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

Critical Accounting Policies and Estimates

We make estimates and assumptions in the preparation of our consolidated financial statements and related notes in conformity with Generally Accepted Accounting Principles. We evaluate these estimates on an ongoing basis. We base these estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of our assets and liabilities. Actual results may differ significantly from those estimates under different assumptions and conditions. (See "Forward-Looking Statements" in Item 1A). We considered the following accounting policies to be the most critical due to the estimation process involved in each:

Allowance for Doubtful Accounts

We monitor collections and payments and maintain an allowance for doubtful accounts based upon our historical experience and any specific collection issues that we have identified. While such credit losses have been within our expectations and the allowances established, we cannot guarantee that we will continue to experience the same credit loss rates that were experienced in the past. Measurement of such losses requires consideration of historical loss experience, including the need to adjust for current conditions, and judgments about the probable effects of relevant observable data, including present economic conditions such as delinquency rates and the financial health of various governmental entities. Changes to the estimated allowance for doubtful accounts could be material to our results of operations or financial condition.

Accounting for Stock-Based Compensation

We have used and expect to continue to use the Black-Scholes option pricing model to compute the estimated fair value of stock-based awards. The Black-Scholes option pricing model includes assumptions regarding dividend yields, expected volatility, expected option term and risk-free interest rates. The assumptions used in computing the fair value of stock-based awards reflect our best estimates, but involve uncertainties relating to market and other conditions, many of which are outside of our control. We estimate expected volatility by considering the historical volatility of our stock and our expectations of volatility for the expected term of stock-based compensation awards. As a result, if other assumptions or estimates had been used for options granted, stock-based compensation expense that was recorded could have been materially different. Furthermore, if different assumptions are used in future periods, stock-based compensation expense could be materially impacted in the future.

Goodwill and Intangible Assets

Goodwill is tested for impairment annually as of March 31, the last day of our fourth fiscal quarter, unless an event occurs that would cause us to believe the value is impaired at an interim date. There was no impairment of goodwill and no adjustments were deemed necessary as a result of our impairment testing at March 31, 2012.

At March 31, 2011, the Company's test for goodwill impairment subsequent to the sale of the Upstate Region indicated that $70,000 of recorded goodwill attributable to the Upstate Region had been impaired. Accordingly, the Company wrote off $70,000 of goodwill and recorded the charge as a reduction in the gain on the sale of discontinued operations in the accompanying Statement of Operations at March 31, 2011.

The sale of the Upstate Region and the release of ITG's former President from his non-competition agreement triggered an impairment valuation of our amortizable intangible assets. An evaluation of the undiscounted cash flows determined that $372,089 of the customer contracts intangible assets and $17,208 of non-competition intangible assets had become impaired and, therefore, were recorded as a reduction of the gain on sale of discontinued operations in the Statement of Operations at March 31, 2011.

We assess the recoverability of the carrying value of our identifiable intangible assets with finite useful lives whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Intangible assets, consisting of customer contracts, are being amortized on a straight-line basis over an estimated life of fifteen years.

Results of Operations

On March 31, 2011, we completed the disposition of the Upstate Region of ITG. Accordingly, the results of operations from ITG's Upstate Region were classified as discontinued operations and except where specific discussions of ITG's Upstate Region are made, all financial information presented in this Annual Report excludes the Upstate Region for all periods presented.

Total compensation to the Company in the sale of the Upstate Region amounted to $650,000, consisting of $200,000 in cash and a thirty-month note receivable in the amount of $450,000. In addition, the Company released John Torrens, ITG's former President, from his non-competition agreement for a sum of $100,000 in cash. As a result of the sale of ITG's Upstate Region and the release of John Torrens from his non-competition agreement, we recognized a gain of $290,703, net of tax, for the year ended March 31, 2011.

During the year ended March 31, 2012 ("Fiscal 2012"), we recognized revenues of $3,340,109 as compared to revenues of $2,984,412 for the year ended March 31, 2011 ("Fiscal 2011"), an increase of approximately 11.9%. This increase was due to increases in school staffing and SEIT services of approximately 33.4% and 13.4%, respectively, in Fiscal 2012 over the prior fiscal year. However, during Fiscal 2012, these increases were offset by a decrease in EI services of $240,289 from EI revenues recorded in Fiscal 2011. New York City is not granting EI contracts to any new providers in the upcoming request for proposal process and our agreement to subcontract our services to another approved provider was not renewed.

