<PAGE>

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

                                  FORM 10-Q/A
              QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                      THE SECURITIES EXCHANGE ACT OF 1934

<TABLE>
<CAPTION>
<S>                                                                  <C>
For the quarterly period ended March 31, 2004                         Commission File No. 333-96119

   WRC MEDIA INC.                                                     WEEKLY READER CORPORATION
   (Exact name of Registrant as specified in its charter)             (Exact name of Registrant as specified in its charter)

   DELAWARE                                                           DELAWARE
   (State or other jurisdiction of incorporation or organization)     (State or other jurisdiction of incorporation or organization)

   2731                                                               2721
   (Primary Standard Industrial Classification Number)                (Primary Standard Industrial Classification Number)

   13-4066536                                                         13-3603780
   (I.R.S. Employer Identification Number)                            (I.R.S. Employer Identification Number)

                                    COMPASSLEARNING, INC.
                                    (Exact name of Registrant as specified in its charter)
                                    2731

                                    DELAWARE
                                    (State or other jurisdiction of incorporation or organization)
                                    7372

                                    (Primary Standard Industrial Classification Number)
                                    7372
                                    13-4066535
                                    (I.R.S. Employer Identification Number)

WRC MEDIA INC.                        WEEKLY READER CORPORATION                  COMPASSLEARNING, INC.
512 7th AVENUE, 22nd FLOOR            512 7th AVENUE, 22nd FLOOR                 512 7th AVENUE, 22nd FLOOR
NEW YORK, NY 10018                    NEW YORK, NY 10018                         NEW YORK, NY 10018
(212) 768-1150                        (212) 768-1150                             (212) 768-1150
</TABLE>


       (Address, including zip code, and telephone number, including area
            code, of each Registrant's principal executive offices)

--------------------------------------------------------------------------------
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
--------------------------------------------------------------------------------
Indicate by check mark whether the registrant is an accelerated filer (as
defined in rule 12b-2 of the Exchange Act.
      |_| Yes  |X| No

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
--------------------------------------------------------------------------------
TITLE OF CLASS                   |  NAME OF EACH EXCHANGE ON WHICH REGISTERED
--------------------------------------------------------------------------------
12 3/4% Senior Subordinated
Notes due 2009                   |  OVER-THE-COUNTER MARKET
--------------------------------------------------------------------------------

<PAGE>

                                EXPLANATORY NOTE

This Form 10-Q/A is being filed for the purpose of amending Items 1, 2 and 4 of
Part I and Item 6 of Part II of Form 10-Q to reflect the restatement of the
Company's results of operations for the three month periods ended March 31, 2004
and 2003 and the restatement of the Company's balance sheets as of March 31,
2004 and December 31, 2003. Refer to Item 1. Consolidated Financial Statements
-WRC Media Inc. and Subsidiaries - Note 17 Restatement and Item 1. Consolidated
Financial Statements- Weekly Reader Corporation and Subsidiaries - Note 15
Restatement.

On May 14, 2004 the Company filed its quarterly report on Form 10-Q for the
period ended March 31, 2004, prior to the completion of the reaudit of the
Company's 2001 consolidated financial statements.

On June 15, 2004, the Company filed its annual report on Form 10-K that included
its consolidated financial statements for December 31, 2001, 2002 and 2003,
which had been restated to correct certain accounting errors. Certain errors
identified in the reaudit that impacted the Company's consolidated financial
statements for 2001, 2002 and 2003 were not reflected in the Company's original
quarterly report for the period ended March 31, 2004. Accordingly, the Company
has amended its previously reported condensed consolidated financial statements
for the three month periods ended March 31, 2003 and 2004 and its December 31,
2003 balance sheet to correct these errors.

This Form 10-Q/A amends and restates Items 1, 2 and 4 of Part I and Item 6 of
Part II of the original Form 10-Q, and no other information included in the
original Form 10-Q is amended hereby.

The Company did not amend its quarterly reports on Form 10-Q for periods
affected by the restatement that ended prior to March 31, 2004, and the
financial statements and related financial information contained in such reports
should no longer be relied upon.

All referenced amounts in this Form 10-Q/A for prior periods and prior period
comparisons reflect the balances and amounts on a restated basis.


                                       1
<PAGE>

PART 1                                      FINANCIAL INFORMATION

ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS


                                       2
<PAGE>

                        WRC MEDIA INC. AND SUBSIDIARIES
                     CONDENSED CONSOLIDATED BALANCE SHEETS
            (Amounts in thousands, except share and per share data)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                          December 31,     March 31,
                                                                              2003           2004
                                                                         -------------   -------------
                                                                         (As restated    (As restated
ASSETS                                                                   See Note 17)     See Note 17)
<S>                                                                       <C>             <C>
Current Assets:
     Cash and cash equivalents                                             $   1,432       $   6,372
     Accounts receivable (net of allowance for doubtful accounts
     and sales returns of $2,519 and $2,391, respectively)                    30,027          25,758
     Inventories                                                              16,652          15,213
     Prepaid expenses                                                          3,367           3,165
     Other current assets (including restricted assets of $1,006
      and $910, respectively)                                                  1,889           1,564
                                                                           ---------       ---------

       Total current assets                                                   53,367          52,072

Property and equipment, net                                                    5,792           5,084
Capitalized software, net                                                      7,293           7,414
Goodwill                                                                     241,324         241,324
Deferred financing costs, net                                                  5,675           9,548
Other intangible assets, net                                                  76,860          74,040
Other assets                                                                  29,896          32,097
                                                                           ---------       ---------

       Total assets                                                        $ 420,207       $ 421,579
                                                                           =========       =========

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
     Accounts payable                                                      $  16,963       $  13,960
     Accrued payroll, commissions and benefits                                 9,356           7,773
     Current portion of deferred revenue                                      35,900          27,559
     Other accrued liabilities                                                17,166          20,345
     Current portion of long-term debt                                         8,477            --
                                                                           ---------       ---------

       Total current liabilities                                              87,862          69,637

Deferred revenue, net of current portion                                         959             990
Deferred tax liabilities                                                      10,800          11,525
15% senior preferred stock,
   including accrued dividends and accretion of warrant value
   (5,701,360 shares outstanding), (Liquidation preference of $143,835)         --           136,138
Long-term debt                                                               262,925         292,844
                                                                           ---------       ---------

       Total liabilities                                                     362,546         511,134
                                                                           ---------       ---------

Commitments and contingencies

15% senior preferred stock, including accrued dividends
   and accretion of warrant value (5,508,080 shares outstanding)             130,701            --

Warrants on common stock of subsidiaries                                      11,751          11,751

Common stock subject to redemption                                               940             940
                                                                           ---------       ---------

Stockholders' deficit:
     Common stock, ($.01 par value, 20,000,000 shares authorized;
     7,008,406 shares outstanding in 2003 and 2004)                               70              70
     18% convertible preferred stock, ($.01 par value, 750,000 shares
     authorized, 547,980 and 572,639 outstanding, respectively)               21,919          22,905
     Additional paid-in capital                                              131,753         131,753
     Accumulated other comprehensive loss                                     (1,899)         (1,899)
     Accumulated deficit                                                    (237,574)       (255,075)
                                                                           ---------       ---------

       Total stockholders' deficit                                           (85,731)       (102,246)
                                                                           ---------       ---------

       Total liabilities and stockholders' deficit                         $ 420,207       $ 421,579
                                                                           =========       =========
</TABLE>


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


                                       3
<PAGE>

                        WRC MEDIA INC. AND SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                      FOR THE THREE MONTHS ENDED MARCH 31,
                                  (Unaudited)
                             (Amounts in thousands)

<TABLE>
<CAPTION>
                                                                 2003           2004
                                                             ------------   ------------
                                                             (As Restated   (As Restated
                                                             See Note 17)   See Note 17)
<S>                                                           <C>            <C>
Revenue, net                                                   $ 47,038       $ 42,760

Cost of goods sold                                               13,273         12,920
                                                               --------       --------

Gross profit                                                     33,765         29,840
                                                               --------       --------

Costs and expenses:
     Sales and marketing                                         11,481         11,555
     Research and development                                       711            747
     Distribution, circulation and fulfillment                    3,510          3,552
     Editorial                                                    2,579          2,873
     General and administrative                                   5,642          7,121
     Restructuring costs and other non-recurring expenses           480             65
     Depreciation                                                   622            431
     Amortization of intangible assets                            4,317          4,219
                                                               --------       --------

     Total operating costs and expenses                          29,342         30,563
                                                               --------       --------

Income (loss) from operations                                     4,423           (723)

Interest expense, including amortization
of deferred financing costs                                      (7,132)       (14,502)
Other expense, net                                                 (231)          (250)
                                                               --------       --------

Loss before income tax provision                                 (2,940)       (15,475)

Income tax provision                                                813            802
                                                               --------       --------

Net loss                                                       $ (3,753)      $(16,277)
                                                               ========       ========
</TABLE>


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


                                       4
<PAGE>

                        WRC MEDIA INC. AND SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                      FOR THE THREE MONTHS ENDED MARCH 31,
                                  (Unaudited)
                             (Amounts in thousands)


<TABLE>
<CAPTION>
                                                                                    2003            2004
                                                                                ------------    ------------
                                                                                (As Restated    (As Restated
                                                                                See Note 17)    See Note 17)
<S>                                                                             <C>             <C>
Cash flows from operating activities:

Net loss                                                                         $  (3,753)      $ (16,277)

Adjustments to reconcile net loss to net cash used in operating activities:
     Deferred income tax provision                                                     725             725
     Depreciation and amortization                                                   5,662           5,163
     Accrual of manditorily redeemable preferred stock dividends                      --             5,199
     Amortization of debt discount                                                     107             120
     Amortization of deferred financing costs                                          355           2,266
Changes in operating assets and liabilities:
     Accounts receivable                                                             5,553           4,269
     Inventories                                                                       945           1,439
     Prepaid expenses and other current assets                                      (1,177)            527
     Other noncurrent assets                                                        (4,638)         (3,601)
     Accounts payable                                                               (5,481)         (3,002)
     Deferred revenue                                                               (8,491)         (8,310)
     Accrued liabilities                                                             2,492           1,595
                                                                                 ---------       ---------

Net cash used in operating activities                                               (7,701)         (9,887)
                                                                                 ---------       ---------

Cash flows from investing activities:
     Purchase of property and equipment                                               (112)           (144)
     Capitalized software                                                             (898)           (634)
     Landlord reimbursement for leasehold improvements                                --               421
     Proceeds from the disposition of property and equipment                             4            --
                                                                                 ---------       ---------

Net cash used in investing activities                                               (1,006)           (357)
                                                                                 ---------       ---------

Cash flows from financing activities:
     Proceeds from revolving line of credit                                          7,000          18,000
     Repayments of revolving line of credit                                         (2,000)        (23,000)
     Repayment of senior bank debt                                                  (1,834)       (118,678)
     Deferred financing fees                                                          --            (6,138)
     Proceeds from issuance of long-term debt                                         --           145,000
     Purchase of common stock subject to redemption                                    (25)           --
                                                                                 ---------       ---------

Net cash provided by financing activities                                            3,141          15,184
                                                                                 ---------       ---------

(Decrease) increase in cash and cash equivalents                                    (5,566)          4,940

Cash and cash equivalents, beginning of period                                       9,095           1,432
                                                                                 ---------       ---------

Cash and cash equivalents, end of period                                         $   3,529       $   6,372
                                                                                 =========       =========
</TABLE>


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


                                       5
<PAGE>

                        WRC MEDIA INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)
           (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

1.       DESCRIPTION OF BUSINESS

The accompanying condensed consolidated financial statements include the
accounts of WRC Media Inc. ("WRC Media") and its subsidiaries - Weekly Reader
Corporation ("Weekly Reader"), CompassLearning, Inc. ("CompassLearning") and
ChildU, Inc. ("ChildU"). WRC Media was incorporated on May 14, 1999. The term
"Company" refers to WRC Media and its subsidiaries.

The Company is in the business of developing, publishing and marketing print and
electronic supplemental education materials. Certain of the Company's products
have been sold in the education marketplace for as long as 100 years. The
Company's customers are primarily within the United States.

2.       BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements of the Company as
of March 31, 2004 and for the three-month periods ended March 31, 2003 and 2004
have been prepared in accordance with accounting principles generally accepted
in the United States of America ("GAAP") for interim financial information and
the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments, consisting of only normal recurring adjustments
necessary to present fairly the financial position, the results of operations
and cash flows for the periods presented, have been made.

These condensed consolidated financial statements should be read in conjunction
with the Company's annual financial statements and related notes thereto as
reported in the Company's Annual Report on Form 10-K dated June 15, 2004. The
operating results for the three-month periods ended March 31, 2003 and 2004 are
not necessarily indicative of the results that may be expected for a full year.

3.       RECENT ACCOUNTING PRONOUNCEMENTS

In January 2003, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 46, "Consolidation of Variables Interest Entities ("FIN 46").
FIN 46 clarifies the application of Accounting Research Bulletin No. 51,
"Consolidated Financial Statements" to certain entities in which equity
investors do not have the characteristics of a controlling financial interest or
do not have sufficient equity at risk for the entity to finance its activities
without additional subordinated financial support from other parties. In
December 2003, the FASB issued FIN No. 46 (Revised) ("FIN 46R") to address
certain FIN 46 implementation issues. This interpretation requires that the
assets, liabilities, and results of activities of a Variable Interest Entity
("VIE") be consolidated into the financial statements of the enterprise that is
the primary beneficiary of the VIE. FIN 46R also requires additional disclosures
by primary beneficiaries and other significant variable interest holders. This
interpretation is effective no later than the end of the first interim or
reporting period ending after March 15, 2004, except for those VIE's that are
considered to be special purpose entities, for which the effective date is no
later than the end of the first interim or annual reporting period ending after
December 15, 2003. The adoption of FIN 46R, effective March 31, 2004, did not
have any effect on the Company's consolidated financial position or results of
operations.

In April 2003, the FASB issued Statements of Financial Accounting Standards
("SFAS") No. 149 "Amendment of Statement 133 on Derivative Instruments and
Hedging Activities" ("SFAS 149"), which amends and clarifies accounting for
derivative instruments, and for hedging activities under SFAS 133. Specifically,
SFAS 149 requires that contracts with comparable characteristics be accounted
for similarly. Additionally, SFAS 149 clarifies the circumstances in which a
contract with an initial net investment meets the characteristics of a
derivative and when a derivative contains a financing component that requires
special reporting in the statement of cash flows. This Statement is generally
effective for contracts entered into or modified after June 30, 2003 and its
adoption did not have any effect on the Company's consolidated financial
position or results of operations.


                                       6
<PAGE>

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity" ("SFAS 150").
SFAS 150 establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its scope
as a liability (or an asset in some circumstances). Many of those instruments
were previously classified as equity. This statement was effective for the
Company beginning January 1, 2004. For financial instruments created before the
issuance date of this statement and still existing at the beginning of the
interim period of adoption, transition shall be achieved by reporting the
cumulative effect of a change in an accounting principle by initially measuring
the financial instruments at fair value or other measurement attribute required
by this statement. The adoption of this statement required the Company to
reclassify its 15% Senior Preferred Stock from the mezzanine section of the
balance sheet to long-term liabilities at March 31, 2004. Effective January 1,
2004 dividend payments for the 15% Senior Preferred Stock ("15% Senior
Preferred") are recorded as interest expense in the consolidated statement of
operations. The adoption of this statement did not result in any adjustment to
the book value of its 15% Senior Preferred as of January 1, 2004 as book value
approximated fair value at January 1, 2004. For the three-months ended March 31,
2004 the Company recognized $5,199 of accrued dividends on 15% Senior Preferred
as interest expense.

On December 23, 2003, the FASB issued SFAS No. 132 (Revised 2003), "Employers'
Disclosures about Pensions and Other Postretirement Benefits, an amendment of
FASB Statements No. 87, 88 and 106." It requires additional disclosures to those
in the original Statement 132 about the assets, obligations, cash flows and net
periodic benefit cost of defined benefit pension plans and other defined benefit
post-retirement plans. The majority of the provisions of this statement apply to
financial statements issued for fiscal years ending after December 15, 2003. The
Company has adopted such disclosure provisions (See Note 15).

