<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 June 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 15,460,314 shares outstanding of the Registrant's common
stock, $0.001 par value, as of August 8, 2001.

<PAGE>

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



PART I - Financial Information

Item 1  Financial Statements

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

        Consolidated Statements of Operations for the Three and Six
        Months ended June 30, 2001 and 2000                                4

        Consolidated Statements of Cash Flows for the Six
        Months Ended June 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                                                        20


<PAGE>

                          PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                COMPASS KNOWLEDGE HOLDINGS, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                    AS OF JUNE 30, 2001 AND DECEMBER 31, 2000

<TABLE>
<CAPTION>

                                                         June 30, 2001         December 31, 2000
                                                         -------------         -----------------
                             ASSETS
                             ------
<S>                                                     <C>                      <C>
CURRENT ASSETS:
 Cash                                                   $   626,079              $   840,785
 Accounts receivable, net of allowance                      373,809                   45,074
 Prepaid expenses                                           214,416                  108,737
 Other assets, net                                          577,654                  446,904

                                                        -----------              -----------
  Total current assets                                    1,791,958                1,441,500

PROPERTY AND EQUIPMENT, net                                 327,811                  280,413

GOODWILL, net                                             3,122,847                3,278,948

OTHER ASSETS, net                                           760,921                  704,616

                                                        -----------              -----------
  Total assets                                          $ 6,003,537              $ 5,705,477
                                                        ===========              ===========

                 LIABILITIES AND STOCKHOLDERS' EQUITY
                 ------------------------------------
CURRENT LIABILITIES:

 Accounts payable and accrued expenses                  $   503,640              $   371,518

 Deferred student fees                                    1,182,934                  467,032

 Note payable-current portion
                                                            100,000                     --

                                                        -----------              -----------
 Total current liabilities                                1,786,574                  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                  15,460                   14,875
  shares authorized, 15,460,314 and 14,875,000 shares
  issued and outstanding at June 30, 2001 and
  December 31, 2000 respectively
  Additional paid-in-capital                              4,942,229                4,571,688
 Unearned compensation                                       (3,952)                  (7,574)
 Accumulated deficit                                     (2,403,800)              (1,379,088)

                                                        -----------              -----------
  Total stockholders' equity                              4,216,963                4,866,927
                                                        -----------              -----------
  Total liabilities and stockholders'equity             $ 6,003,537              $ 5,705,477
                                                        ===========              ===========

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

</TABLE>

                                       1
<PAGE>

            COMPASS KNOWLEDGE HOLDINGS, INC. AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF OPERATIONS

       FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000

<TABLE>
<CAPTION>

                                                            For the Three Months Ended June 30, For the Six Months Ended June 30,
                                                            ---------------------------------   ------------------------------
                                                                2001                2000            2001            2000
                                                                ----                ----            ----            ----
<S>                                                             <C>                <C>             <C>             <C>
TOTAL STUDENT FEE REVENUE
    Net student fee revenue from degree programs                $ 545,433          $ 575,956       $1,203,179      $1,155,189
    Gross student fee revenue from non-degree programs            181,906            153,591          441,154         266,081
    Gross revenue from subscriptions and consulting services      445,223                  -          822,833               -
    Other revenue                                                   7,295              2,583           12,055           5,257
                                                            --------------      -------------   --------------  --------------
                    Total revenue                               1,179,857            732,130        2,479,221       1,426,527

INSTRUCTION COSTS AND SERVICES                                    474,879            113,465          931,739         310,371
                                                            --------------      -------------   --------------  --------------
                    Gross profit                                  704,979            618,665        1,547,483       1,116,156
                                                            --------------      -------------   --------------  --------------

OPERATING EXPENSES
    Selling and promotional                                       201,440            121,636          351,736         211,309
    General and administrative                                  1,081,316            625,298        2,162,582       1,083,016
                                                            --------------      -------------   --------------  --------------
                    Total operating expenses                    1,282,756            746,934        2,514,318       1,294,325
                                                            --------------      -------------   --------------  --------------

LOSS FROM OPERATIONS                                             (577,777)          (128,269)        (966,835)       (178,169)
                                                            --------------      -------------   --------------  --------------

OTHER INCOME (EXPENSE)
    Interest income                                                 8,509             58,314           18,523         151,603
    Interest expense                                               (3,000)                 -           (6,400)           (155)
                                                            --------------      -------------   --------------  --------------
                    Total other income                              5,509             58,314           12,123         151,448
                                                            --------------      -------------   --------------  --------------