Our cost of services consists of payroll and payroll-related costs paid to our staff of salaried and per diem clinicians. As a percentage of revenue, costs of services during Fiscal 2012 and Fiscal 2011 were 67.4% and 66.3%, respectively. Each year, we are required to file a standardized fiscal cost report with New York State which is used to calculate reconciliation tuition rates/adjustment factors and prospective tuition rates for our SEIT program. As a result of this rate reconciliation process, fees paid by preschools under the rate reconciliation process were reduced by 4.0%. This rate reduction caused the cost of services to increase as a percentage of revenue during Fiscal 2012.

Selling, general and administrative expenses for Fiscal 2012 and Fiscal 2011 were $1,786,011 and $2,584,465, respectively, a decrease of $798,454. During Fiscal 2012, stock-based compensation expense relating to the issuance of stock options and warrants totaled $94,517 as compared to $646,300 of stock-based compensation recorded in Fiscal 2011. During Fiscal 2012, we also had a decrease in our professional fees for legal and administrative fees as compared to Fiscal 2011. In our prior fiscal year, we had incurred fees related to our appeal for an extension of time, as permitted under the Listing Rules of The Nasdaq Stock Market, to comply with the $1.00 per share minimum bid price requirement for continued listing, the sale of ITG's Upstate Region and fees incurred in our search for acquisition candidates. During the third quarter of Fiscal 2011, we also incurred certain non-recurring expenses related to the temporary relocation of our New York City regional office due to mold issues present in the building we occupied.

Interest income was $20,129 and $5,837 during Fiscal 2012 and Fiscal 2011, respectively. The increase in interest income was a result of the receipt of interest on the note receivable and on delinquent receivables by certain charter schools in the current fiscal year.

Liquidity and Capital Resources

Our primary source of cash is existing cash resources. At March 31, 2012, we had working capital of $3,528,708 as compared to working capital of $3,577,376 at March 31, 2011. We believe that we have sufficient liquidity to meet our needs for beyond the next twelve months.

During Fiscal 2012, net cash provided by operating activities was $112,625, predominately attributable to the operating activities of discontinued operations totaling $557,457 offset by an operating loss of $647,396.

Cash flows from investing activities during Fiscal 2012 included $165,000 of proceeds received from collections of the note receivable.

The Company completed a private placement of 164,715 Shares to non-affiliated accredited investors at a price of $1.80 per Share on June 30, 2011. Total aggregate proceeds of $296,487 were received by the Company.

While we have not experienced any significant impact from the general slowdown of the economy or current global credit crisis, continuing economic deterioration could have a negative impact on our net revenues and operating results in future periods.

We continue to review strategic alternatives for maximizing shareholder value. Potential acquisitions will be evaluated based on their respective merits.

Credit Risk

Service revenue is concentrated within a limited number of customers throughout New York State; municipalities within New York State provide substantial and significant revenue to us. This concentration of customers may impact our overall exposure to credit risk, either positively or negatively, in that our customers may be similarly affected by changes in economic or other conditions in New York State.

Seasonality

Our business is moderately seasonal in nature based on the timing of the school year. Accordingly, our second fiscal quarter, which includes two full months during which schools are not in session (July and August), is the quarter in which we will achieve our lowest volume of revenues.

Interest Rate Risk

Interest rate risk represents the potential loss from adverse changes in market interest rates. As we may hold U.S. Treasury securities or money market funds, we may be exposed to interest rate risk arising from changes in the level and volatility of interest rates and in the shape of the yield curve.

Off Balance Sheet Arrangements

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

Subsequent Events

We have completed an evaluation of the impact of any subsequent events through the date the financial statements contained in this Report and determined that there were no subsequent events requiring disclosure in or adjustment to these financial statements.

Recently Issued Accounting Pronouncements

In September, 2011, the Financial Accounting Standards Board ratified Accounting Standards Update No. 2011-08 Intangibles-Goodwill and Other (Topic 350): Testing Goodwill for Impairment ("ASU 2011-08"). ASU 2011-08 permits an entity to first assess qualitative factors to determine whether it is more likely than not (a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying amount. After assessing qualitative factors, if an entity determines that it is not more likely than not that the fair value of the reporting unit is less than its carrying amount, no further testing is necessary. If an entity determines that it is more likely than not that the fair value of the reporting unit is less than its carrying value, then the traditional two-step goodwill impairment test must be performed. ASU 2011-08 is effective for fiscal years beginning after December 15, 2011 and the Company has concluded that the adoption of ASU 2011-08 will not have a material effect on its consolidated financial statements.

Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the Company's consolidated financial statements.