interest of 0.25%.

Fair Value Measurements   Fair value is 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.  The Company classifies assets and liabilities recorded at fair value under the fair value hierarchy based upon the observability of inputs used in valuation techniques.  Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed market assumptions. The fair value measurements are classified under the following hierarchy:   <table cellspacing="0" cellpadding="0" style="width: 100%"> <tr style="vertical-align: top"> <td style="width: 5%; font: 8pt/115% Times New Roman, Times, Serif">●</td> <td style="width: 95%; font: 8pt/115% Times New Roman, Times, Serif">Level 1Observable inputs that reflect quoted market prices (unadjusted) for identical assets and liabilities in active markets;</td></tr> </table>   <table cellspacing="0" cellpadding="0" style="width: 100%"> <tr style="vertical-align: top"> <td style="width: 5%; font: 8pt/115% Times New Roman, Times, Serif">●</td> <td style="width: 95%; font: 8pt/115% Times New Roman, Times, Serif">Level 2Observable inputs, other than quoted market prices, that are either directly or indirectly observable in the marketplace for identical or similar assets and 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 and liabilities; and</td></tr> </table>   <table cellspacing="0" cellpadding="0" style="width: 100%"> <tr style="vertical-align: top"> <td style="width: 5%; font: 8pt/115% Times New Roman, Times, Serif">●</td> <td style="width: 95%; font: 8pt/115% Times New Roman, Times, Serif">Level 3Unobservable inputs that are supported by little or no market activity that are significant to the fair value of assets or liabilities.</td></tr> </table>   The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.

Net Loss Per Share   Net loss per common share is based on the weighted average number of shares of common stock outstanding during each period. Common stock equivalents, including 1,925,000 and 0 stock options, 882,500 and 400,000 stock warrants, and a variable amount of shares underlying $2,255,825 (a minimum of 2,255,825 common shares as of June 30, 2012) and $15,000 of convertible notes payable for the six months ended June 30, 2012 and 2011, respectively, are not considered in diluted loss per share because the effect would be anti-dilutive.

Recent Accounting Pronouncements   In June 2011, the FASB, issued ASU 2011-05, which amends ASC Topic 220, Comprehensive Income, which requires an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements.  It eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders' equity.  The ASU does not change the items which must be reported in other comprehensive income, how such items are measured or when they must be reclassified to net income.  This ASU is effective for interim and annual periods beginning after December 15, 2011.  The Company adopted ASU 2011-05 effective January 1, 2012, and such adoption did not have a material effect on the Company's financial statements.

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Overview   Aspen Group, Inc. (together with its subsidiaries, the Company or Aspen) was founded in Colorado in 1987 as the International School of Information Management.  On September 30, 2004, it was acquired by Higher Education Management Group, Inc. (HEMG) and changed its name to Aspen University Inc.  On May 13, 2011, the Company formed in Colorado a subsidiary, Aspen University Marketing, LLC, which is currently inactive.  On March 13, 2012, the Company was recapitalized in a reverse merger (See Note 9).  All references to the Company or Aspen before March 13, 2012 are to Aspen University, Inc.   Aspens mission is to become an institution of choice for adult learners by offering cost-effective, comprehensive, and relevant online education.  One of the key differences between Aspen and other publicly-traded, exclusively online, for-profit universities is that approximately 88% of our degree-seeking students (as of June 30, 2012) were enrolled in graduate degree programs (Master or Doctorate degree program).  Since 1993, we have been nationally accredited by the Distance Education and Training Council (DETC), a national accrediting agency recognized by the U.S. Department of Education (the DOE).   Basis of Presentation   The interim condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC).  In the opinion of the Companys management, all adjustments (consisting of normal recurring adjustments and reclassifications and non-recurring adjustments) necessary to present fairly our results of operations for the three and six months ended June 30, 2012 and 2011, our cash flows for the six months ended June 30, 2012 and 2011 and our financial position as of June 30, 2012 have been made.  The results of operations for such interim periods are not necessarily indicative of the operating results to be expected for the full year.   Certain information and disclosures normally included in the notes to the annual consolidated financial statements have been condensed or omitted from these interim consolidated financial statements.  Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Report on Form 8-K/A for the year ended December 31, 2011, as filed with the SEC on August 20, 2012.  The December 31, 2011 balance sheet is derived from those statements.   Going Concern   The Company had a net loss allocable to common stockholders of $3,630,719 and negative cash flows from operations of $1,961,458 for the six months ended June 30, 2012.  The Companys ability to continue as a going concern is contingent on securing additional debt or equity financing from outside investors.  These matters raise substantial doubt about the Company's ability to continue as a going concern.  Management plans to continue to implement its business plan and to fund operations by raising additional capital through the issuance of debt and equity securities.  The Company has presently engaged a broker-dealer, Laidlaw & Company (UK) Ltd., to assist with raising up to $7,200,000 in additional debt and equity capital subsequent to the close of the merger with Aspen Group, Inc.  Since the beginning of 2012, the Company has raised $2,006,000 in gross funding including $1,706,000 from the sale of convertible notes and warrants under the Laidlaw arrangement (see Note 6) and $300,000 from the sale of a convertible note to the Company's CEO.        The financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

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Note Receivable, Secured Related Party   On December 14, 2011, the Company loaned $150,000 to an officer of the Company in exchange for a promissory note bearing 3% per annum.  As collateral, the note was secured by 500,000 shares of the Companys common stock owned personally by the officer.  The note along with accrued interest was due and payable on September 14, 2012.  For the six months ended June 30, 2012, interest income of $594 was recognized on the note receivable.  As of December 31, 2011, the balance due on the note receivable was $150,000, all of which is short-term.  On February 16, 2012, the note receivable from an officer was repaid along with accrued interest (See Note 11).   Accounts Receivable, Secured Related Party   On March 30, 2008 and December 1, 2008, the Company sold course curricula pursuant to marketing agreements to Higher Education Group Management, Inc. (HEMG), a related party and principal stockholder of the Company whose president is Mr. Patrick Spada, the former Chairman of the Company, in the amount of $455,000 and $600,000, respectively; UCC filings were filed accordingly.  Under the marketing agreements, the receivables are due net 60 months.  On September 16, 2011, HEMG pledged 772,793 Series C preferred shares (automatically converted to 654,850 common shares on March 13, 2012) of the Company as collateral for this account receivable.  On March 8, 2012, due to the impending reduction in the value of the collateral as the result of the Series C conversion ratio and the Companys inability to engage Mr. Spada in good faith negotiations to increase HEMGs pledge, Michael Mathews, the Companys CEO, pledged 117,943 common shares of the Company, owned personally by him, valued at $1.00 per share based on recent sales of capital stock as additional collateral to the accounts receivable, secured related party.  On March 13, 2012, the Company deemed the receivables stemming from the sale of courseware curricula to be in default.     On April 4, 2012, the Company entered into an agreement with: (i) an individual, (ii) Higher Education Group Management, Inc. (HEMG), a related party and principal stockholder of the Company whose president is Mr. Patrick Spada, the former Chairman of the Company and (iii) Mr. Patrick Spada. Under the agreement, (a) the individual shall purchase and HEMG shall sell to the individual 400,000 common shares of the Company at $0.50 per share by April 10, 2012; (b) the Company guaranteed it would purchase at least 600,000 common shares of the Company at $0.50 per share within 90 days of the agreement and the Company would use its best efforts to purchase from HEMG and resell to investors an additional 1,400,000 common shares of the Company at $0.50 per share within 180 days of the agreement; (c) provided HEMG and Mr. Patrick Spada fulfill their obligations under (a) and (b) above, the Company shall consent to additional private transfers by HEMG and/or Mr. Patrick Spada of up to 500,000 common shares of the Company on or before March 13, 2013; (d) HEMG agrees to not sell, pledge or otherwise transfer 142,500 common shares of the Company pending resolution of a dispute regarding the Companys claim that HEMG sold 131,500 common shares of the Company without having enough authorized shares and a stockholder did not receive 11,000 common shares of the Company owed to him as a result of a stock dividend; and (e) the Company shall waive any default of the accounts receivable, secured - related party and extend the due date to September 30, 2014. A group of predominantly existing shareholders implemented the purchase of 400,000 common shares at $0.50 per share per section (a) above on or before the April 10, 2012 deadline. Subsequent to June 30, 2012, third party investors placed $168,000 in escrow to purchase 336,000 shares per section (b) above (See Note 7). Based on the Company plans to raise additional capital from the sale of its common stock, and the estimated price per share from such offering, the value of the aforementioned collateral shall decrease. Accordingly, as of June 30, 2012, the Company has recognized an allowance of $309,117 for this account receivable. As of June 30, 2012 and December 31, 2011, the balance of the account receivable, net of allowance, was $463,676 and $772,793 and is shown as accounts receivable, secured related party, net (See Note 11).

Intangible assets consisted of the following at June 30, 2012 and December 31, 2011:   <table align="center" cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: bottom"> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="border-bottom: black 1pt solid"> June 30, 2012</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="border-bottom: black 1pt solid"> December 31, 2011</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="width: 72%; line-height: 115%">Course curricula</td> <td style="width: 1%; line-height: 115%; text-align: right"> </td> <td style="width: 1%; line-height: 115%">$</td> <td style="width: 11%; line-height: 115%; text-align: right">2,092,638</td> <td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%; text-align: right"> </td> <td style="width: 1%; line-height: 115%">$</td> <td style="width: 11%; line-height: 115%; text-align: right">2,072,238</td> <td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Call center</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%; text-align: right">1,214,044</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%; text-align: right">927,455</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">3,306,682</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">2,999,693</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Accumulated amortization</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%; text-align: right">(1,934,158</td> <td nowrap="nowrap" style="line-height: 115%">)</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%; text-align: right">(1,762,697</td> <td nowrap="nowrap" style="line-height: 115%">)</td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Intangible assets, net</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%">$</td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">1,372,524</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%">$</td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">1,236,996</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> </table>   The following is a schedule of estimated future amortization expense of intangible assets as of June 30, 2012:   <table align="center" cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: bottom"> <td style="line-height: 115%; text-align: center"> Year Ending December 31,</td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="width: 84%; line-height: 115%; text-align: center">2012</td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%">$</td> <td style="width: 13%; line-height: 115%; text-align: right">378,257</td> <td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%; text-align: center">2013</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">339,902</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%; text-align: center">2014</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">300,484</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%; text-align: center">2015</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">262,242</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%; text-align: center">2016</td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%; text-align: right">91,639</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%; text-align: center">Total</td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%">$</td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">1,372,524</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> </table>   Amortization expense for the six months ended June 30, 2012 and 2011 was $171,461 and $98,456, respectively.

During 2009, the Company received advances aggregating $200,000 from three individuals.  Of the total funds received, $50,000 was received from a related party.  From the date the funds were received through the date the loans were converted into convertible promissory notes payable, the loans were non-interest bearing demand loans and, therefore, no interest expense was recognized or due.  As of December 31, 2011, the entire balance of the loans payable is included in long-term liabilities as the Company, in February 2012, has converted the loans into long-term convertible notes payable (See Notes 6 and 11).

As part of the recapitalization that occurred on March 13, 2012, the Company assumed from the public entity an aggregate of $20,000 of convertible notes bearing interest at 10% per annum.  Each note holder had the right, at its option and simultaneously with the first closing thereof, to convert all or a portion of the principal amount of the note into shares of the Companys common stock at the conversion price of the next equity offering of the Company.  The notes meet the criteria of stock settled debt under ASC 480, Distinguishing Liabilities from Equity, and accordingly are presented at their fixed monetary amount of $20,000.  The convertible notes were past due as of the date of assumption and, accordingly, the Company was in default.  In April 2012, the convertible notes payable of $20,000 were converted into 20,000 common shares of the Company and, accordingly, the default was cured (See Note 9).   On February 25, 2012, February 27, 2012 and February 29, 2012, loans payable to an individual, another individual and a related party (the brother of Patrick Spada, the former Chairman of the Company), of $100,000, $50,000 and $50,000, respectively, were converted into two-year convertible promissory notes, bearing interest of 0.19% per annum.  Beginning March 31, 2012, the notes are convertible into common shares of the Company at the rate of $1.00 per share.  The Company evaluated the convertible notes and determined that, for the embedded conversion option, there was no beneficial conversion value to record as the conversion price is considered to be the fair market value of the common shares on the note issue dates.  As these loans (now convertible promissory notes) are not due for at least 12 months after the balance sheet, they have been included in long-term liabilities as of June 30, 2012 (See Notes 5 and 11).   On March 13, 2012, the Companys CEO made an investment of $300,000 in a convertible promissory note due March 31, 2013, bearing interest at 0.19% per annum.  The note is convertible into common shares of the Company at the rate of $1.00 per share upon five days written notice to the Company.  The Company evaluated the convertible notes and determined that, for the embedded conversion option, there was no beneficial conversion value to record as the conversion price is considered to be the fair market value of the common shares on the note issue date (See Note 11).   On February 29, 2012, (the "Effective Date") (and as amended on March 30, 2012) the Company retained the investment bank of Laidlaw & Company (UK) Ltd. ("Laidlaw") on an exclusive basis with certain "carve-out" provisions for the purpose of raising up to $6,000,000 (plus up to an additional $1,200,000 million to cover over-allotments at the option of Laidlaw) through two successive best-efforts private placements of the Company's securities.  The Phase One financing was an offering of up to 40 Units of $50,000 each and was to be completed by March 31, 2012, but was extended to May 31, 2012 (extended to June 30, 2012 per the March 30, 2012 amendment).  Each Unit consists of: (i) senior secured convertible notes (the "Convertible Notes"), bearing 10% interest, convertible into the Company's common shares at the lower of (a) $1.00 or (b) 95% of the per share purchase price of any shares of common stock (or common stock equivalents) issued on or after the original issue date of the note and (ii) five-year warrant to purchase that number of the Company's common shares equal to 25% of the number of shares issuable upon conversion of the Convertible Notes.  Mandatory conversion will occur on the initial closing of the Phase Two financing.  The Convertible Notes mature on June 30, 2012 (extended to September 30, 2012 per the March 30, 2012 amendment), carry provisions for price protection and require the Company to file a registration statement for the resale of the underlying common stock nine months after closing of the Phase Two offering.  For the Phase One financing, Laidlaw received a cash fee of 10% of aggregate funds raised along with a five-year warrant (the "Laidlaw Warrant") equal to 10% of the common stock reserved for issuance in connection with the Units.  Separately, Laidlaw required an activation fee of $25,000, of which $15,000 was paid upon execution of the agreement and the remaining $10,000 was paid as of May 18, 2012.  As of June 30, 2012, the Company, without the assistance of any broker dealer, raised $150,000 from the sale of 3.0 Units (including convertible notes payable and an estimated 37,500 warrants) from the Phase One financing and, raised another $1,289,527 (net of debt issuance costs of $266,473) from the sale of 31.12 Units (including convertible notes payable and an estimated 389,000 warrants) through Laidlaw.  The convertible note embedded conversion options did not qualify as derivatives since the conversion shares were not readily convertible to cash due to an inactive trading market and there was no beneficial conversion value since the conversion price equaled the fair value of the shares.     On May 1, 2012, the Company issued a convertible promissory note payable to a consultant in the amount of $49,825 in exchange for past services rendered, of which $38,175 pertains to the six months ended June 30, 2012.  The note bears interest at 0.19% per annum, matures September 30, 2012, and is convertible into the Companys common shares at the lower (a) $1.00 or (b) the per share purchase price of any shares of common stock (or common stock equivalents) issued on or after the original issue date of the note.  The convertible note embedded conversion options did not qualify as derivatives since the conversion shares were not readily convertible to cash due to an inactive trading market and there was no beneficial conversion value since the conversion price equaled the fair value of the shares.   Convertible notes payable consisted of the following at June 30, 2012:   <table align="center" cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: bottom"> <td style="line-height: 115%"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="border-bottom: black 1pt solid"> June 30, 2012</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="width: 86%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%; text-align: right"> </td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 11%; line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Notes payable - originating March 15, 2012 through March 23, 2012; no monthly payments required; bearing interest at 10%; maturing at September 30, 2012 [A]</td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">150,000</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Notes payable - originating April 27, 2012 through June 15, 2012; no monthly payments required; bearing interest at 10%; maturing at September 30, 2012</td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">1,556,000</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Note payable - originating May 1, 2012; no monthly payments required; bearing interest at 0.19%; maturing at September 30, 2012</td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">49,825</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Note payable - related party originating March 13, 2012; no monthly payments required; bearing interest at 0.19%; maturing at March 31, 2013</td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">300,000</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Note payable - originating February 25, 2012; no monthly payments required; bearing interest at 0.19%; maturing at February 25, 2014</td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">100,000</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Note payable - originating February 27, 2012; no monthly payments required; bearing interest at 0.19%; maturing at February 27, 2014</td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">50,000</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Note payable - related party originating February 29, 2012; no monthly payments required; bearing interest at 0.19%; maturing at February 29, 2014</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%; text-align: right">50,000</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Total</td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">2,255,825</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Less: Current maturities (includes $300,000 to related parties)</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%; text-align: right">(2,055,825</td> <td nowrap="nowrap" style="line-height: 115%">)</td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Amount due after one year (includes $50,000 to related parties)</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%">$</td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">200,000</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">[A] - maturity date extended from June 30, 2012 to September 30, 2012.</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> </table>   Future maturities of the convertible notes payable are as follows:   <table align="center" cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: bottom"> <td style="line-height: 115%; text-align: center"> Year Ending December 31,</td> <td style="line-height: 115%; text-align: center"> </td> <td colspan="2" style="line-height: 115%; text-align: center"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="width: 84%; line-height: 115%; text-align: center">2012</td> <td style="width: 1%; line-height: 115%; text-align: right"> </td> <td style="width: 1%; line-height: 115%">$</td> <td style="width: 13%; line-height: 115%; text-align: right">1,755,825</td> <td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%; text-align: center">2013</td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">300,000</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%; text-align: center">2014</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%; text-align: right">200,000</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%; text-align: center"> </td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%">$</td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">2,255,825</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> </table>