(LOSS) INCOME BEFORE PREFERRED DIVIDENDS                         (572,268)           (69,955)        (954,712)        (26,721)


LESS: PREFERRED STOCK DIVIDENDS                                   (35,000)           (35,000)         (70,000)        (74,822)
                                                            --------------      -------------   --------------  --------------

NET (LOSS) INCOME AVAILABLE TO COMMON STOCKHOLDERS             $ (607,268)         $(104,955)    $ (1,024,712)     $ (101,543)
                                                            ==============      =============   ==============  ==============

EARNINGS PER SHARE
    Basic                                                        $ (0.039)          $ (0.007)        $ (0.068)       $ (0.007)
                                                            ==============      =============   ==============  ==============
    Diluted                                                      $ (0.039)          $ (0.007)        $ (0.068)       $ (0.006)
                                                            ==============      =============   ==============  ==============

WEIGHTED AVERAGE SHARES OUTSTANDING
    Basic                                                      15,421,920         14,750,000       15,166,445      14,750,000
                                                            ==============      =============   ==============  ==============
    Diluted                                                    15,421,920         15,570,823       15,166,445      15,676,397
                                                            ==============      =============   ==============  ==============


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

</TABLE>

                                       2
<PAGE>

                         COMPASS KNOWLEDGE HOLDINGS, INC. AND SUBSIDIARIES

                               CONSOLIDATED STATEMENTS OF CASH FLOWS

                              FOR THE SIX MONTHS ENDED JUNE 30, 2001

<TABLE>
<CAPTION>
                                                                    2001            2000
                                                                    ----            ----
<S>                                                           <C>            <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:

 Net (loss) income                                               $(954,712)   $   (26,721)

 Adjustments to reconcile net (loss) income to net cash

   provided by (used for) operating activities-

     Depreciation and amortization                                 623,536        148,894

     Amortization of unearned compensation                           3,623         10,909

     Stock-based compensation                                       78,469             --


Decrease (increase) in operating assets and liabilities-

     Accounts receivable                                          (328,735)       475,697

     Due from related parties                                           --          4,332

     Prepaid expenses                                             (100,000)       (95,686)

     Other current assets                                           (5,679)       (19,419)

     Other long-term assets                                          5,291       (108,743)

     Accounts payable and accrued expenses                         132,122         95,287

     Due to related parties                                             --       (301,220)

     Deferred revenue                                              715,902       (182,006)
                                                                 ---------    -----------

          Net cash provided by

          operating activities                                     169,816          1,324
                                                                 ---------    -----------


CASH FLOWS FROM INVESTING ACTIVITIES:

 Purchases of property and equipment                              (105,054)      (106,117)

 Cash payments for content development costs                      (231,727)      (203,309)

 Cash payments for direct marketing costs                         (370,397)      (307,226)

                                                                 ---------    -----------
          Net cash used for investing activities                  (707,179)      (616,652)
                                                                 ---------    -----------

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                               --        (12,510)

 Payment of preferred dividend                                     (70,000)       (92,322)

                                                                 ---------    -----------
          Net cash provided by (used for) financing activities     322,656       (104,832)
                                                                 ---------    -----------

          NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS    (214,706)      (720,160)


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

CASH AND CASH EQUIVALENTS, end of period                         $ 626,079    $ 4,060,873
                                                                 =========    ===========



Supplemental disclosure of cash flow information:
 Cash paid during the year for:
  Interest                                                       $   6,400    $        --


               The accompanying notes are an integral part of the consolidated financial statements
</TABLE>

                                       3
<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 six month periods
                  ended June 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 June 30, 2001 there were 2,000 shares of Preferred Stock
                  outstanding, convertible into 875,000 common shares. Also,
                  there were options to purchase 2,271,200 shares of common
                  stock and warrants to purchase 592,657 shares of common stock
                  outstanding at June 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 June 30, 2001, the Company granted
                  150,000 options to employees of the Company to purchase common
                  stock of the Company at an exercise price of $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 increased $80,280
                  to $82,092 for the three months ended June 30, 2001 from
                  $1,812 for the three months ended March 31, 2000. The expense
                  was the result of amortization of deferred compensation
                  resulting from granting stock options and warrants to outside
                  consultants and investment bankers.