4.       SEGMENT INFORMATION

The Company has four reporting segments: Weekly Reader, World Almanac, American
Guidance Service ("AGS"), and CompassLearning and ChildU ("Compass/ChildU").
This classification reflects the nature of the Company's organizational
structure by which the chief operating decision-maker reviews and assesses the
operating performance of the reporting segment and allocates corporate
resources.

         o        Weekly Reader is a publisher of classroom periodicals,
                  grade-specific workbooks and custom publisher of instructional
                  materials paid for by various sponsors.

         o        World Almanac publishes print reference materials sold into
                  the trade channel; publishes nonfiction and fiction children's
                  books under three imprints for K-12 students; publishes print
                  and electronic reference materials sold into the library
                  channel; and distributes third-party books targeted for K-12
                  students through its catalogs.

         o        AGS is a publisher of testing and assessment products and
                  supplemental instructional materials. AGS products are sold
                  into the school channel. Testing and assessment products are
                  primarily for K-12 students and supplemental instructional
                  materials are primarily for low-performing students in middle
                  and secondary schools.

         o        Compass/ChildU produce research-based technology learning
                  solutions, including web-based e-learning solutions that bring
                  into being educational assessment, curriculum and management
                  tools for grades Pre-K through 12, all of which are aligned to
                  local, state and national standards.

Information regarding the operations of the Company's reporting segments is set
forth below. Parent Company expenses and assets not allocated are included in
corporate. WRC Media evaluates segment performance based on several factors, of
which the primary financial measure is operating income (loss).

                                       7
<PAGE>
<TABLE>
<CAPTION>
                                                      Weekly     World                Compass/
                                                      Reader    Almanac      AGS       ChildU    Corporate   Eliminations    Total
                                                      ------    -------      ---       ------    ---------   ------------    -----
<S>                                                  <C>        <C>       <C>         <C>        <C>          <C>          <C>
Three months ended March 31, 2004
---------------------------------

Net Revenue                                           10,114     11,881     12,433      8,332        --            --        42,760
Income/ (loss) from operations                         1,900      1,370      1,538     (4,590)       (941)         --          (723)
Depreciation and amortization                            132        486      1,986      1,619         940          --         5,163
Restructuring costs and other non-recurring items       --         --         --           64           1          --            65
Assets                                                50,472     98,295    184,204     59,146     275,362      (245,900)    421,579
Capital expenditures                                      34         20         60         25           5                     144

Three months ended March 31, 2003
---------------------------------

Net Revenue                                           10,497     12,593     11,729     12,219        --            --        47,038
Income/ (loss) from operations                         2,689      2,295      1,881     (1,147)     (1,295)         --         4,423
Depreciation and amortization                            185        557      1,792      2,188         940          --         5,662
Restructuring costs and other non-recurring items       --         --         --         --           480                     480
Assets                                                53,049     91,727    168,385     54,751     258,813      (199,349)    427,376
Capital expenditures                                      67         24         16          3           2                       112
</TABLE>

5.       RESTRUCTURING COSTS AND OTHER NON-RECURRING EXPENSES

During the three-months ended March 31, 2004, the Company reviewed its
restructuring reserve established in 2002 and increased the reserve $65 for
lease terminations resulting from the updating of the assumptions used in
determining the fair value of the remaining lease obligations associated with
facilities vacated during 2002.

The restructuring reserve totaling approximately $2,893 at March 31, 2004, is
expected to be paid as follows: remaining nine months of 2004 - $727, 2005 and
beyond - $2,166. These charges are included in other accrued liabilities on the
condensed consolidated balance sheets.

Components of the Company's restructuring plan initiated in the fourth quarter
of 2002 are shown in the following table.

<TABLE>
<CAPTION>
                                      Balance at        Additional                           Balance at
                                   December 31, 2003     Charges         Amounts Paid      March 31, 2004
                                   -----------------     -------         ------------      --------------
<S>                                    <C>               <C>               <C>                <C>
Severance and other benefits            $   32            $ --              $  (32)            $ --
Lease terminations                       3,243                65              (415)             2,893
                                        ------            ------            ------             ------
Total                                   $3,275            $   65            $ (447)            $2,893
                                        ======            ======            ======             ======
</TABLE>

6.       STOCK-BASED COMPENSATION

Stock based compensation arrangements with employees are accounted for using the
intrinsic value method in accordance with the provisions of Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25"). The Company applies SFAS No. 123, "Accounting for Stock-Based
Compensation and Related Interpretations" ("SFAS 123") for stock-based
compensation arrangements with non-employees. The Company applies the additional
disclosure requirements of SFAS 123, as amended by SFAS No. 148 "Accounting for
Stock-Based Compensation - Transition and Disclosure," for employee stock
arrangements.

The following table details the effect on net loss had compensation expense for
stock-based compensation arrangements with employees been recorded based on the
fair value method under SFAS 123, as amended.

<TABLE>
<CAPTION>
                                                        Three-Months Ended March 31,
                                                            2003           2004
                                                          --------       --------
<S>                                                      <C>            <C>
Net loss, as reported                                     $ (3,753)      $(16,277)
Deduct:  Total stock-based employee compensation
expense determined under the fair value based method
for all awards, net of related tax effects                     (46)            (4)
                                                          --------       --------
Pro forma net loss                                        $ (3,799)      $(16,281)
                                                          ========       ========
</TABLE>


                                       8
<PAGE>

The Company has outstanding stock options issued to certain of its executives
that are required to be accounted for as variable options. During the
three-month periods ended March 31, 2003 and 2004 no compensation expense was
recognized for these options as the fair market value of the Company's common
stock, as estimated by the Company's Board of Directors, was less than the
exercise price of these options.

7.       DEBT

On March 29, 2004, the Company refinanced all of its term loans under its Senior
Bank Credit Facilities (the "First-Lien Facility") with a $145,000 senior,
second-priority lien secured financing that was provided to the Company pursuant
to a term loan facility (the "Second-Lien Facility"). The proceeds of the
Second-Lien Facility were used (i) to refinance in full all term loans
outstanding under the First-Lien Facility, (ii) to pay fees and expenses related
to the Second-Lien Facility and all transactions contemplated in connection
therewith and (iii) for general corporate purposes of the Company.

All payment obligations under the Second-Lien Facility are secured by a
second-priority lien on the collateral securing the First-Lien Facility;
provided that all obligations under the Second-Lien Facility will rank equally
in right of payment with all payment obligations under the First-Lien Facility
and will not otherwise be subordinated in any respect to the First-Lien
Facility. The final maturity of the Second-Lien Facility is March 29, 2009. At
the Company's option, the loans will bear interest at either the Administrative
Agent's (i) alternate base rate ("base rate loans") or (ii) reserve-adjusted
LIBO rate ("LIBO rate loans") plus, in each case, the "Applicable Margin" (as
defined). "Applicable Margin" means, with respect to (i) Base Rate Loans, a rate
of 4.00% per annum and (ii) LIBO Rate Loans, a rate of 5.00% per annum.

The Second-Lien Facility is subject to mandatory prepayment with:

         o        the proceeds of the incurrence of certain indebtedness

         o        the proceeds of certain asset sales or other dispositions

         o        a change in control

         o        annually, 50% of the Company's excess cash flow (as defined)
                  from the prior year.

The Second-Lien Facility provide for certain restrictions, including
restrictions on asset sales, dividend payments, additional indebtedness payments
for restricted investments. In addition, the Second-Lien Facility provides for
the maintenance of a financial covenant, a maximum ratio (the "Senior Leverage
Ratio") of Senior Secured Debt to trailing four quarter EBITDA (as defined
therein) not to exceed 4.25:1.00 for any fiscal quarter, except the fiscal
quarter ended June 30, 2005 for which the Senior Leverage Ratio shall not exceed
4.50:1.00, in each case to be tested on the last day of each fiscal quarter and
computed for the Parent and its consolidated subsidiaries. In connection with
entering into the Second-Lien Facility, the Company entered into an amendment
and restatement of its First-Lien Facility, which now consists solely of a
$30,000 revolving credit facility.

The First-Lien Facility, as amended and restated, has a maturity of December 29,
2008, and has one financial covenant, a Senior Leverage Ratio of senior secured
debt to trailing four quarter EBITDA (as defined therein) not to exceed
4.00:1.00 for any fiscal quarter, except the fiscal quarter ended June 30, 2005
for which the Senior Leverage Ratio may not exceed 4.25:1.00, in each case to be
tested on the last day of the fiscal quarter and computed for the Company and
its consolidated subsidiaries. Interest on revolving loan borrowings under the
First-Lien Facility bear interest at a rate per annum equal to the LIBO rate as
defined in the First-Lien Facility plus 3.5% or the alternate base rate as
defined in the First-Lien Facility plus 2.5%.

As a result of the refinancing of the Company wrote-off the remaining balances
of deferred financing costs associated with the First Lien Facility of
approximately $1,914. These costs are included in interest expense, including
amortization of deferred financing costs, on the condensed consolidated
statement of operations for the three-months ended March 31, 2004.


                                       9
<PAGE>

In connection with the refinancing the Company incurred costs and expenses,
primarily investment banking and legal fees, of approximately $6,138. These
amounts have been recorded as deferred financing fees at March 31, 2004 and will
be amortized over the term of the Second Lien Facility using the effective
interest method.

At March 31, 2004, there were no outstanding advances under the Company's
$30,000 revolving credit facility, which bears interest at approximately 4.6%
for Eurodollar rate advances and 6.4% for base rate advances as of March 31,
2004. The Company has stand-by letters of credit, renewable annually, in the
amount of $2,050 of which $2,000 serves as security for a real estate lease
entered into by the Company and $50 serves as security for certain surety bonds
issued on behalf of the Company. While these letters of credit are in effect,
the Company's available borrowing under the revolving credit facility is reduced
by $2,050.

8.       FINANCIAL INSTRUMENTS

Pursuant to the terms of the First and Second-Lien Credit Agreements, the
Company is required to enter into or maintain interest rate protection
agreements (interest rate swaps, caps, collars or similar agreements) in a
notional amount that, when taken together with the aggregate principal amount of
Total Debt, as defined subject to a fixed interest rate, is at least equal to at
least 50% of the aggregate principal amount of all Total Debt. On November 15,
2003, the Company entered into a one year interest rate cap agreement with a
notional principal of $61,000, which caps the LIBOR based rate, as defined, on
those loans at 2.5%. The interest rate protection agreement did not qualify for
hedge accounting treatment and as such the Company marks to market the contract
at the end of each period. The fair value of the interest rate cap at March 31,
2004 is de-minimus.

9.       INVENTORIES

Inventories as of December 31, 2003 and March 31, 2004 are as follows:

                                                  December 31,     March 31,
                                                      2003           2004
                                                  ------------     ---------
Finished goods                                      $16,533         $15,112
Raw materials                                           119             101
                                                    -------         -------
                                                    $16,652         $15,213
                                                    =======         =======

10.      GOODWILL AND TRADEMARKS

At December 31, 2003 and March 31, 2004, goodwill and indefinite lived
intangibles are as follows:

                                                  December 31,     March 31,
                                                     2003            2004
                                                  ------------     ---------

Goodwill                                           $241,324        $241,324
Long Lived Assets - Trademarks and copyrights        23,772          23,772
                                                   --------        --------
                                                   $265,096        $265,096
                                                   ========        ========

There were no changes in goodwill and indefinite lived intangible assets during
the three-months ended March 31, 2004.

The Company recorded non-cash deferred income tax expense of $725 during the
three-months ended March 31, 2003 and 2004, for taxable temporary differences
that will not reverse prior to expiration of the Company's net operating loss
carryforward periods. Book amortization of tax-deductible goodwill and
trademarks ceased on January 1, 2002 upon the Company's adoption of SFAS No.
142, however the Company continues to amortize these assets for tax purposes. As
a result, the Company will have deferred tax liabilities that will arise each
quarter as the taxable temporary differences related to the amortization of
these assets will not reverse prior to the expiration period of the Company's
deductible temporary differences unless the related assets are sold or an
impairment of the assets is recorded. The Company expects that it will record an
additional $2,175 to increase deferred tax liabilities during the remaining nine
months of 2004.

                                       10
<PAGE>

11.      OTHER INTANGIBLE ASSETS

The gross carrying amount and accumulated amortization of the Company's
intangible assets other than goodwill and indefinite lived intangible are as
follows:

<TABLE>
<CAPTION>
                                                      ------------------------------------    ------------------------------------
                                                               December 31, 2003                         March 31, 2004
                                                      ------------------------------------    ------------------------------------
                                                                  Accumulated                             Accumulated
                                    Useful Lives       Gross      Amortization      Net        Gross      Amortization       Net
                                    ------------      --------    ------------    --------    --------    ------------    --------
<S>                                  <C>             <C>           <C>           <C>         <C>           <C>           <C>
Customer Lists                        6-15 yrs        $ 48,600      $ (24,948)    $ 23,652    $ 48,600      $ (26,390)    $ 22,210
Copyrights                            10-20 yrs         30,800         (6,462)      24,338      30,800         (6,854)      23,946
Software                              3-5 yrs           14,789        (10,027)       4,762      14,789        (10,980)       3,809
Trademark                             4-10 yrs             200            (82)         118         200            (87)         113
Distributor relationships             6 yrs                700           (482)         218         700           (510)         190
                                                      --------      ---------     --------    --------      ---------     --------
                            Total:                    $ 95,089      $ (42,001)    $ 53,088    $ 95,089      $ (44,821)    $ 50,268
                                                      ========      =========     ========    ========      =========     ========
</TABLE>

Included in other intangible assets, are trademarks and copyrights not subject
to amortization, for which the total carrying amount was $23,772 at December 31,
2003 and March 31, 2004.

Amortization of intangibles for the three-months ended March 31, 2003 and 2004
was $3,114 and $2,820, respectively and is included in amortization of
intangible assets on the condensed consolidated statement of operations. The
estimated amortization expense for intangible assets subject to amortization for
the next five years is as follows:

Remaining nine months of 2004 .............................     $ 7,111
2005 ......................................................       9,197
2006 ......................................................       6,843
2007 ......................................................       4,600
2008 ......................................................       3,461
2009 ......................................................       3,253
Thereafter ................................................      15,803

12.      COMMITMENTS AND CONTINGENCIES

The Company is a party to litigation arising in the normal course of business.
Management regularly analyzes current information and, as necessary, provides
accruals for probable liabilities on the eventual disposition of these matters.
Management believes that the effect on its results of operations and financial
position, if any, for the disposition of these matters, will not be material.

The Securities and Exchange Commission ("SEC") is conducting a preliminary
inquiry concerning the Company and has requested that the Company voluntarily
provide the SEC with various documents and information, and that certain
officers and employees of the Company voluntarily give testimony or be
interviewed. The Company is cooperating fully with the SEC inquiry, and has
continued to provide all documents, information and testimony requested by the
SEC, and has arranged all interviews requested by the SEC with Company
employees. The Company cannot predict the final outcome of this inquiry at this
time.

15% Senior Preferred Stock due 2011

In 1999, the Company issued 3,000,000 shares of 15% Senior Preferred Stock due
in 2011 with a liquidation preference of $25.00 per share. The Senior Preferred
Stock shall accrue dividends at a rate of 15% per annum, subject to adjustment
if the Company fails to redeem all outstanding shares of such Preferred Stock in
connection with a mandatory redemption or change of control. Such accrued
dividends reflect penalty dividends of 0.5% for periods prior to November 17,
2001. While the Company believes that no penalty dividend is due for subsequent
periods, the preferred shareholders may disagree with that conclusion.


                                       11
<PAGE>

13.      NOTES OFFERING AND GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION

In connection with the recapitalization and purchase of Weekly Reader during
November 1999, the Company, Weekly Reader and CompassLearning as co-issuers,
completed an offering of $152,000 of 12 3/4% Senior Subordinated Notes due 2009
(the "Old Notes"). In June 2000, the Old Notes were exchanged in full for $152.0
million of new 12 3/4% Senior Subordinated Notes due 2009 (the "Notes"), which
have terms that are substantially identical to the Old Notes. Interest on the
Notes is payable semi-annually, on May 15 and November 15 of each year. The
Notes are jointly, severally, fully and unconditionally guaranteed by certain
subsidiaries of the Company, including CompassLearning, Inc., a wholly-owned
subsidiary and Weekly Reader, a majority (94.9%) owned subsidiary of the Company
(collectively, the "Subsidiary Guarantors").

The following tables present condensed consolidating financial information for
WRC Media and the subsidiary guarantors as of and for the three-month periods
ended March 31, 2003 and 2004 for: (1) WRC Media, (2) Weekly Reader, a
majority-owned subsidiary, (3) CompassLearning, Inc., a wholly-owned subsidiary,
(4) ChildU, Inc. a wholly-owned subsidiary, and (5) the Company on a
consolidated basis.

