<PAGE>

                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                  FORM 10-QSB

                                  (Mark One)

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

               For the quarterly period ended September 30, 2001

                                      OR

           [_] 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 0-29615

                       COMPASS KNOWLEDGE HOLDINGS, INC.
            (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

           NEVADA                                             87-0471549
(STATE OR OTHER JURISDICTION OF                             (IRS EMPLOYER
 INCORPORATION OR ORGANIZATION)                         IDENTIFICATION NUMBER)

                          2710 REW CIRCLE, SUITE 100
                             OCOEE, FLORIDA 34761
          (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES INCLUDING ZIP CODE)

                                (407) 573-2000
             (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

                                (407) 656-7585
             (REGISTRANT'S FACSIMILE NUMBER, INCLUDING AREA CODE)

                           WWW.COMPASSKNOWLEDGE.COM
                        (REGISTRANT'S WEBSITE ADDRESS)


     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.

[X] Yes   [_] No

     There were 15,841,564 shares outstanding of the Registrant's common stock,
$0.001 par value, as of November 6, 2001.

<PAGE>

                       COMPASS KNOWLEDGE HOLDINGS, INC.
                                  FORM 10-QSB
                   For the Quarter ended September 30, 2001

<TABLE>
<S>                                                                <C>
PART I - Financial Information

Item 1   Financial Statements

         Consolidated Balance Sheet as of September 30,
         2001 and December 31, 2000                                  3

         Consolidated Statements of Operations for the Three
         and Nine Months ended September 30, 2001 and 2000           4

         Consolidated Statements of Cash Flows for the Nine
         Months Ended September 30, 2001 and 2000                    5

         Notes to Financial Statements                               6

Item 2   Management's Discussion and Analysis of Results
         of Operations and Financial Condition                       7

PART II - Other Information

Item 2   Changes in Securities                                      18

Item 5   Other Information                                          18

Item 6   Exhibits and Reports on Form 8-K                           19

         Signatures                                                 19
</TABLE>

                                      2
<PAGE>

                         PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

               COMPASS KNOWLEDGE HOLDINGS, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

                AS OF SEPTEMBER 30, 2001 AND DECEMBER 31, 2000

<TABLE>
<CAPTION>
                                                                                 September 30, 2001       December 31, 2000
                                                                                 ------------------       -----------------
                                        ASSETS                                      (Unaudited)              (Audited)
                                        ------
         <S>                                                                     <C>                      <C>
         CURRENT ASSETS:
             Cash                                                                         $ 740,993               $ 840,785
             Accounts receivable, net of allowance                                          517,198                  45,074
             Prepaid expenses                                                               203,506                 108,737
             Other assets, net                                                              426,347                 446,904
                                                                                     --------------           -------------
                 Total current assets                                                     1,888,044               1,441,500

         PROPERTY AND EQUIPMENT, net                                                        283,733                 280,413

         GOODWILL, net                                                                    4,233,326               3,278,948

         OTHER ASSETS, net                                                                  899,043                 704,616
                                                                                     --------------           -------------
                 Total assets                                                           $ 7,304,146             $ 5,705,477
                                                                                     ==============           =============

                           LIABILITIES AND STOCKHOLDERS' EQUITY
                           ------------------------------------
         CURRENT LIABILITIES:
             Accounts payable and accrued expenses                                        $ 654,096               $ 371,518
             Deferred student fees                                                        1,449,526                 467,032
             Note payable-current portion                                                   100,000                       -
                                                                                     --------------           -------------
                 Total current liabilities                                                2,203,622                 838,550

             Long term deferred student fees                                                  3,541                       -
                                                                                     --------------           -------------
                 Total liabilities                                                        2,207,163                 838,550

         STOCKHOLDERS' EQUITY:
             Preferred stock, 5,000,000 shares authorized,                                1,667,026               1,667,026
                 2,000 shares issued and outstanding
             Common stock, $0.001 par value; 50,000,000                                      16,023                  14,875
                 shares authorized, 15,841,564 and 14,875,000 shares issued and
                 outstanding at September 30, 2001 and December 31, 2000
                 respectively
             Additional paid-in-capital                                                   6,066,666               4,571,688
             Unearned compensation                                                           (2,139)                 (7,574)
             Accumulated deficit                                                         (2,559,968)             (1,379,088)
             Treasury Stock at cost 181,250 shares                                          (90,625)                      -
                                                                                     --------------           -------------
                 Total stockholders' equity                                               5,096,983               4,866,927
                                                                                     --------------           -------------
                 Total liabilities and stockholders' equity                              $ 7,304,146             $ 5,705,477
                                                                                     ==============           =============
</TABLE>

  The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                       3
<PAGE>

                COMPASS KNOWLEDGE HOLDINGS, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

     FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000

<TABLE>
<CAPTION>
                                                                       For the Three Months                For the Nine Months
                                                                        Ended September 30,                Ended September 30,
                                                                    ----------------------------      -----------------------------
                                                                        2001             2000             2001              2000
                                                                        ----             ----             ----              ----
<S>                                                                 <C>               <C>             <C>               <C>
TOTAL STUDENT FEE REVENUE
        Net student fee revenue from degree programs                $   740,432      $   502,519      $  1,943,611      $ 1,657,708
        Gross student fee revenue from non-degree programs              102,653          118,147           543,808          384,228
        Gross revenue from subscriptions and consulting services        533,357          178,794         1,356,190          178,794
        Other revenue                                                     1,311              791            13,365            6,048
                                                                    -----------      -----------      ------------      -----------
                    Total revenue                                     1,377,753          800,251         3,856,974        2,226,778

INSTRUCTION COSTS AND SERVICES                                          342,653          231,630         1,274,392          542,001
                                                                    -----------      -----------      ------------      -----------
                    Gross profit                                      1,035,099          568,621         2,582,582        1,684,777
                                                                    -----------      -----------      ------------      -----------

OPERATING EXPENSES
        Selling and promotional                                         188,368          207,248           540,104          418,557
        General and administrative                                      968,958          993,919         3,131,540        2,076,935
                                                                    -----------      -----------      ------------      -----------
                    Total operating expenses                          1,157,326        1,201,167         3,671,644        2,495,492
                                                                    -----------      -----------      ------------      -----------

LOSS FROM OPERATIONS                                                   (122,227)        (632,546)       (1,089,062)        (810,715)
                                                                    -----------      -----------      ------------      -----------

OTHER INCOME (EXPENSE)
        Interest income                                                   4,060           44,167            22,748          195,770
        Interest expense                                                 (3,000)               -            (9,566)            (155)
                                                                    -----------      -----------      ------------      -----------
                    Total other income                                    1,060           44,167            13,182          195,615
                                                                    -----------      -----------      ------------      -----------

