~~U. S.~~ UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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

£ o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~West Orange, NJ 07052~~

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 Tý No £o

Large accelerated filer£o

Accelerated filerTý

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~~Non-accelerated filer~~Smaller reporting company £o

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

Item 1. ~~FINANCIAL~~Financial ~~STATEMENTS~~Statements

Accounts receivable, less allowance of $10,978 and $11,244 at March 31, 2008 and December 31, 2007, respectively

CONDENSED CONSOLIDATED BALANCE SHEETS

LIABILITIES AND STOCKHOLDERS' EQUITY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

CONDENSED CONSOLIDATED ~~STATEMENTS~~STATEMENT OF ~~OPERATIONS~~CHANGES IN STOCKHOLDERS' EQUITY

Three Months Ended

Nine Months Ended

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(In thousands)~~

Nine Months Ended September 30,

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30,

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business Activities– Lincoln Educational Services Corporation and subsidiaries (the "Company") is a diversified provider of career-oriented post-secondary education. The Company offers recent high school graduates and working adults degree and diploma programs in five principal areas of study: ~~Automotive Technology, Health Sciences (which includes programs for licensed practical nursing (LPN), medical administrative assistants, medical assistants, pharmacy technicians, medical coding~~automotive technology, health sciences, skilled trades, business and ~~billing~~information technology and ~~dental assisting), Business and Information Technology, Hospitality Services (spa and culinary) and Skilled Trades.~~hospitality services. The Company currently has 34 ~~campuses~~schools in 17 states across the United States.

Basis of Presentation– The accompanying unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission and in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Certain information and footnote disclosures normally included in annual financial statements have been omitted or condensed pursuant to such regulations. These statements, when read in conjunction with the December 31, ~~2006~~2007 consolidated financial statements of the Company, reflect all adjustments, consisting solely of normal recurring adjustments, necessary to present fairly the consolidated financial position, results of operations, and cash flows for such periods. The results of operations for the three ~~and nine~~ months ended ~~September 30, 2007~~March 31, 2008 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, ~~2007.~~2008.

Use of Estimates in the Preparation of Financial Statements– The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. On an ongoing basis, the Company evaluates the estimates and assumptions, including those related to revenue recognition, bad debts, fixed assets, goodwill and other intangible assets, stock-based compensation, income taxes, benefit plans and certain accruals. Actual results could differ from those estimates.

2.	RECENT ACCOUNTING PRONOUNCEMENTS

In ~~February 2007,~~March 2008, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 161, “Disclosures about Derivative Instruments and Hedging Activities,” (“SFAS No. 161”) – an amendment to FASB Statement No. 133. The Statement is intended to improve financial standards for derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity's financial position, financial performance, and cash flows. Entities are required to provide enhanced disclosures about: (a) how and why an entity uses derivative instruments; (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations; and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. The Statement will be effective for the Company as of January 1, 2009. The adoption of the provision of SFAS No. 161 is not expected to have a material effect on the Company’s consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141R, "Business Combinations". The Statement establishes revised principles and requirements for how the Company will recognize and measure assets and liabilities acquired in a business combination. The Statement will be effective for the Company’s business combinations completed on or after January 1, 2009. The Company is currently evaluating the impact of the adoption of the Statement on its consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements, an amendment of Accounting Research Bulletin (“ARB”) No. 51," (“SFAS No. 160”). The Statement establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. The Statement will be effective for the Company as of January 1, 2009. The adoption of the provision of SFAS No. 160 is not expected to have a material effect on the Company’s consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities”, (“SFAS No. 159”), providing companies with an option to report selected financial assets and liabilities at fair value. The objective of SFAS No. 159 is to reduce both complexity in accounting for financial instruments and the volatility in earnings caused by measuring related assets and liabilities differently. ~~Generally accepted accounting principles have~~Historically, GAAP has required different measurement attributes for different assets and liabilities that can create artificial volatility in earnings. SFAS No. 159 helps to mitigate this type of accounting-induced volatility by enabling companies to report related assets and liabilities at fair value, which would likely reduce the need for companies to comply with detailed rules for hedge accounting. SFAS No. 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 requires companies to provide additional information that will help investors and other users of financial statements to more easily understand the effect of the Company’s choice to use fair value on its earnings. It also requires entities to display the fair value of those assets and liabilities for which the ~~Company~~entity has chosen to use fair value on the face of the balance sheet. SFAS No. 159 ~~will be~~became effective for the Company as of January 1, ~~2008. The~~2008; however, the Company ~~is currently evaluating~~did not elect to utilize the ~~impact of the adoption of this Statement on its consolidated financial statements.~~

~~In September 2006, the FASB issued SFAS No. 158,~~ ~~“Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132(R).”~~ Among other items, SFAS No. 158 requires recognition of the overfunded or underfunded status of an entity’s defined benefit postretirement plan as an asset or liability in the financial statements, requires the measurement of defined benefit postretirement planoption to report selected assets and obligations as of the end of the employer’s fiscal year, and requires recognition of the funded status of defined benefit postretirement plans in other comprehensive income. The Company adopted SFAS No. 158 on December 31, 2006. The incremental effects of applying SFAS No. 158 on the Company’s December 31, 2006 consolidated financial statements, on a line by line basis, are as follows:liabilities at fair value.

Balances Before Adoption of Statement 158

Balances After Adoption of Statement 158

In September 2006, the FASB issued SFAS No. 157, “Fair Value ~~Measurements.”~~Measurements”, (“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value ~~measurements, the Board~~measurements; FASB having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements. The provisions of SFAS No. 157 ~~are~~became effective for the Company as of January 1, 2008. The adoption of the provision of SFAS No. 157 ~~is not expected to have a material effect on the Company’s consolidated financial statements.~~

~~In June 2006, the FASB issued FASB Interpretation (“FIN”) No. 48, “~~~~Accounting for Uncertainty in Income Taxes~~~~.” FIN No. 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB SFAS No. 109, “~~~~Accounting for Income Taxes~~”, which was adopted by the Company on January 1, 2007. FIN No. 48 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. The adoption of FIN No. 48 resulted in a cumulative effect adjustment to retained earnings as of January 1, 2007 of $0.1 million.

~~In March 2006, the FASB issued SFAS No. 156, “~~~~Accounting for Servicing of Financial Assets.~~” SFAS No. 156 provides guidance addressing the recognition and measurement of separately recognized servicing assets and liabilities, common with mortgage securitization activities, and provides an approach to simplify efforts to obtain hedge accounting treatment. SFAS No. 156 was adopted on January 1, 2007. The adoption of the provision of SFAS No. 156 had no effect on the Company’s consolidated financial statements.

~~In February 2006, the FASB issued SFAS No. 155, “~~~~Accounting for Certain Hybrid Financial Instruments~~~~.” SFAS No. 155 is effective beginning January 1, 2007. The adoption of the provision of SFAS No. 155~~ had no effect on the Company’s consolidated financial statements.

3.	DISCONTINUED OPERATIONS

Three Months Ended

Nine Months Ended

4.	STOCK-BASED COMPENSATION

The Company currently accounts for stock-based employee compensation arrangements in accordance with the provisions of SFAS No. 123R, “Share Based Payment.” Reflected in the accompanying condensed consolidated statements of ~~income is~~operations were compensation expense ~~including amortization of deferred compensation,~~ of approximately ~~$0.5~~$0.6 million and ~~$0.3~~$0.4 million for the three months ended ~~September 30,~~March 31, 2008 and 2007, ~~and 2006, respectively, and $1.3 million and 1.0 million for the nine months ended September 30, 2007 and 2006,~~ respectively. The Company uses the Black-Scholes valuation model and utilizes straight-line amortization of compensation expense over the requisite service period of the grant. The Company makes an estimate of expected forfeitures upon grant issuance.