Line of Credit   The Company maintains a line of credit with a bank, up to a maximum credit line of $250,000.  The line of credit bears interest equal to the prime rate plus 0.50% (overall interest rate of 3.75% at June 30, 2012).  The line of credit requires minimum monthly payments consisting of interest only.  The line of credit is secured by all business assets, inventory, equipment, accounts, general intangibles, chattel paper, documents, instruments and letter of credit rights of the Company.  The line of credit is for an unspecified time until the bank notifies the Company of the Final Availability Date, at which time payments on the line of credit become the sum of: (a) accrued interest and (b) 1/60th of the unpaid principal balance immediately following the Final Availability Date.  The balance due on the line of credit as of June 30, 2012 was $222,703.  Since the earliest the line of credit is due and payable is over a five year period and the Company believes that it could obtain a comparable replacement line of credit elsewhere, the entire line of credit is included in long-term liabilities.  The unused amount under the line of credit available to the Company at June 30, 2012 was $27,297.   Legal Matters   From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of June 30, 2012, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations.   There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.   Regulatory Matters   The University is subject to extensive regulation by Federal and State governmental agencies and accrediting bodies.  In particular, the HEA and the regulations promulgated thereunder by the DOE subject the University to significant regulatory scrutiny on the basis of numerous standards that schools must satisfy to participate in the various types of federal student financial assistance programs authorized under Title IV of the HEA.  The University has had provisional certification to participate in the Title IV programs.  That provisional certification imposes certain regulatory restrictions including, but not limited to, a limit of 500 student recipients for Title IV funding for the duration of the provisional certification.  During 2011, the Universitys provisional certification was scheduled to expire, but the University timely filed its application for recertification with the DOE, which extended the term of the Universitys certification pending DOE review.  The provisional certification restrictions continue with regard to the Universitys participation in Title IV programs.   To participate in the Title IV programs, an institution must be authorized to offer its programs of instruction by the relevant agencies of the State in which it is located, and since July 2011, potentially in the States where an institution offers postsecondary education through distance education.  In addition, an institution must be accredited by an accrediting agency recognized by the DOE and certified as eligible by the DOE.  The DOE will certify an institution to participate in the Title IV programs only after the institution has demonstrated compliance with the HEA and the DOEs extensive academic, administrative, and financial regulations regarding institutional eligibility and certification.  An institution must also demonstrate its compliance with these requirements to the DOE on an ongoing basis.  The University performs periodic reviews of its compliance with the various applicable regulatory requirements.  If we were ineligible to receive Title IV funding, given Title IV cash receipts represented approximately 7% of total revenues in 2011, our operations and liquidity would be minimally impacted.     As a result of certain events in 2012, the Company has been requested by DOE to provide a letter of credit in the amount of $105,865, which is 10% of Aspens Title IV receipts in 2011, by March 28, 2012.  On March 27, 2012, the Company provided the DOE with the requested letter of credit expiring March 28, 2013.  On June 18, 2012, the DOE, having reviewed Aspens same-day balance sheet filing and application for approval of the change in ownership and control, notified Aspen of the DOEs requirement that Aspen increase its letter of credit by August 31, 2012 from 10% to 25% of Aspens Title IV receipts in 2011.  Aspen has timely informed the DOE that it will provide the additional letter of credit in the amount of $158,800 by August 31, 2012.  The DOE may impose additional or different terms and conditions in any final provisional program participation agreement that it may issue.   The HEA requires accrediting agencies to review many aspects of an institution's operations in order to ensure that the education offered is of sufficiently high quality to achieve satisfactory outcomes and that the institution is complying with accrediting standards.  Failure to demonstrate compliance with accrediting standards may result in the imposition of probation, the requirements to provide periodic reports, the loss of accreditation or other penalties if deficiencies are not remediated.   Because the Company operates in a highly regulated industry, it may be subject from time to time to audits, investigations, claims of noncompliance or lawsuits by governmental agencies or third parties, which allege statutory violations, regulatory infractions or common law causes of action.   Delaware Approval to Confer Degrees   Aspen is a Delaware corporation.  Delaware law requires an institution to obtain approval from the Delaware Department of Education (Delaware DOE) before it may incorporate with the power to confer degrees.  Aspen did not obtain such approval prior to the period ended June 30, 2012.  On July 3, 2012, Aspen received notice from the Delaware DOE that it is granted provisional approval status effective until June 30, 2015.  Aspen is authorized by the Colorado Commission on Education to operate in Colorado as a degree granting institution.   Guarantee to Purchase Common Shares   On April 4, 2012, the Company entered into an agreement with: (i) an individual, (ii) Higher Education Group Management, Inc. (HEMG), a related party and principal stockholder of the Company whose president is Mr. Patrick Spada, the former Chairman of the Company and (iii) Mr. Patrick Spada (See Note 3). As part of the agreement, the Company guaranteed it would purchase at least 600,000 common shares of the Company at $0.50 per share within 90 days of the agreement. As of July 3, 2012, the guarantee resulted in a liability of the Company to purchase these shares. Subsequent to June 30, 2012, third party investors placed $168,000 in escrow to purchase 336,000 common shares, leaving the Company with a remaining liability to purchase 264,000 common shares for $132,000.

Prior to their conversion to common shares on March 13, 2012, the Series A, Series D and Series E preferred shares were classified as temporary equity.  During 2012 through March 13, 2012, the preferred shares accumulated additional dividends of $37,379 and as of March 13, 2012, total cumulative preferred dividends were $124,705.  On March 13, 2012, all preferred shares were automatically converted into common shares and, based on the terms of the preferred shares, none of the cumulative dividends shall ever be paid (See Note 9).