         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 2,271,200 stock options with an
                  exercise price of $1.02 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 June 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

                                       4
<PAGE>

                  Company $125,000 (the "Loan"). Pursuant to the promissory note
                  (the "Note") issued by the 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 June 30, 2001,
                  Cloverleaf had loaned the Company $100,000, which has been
                  classified as a current liability.

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.

         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 three and six month periods ended June 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 six month periods
         ended June 30, 2001 and the comparable periods in 2000. The

                                       5
<PAGE>

         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 second quarter of 2001 and 2000 and for
         the first six months of 2001 and 2000 was as follows:

<TABLE>
<CAPTION>

                                                      Three Months ended                  Six Months ended
                                                            June 30                            June 30

                                                      2001             2000            2001           2000
                                                      ----             ----            ----           ----
<S>                                              <C>             <C>             <C>             <C>
Total revenue                                    $  1,179,857    $    732,130    $  2,479,221    $  1,426,527
Gross Profit                                     $    704,979    $    618,665    $  1,547,483    $  1,116,156
(Loss) Income before Preferred Dividends         $   (572,268)   $    (69,955)   $   (954,712)   $    (26,721)
(Loss) Earnings per share, basic                 $     (0.039)   $     (0.007)   $     (0.068)   $     (0.007)
(Loss) Earnings per share, diluted               $     (0.039)   $     (0.007)   $     (0.068)   $     (0.006)

Weighted average shares outstanding
                             Basic                 15,421,920      14,750,000      15,166,445      14,750,000
                             Diluted               15,421,920      15,570,823      15,166,445      15,676,397
</TABLE>

                                                       At June 30, 2001
                                                   ------------------------

Working Capital                                           $    5,384
Total Current Assets                                      $1,791,958
Total Property and Equipment, net                         $  327,811
Total Current Liabilities                                 $1,786,574
Stockholders' Equity                                      $4,216,963


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

                  Total revenues increased by $447,727, or 61.2%, to $1,179,857
         for the three months ended June 30, 2001 from $732,130 for the
         comparable 2000 period. Revenues from subscriptions and consulting
         services and non-degree programs increased by $478,248 or 206.2% for
         the three months ended June 30, 2001 from $156,175 for the comparable
         2000 period. The majority of this increase is from our subsidiary,
         Educators' Learning Network, Inc. formerly known as Jamita ("eLNet"),
         acquired in August 2000, which contributed $332,333 in subscription
         based revenues for the three months ended June 30, 2001. Consulting
         contracts also added an incremental $112,900 in revenues for the three
         months ended June 30, 2001; while non-degree program revenues increased
         by $28,314, or 18.4%, to $181,905 from $153,591 for the comparable 2000
         period. On the other hand, degree program revenue declined by $30,522,
         or 5.3%, to $545,433 for three months ended June 30, 2001 from $575,955
         for the comparable 2000 period due to the timing of summer semester
         revenue recognition in one existing program and lower spring semester
         enrollments in another, partially offset by revenues from two programs
         launched after the period ending June 30, 2000. While management
         believes that the overall decline in degree program revenue is isolated
         to this period, no assurance can be given that such revenues will not
         continue to decline in future periods.

                  Gross profit increased 14.0% to $704,979 for the three months
         ended June 30, 2001 from $618,665 for the comparable 2000 period. Our
         gross profit reflects a one-time charge against earnings of $80,185 to
         write-off capitalized content development costs we incurred with
         respect to several non-degree programs that we have decided not to
         launch in the foreseeable future. Excluding this write-off, gross
         profit increased by 26.9%, to $785,164, primarily due to $207,276 in
         gross profit contribution from eLNet

                                       6
<PAGE>

         and $71,322 in gross profit contribution from consulting services, and
         partially offset by a $128,567 decline in gross profit from degree
         programs. The decline in gross profit from degree programs was
         primarily due to lower recognized revenues due to the timing of summer
         semester revenue recognition in one existing program and lower spring
         semester enrollments in another and the amortization expenses related
         to the development of content. For the three months ended June 30,
         2001, our gross profit margin declined to 59.8%, compared to 84.5% in
         the comparable 2000 period, primarily reflecting a higher proportion of
         our revenues derived from lower margin products, the write-off of
         content and amortization expense related to the development of content.
         Excluding the write-off of capitalized content development costs, our
         gross profit margin would have been 66.5%.