(LOSS) INCOME BEFORE PREFERRED DIVIDENDS                               (121,167)        (588,379)       (1,075,880)        (615,100)

LESS: PREFERRED STOCK DIVIDENDS                                         (35,000)         (35,000)         (105,000)        (109,822)
                                                                    -----------      -----------      ------------      -----------

NET (LOSS) INCOME AVAILABLE TO COMMON STOCKHOLDERS                  $  (156,167)     $  (623,379)     $ (1,180,880)     $  (724,922)
                                                                    ===========      ===========      ============      ===========

EARNINGS PER SHARE
        Basic                                                       $    (0.010)     $    (0.042)     $     (0.077)     $    (0.049)
                                                                    ===========      ===========      ============      ===========
        Diluted                                                     $    (0.010)     $    (0.040)     $     (0.077)     $    (0.046)
                                                                    ===========      ===========      ============      ===========

WEIGHTED AVERAGE SHARES OUTSTANDING
        Basic                                                        15,676,482       14,832,880        15,336,635       14,777,828
                                                                    ===========      ===========      ============      ===========
        Diluted                                                      15,676,482       15,408,491        15,336,635       15,643,638
                                                                    ===========      ===========      ============      ===========
</TABLE>


   The accompanying notes are an integral part of the consolidated financial
                                   statements

                                       4
<PAGE>

               COMPASS KNOWLEDGE HOLDINGS, INC. AND SUBSIDIARIES

               CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

             FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001AND 2000

<TABLE>
<CAPTION>
                                                                                                          2001              2000
<S>                                                                                                   <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net (loss) income                                                                                   $ (1,075,880)    $  (615,100)
   Adjustments to reconcile net (loss) income to net cash
      provided by (used for) operating activities-
            Depreciation and amortization                                                                   967,630         376,927
            Amortization of unearned compensation                                                             5,435          23,846
            Stock-based compensation                                                                         78,469               -

            Decrease (increase) in operating assets and liabilities-
                      Accounts receivable                                                                  (472,124)        300,814
                      Provision for losses on accounts receivable                                                 -         (10,887)
                      Prepaid taxes                                                                               -         (13,600)
                      Prepaid expenses                                                                     (100,000)        (76,984)
                      Other current assets                                                                    5,231          (8,515)
                      Other long-term assets                                                                  5,291        (501,801)
                      Accounts payable and accrued expenses                                                 282,578         200,146
                      Due to related parties                                                                      -        (313,730)
                      Deferred revenue                                                                      986,035         150,493
                      Accrued Dividends                                                                           -               -
                                                                                                       ------------     -----------

                               Net cash provided by (used in) operating activities                          682,666        (488,391)
                                                                                                       ============     ===========

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchases of property and equipment                                                                     (105,096)       (149,497)
   Cash payments for content development costs                                                             (386,506)       (203,309)
   Cash payments for direct marketing costs                                                                (463,485)       (307,226)
   Acquisitions, net of cash/divestiture                                                                   (115,028)     (2,080,151)
                                                                                                       ------------     -----------
                               Net cash provided by (used in) investing activities                       (1,070,115)     (2,740,183)
                                                                                                       ============     ===========

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from issuance of common stock and warrants                                                      292,656               -
   Proceeds from issuance of note payable                                                                   100,000               -
   Payment of notes payable to stockholders                                                                       -               -
   Payment of preferred dividend                                                                           (105,000)       (109,822)
                                                                                                       ------------     -----------
                               Net cash provided by (used in) financing activities                          287,656        (109,822)
                                                                                                       ============     ===========

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                                        (99,792)     (3,338,396)

CASH AND CASH EQUIVALENTS, beginning of period                                                              840,785       4,781,033
                                                                                                       ------------     -----------

CASH AND CASH EQUIVALENTS, end of period                                                               $    740,993     $ 1,442,637
                                                                                                       ============     ===========
Supplemental disclosure of cash flow information:
       Cash paid during the year for:
          Interest                                                                                     $      9,566     $         -
</TABLE>

  The accompanying notes are an integral part of the consolidated financial
                                  statements

                                       5
<PAGE>

               Compass Knowledge Holdings, Inc. and Subsidiaries
                  Notes to Consolidated Financial Statements


1.   Principles of Interim Statements. The following unaudited financial
     statements have been prepared pursuant to the rules and regulations of the
     Securities and Exchange Commission. Certain information and note
     disclosures which are normally included in annual financial statements
     prepared in accordance with generally accepted accounting principles have
     been omitted pursuant to those rules and regulations. The information
     presented in the unaudited consolidated financial statements reflects all
     adjustments, which are, in the opinion of the management, necessary to
     present fairly the Company's financial position and the results of
     operations for the interim periods. The consolidated format is designed to
     be read in conjunction with the Company's Form 10-KSB. For further
     information refer to the consolidated financial statements and the notes
     thereto included in the Company's Form 10-KSB for the year ended December
     31, 2000 filed with the Securities and Exchange Commission filed on March
     15, 2001.

     The results of operations for the three and nine month periods ended
     September 30, 2001 are not necessarily indicative of results to be expected
     for the entire year.

     The consolidated financial statements include the accounts of the Company
     and its subsidiaries. Intercompany balances and transactions have been
     eliminated in consolidation.

2.   As of September 30, 2001 there were 2,000 shares of Preferred Stock
     outstanding, convertible into 875,000 common shares. Also, there were
     options to purchase 2,407,200 shares of common stock and warrants to
     purchase 592,657 shares of common stock outstanding at September 30, 2001.
     The impact of the assumed conversion of the preferred stock, options and
     warrants were not included in the computation of diluted earnings per share
     because the effect of the assumed conversion had an antidilutive effect.

3.   During the quarter ended September 30, 2001, the Company granted 166,000
     options to employees of the Company to purchase common stock of the Company
     at exercise prices of $0.35 and $0.375, which will be accounted for under
     APB 25. Accordingly, no compensation expense will be recognized in the
     statement of operations, since the option price was greater or equal to the
     market value of the Company's common stock at the time of grant.

4.   Stock and option-based compensation expense decreased $11,123 to $1,812 for
     the three months ended September 30, 2001 from $12,935 for the three months
     ended September 30, 2000. The period expense was the result of amortization
     of deferred compensation resulting from granting stock options and warrants
     to an outside consultant.