Stock Dividend and Reverse Split   On February 23, 2012, the Company approved a stock dividend of one new share of the Company for each share presently held.  Following the stock dividend, the Company approved a one-for-two reverse stock split as of the close of business on February 24, 2012 in which each two shares of common stock shall be combined into one share of common stock.  This was done in order to reduce the conversion ratio of the convertible preferred stock for all Series to 1 for 1 except for Series C, which had a conversion ratio of 0.8473809.     Common Stock   On March 13, 2012, all of the outstanding preferred shares of the Company were automatically converted into 13,677,274 common shares of Aspen Group, Inc. (See Note 8).   Pursuant to the recapitalization discussed below, the Company is deemed to have issued 9,760,000 common shares to the original stockholders of the publicly-held entity.   In April 2012, the Company issued 20,000 common shares upon the conversion of $20,000 of convertible notes payable (See Note 6).   Recapitalization   On March 13, 2012 (the recapitalization date), the Company was acquired by Aspen Group, Inc., an inactive publicly-held company, in a reverse merger transaction accounted for as a recapitalization of the Company (the Recapitalization or the Reverse Merger).  The common and preferred stockholders of the Company received 25,515,204 common shares of Aspen Group, Inc. in exchange for 100% of the capital stock of Aspen University Inc.  For accounting purposes, Aspen University Inc. is the acquirer and Aspen Group, Inc. is the acquired company because the stockholders of Aspen University Inc. acquired both voting and management control of the combined entity.  The Company is deemed to have issued 9,760,000 common shares to the original stockholders of the publicly-held entity.  Accordingly, after completion of the recapitalization, the historical operations of the Company are those of Aspen University Inc. and the operations since the recapitalization date are those of Aspen University Inc. and Aspen Group, Inc.  The assets and liabilities of both companies are combined at historical cost on the recapitalization date.  As a result of the recapitalization and conversion of all Company preferred shares into common shares of the public entity, all redemption and dividend rights of preferred shares were terminated.  As a result of the recapitalization, the Company now has 120,000,000 shares of common stock, par value $0.001 per share, and 10,000,000 shares of preferred stock, par value $0.001 per share authorized.  The assets acquired and liabilities assumed from the publicly-held company were as follows:   <table align="center" cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: bottom"> <td style="width: 84%; line-height: 115%">Cash and cash equivalents</td> <td style="width: 1%; line-height: 115%; text-align: right"> </td> <td style="width: 1%; line-height: 115%">$</td> <td style="width: 13%; line-height: 115%; text-align: right">337</td> <td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Liabilities assumed</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%; text-align: right">(21,206</td> <td nowrap="nowrap" style="line-height: 115%">)</td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Net</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%">$</td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">(20,869</td> <td nowrap="nowrap" style="line-height: 115%">)</td></tr> </table>   Stock Warrants   All outstanding warrants issued by the Company to date have been related to capital raises.  Accordingly, the Company has not recognized any stock-based compensation for warrants issued during the periods presented.   A summary of the Companys warrant activity during the six months ended June 30, 2012 is presented below:   <table align="center" cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: bottom"> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Weighted</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Weighted</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Average</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Average</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Remaining</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Aggregate</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Number of</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Exercise</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Contractual</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Intrinsic</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td></tr> <tr style="vertical-align: bottom"> <td style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold">Warrants</td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold; text-align: center">Shares</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold; text-align: center">Price</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold; text-align: center">Term</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold; text-align: center">Value</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Balance Outstanding, December 31, 2011</td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">456,000</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%">$</td> <td style="line-height: 115%; text-align: right">1.00</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="padding-left: 0.25in; line-height: 115%">  Granted</td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">426,500</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%">$</td> <td style="line-height: 115%; text-align: right">1.00</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="padding-left: 0.25in; line-height: 115%">  Exercised</td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">-</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">-</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="padding-left: 0.25in; line-height: 115%">  Forfeited</td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">-</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">-</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="padding-left: 0.25in; line-height: 115%">  Expired</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%; text-align: right">-</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%; text-align: right">-</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="width: 52%; line-height: 115%">Balance Outstanding, June 30, 2012</td> <td style="width: 1%; line-height: 115%; text-align: right"> </td> <td style="width: 1%; border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="width: 9%; border-bottom: black 2.25pt double; line-height: 115%; text-align: right">882,500</td> <td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%; text-align: right"> </td> <td style="width: 1%; border-bottom: black 2.25pt double; line-height: 115%">$</td> <td style="width: 9%; border-bottom: black 2.25pt double; line-height: 115%; text-align: right">1.00</td> <td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%; text-align: right"> </td> <td style="width: 1%; border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="width: 9%; border-bottom: black 2.25pt double; line-height: 115%; text-align: right">4.4</td> <td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%; text-align: right"> </td> <td style="width: 1%; border-bottom: black 2.25pt double; line-height: 115%">$</td> <td style="width: 9%; border-bottom: black 2.25pt double; line-height: 115%; text-align: right">-</td> <td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Exercisable, June 30, 2012</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">882,500</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%">$</td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">1.00</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">4.4</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%">$</td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">-</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> </table>   All of the Companys warrants contain price protection.  The Company evaluated whether the price protection provision of the warrant would cause derivative treatment.  In its assessment, the Company determined that since its shares are not readily convertible to cash due to no active public market existing, the warrants are excluded from derivative treatment.     Stock Incentive Plan and Stock Option Grants to Employees and Directors   Immediately following the closing of the Reverse Merger, on March 13, 2012, the Company adopted the 2012 Equity Incentive Plan (the Plan) that provides for the grant of 2,500,000 shares in the form of incentive stock options, non-qualified stock options, restricted shares, stock appreciation rights and restricted stock units to employees, consultants, officers and directors.  As of June 30, 2012, 575,000 shares were remaining under the Plan for future issuance.   During the six months ended June 30, 2012, the Company granted 1,895,000 stock options to employees, all of which were under the Plan, having an exercise price of $1.00 per share.  The options vest pro rata over three years on each anniversary date; all options expire five years from the grant date.  The total fair value of stock options granted to employees during the six months ended June 30, 2012 was $625,350, which is being recognized over the respective vesting periods.  The Company recorded compensation expense of $55,374 for the six months ended June 30, 2012, in connection with employee stock options.   The Company estimates the fair value of share-based compensation utilizing the Black-Scholes option pricing model, which is dependent upon several variables such as the expected option term, expected volatility of the Companys stock price over the expected term, expected risk-free interest rate over the expected option term, expected dividend yield rate over the expected option term, and an estimate of expected forfeiture rates.  The Company believes this valuation methodology is appropriate for estimating the fair value of stock options granted to employees and directors which are subject to ASC Topic 718 requirements.  These amounts are estimates and thus may not be reflective of actual future results, nor amounts ultimately realized by recipients of these grants.  The Company recognizes compensation on a straight-line basis over the requisite service period for each award.  The following table summarizes the assumptions the Company utilized to record compensation expense for stock options granted to employees during the six months ended June 30, 2012 and 2011:   <table align="center" cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: bottom"> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">For the Six</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">For the Six</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Months Ended</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Months Ended</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td></tr> <tr style="vertical-align: bottom"> <td style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold">Assumptions</td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold; text-align: center">June 30, 2012</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold; text-align: center">June 30, 2011</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="width: 76%; line-height: 115%">Expected life (years)</td> <td style="width: 1%; line-height: 115%; text-align: right"> </td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 9%; line-height: 115%; text-align: right">3.5</td> <td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 9%; line-height: 115%; text-align: right">N/A</td> <td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Expected volatility</td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">44.2</td> <td nowrap="nowrap" style="line-height: 115%">%</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">N/A</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Weighted-average volatility</td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">44.2</td> <td nowrap="nowrap" style="line-height: 115%">%</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">N/A</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Risk-free interest rate</td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right; padding-left: -20pt; text-indent: -10pt">0.56% - 0.60</td> <td nowrap="nowrap" style="line-height: 115%">%</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">N/A</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Dividend yield</td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">0.00</td> <td nowrap="nowrap" style="line-height: 115%">%</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">N/A</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Expected forfeiture rate</td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">2.0</td> <td nowrap="nowrap" style="line-height: 115%">%</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">N/A</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> </table>   The Company utilized the simplified method to estimate the expected life for stock options granted to employees.  The simplified method was used as the Company does not have sufficient historical data regarding stock option exercises.  The expected volatility is based on the average of the expected volatilities from the most recent audited financial statements available for comparative public companies that are deemed to be similar in nature to the Company.  The risk-free interest rate is based on the U.S. Treasury yields with terms equivalent to the expected life of the related option at the time of the grant.  Dividend yield is based on historical trends.  While the Company believes these estimates are reasonable, the compensation expense recorded would increase if the expected life was increased, a higher expected volatility was used, or if the expected dividend yield increased.     A summary of the Companys stock option activity for employees and directors during the three months ended June 30, 2012 is presented below:   <table align="center" cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: bottom"> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Weighted</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Weighted</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Average</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Average</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Remaining</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Aggregate</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Number of</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Exercise</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Contractual</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Intrinsic</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td></tr> <tr style="vertical-align: bottom"> <td style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold">Options</td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold; text-align: center">Shares</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold; text-align: center">Price</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold; text-align: center">Term</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold; text-align: center">Value</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Balance Outstanding, December 31, 2011</td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="padding-left: 0.25in; line-height: 115%">  Granted</td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">1,895,000</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%">$</td> <td style="line-height: 115%; text-align: right">1.00</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="padding-left: 0.25in; line-height: 115%">  Exercised</td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">-</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="padding-left: 0.25in; line-height: 115%">  Forfeited</td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">(145,000</td> <td nowrap="nowrap" style="line-height: 115%">)</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%">$</td> <td style="line-height: 115%; text-align: right">1.00</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="padding-left: 0.25in; line-height: 115%">  Expired</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%; text-align: right">-</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="width: 52%; line-height: 115%">Balance Outstanding, June 30, 2012</td> <td style="width: 1%; line-height: 115%; text-align: right"> </td> <td style="width: 1%; border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="width: 9%; border-bottom: black 2.25pt double; line-height: 115%; text-align: right">1,750,000</td> <td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%; text-align: right"> </td> <td style="width: 1%; border-bottom: black 2.25pt double; line-height: 115%">$</td> <td style="width: 9%; border-bottom: black 2.25pt double; line-height: 115%; text-align: right">1.00</td> <td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%; text-align: right"> </td> <td style="width: 1%; border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="width: 9%; border-bottom: black 2.25pt double; line-height: 115%; text-align: right">4.7</td> <td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%; text-align: right"> </td> <td style="width: 1%; border-bottom: black 2.25pt double; line-height: 115%">$</td> <td style="width: 9%; border-bottom: black 2.25pt double; line-height: 115%; text-align: right">-</td> <td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Expected to vest, June 30, 2012</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">1,714,500</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%">$</td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">1.00</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">4.7</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%">$</td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">-</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Exercisable, June 30, 2012</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">-</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">N/A</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">N/A</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">N/A</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> </table>   The weighted-average grant-date fair value of options granted to employees during the six months ended June 30, 2012 was $0.33.   As of June 30, 2012, there was $511,095 of total unrecognized compensation costs related to nonvested share-based compensation arrangements.  That cost is expected to be recognized over a weighted-average period of 1.5 years.   Stock Option Grants to Non-Employees   During the six months ended June 30, 2012, the Company granted 175,000 stock options to non-employees, all of which were under the Plan, having an exercise price of $1.00 per share.  The options vest pro rata over three years on each anniversary date; all options expire five years from the grant date.  The total fair value of stock options granted to non-employees during the six months ended June 30, 2012 was $57,750, all of which was recognized immediately as these stock options were issued for prior services rendered.  The Company recorded compensation expense of $57,750 for the six months ended June 30, 2012, in connection with non-employee stock options.   The following table summarizes the assumptions the Company utilized to record compensation expense for stock options granted to non-employees during the six months ended June 30, 2012 and 2011:   <table align="center" cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: bottom"> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">For the Six</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">For the Six</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Months Ended</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Months Ended</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td></tr> <tr style="vertical-align: bottom"> <td style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold">Assumptions</td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold; text-align: center">June 30, 2012</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold; text-align: center">June 30, 2011</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="width: 76%; line-height: 115%">Expected life (years)</td> <td style="width: 1%; line-height: 115%; text-align: right"> </td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 9%; line-height: 115%; text-align: right">3.5</td> <td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 9%; line-height: 115%; text-align: right">N/A</td> <td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Expected volatility</td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">44.2</td> <td nowrap="nowrap" style="line-height: 115%">%</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">N/A</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Weighted-average volatility</td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">44.2</td> <td nowrap="nowrap" style="line-height: 115%">%</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">N/A</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Risk-free interest rate</td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">0.60</td> <td nowrap="nowrap" style="line-height: 115%">%</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">N/A</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Dividend yield</td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">0.00</td> <td nowrap="nowrap" style="line-height: 115%">%</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">N/A</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> </table>       A summary of the Companys stock option activity for non-employees during the six months ended June 30, 2012 is presented below:   <table align="center" cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: bottom"> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Weighted</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Weighted</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Average</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Average</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Remaining</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Aggregate</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Number of</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Exercise</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Contractual</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Intrinsic</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td></tr> <tr style="vertical-align: bottom"> <td style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold">Options</td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold; text-align: center">Shares</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold; text-align: center">Price</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold; text-align: center">Term</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold; text-align: center">Value</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Balance Outstanding, December 31, 2011</td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="padding-left: 0.25in; line-height: 115%">  Granted</td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">175,000</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%">$</td> <td style="line-height: 115%; text-align: right">1.00</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="padding-left: 0.25in; line-height: 115%">  Exercised</td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">-</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="padding-left: 0.25in; line-height: 115%">  Forfeited</td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">-</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="padding-left: 0.25in; line-height: 115%">  Expired</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%; text-align: right">-</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="width: 52%; line-height: 115%">Balance Outstanding, June 30, 2012</td> <td style="width: 1%; line-height: 115%; text-align: right"> </td> <td style="width: 1%; border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="width: 9%; border-bottom: black 2.25pt double; line-height: 115%; text-align: right">175,000</td> <td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%; text-align: right"> </td> <td style="width: 1%; border-bottom: black 2.25pt double; line-height: 115%">$</td> <td style="width: 9%; border-bottom: black 2.25pt double; line-height: 115%; text-align: right">1.00</td> <td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%; text-align: right"> </td> <td style="width: 1%; border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="width: 9%; border-bottom: black 2.25pt double; line-height: 115%; text-align: right">4.7</td> <td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%; text-align: right"> </td> <td style="width: 1%; border-bottom: black 2.25pt double; line-height: 115%">$</td> <td style="width: 9%; border-bottom: black 2.25pt double; line-height: 115%; text-align: right">-</td> <td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Expected to vest, June 30, 2012</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">175,000</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%">$</td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">1.00</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">4.7</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%">$</td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">-</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Exercisable, June 30, 2012</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">-</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">N/A</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">N/A</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">N/A</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> </table>   The weighted-average grant-date fair value of options granted to non-employees during the three months ended June 30, 2012 was $0.33.

<table align="center" cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: bottom"> <td style="width: 84%; line-height: 115%">Cash and cash equivalents</td> <td style="width: 1%; line-height: 115%; text-align: right"> </td> <td style="width: 1%; line-height: 115%">$</td> <td style="width: 13%; line-height: 115%; text-align: right">337</td> <td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Liabilities assumed</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%; text-align: right">(21,206</td> <td nowrap="nowrap" style="line-height: 115%">)</td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Net</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%">$</td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">(20,869</td> <td nowrap="nowrap" style="line-height: 115%">)</td></tr> </table>

<table align="center" cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: bottom"> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Weighted</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Weighted</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Average</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Average</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Remaining</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Aggregate</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Number of</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Exercise</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Contractual</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Intrinsic</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td></tr> <tr style="vertical-align: bottom"> <td style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold">Options</td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold; text-align: center">Shares</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold; text-align: center">Price</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold; text-align: center">Term</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold; text-align: center">Value</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Balance Outstanding, December 31, 2011</td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="padding-left: 0.25in; line-height: 115%">  Granted</td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">1,895,000</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%">$</td> <td style="line-height: 115%; text-align: right">1.00</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="padding-left: 0.25in; line-height: 115%">  Exercised</td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">-</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="padding-left: 0.25in; line-height: 115%">  Forfeited</td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">(145,000</td> <td nowrap="nowrap" style="line-height: 115%">)</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%">$</td> <td style="line-height: 115%; text-align: right">1.00</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="padding-left: 0.25in; line-height: 115%">  Expired</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%; text-align: right">-</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="width: 52%; line-height: 115%">Balance Outstanding, June 30, 2012</td> <td style="width: 1%; line-height: 115%; text-align: right"> </td> <td style="width: 1%; border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="width: 9%; border-bottom: black 2.25pt double; line-height: 115%; text-align: right">1,750,000</td> <td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%; text-align: right"> </td> <td style="width: 1%; border-bottom: black 2.25pt double; line-height: 115%">$</td> <td style="width: 9%; border-bottom: black 2.25pt double; line-height: 115%; text-align: right">1.00</td> <td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%; text-align: right"> </td> <td style="width: 1%; border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="width: 9%; border-bottom: black 2.25pt double; line-height: 115%; text-align: right">4.7</td> <td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%; text-align: right"> </td> <td style="width: 1%; border-bottom: black 2.25pt double; line-height: 115%">$</td> <td style="width: 9%; border-bottom: black 2.25pt double; line-height: 115%; text-align: right">-</td> <td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Expected to vest, June 30, 2012</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">1,714,500</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%">$</td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">1.00</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">4.7</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%">$</td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">-</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Exercisable, June 30, 2012</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">-</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">N/A</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">N/A</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">N/A</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> </table>

<table align="center" cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: bottom"> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">For the Six</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">For the Six</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Months Ended</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Months Ended</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td></tr> <tr style="vertical-align: bottom"> <td style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold">Assumptions</td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold; text-align: center">June 30, 2012</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold; text-align: center">June 30, 2011</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="width: 76%; line-height: 115%">Expected life (years)</td> <td style="width: 1%; line-height: 115%; text-align: right"> </td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 9%; line-height: 115%; text-align: right">3.5</td> <td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 9%; line-height: 115%; text-align: right">N/A</td> <td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Expected volatility</td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">44.2</td> <td nowrap="nowrap" style="line-height: 115%">%</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">N/A</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Weighted-average volatility</td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">44.2</td> <td nowrap="nowrap" style="line-height: 115%">%</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">N/A</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Risk-free interest rate</td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">0.60</td> <td nowrap="nowrap" style="line-height: 115%">%</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">N/A</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Dividend yield</td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">0.00</td> <td nowrap="nowrap" style="line-height: 115%">%</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">N/A</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> </table>       A summary of the Companys stock option activity for non-employees during the six months ended June 30, 2012 is presented below:   <table align="center" cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: bottom"> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Weighted</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Weighted</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Average</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Average</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Remaining</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Aggregate</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Number of</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Exercise</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Contractual</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Intrinsic</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td></tr> <tr style="vertical-align: bottom"> <td style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold">Options</td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold; text-align: center">Shares</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold; text-align: center">Price</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold; text-align: center">Term</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold; text-align: center">Value</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Balance Outstanding, December 31, 2011</td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="padding-left: 0.25in; line-height: 115%">  Granted</td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">175,000</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%">$</td> <td style="line-height: 115%; text-align: right">1.00</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="padding-left: 0.25in; line-height: 115%">  Exercised</td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">-</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="padding-left: 0.25in; line-height: 115%">  Forfeited</td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right">-</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="padding-left: 0.25in; line-height: 115%">  Expired</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%; text-align: right">-</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="width: 52%; line-height: 115%">Balance Outstanding, June 30, 2012</td> <td style="width: 1%; line-height: 115%; text-align: right"> </td> <td style="width: 1%; border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="width: 9%; border-bottom: black 2.25pt double; line-height: 115%; text-align: right">175,000</td> <td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%; text-align: right"> </td> <td style="width: 1%; border-bottom: black 2.25pt double; line-height: 115%">$</td> <td style="width: 9%; border-bottom: black 2.25pt double; line-height: 115%; text-align: right">1.00</td> <td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%; text-align: right"> </td> <td style="width: 1%; border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="width: 9%; border-bottom: black 2.25pt double; line-height: 115%; text-align: right">4.7</td> <td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%; text-align: right"> </td> <td style="width: 1%; border-bottom: black 2.25pt double; line-height: 115%">$</td> <td style="width: 9%; border-bottom: black 2.25pt double; line-height: 115%; text-align: right">-</td> <td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Expected to vest, June 30, 2012</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">175,000</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%">$</td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">1.00</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">4.7</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%">$</td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">-</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Exercisable, June 30, 2012</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">-</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">N/A</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">N/A</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">N/A</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> </table>