<TABLE>
<CAPTION>
                                                                         SUBSIDIARY GUARANTORS
                                                                ---------------------------------------
                                                                  WEEKLY                                                    WRC
                                                     WRC          READER     COMPASSLEARNING                             MEDIA INC.
                                                  MEDIA INC.    CORPORATION        INC.        CHILDU     ELIMINATIONS  CONSOLIDATED
                                                  ----------    -----------  ---------------  ---------   ------------  ------------
                                                                             (IN THOUSANDS)
<S>                                               <C>           <C>            <C>           <C>          <C>            <C>
BALANCE SHEET AS OF  MARCH 31, 2004
Assets:
Current assets                                     $   2,725     $  73,782      $  14,533     $   9,196    $ (48,164)     $  52,072
Property and equipment, net                             --           4,391            555           138         --            5,084
Goodwill and other intangible assets, net            155,505       132,734         23,494         3,631         --          315,364
Other assets                                         109,473        31,912          5,136         2,463      (99,925)        49,059
                                                   ---------     ---------      ---------     ---------    ---------      ---------
Total assets                                       $ 267,703     $ 242,819      $  43,718     $  15,428    $(148,089)     $ 421,579
                                                   =========     =========      =========     =========    =========      =========

Liabilities and stockholders' deficit:
Current liabilities                                $ 109,838     $  37,895      $  44,369     $  16,226    $(138,691)     $  69,637
Redeemable preferred stock, plus accrued
  dividends                                          136,138       143,835           --            --       (143,835)       136,138
Long-term debt, less current portion                 147,844       292,844           --            --       (147,844)       292,844
Other liabilities                                      6,550         4,975            990          --           --           12,515
Warrants on common stock of subsidiaries              11,751          --             --            --           --           11,751
Common stock subject to redemption                       940          --             --            --           --              940
Stockholders' deficit                               (145,358)     (236,730)        (1,641)         (798)     282,281       (102,246)
                                                   ---------     ---------      ---------     ---------    ---------      ---------
Total liabilities and stockholders' deficit        $ 267,703     $ 242,819      $  43,718     $  15,428    $(148,089)     $ 421,579
                                                   =========     =========      =========     =========    =========      =========
</TABLE>

<TABLE>
<CAPTION>
                                                                         SUBSIDIARY GUARANTORS
                                                                ---------------------------------------
                                                                  WEEKLY                                                    WRC
                                                     WRC          READER     COMPASSLEARNING                             MEDIA INC.
                                                  MEDIA INC.    CORPORATION        INC.        CHILDU     ELIMINATIONS  CONSOLIDATED
                                                  ----------    -----------  ---------------  ---------   ------------  ------------
                                                                             (IN THOUSANDS)
<S>                                               <C>           <C>            <C>           <C>          <C>            <C>
STATEMENTS OF OPERATIONS FOR THE THREE MONTHS
ENDED MARCH 31, 2004

Revenue, net                                       $   --        $ 34,428       $  6,669      $  1,663     $   --         $ 42,760
Operating costs and expenses                            928        29,633         10,202         2,720         --           43,483
Interest expense, net                                11,918        12,748           --            --        (10,164)        14,502
Other (income) expense                                  253           197           --            --           (200)           250
Provision for income taxes                              609           158             35          --           --              802
                                                   --------      --------       --------      --------     --------       --------
Net loss                                           $(13,708)     $ (8,308)      $ (3,568)     $ (1,057)    $ 10,364       $(16,277)
                                                   ========      ========       ========      ========     ========       ========

CASH FLOW FOR THE THREE MONTHS
ENDED MARCH 31, 2004

Cash flow provided by (used in) operations         $     22      $(10,400)      $ (3,926)     $   (428)    $  4,845       $ (9,887)
Cash flow used in investing activities                 --            (119)          (120)         (118)        --             (357)
Cash flow provided by (used in) financing
  activities                                            (37)       15,468          4,046           552       (4,845)        15,184
Cash and cash equivalents at beginning of
  period                                                100         1,267              4            61         --            1,432
                                                   --------      --------       --------      --------     --------       --------
Cash and cash equivalents at end of period         $     85      $  6,216       $      4      $     67     $   --         $  6,372
                                                   ========      ========       ========      ========     ========       ========
</TABLE>

<TABLE>
<CAPTION>
                                                                         SUBSIDIARY GUARANTORS
                                                                ---------------------------------------
                                                                  WEEKLY                                                    WRC
                                                     WRC          READER     COMPASSLEARNING                             MEDIA INC.
                                                  MEDIA INC.    CORPORATION        INC.        CHILDU     ELIMINATIONS  CONSOLIDATED
                                                  ----------    -----------  ---------------  ---------   ------------  ------------
                                                                             (IN THOUSANDS)
<S>                                               <C>           <C>            <C>           <C>          <C>            <C>
STATEMENTS OF OPERATIONS FOR THE THREE MONTHS
ENDED MARCH 31, 2003

Revenue, net                                       $   --        $ 34,819       $ 11,246      $    973     $   --         $ 47,038
Operating costs and expenses                          1,409        27,839         12,006         1,361         --           42,615
Interest expense, net                                 5,262         6,822           --            --         (4,952)         7,132
Other (income) expense                                  237           194           --            --           (200)           231
Provision for income taxes                              608           190             15          --           --              813
                                                   --------      --------       --------      --------     --------       --------
Net loss                                           $ (7,516)     $   (226)      $   (775)     $   (388)    $  5,152       $ (3,753)
                                                   ========      ========       ========      ========     ========       ========

CASH FLOW FOR THE THREE MONTHS
ENDED MARCH 31, 2003

Cash flow provided by (used in) operations         $   (537)     $(12,739)      $    709      $     23     $  4,843       $ (7,701)
Cash flow used in investing activities                 --            (105)          (515)         (386)        --           (1,006)
Cash flow provided by (used in) financing
  activities                                            318         7,493           (194)          367       (4,843)         3,141
Cash and cash equivalents at beginning of
  period                                              1,154         7,819              4           118         --            9,095
                                                   --------      --------       --------      --------     --------       --------
Cash and cash equivalents at end of period         $    935      $  2,468       $      4      $    122     $   --         $  3,529
                                                   ========      ========       ========      ========     ========       ========
</TABLE>

14.      RELATED PARTY TRANSACTIONS

Management Agreements

In connection with the acquisition of Weekly Reader and CompassLearning, the
Company entered into management agreements with its principal shareholder. In
accordance with the management agreements, the shareholder provides to Weekly
Reader and CompassLearning management consulting and advisory services. As a
result, Weekly Reader and CompassLearning are obligated to pay to the
shareholder annual aggregate management fees for services to both Weekly Reader
and CompassLearning totaling $950, which are payable quarterly.


                                       12
<PAGE>

In addition, the Company will reimburse the principal shareholder for reasonable
out-of-pocket costs and expenses incurred in connection with the performance of
its services. During the three-month periods ended March 31, 2003 and 2004, the
Company recognized general and administrative expense of $238 for management
fees. At March 31, 2004, other accrued liabilities include approximately $888 of
accrued management fees.

15.      PENSION BENEFITS

The following table provides components of net periodic benefit cost for the
Company's defined benefit pension plan for the three-months ended March 31, 2003
and 2004:

                                                             Pension Benefits
                                                           --------------------
                                                            2003           2004
                                                           -----          -----
Service cost                                               $ 229          $ 225
Interest Cost                                                221            238
Expected return on plan assets                              (169)          (242)
Amortization of net loss                                      74             42
                                                           -----          -----
Net periodic benefit cost                                  $ 355          $ 263
                                                           =====          =====

16.      SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

                                                  Three-Months Ended March 31,
                                                  ----------------------------
                                                     2003              2004
                                                    ------            ------
Cash paid during the period for interest            $2,053            $2,676
Cash paid during the period for income taxes        $   88            $  114

Non-cash financing activities:
Preferred stock dividends accrued                   $5,314            $6,185 (1)
Accretion of preferred stock                        $  235            $  238

(1)      During the quarter ended March 31, 2004, $5,199 of such preferred stock
         dividends have been recorded as interest expense in the statement of
         operations, resulting from the Company's adoption of SFAS 150 effective
         January 1, 2004.

17.      RESTATEMENT

In connection with the audit of the Company's 2003 consolidated financial
statements and the reaudit of its 2001 consolidated financial statements, the
Company has restated its previously audited consolidated balance sheets as of
December 31, 2001, 2002 and 2003 and the related statements of operations,
stockholders' deficit and cash flows for the years ended December 31, 2001, 2002
and 2003.

On May 14, 2004, the Company filed a Form 10-Q that included its condensed
consolidated financial statements for the three-months ended March 31, 2003,
which had been restated to correct certain accounting errors (the "Initial
Restatement"). At that time, the Company announced that the reaudit of its 2001
financial statements was in progress and that completion of the reaudit could
result in additional restatements to its financial statements. Subsequent to the
Initial Restatement, the reaudit of the Company's 2001 consolidated financial
statements was completed and identified additional errors that impacted the
Company's financial statements for the three-month periods ended March 31, 2003
and 2004. Accordingly, the Company has restated its previously reported results
as of December 31, 2003 and for the three-months ended March 31, 2003 and 2004
for the correction of these additional errors (the "Further Restatement").


                                       13
<PAGE>

In connection with the Initial Restatement, management had restated its
financial statements for the quarter ended March 31, 2003 because it had
incorrectly accounted for (i) the revenue recognition of a software and services
sale in December 2002; (ii) the purchase price related to the ChildU acquisition
in 2001 (iii) revenue recognition for distributor sales in 2001 and 2002; (iv)
rent expense in 2001 and 2002; (v) other items including an adjustment relating
the amortization period for certain capitalized prepublication costs .

Described below are the matters for which the Company has restated its condensed
consolidated financial statements for the three months ended March 31, 2003 in
connection with the Initial Restatement.

         o        Software and Services Sale. In December 2002, the Company
                  recorded a $1,860 receivable of revenue from the sale of
                  educational software and services to a school district. Of
                  this amount, $1,169 was recognized as revenue during the
                  fiscal quarter ended December 31, 2002, and $691 was recorded
                  as a deferred revenue liability as of December 31, 2002.
                  Accrued sales commissions of $342 also were recorded. In the
                  first quarter of 2003, this $1,169 of revenue previously
                  recognized in December 2002 was offset by recording a bad debt
                  reserve of $920 and by retaining an excess of $249 in the
                  Company's allowance for doubtful accounts, which excess amount
                  would have otherwise been reversed. The Company has concluded
                  that the sale did not meet the criteria under GAAP for revenue
                  recognition for the year ended December 31, 2002, and that it
                  incorrectly recorded the related bad debt reserve and retained
                  the excess allowance for doubtful accounts in 2003. The
                  Company has corrected these errors by reversing these
                  transactions. The net effect for the three-months ended March
                  31, 2003 was to decrease net loss by approximately $920. In
                  addition, total assets increased by approximately $920 as of
                  March 31, 2003.

         o        ChildU Goodwill Reduction. The Company's subsidiary, ChildU,
                  Inc., was acquired in 2001. In connection with such
                  acquisition, the Company issued shares of its common stock to
                  the holders of notes issued by ChildU. The Company has
                  determined that the value assigned to these shares when the
                  Company recorded the purchase price for this acquisition in
                  its historical financial statements for 2001 exceeded the fair
                  market value of these shares. Accordingly, the Company has
                  restated its financial statements to record correctly the fair
                  market value of these shares, which had the effect of reducing
                  the purchase price for ChildU, goodwill and additional paid-in
                  capital, by approximately $3,419 as of December 31, 2001. In
                  addition, the Company allocated the entire purchase price to
                  goodwill, and had assigned that goodwill an estimated life of
                  40 years. The asset acquired was software technology and not
                  goodwill. The Company has restated its financial statements to
                  record the software technology and to amortize such acquired
                  technology over its estimated useful life of five years, which
                  had the effect of increasing net loss by $418, and increasing
                  intangibles amortization expense by $418 in the three-months
                  ended March 31, 2003.

Following the determination to restate the Company's financial statements for
matters described above, the Company also determined that it would correct for
certain errors made in the application of GAAP that had not previously been
corrected because in each such case it believed that the amount of any such
error was not material to its condensed consolidated financial statements. These
matters are described below.

         o        Distributor Sales. Historically the Company recognized revenue
                  under a distribution contract between its subsidiary, World
                  Almanac Education Group, and a distributor at the time that
                  the Company shipped its products to the distributor rather
                  than at the time those products were resold by the
                  distributor. The Company also recorded distribution fees under
                  this contract as operating costs and expenses, based on its
                  understanding of the distribution contract. The Company has
                  determined to recognize revenue only at the time the
                  distributor ships these products to its customer. The Company
                  has restated its financial statements which decreased its net
                  loss and increased net assets by $169 for the three-months
                  ended March 31, 2003.

         o        Rent. The Company has two leases that have "free rent"
                  incentives at the commencement of the leases and also contain
                  rent escalation clauses (which clauses provide for rent
                  increases over time) for which it was required under GAAP to
                  record the average rent expense ratably over the lease term.
                  In its historical 2001 financial statements, however, the
                  Company recorded the rent expense from these leases as it was
                  paid. In its historical 2002 financial statements, the Company
                  began correctly recording the average rent expense for these
                  leases, but it calculated the average rent using the remainder
                  of the lease term instead of the entire lease term. The
                  Company has restated its financial statements to correct these
                  errors, which had the net effect of decreasing its net loss by
                  $158 and decreasing liabilities by $158 for the three-months
                  ended March 31, 2003.


                                       14
<PAGE>

         o        Other. The Company also made an adjustment relating to the
                  amortization period for certain capitalized pre-publication
                  costs which had the effect of increasing net loss by $105 for
                  the three-months ended March 31, 2003 and it reclassified $465
                  of software development amortization from amortization of
                  intangibles to cost of goods sold in the condensed
                  consolidated statement of operations for the three-months
                  ended March 31, 2003.

In connection with the re-audit of the Company's 2001 consolidated financial
statements, management determined that it had incorrectly accounted for the
following items, which comprise the Further Restatement: (i) intangible assets
acquired in 1999 in connection with the Company's acquisition of Weekly Reader;
(ii) acquisition reserves for acquisitions in 1999; (iii) its adoption of SFAS
142 and the preparation of its transitional impairment analysis; (iv) deferred
tax liabilities recognized upon the adoption of SFAS 142; (v) Senior Preferred
Stock dividends; and (vi) a number of other items which had been previously
identified and collectively determined to be immaterial but which the Company
has now decided to correct. In addition, the Company corrected certain errors in
its disclosures regarding stock options granted to its employees.

Described below are the matters for which the Company has restated its condensed
consolidated financial statements as of December 31, 2003 and for the
three-months ended March 31, 2003 and 2004 in connection with the Further
Restatement.

         o        WRC Media Goodwill and Intangible Assets. In connection with
                  the reaudit of the Company's 2001 consolidated financial
                  statements, the Company reconsidered the assumptions used to
                  determine the estimated fair value and economic lives of the
                  intangible assets acquired in connection with the 1999
                  acquisition and recapitalization of Weekly Reader by WRC Media
                  Inc. (the "1999 Intangible Assets"). The Company has
                  determined that the original basis for estimating the fair
                  value and economic lives of the intangible assets was a
                  valuation report that the former owners of Weekly Reader had
                  provided to WRC Media at the time of the 1999 acquisition.
                  Accordingly, in 2004, the Company engaged a valuation
                  consulting firm to assist management in assessing the fair
                  values and economic lives of the 1999 Intangible Assets as of
                  the acquisition date. As a result, certain estimated fair
                  values and economic lives of the 1999 Intangible Assets have
                  been revised. Accordingly, the Company has restated its
                  financial statements to correctly state the estimated fair
                  value and economic lives of the 1999 Intangible Assets
                  acquired as of November 17, 1999. This had the effect of
                  increasing goodwill by $36,238 and decreasing other
                  intangibles in the aggregate by the same amount. Other
                  intangible assets include Copyrights, Customer lists and
                  Trademarks. Copyrights increased by $4,733 and their estimated
                  useful life was amended from 10 years to approximately 20
                  years, Customer lists decreased by $13,680 and their estimated
                  useful life decreased from 10 years to approximately 8.5 years
                  and Trademarks decreased by $27,291 and their estimated useful
                  life decreased from 40 years to approximately 39 years. In
                  addition, the Company has restated its financial statements to
                  correct amortization expense for goodwill and other intangible
                  assets, which had the effect of reducing accumulated deficit
                  as of December 31, 2003 by $13,508, and reducing amortization
                  expense of intangible assets for the three-months ended March
                  31, 2003 and 2004 by $374 and $311, respectively.

         o        CompassLearning/Weekly Reader Additional Goodwill Reduction.
                  As discussed above the Company recorded certain reserves for a
                  planned restructuring in connection with the acquisitions of
                  CompassLearning and Weekly Reader. In connection with the
                  reaudit of its 2001 consolidated financial statements the
                  Company determined that it had incorrectly recorded reserves
                  of $3,106 related to estimated liabilities it believed it had
                  assumed at the date of such acquisitions. The Company
                  concluded that the acquisition reserves associated with these
                  liabilities should have been reversed in 1999. The estimated
                  liabilities associated with the excess reserves included
                  $1,522 of debt issuance costs, $1,157 of severance and
                  consulting fees, primarily attributable to employees or
                  consultants hired subsequent to the acquisition date, $362 of
                  leasehold improvements for space to be occupied by employees
                  of World Almanac Group and other administrative costs of $65.
                  The Company determined that goodwill and the related
                  acquisition reserves should be reduced by $3,106. The Company
                  has restated its financial statements to correct for these
                  errors. The net effect of such adjustments was to the
                  accumulated deficit as of December 31, 2003 by $2,103 and to
                  increase net loss for the three-months ended March 31, 2003
                  and 2004 by $56 and $50, respectively.