5.   In accordance with Statement of Financial Accounting Standards No. 128,
     "Earnings Per Share," the Company has reported basic earnings per share and
     diluted earnings per share. The diluted weighted average common shares
     outstanding include no impact of the assumed exercise of 2,407,200 stock
     options with an exercise price of $.96 or 592,657 warrants with an exercise
     price of $0.63 per share because the effect of the assumed conversion had
     an anti-dilutive effect.

6.   No provision for income taxes has been recorded for the period ending
     September 30, 2001, as the benefit resulting from the operating loss has
     been entirely offset by a valuation allowance due to the uncertainty
     surrounding the Company's ability to realize the deferred tax assets in the
     future.

7.   On March 30, 2001, the Company entered into a loan agreement (the "Loan
     Agreement") with Cloverleaf Capital Advisors, LLC ("Cloverleaf") whereby
     Cloverleaf agreed to loan the Company $125,000 (the "Loan"). Pursuant to
     the promissory note (the "Note") issued by the

                                       6
<PAGE>

     Company in connection with the Loan, the Company agreed to repay Cloverleaf
     the principal sum loaned plus interest accruing at the rate of 12% per
     Annum as follows: Interest is due and payable on the first day of each
     month beginning May 1, 2001 and continuing on the same day of each month
     thereafter until the principal is paid in full; principal is payable as
     follows: $25,000 on or before June 1, 2001, $50,000 on or before December
     1, 2001 and $50,000 on or before June 1, 2002. As of the period ending
     September 30, 2001, Cloverleaf had loaned the Company $100,000, which has
     been classified as a current liability.

8.   Effective July 1, 2001, the Company entered into a Settlement Agreement
     with Michael Rutherford whereby Mr. Rutherford resigned as an officer and
     director of two of the Company's subsidiaries, his employment agreement
     with such subsidiaries was terminated and substantially all of the assets
     of the Company's subsidiary, Rutherford Learning Group ("RLG"), were
     conveyed to Mr. Rutherford. In connection with this transaction, Mr.
     Rutherford returned 181,250 common shares of the Company and his 10 percent
     equity interest in the Company's subsidiary, Educators' Learning Network,
     which he was provided in connection with the Company's acquisition of RLG
     in August 2000. For complete details on this transaction, please see Item
     5 of this Report.

9.   In June 2001, the Financial Accounting Standards Board issued Statements of
     Financial Accounting Standards No. 141, Business Combinations, and No. 142,
     Goodwill and Other Intangible Assets, effective for fiscal years beginning
     after December 15, 2001. Under the new rules, goodwill and intangible
     assets deemed to have indefinite lives will no longer be amortized but will
     be subject to annual impairment tests in accordance with the Statements.
     Other intangible assets will continue to be amortized over their useful
     lives.

     The Company will apply the new rules on accounting for goodwill and other
     intangible assets beginning in the first quarter of 2002. Application of
     the nonamortization provisions of the Statement is not expected to have a
     significant impact on our financial position at transition. During 2002,
     the Company will perform the first of the required impairment tests of
     goodwill and indefinite lived intangible assets as of January 1, 2002 and
     has not yet determined what the effect of these tests will be on the
     earnings and financial position of the Company.

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

     The following discussion should be read in conjunction with the more
detailed information included in our consolidated financial statements and
accompanying notes, as well as the other financial information appearing
elsewhere in this report. The following discussion may contain certain forward-
looking statements that involve risks and uncertainties. Such statements consist
of any statement other than a recitation of historical fact and can be
identified by the use of forward-looking terminology such as "may," "expect,"
"anticipate," "estimate" or "continue" or the negative thereof, other variations
thereof, or comparable terminology. Readers are cautioned not to place undue
reliance on forward-looking statements, which reflect management's opinions only
as of the date hereof. We undertake no obligation to revise or publicly release
the results of any revision to these forward-looking statements. Forward-looking
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from those reflected in such forward-looking
statements. Such statements are made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. The risks and
uncertainties we face include, but are not limited to, those discussed in the
section entitled "Risk Factors" included in this report. Readers should
carefully review these risk factors as well as other risk factors described in
other documents we file from time to time with the Securities and Exchange
Commission, including our Annual Report on Form 10-KSB for the year ended
December 31, 2000 filed with the Securities and Exchange Commission filed on
March 15, 2001.

                                       7
<PAGE>

OVERVIEW

     The following discussion of our results of operations and financial
condition should be read in conjunction with the text and consolidated financial
statements and the notes thereto as included in our Form 10-KSB for the fiscal
year ended December 31, 2000, filed with the Securities and Exchange Commission
on March 15, 2001. Our operating results for the nine month period ending
September 30, 2001 are not necessarily indicative of the results that may be
expected for the year ended December 31, 2001. The balance sheet at December 31,
2000 has been derived from the audited financial statements at that date but
does not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.

     Because of the somewhat seasonal pattern of student enrollments and the
academic calendar, which affect the results of operations and the timing of cash
inflows, we believe that comparisons of our results of operations should be made
to the corresponding period in the preceding year. Comparisons of financial
position should be made to both the end of the previous fiscal year and to the
end of the corresponding period in the preceding year. Because of the
seasonality of student enrollments, our first, second and fourth quarters have
historically represented the periods of highest revenues within a fiscal year.

RESULTS OF OPERATIONS

     Set forth below is certain of our selected consolidated financial and
operating information for the three and nine month periods ended September 30,
2001 and the comparable periods in 2000, respectively. The selected consolidated
financial information is derived from our consolidated financial statements for
such periods. The information set forth below should be read in conjunction with
Management's Discussion and Analysis of Results of Operations and Financial
Condition and our Consolidated Financial Statements and Notes thereto.

     Total revenue for the third quarter of 2001 and 2000 and for the first nine
months of 2001 and 2000 was as follows:

<TABLE>
<CAPTION>
                                                  Three Months ended                 Nine Months ended
                                                     September 30                       September 30

                                                 2001            2000              2001             2000
                                                 ----            ----              ----             ----
<S>                                          <C>             <C>               <C>              <C>
Total revenue                                $ 1,377,753     $   800,251       $ 3,856,974      $ 2,226,778
Gross profit                                 $ 1,035,099     $   568,621       $ 2,582,582      $ 1,684,777
Earnings Before Interest, Tax,
Depreciation and Amortization                $   221,868     $  (404,512)      $  (120,809)     $  (443,786)
(Loss) Income before Preferred               $  (121,167)    $  (588,379)      $(1,075,880)     $  (615,100)
Dividends
(Loss) Earnings per share, basic             $    (0.010)    $    (0.042)      $    (0.077)     $    (0.049)
(Loss) Earnings per share, diluted           $    (0.010)    $    (0.040)      $    (0.077)     $    (0.046)