On December 14, 2011, the Company loaned $150,000 to an officer of the Company in exchange for a promissory note bearing 3% per annum.  As collateral, the note was secured by 500,000 shares of the Companys common stock owned personally by the officer.  The note along with accrued interest was due and payable on September 14, 2012.  For the three months ended June 30, 2012, interest income of $594 was recognized on the note receivable.  As of December 31, 2011, the balance due on the note receivable was $150,000, all of which is short-term.  On February 16, 2012, the note receivable from an officer was repaid along with accrued interest (See Note 3).   On March 30, 2008 and December 1, 2008, the Company sold course curricula pursuant to marketing agreements to Higher Education Group Management, Inc. (HEMG), a related party and principal stockholder of the Company whose president is Mr. Patrick Spada, the former Chairman of the Company, in the amount of $455,000 and $600,000, respectively; UCC filings were filed accordingly.  Under the marketing agreements, the receivables are due net 60 months.  On September 16, 2011, HEMG pledged 772,793 Series C preferred shares (automatically converted to 654,850 common shares on March 13, 2012) of the Company as collateral for this account receivable.  On March 8, 2012, due to the impending reduction in the value of the collateral as the result of the Series C conversion ratio and the Companys inability to engage Mr. Spada in good faith negotiations to increase HEMGs pledge, Michael Mathews, the Companys CEO, pledged 117,943 common shares of the Company, owned personally by him, valued at $1.00 per share based on recent sales of capital stock as additional collateral to the accounts receivable, secured related party.  On March 13, 2012, the Company deemed the receivables stemming from the sale of courseware curricula to be in default.     On April 4, 2012, the Company entered into an agreement with: (i) an individual, (ii) Higher Education Group Management, Inc. (HEMG), a related party and principal stockholder of the Company whose president is Mr. Patrick Spada, the former Chairman of the Company and (iii) Mr. Patrick Spada. Under the agreement, (a) the individual shall purchase and HEMG shall sell to the individual 400,000 common shares of the Company at $0.50 per share by April 10, 2012; (b) the Company guaranteed it would purchase at least 600,000 common shares of the Company at $0.50 per share within 90 days of the agreement and the Company would use its best efforts to purchase from HEMG and resell to investors an additional 1,400,000 common shares of the Company at $0.50 per share within 180 days of the agreement; (c) provided HEMG and Mr. Patrick Spada fulfill their obligations under (a) and (b) above, the Company shall consent to additional private transfers by HEMG and/or Mr. Patrick Spada of up to 500,000 common shares of the Company on or before March 13, 2013; (d) HEMG agrees to not sell, pledge or otherwise transfer 142,500 common shares of the Company pending resolution of a dispute regarding the Companys claim that HEMG sold 131,500 common shares of the Company without having enough authorized shares and a stockholder did not receive 11,000 common shares of the Company owed to him as a result of a stock dividend; and (e) the Company shall waive any default of the accounts receivable, secured - related party and extend the due date to September 30, 2014. A group of predominantly existing shareholders implemented the purchase of 400,000 common shares at $0.50 per share per section (a) above on or before the April 10, 2012 deadline. Subsequent to June 30,third party investors placed $168,000 in escrow, to purchase 336,000 shares per section (b) above (See Note 7). Based on the Company plans to raise additional capital from the sale of its common stock, and the estimated price per share from such offering, the value of the aforementioned collateral shall decrease. Accordingly, as of June 30, 2012, the Company has recognized an allowance of $309,117 for this account receivable. As of June 30, 2012 and December 31, 2011, the balance of the account receivable, net of allowance, was $463,676 and $772,793 and is shown as accounts receivable, secured related party, net (See Note 3).   On February 25, 2012, February 27, 2012 and February 29, 2012, loans payable to an individual, another individual and a related party (the brother of Patrick Spada, the former Chairman of the Company), of $100,000, $50,000 and $50,000, respectively, were converted into two-year convertible promissory notes, bearing interest of 0.19% per annum.  Beginning March 31, 2012, the notes are convertible into common shares of the Company at the rate of $1.00 per share.  The Company evaluated the convertible notes and determined that, for the embedded conversion option, there was no beneficial conversion value to record as the conversion price is considered to be the fair market value of the common shares on the note issue dates.  As these loans (now convertible promissory notes) are not due for at least 12 months after the balance sheet, they have been included in long-term liabilities as of June 30, 2012 (See Notes 5 and 6).   On March 13, 2012, the Companys CEO made an investment of $300,000 in a convertible promissory note due March 31, 2013, bearing interest at 0.19% per annum.  The note is convertible into common shares of the Company at the rate of $1.00 per share upon five days written notice to the Company.  The Company evaluated the convertible notes and determined that, for the embedded conversion option, there was no beneficial conversion value to record as the conversion price is considered to be the fair market value of the common shares on the note issue date (See Note 6).

On August 14, 2012, the Companys CEO loaned the Company $300,000 in exchange for a convertible demand note bearing interest at 5% per annum. The note is convertible at the lesser of: (i) $0.60 per share or (ii) the same conversion price of the convertible notes issued in the Companys current private placement. The Company evaluated the convertible note and determined that, for the embedded conversion option, there was no beneficial conversion value to record as the conversion price is considered to be the fair market value of the common shares on the note issue date.   On August 16, 2012, as a direct result of removing the receivable from stockholder of approximately $2.2 million from the balance sheet and restating the March 31, 2012 and the December 31, 2011 and 2010 consolidated financial statements, the Company rescinded the pledge agreements guaranteeing the receivable and returned the pledged shares to the three directors.

Concentration of Revenues, Accounts Receivable and Costs and Expenses   For the three and six months ended June 30, 2012 and 2011, the Company had significant customers with individual percentage of total revenues equaling 10% or greater as follows:   <table align="center" cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: bottom"> <td style="line-height: 115%; font-weight: bold"> </td> <td style="line-height: 115%; font-weight: bold"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">For the Three</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td> <td style="line-height: 115%; font-weight: bold"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">For the Three</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td> <td style="line-height: 115%; font-weight: bold"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">For the Six</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td> <td style="line-height: 115%; font-weight: bold"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">For the Six</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%; font-weight: bold"> </td> <td style="line-height: 115%; font-weight: bold"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Months Ended</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td> <td style="line-height: 115%; font-weight: bold"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Months Ended</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td> <td style="line-height: 115%; font-weight: bold"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Months Ended</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td> <td style="line-height: 115%; font-weight: bold"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Months Ended</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%; font-weight: bold"> </td> <td style="line-height: 115%; font-weight: bold"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold; text-align: center">June 30, 2012</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td> <td style="line-height: 115%; font-weight: bold"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold; text-align: center">June 30, 2011</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td> <td style="line-height: 115%; font-weight: bold"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold; text-align: center">June 30, 2012</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td> <td style="line-height: 115%; font-weight: bold"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold; text-align: center">June 30, 2011</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="width: 52%; line-height: 115%">Customer 1</td> <td style="width: 1%; line-height: 115%; text-align: right"> </td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 9%; line-height: 115%; text-align: right">33.3</td> <td nowrap="nowrap" style="width: 1%; line-height: 115%">%</td> <td style="width: 1%; line-height: 115%; text-align: right"> </td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 9%; line-height: 115%; text-align: right">43.9</td> <td nowrap="nowrap" style="width: 1%; line-height: 115%">%</td> <td style="width: 1%; line-height: 115%; text-align: right"> </td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 9%; line-height: 115%; text-align: right">39.7</td> <td nowrap="nowrap" style="width: 1%; line-height: 115%">%</td> <td style="width: 1%; line-height: 115%; text-align: right"> </td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 9%; line-height: 115%; text-align: right">45.5</td> <td nowrap="nowrap" style="width: 1%; line-height: 115%">%</td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Customer 2</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%; text-align: right">16.3</td> <td nowrap="nowrap" style="line-height: 115%">%</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%; text-align: right">-</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%; text-align: right">17.9</td> <td nowrap="nowrap" style="line-height: 115%">%</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%; text-align: right">-</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Totals</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">49.6</td> <td nowrap="nowrap" style="line-height: 115%">%</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">43.9</td> <td nowrap="nowrap" style="line-height: 115%">%</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">57.6</td> <td nowrap="nowrap" style="line-height: 115%">%</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">45.5</td> <td nowrap="nowrap" style="line-height: 115%">%</td></tr> </table>       At June 30, 2012 and December 31, 2011, concentration of accounts receivable with significant customers representing 10% or greater of accounts receivable was as follows:   <table align="center" cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: bottom"> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="border-bottom: black 1pt solid"> June 30, 2012</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="border-bottom: black 1pt solid"> December 31, 2011</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="width: 76%; line-height: 115%">Customer 1</td> <td style="width: 1%; line-height: 115%; text-align: right"> </td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 9%; line-height: 115%; text-align: right">58.4</td> <td nowrap="nowrap" style="width: 1%; line-height: 115%">%</td> <td style="width: 1%; line-height: 115%; text-align: right"> </td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 9%; line-height: 115%; text-align: right">53.4</td> <td nowrap="nowrap" style="width: 1%; line-height: 115%">%</td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Customer 2</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%; text-align: right">17.0</td> <td nowrap="nowrap" style="line-height: 115%">%</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%; text-align: right">17.3</td> <td nowrap="nowrap" style="line-height: 115%">%</td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Totals</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">75.4</td> <td nowrap="nowrap" style="line-height: 115%">%</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">70.7</td> <td nowrap="nowrap" style="line-height: 115%">%</td></tr> </table>   For the three and six months ended June 30, 2012 and 2011, the Company had significant vendors representing 10% or greater of cost and expense as follows:   <table align="center" cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: bottom"> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">For the Three</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">For the Three</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">For the Six</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">For the Six</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Months Ended</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Months Ended</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Months Ended</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Months Ended</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold; text-align: center">June 30, 2012</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold; text-align: center">June 30, 2011</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold; text-align: center">June 30, 2012</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold; text-align: center">June 30, 2011</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="width: 52%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%; text-align: right"> </td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 9%; line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%; text-align: right"> </td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 9%; line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%; text-align: right"> </td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 9%; line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%; text-align: right"> </td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 9%; line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Vendor 1</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%; text-align: right">12.1</td> <td nowrap="nowrap" style="line-height: 115%">%</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%; text-align: right">27.1</td> <td nowrap="nowrap" style="line-height: 115%">%</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%; text-align: right">14.3</td> <td nowrap="nowrap" style="line-height: 115%">%</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%; text-align: right">31.8</td> <td nowrap="nowrap" style="line-height: 115%">%</td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Totals</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">12.1</td> <td nowrap="nowrap" style="line-height: 115%">%</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">27.1</td> <td nowrap="nowrap" style="line-height: 115%">%</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">14.3</td> <td nowrap="nowrap" style="line-height: 115%">%</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">31.8</td> <td nowrap="nowrap" style="line-height: 115%">%</td></tr> </table>

<table align="center" cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: bottom"> <td style="line-height: 115%; font-weight: bold"> </td> <td style="line-height: 115%; font-weight: bold"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">For the Three</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td> <td style="line-height: 115%; font-weight: bold"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">For the Three</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td> <td style="line-height: 115%; font-weight: bold"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">For the Six</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td> <td style="line-height: 115%; font-weight: bold"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">For the Six</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%; font-weight: bold"> </td> <td style="line-height: 115%; font-weight: bold"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Months Ended</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td> <td style="line-height: 115%; font-weight: bold"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Months Ended</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td> <td style="line-height: 115%; font-weight: bold"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Months Ended</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td> <td style="line-height: 115%; font-weight: bold"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Months Ended</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%; font-weight: bold"> </td> <td style="line-height: 115%; font-weight: bold"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold; text-align: center">June 30, 2012</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td> <td style="line-height: 115%; font-weight: bold"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold; text-align: center">June 30, 2011</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td> <td style="line-height: 115%; font-weight: bold"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold; text-align: center">June 30, 2012</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td> <td style="line-height: 115%; font-weight: bold"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold; text-align: center">June 30, 2011</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="width: 52%; line-height: 115%">Customer 1</td> <td style="width: 1%; line-height: 115%; text-align: right"> </td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 9%; line-height: 115%; text-align: right">33.3</td> <td nowrap="nowrap" style="width: 1%; line-height: 115%">%</td> <td style="width: 1%; line-height: 115%; text-align: right"> </td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 9%; line-height: 115%; text-align: right">43.9</td> <td nowrap="nowrap" style="width: 1%; line-height: 115%">%</td> <td style="width: 1%; line-height: 115%; text-align: right"> </td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 9%; line-height: 115%; text-align: right">39.7</td> <td nowrap="nowrap" style="width: 1%; line-height: 115%">%</td> <td style="width: 1%; line-height: 115%; text-align: right"> </td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 9%; line-height: 115%; text-align: right">45.5</td> <td nowrap="nowrap" style="width: 1%; line-height: 115%">%</td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Customer 2</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%; text-align: right">16.3</td> <td nowrap="nowrap" style="line-height: 115%">%</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%; text-align: right">-</td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%; text-align: right">17.9</td> <td nowrap="nowrap" style="line-height: 115%">%</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%; text-align: right">-</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Totals</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">49.6</td> <td nowrap="nowrap" style="line-height: 115%">%</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">43.9</td> <td nowrap="nowrap" style="line-height: 115%">%</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">57.6</td> <td nowrap="nowrap" style="line-height: 115%">%</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">45.5</td> <td nowrap="nowrap" style="line-height: 115%">%</td></tr> </table> <table align="center" cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: bottom"> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="border-bottom: black 1pt solid"> June 30, 2012</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="border-bottom: black 1pt solid"> December 31, 2011</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="width: 76%; line-height: 115%">Customer 1</td> <td style="width: 1%; line-height: 115%; text-align: right"> </td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 9%; line-height: 115%; text-align: right">58.4</td> <td nowrap="nowrap" style="width: 1%; line-height: 115%">%</td> <td style="width: 1%; line-height: 115%; text-align: right"> </td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 9%; line-height: 115%; text-align: right">53.4</td> <td nowrap="nowrap" style="width: 1%; line-height: 115%">%</td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Customer 2</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%; text-align: right">17.0</td> <td nowrap="nowrap" style="line-height: 115%">%</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%; text-align: right">17.3</td> <td nowrap="nowrap" style="line-height: 115%">%</td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Totals</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">75.4</td> <td nowrap="nowrap" style="line-height: 115%">%</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">70.7</td> <td nowrap="nowrap" style="line-height: 115%">%</td></tr> </table> <table align="center" cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: bottom"> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">For the Three</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">For the Three</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">For the Six</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">For the Six</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Months Ended</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Months Ended</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Months Ended</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Months Ended</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold; text-align: center">June 30, 2012</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold; text-align: center">June 30, 2011</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold; text-align: center">June 30, 2012</td> <td nowrap="nowrap" style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td style="line-height: 115%; font-weight: bold; text-align: center"> </td> <td colspan="2" style="border-bottom: black 1pt solid; line-height: 115%; font-weight: bold; text-align: center">June 30, 2011</td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="width: 52%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%; text-align: right"> </td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 9%; line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%; text-align: right"> </td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 9%; line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%; text-align: right"> </td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 9%; line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%; text-align: right"> </td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 9%; line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Vendor 1</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%; text-align: right">12.1</td> <td nowrap="nowrap" style="line-height: 115%">%</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%; text-align: right">27.1</td> <td nowrap="nowrap" style="line-height: 115%">%</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%; text-align: right">14.3</td> <td nowrap="nowrap" style="line-height: 115%">%</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%; text-align: right">31.8</td> <td nowrap="nowrap" style="line-height: 115%">%</td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%; text-align: right"> </td> <td nowrap="nowrap" style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td style="line-height: 115%">Totals</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">12.1</td> <td nowrap="nowrap" style="line-height: 115%">%</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">27.1</td> <td nowrap="nowrap" style="line-height: 115%">%</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">14.3</td> <td nowrap="nowrap" style="line-height: 115%">%</td> <td style="line-height: 115%; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">31.8</td> <td nowrap="nowrap" style="line-height: 115%">%</td></tr> </table>

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10. Concentrations (Details 2)	3 Months Ended		6 Months Ended
10. Concentrations (Details 2)	Mar. 31, 2012	Mar. 31, 2011	Jun. 30, 2012	Jun. 30, 2011
Concentrations Details 2
Vendor 1	12.10%	27.10%	14.30%	31.80%
Totals	12.10%	27.10%	14.30%	31.80%

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4. Intangible Assets (Details 1) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Intangible Assets Details 1
For the year ended December 31, 2012	$ 378,257
For the year ended December 31, 2013	339,902
For the year ended December 31, 2014	300,484
For the year ended December 31, 2015	262,242
For the year ended December 31, 2016	91,639
Total	$ 1,372,524	$ 1,236,996

XML 16 R37.htm IDEA: XBRL DOCUMENT

7. Commitments and Contingencies (Details Narrative) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Commitments And Contingencies Details Narrative
Line of Credit-Balance Due	$ 222,703	$ 233,215
Line of Credit-Credit Available	27,297
Common shares purchased	216,000
Purchased Common shares Price per Share	$ 0.50
Common shares value	$ 108,000

- Definition

The carrying value as of the balance sheet date of the current and noncurrent portions of long-term obligations drawn from a line of credit, which is a bank's commitment to make loans up to a specific amount. Examples of items that might be included in the application of this element may consist of letters of credit, standby letters of credit, and revolving credit arrangements, under which borrowings can be made up to a maximum amount as of any point in time conditional on satisfaction of specified terms before, as of and after the date of drawdowns on the line. Includes short-term obligations that would normally be classified as current liabilities but for which (a) postbalance sheet date issuance of a long term obligation to refinance the short term obligation on a long term basis, or (b) the enterprise has entered into a financing agreement that clearly permits the enterprise to refinance the short-term obligation on a long term basis and the following conditions are met (1) the agreement does not expire within 1 year and is not cancelable by the lender except for violation of an objectively determinable provision, (2) no violation exists at the BS date, and (3) the lender has entered into the financing agreement is expected to be financially capable of honoring the agreement.