                                       15
<PAGE>

         o        Goodwill and Long-lived Intangible Asset Impairment. On
                  January 1, 2002, the Company adopted SFAS 142 for its goodwill
                  and intangible assets. Upon adoption, the Company ceased
                  amortization of goodwill and other indefinite lived intangible
                  assets, which primarily consist of trademarks. As required by
                  SFAS 142, the Company reviewed its indefinite lived
                  intangibles (goodwill and trademarks) for impairment as of
                  January 1, 2002. The Company has four reporting units with
                  goodwill. Goodwill was tested for impairment at the reporting
                  unit level. As a result, the Company recorded a transitional
                  goodwill and indefinite lived intangible asset impairment
                  charge of $72,022 at American Guidance Service, Inc. ("AGS") a
                  subsidiary of Weekly Reader. This charge was reported as a
                  cumulative effect of accounting change, as of January 1, 2002,
                  in the consolidated statements of operations. In connection
                  with the reconsideration of the assumptions used to determine
                  the estimated fair value and economic lives of the 1999
                  Intangible Assets discussed above, the Company updated its
                  transitional impairment analysis and determined that it had
                  incorrectly calculated the fair value of its reporting units.
                  Accordingly, the impairment charge of $72,022 at AGS was
                  incorrect and not required. The Company's measurement of fair
                  value was based on an evaluation of future discounted cash
                  flows. This evaluation utilized the best information available
                  in the circumstances, including reasonable and supportable
                  assumptions and projections. The discounted cash flow
                  evaluation considered several earnings scenarios and the
                  likelihood of possible outcomes. Collectively, this evaluation
                  was management's best estimate of projected future cash flows.
                  The Company's discounted cash flow evaluation used a range of
                  discount rates that corresponds to the Company's
                  weighted-average cost of capital. This discount rate range
                  assumed was consistent with that used for investment decisions
                  and takes into account the specific and detailed operating
                  plans and strategies of the WRC Media's reporting units.
                  Certain other key assumptions utilized, including changes in
                  revenue, operating expenses, working capital requirements and
                  capital expenditures including pre-publication costs, are
                  based on reasonable estimates related to the Company's
                  strategic initiatives and current market conditions. Such
                  assumptions also are consistent with those utilized in the
                  Company's annual planning process. The Company has restated
                  its December 31, 2003 and March 31, 2004 balance sheets to
                  correct for this error. The net effect of such adjustment was
                  to increase goodwill and decrease accumulated deficit by
                  $72,022 at December 31, 2003 and March 31, 2004.

         o        Deferred Tax Liabilities. The Company recognized non-cash
                  deferred income tax expense and a deferred tax liability of
                  approximately $8,700 on January 1, 2002 in connection with its
                  adoption of SFAS 142. The deferred tax liability relates to
                  the excess of tax over book amortization of tax-deductible
                  goodwill and trademarks since the timing of the reversal of
                  this liability is indefinite, unless the related assets are
                  sold or an impairment of the assets is recorded, and can no
                  longer be offset by the Company's net operating loss
                  carry-forwards, which expire within a statutory period. During
                  2003, the Company recorded additional deferred tax expense of
                  $2,000. The non-cash deferred income tax expense recorded on
                  January 1, 2002 was reduced to $5,200; a decrease of $3,500.
                  The non-cash income tax expense recorded during the years
                  ended December 31, 2002 and 2003 increased by $700 from $2,000
                  to $2,700 and by $900 from $2,000 to $2,900, respectively. The
                  net effect of these corrections on the Company's balance sheet
                  at December 31, 2003 was to decrease accumulated deficit and
                  deferred tax liabilities by $1,900, respectively. The non-cash
                  income tax expense recorded during the three-months ended
                  March 31, 2003 and 2004 increased by $225. Total tax expense
                  increased from $588 to $813 in the three-month period ended
                  March 31, 2003 and from $577 to $802 in the three-month period
                  ended March 31, 2004. These restatements are principally due
                  to the revision of estimated fair value and economic lives of
                  the 1999 Intangible Assets discussed above.

         o        15% Senior Preferred Stock due 2011. In 1999, the Company
                  issued 3,000,000 shares of 15% Senior Preferred Stock due in
                  2011. The 15% Senior Preferred Stock accrued dividends at a
                  rate of 15% per annum. The Certificate of Designation provides
                  that the 15% Senior Preferred Stock was subject to a default
                  or penalty dividend of 0.5% in the event of certain
                  registration defaults. A penalty dividend was applicable from
                  mid-August of 2000 through November 17, 2001. While the
                  Company believes that no penalty dividend is due for
                  subsequent periods, the preferred shareholders may disagree
                  with that conclusion. The Company had not previously recorded
                  this penalty dividend. The recording of the penalty dividends
                  (and required compounding in subsequent periods) resulted in
                  the Company increasing accrued dividends on 15% Senior
                  Preferred Stock by $934 as of December 31, 2003 and by $30 and
                  $35 during the three-months ended March 31, 2003 and 2004
                  respectively.


                                       16
<PAGE>

         o        Segment Information. The Company previously disclosed one
                  reportable segment. The Company now discloses four reportable
                  segments.

         o        Other. In connection with the re-audit of the Company's 2001
                  financial statements, the Company has made a number of other
                  corrections to the financial statements, which collectively
                  were immaterial.

Summarized below are the significant effects of the Restatement, which includes
the Initial Restatement and the Further Restatement.


<TABLE>
<CAPTION>
                                                                 March 31, 2004
                                                   ------------------------------------------
                                                   As Previously
                                                    Reported in      Further
                                                    May 14, 2004   Restatement
                                                     Form 10-Q     Adjustments    As Restated
                                                   -------------   -----------    -----------
<S>                                                 <C>            <C>            <C>
ASSETS
Current Assets:
     Cash and cash equivalents                       $   6,372                     $   6,372
     Accounts receivable, net                           25,758                        25,758
     Inventories                                        15,213                        15,213
     Prepaid expenses                                    3,165                         3,165
     Other current assets                                1,564                         1,564
                                                     ---------      ---------      ---------

       Total current assets                             52,072           --           52,072

Property and equipment, net                              4,824      $     260          5,084
Capitalized software, net                                7,414                         7,414
Goodwill                                               143,149         98,175        241,324
Deferred financing costs, net                            8,856            692          9,548
Other intangible assets, net                            89,479        (15,439)        74,040
Other assets and investments                            32,649           (552)        32,097
                                                     ---------      ---------      ---------

       Total assets                                  $ 338,443      $  83,136      $ 421,579
                                                     =========      =========      =========

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
     Accounts payable                                $  13,960                     $  13,960
     Accrued payroll, commissions and benefits           7,773                         7,773
     Current portion of deferred revenue                27,559                        27,559
     Other accrued liabilities                          20,345                        20,345
                                                     ---------      ---------      ---------

       Total current liabilities                        69,637           --           69,637

Deferred revenue, net of current portion                   990                           990
Deferred tax liabilities                                13,200      $  (1,675)        11,525
15% redeemable senior preferred stock                  135,169            969        136,138
Long-term debt                                         292,844                       292,844
                                                     ---------      ---------      ---------

       Total liabilities                               511,840           (706)       511,134
                                                     ---------      ---------      ---------

Commitments and contingencies

Warrants on common stock of subsidiaries                11,751                        11,751
Common stock subject to redemption                         940                           940
                                                     ---------      ---------      ---------

Stockholders' deficit:
     Common stock                                           70                            70
     18% convertible preferred stock                    22,905                        22,905
     Additional paid-in capital                        131,753                       131,753
     Accumulated other comprehensive loss               (1,899)                       (1,899)
     Accumulated deficit                              (338,917)        83,842       (255,075)
                                                     ---------      ---------      ---------

       Total stockholders' deficit                    (186,088)        83,842       (102,246)
                                                     ---------      ---------      ---------

       Total liabilities and stockholders' deficit   $ 338,443      $  83,136      $ 421,579
                                                     =========      =========      =========
</TABLE>


                                       17
<PAGE>

<TABLE>
<CAPTION>
                                                                December 31, 2003
                                                   ------------------------------------------
                                                   As Previously
                                                    Reported in      Further
                                                    May 14, 2004   Restatement
                                                      Form 10-Q    Adjustments    As Restated
                                                   --------------  -----------    -----------
<S>                                                 <C>            <C>            <C>
ASSETS
Current Assets:
   Cash and cash equivalents                         $   1,432                     $   1,432
   Accounts receivable, net                             30,027                        30,027
   Inventories                                          16,652                        16,652
   Prepaid expenses                                      3,367                         3,367
   Other current assets                                  1,889                         1,889
                                                     ---------      ---------      ---------
     Total current assets                               53,367           --           53,367
Property and equipment, net                              5,526      $     266          5,792
Capitalized software, net                                7,293                         7,293
Goodwill                                               143,149         98,175        241,324
Deferred financing costs, net                            4,939            736          5,675
Other intangible assets, net                            92,610        (15,750)        76,860
Other assets and investments                            30,448           (552)        29,896
                                                     ---------      ---------      ---------
     Total assets                                    $ 337,332      $  82,875      $ 420,207
                                                     =========      =========      =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
   Accounts payable                                  $  16,963                     $  16,963
   Accrued payroll, commissions and benefits             9,356                         9,356
   Current portion of deferred revenue                  35,900                        35,900
   Other accrued liabilities                            17,166                        17,166
   Current portion of long-term debt                     8,477                         8,477
                                                     ---------      ---------      ---------
     Total current liabilities                          87,862           --           87,862

Deferred revenue, net of current portion                   959                           959
Deferred tax liabilities                                12,700      $  (1,900)        10,800
Long-term debt                                         262,925                       262,925
                                                     ---------      ---------      ---------
     Total liabilities                                 364,446         (1,900)       362,546
                                                     ---------      ---------      ---------
Commitments and contingencies
15% redeemable senior preferred stock                  129,767            934        130,701
                                                     ---------      ---------      ---------
Warrants on common stock of subsidiaries                11,751                        11,751
                                                     ---------      ---------      ---------
Common stock subject to redemption                         940                           940
                                                     ---------      ---------      ---------
Stockholders' deficit:
   Common stock                                             70                            70
   18% convertible preferred stock                      21,919                        21,919
   Additional paid-in capital                          131,753           --          131,753
   Accumulated other comprehensive loss                 (1,899)                       (1,899)
   Accumulated deficit                                (321,415)        83,841       (237,574)
                                                     ---------      ---------      ---------
     Total stockholders' deficit                      (169,572)        83,841        (85,731)
                                                     ---------      ---------      ---------
     Total liabilities and stockholders' deficit     $ 337,332      $  82,875      $ 420,207
                                                     =========      =========      =========
</TABLE>


                                       18
<PAGE>

<TABLE>
<CAPTION>
                                                               Three Months Ended March 31, 2004
                                                           -----------------------------------------
                                                           As Previously
                                                            Reported in     Further
                                                            May 14, 2004  Restatement
                                                             Form 10-Q    Adjustments    As Restated
                                                           -------------  -----------    -----------
<S>                                                          <C>           <C>           <C>
Revenue, net                                                  $ 42,760                    $ 42,760

Cost of goods sold                                              12,920                      12,920
                                                              --------      --------      --------

     Gross profit                                               29,840          --          29,840
                                                              --------      --------      --------

Costs and expenses:
     Sales and marketing                                        11,555                      11,555
     Research and development                                      747                         747
     Distribution, circulation and fulfillment                   3,552                       3,552
     Editorial                                                   2,873                       2,873
     General and administrative                                  7,121                       7,121
     Restructuring costs and other non-recurring expenses           65                          65
     Depreciation                                                  425      $      6           431
     Amortization of intangible assets                           4,530          (311)        4,219
                                                              --------      --------      --------

     Total operating costs and expenses                         30,868          (305)       30,563
                                                              --------      --------      --------

     Loss from operations                                       (1,028)          305          (723)

Interest expense, including amortization
   of deferred financing costs                                 (14,423)          (79)      (14,502)
Other expense, net                                                (250)                       (250)
                                                              --------      --------      --------

     Loss before income tax provision                          (15,701)          226       (15,475)

Income tax provision                                               577           225           802
                                                              --------      --------      --------

     Net loss                                                 $(16,278)     $      1      $(16,277)
                                                              ========      ========      ========
</TABLE>

<TABLE>
<CAPTION>
                                                                             Three Months Ended March 31, 2003
                                                           ---------------------------------------------------------------------
                                                                                        As Previously
                                                           As Previously     Initial    Restated in      Further
                                                            Reported in    Restatement  May 14, 2004   Restatement
                                                           2003 Form 10-Q  Adjustments   Form 10-Q     Adjustments   As Restated
                                                           --------------  -----------  -------------  -----------   -----------
<S>                                                          <C>           <C>           <C>           <C>           <C>
Revenue, net                                                  $ 46,977      $    243      $ 47,220      $   (182)     $ 47,038

Cost of goods sold                                              12,734           539        13,273          --          13,273
                                                              --------      --------      --------      --------      --------

     Gross profit                                               34,243          (296)       33,947          (182)       33,765
                                                              --------      --------      --------      --------      --------

Costs and expenses:
     Sales and marketing                                        11,481                      11,481                      11,481
     Research and development                                      711                         711                         711
     Distribution, circulation and fulfillment                   3,510                       3,510                       3,510
     Editorial                                                   2,579                       2,579                       2,579
     General and administrative                                  6,720        (1,078)        5,642                       5,642
     Restructuring costs and other non-recurring expenses          480                         480                         480
     Depreciation                                                  616                         616             6           622
     Amortization of intangible assets                           4,633            58         4,691          (374)        4,317
                                                              --------      --------      --------      --------      --------

     Total operating costs and expenses                         30,730        (1,020)       29,710          (368)       29,342
                                                              --------      --------      --------      --------      --------

     Income from operations                                      3,513           724         4,237           186         4,423

Interest expense, including amortization
   of deferred financing costs                                  (7,082)                     (7,082)          (50)       (7,132)
Other expense, net                                                (231)                       (231)                       (231)
                                                              --------      --------      --------      --------      --------

     Loss before income tax provision                           (3,800)          724        (3,076)          136        (2,940)

Income tax provision                                               588                         588           225           813
                                                              --------      --------      --------      --------      --------

     Net loss                                                 $ (4,388)     $    724      $ (3,664)     $    (89)     $ (3,753)
                                                              ========      ========      ========      ========      ========
</TABLE>


                                       19
<PAGE>

                   WEEKLY READER CORPORATION AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
             (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                    December 31,    March 31,
                                                                        2003           2004
                                                                    ------------   ------------
                                                                    (As restated   (As restated
                                                                    See Note 15)   See Note 15)
<S>                                                                  <C>            <C>
ASSETS
Current Assets:

     Cash                                                             $   1,267      $   6,216
     Accounts receivable (net of allowance for doubtful accounts
     and sales returns of $2,179 and $2,205, respectively.)              20,880         19,387
     Inventories                                                         15,890         14,476
     Due from related party                                              11,502         29,892
     Prepaid expenses                                                     2,882          2,600
     Other current assets (including restricted assets of $1,006
      and $910, respectively)                                             1,889          1,211
                                                                      ---------      ---------

       Total current assets                                              54,310         73,782

Property and equipment, net                                               4,665          4,391
Goodwill                                                                101,978        101,978
Deferred financing costs, net                                               512           --
Other intangible assets, net                                             31,580         30,756
Other assets                                                             29,711         31,912
                                                                      ---------      ---------

       Total assets                                                   $ 222,756      $ 242,819
                                                                      =========      =========

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
     Accounts payable                                                 $  15,446      $  12,372
     Deferred revenue                                                    17,565         12,307
     Accrued expenses and other current liabilities                      15,865         13,216
     Current portion of long-term debt                                    8,477           --
                                                                      ---------      ---------

       Total current liabilities                                         57,353         37,895