Weighted average shares outstanding
                         Basic                15,676,482      14,832,880        15,336,635       14,777,828
                         Diluted              15,676,482      15,408,491        15,336,635       15,643,638
</TABLE>


                                          At September 30, 2001
                                          ----------------------

Working Capital                                 $ (315,578)
Total Current Assets                            $1,888,044
Total Property and Equipment, net               $  283,733
Total Current Liabilities                       $2,203,622
Stockholders' Equity                            $5,096,983

                                       8
<PAGE>

THREE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 2000

     Total revenues increased by $577,502, or 72.2%, to $1,377,753 for the three
months ended September 30, 2001 from $800,251 for the comparable 2000 period.
Revenues increased in degree programs and subscriptions and consulting services
compared to the year ago period. The majority of the increase is from our
subsidiary, Educators' Learning Network, Inc., formerly known as Jamita
("eLNet"), which was acquired in August 2000, which contributed $366,733 in
revenues for the three months ended September 30, 2001 compared to $178,794 in
the year ago period. ELNet's $187,939, or 105%, increase was due to an increase
in new customers sales combined with three months of revenue recognition in the
2001 period compared with two months of revenue recognition in the 2000 period.
Consulting contracts added an incremental $166,624 in revenues for the three
months ended September 30, 2001. Degree program revenue increased by $237,913,
or 47.3%, to $740,432 for the three months ended September 30, 2001 from
$502,519 for the comparable 2000 period. All degree programs had higher revenue
in the 2001 period compared to the year ago period. Non-degree program revenue
declined $15,494, or 13.1%, to $102,653 in the three months ended September 30,
2001 from $118,147 in the year ago period. The decrease in non-degree program
revenues is directly related to the postponement of a program due to travel
disruptions following the September 11, 2001 attacks on the Pentagon and World
Trade Center.

     Gross profit increased $466,478, or 82.0%, to $1,035,099 for the three
months ended September 30, 2001 from $568,621 for the comparable 2000 period,
primarily due to higher contributions from consulting contracts, degree programs
and eLNet. For the three months ended September 30, 2001, our gross profit
margin increased to 75.1%, compared to 71.1% in the comparable 2000 period,
reflecting the impact of high margin consulting revenues, partially offset by
lower eLNet margins. eLNet margins for the three months ended September 30, 2001
were 65.8%, in the year ago period margins were 91.2%, reflecting atypically low
costs in the two months following the acquisition.

     Operating expenses decreased by $43,841, or 3.6%, to $1,157,326 for the
three months ended September 30, 2001 from $1,201,167 in the comparable 2000
period. The decrease was primarily due to a year-over-year reduction in our
personnel, from 41 full time employees on September 30, 2000 to 34 full time
employees on September 30, 2001, combined with lower personnel recruitment and
travel expenses. These reductions were partially offset by higher depreciation
and amortization expenses related primarily to the acquisition of eLNet. Lower
personnel costs reflect our focus on cost control. Depreciation and the
amortization of goodwill and marketing expenses increased over the year ago
period, reflecting our aggressive efforts to grow our business.

     Net interest income decreased compared with the comparable year ago period
reflecting our allocation of cash reserves to the investments we made in people,
programs and marketing.

     As a result of the increase in sales, improvement of margins and reduction
in operating expenses, net income before dividends increased by $467,212,
resulting in a net loss before dividends of $121,167 for the three months ended
September 30, 2001 compared with a net loss before dividends of $588,379 in the
comparable 2000 period.

NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 2000

     Total revenues increased by $1,630,196 to $3,856,974 for the nine months
ended September 30, 2001 from $2,226,778 for the comparable 2000 period,
representing an increase of 73.2%. Revenues increased in all three of our
principal sources of revenue: degree programs, non-degree programs and
subscriptions and consulting services. The majority of the increase is from our
subsidiary, Educators' Learning Network, Inc., formerly known as Jamita
("eLNet"), which was acquired in August 2000, and contributed $1,029,625 in
revenues for the nine months ended September 30, 2001 compared to $178,794 in
the year ago period. The $850,831, or 476%, increase was due to nine months of
revenue recognition

                                       9
<PAGE>

in the 2001 period compared with two months of revenue recognition in the 2000
period combined with an increase in new customer sales. Consulting contracts
added incremental revenues of $291,524 for the nine months ended September 30,
2001. Degree program revenue also increased, growing by $285,904, or 17.2%, to
$1,943,612 for the nine months ended September 30, 2001 from $1,657,708 for the
comparable 2000 period. Non-degree program revenue grew $159,578, or 41.5%, to
$543,806 for the nine months ended September 30, 2001 compared to $384,228 in
the year ago period.

     Gross profit increased $897,805, or 53.3% to $2,582,582 for the nine months
ended September 30, 2001 from $1,684,777 for the comparable 2000 period. Our
gross profit reflects an $80,185 charge to write-off content, which we developed
and do not anticipate using in the near future. Excluding this write-off, gross
profit increased by $977,990, or 58.0%, to $2,662,767, primarily due to higher
contributions from eLNet and consulting contracts. For the nine months ended
September 30, 2001, our gross profit margin declined to 67.0%, compared to 75.7%
in the comparable 2000 period, primarily reflecting a higher proportion of
revenues derived from lower margin products, the write-off of content and
amortization expense related to the development of content. Excluding the write-
off, our gross profit margin would have been 69.0%.

     Operating expenses increased by $1,176,152 to $3,671,644 for the nine
months ended September 30, 2001 from $2,495,492 in the comparable 2000 period,
representing an increase of 47.1%. The increase is primarily due to higher
personnel, depreciation and amortization and contract labor costs for the nine
months ended September 30, 2001 compared to the year ago period. The expense
increases are directly related to launching and administering three new
programs, consulting engagements and initiatives initiated since June 2000. We
believe our current team of 34 full time employees on September 30, 2001, down
from 41 full time employees on September 30, 2000, is adequate to support our
planned growth for the remainder of the fiscal period.

     Net interest income decreased compared with the comparable year ago period
reflecting our allocation of cash reserves to the investments we made in people,
programs and marketing.

     As a result of the above changes, net income before dividends decreased by
$460,780, resulting in a net loss before dividends of $1,075,880 for the nine
months ended September 30, 2001 compared with a net loss before dividends of
$615,100 in the comparable 2000 period.

LIQUIDITY AND CAPITAL RESOURCES

     Our cash amounted to $740,993 at September 30, 2001, compared to $840,785
at December 31, 2000. The net cash provided by our operations was $682,666 for
the nine months ended September 30, 2001, compared to operations using $488,391
in the comparable 2000 period.