+ References+ Details

XML 17 R9.htm IDEA: XBRL DOCUMENT

3. Secured Note and Accounts Receivable-Related Parties

6 Months Ended

Jun. 30, 2012

Text Block [Abstract]

3. Secured Note and Accounts Receivable-Related Parties

Note Receivable, Secured – Related Party

Accounts Receivable, Secured – Related Party

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9. Stockholders' Equity (Details 1) (USD $)	6 Months Ended
9. Stockholders' Equity (Details 1) (USD $)	Jun. 30, 2012
Stock Warrants
Number of Options Outstanding, Beginning	456,000
Number of Options Granted	426,500
Number of Options Outstanding, Ending	882,500
Number of Options Exercisable	882,500
Weighted Average Exercise Price Outstanding, Beginning	$ 1
Weighted Average Exercise Price Granted	$ 1
Weighted Average Exercise Price Outstanding, Ending	$ 1
Weighted Average Exercise Price Exercisable	$ 1
Weighted Average Remaining Contractual Life (in years) Outstanding	4 years 4 months 25 days
Weighted Average Remaining Contractual Life (in years) Exercisable	4 years 4 months 25 days
Grants to Employee and Directors
Number of Options Granted	1,895,000
Number of Options Forfeited	(145,000)
Number of Options Outstanding, Ending	1,750,000
Weighted Average Exercise Price Granted	$ 1
Weighted Average Exercise Price Outstanding, Ending	$ 1
Weighted Average Remaining Contractual Life (in years) Outstanding	4 years 8 months 12 days
Weighted Average Remaining Contractual Life (in years) Exercisable	4 years 8 months 12 days
Grants to Non Employees
Number of Options Granted	175,000
Number of Options Outstanding, Ending	175,000
Weighted Average Exercise Price Granted	$ 1
Weighted Average Exercise Price Outstanding, Ending	$ 1
Weighted Average Remaining Contractual Life (in years) Outstanding	4 years 8 months 12 days
Weighted Average Remaining Contractual Life (in years) Exercisable	4 years 8 months 12 days

- Definition

The number of shares reserved for issuance under stock option agreements awarded under the plan that validly exist and are outstanding as of the balance sheet date, including vested options.

+ References+ Details

XML 20 R28.htm IDEA: XBRL DOCUMENT

9. Stockholders' Equity (Details) (USD $)	Mar. 13, 2012
Stockholders Equity Details
Cash and cash equivalents	337
Liabilities Assumed	$ (21,206)
Net	$ (20,869)

XML 21 R30.htm IDEA: XBRL DOCUMENT

9. Stockholders' Equity (Details 2)	6 Months Ended
9. Stockholders' Equity (Details 2)	Jun. 30, 2012
Stock Incentive Plan To Employees And Directors
Expected life (years)	3 years 6 months
Expected volatility	44.20%
Weighted-average volatility	44.20%
Risk-free interest rate, Minimum	0.56%
Risk-free interest rate, Maximum	0.60%
Dividend yield	0.00%
Expected forfeiture rate	0.20%
Stock Incentive Plan To Non Employees
Expected life (years)	3 years 6 months
Expected volatility	44.20%
Weighted-average volatility	44.20%
Risk-free interest rate, Maximum	0.60%
Dividend yield	0.00%

- Definition

The estimated measure of the percentage by which a share price is expected to fluctuate during a period. Volatility also may be defined as a probability-weighted measure of the dispersion of returns about the mean. The volatility of a share price is the standard deviation of the continuously compounded rates of return on the share over a specified period. That is the same as the standard deviation of the differences in the natural logarithms of the stock prices plus dividends, if any, over the period.

+ References+ Details

XML 22 R31.htm IDEA: XBRL DOCUMENT

10. Concentrations (Details)	3 Months Ended		6 Months Ended
10. Concentrations (Details)	Mar. 31, 2012	Mar. 31, 2011	Jun. 30, 2012	Jun. 30, 2011
Concentrations Details
Customer 1	33.30%	43.90%	39.70%	45.50%
Customer 2	16.30%	0.00%	17.90%	0.00%
Totals	46.90%	43.90%	57.60%	45.50%

XML 23 R8.htm IDEA: XBRL DOCUMENT

2. Significant Accounting Policies

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

2. Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of Aspen Group, Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

Restricted Cash

Fair Value Measurements

●	Level 1—Observable inputs that reflect quoted market prices (unadjusted) for identical assets and liabilities in active markets;

●

●	Level 3—Unobservable inputs that are supported by little or no market activity that are significant to the fair value of assets or liabilities.

Net Loss Per Share

Recent Accounting Pronouncements

- Definition

The entire disclosure for all significant accounting policies of the reporting entity.

+ References+ Details

XML 24 R32.htm IDEA: XBRL DOCUMENT

10. Concentrations (Details 1)	Jun. 30, 2012	Dec. 31, 2011
Concentrations Details 1
Customer 1	58.40%	53.40%
Customer 2	17.00%	17.30%
Totals	75.40%	70.70%

XML 25 R2.htm IDEA: XBRL DOCUMENT

Condensed Consolidated Balance Sheets (Unaudited) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Assets
Cash and cash equivalents	$ 265,570	$ 766,602
Restricted cash	105,932	0
Accounts receivable, net of allowance of $61,500 and $47,595, respectively	1,094,448	847,234
Accounts receivable, secured - related party	0	772,793
Note receivable from officer, secured - related party	0	150,000
Prepaid expenses and other current assets	116,561	103,478
Total current assets	1,582,511	2,640,107
Property and equipment, net	112,201	129,944
Intangible assets, net	1,372,524	1,236,996
Debt issuance costs, net	180,908	0
Accounts receivable, secured-related party, net of allowance of $309,117 and $0, respectively	463,676	0
Other assets	6,559	6,559
Total assets	3,718,379	4,013,606
Liabilities and Stockholders' Equity (Deficiency)
Accounts payable	1,634,995	1,094,029
Accrued expenses	687,240	167,528
Deferred revenue	932,366	835,694
Convertible notes payable, current portion (includes $300,000 to related parties)	2,055,825	0
Notes payable, current portion	0	6,383
Loan payable to stockholder	491	0
Deferred rent, current portion	5,274	4,291
Total current liabilities	5,316,191	2,107,925
Line of credit	222,703	233,215
Loans payable (includes $50,000 to related parties)	0	200,000
Convertible notes payable (includes $50,000 to related parties)	200,000	0
Notes payable	0	8,768
Deferred rent	18,146	21,274
Total liabilities	5,757,040	2,571,182
Commitments and contingencies	0	0
Temporary equity:
Series A preferred stock, $0.001 par value; 850,500 shares designated, none and 850,395 shares issued and outstanding, respectively	0	809,900
Series D preferred stock, $0.001 par value; 3,700,000 shares designated, none and 1,176,750 shares issued and outstanding, respectively (liquidation value of $1,176,750)	0	1,109,268
Series E preferred stock, $0.001 par value; 2,000,000 shares designated, none and 1,700,000 shares issued and outstanding, respectively (liquidation value of $1,700,000)	0	1,550,817
Total temporary equity	0	3,469,985
Stockholders' equity:
Preferred stock, $0.001 par value; 10,000,000 shares authorized	0	0
Series C preferred stock, $0.001 par value; 11,411,400 shares designated, none and 11,307,450 shares issued and outstanding, respectively (liquidation value of $11,307)	0	11,307
Series B preferred stock, $0.001 par value; 368,421 shares designated, none and 368,411 shares issued and outstanding, respectively	0	368
Common stock, $0.001 par value; 120,000,000 shares authorized, 35,275,204 and 11,837,930 issued and outstanding, respectively	35,295	11,838
Additional paid-in capital	6,845,754	3,275,296
Accumulated deficit	(8,919,710)	(5,326,370)
Total stockholders' equity	(2,038,661)	(2,027,561)
Total liabilities and stockholders' equity	$ 3,718,379	$ 4,013,606

XML 26 R6.htm IDEA: XBRL DOCUMENT

Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $)	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Cash flows from operating activities:
Net loss	$ (3,454,400)	$ (350,821)
Adjustments to reconcile net loss to net cash (used in) operating activities:
Provision for bad debts	84,476	10,060
Receivable collateral valuation service	309,117	0
Amortization of debt issuance costs	85,565	0
Gain on disposal of property and equipment	(5,879)	0
Depreciation and amortization	185,937	106,404
Issuance of convertible notes in exchange for service rendered	38,175	22,000
Stock-based compensation	113,124	0
Changes in operating assets and libilities, net of effects of acquisition:
Accounts receivable	(331,690)	(83,309)
Accounts receivable, secured-related party	0	7,376
Prepaid expenses and other current assets	(13,083)	(29,489)
Accounts payable	375,510	258,189
Accrued expenses	535,163	(70,161)
Deferred rent	(2,145)	(1,162)
Deferred revenue	96,672	4,969
Net cash (used in) operating activities	(1,983,458)	(125,944)
Cash flow from investing activities:
Cash acquired as part of merger	337	3,200
Purchases of property and equipment	(6,005)	(115,046)
Purchases of intangible assets	(306,989)	(427,603)
Increase in restricted cash	(105,932)	0
Proceeds received from officer loan repayment	150,000	0
Net cash (used in) investing activities	(268,589)	(539,449)
Cash flows from financing activities:
Proceeds from (repayments in) line of credit, net	(10,512)	(4,293)
Principal payment on note payable	0	(2,874)
Proceeds from note payable	22,000	0
Proceeds received from issuance of convertible notes and warrants	2,006,000	328,000
Disbursemenents for debt issuance costs	(266,473)	0
Proceeds from issuance of Series A and D preferred stock	0	1,169,419
Repayments of convertible notes payable	0	(10,000)
Disbursements to purchase treasury shares	0	(740,000)
Net cash provided by financing activities	1,751,015	740,252
Net (decrease) increase in cash and cash equivalents	(501,032)	74,859
Cash and cash equivalents at beginning of period	766,602	294,838
Cash and cash equivalents at end of period	265,570	369,697
Supplemental disclosure of cash flow information:
Cash paid for interest	89,942	13,058
Cash paid for income taxes	0	0
Supplemental disclosure of non-cash investing and financing activities:
Conversion of all preferred shares into common shares		0
Conversion of loans payable to convertible notes payable	200,000	0
Liabilities assumed in recapitalization	21,206	0
Conversion of convertible notes payable into common shares	20,000	0
Settlement of notes payable by disposal of property and equipment	15,151	0
Issuance of convertible notes payable to pay accounts payable	11,650	0
Conversion of convertible notes payable into Preferred Series B shares	0	350,000
Recognition of accrual to rescing common shares	$ 0	$ 165,000

XML 27 R35.htm IDEA: XBRL DOCUMENT

3. Secured Note and Accounts Receivable-Related Parties (Details Narrative) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Secured Note And Accounts Receivable-Related Parties Details Narrative
Allowance for accounts receivable	$ 309,117
Accounts Receivable, net of allowance	$ 463,676	$ 772,793

XML 28 R22.htm IDEA: XBRL DOCUMENT

9. Stockholders' Equity (Tables)

6 Months Ended

Jun. 30, 2012

Equity [Abstract]

Assets and Liabilities

Cash and cash equivalents	$	337
Liabilities assumed		(21,206	)
Net	$	(20,869	)

Warranty Activity

					Weighted
			Weighted		Average
			Average		Remaining		Aggregate
	Number of		Exercise		Contractual		Intrinsic
Warrants	Shares		Price		Term		Value

Balance Outstanding, December 31, 2011		456,000	$	1.00
Granted		426,500	$	1.00
Exercised		-		-
Forfeited		-		-
Expired		-		-
Balance Outstanding, June 30, 2012		882,500	$	1.00		4.4	$	-

Exercisable, June 30, 2012		882,500	$	1.00		4.4	$	-

Compensation Expense for Stock Options Granted

	For the Six			For the Six
	Months Ended			Months Ended
Assumptions	June 30, 2012			June 30, 2011
Expected life (years)		3.5			N/A
Expected volatility		44.2	%		N/A
Weighted-average volatility		44.2	%		N/A
Risk-free interest rate		0.56% - 0.60	%		N/A
Dividend yield		0.00	%		N/A
Expected forfeiture rate		2.0	%		N/A

Stock Options Activity to Employees

						Weighted
				Weighted		Average
				Average		Remaining		Aggregate
	Number of			Exercise		Contractual		Intrinsic
Options	Shares			Price		Term		Value
Balance Outstanding, December 31, 2011
Granted		1,895,000		$	1.00
Exercised		-
Forfeited		(145,000	)	$	1.00
Expired		-
Balance Outstanding, June 30, 2012		1,750,000		$	1.00		4.7	$	-

Expected to vest, June 30, 2012		1,714,500		$	1.00		4.7	$	-

Exercisable, June 30, 2012		-			N/A		N/A		N/A

Stock Options Grants to Non-Employees

	For the Six			For the Six
	Months Ended			Months Ended
Assumptions	June 30, 2012			June 30, 2011
Expected life (years)		3.5			N/A
Expected volatility		44.2	%		N/A
Weighted-average volatility		44.2	%		N/A
Risk-free interest rate		0.60	%		N/A
Dividend yield		0.00	%		N/A

A summary of the Company’s stock option activity for non-employees during the six months ended June 30, 2012 is presented below:

					Weighted
			Weighted		Average
			Average		Remaining		Aggregate
	Number of		Exercise		Contractual		Intrinsic
Options	Shares		Price		Term		Value
Balance Outstanding, December 31, 2011
Granted		175,000	$	1.00
Exercised		-
Forfeited		-
Expired		-
Balance Outstanding, June 30, 2012		175,000	$	1.00		4.7	$	-

Expected to vest, June 30, 2012		175,000	$	1.00		4.7	$	-

Exercisable, June 30, 2012		-		N/A		N/A		N/A

- Definition

Tabular disclosure of the allocation of equity-based compensation costs to a given line item on the balance sheet and income statement for the period. This may include the reporting line for the costs and the amount capitalized and expensed.

+ References+ Details

- Definition

Tabular disclosure of warrants or rights issued. Warrants and rights outstanding are derivative securities that give the holder the right to purchase securities (usually equity) from the issuer at a specific price within a certain time frame. Warrants are often included in a new debt issue to entice investors by a higher return potential. The main difference between warrants and call options is that warrants are issued and guaranteed by the company, whereas options are exchange instruments and are not issued by the company. Also, the lifetime of a warrant is often measured in years, while the lifetime of a typical option is measured in months. Disclose the title of issue of securities called for by warrants and rights outstanding, the aggregate amount of securities called for by warrants and rights outstanding, the date from which the warrants or rights are exercisable, and the price at which the warrant or right is exercisable.