Deferred tax liability                                                    4,800          4,975
15% senior preferred stock,
including accrued dividends and accretion of warrant value
(5,701,360 shares outstanding)
(Liquidation preference of $142,866)                                       --          143,835
Long-term debt                                                          262,925        292,844
                                                                      ---------      ---------
       Total liabilities                                                325,078        479,549
                                                                      ---------      ---------

Commitments and contingencies
15% senior preferred stock,
including accrued dividends and accretion of warrant value
(5,508,000 shares outstanding)                                          138,636           --

Stockholders' deficit:
     Common stock, ($.01 par value, 20,000,000 shares authorized;
     2,830,000 shares outstanding in 2003 and 2004)                          28             28
     Additional paid-in capital                                           9,133          9,133
     Due from parent                                                    (56,464)       (43,928)
     Accumulated other comprehensive loss                                (1,899)        (1,899)
     Accumulated deficit                                               (191,756)      (200,064)
                                                                      ---------      ---------

       Total stockholders' deficit                                     (240,958)      (236,730)
                                                                      ---------      ---------

       Total liabilities and stockholders' deficit                    $ 222,756      $ 242,819
                                                                      =========      =========
</TABLE>

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

                                       20
<PAGE>

                   WEEKLY READER CORPORATION AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                      FOR THE THREE MONTHS ENDED MARCH 31,
                                   (UNAUDITED)
                             (AMOUNTS IN THOUSANDS)

                                                     2003          2004
                                                 ------------  ------------
                                                 (As Restated  (As Restated
                                                 See Note 15)  See Note 15)

Revenue, net                                       $ 34,819      $ 34,428

Cost of goods sold                                    8,439         8,501
                                                   --------      --------

Gross profit                                         26,380        25,927
                                                   --------      --------

Costs and expenses:
     Sales and marketing                              6,327         7,025
     Distribution, circulation and fulfillment        3,510         3,552
     Editorial                                        2,579         2,873
     General and administrative                       4,439         5,065
     Restructuring costs                               --               1
     Depreciation                                       445           393
     Amortization of intangible assets                2,100         2,223
                                                   --------      --------

     Total operating costs and expenses              19,400        21,132
                                                   --------      --------

Income from operations                                6,980         4,795

Other expense:
Interest expense, including amortization
of deferred financing costs                          (6,822)      (12,748)
Other expense, net                                     (194)         (197)
                                                   --------      --------

Loss before income tax provision                        (36)       (8,150)

Income tax provision                                    190           158
                                                   --------      --------

Net loss                                           $   (226)     $ (8,308)
                                                   ========      ========

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


                                       21
<PAGE>

                   WEEKLY READER CORPORATION AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                      FOR THE THREE MONTHS ENDED MARCH 31,
                                   (UNAUDITED)
                             (AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                  2003           2004
                                                                              ------------   ------------
                                                                              (As Restated   (As Restated
                                                                              See Note 15)   See Note 15)
<S>                                                                            <C>            <C>
Cash flows from operating activities:

Net loss                                                                        $    (226)     $  (8,308)

Adjustments to reconcile net loss to net cash used in operating activities:
     Deferred income tax provision                                                    175            175
     Depreciation and amortization                                                  2,545          2,616
     Accrual of manditorily redeemable preferred stock dividends                     --            5,199
     Amortization of debt discount                                                    107            120
     Amortization of deferred financing costs                                          45            512
Changes in operating assets and liabilities:
     Accounts receivable                                                            2,444          1,493
     Inventories                                                                      994          1,414
     Prepaid expenses and other current assets                                       (853)           960
     Other non-current assets                                                      (4,638)        (3,601)
     Accounts payable                                                              (5,160)        (3,074)
     Deferred revenue                                                              (6,513)        (5,258)
     Accrued liabilities                                                           (1,659)        (2,648)
                                                                                ---------      ---------

Net cash used in operating activities                                             (12,739)       (10,400)
                                                                                ---------      ---------

Cash flows from investing activities:
     Purchases of property and equipment                                             (109)          (119)
     Proceeds from the disposition of property and equipment                            4           --
                                                                                ---------      ---------

Net cash used in investing activities                                                (105)          (119)
                                                                                ---------      ---------

Cash flows from financing activities:
     Proceeds from revolving line of credit                                         7,000         18,000
     Repayments of borrowings under revolving line of credit                       (2,000)       (23,000)
     Repayment of senior bank debt                                                 (1,834)      (118,678)
     Proceeds from issuance of long term debt                                        --          145,000
     Decrease in due from parent, net                                               5,865         12,536
     Increase in due from related party                                            (1,538)       (18,390)
                                                                                ---------      ---------

Net cash provided by financing activities                                           7,493         15,468
                                                                                ---------      ---------

(Decrease) increase in cash and cash equivalents                                   (5,351)         4,949

Cash and cash equivalents, beginning of period                                      7,819          1,267
                                                                                ---------      ---------

Cash and cash equivalents, end of period                                        $   2,468      $   6,216
                                                                                =========      =========
</TABLE>

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


                                       22
<PAGE>

                   WEEKLY READER CORPORATION AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)
           (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)


1.       DESCRIPTION OF BUSINESS

The condensed consolidated financial statements of Weekly Reader Corporation
("WRC") include the accounts of WRC and its subsidiary, Lifetime Learning
System, Inc. ("Lifetime Learning"), World Almanac Education Group ("WAE") and
its subsidiaries, Funk & Wagnalls Yearbook Corporation and Gareth Stevens, Inc.
("Gareth Stevens"), and American Guidance Service, Inc. and its subsidiaries,
AGS International Sales, Inc. and Lindy Acquisition Co., LLC (all are
collectively referred to as "Weekly Reader" or the "Company"). At December 31,
2003 and March 31, 2004, WRC Media Inc. (the "Parent") owns 94.9% and PRIMEDIA,
Inc. owns 5.1% of the common stock of Weekly Reader. On May 9, 2001 American
Guidance acquired through a subsidiary all of the operating assets of Lindy
Enterprises, Inc. ("Lindy") for approximately $7,500. The transaction was
accounted for as an asset purchase. Lindy develops curriculum-based skills
assessment and test preparation products that correlate to national and state
curriculum.

2.       BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements of the Company as
of March 31, 2004 and for the three-month periods ended March 31, 2003 and 2004
have been prepared in accordance with accounting principles generally accepted
in the United States of America ("GAAP") for interim financial information and
the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by GAAP for
complete financial statements In the opinion of management, all adjustments,
consisting of only normal recurring adjustments necessary to present fairly the
financial position, the results of operations and cash flows for the periods
presented, have been made.

These condensed consolidated financial statements should be read in conjunction
with Weekly Reader Corporation and Subsidiaries annual financial statements and
related notes thereto for the year ended December 31, 2003 included in the
Company's Annual Report Form 10-K dated June 15, 2004. The operating results for
the three-month periods ended March 31, 2003 and 2004 are not necessarily
indicative of the results that may be expected for a full year.

3.       RECENT ACCOUNTING PRONOUNCEMENTS

In January 2003, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 46, "Consolidation of Variables Interest Entities ("FIN 46").
FIN 46 clarifies the application of Accounting Research Bulletin No. 51,
"Consolidated Financial Statements" to certain entities in which equity
investors do not have the characteristics of a controlling financial interest or
do not have sufficient equity at risk for the entity to finance its activities
without additional subordinated financial support from other parties. In
December 2003, the FASB issued FIN No. 46 (Revised) ("FIN 46R") to address
certain FIN 46 implementation issues. This interpretation requires that the
assets, liabilities, and results of activities of a Variable Interest Entity
("VIE") be consolidated into the financial statements of the enterprise that is
the primary beneficiary of the VIE. FIN 46R also requires additional disclosures
by primary beneficiaries and other significant variable interest holders. This
interpretation is effective no later than the end of the first interim or
reporting period ending after March 15, 2004, except for those VIE's that are
considered to be special purpose entities, for which the effective date is no
later than the end of the first interim or annual reporting period ending after
December 15, 2003. The adoption of FIN 46R effective March 31, 2004 did not have
a significant impact on the Company's consolidated financial position or results
of operations.

In April 2003, the FASB issued Statement of Financial Accounting Standards
("SFAS") No. 149 "Amendment of Statement 133 on Derivative Instruments and
Hedging Activities" ("SFAS 149"), which amends and clarifies accounting for
derivative instruments, and for hedging activities under SFAS 133. Specifically,
SFAS 149 requires that contracts with comparable characteristics be accounted
for similarly. Additionally, SFAS 149 clarifies the circumstances in which a
contract with an initial net investment meets the characteristics of a
derivative and when a derivative contains a financing component that requires
special reporting in the statement of cash flows. This statement is generally
effective for contracts entered into or modified after June 30, 2003 and did not
have a significant impact on the Company's consolidated financial position or
results of operations.


                                       23
<PAGE>

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity" ("SFAS 150").
SFAS 150 establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its scope
as a liability (or an asset in some circumstances). Many of those instruments
were previously classified as equity. This statement was effective for the
Company beginning January 1, 2004. For financial instruments created before the
issuance date of this statement and still existing at the beginning of the
interim period of adoption, transition shall be achieved by reporting the
cumulative effect of a change in an accounting principle by initially measuring
the financial instruments at fair value or other measurement attribute required
by this statement. The adoption of this statement required the Company to
reclassify its 15% Senior Preferred Stock ("15% Senior Preferred") from the
mezzanine section of the balance sheet to long-term liabilities at March 31,
2004. Effective January 1, 2004 dividend payments for the 15% Senior Preferred
are recorded as interest expense in the consolidated statement of operations.
The adoption of this statement did not result in any adjustment to the book
value of its 15% Senior Preferred as of January 1, 2004 as book value
approximated fair value at January 1, 2004. For the three-months ended March 31,
2004 the Company recognized $5,199 of accrued dividends on 15% Senior Preferred
as interest expense.

On December 23, 2003, the FASB issued SFAS No. 132 (Revised 2003), "Employers'
Disclosures about Pensions and Other Postretirement Benefits, an amendment of
FASB Statements No. 87, 88 and 106." It requires additional disclosures to those
in the original Statement 132 about the assets, obligations, cash flows and net
periodic benefit cost of defined benefit pension plans and other defined benefit
post-retirement plans. The majority of the provisions of this statement apply to
financial statements issued for fiscal years ending after December 15, 2003. The
Company has adopted such disclosure provisions (see Note 13).

4.       SEGMENT INFORMATION

The Company has three reporting segments: Weekly Reader, World Almanac, and
American Guidance Service ("AGS"). This classification reflects the nature of
the Company's organizational structure by which the chief operating
decision-maker reviews and assesses the operating performance of the reporting
segment and allocates corporate resources.

         o        Weekly Reader is a publisher of classroom periodicals,
                  grade-specific workbooks and custom publisher of instructional
                  materials paid for by various sponsors.

         o        World Almanac publishes print reference materials sold into
                  the trade channel; publishes nonfiction and fiction children's
                  books under three imprints for K-12 students; publishes print
                  and electronic reference materials sold into the library
                  channel; and distributes third-party books targeted for K-12
                  students through its catalogs.

         o        AGS is a publisher of testing and assessment products and
                  supplemental instructional materials. AGS products are sold
                  into the school channel. Testing and assessment products are
                  primarily for K-12 students and supplemental instructional
                  materials are primarily for low-performing students in middle
                  and secondary schools.

Information regarding the operations of the Company's reporting segments is set
forth below. Parent Company expenses and assets not allocated to reporting
segments are included in Corporate. Weekly Reader Corporation evaluates
performance based on several factors, of which the primary financial measure is
operating income (loss).


                                       24
<PAGE>

<TABLE>
<CAPTION>
                                                  Weekly       World
                                                  Reader      Almanac        AGS       Corporate    Eliminations     Total
                                                  ------      -------        ---       ---------    ------------     -----
<S>                                              <C>          <C>         <C>          <C>           <C>           <C>
Three months ended March 31, 2004
---------------------------------

Net Revenue                                       10,114       11,881       12,433         --            --          34,428
Income/ (loss) from operations                     1,900        1,370        1,538          (13)         --           4,795
Depreciation and amortization                        132          486        1,986           12          --           2,616
Restructuring costs and other non-recurring
  items                                               --           --           --            1          --               1
Assets                                            50,472       98,295      184,204        8,261       (98,413)      242,819
Capital expenditures                                  34           20           60            5          --             119

Three months ended March 31, 2003
---------------------------------

Net Revenue                                       10,497       12,593       11,729         --            --          34,819
Income/ (loss) from operations                     2,689        2,295        1,881          115          --           6,980
Depreciation and amortization                        185          557        1,792           11          --           2,545
Assets                                            53,049       91,727      168,385      (16,375)      (75,946)      220,840
Capital expenditures                                  67           24           16            2          --             109
</TABLE>

5.       RESTRUCTURING AND OTHER NON-RECURRING EXPENSES

During the three-months ended March 31, 2004, the Company reviewed its
restructuring reserve established in 2002 and adjusted the reserve by $1 due to
updating the assumptions used in determining the fair value of the remaining
lease obligations associated with facilities vacated during 2002.

The restructuring reserve totaling approximately $976 at March 31, 2004 is
expected to be paid as follows: remaining nine months of 2004 - $152 and 2005
and beyond - $824 and is included in accrued expenses and other current
liabilities in the condensed consolidated balance sheets.

Components of the Company's restructuring plan initiated in the fourth quarter
of 2002 are shown in the following table:

                                 Balance at                           Balance at
                                December 31,  Additional    Amounts    March 31,
                                    2003      Adjustments    Paid        2004
                                ------------  -----------   -------   ----------
Severance and other benefits       $   20        $ --       $  (20)     $ --
Lease terminations                    988             1        (13)        976
Total                              $1,008        $    1     $  (33)     $  976

6.       DEBT

On March 29, 2004, the Company refinanced all of its term loans under its Senior
Bank Credit Facilities (the "First-Lien Facility") with a $145,000 senior,
second-priority lien secured financing that was provided to the Company pursuant
to a term loan facility (the "Second-Lien Facility"). The proceeds of the
Second-Lien Facility were used (i) to refinance in full all term loans
outstanding under the First-Lien Facility, (ii) to pay fees and expenses related
to the Second-Lien Facility and all transactions contemplated in connection
therewith and (iii) for general corporate purposes of the Company.

All payment obligations under the Second-Lien Facility are secured by a
second-priority lien on the collateral securing the First-Lien Facility;
provided that all obligations under the Second-Lien Facility will rank equally
in right of payment with all payment obligations under the First-Lien Facility
and will not otherwise be subordinated in any respect to the First-Lien
Facility. The final maturity of the Second-Lien Facility will be March 29, 2009.
At the Company's option, the loans will bear interest at either the
Administrative Agent's (i) alternate base rate ("base rate loans") or (ii)
reserve-adjusted LIBO rate ("LIBO rate loans") plus, in each case, the
"Applicable Margin" (as defined). "Applicable Margin" means, with respect to (i)
Base Rate Loans, a rate of 4.00% per annum and (ii) LIBO Rate Loans, a rate of
5.00% per annum.

                                       25
<PAGE>

The Second-Lien Facility is subject to mandatory prepayment with:

         o        the proceeds of the incurrence of certain indebtedness

         o        the proceeds of certain asset sales or other dispositions

         o        a change in control

         o        annually, 50% of the Company's excess cash flow (as defined)
                  from the prior year.

The Second-Lien Facility provide for certain restrictions, including
restrictions on asset sales, dividend payments, additional indebtedness payments
for restricted investments. In addition, the Second-Lien Facility provides for
the maintenance of a financial covenant, a maximum ratio (the "Senior Leverage
Ratio") of Senior Secured Debt to trailing four quarter EBITDA (as defined
therein) not to exceed 4.25:1.00 for any fiscal quarter, except the fiscal
quarter ended June 30, 2005 for which the Senior Leverage Ratio shall not exceed
4.50:1.00, in each case to be tested on the last day of each fiscal quarter and
computed for WRC Media (as defined within the agreement) and its consolidated
subsidiaries. In connection with entering into the Second-Lien Facility, the
Company entered into an amendment and restatement of its First-Lien Facility,
which now consists solely of a $30,000 revolving credit facility.

The First-Lien Facility, as amended and restated, has a maturity of December 29,
2008, and has one financial covenant, a Senior Leverage Ratio of senior secured
debt to trailing four quarter EBITDA (as defined therein) not to exceed
4.00:1.00 for any fiscal quarter, except the fiscal quarter ended June 30, 2005
for which the Senior Leverage Ratio may not exceed 4.25:1.00, in each case to be
tested on the last day of the fiscal quarter and computed for the Company and
its consolidated subsidiaries. Interest on revolving loan borrowings under the
First-Lien Facility bear interest at a rate per annum equal to the LIBO rate as
defined in the First-Lien Facility plus 3.5% or the alternate base rate as
defined in the First-Lien Facility plus 2.5%.