     We used $1,070,115 in investing activities during the nine months ended
September 30, 2001, compared with $2,740,183 in the comparable 2000 period, to
develop and market our programs. In the year ago period, $2,080,151 of the use
of cash was related to two acquisitions completed during that period.

     We received $287,656 in financing activities for the nine months ended
September 30, 2001 compared with a use of $109,822 in the comparable 2000
period. The increase is primarily due to our raising $292,656 through a board
authorized private placement of our common stock and warrants to purchase our
common stock pursuant to an exemption from registration under The Securities Act
of 1933. We first offered these securities for sale to certain accredited
investors on February 26, 2001, and through September 30, 2001 have sold 585,315
shares of restricted common stock at $0.50 per share and have sold 292,657
warrants at an exercise price of $0.50 per share. This private offering was
closed in July 2001, and we expect to receive the balance of the unpaid
subscriptions during the fourth quarter of 2001.

SEASONALITY

     We experience seasonality in our results of operations primarily as a
result of changes in the level

                                      10
<PAGE>

of student enrollments and course completion. We typically offer courses during
all three semesters (fall -August through December; spring - December through
April; and summer - May through August) of the school year. The summer semester
typically experiences lower enrollment of new students as well as an increase in
the number of students taking a "break" from their programs thereby resulting in
lower revenues. Accordingly, costs and expenses historically increase as a
percentage of revenues as a result of certain fixed costs not significantly
affected by the seasonal summer semester declines in net revenues. Changes in
the start and finish dates of courses also impact the quarter in which revenue
is recognized and impact comparability on a year-to-year basis. We anticipate
that these seasonal trends will continue in the future.

RISK FACTORS

     An investment in our common stock involves a high degree of risk. Before
deciding to invest in shares of our common stock, please carefully consider the
following risk factors and the other information in this report as well as other
risk factors described in other documents we file from time to time with the
Securities and Exchange Commission, including our Annual Report on Form 10-KSB.
Any of the following risks could seriously harm our business and results of
operations. As a result, the trading price of our common stock could decline,
and you could lose part or all of your investment.

A Failure to Manage Our Growth Could Adversely Affect Our Business

     Our strategy is to grow, both internally and through acquisitions, as
aggressively as our cash reserves and anticipated cash flow will allow. This
strategy will place significant demands on our financial, operational, and
management resources and will expose us to a variety of risks. Our growth has
resulted in an increase in the level of responsibility for our key personnel.
Expenses arising from our efforts to integrate our acquisitions, develop new
products, or increase our existing market penetration could have an adverse
impact on our business, results of operations, and financial condition.

     Our efforts to integrate our acquisitions and incorporate and manage our
new product offerings and services have been slower than expected. As a result,
these acquisitions have required our management to develop expertise in new
areas and to attract new customers, both of which have taken considerable
management time and resources. While management believes we have crested the
learning curve with respect to the integration of these businesses and their
products and services no assurance can be given as to whether or not such
operations will be profitable in the near term.

We Have Restructured Our Operations

     Last fall we began restructuring our operations to primarily concentrate on
our core competencies to provide, among other things, e-learning assessment
services, specialized expertise in content repurposing and development and
marketing in our primary market niches and by adding certain additional vertical
markets and product offerings. Management will continue to monitor these
adjustments in fiscal 2001 and will make additional adjustments within our
organization, as necessary. The transition issues associated with this
restructuring may recur, and our revenue growth rates have declined as a result
of this restructuring.

We May Engage in Joint Ventures, Strategic Alliances and Acquire Businesses, and
We May Be Unable to Integrate any New Operations, Technologies, Products or
Personnel

     As part of our business strategy, we have and will continue to engage in
joint ventures and strategic alliances as well as to continue to acquire
businesses that offer complementary products, services and technologies. Any
ventures, alliances, acquisitions or investments will be accompanied by certain
risks. These risks include, among other things, the:

  .  expenditures of cash which may reduce our cash reserves to critical levels,
  .  difficulty of assimilating the operations and personnel of the targeted
     businesses,
  .  potential disruption of our ongoing business,

                                      11
<PAGE>

  .  distraction of management from our core business,
  .  inability of management to maximize our financial and strategic position,
  .  increase in general and administrative expenses,
  .  expansion of management information systems,
  .  need for greater facilities requirements,
  .  increase in overall headcount,
  .  maintenance of uniform standards, controls, procedures and policies, and
  .  impairment of relationships with employees and clients as a result of any
     integration of new management personnel.

     Any of these factors could have a material adverse effect on our business,
results of operations or financial conditions, particularly in the case of a
larger acquisition.

     Consideration paid for future acquisitions could be in the form of:

  .  cash,
  .  stock,
  .  rights to purchase stock,
  .  convertible promissory notes, or
  .  a combination of the above types of consideration.

     While we intend to participate in only accretive transactions, dilution of
existing stockholders and to earnings per share may result in connection with
any such future acquisitions. Our integration processes may also not be
successful and the anticipated benefits of any past or future acquisition may
not be realized.

Some of Our Products Have a Lower Gross Margin Than Others

     Some of our revenues are derived from products such as our subscription
based and non-degree programs which, as a percentage of revenues, currently
require a higher level of distribution and support expenditures compared to some
of our degree programs. To the extent that revenues generated from these
products become a greater percentage of our total revenues, our operating
margins will decrease, unless the expenses associated with these products
decline as a percentage of revenues.

Our Limited Operating History Does Not Afford Significant Financial Data Upon
Which To Forecast Quarterly Revenue Or Operating Results, And Our Operating
Results May Fluctuate From Quarter To Quarter Due To The Nature Of Our Business,
Which Could Have A Negative Impact On The Price Of Our Common Stock

     As a result of our limited operating history with respect to our
subscriptions and consulting services business, we may not have sufficient
historical financial data upon which to accurately forecast quarterly revenue
and operating results with respect to this portion of our business. If our
quarterly revenue or operating results fall below the expectations of investors
or securities analysts, the price of our common stock could fall substantially.
Our quarterly operating results may fluctuate as a result of a variety of
factors, including:

  .  seasonality - due to the budget and purchasing cycles of our customers,
  .  the expenses we incur to support the anticipated growth of our business,
     and
  .  orders and cash collections being less or slower than anticipated.

     Most of our expenses do not vary directly with revenue and are difficult to
adjust in the short term. As a result, if revenue or cash collections for a
particular quarter is below our expectations, we could not proportionately
reduce operating expenses for that quarter. Any such revenue or cash collections
shortfall would, therefore, have a disproportionate effect on our expected
operating results for that quarter.