5.	WEIGHTED AVERAGE COMMON SHARES

Three Months Ended

Nine Months Ended

6.	~~BUSINESS ACQUISITIONS~~

Nine months ended September 30, 2006

Pro forma impact FLA 2006

7.	GOODWILL AND OTHER INTANGIBLE ASSETS

The Company accounts for its intangible assets in accordance with SFAS No. 142,~~“Goodwill~~ “Goodwill and Other Intangible Assets.” The Company reviews intangible assets with an indefinite useful life for impairment when indicators of impairment exist. Annually, or more frequently, if necessary, the Company evaluates goodwill for impairment, with any resulting impairment reflected as an operating expense.

At September 30, 2007

At December 31, 2006

Weighted Average Amortization Period (years)

Gross Carrying Amount

Accumulated Amortization

Gross Carrying Amount

Accumulated Amortization

LONG-TERM DEBT

109

Index

~~During the quarter ended September 30, 2007,~~In January 2008, the Company repaid ~~$16.5 million of outstanding debt resulting in $5.0 million in~~all debt outstanding under ~~the~~its credit agreement ~~as of September 30, 2007. Interest on these~~and subsequently borrowed $7.0 million under its credit agreement to meet its working capital needs. The interest rate under all borrowings was 5.25% at ~~September 30, 2007 ranged from 6.32% to 8.25%.~~March 31, 2008.

The credit agreement contains various covenants, including a number of financial covenants. Furthermore, the credit agreement contains customary events of default as well as an event of default in the event of the suspension or termination of Title IV Program funding for the Company’s and its ~~subsidiaries’ campuses~~subsidiaries' schools aggregating 10% or more of the Company’s EBITDA (as defined) or its consolidated total assets and such suspension or termination is not cured within a specified period. As of ~~September 30, 2007,~~March 31, 2008, the Company was in compliance with the financial covenants contained in the credit agreement.

EQUITY

Under the Company’s Long-Term Incentive Plan (the “LTIP”), certain employees received an award of restricted shares of common stock totaling 200,000 shares, valued at $2.9 million, on October 30, 2007 and 80,000 shares, valued at $1.0 million, on February 29, 2008. The restricted shares vest ratably on the first through fifth anniversary of the grant date; however, there is no vesting period on the right to vote or the right to receive dividends on these restricted shares. The recognized restricted stock expense for the three months ended March 31, 2008 was $0.2 million. The deferred compensation or unrecognized restricted stock expense under the LTIP as of March 31, 2008 was $3.6 million.

Pursuant to the Company’s 2005 Non-Employee Directors Restricted Stock Plan (the “Non-Employee Directors Plan”), each of the Company’s seven non-employee directors ~~received~~receives an annual award of ~~3,069~~ restricted shares of common stock ~~equal to $0.06 million~~ on July 29, 2005. On January 1, 2006, one non-employee director resigned, forfeiting 3,069 restricted shares of common stock awarded on July 29, 2005. Two newly appointed non-employee directors each received an award of 3,625 restricted shares of common stock equal to $0.06 million on March 1, 2006. On May 23, 2006, the date of the Company’s ~~2006~~ annual meeting ~~each non-employee director received an annual restricted award~~ of 1,781 restricted shares of common stock equal to $0.03 million. Beginning in 2007, each non-employee director received, on April 26, 2007, the date of the Company’s 2007 annual meeting, an annual restricted award of 2,825 restricted shares of common stock equal to $0.04 million.shareholders. The number of shares granted to each non-employee director ~~was~~is based on the fair market value of a share of common stock on that date. The restricted shares vest ratably on the first ~~second and~~through third ~~anniversaries~~anniversary of the grant date; however, there is no vesting period on the right to vote or the right to receive dividends on these restricted shares. As of ~~September 30, 2007,~~March 31, 2008, there were a total of ~~62,512~~57,477 shares awarded and ~~19,442~~21,862 shares vested under the Non-Employee Directors Plan. The recognized restricted stock expense for the three months ended ~~September 30,~~March 31, 2008 and 2007 ~~and 2006~~ was ~~$0.09 million and $0.06 million, respectively, and for the nine months ended September 30, 2007 and 2006 was $0.2~~$0.1 million and $0.1 million, respectively. The deferred compensation or unrecognized restricted stock expense under the Non-Employee Directors Plan as of ~~September 30,~~March 31, 2008 and 2007 ~~and 2006~~ was ~~$0.6~~$0.3 million and ~~$0.5~~$0.4 million, respectively.

The fair value of the stock options used to compute stock-based compensation is the estimated present value at the date of grant using the Black-Scholes option pricing model. The weighted average fair values of options granted during ~~2007~~2008 were ~~$6.78~~$6.68 using the following weighted average assumptions for grants:

September 30,

2007

Expected volatility 55.42 %
Expected dividend yield 0 %
Expected life (term) 6 Years
Risk-free interest rate 4.36 %
Weighted-average exercise price during the year $ 11.96

		March 31, 2008
Expected volatility		57.23%
Expected dividend yield		0%
Expected life (term)		6 Years
Risk-free interest rate		2.76%
Expected forfeiture rate		20.00%

~~Index~~

The following is a summary of transactions pertaining to the option plans:

	Shares			Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value (in thousands)		Shares			Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding, December 31, 2006		1,728,225		$	8.85
Outstanding as of December 31, 2007										1,512,163		$	9.65
Granted		185,500			11.96					94,000			12.00
Cancelled		(39,000	)		16.79					(27,500	)		17.78
Exercised		(33,271	)		4.36		$	218		(18,300	)		3.40		$	184
Outstanding, September 30, 2007		1,841,454			9.08	5.91 years		9,788
Outstanding as of March 31, 2008										1,560,363			9.73	5.82 years		6,349

Exercisable as of September 30, 2007		1,249,215				6.35 years		9,444
Exercisable as of March 31, 2008										1,113,427			7.70	4.81 years		6,337

As of September 30, 2007

Stock Options Outstanding

Stock Options Exercisable

Range of Exercise Prices

Contractual Weighted Average life (years)

Weighted Average Price

Weighted Exercise Price

~~10.~~

SLM FINANCIAL CORPORATION LOAN AGREEMENT

In January 2008, SLM notified the Company that it was ~~required to fund 30%~~terminating its tiered discount loan program, effective February 18, 2008. The termination of ~~all loans disbursed into~~this agreement did not have a ~~SLM reserve account. A total of $1.5 million has been funded related to total loans disbursed. For~~significant impact on the ~~nine months ended September 30, 2007 no loans have been disbursed under this program.~~Company’s financial condition.

~~11.~~

10.

INCOME TAXES

~~12.~~

11.

COMMITMENTS AND CONTINGENCIES

Litigation and Regulatory Matters – In the ordinary conduct of its business, the ~~Company’s business, it~~Company is subject to periodic lawsuits, investigations and claims, including, but not limited to, claims involving students or graduates and routine employment matters. Although the Company cannot predict with certainty the ultimate resolution of lawsuits, investigations and claims asserted against it, the Company does not believe that any currently pending legal proceeding to which it is a party will have a material adverse effect on the Company’s business, financial condition, results of ~~operation~~operations or cash flows.

~~13.~~

12.

PENSION PLAN

13.

SUBSEQUENT EVENTS

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

Discontinued Operations

~~Impairment of Goodwill and Long-lived Assets~~

On July 31, 2007, our Board of Directors approved a plan ~~(the “Plan”)~~ to cease operations at three of our ~~Plymouth Meeting, PA, Norcross, GA and our Henderson, NV~~ campuses. While we believed that these campuses offered effective and valuable academic programs, given the current competitive environment the campuses’ financial results had not met expectations. We concluded that the continued operation of these campuses was inconsistent with our strategic goals. As a result of ~~the above, we reviewed the related goodwill and long-lived assets for possible impairment in accordance with SFAS No. 142, “~~~~Goodwill and Other Intangible Assets,”~~ ~~and SFAS No. 144, “~~~~Accounting for the Impairment or Disposal of Long-Lived Assets.”~~

~~Discontinued Operations~~

Critical Accounting Policies and Estimates

Revenue recognition. Revenues are derived primarily from programs taught at our ~~campuses.~~schools. Tuition revenues, textbook sales and one-time fees, such as nonrefundable application fees and course material fees, are recognized on a straight-line basis over the length of the applicable program, which is the period of time from a student’s start date through his or her graduation date, including internships or externships that take place prior to graduation. If a student withdraws from a program prior to a specified date, any paid but unearned tuition is refunded. Refunds are calculated and paid in accordance with federal, state and accrediting agency standards. Other revenues, such as ~~textbook sales,~~ tool sales and contract training revenues are recognized as services are performed or goods are delivered. On an individual student basis, tuition earned in excess of cash received is recorded as accounts receivable, and cash received in excess of tuition earned is recorded as unearned tuition.