As a result of the refinancing, the Company wrote-off the remaining balances of
deferred financing costs associated with the First Lien Facility of
approximately $467. These costs are included in interest expense, including
amortization of deferred financing costs on the condensed consolidated statement
of operations for the three-months ended March 31, 2004.

In connection with the refinancing the Company incurred costs and expenses,
primarily investment banking and legal fees, of approximately $6,138. These
amounts have been recorded as deferred financing fees at March 31, 2004 and will
be amortized over the term of the Second Lien Facility using the effective
interest method.

At March 31, 2004, there were no outstanding advances under the Company's
$30,000 revolving credit facility, which bears interest at approximately 4.6%
for Eurodollar rate advances and 6.4% for base rate advances as of March 31,
2004. The Company has stand-by letters of credit, renewable annually, in the
amount of $2,050 of which $2,000 serves as security for a real estate lease
entered into by the Company and $50 serves as security for certain surety bonds
issued on behalf of the Company. While these letters of credit are in effect,
the Company's available borrowing under the revolving credit facility is reduced
by $2,050.

7.       FINANCIAL INSTRUMENTS

Pursuant to the terms of the First and Second-Lien Credit Agreements, the
Company is required to enter into or maintain interest rate protection
agreements (interest rate swaps, caps, collars or similar agreements) in a
notional amount that, when taken together with the aggregate principal amount of
the Company's Total Debt subject to a fixed interest rate, is at least equal to
at least 50% of the aggregate principal amount of all Total Debt. On November
15, 2003, the Company entered into a one year interest rate cap agreement with a
notional principal of $61,000, which caps the LIBOR based rate, as defined, on
those loans at 2.5%. The interest rate protection agreement did not qualify for
hedge accounting treatment and as such the Company marks the contract to market
at the end of each period. The fair value of the interest rate cap at March 31,
2004 is de-minimis.


                                       26
<PAGE>

8.       INVENTORIES

Inventories are comprised of the following:

                                             December 31, 2003    March 31, 2004
                                             -----------------    --------------
Finished goods                                    $15,853             $14,452
Raw materials                                          37                  24
                                                  -------             -------
Inventory, net                                    $15,890             $14,476
                                                  =======             =======


9.       GOODWILL AND TRADEMARKS

At December 31, 2003 and March 31, 2004, Goodwill and indefinite lived
intangibles are as follows:

<TABLE>
<CAPTION>
                                                     December 31, 2003    March 31, 2004
                                                     -----------------    --------------
<S>                                                      <C>               <C>
Goodwill                                                  $101,978          $101,978
Long Lived Assets - Trademarks and copyrights               15,675            15,675
                                                          $117,653          $117,653
</TABLE>

There were no changes to goodwill and indefinite lived intangibles during the
three-months ended March 31, 2004.

WRC recorded non-cash deferred income tax expense of $175 during the
three-months ended March 31, 2003 and 2004, for taxable temporary differences
that will not reverse prior to expiration of the Company's net operating loss
carryforward periods. Book amortization of tax-deductible goodwill and
trademarks ceased on January 1, 2002 upon the Company's adoption of SFAS No.
142, however, WRC will continue to amortize these assets for tax purposes. As a
result, WRC will have deferred tax liabilities that will arise each quarter
because the taxable temporary differences related to the amortization of these
assets will not reverse prior to the expiration period of WRC's deductible
temporary differences unless the related assets are sold or an impairment of the
assets is recorded. The Company expects that it will record an additional $525
to increase deferred tax liabilities during the remaining nine months of 2004.

10. OTHER INTANGIBLE ASSETS

The gross carrying amount and accumulated amortization of the WRC's intangible
assets other than goodwill and indefinite lived intangible assets are as
follows:

Weekly Reader Corporation

<TABLE>
<CAPTION>
                                        ----------------------------------------      ----------------------------------------
                                                    December 31, 2003                              March 31, 2004
                                        ----------------------------------------      ----------------------------------------
                                                      Accumulated                                   Accumulated
                      Useful Lives       Gross        Amortization        Net          Gross        Amortization         Net
                      ------------      --------      ------------      --------      --------      ------------      --------
<S>                  <C>               <C>            <C>              <C>           <C>            <C>              <C>
Customer Lists        6-15 yrs          $    318       $    (161)       $    157      $    318       $    (172)       $    146
Copyrights            10-20 yrs           19,936          (4,901)         15,035        19,936          (5,179)         14,757
Software              3 yrs                6,420          (5,707)            713         6,420          (6,242)            178
                                        --------       ---------        --------      --------       ---------        --------
              Total:                    $ 26,674       $ (10,769)       $ 15,905      $ 26,674       $ (11,593)       $ 15,081
                                        ========       =========        ========      ========       =========        ========
</TABLE>

For trademarks and copyrights not subject to amortization, which is included in
other intangible assets, the total carrying amount was $15,675 as of December
31, 2003 and March 31, 2004.

Amortization of intangibles for the three-months ended March 31, 2003 and 2004
was $897 and $824, respectively, and is included in amortization of goodwill and
intangible assets on the condensed consolidated statement of operations. The
estimated amortization expense for intangible assets still subject to
amortization for the next five years is as follows:


                                       27
<PAGE>

Remaining nine months ended of 2004 ..........................      $1,119
2005 .........................................................       1,225
2006 .........................................................       1,184
2007 .........................................................       1,181
2008 .........................................................       1,144
2009 .........................................................       1,123
Thereafter ...................................................       8,105

11.      COMMITMENTS AND CONTINGENCIES

The Company is a party to litigation arising in the normal course of business.
Management regularly analyzes current information and, as necessary, provides
accruals for probable liabilities on the eventual disposition of these matters.
Management believes that the effect on its results of operations and financial
position, if any, for the disposition of these matters, will not be material.

The Securities and Exchange Committee ("SEC") is conducting a preliminary
inquiry concerning the Company and has requested that the Company voluntarily
provide the SEC with various documents and information, and that certain
officers and employees of the Company voluntarily give testimony or be
interviewed. The Company is cooperating fully with the SEC inquiry, and has
continued to provide all documents, information and testimony requested by the
SEC, and has arranged all interviews requested by the SEC with Company
employees. The Company cannot predict the final outcome of this inquiry at this
time.

In 1999, the Company issued 3,000,000 shares of 15% Senior Preferred Stock due
in 2011 with a liquidation preference of $25.00 per share. The Senior Preferred
Stock shall accrue dividends at a rate of 15% per annum, subject to adjustment
if the Company fails to redeem all outstanding shares of such preferred stock in
connection with a mandatory redemption or change of control. Preferred Stock
dividends are payable in additional shares of Senior Preferred Stock. Such
accrued dividends reflect penalty dividends of 0.5% for periods prior to
November 17, 2001. While the Company believes that no penalty dividend is due
for subsequent periods, the preferred shareholders may disagree with that
conclusion.

12.      RELATED PARTY TRANSACTIONS

In connection with the acquisition of Weekly Reader, the Company entered into a
management agreement with the principal shareholder of WRC Media Inc. In
accordance with the management agreement, the shareholder provides Weekly Reader
management consulting and financial advisory services. As a result, the Company
is obligated to pay to the shareholder annual aggregate management fees for
services totaling $800, which are payable quarterly. At March 31, 2004, other
accrued liabilities include approximately $700 of accrued management fees.

In addition, the Company will reimburse the principal shareholder for reasonable
out-of-pocket costs and expenses incurred in connection with the performance of
its services. During the three-month periods ended March 31, 2003 and 2004, the
Company recognized general and administrative expense of $200 for management
fees.

13.      PENSION BENEFITS

The following table provides components of net periodic benefit cost for the
Company's defined benefit pension plan for the three-months ended March 31, 2003
and 2004:

<TABLE>
<CAPTION>
                                                            Pension Benefits
                                                          ---------------------
                                                           2003            2004
                                                          -----           -----
<S>                                                      <C>             <C>
Service cost                                              $ 229           $ 225
Interest Cost                                               221             238
Expected return on plan assets                             (169)           (242)
Amortization of net loss                                     74              42
Net periodic benefit cost                                 $ 355           $ 263
</TABLE>


                                       28
<PAGE>

14.      SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

                                                   Three-Months Ended March 31,
                                                   ----------------------------
                                                       2003           2004
                                                      ------         ------
Cash paid during the period for interest              $2,053         $2,676
Cash paid during the period for income taxes          $   15         $   20

Non-cash financing activity:
Preferred stock dividends accrued                     $4,487         $5,199 (1)

(1)      During the quarter ended March 31, 2004, $5,198 of such preferred stock
         dividends have been recorded as interest expense in the statement of
         operations, resulting from the Company's adoption of SFAS 150 effective
         January 1, 2004.

15.      RESTATEMENT

In connection with the audit of the Company's 2003 consolidated financial
statements and the reaudit of its 2001 consolidated financial statements, the
Company has restated its previously audited consolidated balance sheets as of
December 31, 2001, 2002 and 2003 and the related statements of operations,
stockholders' deficit and cash flows for the years ended December 31, 2001, 2002
and 2003.

On May 14, 2004, the Company filed a Form 10-Q that included its condensed
consolidated financial statements for the three-months ended March 31, 2003,
which had been restated to correct certain accounting errors (the "Initial
Restatement"). At that time, the Company announced that the reaudit of its 2001
financial statements was in progress and that completion of the reaudit could
result in additional restatements to its financial statements. Subsequent to the
Initial Restatement, the reaudit of the Company's 2001 consolidated financial
statements was completed and identified additional errors that impacted the
Company's financial statements for three-month periods ended March 31, 2003 and
2004. Accordingly, the Company has restated its previously reported results as
of December 31, 2003 and for the three-months ended March 31, 2003 and 2004 for
the correction of these additional errors (the "Further Restatement").

In connection with the Initial Restatement, management had restated its
financial statements for the quarter ended March 31, 2003 because it had
incorrectly accounted for (i) revenue recognition for distributor sales in 2001
and 2002; (ii) rent expense in 2001 and 2002; and (iii) other items including an
adjustment relating the amortization period for certain capitalized
prepublication costs.

Described below are the matters for which the Company had restated its condensed
consolidated financial statements for the three-months ended March 31, 2003 in
connection with the Initial Restatement.

         o        Distributor Sales. Historically the Company recognized revenue
                  under a distribution contract between its subsidiary, World
                  Almanac Education Group, and a distributor at the time that
                  the Company shipped its products to the distributor rather
                  than at the time those products were resold by the
                  distributor. The Company also recorded distribution fees under
                  this contract as operating costs and expenses, based on its
                  understanding of the distribution contract. The Company has
                  determined to recognize revenue only at the time the
                  distributor ships these products to its customer. The Company
                  has restated its financial statements which decreased its net
                  loss and increased net assets by $169 for the three-months
                  ended March 31, 2003.

         o        Rent. The Company has two leases that have "free rent"
                  incentives at the commencement of the leases and also contain
                  rent escalation clauses (which clauses provide for rent
                  increases over time) for which it was required under GAAP to
                  record the average rent expense ratably over the lease term.
                  In its historical 2001 financial statements, however, the
                  Company recorded the rent expense from these leases as it was
                  paid. In its historical 2002 financial statements, the Company
                  began correctly recording the average rent expense for these
                  leases, but it calculated the average rent using the remainder
                  of the lease term instead of the entire lease term. The
                  Company has restated its financial statements to correct these
                  errors, with the net effect being to decrease its net loss by
                  $158 and decrease liabilities by $158 for the three-months
                  ended March 31, 2003.


                                       29
<PAGE>

         o        Other. The Company also made an adjustment relating to the
                  amortization period for certain capitalized pre-publication
                  costs which had the effect of increasing net loss by $105 for
                  the three-months ended March 31, 2003.

In connection with the reaudit of the Company's 2001 consolidated financial
statements, management determined that it had incorrectly accounted for the
following items, which comprise the Further Restatement: (i) intangible assets
acquired in 1999 in connection with the Parent's acquisition of Weekly Reader;
(ii) acquisition reserves for acquisitions in 1999; (iii) its adoption of SFAS
142 and the preparation of its transitional impairment analysis; (iv) deferred
tax liabilities recognized upon adoption of SFAS 142; (v) Senior Preferred Stock
dividends; and (vi) a number of other items which had been previously identified
and collectively determined to be immaterial.

Described below are the matters for which the Company has restated its
condensed consolidated financial statements as of December 31, 2003 and for the
three-months ended March 31, 2003 and 2004 in connection with the Further
Restatement.

         o        Weekly Reader Intangible Assets. In connection with the
                  reaudit of the Company's 2001 consolidated financial
                  statements, the Company reconsidered the assumptions used to
                  determine the estimated fair value and economic lives of the
                  intangible assets acquired in connection with the 1999
                  acquisition and recapitalization of Weekly Reader by its
                  Parent (the "1999 Intangible Assets"). The Company has
                  determined that the original basis for estimating the fair
                  value and economic lives of the intangible assets was a
                  valuation report that the former owners of Weekly Reader
                  Corporation had provided to the Parent at the time of the 1999
                  acquisition. Accordingly, in 2004, the Parent engaged a
                  valuation consulting firm to assist management in assessing
                  the fair values and economic lives of the 1999 Intangible
                  Assets as of the acquisition date. As a result, certain
                  economic lives of the 1999 Intangible Assets have been
                  revised. Accordingly, the Company has restated its financial
                  statements to correctly state the estimated economic lives of
                  the 1999 Intangible Assets acquired as of November 17, 1999.
                  Other intangible assets include copyrights, customer lists and
                  trademarks. Copyrights estimated useful life was amended from
                  10 years to approximately 20 years; Customer lists estimated
                  useful life decreased from 10 years to approximately 8.5 years
                  and Trademarks estimated useful life decreased from 40 years
                  to approximately 39 years. The Company has restated its
                  financial statements to correct the amortization expense for
                  these intangible assets which had the effect of reducing
                  accumulated deficit as of December 31, 2003 by $12,141, and
                  decreasing amortization expense of intangible assets for the
                  three-months ended March 31, 2003 and 2004 by $259 and $195,
                  respectively.

         o        Goodwill and Long-lived Intangible Asset Impairment. On
                  January 1, 2002, the Company adopted SFAS 142 for its goodwill
                  and intangible assets. Upon adoption, the Company ceased
                  amortization of goodwill and indefinite lived intangible
                  assets, which consist primarily of trademarks. As required by
                  SFAS 142, the Company reviewed its indefinite lived
                  intangibles (goodwill and trademarks) for impairment as of
                  January 1, 2002. The Company has three reporting units with
                  goodwill. Goodwill was tested for impairment at the reporting
                  unit level. As a result, the Company recorded a transitional
                  goodwill and indefinite lived intangible asset impairment
                  charge of $72,022 at AGS. This charge was reported as a
                  cumulative effect of accounting change, as of January 1, 2002,
                  in the consolidated statements of operations. In connection
                  with the reconsideration of the assumptions used to determine
                  the estimated fair value and economic lives of 1999 Intangible
                  Assets discussed above, the Company updated its transitional
                  impairment analysis and determined that it incorrectly
                  calculated the fair value of its reporting units. Accordingly,
                  the impairment charge of $72,022 at AGS was incorrect and not
                  required. The Company's measurement of fair value was based on
                  an evaluation of future discounted cash flows. This evaluation
                  utilized the best information available in the circumstances,
                  including reasonable and supportable assumptions and
                  projections. The discounted cash flow evaluation considered
                  several earnings scenarios and the likelihood of possible
                  outcomes. Collectively, this evaluation was management's best
                  estimate of projected future cash flows. The Company's
                  discounted cash flow evaluation used a range of discount rates
                  that corresponds to the Company's weighted-average cost of
                  capital. This discount rate range assumed was consistent with
                  that used for investment decisions and takes into account the
                  specific and detailed operating plans and strategies of the
                  WRC's reporting units. Certain other key assumptions utilized,
                  including changes in revenue, operating expenses, working
                  capital requirements and capital expenditures including
                  pre-publication costs, are based on reasonable estimates
                  related to the Company's strategic initiatives and current
                  market conditions. Such assumptions also are consistent with
                  those utilized in the Company's annual planning process. The
                  Company has restated its December 31, 2003 and March 31, 2004
                  balance sheets to correct for this error. The net effect of
                  such adjustment was to increase goodwill and decrease
                  accumulated deficit by $72,022 at December 31, 2003 and March
                  31, 2004.