                  Operating expenses increased by $535,822 to $1,282,756 for the
         three months ended June 30, 2001 from $746,934 in the comparable 2000
         period, representing an increase of 71.7%. The increase is primarily
         due to the growth of our personnel, from 29 full time employees on June
         30, 2000 to 37 full time employees on June 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, including contract labor, are
         directly related to administering new programs, consulting engagements
         and initiatives launched during the past twelve months as well as
         developing new programs, partnerships and consulting engagements. We
         believe our current team is adequate to support our planned growth for
         the remainder of this fiscal period. 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.

                  We own 100% of all of our subsidiaries except for eLNet which
         has as of June 30, 2001 a 10% minority ownership. No value was given to
         the minority interest based on eLNet's operating results.

                  As a result of the above changes, net income before dividends
         declined by $502,313, resulting in a net loss before dividends of
         $572,268 for the three months ended June 30, 2001 compared with a net
         loss before dividends of $69,955 in the comparable 2000 period.

         SIX MONTHS ENDED JUNE 30, 2001 COMPARED TO SIX MONTHS ENDED
         JUNE 30, 2000

                  Total revenues increased by $1,052,694 to $2,479,221 for the
         six months ended June 30, 2001 from $1,426,527 for the comparable 2000
         period, representing an increase of 73.8%. Revenues increased in all
         three of our principal sources of revenue: subscriptions and consulting
         services, non-degree and degree programs. The majority of the increase
         is from our subsidiary, eLNet which contributed $662,892 in
         subscription based revenues for the six months ended June 30, 2001.
         Non-degree program revenue also increased, growing by $175,073, or
         65.8%, to $441,154. Consulting contracts added an incremental $159,951
         in revenues for the six months ended June 30, 2001. Degree program
         revenue increased by $47,990, or 4.2%, to $1,203,179 for the six months
         ended June 30, 2001 from $1,155,189 for the comparable 2000 period.

                  Gross profit increased 38.6% to $1,547,483 for the six months
         ended June 30, 2001 from $1,116,156 for the comparable 2000 period. Our
         gross profit reflects the $80,185 charge to earnings resulting from the
         write-off of certain content described above. Excluding this write-off,
         gross profit increased by 45.8%, to $1,627,668, primarily due to
         $363,765 in gross profit contribution from eLNet and $115,492 in gross
         profit contribution from consulting services. For the six months ended
         June 30, 2001, our gross profit margin declined to 62.4%, compared to
         78.2% 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 65.7%.

                  Operating expenses increased by $1,219,993 to $2,514,318 for
         the six months ended June 30, 2001 from $1,294,325 in the comparable
         2000 period, representing an increase of 94.3%. The increase is

                                       7
<PAGE>

         primarily due to the growth of our personnel, from 29 full time
         employees on June 30, 2000 to 37 full time employees on June 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, including contract
         labor, are directly related to administering the new programs,
         consulting engagements and initiatives launched during the past twelve
         months as well as developing new programs, partnerships and consulting
         engagements. We believe our current team is adequate to support our
         planned growth for the remainder of this fiscal period. Depreciation
         and the amortization of goodwill, travel 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.

                  We own 100% of all of our subsidiaries, except for eLNet which
         has a 10% minority ownership. No value was given to the minority
         interest based on eLNet's operating results.

                  As a result of the above changes, net income before dividends
         declined by $927,991, resulting in a net loss before dividends of
         $954,712 for the six months ended June 30, 2001 compared with a net
         loss before dividends of $26,721 in the comparable 2000 period.

         LIQUIDITY AND CAPITAL RESOURCES

                  Our cash amounted to $626,079 at June 30, 2001, compared to
         $840,785 at December 31, 2000. The net cash provided by our operations
         was $169,816 for the six months ended June 30, 2001, compared to
         operations providing $1,324 for the comparable 2000 period.

                  We used $707,179 in investing activities during the six months
         ended June 30, 2001, compared with $616,652 in the comparable 2000
         period, to purchase and upgrade computer and other office equipment, as
         well as our investment in direct marketing activities, and repurposing,
         converting and developing content.

                  Cash provided from financing activities was $322,656 for the
         six months ended June 30, 2001 compared with a use of $104,832 in the
         comparable 2000 period. This 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 June 30, 2001 we sold 12.144 Units
         consisting of 607,188 shares of our restricted common stock at $0.50
         per share and warrants to purchase 303,594 shares of our restricted
         common stock at an exercise price of $0.50 per share, 21,876 of these
         shares have not been issued pending the receipt of $10,938 from an
         officer of the Company. This offering was terminated on May 22, 2001.
         The proceeds of this offering were used for general corporate purposes.