Allowance for uncollectible accounts. Based upon experience and judgment, we establish an allowance for uncollectible accounts with respect to tuition receivables. We use an internal group of collectors, augmented by third-party collectors as deemed appropriate, in our collection efforts. In establishing our allowance for uncollectible accounts, we consider, among other things, a student’s status (in-school or out-of-school), whether or not additional financial aid funding will be collected from Title IV Programs or other sources, whether or not a student is currently making payments and overall collection history. Changes in trends in any of these areas may impact the allowance for uncollectible accounts. The receivables balances of withdrawn students with delinquent obligations are reserved based on our collection history. Although we believe that our reserves are adequate, if the financial condition of our students deteriorates, resulting in an impairment of their ability to make payments, ~~or if we underestimate the allowances required,~~ additional allowances may be necessary, which will result in increased selling, general and administrative expenses in the period such determination is made.

Goodwill. We test our goodwill for impairment annually, or whenever events or changes in circumstances indicate an impairment may have occurred, by comparing its fair value to its carrying value. Impairment may result from, among other things, deterioration in the performance of the acquired business, adverse market conditions, adverse changes in applicable laws or regulations, including changes that restrict the activities of the acquired business, and a variety of other circumstances. If we determine that impairment has occurred, we are required to record a write-down of the carrying value and charge the impairment as an operating expense in the period the determination is made. In evaluating the recoverability of the carrying value of goodwill and other indefinite-lived intangible assets, we must make assumptions regarding estimated future cash flows and other factors to determine the fair value of the acquired assets. Changes in strategy or market conditions could significantly impact these judgments in the future and require an adjustment to the recorded balances.

Stock-based compensation. We currently account for stock-based employee compensation arrangements in accordance with the provisions of ~~SFAS~~Statement of Financial Accounting Standards (“SFAS”) No. 123R, “Share Based Payment.” We use a fair value-based method of accounting for options as prescribed by SFAS No. 123 “Accounting for Stock-Based Compensation”. Because no public market for our common stock existed prior to our initial public offering, our board of directors determined the fair value of our common stock based upon several factors, including our operating performance, forecasted future operating results, and our expected valuation in an initial public offering.

Bonus costs. We accrue the estimated cost of our bonus programs using current financial and statistical information as compared to targeted financial achievements and actual student graduate outcomes. Although we believe our estimated liability recorded for bonuses is reasonable, actual results could differ and require adjustment of the recorded balance.

Effect of Inflation

Recent Accounting Pronouncements

In ~~February 2007,~~March 2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities,” (“SFAS No. 161”) – an amendment to FASB Statement No. 133. The Statement is intended to improve financial standards for derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity's financial position, financial performance, and cash flows. Entities are required to provide enhanced disclosures about: (a) how and why an entity uses derivative instruments; (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations; and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. The Statement will be effective for us as of January 1, 2009. The adoption of the provision of SFAS No. 161 is not expected to have a material effect on our consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141R, "Business Combinations”. The Statement establishes revised principles and requirements for how we will recognize and measure assets and liabilities acquired in a business combination. The Statement will be effective for our business combinations completed on or after January 1, 2009. We are currently evaluating the impact of the adoption of the Statement on our consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements, (“SFAS No. 160”), an amendment of Accounting ~~Standards~~Research Bulletin (“~~SFAS”~~ARB”) No. 51". The Statement establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. The Statement will be effective for us as of January 1, 2009. The adoption of the provision of SFAS No. 160 is not expected to have a material effect on our consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities”, (“SFAS No. 159”), providing companies with an option to report selected financial assets and liabilities at fair value. The objective of SFAS No. 159 is to reduce both complexity in accounting for financial instruments and the volatility in earnings caused by measuring related assets and liabilities differently. ~~Generally accepted accounting principles have~~Historically GAAP has required different measurement attributes for different assets and liabilities that can create artificial volatility in earnings. SFAS No. 159 helps to mitigate this type of accounting-induced volatility by enabling companies to report related assets and liabilities at fair value, which would likely reduce the need for companies to comply with detailed rules for hedge accounting. SFAS No. 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 requires companies to provide additional information that will help investors and other users of financial statements to more easily understand the effect of ~~the Company’s~~our choice to use fair value on its earnings. It also requires entities to display the fair value of those assets and liabilities for which the ~~Company~~entity has chosen to use fair value on the face of the balance sheet. SFAS No. 159 ~~will be~~became effective for us as of January 1, ~~2008. We are currently evaluating~~2008; however, we did not elect to utilize the ~~impact of the adoption of SFAS No. 159 on our consolidated financial statements.~~

Balances Before Adoption of Statement 158

Balances After Adoption of Statement 158

In September 2006, the FASB issued SFAS No. 157, “Fair Value ~~Measurements.”~~Measurements”, (“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value ~~measurements, the Board~~measurements; FASB having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements. The provisions of SFAS No. 157 ~~are~~became effective for ~~the Company~~us as of January 1, 2008. The adoption of the provision of SFAS No. 157 ~~is not expected to have a material effect on our consolidated financial statements.~~

~~In June 2006, FASB issued FASB Interpretation (“FIN”) No. 48, “~~~~Accounting for Uncertainty in Income Taxes~~~~.” FIN No. 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB SFAS No. 109, “~~~~Accounting for Income Taxes~~”, which was adopted by us on January 1, 2007. FIN No. 48 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. The adoption of FIN No. 48 resulted in a negative cumulative effect adjustment to retained earnings as of January 1, 2007 of approximately $0.1 million.

~~In March 2006, FASB issued SFAS No. 156, “~~~~Accounting for Servicing of Financial Assets.~~” SFAS No. 156 provides guidance addressing the recognition and measurement of separately recognized servicing assets and liabilities, common with mortgage securitization activities, and provides an approach to simplify efforts to obtain hedge accounting treatment. SFAS No. 156 will be adopted on January 1, 2007. The adoption of the provision of SFAS No. 156 had no effect on our consolidated financial statements.

~~In February 2006, the FASB issued SFAS No. 155, “~~~~Accounting for Certain Hybrid Financial Instruments~~~~.” SFAS No. 155 is effective beginning January 1, 2007. The adoption of the provision of SFAS No. 155 had no effect on our consolidated financial statements.~~

1714

Index

Results of Operations

~~Results of Continuing Operations~~Certain reported amounts in our analysis have been rounded for presentation purposes.