                                       30
<PAGE>

         o        Weekly Reader Goodwill Reduction. The Company recorded certain
                  reserves for a planned restructuring in connection with its
                  acquisition by WRC Media in 1999. In connection with the
                  reaudit of its 2001 consolidated financial statements the
                  Company determined that it had incorrectly recorded reserves
                  of $602 related to estimated liabilities it believed it had
                  assumed at the date of such acquisition. The Company concluded
                  that the acquisition reserves associated with these
                  liabilities should have been reversed in 1999. The estimated
                  liabilities were associated with the excess reserves for
                  severance, primarily attributable to employees hired
                  subsequent to the acquisition date. The Company has restated
                  its financial statements to correct for these errors. The net
                  effect of such adjustments was to increase accumulated deficit
                  by $601 as of December 31, 2003 and to increase net loss for
                  each of the three-month periods ended March 31, 2003 and 2004
                  by $6.

         o        Deferred Tax Liabilities. The Company recognized non-cash
                  deferred income tax expense and a deferred tax liability of
                  approximately $1,360 on January 1, 2002 in connection with its
                  adoption of SFAS 142. The deferred tax liability relates to
                  the excess of tax over book amortization of tax-deductible
                  goodwill and trademarks since the timing of the reversal of
                  this liability is indefinite, unless the related assets are
                  sold or an impairment of the assets is recorded, and can no
                  longer be offset by the Company's net operating loss
                  carry-forwards, which expire within a statutory period. During
                  each of 2002 and 2003 the Company recorded additional deferred
                  tax expense of $640. The non-cash deferred income tax expense
                  recorded on January 1, 2002 has been restated to $3,500, an
                  increase of $2,140. The non-cash income tax expense recorded
                  during the years ended December 31, 2002 and 2003 decreased by
                  $40 from $640 to $600 and increased by $60 from $640 to $700,
                  respectively. The net effect of these corrections on the
                  Company's balance sheet at December 31, 2003 was to increase
                  accumulated deficit and deferred tax liabilities by $2,160,
                  respectively. The non-cash income tax expense recorded during
                  the three-months ended March 31, 2003 and 2004 increased by
                  $15. Total tax expense increased from $175 to $190 in the
                  three-month period ended March 31, 2003 and from $143 to $158
                  in the three-month period ended March 31, 2004. These
                  restatements are principally due to the revision of estimated
                  fair value and economic lives of the 1999 Intangible Assets
                  discussed above.

         o        15% Senior Preferred Stock due 2011. In 1999, the Company
                  issued 3,000,000 shares of 15% Senior Preferred Stock due in
                  2011. The 15% Senior Preferred Stock accrues dividends at a
                  rate of 15% per annum. The Certificate of Designation provides
                  that the 15% Senior Preferred Stock was subject to a default
                  or penalty dividend of 0.5% in the event of certain
                  registration defaults. A penalty dividend was applicable from
                  mid-August of 2000 through November 17, 2001. While the
                  Company believes that no penalty dividend is due for
                  subsequent periods, the preferred shareholders may disagree
                  with that conclusion. The Company had not previously recorded
                  this penalty dividend. The recording of the penalty dividends
                  (and required compounding in subsequent periods) resulted in
                  the Company increasing accrued dividends on Senior Preferred
                  Stock by $934 as of December 31, 2003 and by $30 and $35
                  during the three-months ended March 31, 2003 and 2004
                  respectively.

         o        Segment Information. The Company previously disclosed one
                  reportable segment. The Company now discloses three reportable
                  segments.

         o        Other. In connection with the re-audit of the Company's 2001
                  financial statements, the Company has made a number of other
                  corrections to the financial statements, which collectively
                  were immaterial.


                                       31
<PAGE>

Summarized below are the significant effects of the Restatement, which includes
the Initial Restatement and the Further Restatement.

<TABLE>
<CAPTION>
                                                                  March 31, 2004
                                                     ----------------------------------------
                                                     As Previously
                                                      Reported in     Further
                                                     May 14, 2004   Restatement
                                                       Form 10-Q    Adjustments   As Restated
                                                     -------------  -----------   -----------
<S>                                                   <C>           <C>           <C>
ASSETS
Current Assets:
     Cash and cash equivalents                         $   6,216                   $   6,216
     Accounts receivable, net                             19,387                      19,387
     Inventories                                          14,476                      14,476
     Due from related party                               29,892                      29,892
     Prepaid expenses                                      2,600                       2,600
     Other current assets                                  1,211                       1,211
                                                       ---------     ---------     ---------
       Total current assets                               73,782          --          73,782

Property and equipment, net                                4,131     $     260         4,391
Goodwill                                                  35,018        66,960       101,978
Other intangible assets, net                              13,358        17,398        30,756
Other assets and investments                              32,464          (552)       31,912
                                                       ---------     ---------     ---------
       Total assets                                    $ 158,753     $  84,066     $ 242,819
                                                       =========     =========     =========

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
     Accounts payable                                  $  12,372                   $  12,372
     Deferred revenue                                     12,307                      12,307
     Accrued expenses and other current liabilities       12,516     $     700        13,216
                                                       ---------     ---------     ---------

       Total current liabilities                          37,195           700        37,895

Deferred tax liabilities                                   2,800         2,175         4,975
15% redeemable senior preferred stock                    142,866           969       143,835
Long-term debt                                           292,844                     292,844
                                                       ---------     ---------     ---------

       Total liabilities                                 475,705         3,844       479,549
                                                       ---------     ---------     ---------

Commitments and contingencies


Stockholders' deficit:
     Common stock                                             28                          28
     Additional paid-in capital                            9,133                       9,133
     Due from parent                                     (46,492)        2,564       (43,928)
     Accumulated other comprehensive loss                 (1,899)                     (1,899)
     Accumulated deficit                                (277,722)       77,658      (200,064)
                                                       ---------     ---------     ---------

       Total stockholders' deficit                      (316,952)       80,222      (236,730)
                                                       ---------     ---------     ---------

       Total liabilities and stockholders' deficit     $ 158,753     $  84,066     $ 242,819
                                                       =========     =========     =========
</TABLE>


                                       32
<PAGE>

<TABLE>
<CAPTION>

                                                                                  December 31, 2003
                                                                   -----------------------------------------
                                                                   As Previously
                                                                    Reported in       Further
                                                                    May 14, 2004    Restatement
                                                                     Form 10-Q      Adjustments    As Restated
                                                                   -------------    -----------   ----------
<S>                                                                   <C>           <C>           <C>
ASSETS
Current Assets:
     Cash and cash equivalents                                        $   1,267                   $   1,267
     Accounts receivable, net                                            20,880                      20,880
     Inventories                                                         15,890                      15,890
     Due from related party                                              11,502                      11,502
     Prepaid expenses                                                     2,882                       2,882
     Other current assets                                                 1,889                       1,889
                                                                      ---------     ---------     ---------
       Total current assets                                              54,310             -        54,310

Property and equipment, net                                               4,399     $     266         4,665
Goodwill                                                                 35,018        66,960       101,978
Deferred financing costs, net                                               512             -           512
Other intangible assets, net                                             14,377        17,203        31,580
Other assets and investments                                             30,263          (552)       29,711
                                                                      ---------     ---------     ---------
       Total assets                                                   $ 138,879     $  83,877     $ 222,756
                                                                      =========     =========     =========

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
     Accounts payable                                                 $  15,446     $       -     $  15,446
     Deferred revenue                                                    17,565                      17,565
     Accrued expenses and other current liabilities                      15,365           500        15,865
     Current portion of long-term debt                                    8,477             -         8,477
                                                                      ---------     ---------     ---------
       Total current liabilities                                         56,853           500        57,353
Deferred tax liabilities                                                  2,640         2,160         4,800
Long-term debt                                                          262,925                     262,925
                                                                      ---------     ---------     ---------
       Total liabilities                                                322,418         2,660       325,078
                                                                      ---------     ---------     ---------

Commitments and contingencies
   15% redeemable senior preferred stock                                137,702           934       138,636
                                                                      ---------     ---------     ---------

Stockholders' deficit:
     Common stock                                                            28                          28
     Additional paid-in capital                                           9,133             -         9,133
     Due from parent                                                    (59,028)        2,564       (56,464)
     Accumulated other comprehensive loss                                (1,899)                     (1,899)
     Accumulated deficit                                               (269,475)       77,719      (191,756)
                                                                      ---------     ---------     ---------

       Total stockholders' deficit                                     (321,241)       80,283      (240,958)
                                                                      ---------     ---------     ---------

       Total liabilities and stockholders' deficit                    $ 138,879     $  83,877     $ 222,756
                                                                      =========     =========     =========

</TABLE>


                                       33
<PAGE>

<TABLE>
<CAPTION>
                                                             Three Months Ended March 31, 2004
                                                          ---------------------------------------
                                                          As Previously
                                                           Reported in    Further
                                                          May 14, 2004  Restatement
                                                            Form 10-Q   Adjustments   As Restated
                                                          ------------- -----------   -----------
<S>                                                         <C>          <C>          <C>
Revenue, net                                                 $ 34,428                  $ 34,428

Cost of goods sold                                              8,501                     8,501
                                                             --------     --------     --------

     Gross profit                                              25,927         --         25,927
                                                             --------     --------     --------

Costs and expenses:
     Sales and marketing                                        7,025                     7,025
     Distribution, circulation and fulfillment                  3,552                     3,552
     Editorial                                                  2,873                     2,873
     General and administrative                                 5,065                     5,065
     Restructuring costs and other non-recurring expenses           1                         1
     Depreciation                                                 387     $      6          393
     Amortization of intangible assets                          2,418         (195)       2,223
                                                             --------     --------     --------

     Total operating costs and expenses                        21,321         (189)      21,132
                                                             --------     --------     --------

     Income from operations                                     4,606          189        4,795

Interest expense, including amortization
   of deferred financing costs                                (12,713)         (35)     (12,748)
Other income (expense), net                                         3         (200)        (197)
                                                             --------     --------     --------

     Loss before income tax provision                          (8,104)         (46)      (8,150)

Income tax provision                                              143           15          158
                                                             --------     --------     --------

     Net loss                                                $ (8,247)    $    (61)    $ (8,308)
                                                             ========     ========     ========
</TABLE>

<TABLE>
<CAPTION>
                                                                             Three Months Ended March 31, 2003
                                                           ---------------------------------------------------------------------
                                                                                            As
                                                                                         Previously
                                                            As Previously    Initial    Restated in      Further
                                                             Reported in   Restatement  May 14, 2004   Restatement
                                                           2003 Form 10-Q  Adjustments   Form 10-Q     Adjustments   As Restated
                                                           --------------  -----------  ------------   -----------   -----------
<S>                                                          <C>           <C>           <C>           <C>           <C>
Revenue, net                                                  $ 34,758      $    243      $ 35,001      $   (182)     $ 34,819

Cost of goods sold                                               8,365            74         8,439                       8,439
                                                              --------      --------      --------      --------      --------

     Gross profit                                               26,393           169        26,562          (182)       26,380
                                                              --------      --------      --------      --------      --------

Costs and expenses:
     Sales and marketing                                         6,327                       6,327                       6,327
     Distribution, circulation and fulfillment                   3,510                       3,510                       3,510
     Editorial                                                   2,579                       2,579                       2,579
     General and administrative                                  4,597          (158)        4,439                       4,439
     Restructuring costs and other non-recurring expenses         --                          --                          --
     Depreciation                                                  439                         439             6           445
     Amortization of intangible assets                           2,254           105         2,359          (259)        2,100
                                                              --------      --------      --------      --------      --------

     Total operating costs and expenses                         19,706           (53)       19,653          (253)       19,400
                                                              --------      --------      --------      --------      --------

     Income from operations                                      6,687           222         6,909            71         6,980

Interest expense, including amortization
   of deferred financing costs                                  (6,822)                     (6,822)                     (6,822)
Other income (expense), net                                          6                           6          (200)         (194)
                                                              --------      --------      --------      --------      --------

     Loss before income tax provision                             (129)          222            93          (129)          (36)

Income tax provision                                               175                         175            15           190
                                                              --------      --------      --------      --------      --------

     Net loss                                                 $   (304)     $    222      $    (82)     $   (144)     $   (226)
                                                              ========      ========      ========      ========      ========
</TABLE>


                                       34
<PAGE>

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

The Management's Discussion and Analysis of Financial Condition and Results of
Operation set forth in this Item 2 has been revised to reflect the restatement
of the Company's condensed consolidated financial statements as of December 31,
2003 and March 31, 2004 and for the three-months ended March 31, 2003 and 2004.
For a discussion of the restatement adjustments, see "Item 1. Consolidated
Financial Statements -WRC Media Inc. and Subsidiaries--Note 17. Restatement" and
"Item 1. Consolidated Financial Statements - Weekly Reader Corporation and
Subsidiaries - Note 15. Restatement."

The following discussion is intended to assist in understanding the financial
condition as of March 31, 2004 of WRC Media Inc. ("WRC Media") and its
subsidiaries, and Weekly Reader Corporation and its subsidiaries, and their
results of operations for the three-months ended March 31, 2003 and 2004. You
should read the following discussion in conjunction with the Condensed
Consolidated Financial Statements of WRC Media and its subsidiaries and Weekly
Reader Corporation and its subsidiaries ("Weekly Reader") attached to this
discussion and analysis. Unless the context otherwise requires, the terms "we,"
"our," and "us" refer to WRC Media and its subsidiaries and their predecessor
companies. This discussion and analysis contains forward-looking statements.
These forward-looking statements are subject to certain risks and uncertainties,
including the Company's ability to continue to produce successful supplemental
education material and software products; reductions in state and local funding
for educational spending materials resulting, among other things, from
increasing state budget deficits; uncertainty in the current operating
environment which makes it difficult to forecast future results; and other risks
and factors identified in this report and in the Company's Annual Report on Form
10-K for the year ended December 31, 2003. Although we believe that our plans,
intentions and expectations reflected in or suggested by these forward-looking
statements are reasonable, we cannot assure you that these plans, intentions or
expectations will be achieved. These forward-looking statements are subject to
risks, uncertainties and assumptions about us.

The Company believed that upon furnishing its audited 2003 financial statements
to the holders of its 12 3/4% senior subordinated notes and filing such
statements with the SEC in the Company's March 31, 2004 Form 8-K that it was in
compliance with the indentures information requirements. The report of Deloitte
& Touche LLP included in the Form 8-K contained an explanatory paragraph
regarding the Company's ability to continue as going concern due to the
possibility that the trustee or noteholders might assert a breach under the
indenture to furnish audited financial statements for 2001 and potentially
attempt to accelerate the payment of the notes. The filing of the Company's
Annual Report on Form 10-K and the completion of the reaudit of our 2001
financial statements obviates the possibility of any potential breach of the
indenture.

OVERVIEW

We are a leading publisher of supplemental education materials for the Pre K-12
education market. Our portfolio of products includes a broad range of both print
and electronic supplemental instructional materials, testing and assessment
products and library materials, several of which have been published for over
100 years. Weekly Reader is a leading publisher of classroom periodicals based
on the 2002-2003 school year circulation of 7.0 million subscribers. In addition
to our well-recognized classroom periodicals, such as Weekly Reader and Current
Events, we publish distinct, grade-specific basic and life skills workbooks. AGS
has been a leading publisher of individually administered and group testing and
assessment products, and supplemental instructional materials for over 45 years.
AGS's testing and assessment products are primarily for K-12 students and its
supplemental instructional materials are primarily for low-performing students
in middle and secondary schools. CompassLearning is a research-based technology
learning solutions company that produces educational assessment, curriculum and
management tools for grades Pre-K through 12, all of which are aligned to local,
state and national standards. Offering more than 8,000 hours of interactive
standards-based managed curriculum that inspires educators and students to
explore and achieve success, CompassLearning has been serving the Pre-K to 12
market for over 30 years. World Almanac has been a leading publisher of
reference and informational materials targeted to K-12 students, as well as
other well-known general reference and informational materials, for over 130
years. World Almanac publishes well-known print reference materials, such as The
World Almanac and Book of Facts and nonfiction and fiction books for K-12
students under three Gareth Stevens imprints. In addition, World Almanac
publishes electronic reference materials such as the Funk & Wagnalls
Encyclopedia database and an Internet-based version of Facts On File World News
Digest, which in its print version is World Almanac's leading subscription-based
product. World Almanac also distributes third-party products that are targeted
for K-12 students through its World Almanac Education Library Services ("WAELS")
catalogs.

                                       35
<PAGE>

During 2003, the education market was impacted by the sluggish U.S. economy. The
economy which has been slow moving since early 2002 has significantly impacted
state budgets in fiscal 2002 and 2003. Education budgets, which typically
represent over 20% of state budgets, have suffered as a result with forty of the
fifty states under pressure to make cuts in the elementary and secondary
programs in the 2003-2004 school year (Source: MCH Education Data, August 2003).
All K-12 supplemental educational publishers were confronted in 2002 and 2003
with this lack of funding availability and delayed purchasing decisions. We
expect this funding environment to continue at least through to the end of the
2003-2004 school year.