+ References+ Details

XML 29 R36.htm IDEA: XBRL DOCUMENT

6. Convertible Notes Payable (Details Narrative) (USD $)	Jun. 30, 2012
Convertible Notes Payable Details Narrative
Convertible promisory note payable	$ 38,175

XML 30 R24.htm IDEA: XBRL DOCUMENT

4. Intangible Assets (Details) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Intangible Assets Details
Course curricula	$ 2,092,638	$ 2,072,238
Call center	1,214,044	927,455
Total	3,306,682	2,999,693
Accumulated amortization	(1,934,158)	(1,762,697)
Intangible assets, net	$ 1,372,524	$ 1,236,996

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1. Nature of Operations and Going Concern

6 Months Ended

Jun. 30, 2012

Organization, Consolidation and Presentation of Financial Statements [Abstract]

1. Nature of Operations and Going Concern

Overview

Basis of Presentation

Going Concern

The Company had a net loss allocable to common stockholders of $3,630,719 and negative cash flows from operations of $1,961,458 for the six months ended June 30, 2012. The Company’s ability to continue as a going concern is contingent on securing additional debt or equity financing from outside investors. These matters raise substantial doubt about the Company's ability to continue as a going concern. Management plans to continue to implement its business plan and to fund operations by raising additional capital through the issuance of debt and equity securities. The Company has presently engaged a broker-dealer, Laidlaw & Company (UK) Ltd., to assist with raising up to $7,200,000 in additional debt and equity capital subsequent to the close of the merger with Aspen Group, Inc. Since the beginning of 2012, the Company has raised $2,006,000 in gross funding including $1,706,000 from the sale of convertible notes and warrants under the Laidlaw arrangement (see Note 6) and $300,000 from the sale of a convertible note to the Company's CEO.

XML 33 R3.htm IDEA: XBRL DOCUMENT

Condensed Consolidated Balance Sheets (Parenthetical) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Assets
Accounts receivable, allowance for doubtful accounts	$ 84,541
Temporary equity:
Preferred stock, par value Series A	$ 0.001	$ 0.001
Preferred stock, designated shares Series A	850,500	850,500
Preferred stock, issued shares Series A	850,395	850,395
Preferred stock, outstanding shares Series A	850,395	850,395
Preferred stock, par value Series D	$ 0.001	$ 0.001
Preferred stock, designated shares Series D	3,700,000	3,700,000
Preferred stock, issued shares Series D	1,176,750	1,176,750
Preferred stock, outstanding shares Series D	1,176,750	1,176,750
liquidation value, Series D	1,176,750	1,176,750
Preferred stock, par value Series E	$ 0.001	$ 0.001
Preferred stock, designated shares Series E	2,000,000	2,000,000
Preferred stock, issued shares Series E	1,700,000	1,700,000
Preferred stock, outstanding shares Series E	1,700,000	1,700,000
liquidation value, Series E	1,700,000	1,700,000
Stockholders' Equity:
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, authorized shares	10,000,000	10,000,000
Preferred stock, par value Series C	$ 0.001	$ 0.001
Preferred stock, designated shares Series C	11,411,400	11,411,400
Preferred stock, issued shares Series C	11,307,450	11,307,450
Preferred stock, outstanding shares Series C	11,307,450	11,307,450
liquidation value, Series C	$ 11,307	$ 11,307
Preferred stock, par value Series B	$ 0.001	$ 0.001
Preferred stock, designated shares Series B	368,421	368,421
Preferred stock, issued shares Series B	368,411	368,411
Preferred stock, outstanding shares Series B	368,411	368,411
Commont Stock, par value	$ 0.001	$ 0.001
Common stock, authorized shares	120,000,000	120,000,000
Common stock, issued shares	35,295,204	11,837,930
Common stock, outstanding shares	35,295,204	11,837,930

XML 34 R17.htm IDEA: XBRL DOCUMENT

11. Related Party Transactions

6 Months Ended

Jun. 30, 2012

11. Related Party Transactions

On December 14, 2011, the Company loaned $150,000 to an officer of the Company in exchange for a promissory note bearing 3% per annum. As collateral, the note was secured by 500,000 shares of the Company’s common stock owned personally by the officer. The note along with accrued interest was due and payable on September 14, 2012. For the three months ended June 30, 2012, interest income of $594 was recognized on the note receivable. As of December 31, 2011, the balance due on the note receivable was $150,000, all of which is short-term. On February 16, 2012, the note receivable from an officer was repaid along with accrued interest (See Note 3).

On April 4, 2012, the Company entered into an agreement with: (i) an individual, (ii) Higher Education Group Management, Inc. (“HEMG”), a related party and principal stockholder of the Company whose president is Mr. Patrick Spada, the former Chairman of the Company and (iii) Mr. Patrick Spada. Under the agreement, (a) the individual shall purchase and HEMG shall sell to the individual 400,000 common shares of the Company at $0.50 per share by April 10, 2012; (b) the Company guaranteed it would purchase at least 600,000 common shares of the Company at $0.50 per share within 90 days of the agreement and the Company would use its best efforts to purchase from HEMG and resell to investors an additional 1,400,000 common shares of the Company at $0.50 per share within 180 days of the agreement; (c) provided HEMG and Mr. Patrick Spada fulfill their obligations under (a) and (b) above, the Company shall consent to additional private transfers by HEMG and/or Mr. Patrick Spada of up to 500,000 common shares of the Company on or before March 13, 2013; (d) HEMG agrees to not sell, pledge or otherwise transfer 142,500 common shares of the Company pending resolution of a dispute regarding the Company’s claim that HEMG sold 131,500 common shares of the Company without having enough authorized shares and a stockholder did not receive 11,000 common shares of the Company owed to him as a result of a stock dividend; and (e) the Company shall waive any default of the accounts receivable, secured - related party and extend the due date to September 30, 2014. A group of predominantly existing shareholders implemented the purchase of 400,000 common shares at $0.50 per share per section (a) above on or before the April 10, 2012 deadline. Subsequent to June 30,third party investors placed $168,000 in escrow, to purchase 336,000 shares per section (b) above (See Note 7). Based on the Company plans to raise additional capital from the sale of its common stock, and the estimated price per share from such offering, the value of the aforementioned collateral shall decrease. Accordingly, as of June 30, 2012, the Company has recognized an allowance of $309,117 for this account receivable. As of June 30, 2012 and December 31, 2011, the balance of the account receivable, net of allowance, was $463,676 and $772,793 and is shown as accounts receivable, secured – related party, net (See Note 3).

- Definition

The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

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-Name Statement of Financial Accounting Standard (FAS)

-Number 57

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-Name Regulation S-X (SX)

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-Paragraph k

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+ Details

XML 35 R1.htm IDEA: XBRL DOCUMENT

Document and Entity Information	6 Months Ended
Document and Entity Information	Jun. 30, 2012	Aug. 20, 2012
Document And Entity Information
Entity Registrant Name	ASPEN GROUP, INC.
Entity Central Index Key	0001487198
Document Type	10-Q
Document Period End Date	Jun. 30, 2012
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		35,295,204
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2012

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12. Subsequent Events
6 Months Ended

Jun. 30, 2012

Subsequent Events [Abstract]

12. Subsequent Events

On August 14, 2012, the Company’s CEO loaned the Company $300,000 in exchange for a convertible demand note bearing interest at 5% per annum. The note is convertible at the lesser of: (i) $0.60 per share or (ii) the same conversion price of the convertible notes issued in the Company’s current private placement. The Company evaluated the convertible note and determined that, for the embedded conversion option, there was no beneficial conversion value to record as the conversion price is considered to be the fair market value of the common shares on the note issue date.

On August 16, 2012, as a direct result of removing the receivable from stockholder of approximately $2.2 million from the balance sheet and restating the March 31, 2012 and the December 31, 2011 and 2010 consolidated financial statements, the Company rescinded the pledge agreements guaranteeing the receivable and returned the pledged shares to the three directors.

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Condensed Consolidated Statements of Operations (Unaudited) (USD $)
3 Months Ended 6 Months Ended

Mar. 31, 2012

Mar. 31, 2011

Jun. 30, 2012

Jun. 30, 2011

Income Statement [Abstract]

Revenues $ 1,407,282 $ 950,592 $ 2,765,101 $ 1,958,464

Costs and expenses:

Instructional costs and services 924,189 465,415 1,828,886 996,674

Marketing and promotional 446,652 60,796 883,957 140,390

General and administrative 1,168,168 675,626 2,887,494 1,044,123

Receivable collateral valuation service 309,117 0 309,117 0

Depreciation and amortization 96,188 53,959 185,937 106,404

Total costs and expenses 2,944,314 1,255,796 6,095,391 2,287,591

Operating loss (1,537,032) (305,204) (3,330,290) (329,127)

Other income (expense):

Interest income 85 4 729 8

Interest expense (127,687) (3,479) (130,718) (6,826)

Gain on disposal of property and equipment 0 0 5,879

Loss due to unauthorized borrowing 0 0 0 (14,876)

Total other income (expense) (127,602) (3,475) (124,110) (21,694)

Loss before income taxes (1,664,634) (308,679) (3,454,400) (350,821)

Income tax expense (benefit) 0 0 0 0

Net loss (1,664,634) (308,679) (3,454,400) (350,821)

Cumulative preferred stock dividends 0 (11,969) (37,379) (15,534)

Net loss allocable to common stockholders $ (1,664,634) $ (320,648) $ (3,491,779) $ (366,355)

Loss per share:

Basic and diluted $ (0.05) $ (0.02) $ (0.14) $ (0.02)

Weighted average number of common shares outstanding:

Basic and diluted 35,289,204 16,860,212 25,881,462 18,941,542

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6. Convertible Notes Payable
6 Months Ended

Jun. 30, 2012

Debt Disclosure [Abstract]

6. Convertible Notes Payable

As part of the recapitalization that occurred on March 13, 2012, the Company assumed from the public entity an aggregate of $20,000 of convertible notes bearing interest at 10% per annum. Each note holder had the right, at its option and simultaneously with the first closing thereof, to convert all or a portion of the principal amount of the note into shares of the Company’s common stock at the conversion price of the next equity offering of the Company. The notes meet the criteria of stock settled debt under ASC 480, “Distinguishing Liabilities from Equity”, and accordingly are presented at their fixed monetary amount of $20,000. The convertible notes were past due as of the date of assumption and, accordingly, the Company was in default. In April 2012, the convertible notes payable of $20,000 were converted into 20,000 common shares of the Company and, accordingly, the default was cured (See Note 9).

On February 25, 2012, February 27, 2012 and February 29, 2012, loans payable to an individual, another individual and a related party (the brother of Patrick Spada, the former Chairman of the Company), of $100,000, $50,000 and $50,000, respectively, were converted into two-year convertible promissory notes, bearing interest of 0.19% per annum. Beginning March 31, 2012, the notes are convertible into common shares of the Company at the rate of $1.00 per share. The Company evaluated the convertible notes and determined that, for the embedded conversion option, there was no beneficial conversion value to record as the conversion price is considered to be the fair market value of the common shares on the note issue dates. As these loans (now convertible promissory notes) are not due for at least 12 months after the balance sheet, they have been included in long-term liabilities as of June 30, 2012 (See Notes 5 and 11).

On March 13, 2012, the Company’s CEO made an investment of $300,000 in a convertible promissory note due March 31, 2013, bearing interest at 0.19% per annum. The note is convertible into common shares of the Company at the rate of $1.00 per share upon five days written notice to the Company. The Company evaluated the convertible notes and determined that, for the embedded conversion option, there was no beneficial conversion value to record as the conversion price is considered to be the fair market value of the common shares on the note issue date (See Note 11).

On February 29, 2012, (the "Effective Date") (and as amended on March 30, 2012) the Company retained the investment bank of Laidlaw & Company (UK) Ltd. ("Laidlaw") on an exclusive basis with certain "carve-out" provisions for the purpose of raising up to $6,000,000 (plus up to an additional $1,200,000 million to cover over-allotments at the option of Laidlaw) through two successive best-efforts private placements of the Company's securities. The Phase One financing was an offering of up to 40 Units of $50,000 each and was to be completed by March 31, 2012, but was extended to May 31, 2012 (extended to June 30, 2012 per the March 30, 2012 amendment). Each Unit consists of: (i) senior secured convertible notes (the "Convertible Notes"), bearing 10% interest, convertible into the Company's common shares at the lower of (a) $1.00 or (b) 95% of the per share purchase price of any shares of common stock (or common stock equivalents) issued on or after the original issue date of the note and (ii) five-year warrant to purchase that number of the Company's common shares equal to 25% of the number of shares issuable upon conversion of the Convertible Notes. Mandatory conversion will occur on the initial closing of the Phase Two financing. The Convertible Notes mature on June 30, 2012 (extended to September 30, 2012 per the March 30, 2012 amendment), carry provisions for price protection and require the Company to file a registration statement for the resale of the underlying common stock nine months after closing of the Phase Two offering. For the Phase One financing, Laidlaw received a cash fee of 10% of aggregate funds raised along with a five-year warrant (the "Laidlaw Warrant") equal to 10% of the common stock reserved for issuance in connection with the Units. Separately, Laidlaw required an activation fee of $25,000, of which $15,000 was paid upon execution of the agreement and the remaining $10,000 was paid as of May 18, 2012. As of June 30, 2012, the Company, without the assistance of any broker dealer, raised $150,000 from the sale of 3.0 Units (including convertible notes payable and an estimated 37,500 warrants) from the Phase One financing and, raised another $1,289,527 (net of debt issuance costs of $266,473) from the sale of 31.12 Units (including convertible notes payable and an estimated 389,000 warrants) through Laidlaw. The convertible note embedded conversion options did not qualify as derivatives since the conversion shares were not readily convertible to cash due to an inactive trading market and there was no beneficial conversion value since the conversion price equaled the fair value of the shares.

On May 1, 2012, the Company issued a convertible promissory note payable to a consultant in the amount of $49,825 in exchange for past services rendered, of which $38,175 pertains to the six months ended June 30, 2012. The note bears interest at 0.19% per annum, matures September 30, 2012, and is convertible into the Company’s common shares at the lower (a) $1.00 or (b) the per share purchase price of any shares of common stock (or common stock equivalents) issued on or after the original issue date of the note. The convertible note embedded conversion options did not qualify as derivatives since the conversion shares were not readily convertible to cash due to an inactive trading market and there was no beneficial conversion value since the conversion price equaled the fair value of the shares.

Convertible notes payable consisted of the following at June 30, 2012:

June 30,

2012

Notes payable - originating March 15, 2012 through March 23, 2012; no monthly payments required; bearing interest at 10%; maturing at September 30, 2012 [A] 150,000

Notes payable - originating April 27, 2012 through June 15, 2012; no monthly payments required; bearing interest at 10%; maturing at September 30, 2012 1,556,000

Note payable - originating May 1, 2012; no monthly payments required; bearing interest at 0.19%; maturing at September 30, 2012 49,825

Note payable - related party originating March 13, 2012; no monthly payments required; bearing interest at 0.19%; maturing at March 31, 2013 300,000

Note payable - originating February 25, 2012; no monthly payments required; bearing interest at 0.19%; maturing at February 25, 2014 100,000

Note payable - originating February 27, 2012; no monthly payments required; bearing interest at 0.19%; maturing at February 27, 2014 50,000

Note payable - related party originating February 29, 2012; no monthly payments required; bearing interest at 0.19%; maturing at February 29, 2014 50,000

Total 2,255,825

Less: Current maturities (includes $300,000 to related parties) (2,055,825 )

Amount due after one year (includes $50,000 to related parties) $ 200,000

[A] - maturity date extended from June 30, 2012 to September 30, 2012.