The following table sets forth selected consolidated statements of ~~continuing~~ operations data as a percentage of revenues for each of the periods ~~indicated.~~indicated:

	Three Months Ended
	March 31,
	2008			2007
Revenues		100.0	%		100.0	%
Costs and expenses:
Educational services and facilities		43.6	%		44.8	%
Selling, general and administrative		54.9	%		56.7	%
Total costs and expenses		98.5	%		101.5	%
Operating income (loss)		1.5	%		(1.5	%)
Interest expense, net		(0.5	%)		(0.6	%)
Income (loss) from continuing operations before income taxes		1.0	%		(2.1	%)
Provision (benefit) for income taxes		0.4	%		(0.9	%)
Net income (loss) from continuing operations		0.6	%		(1.2	%)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2007

2006

2007

2006

Revenues 100.0 % 100.0 % 100.0 % 100.0 %
Costs and expenses:
Educational services and facilities 42.8 % 42.7 % 44.0 % 42.3 %
Selling, general and administrative 47.9 % 50.5 % 52.2 % 51.8 %
Total costs and expenses 90.7 % 93.2 % 96.2 % 94.1 %
Operating income 9.3 % 6.8 % 3.8 % 5.9 %
Other loss 0.0 % (0.3 )% 0.0 % (0.1 )%
Interest expense, net (0.7 )% (0.7 )% (0.7 )% (0.4 )%
Income from continuing operations before income taxes 8.6 % 5.8 % 3.1 % 5.5 %
Provision for income taxes 3.6 % 2.4 % 1.3 % 2.2 %
Net income from continuing operations 5.0 % 3.4 % 1.8 % 3.3 %

Three Months Ended ~~September 30, 2007~~March 31, 2008 Compared to Three Months Ended ~~September 30, 2006~~March 31, 2007

Revenues. Revenues increased by ~~$4.7~~$7.9 million, or ~~5.7%~~10.3%, to ~~$86.6~~$84.0 million for the ~~three months~~quarter ended ~~September 30, 2007~~March 31, 2008 from ~~$81.9~~$76.2 million for the ~~comparable period in 2006.~~quarter ended March 31, 2007. The increase in ~~revenue~~revenues for the quarter was primarily attributable ~~in part~~ to a ~~2.3%~~9.3% increase in average student population, which increased to ~~18,185~~18,459 for the quarter ended ~~September 30, 2007~~March 31, 2008 from ~~17,774~~16,885 for the quarter ended ~~September 30, 2006.~~March 31, 2007. The remainder of this increase was due to tuition increases. For a general discussion of trends in our student enrollment, see “Seasonality and Trends” below.

Educational services and facilities expenses. Our educational services and facilities expenses for the quarter ended ~~September 30, 2007~~March 31, 2008 were ~~$37.1~~$36.6 million, representing an increase of ~~$2.1~~$2.5 million, or ~~6.0%~~7.3%, as compared to ~~$34.9~~$34.2 million for the quarter ended ~~September 30, 2006.~~March 31, 2007. The increase in educational services and facilities expenses was due ~~to: (i)~~to instructional expenses and books and ~~tool~~tools expenses, which increased by ~~$1.2~~$1.1 million, or ~~23.8%~~6.0%, ~~as compared to the quarter ended September 30, 2006 due to higher tool sales during the period;~~ and ~~(ii) facilities expenses, which increased by approximately~~ $0.9 million, or 26.7%, respectively, over the same quarter in ~~2006. Approximately $0.5 million of the~~2007. Increases in instructional expenses and books and tools expenses were due to a 7.5% increase in ~~facilities expenses was due~~student starts during the first quarter of 2008 as compared to ~~additional square footage at some of our facilities to accommodate new programs and higher utility, insurance and property taxes. The remainder of~~ the increase was attributable to higher repairs and maintenance expense at our facilities ($0.2 million) and overflow housing expenses ($0.2 million) at one of our destination campuses over the same period in 2006. As a percentage of revenue, educational services and facilities expenses for the secondfirst quarter of 2007 ~~increased to 42.8% from 42.7% in 2006.~~

~~Selling, general~~ and ~~administrative expenses~~. Our selling, general and administrative expenses for the quarter ended September 30, 2007 were $41.4 million, consistent with the quarter ended September 30, 2006. For the three months ended September 30, 2007, our sales and marketing expenses decreased by approximately $2.0 million from the same period in 2006. This decrease was theas a result of the additional marketing expenses incurred in the third quarter of 2006, to compensate for the shortfall we experienced in the high school market, coupled with a shift in mix between television advertising and web based initiatives. Offsetting this decrease in sales and marketing expenses was an increase of $2.0 million in administrative expenses. Theoverall increase in administrative expenses during the quarter was due to the hiring of additional personnel in anticipation of higher enrollment levels and to yearly compensation increases to existing personnel. Additionally, during the quarterstudent population. We began 2008 with approximately 1,400 more students than we ~~entered into an agreement~~began with a vendor for certain equipment at our campuses. We incurred an upfront one time non-cash charge of $0.5 million in connection with this agreement. As a percentage of revenue, selling, general and administrative expenses for the third quarter of 2007 decreased to 47.9% from 50.5% in 2006.

~~For the quarter ended September 30, 2007, our bad debt expense was 5.3% as compared to 5.7% for the same quarter in 2006.~~

~~Net interest expense~~. Our net interest expense for each of the quarters ended September 30, 2007 and 2006 was $0.6 million. As of September 30, 2007, we had $5.0 million outstanding under our credit agreement as compared to September 30, 2006 when we had $17.2 million of debt comprised of $10.0 million outstanding under our credit agreement and a mortgage note assumed in connection with our acquisition of FLA for $7.2 million. For the quarter ended September 30, 2007, our average amounts outstanding under our credit agreement was $16.0 compared to $10.8 for the quarter ended September 30, 2006.

~~Income taxes~~. For the quarter ended September 30, 2007 we recorded a provision of $3.1 million, or 41.6% of pretax income. As a percentage of pretax income, our provision was essentially unchanged from the $2.0 million, or 41.5% of pretax income, for the quarter ended September 30, 2006.

~~Index~~

~~Nine Months Ended September 30, 2007 Compared to Nine Months Ended September 30, 2006~~

~~Revenues~~. Revenues increased by $10.3 million, or 4.5%, to $237.5 million for the nine months ending September 30, 2007 from $227.2 million for the comparable period in 2006. Included in revenue for the nine months ended September 30, 2007 was an increase of approximately $6.5 million over the corresponding prior period from our acquisition of FLA, on May 22, 2006. The remainder of the increase in revenue during the period was attributable to our Queens facility, which we opened in March 2006. This facility was a start-up facility in 2006 and only contributed six months of earnings for the nine month period ending September 30, 2006. For the nine months ended September 30, 2007, the Queens campus was in operation for the full period. Revenue for the period was also impacted positively by tuition increases which averaged 3.5% for 2007 and a 0.4% increase in average student population, which increased to 17,193 for the nine months ended September 30, 2007 from 17,132 for the nine months ended September 30, 2006. For a general discussion of trends in our student enrollment, see “Seasonality and Trends” below.

~~Educational services and facilities expenses~~. Our educational services and facilities expenses for the nine months ended September 30, 2007 were $104.5 million, representing an increase of $8.4 million, or 8.8%, as compared to $96.1 million for the nine months ended September 30, 2006. The acquisition of FLA resulted in $2.5 million of this increase.January 1, 2007. The remainder of the increase in educational services and facilities expenses was ~~primarily due to: (i) instructional expenses, which increased $0.5 million, or 1.0%~~ due to yearly compensation increases; (ii) books and tool expenses, which increased by $1.7 million, or 15.0%, as compared to the nine months ended September 30, 2006 due higher tool sales during the period; and (iii) facilities expenses, which increased by approximately ~~$3.7~~$0.4 million over the ~~same period in 2006. Approximately $1.7 million~~first quarter of ~~the increase in facilities expenses was~~2007 primarily due to additional square footage at some of our facilities and higher utility, insurance and property taxes. The remainder of the increase was attributable to higher repairs and maintenance expense at our facilities ($1.3 million) and increased depreciation expense ~~($0.5 million) over the same period in prior year. Of the $1.3~~of $0.7 million, ~~increase~~offset by decreases in repairs and maintenance ~~expenses as of September 30, 2007, $0.8 million was due to repairs and maintenance expenses at one of our campuses~~ during the ~~first quarter of 2007.~~period. As a percentage of ~~revenue,~~revenues, educational services and facilities expenses for the ~~third~~first quarter of ~~2007 increased~~2008 decreased to ~~44.0%~~43.6% from ~~42.3% in 2006.~~44.8% for the first quarter of 2007.