                                      12
<PAGE>

The Variability And Length Of The Sales Cycle For Some Of Our Products May Make
Our Operating Results Unpredictable And Volatile

     The period between our initial contact with a potential customer and
content provider and the purchase of our products by that customer or students,
as the case may be, typically ranges from three to 12 months. Factors that
contribute to our long sales cycle, include:

  .  our need to educate potential customers about the benefits of our products
     and services,
  .  competitive evaluations by customers,
  .  the customers' internal budgeting and approval processes, and
  .  the fact that some customers view education products as discretionary
     spending, rather than essential purchases.

     Our long sales cycle makes it difficult for us to predict if and when a
potential sale will actually occur. In addition, if a sale is delayed from the
quarter in which we expect it to occur, our operating results for that quarter
would be adversely affected.

We Could Be Subjected To Legal Actions Based Upon The Content We Obtain From
Third Parties Over Whom We Exert Limited Control

     It is possible that we could become subject to legal actions based upon
claims that our course content infringes the rights of others or is erroneous.
Any such claims, with or without merit, could subject us to costly litigation
and the diversion of our financial resources and management personnel. The risk
of such claims is exacerbated by the fact that our course content is provided by
third parties over whom we exert limited control. Further, if those claims are
successful, we may be required to alter the content, pay financial damages or
obtain content from others.

Our Stock Price May Continue To Be Volatile

     The market price of our common stock has experienced significant
fluctuations and may continue to fluctuate significantly. The trading price of
our common stock could be subject to wide fluctuations in response to various
factors, some of which are beyond our control, including:

  .  adverse market conditions,
  .  actual or anticipated variations in quarterly results of operations,
  .  changes in our intellectual property rights or our competitors,
  .  announcements of technological innovations,
  .  our introduction or elimination of new programs, products or services or
     changes in product pricing by our competitors,
  .  changes in financial estimates,
  .  announcement of significant acquisitions, strategic partnerships, joint
     ventures or capital commitments by us or our competitors,
  .  additions or departures of key personnel, and
  .  regulatory changes or interpretations.

     The stock prices for many companies in the eLearning education sectors have
experienced wide fluctuations, which often have been unrelated to their
operating performance. We believe that these fluctuations have adversely
affected the market price of our common stock.

The Market For Distance Learning In Higher Education Continues To Develop

     The market for distance learning continues to develop, but still remains
only a small portion of the overall higher education market. Our success will
depend upon colleges, universities, associations and

                                      13
<PAGE>

companies continuing to implement distance learning programs. We presently have
entered into contracts with only five universities. Any failure of online
learning to gain continuing market acceptance would have a material adverse
effect on our business and financial results.

We Operate In A Highly Competitive Market And We May Not Have Adequate Resources
To Compete Successfully

     The distance learning market continues to quickly evolve and is subject to
rapid technological change and is extremely competitive in nature. Our
competitors vary in size and in the scope and breadth of the products and
services they offer. Competition is most intense from colleges and universities.
Some colleges and universities construct online learning systems utilizing in-
house personnel and creating their own software or purchasing software
components from a vendor. We also face significant competition from a variety of
companies including:

  .  other companies which seek to offer a complete solution including software
     and services,
  .  companies which provide large libraries of content,
  .  software companies with specific products for the college and university
     market,
  .  systems integrators, and
  .  hardware vendors.

     Other competitors in this market include a wide range of education and
training providers. These companies use video, cable, correspondence, CD-ROM,
computer-based training, and online training.

     We believe that the level of competition will continue to increase as
current competitors increase the sophistication of their offerings and as new
participants enter the market. Many of our current and potential competitors
have longer operating histories, larger customer bases, greater brand
recognition and significantly greater financial, marketing and other resources
than we do and may enter into strategic or commercial relationships with larger,
more established and well-financed companies. Certain competitors may be able to
secure alliances with customers and affiliates on more favorable terms, devote
greater resources to marketing and promotional campaigns and devote
substantially more resources to systems development than we can. In addition,
new technologies and the expansion of existing technologies may increase the
competitive pressures we face. Increased competition may result in reduced
operating margins, our inability to achieve projected market share and brand
recognition. We may not be able to compete successfully against current and
future competitors, and competitive pressures we face could have a material
adverse effect on our business and financial results.

Our Market Is Characterized By Rapid Change

     The market for our products and services is characterized by rapid
technological change, business model modifications, changes in customer demands
and evolving industry standards. The introduction of services embodying new
technologies, the convergence of technology companies with content and service
companies and the emergence of new industry standards can render our existing
products and services obsolete and unmarketable. To succeed, we must address the
increasingly sophisticated needs of higher education by improving our business
model, engaging in high growth activities and providing products and services
that keep pace with technological developments, emerging industry standards and
customer requirements.

Our Operating Results Are Likely To Fluctuate Significantly And May Be Below
Expectations

     The following factors may affect our quarterly, as well as our annual,
operating results:

  .  our ability to attract and retain colleges, universities, associations and
     companies,
  .  our ability to successfully implement our proposed distributed learning
     programs,
  .  the amount and timing of operating costs and capital expenditures relating
     to expansion of our business,
  .  our introduction of new or enhanced services and products, and similar
     introductions by our

                                      14
<PAGE>

     competitors,
  .  our ability to upgrade and develop our systems and infrastructure,
  .  our ability to attract, motivate and retain personnel, and
  .  technical difficulties in delivering our services.

     As a result, we believe that our prior sales and operating results may not
necessarily be meaningful, and that such comparisons may not be accurate
indicators of future performance. Just because our business grew during the last
two years, we can give no assurance that these percentages will reflect the
ongoing pattern of our business.

History of Losses

     Prior to expanding our infrastructure and business in fiscal year 2000 the
Company was profitable, but during the fiscal year 2000 and for the first three
quarters of 2001 the Company has been unable to generate revenue sufficient to
offset these additional expenses and charges. Consequently, the Company
sustained substantial losses in 2000 and additional losses for the nine months
ending September 30, 2001. Net losses for the twelve (12) months ended December
31, 2000 were approximately $1,154,511 ($1,299,335 after preferred dividends) or
$.087 per share and net losses for the nine (9) months ending September 30, 2001
were approximately $1,075,880 ($1,180,880 after preferred dividends) or $0.077
per share. The loss is primarily due to the growth in our personnel, from 17
full-time employees on December 31, 1999 to 34 full time employees as of
September 30, 2001, which resulted in a significant increase in payroll and
other employee related costs as well as higher infrastructure related expenses.
The increases in personnel and infrastructure costs are directly related to
administering the new programs launched during the past twelve months as well as
developing new programs and partnerships. We believe our current team is
adequate to support our planned growth for the remainder of this fiscal period.
Travel expenses, amortization of goodwill, primarily related to our August 2000
acquisition of eLNet marketing expenses, and professional fees increased over
the year ago period, reflecting our aggressive efforts to grow our business.
There can be no assurance that the Company will ever achieve the level of
revenues needed to be profitable in the future or, if profitability is achieved,
that it will be sustained.