Future maturities of the convertible notes payable are as follows:

Year Ending December 31,

2012 $ 1,755,825

2013 300,000

2014 200,000

$ 2,255,825

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5. Loans Payable
6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

5. Loans Payable

During 2009, the Company received advances aggregating $200,000 from three individuals. Of the total funds received, $50,000 was received from a related party. From the date the funds were received through the date the loans were converted into convertible promissory notes payable, the loans were non-interest bearing demand loans and, therefore, no interest expense was recognized or due. As of December 31, 2011, the entire balance of the loans payable is included in long-term liabilities as the Company, in February 2012, has converted the loans into long-term convertible notes payable (See Notes 6 and 11).

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10. Concentrations (Tables)
6 Months Ended

Jun. 30, 2012

Risks and Uncertainties [Abstract]

Concentrations Of Revenues

For the Three For the Three For the Six For the Six

Months Ended Months Ended Months Ended Months Ended

June 30, 2012 June 30, 2011 June 30, 2012 June 30, 2011

Customer 1 33.3 % 43.9 % 39.7 % 45.5 %

Customer 2 16.3 % - 17.9 % -

Totals 49.6 % 43.9 % 57.6 % 45.5 %

Concentrations Of Accounts Receivable

June 30,

2012

December 31,

2011

Customer 1 58.4 % 53.4 %

Customer 2 17.0 % 17.3 %

Totals 75.4 % 70.7 %

Concentrations Of Expense

For the Three For the Three For the Six For the Six

Months Ended Months Ended Months Ended Months Ended

June 30, 2012 June 30, 2011 June 30, 2012 June 30, 2011

Vendor 1 12.1 % 27.1 % 14.3 % 31.8 %

Totals 12.1 % 27.1 % 14.3 % 31.8 %

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2. Significant Accounting Policies (Policies)
6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Principles of Consolidation
Principles of Consolidation

The consolidated financial statements include the accounts of Aspen Group, Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

Use of Estimates

The preparation of the unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts in the unaudited condensed consolidated financial statements. Actual results could differ from those estimates. Significant estimates in the accompanying unaudited condensed consolidated financial statements include the allowance for doubtful accounts and other receivables, the valuation of collateral on certain receivables, the valuation and amortization periods of intangible assets, valuation of stock-based compensation and the valuation allowance on deferred tax assets.

Restricted Cash

Restricted Cash

Restricted cash represents amounts pledged as security for transactions involving Title IV programs. Upon the DOE’s completion of its review of the Company’s application to participate in Title IV programs, the funds are expected to be released and available for use by the Company.

Consistent with the Higher Education Act, Aspen’s certification to participate in Title IV programs terminated after closing of the reverse merger, and Aspen must apply to DOE to reestablish its eligibility and certification to participate in the Title IV programs. However, in order to avoid significant disruption in disbursements of Title IV funds, the DOE may temporarily and provisionally certify an institution that is seeking approval of a change in ownership, like Aspen, under certain circumstances while the DOE reviews the institution’s application. On March 15, 2012 the DOE asked Aspen to provide to the DOE by March 28, 2012 a letter of credit in the amount of $105,865, which is 10% of Aspen’s Title IV receipts in 2011. On March 27, 2012, the Company opened a 12-month money market account, maturing March 28, 2013, with its banking institution in the amount of $105,865 and pledged that to the letter of credit. The Company shall consider $105,932 (includes accrued interest of $67) as restricted cash until such letter of credit expires. As of June 30, 2012, the account bears interest of 0.25%.

Fair Value Measurements

Fair Value Measurements

Fair value is 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. The Company classifies assets and liabilities recorded at fair value under the fair value hierarchy based upon the observability of inputs used in valuation techniques. Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed market assumptions. The fair value measurements are classified under the following hierarchy:

● Level 1—Observable inputs that reflect quoted market prices (unadjusted) for identical assets and liabilities in active markets;

● Level 2—Observable inputs, other than quoted market prices, that are either directly or indirectly observable in the marketplace for identical or similar assets and 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 and liabilities; and

● Level 3—Unobservable inputs that are supported by little or no market activity that are significant to the fair value of assets or liabilities.

The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.

Net Loss Per Share

Net Loss Per Share

Net loss per common share is based on the weighted average number of shares of common stock outstanding during each period. Common stock equivalents, including 1,925,000 and 0 stock options, 882,500 and 400,000 stock warrants, and a variable amount of shares underlying $2,255,825 (a minimum of 2,255,825 common shares as of June 30, 2012) and $15,000 of convertible notes payable for the six months ended June 30, 2012 and 2011, respectively, are not considered in diluted loss per share because the effect would be anti-dilutive.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In June 2011, the FASB, issued ASU 2011-05, which amends ASC Topic 220, Comprehensive Income, which requires an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. It eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders' equity. The ASU does not change the items which must be reported in other comprehensive income, how such items are measured or when they must be reclassified to net income. This ASU is effective for interim and annual periods beginning after December 15, 2011. The Company adopted ASU 2011-05 effective January 1, 2012, and such adoption did not have a material effect on the Company's financial statements.

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9. Stockholders' Equity
6 Months Ended

Jun. 30, 2012

Equity [Abstract]

9. Stockholders' Equity

Stock Dividend and Reverse Split

On February 23, 2012, the Company approved a stock dividend of one new share of the Company for each share presently held. Following the stock dividend, the Company approved a one-for-two reverse stock split as of the close of business on February 24, 2012 in which each two shares of common stock shall be combined into one share of common stock. This was done in order to reduce the conversion ratio of the convertible preferred stock for all Series to 1 for 1 except for Series C, which had a conversion ratio of 0.8473809.

Common Stock

On March 13, 2012, all of the outstanding preferred shares of the Company were automatically converted into 13,677,274 common shares of Aspen Group, Inc. (See Note 8).

Pursuant to the recapitalization discussed below, the Company is deemed to have issued 9,760,000 common shares to the original stockholders of the publicly-held entity.

In April 2012, the Company issued 20,000 common shares upon the conversion of $20,000 of convertible notes payable (See Note 6).

Recapitalization

On March 13, 2012 (the “recapitalization date”), the Company was acquired by Aspen Group, Inc., an inactive publicly-held company, in a reverse merger transaction accounted for as a recapitalization of the Company (the “Recapitalization” or the “Reverse Merger”). The common and preferred stockholders of the Company received 25,515,204 common shares of Aspen Group, Inc. in exchange for 100% of the capital stock of Aspen University Inc. For accounting purposes, Aspen University Inc. is the acquirer and Aspen Group, Inc. is the acquired company because the stockholders of Aspen University Inc. acquired both voting and management control of the combined entity. The Company is deemed to have issued 9,760,000 common shares to the original stockholders of the publicly-held entity. Accordingly, after completion of the recapitalization, the historical operations of the Company are those of Aspen University Inc. and the operations since the recapitalization date are those of Aspen University Inc. and Aspen Group, Inc. The assets and liabilities of both companies are combined at historical cost on the recapitalization date. As a result of the recapitalization and conversion of all Company preferred shares into common shares of the public entity, all redemption and dividend rights of preferred shares were terminated. As a result of the recapitalization, the Company now has 120,000,000 shares of common stock, par value $0.001 per share, and 10,000,000 shares of preferred stock, par value $0.001 per share authorized. The assets acquired and liabilities assumed from the publicly-held company were as follows:

Cash and cash equivalents $ 337

Liabilities assumed (21,206 )

Net $ (20,869 )

Stock Warrants

All outstanding warrants issued by the Company to date have been related to capital raises. Accordingly, the Company has not recognized any stock-based compensation for warrants issued during the periods presented.

A summary of the Company’s warrant activity during the six months ended June 30, 2012 is presented below:

Weighted

Weighted Average

Average Remaining Aggregate

Number of Exercise Contractual Intrinsic

Warrants Shares Price Term Value

Balance Outstanding, December 31, 2011 456,000 $ 1.00

 Granted 426,500 $ 1.00

 Exercised - -

 Forfeited - -

 Expired - -

Balance Outstanding, June 30, 2012 882,500 $ 1.00 4.4 $ -

Exercisable, June 30, 2012 882,500 $ 1.00 4.4 $ -

All of the Company’s warrants contain price protection. The Company evaluated whether the price protection provision of the warrant would cause derivative treatment. In its assessment, the Company determined that since its shares are not readily convertible to cash due to no active public market existing, the warrants are excluded from derivative treatment.

Stock Incentive Plan and Stock Option Grants to Employees and Directors

Immediately following the closing of the Reverse Merger, on March 13, 2012, the Company adopted the 2012 Equity Incentive Plan (the “Plan”) that provides for the grant of 2,500,000 shares in the form of incentive stock options, non-qualified stock options, restricted shares, stock appreciation rights and restricted stock units to employees, consultants, officers and directors. As of June 30, 2012, 575,000 shares were remaining under the Plan for future issuance.

During the six months ended June 30, 2012, the Company granted 1,895,000 stock options to employees, all of which were under the Plan, having an exercise price of $1.00 per share. The options vest pro rata over three years on each anniversary date; all options expire five years from the grant date. The total fair value of stock options granted to employees during the six months ended June 30, 2012 was $625,350, which is being recognized over the respective vesting periods. The Company recorded compensation expense of $55,374 for the six months ended June 30, 2012, in connection with employee stock options.

The Company estimates the fair value of share-based compensation utilizing the Black-Scholes option pricing model, which is dependent upon several variables such as the expected option term, expected volatility of the Company’s stock price over the expected term, expected risk-free interest rate over the expected option term, expected dividend yield rate over the expected option term, and an estimate of expected forfeiture rates. The Company believes this valuation methodology is appropriate for estimating the fair value of stock options granted to employees and directors which are subject to ASC Topic 718 requirements. These amounts are estimates and thus may not be reflective of actual future results, nor amounts ultimately realized by recipients of these grants. The Company recognizes compensation on a straight-line basis over the requisite service period for each award. The following table summarizes the assumptions the Company utilized to record compensation expense for stock options granted to employees during the six months ended June 30, 2012 and 2011:

For the Six For the Six

Months Ended Months Ended

Assumptions June 30, 2012 June 30, 2011

Expected life (years) 3.5 N/A

Expected volatility 44.2 % N/A

Weighted-average volatility 44.2 % N/A

Risk-free interest rate 0.56% - 0.60 % N/A

Dividend yield 0.00 % N/A

Expected forfeiture rate 2.0 % N/A

The Company utilized the simplified method to estimate the expected life for stock options granted to employees. The simplified method was used as the Company does not have sufficient historical data regarding stock option exercises. The expected volatility is based on the average of the expected volatilities from the most recent audited financial statements available for comparative public companies that are deemed to be similar in nature to the Company. The risk-free interest rate is based on the U.S. Treasury yields with terms equivalent to the expected life of the related option at the time of the grant. Dividend yield is based on historical trends. While the Company believes these estimates are reasonable, the compensation expense recorded would increase if the expected life was increased, a higher expected volatility was used, or if the expected dividend yield increased.

A summary of the Company’s stock option activity for employees and directors during the three months ended June 30, 2012 is presented below:

Weighted

Weighted Average

Average Remaining Aggregate

Number of Exercise Contractual Intrinsic

Options Shares Price Term Value

Balance Outstanding, December 31, 2011

 Granted 1,895,000 $ 1.00

 Exercised -

 Forfeited (145,000 ) $ 1.00

 Expired -

Balance Outstanding, June 30, 2012 1,750,000 $ 1.00 4.7 $ -

Expected to vest, June 30, 2012 1,714,500 $ 1.00 4.7 $ -

Exercisable, June 30, 2012 - N/A N/A N/A

The weighted-average grant-date fair value of options granted to employees during the six months ended June 30, 2012 was $0.33.

As of June 30, 2012, there was $511,095 of total unrecognized compensation costs related to nonvested share-based compensation arrangements. That cost is expected to be recognized over a weighted-average period of 1.5 years.

Stock Option Grants to Non-Employees

During the six months ended June 30, 2012, the Company granted 175,000 stock options to non-employees, all of which were under the Plan, having an exercise price of $1.00 per share. The options vest pro rata over three years on each anniversary date; all options expire five years from the grant date. The total fair value of stock options granted to non-employees during the six months ended June 30, 2012 was $57,750, all of which was recognized immediately as these stock options were issued for prior services rendered. The Company recorded compensation expense of $57,750 for the six months ended June 30, 2012, in connection with non-employee stock options.

The following table summarizes the assumptions the Company utilized to record compensation expense for stock options granted to non-employees during the six months ended June 30, 2012 and 2011:

For the Six For the Six

Months Ended Months Ended

Assumptions June 30, 2012 June 30, 2011

Expected life (years) 3.5 N/A

Expected volatility 44.2 % N/A

Weighted-average volatility 44.2 % N/A

Risk-free interest rate 0.60 % N/A

Dividend yield 0.00 % N/A

A summary of the Company’s stock option activity for non-employees during the six months ended June 30, 2012 is presented below:

Weighted

Weighted Average

Average Remaining Aggregate

Number of Exercise Contractual Intrinsic

Options Shares Price Term Value

Balance Outstanding, December 31, 2011

 Granted 175,000 $ 1.00

 Exercised -

 Forfeited -

 Expired -

Balance Outstanding, June 30, 2012 175,000 $ 1.00 4.7 $ -

Expected to vest, June 30, 2012 175,000 $ 1.00 4.7 $ -

Exercisable, June 30, 2012 - N/A N/A N/A

The weighted-average grant-date fair value of options granted to non-employees during the three months ended June 30, 2012 was $0.33.

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The entire disclosure for shareholders' equity, comprised of portions attributable to the parent entity and noncontrolling interest, if any, including other comprehensive income (as applicable). Including, but not limited to: (1) balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings; (2) accumulated balance for each classification of other comprehensive income and total amount of comprehensive income; (3) amount and nature of changes in separate accounts, including the number of shares authorized and outstanding, number of shares issued upon exercise and conversion, and for other comprehensive income, the adjustments for reclassifications to net income; (4) rights and privileges of each class of stock authorized; (5) basis of treasury stock, if other than cost, and amounts paid and accounting treatment for treasury stock purchased significantly in excess of market; (6) dividends paid or payable per share and in the aggregate for each class of stock for each period presented; (7) dividend restrictions and accumulated preferred dividends in arrears (in aggregate and per share amount); (8) retained earnings appropriations or restrictions, such as dividend restrictions; (9) impact of change in accounting principle, initial adoption of new accounting principle and correction of an error in previously issued financial statements; (10) shares held in trust for Employee Stock Ownership Plan (ESOP); (11) deferred compensation related to issuance of capital stock; (12) note received for issuance of stock; (13) unamortized discount on shares; (14) description, terms, and number of warrants or rights outstanding; (15) shares under subscription and subscription receivables, effective date of new retained earnings after quasi-reorganization and deficit eliminated by quasi-reorganization and, for a period of at least ten years after the effective date, the point in time from which the new retained dates; and (16) retroactive effective of subsequent change in capital structure.

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7. Commitments and Contingencies
6 Months Ended

Jun. 30, 2012

Commitments and Contingencies Disclosure [Abstract]

7. Commitments and Contingencies

Line of Credit

The Company maintains a line of credit with a bank, up to a maximum credit line of $250,000. The line of credit bears interest equal to the prime rate plus 0.50% (overall interest rate of 3.75% at June 30, 2012). The line of credit requires minimum monthly payments consisting of interest only. The line of credit is secured by all business assets, inventory, equipment, accounts, general intangibles, chattel paper, documents, instruments and letter of credit rights of the Company. The line of credit is for an unspecified time until the bank notifies the Company of the Final Availability Date, at which time payments on the line of credit become the sum of: (a) accrued interest and (b) 1/60th of the unpaid principal balance immediately following the Final Availability Date. The balance due on the line of credit as of June 30, 2012 was $222,703. Since the earliest the line of credit is due and payable is over a five year period and the Company believes that it could obtain a comparable replacement line of credit elsewhere, the entire line of credit is included in long-term liabilities. The unused amount under the line of credit available to the Company at June 30, 2012 was $27,297.