Selling, general and administrative expenses. Our selling, general and administrative expenses for the ~~nine months~~quarter ended ~~September 30, 2007~~March 31, 2008 were ~~$124.1~~$46.1 million, representing an increase of ~~$6.4~~$2.9 million, or ~~5.4%~~6.8%, as compared to ~~$117.7~~$43.2 million for the ~~nine months~~quarter ended ~~September 30, 2006. Included~~March 31, 2007. The increase in ~~the $124.1 million was an incremental increase of $3.2 million, or 50.8%, related to the acquisition of FLA. On a same school basis,~~our selling, general and administrative expenses ~~increased by $3.2 million from~~during the ~~comparable~~ period ~~in 2006,~~was primarily due to increases of $0.9 million in sales expense, resulting from yearly compensation increases and a higher number of sales representatives as compared to the same period in 2006, a $1.1 million decrease in marketing expenditures, a $0.2 million, or 6.0%, increase in student services and a ~~$3.2~~$2.6 million, or 11.7%, increase in administrative ~~expenses. The decrease in marketing~~ expenses for the ~~nine months~~quarter ended ~~September 30, 2007~~March 31, 2008 over the quarter ended March 31, 2007. The increase in student services was ~~the~~primarily due to increases in compensation and benefit expenses attributed to increased financial aid and career services personnel as a result of larger student population during the ~~additional marketing expenses incurred in the third~~first quarter of ~~2006,~~2008 as compared to ~~compensate for~~ the ~~shortfall we experienced in the high school market, coupled with a shift in mix between television advertising and web based initiatives.~~first quarter of 2007. The increase in administrative expenses during the ~~period~~first quarter of 2008 as compared to the first quarter of 2007 was primarily due to ~~yearly~~(a) a $1.0 million increase in compensation and benefits, resulting from annual compensation increases and increased cost of benefits provided to employees; (b) a $0.4 million increase in bad debt expense; (c) a $0.2 million increase in employee training expenses; and (d) a $0.2 million increase in software maintenance expenses ~~associated with pay incentives. Additionally, during the three months ended September 30, 2007 we entered into a Master Agreement with a vendor for certain copiers~~resulting from increased software licenses for our ~~campuses. We incurred an upfront one time non-cash charge of $0.5 million in connection with this agreement.~~student management system. As a percentage of ~~revenue,~~revenues, selling, general and administrative expenses for the ~~nine months ended September 30, 2007 increased~~first quarter of 2008 decreased to ~~52.2%~~54.9% from ~~51.8% in 2006.~~56.7% for the first quarter of 2007.

For the ~~nine months~~quarter ended ~~September 30, 2007 and 2006,~~March 31, 2008, our bad debt expense as a percentage of revenue was ~~5.2% and 5.2%, respectively.~~4.8% as compared to 4.7% for the same quarter in 2007. This increase was primarily attributable to higher accounts receivable due to a 10.3% increase in revenues during the first quarter of 2008 as compared to the first quarter of 2007. The number of days sales outstanding at March 31, 2008 increased slightly to 23.9 days compared to 23.5 days at March 31, 2007.

Index

~~Impairment of goodwill and long-lived assets~~. As of June 30, 2007, we recorded a non-cash charge of $3.0 million related to the impairment of goodwill and other long term assets due to the planned cessation of operations at three of our campuses. See “Impairment of Goodwill and Long-lived Assets”.

Net interest expense. Our net interest expense for the ~~nine months~~quarter ended ~~September 30, 2007~~March 31, 2008 was ~~$1.7~~$0.5 million, ~~representing an increase of $0.8 million from the nine months ended September 30, 2006. This increase was primarily due to the decrease in our average cash balances during the period~~essentially flat as compared to the ~~nine months~~quarter ended ~~September 30, 2006.~~March 31, 2007.

Income taxes. ~~For the nine months ended September 30, 2007 we recorded a~~Our provision for income taxes ~~of $3.0~~for the quarter ended March 31, 2008 was $0.3 million, or ~~41.7%~~38.7% of pretax income, as compared to a ~~provision~~benefit of ~~$5.1~~$0.7 million, or ~~41.1%~~41.9% of pretax ~~income,~~loss, for the ~~nine months~~quarter ended ~~September 30, 2006.~~March 31, 2007. The ~~increase~~decrease in our effective tax rate for the ~~period~~quarter ended March 31, 2008 was primarily attributable to ~~the tax benefit associated with the exercise of stock options, coupled with the effect of the FLA acquisition. For federal tax purposes, FLA is a separate C Corporation.~~favorable shifts in state taxable income between various states.

~~Index~~

Liquidity and Capital Resources

Our primary capital requirements are for facility expansion and maintenance, acquisitions and the development of new programs. Our principal sources of liquidity have been cash provided by operating activities and borrowings under our credit agreement.

The following chart summarizes the principal elements of our cash ~~flow for the nine months ended September 30, 2007 and 2006:~~flows (in thousands):

	Three Months Ended
	March 31,
	2008			2007
Net cash provided by (used in) operating activities	$	7,547		$	(9,092	)
Net cash used in investing activities		(7,440	)		(5,752	)
Net cash provided by financing activities		2,011			13,041

Nine Months Ended September 30,

2007

2006

(in thousands)

Net cash provided by operating activities $ 8,950 $ 1,666
Net cash used in investing activities $ (17,003 ) $ (49,037 )
Net cash provided by financing activities $ 5,129 $ 9,554

At ~~September 30, 2007~~March 31, 2008, we had cash and cash equivalents of ~~$3.5~~$5.6 million, compared to ~~$6.5~~$3.5 million as of December 31, ~~2006.~~2007. For the ~~nine~~three months ended ~~September 30, 2007,~~March 31, 2008, cash and cash equivalents ~~decreased~~increased by approximately ~~$2.9~~$2.1 million from December 31, ~~2006. This decrease was mainly attributable to normal seasonal patterns of lower student populations in the first half of the year.~~2007. Historically, we have financed our operating activities and organic growth primarily through cash generated from operations. ~~In addition, we~~We have financed acquisitions primarily through borrowings under our credit facility and cash generated from operations. During the first ~~six months~~quarter of ~~2007,~~2008, we borrowed ~~$21.5~~$7.0 million under our credit facility. ~~During the three months ended September 30, 2007, we repaid $16.5 million of those borrowings.~~ We currently anticipate that we will be able to meet both our short-term cash needs, as well as our need to fund operations and meet our obligations beyond the next twelve months with cash generated by operations, existing cash balances and, if necessary, borrowings under our credit agreement. At ~~September 30, 2007,~~March 31, 2008, we had net borrowings available under our $100 million credit agreement of approximately ~~$90.6~~$88.6 million, including a $15.6 million sub-limit on letters of credit.

Our primary source of cash is tuition collected from the students. The majority of students enrolled at our ~~students. Our students fund~~schools rely on funds received under various government-sponsored student financial aid programs to pay a substantial portion of their tuition ~~payments from a variety~~and other education-related expenses. The largest of ~~sources including~~these programs are Title IV Programs ~~federal and state grants, private loans and their personal resources. A significant majority~~which represented approximately 80% of our ~~students’ tuition payments are derived from Title IV Programs.~~cash receipts relating to revenues in 2007. Students must apply for a new loan for each academic period. Federal regulations dictate the timing of disbursements of funds under Title IV Programs and loan funds are generally provided by lenders in two disbursements for each academic year. The first disbursement is usually received approximately 30 days after the start of a ~~student’s~~student's academic year and the second disbursement is typically received at the beginning of the sixteenth week ~~after~~from the start of the ~~student’s~~student's academic year. Certain types of grants and other funding are not subject to a 30-day delay. Our programs range from 3014 to ~~84 weeks and may cover one or two academic years.~~105 weeks. In certain instances, if a student withdraws from a program prior to a specified date, any paid but unearned tuition or prorated Title IV financial aid is refunded ~~with the amount varying by state.~~according to state and federal regulations.

The majority of students enrolled at our campuses rely on funds received under various government-sponsored student financial aid programs to pay a substantial portion of their tuition and other education-related expenses. The largest of these programs is Title IV, which represented approximately 80% of our cash receipts relating to revenues in 2006. As a result of the significance of the Title IV funds received by our students, we are highly dependent on these funds to operate our business. Any reduction in the level of Title IV funds that our students are eligible to receive or any impact on our ability to be able to receive Title IV funds would have a significant impact on our operations and our financial condition.