Potential Need for Additional Financing

     We believe that our current cash position, together with the expected
revenues of the Company will be sufficient to provide the Company with capital
sufficient to fund our working capital needs for the fiscal year 2001. However,
it may be necessary, in order to expand our business and consummate acquisitions
that we raise additional capital. If the Company needs to raise additional
financing, there can be no assurance that such funds will, in fact, be available
or if available will be sufficient in the near term or that conditions and
circumstances described herein may not result in subsequent cash requirements by
the Company or that future funds will be sufficient to meet growth. In the event
of such developments, attaining financing under such conditions may not be
possible, or even if additional capital may be otherwise available, the terms on
which such capital may be available may not be commercially feasible or
advantageous.

     Considering our current cash position as well as our projected cash flows
for fiscal 2001 including the attendant risks and contingencies associated with
the expected realization of such cash flows, we believe, based upon current
operations, business strategies and reasonable expectations and assumptions,
that our cash position will be sufficient to fund our business operations
through fiscal 2001. However, there will be limitations on our ability to
continue to develop new product offerings, expand our infrastructure and acquire
new companies and businesses for which significant amounts of cash would be
required to consummate these transactions without obtaining an infusion of
additional capital. Further, to the extent that recently developed program
offerings as well as offerings currently under development or planned do not
prove financially viable within a reasonable period of time, it is our intention
to terminate the offering and/or production of such programs. Further, to the
extent that we experience a material adverse cash position resulting from
employee and other infrastructure costs related to such termination or
discontinuation of such programs, it is our intention to take all appropriate
and reasonably necessary measures to immediately reduce and/or eliminate all
unnecessary employee and infrastructure costs and

                                      15
<PAGE>

expenses related to such terminated or discontinued programs.

Uncertainty With Respect To Technology

     The Company's ability to compete effectively in the eLearning industry will
depend on its success in buying the right technology and expanding its
technology department or maintaining a good relationship with its technology
solutions partner. There can be no assurances that the Company will have
sufficient funds to buy technology or expand its technology department with a
sufficient number of qualified personnel. Further, while the Company is in the
early stages of a strategic relationship with a technology company, no assurance
can be given that such relationship will be successful. Failure to either
acquire technology, expand our technology department with qualified personnel
and/or have a successful long-term relationship with our technology partner will
likely have a material adverse consequence on the Company and its business.

Early Stage Product Development

     Except for the Company's three (3) profitable core degree and non-degree
programs which the Company has been offering for a number of years, all but one
of the Company's offerings are less than one (1) year old or are in development.
No assurance can be given that these products and offerings can be developed
into commercially viable products, reasonably scaled or be attractive to the
marketplace. Nor can there be any assurance that these proposed products will
achieve or sustain profitability. There is, therefore, substantial risk that the
Company's proposed product development and commercialization efforts will not
prove to be successful.

Limited Marketing and Sales Capability

     The Company has limited internal business development, marketing and sales
resources and personnel. In order to market its new offerings and any products
it may develop, the Company may have to expand its marketing and sales force
with technical expertise and distribution capability (or out source such duties
to independent contractors). There can be no assurance that the Company will be
able to expand its sales and distribution capabilities or that the Company will
be successful in gaining market acceptance for any new products or offerings it
may develop. There can be no assurance that the Company will be able to recruit
and retain skilled business development, sales, marketing, service or support
personnel, that agreements with distributors will be available on terms
commercially reasonable to the Company, or at all, or that the Company's
business development, marketing and sales efforts will be successful. Failure to
successfully establish a marketing and sales organization, whether directly or
through third parties, could have a material adverse effect on the Company's
business, financial condition, cash flows, and results of operations. To the
extent that the Company arranges with third parties to market its products, the
success of such products may depend on the efforts of such third parties. There
can be no assurance that any of the Company's proposed business development, and
marketing schedules or plans can or will be met.

Authorization and Discretionary Issuance of Preferred Stock

     The Company's Articles of Incorporation authorize the issuance of "blank
check" preferred stock with such designations, rights, and preferences as may be
determined from time to time by the Board of Directors. Accordingly, the Board
of Directors is empowered, without stockholder approval, to designate and issue
additional series of preferred stock with dividend, liquidation, conversion,
voting or other rights, including the right to issue convertible securities with
no limitations on conversion, which could adversely affect the voting power or
other rights of the holders of the Company's common stock, substantially dilute
the common shareholder's interest and depress the price of the Company's common
stock. In addition, the preferred stock could be utilized, under certain
circumstances, as a method of discouraging, delaying or preventing a change in
control of the Company. Moreover, the substantial amount of outstanding options
and number of warrants, and their terms of conversion may discourage or prevent
an acquisition of the Company.

                                      16

<PAGE>

Absence of Dividends

     The Company has never paid dividends on its common stock and does not
presently intend to pay any dividends in the foreseeable future. The Company
anticipates that any funds available for payment of dividends will be re-
invested into the Company to assist the Company in furthering its business
strategy.

Possible Sales of Securities by Current Shareholders and Depressive Effect On
Market

     There are currently approximately 6,000,000 shares of the Company's common
stock outstanding which are either freely tradable or may be traded as
"restricted securities" pursuant to Rule 144 under the Securities Act. Under
Rule 144, a person who has held restricted securities for a period of one year
may sell a limited number of shares to the public in ordinary brokerage
transactions. Sales of a large number of these securities will likely have a
depressive effect on the market price of the Company's common stock.

Private Offering Exemption

     Securities of the Company have been sold to investors under a private
offering exemptions from registration available under the Securities Act and the
laws of the states in which the securities have been and will be sold. If the
Company failed to comply with the requirements of these exemptions, investors in
this offering may have the right to rescind their purchases if they so desire.
Since compliance with the exemption rules is highly technical, it is possible
that, if an investor seeks rescission, he may succeed. If a number of investors
were to successfully seek rescission, the Company would face severe financial
demands that could have a material adverse effect on the Company and the non-
rescinding shareholders.