                  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

                                       8
<PAGE>

         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. 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 expenses related to such
         terminated or discontinued programs.

         SEASONALITY

                  We experience seasonality in our results of operations
         primarily as a result of changes in the level 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 and the
         Quarterly Reports on Form 10-QSB. 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.

                                       9
<PAGE>

         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:

         o     expenditures of cash which may reduce our cash reserves to
               critical levels,
         o     difficulty of assimilating the operations and personnel of the
               targeted businesses,
         o     potential disruption of our ongoing business,
         o     distraction of management from our core business,
         o     inability of management to maximize our financial and
               strategic position,
         o     increase in general and administrative expenses,
         o     expansion of management information systems,
         o     need for greater facilities requirements,
         o     increase in overall headcount,
         o     maintenance of uniform standards, controls, procedures and
               policies, and
         o     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:

         o     cash,
         o     stock,
         o     rights to purchase stock,
         o     convertible promissory notes, or
         o     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 continue to decrease,
         unless the expenses associated with these products decline as a
         percentage of revenues.

                                       10
<PAGE>

         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:

         o     seasonality - due to the budget and purchasing cycles of our
               customers,
         o     the expenses we incur to support the anticipated growth of our
               business, and
         o     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.

         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:

         o     our need to educate potential customers about the benefits of
               our products and services,
         o     competitive evaluations by customers,
         o     the customers' internal budgeting and approval processes, and
         o     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:

                                       11
<PAGE>

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

         o     other companies which seek to offer a complete solution
               including software and services,

         o     companies which provide large libraries of content,

         o     software companies with specific products for the college and
               university market, o systems integrators, and o 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.

                                       12
<PAGE>

         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:

              o      our ability to attract and retain colleges,
                     universities, associations and companies,

              o      our ability to successfully implement our proposed
                     distributed learning programs,

              o      the amount and timing of operating costs and capital
                     expenditures relating to expansion of our business,

              o      our introduction of new or enhanced services and
                     products, and similar introductions by our
                     competitors, o our ability to upgrade and develop
                     our systems and infrastructure,

              o      our ability to attract, motivate and retain
                     personnel, and o 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 quarter 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 six months ending June 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 six (6) months ending June 30,
         2001 were approximately $954,712 ($1,024,712 after preferred dividends)
         or $0.068 per share. The loss is primarily due to the growth in our
         personnel, from 17 full-time employees on December 31, 1999 to 37 full
         time employees as of June 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

                                       13
<PAGE>

         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. 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 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

                                       14
<PAGE>

         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.

         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.

                                       15
<PAGE>

         There Is Uncertainty Regarding Federal Laws and Regulations.

                  Title IV of the Higher Education Act [20 U.S.C. ss. 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 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 June 30, 2001, we sold approximately
         1.85 Units for $47,187.50 consisting of 94,375 shares of our restricted
         common stock and warrants to purchase 47,187 shares of our common stock
         for $0.50 per share at anytime within three years of the date of sale
         to various officers, directors and other "Accredited Investors." The
         Company paid no commissions with respect to these transactions.

                  In connection with these transactions we relied on the
         exemptions from registration provided by Rule 506, Regulation D and
         Section 4(2) of the Securities Act. We believe that all of the
         purchasers were "Accredited Investors." All of the purchasers
         represented that they were acquiring the shares for investment
         purposes, and the certificates issued were appropriately restricted.

         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:

               o    The Company sold 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").

                                       16
<PAGE>

          The contractual purchase price for the Assets was $1,006,250
consisting of:

               -    181,250 shares of Compass common stock valued at $1.00 per
                    share or $181,250,
               -    Mr. Rutherford's minority interest in eLNet valued at
                    $200,000,
               -    Mr. Rutherford's Incentive Payment due him pursuant to that
                    certain eLNet Purchase Agreement dated August 15, 2000
                    valued at $25,000,
               -    The rights to the ROL License Agreement (described below)
                    valued at $300,000, and
               -    The assumption of certain liabilities equaling $300,000.

     o    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.

     o    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 keynote 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 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.

     o    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.

     o    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.

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.

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<PAGE>

                                   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:    August 8, 2001                   By: /s/ ROGERS W. KIRVEN, JR.
                                          -----------------------------
                                          Chief Executive Officer and Director


Date:    August 8, 2001                   By: /s/ ANTHONY RUBEN
                                          -----------------------------
                                          Chief Financial Officer and Treasurer

                                       18