Cash Flow Operating Activities

Net cash provided by operating activities was ~~$9.0~~$7.5 million for the ~~nine~~three months ended ~~September 30, 2007~~March 31, 2008 compared to ~~$1.7~~net cash used of $9.1 million for the ~~nine~~three months ended ~~September 30, 2006.~~March 31, 2007. The ~~$7.3~~$16.6 million increase in cash provided by operating activities was primarily due to ~~improved focus on~~an approximately $6.2 million increase of cash received from federal fund programs and a reduction of approximately $4.6 million in cash paid for income taxes for the ~~packaging of student financial aid. This resulted in (i) better cash collections during the period~~quarter ended March 31, 2008 as compared to the ~~comparable period~~quarter ended March 31, 2007. The reminder of the increase was primarily due to an increase in ~~prior year (as evidenced by the decrease in day’s sales outstanding to 22.8 days~~net income for the ~~three months~~quarter ended ~~September 30, 2007 from 24.3 days for the three months ended September 30, 2006) and (ii) an increase~~March 31, 2008 as compared to ~~prior year in unearned tuition.~~ a net loss for the quarter ended March 31, 2007.

Index

Cash Flow Investing Activities

Net cash used in investing activities ~~decreased~~increased by ~~$32.0~~$1.6 million to ~~$17.0~~$7.4 million for the ~~nine~~three months ended ~~September 30, 2007~~March 31, 2008 from ~~$49.0~~$5.8 million for the ~~nine~~three months ended ~~September 30, 2006.~~March 31, 2007. Our ~~decrease in~~ cash used in investing activities was primarily ~~due~~related to the purchase ~~of FLA in May of 2006, offset by increased purchases~~ of property and equipment. Our capital expenditures primarily result from facility expansion, leasehold improvements, and investments in classroom and shop ~~technology and in operating systems.~~

We currently lease a majority of our campuses. In October 2005, we completed the purchase of our Grand Prairie, Texas facility, which we opened in July 2006. In addition, with our purchase of FLA on May 22, 2006, we acquired real estate valued at approximately $19.8 million. Our growth strategy is primarily focused on internal growth, including campus expansions; however, we have in the past and expect to continue to consider strategic acquisitions. To the extent that these potential strategic acquisitions are large enough to require financing beyond available cash from operations and borrowings under our credit facilities, we may incur additional debt or issue additional debt or equity securities.

~~Index~~

technology.

Capital expenditures are expected to increase in 2008 as we upgrade and expand current equipment and facilities ~~and~~or open new facilities to meet increased student enrollments. ~~Additionally, we are evaluating several other expansion opportunities.~~ We ~~expect~~anticipate capital expenditures to ~~be able~~range between 8% and 10% of revenues in 2008 and expect to fund these capital expenditures with cash generated from operating ~~activities.~~activities and, if necessary, with borrowings under our credit agreement.

Cash Flow Financing Activities

Net cash provided by financing activities was ~~$5.1~~$2.0 million for the ~~nine~~three months ended ~~September 30, 2007~~March 31, 2008, as compared to ~~net cash provided by financing activities of $9.6~~$13.0 million for the ~~nine~~three months ended ~~September 30, 2006.~~March 31, 2007. This ~~increase in 2007~~decrease of $11.0 million was attributable to a decrease in our ~~borrowing $21.5 million~~net borrowings under our credit agreement ~~during~~for the ~~first half of~~three months ended March 31, 2008, as compared to the three months ended March 31, 2007. During the third quarter we repaid $16.5 million of these borrowings. Due to normal seasonal patterns, our student populations are generally at the lowest levels during the first half of the year and increase during the second half of the year. As a result, during the first half of the year, we typically borrow funds to finance our operations and repay those funds in the second half of the year.

Under the terms of our credit agreement, the lending syndicate provided us with a $100 million credit facility with a term of five years. The credit agreement permits the issuance of letters of credit of up to $20 million, the amount of which reduces the availability of permitted borrowings under the agreement. At the time of entering into the credit agreement we incurred approximately $0.8 million of deferred finance charges.

The following table sets forth our long-term debt ~~at the dates indicated:~~(in thousands):

	At March 31,			At December 31,
	2008			2007
Credit agreement	$	7,000		$	5,000
Finance obligation		9,672			9,672
Automobile loans		10			16
Capital leases (with rates ranging from 2.9% to 8.5%)		643			690
Subtotal		17,325			15,378
Less current maturities		(189	)		(204	)
Total long-term debt	$	17,136		$	15,174

September 30,

December 31,

2007

2006

Credit agreement $ 5,000 $ -
Finance obligation 9,672 9,672
Automobile loans 21 37
Capital leases-computers (with rates ranging from 6.7% to 10.7%) 735 151
Subtotal 15,428 9,860
Less current portion (206 ) (91 )
$ 15,222 $ 9,769

Contractual Obligations

~~Long-Term~~Long-term Debt. As of ~~September 30, 2007,~~March 31, 2008, our long-term debt consisted of amounts borrowed under our credit agreement, the finance obligation in connection with our sale-leaseback transaction in 2001 and amounts due under capital lease obligations.

Lease Commitments. We lease offices, educational facilities and ~~various~~ equipment for varying periods through the year 2023 at basic annual rentals (excluding taxes, insurance, and other expenses under certain leases).

The following table contains supplemental information regarding our total contractual obligations as of ~~September 30, 2007,~~March 31, 2008, measured from the end of our fiscal year, December 31, ~~2006~~2007 (in thousands):

	Payments Due by Period										Payments Due by Period
	Total		Less than 1 year		1-3 years		3-5 years		After 5 years		Total		Less than 1 year		1-3 years		4-5 years		After 5 years
Credit agreement	$	5,000	$	-	$	5,000	$	-	$	-	$	7,000	$	-	$	7,000	$	-	$	-
Capital leases (including interest)		883		240		348		295		-		762		227		321		214		-
Operating leases		135,820		15,839		28,372		24,492		67,117		131,074		16,435		27,791		24,516		62,332
Rent on finance obligation		12,454		1,334		2,669		2,669		5,782		12,202		1,381		2,763		2,763		5,295
Automobile loans (including interest)		21		21		-		-		-		16		16		-		-		-
Total contractual cash obligations	$	154,178	$	17,434	$	36,389	$	27,456	$	72,899	$	151,054	$	18,059	$	37,875	$	27,493	$	67,627

~~Capital Expenditures.~~ We have entered into commitments to expand or renovate campuses. These commitments are in the range of $4.0 to $6.0 million in the aggregate and are due within the next 12 months. Total capital expenditures for the year are expected to range between 3 to 5% of revenues. We expect to fund these commitments from cash generated from operations.

Off-Balance Sheet Arrangements

Seasonality and Trends

Item 3. QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Item 4. CONTROLSAND PROCEDURES

(a) Evaluation of disclosure controls and procedures. Our Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Securities Exchange Act Rule 13a-15(e)) as of the end of the quarterly period covered by this report, have concluded that our disclosure controls and procedures are adequate and effective to reasonably ensure that material 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 specific by Securities and Exchange Commissions’ Rules and Forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

(b) Changes in Internal Control Over Financial Reporting. There were no changes made during our most recently completed fiscal quarter in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. LEGALPROCEEDINGS

In the ordinary conduct of our business, we are periodically subject to lawsuits, investigations and claims, including, but not limited to, claims involving students or graduates and routine employment matters. Although we cannot predict with certainty the ultimate resolution of lawsuits, investigations and claims asserted against us, we do not believe that any currently pending legal proceeding to which we are a party will have a material adverse effect on our business or financial condition, results of operations or cash flows.

(1)	Incorporated by reference to the Company’s Registration Statement on Form S-1 (Registration No. 333-123664).

(2)	Incorporated by reference to the Company’s Form 8-K dated June 28, 2005.

(3)	Incorporated by reference to the Company’s Form ~~10-Q~~10-K for the ~~quarterly period~~year ended ~~March~~December 31, 2006.

(4)	Incorporated by reference to the Company’s Form 8-K dated October 15, 2007.

(5)	Incorporated by reference to the Company’s Form 10-Q for the quarterly period ended March 31, 2006.