Dependence Upon Management

     The Company and its subsidiaries will be dependent to a significant extent
on the continued efforts and abilities of its Chairman and Chief Executive
Officer, Rogers W. Kirven, Jr., its President, Daniel J. Devine and other key
employees including, without limitation, Larry Rowedder. Notwithstanding its
ownership of key-man life on Mr. Kirven, if the Company were to lose the
services of such key employees before a qualified replacement could be obtained,
its business and the financial affairs of the Company could be materially
adversely effected.

There Is Uncertainty Regarding Federal Laws and Regulations.

     Title IV of the Higher Education Act [20 U.S.C. (S) 1094 (a)(20] forbids
institutions that receive federal student aid to "provide any commission, bonus
or other incentive payment based directly or indirectly on success in securing
enrollments or financial aid to any persons or entities engaged in any student
recruiting or admission activities or in making decisions regarding the award of
student financial assistance." As drafted, the "incentive payment" provision
prohibits universities from paying employees or third-parties based on success
in securing enrollments in programs or individual for-credit courses.

     The incentive payments ban enacted in 1992 was intended to prevent schools
from using commissioned sales persons to recruit students. It is management's
opinion that the rule was never intended to regulate legitimate business
arrangements, such as the type of arrangements entered into by the Company and
its university partners, which covers a wide array of professional services.
However, as currently being interpreted by the U.S. Department of Education
Office of the Inspector General ("OIG"), the "incentive payment" provisions
would also prohibit payments based on leads or percentage fee arrangements where
leads are coupled with other services including leads generated through Web
sites even though Web sites cannot "recruit" in the same way as commissioned
sales representatives.

     While our business arrangements that include revenue fee splits with our
university partners

                                      17
<PAGE>

exclude Title IV students from the revenue split formula, our financial
position, results of operations, cash flows, and business models and strategy
could be materially impaired if such business arrangement is deemed to be a
violation of the "incentive payments" provisions under Title IV. The Company has
requested a letter ruling from the U.S. Department of Education ("DOE") that our
business model does not violate the provisions of Title IV regarding "incentive
payments." As of this date, we have not received any response from the DOE. No
assurance can be given that a favorable ruling will be forthcoming or that our
university parties will not be subject to an unfavorable audit which could
materially and adversely affect our business relationships.

PART II - OTHER INFORMATION

ITEM 2 - CHANGES IN SECURITIES

     During the quarter ended September 30, 2001, we issued to Pioneer Ventures
Partners warrants to purchase 300,000 shares of our common stock in increments
of 100,000 at a per share exercise price of $.55, $.75 and $1.00, respectively.
These warrants may be exercised at anytime prior to December 31, 2002, December
31, 2003 and June 30, 2004, with respect to each 100,000 increment. The warrants
were issued in consideration for Pioneer's consent to the change of our
accountants reported in our Form 8-K filed with the SEC on July 17, 2001. The
Company paid no commissions with respect to this transactions.

     In connection with this transaction we relied on the exemptions from
registration provided by Section 4(2) of the Securities Act.

ITEM 5 - OTHER INFORMATION

     On July 30, 2001, effective July 1, 2001, (the "Effective Date") Compass
Knowledge Holdings, Inc. ("Compass") and its subsidiaries, Educators' Learning
Network, Inc. f/k/a Jamita, Inc. ("eLNet") and Rutherford Learning Group, Inc.
("RLG") (Compass, eLNet and RLG are hereinafter sometimes collectively referred
to as the "Company") entered into a Settlement and Asset Purchase Agreement (the
"Agreement") with Michael Rutherford whereby the following transactions were
consummated:

     .    The Company conveyed to Mr. Rutherford certain office and computer
          equipment, all intellectual property rights associated with the
          "Learning Centered School" education program, the RLG trade name,
          marks and logos and certain other general intangible assets
          (collectively, the "Assets").

     .    In connection with the Agreement, Mr. Rutherford returned and conveyed
          the following properties to the Company:

               -  181,250 shares of Compass common stock;
               -  Mr. Rutherford's minority interest in eLNet;
               -  Mr. Rutherford's Incentive Payment due him pursuant to that
                  certain eLNet Purchase Agreement dated August 15, 2000;
               -  The rights to the ROL License Agreement (described below); and
               -  The assumption of certain liabilities.

     .    As of the Effective Date, Mr. Rutherford resigned as an officer and
          director of eLNet and RLG and his employment agreements with the
          Company were terminated effective July 1, 2001.

     .    Pursuant to a Content Development and License Agreement of even date
          therewith (the "LCS License Agreement"), Mr. Rutherford agreed to
          write, produce and serve as the host and key-note speaker, at his sole
          cost and expense, with respect to the Learning Centered School Program
          (the "LCS Programs").

          Pursuant to the LCS License Agreement, Mr. Rutherford granted eLNet
          the exclusive right

                                      18
<PAGE>

          for a term of 10 years to use, market, sell and distribute the LCS
          Program in all distance learning formats. As consideration for the
          License, eLNet agreed to pay Mr. Rutherford 50% of the Net Receipts
          collected by eLNet from such sales, saving certain exceptions.

     .    Pursuant to a Content Development and License Agreement of even date
          therewith (the "ROL License Agreement"), eLNet granted to Mr.
          Rutherford the nonexclusive right to use, market and sell the
          "Requisites of A Leader" Program ("ROL Program") with respect to only
          in-person (live) consulting engagements of Mr. Rutherford for a term
          of five years.

          In connection with the ROL License Agreement, Mr. Rutherford is
          required to create, write and serve as the host and keynote speaker
          with respect to 10 core episodes of the ROL Program for the 2001-2002
          school year.

     .    As of the Effective Date, Mr. Rutherford agreed to provide certain
          consulting services to the Company through September 2002 for the
          following consideration:

               -  $12,500 per month for three (3) consecutive months beginning
                  July 1, 2001 and ending September 30, 2001, and
               -  Five percent of all "Net Receipts" received by eLNet within
                  one (1) year of the sales of the ROL Program by Mr.
                  Rutherford.

     .    The Company recognized $35,051.30 in consulting revenue from RLG for
          the nine month period ending September 30, 2001.

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

(a)  List of Exhibits

     None.

(b)  Reports on Form 8-K

     A Form 8-K was filed by the Company on July 17, 2001.

     An amendment to Form 8-K on Form 8-K/A was filed by the Company on July 24,
     2001.


                                  SIGNATURES

     In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.


                                   COMPASS KNOWLEDGE HOLDINGS, INC.



Date:  November 6, 2001            By: /s/ ROGERS W. KIRVEN, JR.
                                   -----------------------------
                                   Chief Executive Officer and Director


Date:  November 6, 2001            By: /s/ ANTHONY RUBEN
                                   ---------------------
                                   Chief Financial Officer and Treasurer

                                      19