Legal Matters

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of June 30, 2012, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations.

There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

Regulatory Matters

The University is subject to extensive regulation by Federal and State governmental agencies and accrediting bodies. In particular, the HEA and the regulations promulgated thereunder by the DOE subject the University to significant regulatory scrutiny on the basis of numerous standards that schools must satisfy to participate in the various types of federal student financial assistance programs authorized under Title IV of the HEA. The University has had provisional certification to participate in the Title IV programs. That provisional certification imposes certain regulatory restrictions including, but not limited to, a limit of 500 student recipients for Title IV funding for the duration of the provisional certification. During 2011, the University’s provisional certification was scheduled to expire, but the University timely filed its application for recertification with the DOE, which extended the term of the University’s certification pending DOE review. The provisional certification restrictions continue with regard to the University’s participation in Title IV programs.

To participate in the Title IV programs, an institution must be authorized to offer its programs of instruction by the relevant agencies of the State in which it is located, and since July 2011, potentially in the States where an institution offers postsecondary education through distance education. In addition, an institution must be accredited by an accrediting agency recognized by the DOE and certified as eligible by the DOE. The DOE will certify an institution to participate in the Title IV programs only after the institution has demonstrated compliance with the HEA and the DOE’s extensive academic, administrative, and financial regulations regarding institutional eligibility and certification. An institution must also demonstrate its compliance with these requirements to the DOE on an ongoing basis. The University performs periodic reviews of its compliance with the various applicable regulatory requirements. If we were ineligible to receive Title IV funding, given Title IV cash receipts represented approximately 7% of total revenues in 2011, our operations and liquidity would be minimally impacted.

As a result of certain events in 2012, the Company has been requested by DOE to provide a letter of credit in the amount of $105,865, which is 10% of Aspen’s Title IV receipts in 2011, by March 28, 2012. On March 27, 2012, the Company provided the DOE with the requested letter of credit expiring March 28, 2013. On June 18, 2012, the DOE, having reviewed Aspen’s same-day balance sheet filing and application for approval of the change in ownership and control, notified Aspen of the DOE’s requirement that Aspen increase its letter of credit by August 31, 2012 from 10% to 25% of Aspen’s Title IV receipts in 2011. Aspen has timely informed the DOE that it will provide the additional letter of credit in the amount of $158,800 by August 31, 2012. The DOE may impose additional or different terms and conditions in any final provisional program participation agreement that it may issue.

The HEA requires accrediting agencies to review many aspects of an institution's operations in order to ensure that the education offered is of sufficiently high quality to achieve satisfactory outcomes and that the institution is complying with accrediting standards. Failure to demonstrate compliance with accrediting standards may result in the imposition of probation, the requirements to provide periodic reports, the loss of accreditation or other penalties if deficiencies are not remediated.

Because the Company operates in a highly regulated industry, it may be subject from time to time to audits, investigations, claims of noncompliance or lawsuits by governmental agencies or third parties, which allege statutory violations, regulatory infractions or common law causes of action.

Delaware Approval to Confer Degrees

Aspen is a Delaware corporation. Delaware law requires an institution to obtain approval from the Delaware Department of Education (“Delaware DOE”) before it may incorporate with the power to confer degrees. Aspen did not obtain such approval prior to the period ended June 30, 2012. On July 3, 2012, Aspen received notice from the Delaware DOE that it is granted provisional approval status effective until June 30, 2015. Aspen is authorized by the Colorado Commission on Education to operate in Colorado as a degree granting institution.

Guarantee to Purchase Common Shares

On April 4, 2012, the Company entered into an agreement with: (i) an individual, (ii) Higher Education Group Management, Inc. (“HEMG”), a related party and principal stockholder of the Company whose president is Mr. Patrick Spada, the former Chairman of the Company and (iii) Mr. Patrick Spada (See Note 3). As part of the agreement, the Company guaranteed it would purchase at least 600,000 common shares of the Company at $0.50 per share within 90 days of the agreement. As of July 3, 2012, the guarantee resulted in a liability of the Company to purchase these shares. Subsequent to June 30, 2012, third party investors placed $168,000 in escrow to purchase 336,000 common shares, leaving the Company with a remaining liability to purchase 264,000 common shares for $132,000.

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The entire disclosure for commitments and contingencies.

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8. Temporary Equity
6 Months Ended

Jun. 30, 2012

Text Block [Abstract]

8. Temporary Equity

Prior to their conversion to common shares on March 13, 2012, the Series A, Series D and Series E preferred shares were classified as temporary equity. During 2012 through March 13, 2012, the preferred shares accumulated additional dividends of $37,379 and as of March 13, 2012, total cumulative preferred dividends were $124,705. On March 13, 2012, all preferred shares were automatically converted into common shares and, based on the terms of the preferred shares, none of the cumulative dividends shall ever be paid (See Note 9).

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Tabular disclosure of temporary equity. Temporary equity is a security with redemption features that are outside the control of the issuer, is not classified as an asset or liability in conformity with GAAP, and is not mandatorily redeemable. Includes any type of security that is redeemable at a fixed or determinable price or on a fixed or determinable date or dates, is redeemable at the option of the holder, or has conditions for redemption which are not solely within the control of the issuer. If convertible, the issuer does not control the actions or events necessary to issue the maximum number of shares that could be required to be delivered under the conversion option if the holder exercises the option to convert the stock to another class of equity. If the security is a warrant or a rights issue, the warrant or rights issue is considered to be temporary equity if the issuer cannot demonstrate that it would be able to deliver upon the exercise of the option by the holder in all cases. Includes stock with put option held by ESOP and stock redeemable by holder only in the event of a change in control of the issuer.

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10. Concentrations
6 Months Ended

Jun. 30, 2012

Risks and Uncertainties [Abstract]

10. Concentrations

Concentration of Revenues, Accounts Receivable and Costs and Expenses

For the three and six months ended June 30, 2012 and 2011, the Company had significant customers with individual percentage of total revenues equaling 10% or greater as follows:

For the Three For the Three For the Six For the Six

Months Ended Months Ended Months Ended Months Ended

June 30, 2012 June 30, 2011 June 30, 2012 June 30, 2011

Customer 1 33.3 % 43.9 % 39.7 % 45.5 %

Customer 2 16.3 % - 17.9 % -

Totals 49.6 % 43.9 % 57.6 % 45.5 %

At June 30, 2012 and December 31, 2011, concentration of accounts receivable with significant customers representing 10% or greater of accounts receivable was as follows:

June 30,

2012

December 31,

2011

Customer 1 58.4 % 53.4 %

Customer 2 17.0 % 17.3 %

Totals 75.4 % 70.7 %

For the three and six months ended June 30, 2012 and 2011, the Company had significant vendors representing 10% or greater of cost and expense as follows:

For the Three For the Three For the Six For the Six

Months Ended Months Ended Months Ended Months Ended

June 30, 2012 June 30, 2011 June 30, 2012 June 30, 2011

Vendor 1 12.1 % 27.1 % 14.3 % 31.8 %

Totals 12.1 % 27.1 % 14.3 % 31.8 %

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1. Nature of Operations and Going Concern (Details Narrative) (USD $)
6 Months Ended

Jun. 30, 2012

Nature Of Operations And Going Concern Details Narrative

Net Loss-Allocable to Common Shareholders $ 3,630,719

Negative Cash Flows from Operations $ 1,961,458

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6. Convertible Notes Payable (Tables)
6 Months Ended

Jun. 30, 2012

Debt Disclosure [Abstract]

Notes Payable

June 30,

2012

Notes payable - originating March 15, 2012 through March 23, 2012; no monthly payments required; bearing interest at 10%; maturing at September 30, 2012 [A] 150,000

Notes payable - originating April 27, 2012 through June 15, 2012; no monthly payments required; bearing interest at 10%; maturing at September 30, 2012 1,556,000

Note payable - originating May 1, 2012; no monthly payments required; bearing interest at 0.19%; maturing at September 30, 2012 49,825

Note payable - related party originating March 13, 2012; no monthly payments required; bearing interest at 0.19%; maturing at March 31, 2013 300,000

Note payable - originating February 25, 2012; no monthly payments required; bearing interest at 0.19%; maturing at February 25, 2014 100,000

Note payable - originating February 27, 2012; no monthly payments required; bearing interest at 0.19%; maturing at February 27, 2014 50,000

Note payable - related party originating February 29, 2012; no monthly payments required; bearing interest at 0.19%; maturing at February 29, 2014 50,000

Total 2,255,825

Less: Current maturities (includes $300,000 to related parties) (2,055,825 )

Amount due after one year (includes $50,000 to related parties) $ 200,000

[A] - maturity date extended from June 30, 2012 to September 30, 2012.

Future maturities of the notes convertible payable are as follows:

Year Ending December 31,

2012 $ 1,755,825

2013 300,000

2014 200,000

$ 2,255,825

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6. Convertible Notes Payable (Details) (USD $)

Jun. 30, 2012

Total $ 2,255,825

Less: Current Maturities (2,055,825)

Amount due after one year 200,000

Notes Payable March 15 2012 Thru March 23 2012

Notes Payable 150,000

Notes Payable April 27 2012 Thru June 15 2012

Notes Payable 1,556,000

Notes Payable May 1 2012 Thru September 30 2012

Notes Payable 49,825

Notes Payable March13 2012 Thru March 31 2013

Notes Payable 300,000

Notes Payable February 25 2012 Thru Feb 25 2014

Notes Payable 100,000

Notes Payable February 27 2012 Thru Feb 27 2014

Notes Payable 50,000

Notes Payable February 29 2012 Thru Feb 29 2014

Notes Payable $ 50,000

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Condensed Consolidated Statements of Shareholders Equity (Unaudited) (USD $)

Preferred Stock Series B

Preferred Stock Series C

Common Stock

Additional Paid-In Capital

Accumulated Deficit

Total

Beginning balance, amount at Dec. 31, 2011 $ 368 $ 11,307 $ 11,838 $ 3,275,296 $ (5,326,370) $ (2,027,561)

Beginning balance, shares at Dec. 31, 2011 368,411 11,307,450 11,837,930

Conversion of all preferred shares into common shares, shares (368,411) (11,307,450) 13,667,274

Conversion of all preferred shares into common shares, amount (368) (11,307) 13,677 3,467,983

Recapitalization, shares 9,760,000

Recapitalization, amount 9,760 (30,629) (20,869)

Conversion of convertible notes into common shares, shares 20,000

Conversion of convertible notes into common shares, amount 20 19,980 20,000

Stock-based compensation 113,124 113,124

Net loss (3,593,340) (3,454,400)

Ending balance, amount at Jun. 30, 2012 $ 35,295 $ 6,845,754 $ (8,919,710) $ (2,038,661)

Ending balance, shares at Jun. 30, 2012 35,295,204

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4. Intangible Assets
6 Months Ended

Jun. 30, 2012

Goodwill and Intangible Assets Disclosure [Abstract]

4. Intangible Assets

Intangible assets consisted of the following at June 30, 2012 and December 31, 2011:

June 30,

2012

December 31,

2011

Course curricula $ 2,092,638 $ 2,072,238

Call center 1,214,044 927,455

3,306,682 2,999,693

Accumulated amortization (1,934,158 ) (1,762,697 )

Intangible assets, net $ 1,372,524 $ 1,236,996

The following is a schedule of estimated future amortization expense of intangible assets as of June 30, 2012:

Year Ending December 31,

2012 $ 378,257

2013 339,902

2014 300,484

2015 262,242

2016 91,639

Total $ 1,372,524

Amortization expense for the six months ended June 30, 2012 and 2011 was $171,461 and $98,456, respectively.

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6. Convertible Notes Payable (Details 1) (USD $)

Jun. 30, 2012

Convertible Notes Payable Details 1

For the year ended December 31, 2012 $ 1,755,825

For the year ended December 31, 2013 300,000

For the year ended December 31, 2014 200,000

Total $ 2,255,825

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4. Intangible Assets (Tables)
6 Months Ended

Jun. 30, 2012

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets

June 30,

2012

December 31,

2011

Course curricula $ 2,092,638 $ 2,072,238

Call center 1,214,044 927,455

3,306,682 2,999,693

Accumulated amortization (1,934,158 ) (1,762,697 )

Intangible assets, net $ 1,372,524 $ 1,236,996

The following is a schedule of estimated future amortization expense of intangible assets as of June 30, 2012:

Year Ending December 31,

2012 $ 378,257

2013 339,902

2014 300,484

2015 262,242

2016 91,639

Total $ 1,372,524

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Tabular disclosure of the estimated aggregate amortization expense for intangible assets subject to amortization for each of the five succeeding fiscal years.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 350

-SubTopic 30

-Section 50

-Paragraph 2

-Subparagraph (a)

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1. Nature of Operations and Going Concern (Details Narrative) (USD $)	6 Months Ended
	Jun. 30, 2012
Nature Of Operations And Going Concern Details Narrative
Net Loss-Allocable to Common Shareholders	$ 3,630,719
Negative Cash Flows from Operations	$ 1,961,458

6. Convertible Notes Payable (Details) (USD $)	Jun. 30, 2012
Total	$ 2,255,825
Less: Current Maturities	(2,055,825)
Amount due after one year	200,000
Notes Payable March 15 2012 Thru March 23 2012
Notes Payable	150,000
Notes Payable April 27 2012 Thru June 15 2012
Notes Payable	1,556,000
Notes Payable May 1 2012 Thru September 30 2012
Notes Payable	49,825
Notes Payable March13 2012 Thru March 31 2013
Notes Payable	300,000
Notes Payable February 25 2012 Thru Feb 25 2014
Notes Payable	100,000
Notes Payable February 27 2012 Thru Feb 27 2014
Notes Payable	50,000
Notes Payable February 29 2012 Thru Feb 29 2014
Notes Payable	$ 50,000

Condensed Consolidated Statements of Shareholders Equity (Unaudited) (USD $)	Preferred Stock Series B	Preferred Stock Series C	Common Stock	Additional Paid-In Capital	Accumulated Deficit	Total
Beginning balance, amount at Dec. 31, 2011	$ 368	$ 11,307	$ 11,838	$ 3,275,296	$ (5,326,370)	$ (2,027,561)
Beginning balance, shares at Dec. 31, 2011	368,411	11,307,450	11,837,930
Conversion of all preferred shares into common shares, shares	(368,411)	(11,307,450)	13,667,274
Conversion of all preferred shares into common shares, amount	(368)	(11,307)	13,677	3,467,983
Recapitalization, shares			9,760,000
Recapitalization, amount			9,760	(30,629)		(20,869)
Conversion of convertible notes into common shares, shares			20,000
Conversion of convertible notes into common shares, amount			20	19,980		20,000
Stock-based compensation				113,124		113,124
Net loss					(3,593,340)	(3,454,400)
Ending balance, amount at Jun. 30, 2012			$ 35,295	$ 6,845,754	$ (8,919,710)	$ (2,038,661)
Ending balance, shares at Jun. 30, 2012			35,295,204

6. Convertible Notes Payable (Details 1) (USD $)	Jun. 30, 2012
Convertible Notes Payable Details 1
For the year ended December 31, 2012	$ 1,755,825
For the year ended December 31, 2013	300,000
For the year ended December 31, 2014	200,000
Total	$ 2,255,825