(6)	Incorporated by reference to the Company’s Registration Statement on Form S-3 (Registration No. 333-148406).

(7)	Incorporated by reference to the Company’s Form 10-K for the ~~fiscal~~ year ended December 31, ~~2006.~~2007.

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.

New Jersey	57-1150621
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

200 Executive Drive, Suite 340	07052
West Orange, NJ	(Zip Code)
(Address of principal executive offices)

PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements
	~~Condensed Consolidated Balance Sheets at September 30, 2007 and December 31, 2006 (unaudited)~~	1
	Condensed Consolidated Balance Sheets at March 31, 2008 and December 31, 2007 (unaudited)	1
	Condensed Consolidated Statements of Operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2008 and 2007 ~~and 2006~~ (unaudited)	3
	Condensed Consolidated Statement of Changes in Stockholders’ Equity for the ~~nine~~three months ended ~~September 30, 2007~~March 31, 2008 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2008 and 2007 ~~and 2006~~ (unaudited)	5
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1412
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2219
Item 4.	Controls and Procedures	2319
PART II.	OTHER INFORMATION	2319
Item 1.	Legal Proceedings	2319
Item 6.	Exhibits	2420

	September 30,		December 31,		March 31,		December 31,
	2007		2006		2008		2007

ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	3,537	$	6,461	$	5,620	$	3,502
Restricted cash		1,532		920
Accounts receivable, less allowance of $12,328 and $11,456 at September 30, 2007 and December 31, 2006, respectively		20,353		20,473
Accounts receivable, less allowance of $10,978 and $11,244 at March 31, 2008 and December 31, 2007, respectively						19,616		23,286
Inventories		2,694		2,438		2,582		2,540
Deferred income taxes		4,879		4,827
Deferred income taxes, net						4,500		4,575
Due from federal programs		73		-		-		6,087
Prepaid income taxes						3,081		-
Prepaid expenses and other current assets		3,088		3,049		3,645		3,771
Prepaid income taxes		5,669		-
Total current assets		41,825		38,168		39,044		43,761

PROPERTY, EQUIPMENT AND FACILITIES - At cost, net of accumulated depreciation and amortization of $79,078 and $72,870 at September 30, 2007 and December 31, 2006, respectively		101,061		94,368
PROPERTY, EQUIPMENT AND FACILITIES - At cost, net of accumulated depreciation and amortization of $82,362 and $82,931 at March 31, 2008 and December 31, 2007, respectively						108,248		106,564

OTHER ASSETS:
Noncurrent accounts receivable, less allowance of $244 and $159 at March 31, 2008 and December 31, 2007, respectively						2,467		1,608
Deferred finance charges		876		1,019		779		827
Pension plan assets, net		1,139		1,107		1,713		1,696
Deferred income taxes, net		5,052		2,688		6,068		5,500
Goodwill		82,860		84,995		82,714		82,714
Noncurrent accounts receivable, less allowance of $161 and $84 at September 30, 2007 and December 31, 2006, respectively		1,451		723
Other assets, net		3,085		3,148		3,219		3,513
Total other assets		94,463		93,680		96,960		95,858
TOTAL	$	237,349	$	226,216
TOTAL ASSETS					$	244,252	$	246,183

	September 30,			December 31,			March 31,			December 31,
	2007			2006			2008			2007

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and lease obligations	$	206		$	91		$	189		$	204
Unearned tuition		34,605			33,150			31,136			34,810
Accounts payable		14,543			12,118			13,527			13,721
Accrued expenses		12,223			10,335			10,739			10,079
Advance payments of federal programs		-			557			105			-
Income taxes payable		-			2,860			-			1,460
Other short-term liabilities		1,711			-			1,106			1,439
Total current liabilities		63,288			59,111			56,802			61,713

NONCURRENT LIABILITIES:
Long-term debt and lease obligations, net of current portion		15,222			9,769			17,136			15,174
Other long-term liabilities		6,874			5,553			6,741			6,829
Total liabilities		85,384			74,433			80,679			83,716

COMMITMENTS AND CONTINGENCIES (Note 12)
COMMITMENTS AND CONTINGENCIES (Note 11)

STOCKHOLDERS' EQUITY:
Preferred stock, no par value - 10,000,000 shares authorized, no shares issued and outstanding at September 30, 2007 and December 31, 2006		-			-
Common stock, no par value - authorized 100,000,000 shares at September 30, 2007 and December 31, 2006, issued and outstanding 25,506,566 shares at September 30, 2007 and 25,450,695 shares at December 31, 2006		120,327			120,182
Preferred stock, no par value - 10,000,000 shares authorized, no shares issued and outstanding at March 31, 2008 and December 31, 2007								-			-
Common stock, no par value - authorized 100,000,000 shares at March 31, 2008 and December 31, 2007, issued and outstanding 25,986,648 shares at March 31, 2008 and 25,888,348 shares at December 31, 2007								120,441			120,379
Additional paid-in capital		9,206			7,695			13,661			12,378
Deferred compensation		(561	)		(467	)		(3,951	)		(3,228	)
Retained earnings		25,404			26,784			35,508			35,024
Accumulated other comprehensive loss		(2,411	)		(2,411	)		(2,086	)		(2,086	)
Total stockholders' equity		151,965			151,783			163,573			162,467
TOTAL	$	237,349		$	226,216
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY							$	244,252		$	246,183

												Accumulated
					Additional							Other
	Common Stock				Paid-in		Deferred			Retained		Comprehensive
	Shares		Amount		Capital		Compensation			Earnings		Loss			Total
BALANCE - December 31, 2007		25,888,348	$	120,379	$	12,378	$	(3,228	)	$	35,024	$	(2,086	)	$	162,467
Net income		-		-		-		-			484		-			484
Stock-based compensation expense
Restricted stock		80,000		-		960		(723	)		-		-			237
Stock options		-		-		321		-			-		-			321
Tax benefit of options exercised		-		-		2		-			-		-			2
Exercise of stock options		18,300		62		-		-			-		-			62
BALANCE - March 31, 2008		25,986,648	$	120,441	$	13,661	$	(3,951	)	$	35,508	$	(2,086	)	$	163,573

										Accumulated
					Additional					Other
	Common Stock				Paid-in		Deferred			Comprehensive			Retained
	Shares		Amount		Capital		Compensation			Loss			Earnings			Total
BALANCE - December 31, 2006		25,451	$	120,182	$	7,695	$	(467	)	$	(2,411	)	$	26,784		$	151,783
Net loss		-		-		-		-			-			(1,280	)		(1,280	)
Initial adoption of new accounting pronouncement (Note 2)		-		-		-		-			-			(100	)		(100	)
Issuance of restricted stock and amortization of deferred compensation		23		-		320		(94	)		-			-			226
Stock-based compensation expense		-		-		1,123		-			-			-			1,123
Tax benefit of options exercised		-		-		68		-			-			-			68
Exercise of stock options		33		145		-		-			-			-			145
BALANCE - September 30, 2007		25,507	$	120,327	$	9,206	$	(561	)	$	(2,411	)	$	25,404		$	151,965

	Balances Before Adoption of Statement 158		Adjustments			Balances After Adoption of Statement 158
Pension plan assets, net	$	5,169	$	(4,062	)	$	1,107
Deferred income taxes		1,037		1,651			2,688
Accumulated other comprehensive income		-		2,411			2,411

	Three Months Ended
	March 31, 2007
Revenues	$	1,972
Operating expenses		(3,167	)
		(1,195	)
Benefit for income taxes		507
Loss from discontinued operations	$	(688	)

	Nine months ended September 30, 2006
	Historical 2006		Pro forma impact FLA 2006			Pro forma 2006

Revenues	$	227,171	$	7,148		$	234,319
Net income from continuing operations	$	7,293	$	(302	)	$	6,991

Earnings per share from continuing operations- basic	$	0.29				$	0.22
Earnings per share from continuing operations- diluted	$	0.28				$	0.22

Goodwill balance as of December 31, 2006	$	84,995
Goodwill impairment		(2,135	)
Goodwill balance as of September 30, 2007	$	82,860

		At March 31, 2008						At December 31, 2007
	Weighted Average Amortization Period (years)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Student Contracts	1	$	2,215	$	2,215	$	-	$	2,215	$	2,212	$	3
Trade name	Indefinite		1,270		-		1,270		1,270		-		1,270
Accreditation	Indefinite		307		-		307		307		-		307
Curriculum	10		700		225		475		700		208		492
Non-compete	5		201		75		126		201		65		136
Total		$	4,693	$	2,515	$	2,178	$	4,693	$	2,485	$	2,208

Revenue	$	727
Operating loss		(2,359	)
Impairment of long-lived assets		(94	)
Retention bonuses paid to staff		(153	)
Present value of non-cancelable lease commitments		(1,999	)
Other commitments		(170	)
Loss from discontinued operations		(4,048	)
Benefit for income taxes		(1,717	)
Net loss from discontinued operations	$	(2,331	)

Exhibit Number		Description

3.1		Amended and Restated Certificate of Incorporation of the Company (1).

3.2		Amended and Restated By-laws of the Company (2).

4.1		Stockholders’ Agreement, dated as of September 15, 1999, among Lincoln Technical Institute, Inc., Back to School Acquisition, L.L.C., and Five Mile River Capital Partners ~~LLC.~~LLC (1).

4.2		Letter agreement, dated August 9, 2000, by Back to School Acquisition, L.L.C., amending the Stockholders’ Agreement (1).

4.3		Letter agreement, dated August 9, 2000, by Lincoln Technical Institute, Inc., amending the Stockholders’ Agreement (1).

4.4		Management Stockholders Agreement, dated as of January 1, 2002, by and among Lincoln Technical Institute, Inc., Back to School Acquisition, L.L.C. and the Stockholders and other holders of options under the Management Stock Option Plan listed therein (1).

4.5		Assumption Agreement and First Amendment to Management Stockholders Agreement, dated as of December 20, 2007, by and among Lincoln Educational Services Corporation, Lincoln Technical Institute, Inc., Back to School Acquisition, L.L.C. and the Management Investors parties therein (6).

4.6		Registration Rights Agreement between the Company and Back to School Acquisition, L.L.C. (2).

~~4.6~~4.7		Specimen Stock Certificate evidencing shares of common stock (1).

10.1		Credit Agreement, dated as of February 15, 2005, among the Company, the Guarantors from time to time parties thereto, the Lenders from time to time parties thereto and Harris Trust and Savings Bank, as Administrative Agent (1).

10.2		Amended and Restated Employment Agreement, dated as of February 1, 2007, between the Company and David F. Carney ~~(4)~~(3).

10.3	~~Amended~~	Separation and ~~Restated Employment~~Release Agreement, dated as of ~~February 1,~~October 15, 2007, between the Company and Lawrence E. Brown (4).

10.4		Amended and Restated Employment Agreement, dated as of February 1, 2007, between the Company and Scott M. Shaw ~~(4)~~(3).

10.5		Amended and Restated Employment Agreement, dated as of February 1, 2007, between the Company and Cesar Ribeiro ~~(4)~~(3).

10.6		Amended and Restated Employment Agreement, dated as of February 1, 2007, between the Company and Shaun E. McAlmont ~~(4)~~(3).

10.7		Lincoln Educational Services Corporation 2005 Long Term Incentive Plan (1).

10.8		Lincoln Educational Services Corporation 2005 Non Employee Directors Restricted Stock Plan (1).

10.9		Lincoln Educational Services Corporation 2005 Deferred Compensation Plan (1).

10.10		Lincoln Technical Institute Management Stock Option Plan, effective January 1, 2002 (1).

10.11		Form of Stock Option Agreement, dated January 1, 2002, between Lincoln Technical Institute, Inc. and certain participants (1).

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2007			2006			2007			2006

REVENUES	$	86,566		$	81,911		$	237,480		$	227,171
COSTS AND EXPENSES:
Educational services and facilities		37,053			34,944			104,540			96,093
Selling, general and administrative		41,434			41,394			124,075			117,684
Gain on sale of assets		-			(7	)		(15	)		(7	)
Total costs & expenses		78,487			76,331			228,600			213,770
OPERATING INCOME		8,079			5,580			8,880			13,401
OTHER:
Interest income		66			82			149			860
Interest expense		(686	)		(696	)		(1,840	)		(1,740	)
Other income (loss)		26			(200	)		26			(130	)
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		7,485			4,766			7,215			12,391
PROVISION FOR INCOME TAXES		3,115			1,978			3,008			5,098
NET INCOME FROM CONTINUING OPERATIONS		4,370			2,788			4,207			7,293
LOSS FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES		(2,331	)		(556	)		(5,487	)		(1,333	)
NET INCOME (LOSS)	$	2,039		$	2,232		$	(1,280	)	$	5,960
Basic
Earnings per share from continuing operations	$	0.17		$	0.11		$	0.17		$	0.29
Loss per share from discontinued operations		(0.09	)		(0.02	)		(0.22	)		(0.05	)
Net income (loss) per share	$	0.08		$	0.09		$	(0.05	)	$	0.24
Diluted
Earnings per share from continuing operations	$	0.17		$	0.11		$	0.16		$	0.28
Loss per share from discontinued operations		(0.09	)		(0.02	)		(0.21	)		(0.05	)
Net income (loss) per share	$	0.08		$	0.09		$	(0.05	)	$	0.23
Weighted average number of common shares outstanding:
Basic		25,503			25,410			25,482			25,300
Diluted		26,049			26,120			26,029			26,081

		As of September 30, 2007											At March 31, 2008
		Stock Options Outstanding						Stock Options Exercisable					Stock Options Outstanding					Stock Options Exercisable
Range of Exercise Prices	Range of Exercise Prices	Shares		Contractual Weighted Average life (years)		Weighted Average Price		Shares		Weighted Exercise Price		Range of Exercise Prices	Shares		Contractual Weighted Average Life (years)	Weighted Average Price		Shares		Weighted Exercise Price
$	1.55		50,898		1.73	$	1.55		50,898	$	1.55	1.55		50,898	1.22	$	1.55		50,898	$	1.55
$	3.10		883,848		4.28		3.10		876,808		3.10
$	4.00-$13.99		215,500		8.89		11.10		19,400		5.62
$	14.00-$19.99		563,708		7.47		15.28		234,209		14.77
$	20.00-$25.00		127,500		6.93		22.66		67,900		22.99
												3.10		634,257	3.79		3.10		634,257		3.10
			1,841,454		5.91		9.08		1,249,215		6.35	4.00-13.99		293,500	8.92		11.41		80,513		10.01
												14.00-19.99		464,208	7.01		15.28		276,159		14.73
												20.00-25.00		117,500	6.36		22.88		71,600		23.14
														1,560,363	5.82		9.73		1,113,427		7.70


10.12		Form of Stock Option Agreement under our 2005 Long Term Incentive Plan (7).

10.13		Form of Restricted Stock Agreement under our 2005 Long Term Incentive Plan (7).

10.14		Management Stock Subscription Agreement, dated January 1, 2002, among Lincoln Technical Institute, Inc. and certain management investors (1).

~~10.13~~10.15		Stockholder’s Agreement among Lincoln Educational Services Corporation, Back to School Acquisition L.L.C., Steven W. Hart and Steven W. Hart 2003 Grantor Retained Annuity Trust (2).

~~10.14~~10.16		Stock Purchase Agreement, dated as of March 30, 2006, among Lincoln Technical Institute, Inc., and Richard I. Gouse, Andrew T. Gouse, individually and as Trustee of the Carolyn Beth Gouse Irrevocable Trust, Seth A. Kurn and Steven L. Meltzer ~~(3)~~(5).

31.1 *		Certification of Chairman & Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 *		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32 *		Certification of Chairman & Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

	LINCOLN EDUCATIONAL SERVICES CORPORATION


Date: May 8, 2008	By:	/s/ Cesar Ribeiro
		Cesar Ribeiro
		Chief Financial Officer
		(Principal Accounting and Financial Officer)