The No Child Left Behind Act ("NCLB") which was passed in 2002 has resulted in
an increase in federal funding; but most of this increased funding has been
offset by reduced state and local education funding. In addition, the new
guidelines to qualify for federal funding under NCLB have contributed to delayed
purchase decisions. Under these new guidelines:

         o        More federal funds will now flow through states;

         o        There is a change in the mix for formula-based grants and
                  competitive grants which will require districts to change the
                  way they seek and receive funding from states;

         o        The federal government has given state guidelines for
                  distributing funds and each of the states is defining the
                  rules to satisfy these guidelines;

         o        The federal government's new requirements, like the need for
                  professionals with a minimum two-year degree and the emphasis
                  on scientifically based programs, caused some confusion at the
                  school level in 2002 and 2003; and

         o        All these changes have caused delays in the movement of funds
                  from the federal and state sources to the district level

As a result, 2002 and 2003 have been extremely challenging for the education
marketplace in terms of both funding and spending. According to our market
research (Veronis Suhler Stevenson's Communications Industry Forecast & Report
2003-2007), the Elementary and High School (ELHI) instructional spending will
increase 1.5% in 2004 and according to Quality Education Data report published
in the fall of 2003; an increase in instructional technology spending is
projected at 1% for 2004.


                                       36
<PAGE>

Our revenues consist primarily of: subscription revenues from our periodicals;
revenues from sales of printed products including nonfiction and fiction books,
workbooks, worktexts, reference materials and test preparation materials;
computer courseware and hardware; professional development services; and
technical support services.

CONSOLIDATED RESULTS OF OPERATIONS FOR THE THREE-MONTHS ENDED MARCH 31, 2004--
WRC MEDIA INC. AND SUBSIDIARIES

The results of operations of WRC Media and its subsidiaries encompass the
operations of Weekly Reader and its subsidiaries, including AGS and World
Almanac, CompassLearning, and ChildU, Inc. ("ChildU"). The results of operations
of WRC Media and its subsidiaries should be read together with the separate
discussion of the results of operations of Weekly Reader.

In analyzing WRC Media's results for the three-months ended March 31, 2003 and
2004, the seasonal nature of WRC Media's business should be considered. As a
result of seasonality, approximately 20% of WRC Media's publication and related
service revenues usually occur in its first quarter, 20% in its second quarter,
and 60% in the third and fourth quarters combined. However, unlike this revenue
stream, many of WRC Media's expenses are incurred evenly throughout the year.

WRC Media analyzes its revenues, expenses and operating results on a percentage
of net revenue basis. The following table sets forth, for the periods indicated,
consolidated statements of operations data for WRC Media and its subsidiaries,
expressed in millions of dollars and as a percentage of net revenue.


                                       37
<PAGE>
<TABLE>
<CAPTION>
                                                                      Three months ended March 31,
                                                               -----------------------------------------
                                                                     2003                   2004
                                                               ------------------     ------------------
                                                                         % of Net               % of Net
                                                               Amount    Revenue      Amount    Revenue
                                                               ------    --------     ------    --------
                                                                            (Dollars in millions)
<S>                                                            <C>        <C>         <C>        <C>
Revenue, net                                                    $47.0      100.0%      $42.8      100.0%
Cost of goods sold                                               13.3       28.3%       13.0       30.4%
                                                                -----      -----       -----      -----
Gross profit                                                     33.7       71.7%       29.8       69.6%
Costs and expenses:
       Sales and marketing                                       11.5       24.5%       11.6       27.1%
       Research and development                                   0.7        1.5%        0.7        1.6%
       Distribution, circulation and fulfillment                  3.5        7.4%        3.5        8.2%
       Editorial                                                  2.6        5.5%        2.9        6.8%
       General and administrative                                 5.6       11.9%        7.1       16.6%
       Restructuring costs and other non-recurring expenses       0.5        1.1%        0.1        0.2%
       Depreciation                                               0.6        1.3%        0.4        0.9%
       Amortization of intangible assets                          4.3        9.1%        4.2        9.8%
                                                                -----      -----       -----      -----
       Total costs and expenses                                  29.3       62.3%       30.5       71.3%
                                                                -----      -----       -----      -----

Income (loss) from operations                                     4.4        9.4%       (0.7)      (1.7%)
                                                                -----      -----       -----      -----
Interest expense, including amortization
   of deferred financing costs                                   (7.1)     (15.1%)     (14.5)     (33.9%)
Other expense, net                                               (0.2)      (0.4%)      (0.3)      (0.7%)
                                                                -----      -----       -----      -----
Loss before income tax provision                                 (2.9)      (6.1%)     (15.5)     (36.2%)
Income tax provision                                              0.8        1.7%        0.8        1.9%
                                                                -----      -----       -----      -----

Net loss                                                        $(3.7)      (7.9%)     $(16.3)    (38.1%)
                                                                =====      =====       =====      =====

       Adjusted EBITDA (a)                                      $10.3       21.9%      $ 4.3       10.0%
                                                                =====      =====       =====      =====
</TABLE>

(a)      Adjusted EBITDA represents (loss) before interest expense, taxes,
         depreciation, amortization and other (income) charges including
         restructuring costs of $0.3 million and non-recurring costs of $0.2
         million for the three-months ended March 31, 2003 and 2004 and
         restructuring expenses of $0.1 million for the three-months ended March
         31, 2004. Adjusted EBITDA data is a non-GAAP measure and is included in
         our discussion because we believe that this information may be
         considered by investors as an additional basis on which to evaluate WRC
         Media's performance. Because all companies do not calculate Adjusted
         EBITDA identically, the presentation of Adjusted EBITDA in this report
         is not necessarily comparable to similarly titled measures of other
         companies. Adjusted EBITDA is not intended to represent cash flow from
         operating activities and should not be considered an alternative to net
         income or loss (as determined in conformity with GAAP) as an indicator
         of our operating performance or to cash flow as a measure of liquidity.
         It is presented herein as we use it, in addition to operating income,
         to evaluate and measure each business unit's performance. We also use
         Adjusted EBITDA to evaluate management performance. Adjusted EBITDA may
         not be available for our discretionary use as there are requirements to
         repay debt, among other payments.

Three-Months Ended March 31, 2004 Compared to Three-Months Ended March 31, 2003

Revenue, net. For the three-months ended March 31, 2004, net revenue decreased
$4.2 million, or 8.9%, to $42.8 million from $47.0 million for the same period
in 2003. This decrease was primarily due to a decrease in net revenue at
CompassLearning of $4.5 million, or 40.2% to $6.7 million from $11.2 million
from the same period in 2003 combined with a decrease in net revenue at Weekly
Reader of $0.4 million or 1.1%, to $34.4 million from $34.8 million for the same
period in 2003. These revenue decreases were partially offset by an increase in
net revenue at ChildU of $0.7 million, or 70% to $1.7 million from $1.0 million
for the same period in 2003. This increase in revenue was driven by more schools
choosing web enabled products primarily resulting from more schools having
internet connectivity.


                                       38
<PAGE>

For the three-months ended March 31, 2004, net revenue at CompassLearning
decreased $4.5 million or 40.2% to $6.7 million from $11.2 million from the same
period in 2003. This decrease was primarily due to a decrease in software
revenue of $4.3 million, or 79.6%, to $1.1 million from $5.4 million, and a
decrease in technical support revenue of $0.3 million, or 9.4%, to $2.9 million
from $3.2 million from the same period in 2003. Together with ChildU, net
revenue from sales of educational software product decreased $3.8 million or
59.4% to $2.6 million from $6.4 million from the same period in 2003. The
software shortfall was primarily attributable to delayed purchasing decisions
resulting from the weak education funding environment. The K-12 funding
environment continues to be impacted by state budget deficits, which has
resulted in pressure to reduce state and local educational spending, including
spending for teachers, training and supplemental educational materials. While we
believe WRC Media will benefit from the provisions in the Federal No Child Left
Behind Act (the "NCLB Act"), most of the increase in Federal educational funding
for the 2003-2004 school year has been partially offset by lower state and local
education funding for the same period. These cuts and delayed purchases have
negatively affected our top-line net revenue and may continue to affect our
top-line performance at least through the first half of fiscal year 2004. The
uncertainty in the current operating environment makes it difficult to forecast
future results.

The decrease in net revenue at Weekly Reader was primarily due to (1) a decrease
in net revenue at World Almanac of $0.7 million or 5.6% to $11.9 million from
$12.6 million from the same period in 2003. This decrease was due to lower net
revenue of $0.2 million or 65.3% at World Almanac Books that resulted from a
timing difference related to consignment sales for the World Almanac and Book of
Facts and the World Almanac for Kids, lower net revenue of $0.2 million or 3.2%
at WAE Library Services as a result of the elimination of their Prospect catalog
and lower net revenue of $0.2 million or 15.6%, at Funk and Wagnalls due to the
attrition in their customer base; (2) a decrease in net revenue at Weekly
Reader, excluding World Almanac and AGS, of $0.4 million, or 3.8%, to $10.1
million from $10.5 million from the same period in 2003. This decrease was due
to lower periodical net revenue of $0.6 million or 7.2%. The decline is
primarily a result of a weak educational funding environment and competitive
pressures in the school magazine market. This decrease at Weekly Reader was
partially offset by increased net revenue at Lifetime Learning Systems, Inc., a
subsidiary of Weekly Reader of $0.1 million or 5.5% related to increased custom
publishing shipments and increased licensing net revenue at Weekly Reader of
$0.1 million or 126.8% from the same period in 2003 as a result of increased on
air March net revenue from exposure on the QVC Shopping Network channel. The
revenue decreases at World Almanac and Weekly Reader were partially offset by
(3) $0.7 million or 6.0% higher revenue at AGS. AGS revenue increased to $12.4
million for the three-months ended March 31, 2004 from $11.7 million from the
same period in 2003. AGS Assessment net revenue increased by $1.0 million or
16.3% from the same period in 2003 as a result of: increases in net revenue of
KABC II (Kaufman Assessment Battery for Children) of $0.5 million released in
the first quarter of 2004; higher PPVT (Picture Peabody Vocabulary Test) revenue
of $0.5 million due to large orders in the state of Florida, and higher revenue
of GRADE (Group Reading Assessment & Diagnostic Evaluation) and GMADE (Group
Math Assessment & Diagnostic Evaluation) of $0.2 million over the same period in
2003. These four assessment products combined were up $1.2 million or 169.2%
over the same period in 2003. All other assessment products had reduced net
revenue of $0.2 million or 5.0% over the same period in 2003. The overall
increase in Assessment net revenue was partially offset by a decrease in
curriculum net revenue $0.3 million or 4.9% due to a market driven decline in
test prep of $0.4 million or 35.7% and a planned decline of $0.1 million or
14.4% in backlist net revenue partially offset by an increase in
Textbooks/Worktexts of $0.2 or 4.3% driven by growth associated with the Algebra
revision and a literature adoption in the State of Florida.


                                       39
<PAGE>

Gross profit. For the three-months ended March 31, 2004, gross profit decreased
by $3.9 million or 11.6%, to $29.8 million from $33.7 million from the same
period in 2003. This decrease was due to the revenue decrease discussed above.
At CompassLearning gross profit decreased $4.1 million, or 62.1%, to $2.5
million from $6.6 million from the same period in 2003 driven by fixed cost of
sales components applied to a lower revenue base and a low margin services sale
to the Los Angeles School District. Gross profit at CompassLearning as a percent
of revenue decreased to 37.3% from 58.9% from the same period in 2003. At
ChildU, gross profit increased $0.7 million, or 100% to $1.4 million from $0.7
million for the same period in 2003 due to the higher revenue discussed above.
Gross profit at Weekly Reader decreased $0.5 million or 1.9% to $25.9 million
from $26.4 million from the same period in 2003 primarily as a result of (1) a
decrease in gross profit at World Almanac of $0.7 million, or 8.1%, to $7.9
million from $8.6 million from the same period in 2003. Gross profit at World
Almanac as a percent of revenue decreased to 66.4% from 68.3% from the same
period in 2003 due to a write off of inventory at WA Books and the impact of a
discount offer at WAE Library Services that was not in effect for the same
period in 2003; (2) a decrease in gross profit at Weekly Reader, excluding AGS
and World Almanac of $0.3 million, or 3.4%, to $8.5 million from $8.8 million
from the same period in 2003 driven by the volume decrease described above.
Gross profit as a percent of revenue increased slightly to 84.2% from 83.8% from
the same period in 2003. The revenue decreases at World Almanac and Weekly
Reader, not including AGS and World Almanac, were partially offset by (3) an
increase in gross profit at AGS of $0.5 million, or 5.6% to $9.5 million from
$9.0 million from the same period in 2003 driven by the AGS volume increase
described above. Gross profit as a percent of revenue decreased slightly to
76.6% from 76.9% from the same period in 2003 as a result of change in revenue
mix. Overall, WRC Media consolidated gross profit as a percent of revenue
decreased to 69.6% from 71.7% from the same period in 2003 mainly due to the
factors discussed above.

Costs and expenses. For the three-months ended March 31, 2004, operating costs
and expenses increased by $1.2 million, or 4.1%, to $30.5 million from $29.3
million from the same period in 2003. Costs and expenses as a percentage of net
revenue increased to 71.3% from 62.3% from the same period in 2003. This
increase was primarily the result of: (i) $1.5 million or 26.8% increase in
general and administrative expenses due to increases in legal, audit, tax and
consulting professional fees primarily related to the previously disclosed SEC
inquiry of $0.9 million; (ii) higher editorial expenses of $0.3 million or 11.5%
due in part to testing expenditures at AGS associated with a high stakes test
developed for the NY City Department of Education and at Weekly Reader as a
result of amortizing prepaid editorial costs over the shorter period of time of
when the related shipments occurred rather than over the entire school year.
These higher expenses were partially offset by (iii) lower restructuring and
non-recurring costs of $0.4 or 80.0%; (iv) lower depreciation costs of $0.2
million and (v) lower amortization of intangible assets of $0.1 million.

Information regarding costs and expenses of the Company's reporting segments is
set forth below. Parent Company expenses not allocated are included in
"Corporate".


                                       40
<PAGE>

<TABLE>
<CAPTION>
                                                           Weekly     World              Compass/
      (amounts in millions)                                Reader    Almanac      AGS     ChildU    Corporate  Elimination    Total
                                                           ------    -------      ---     ------    ---------  -----------    -----
<S>                                                        <C>       <C>         <C>      <C>         <C>         <C>        <C>
Three months ended March 31, 2004
Sales and marketing                                         $1.8      $1.8        $3.4     $4.6        --                    $11.6
Research and development                                    --        --          --        0.7        --          --          0.7
Distribution, circulation and fulfillment                    1.6       1.4         0.5     --          --          --          3.5
Editorial                                                    1.5       0.9         0.5     --          --          --          2.9
General and administrative                                   1.3       1.5         1.0      1.6         1.7        --          7.1
Restructuring costs and other non-recurring expenses                                        0.1        --          --          0.1
Depreciation                                                 0.1       0.1         0.2     --          --          --          0.4
Amortization of intangible assets                           --         0.4         1.8      1.1         0.9        --          4.2
Total costs and expenses                                     6.3       6.1         7.4      8.1         2.6        --         30.5
Three months ended March 31, 2003
Sales and marketing                                          1.5       1.7         3.1      5.2        --          --         11.5
Research and development                                    --        --          --        0.7        --          --          0.7
Distribution, circulation and fulfillment                    1.6       1.3         0.6     --          --          --          3.5
Editorial                                                    1.4       0.9         0.3     --          --          --          2.6
General and administrative                                   1.1       1.5         1.0      0.8         1.2        --          5.6
Restructuring costs and other non-recurring expenses        --        --          --       --           0.5        --          0.5
Depreciation                                                 0.2       0.1         0.1      0.2        --          --          0.6
Amortization of intangible assets                           --         0.5         1.6      1.3         0.9        --          4.3
Total costs and expenses                                     5.8       6.0         6.7      8.2         2.6        --         29.3
</TABLE>

Interest expense, including amortization of deferred financing costs. For the
three-months ended March 31, 2004, interest expense, including amortization of
deferred financing costs, increased by $7.4 million, or 104.2%, to $14.5 million
from $7.1 million for the same period in 2003 as a result of writing off
deferred financing fees of $1.9 million attributable to the First-Lien Credit
Facility that was refinanced in part by the Second-Lien Credit Facility, which
closed on March 29, 2004. In addition, the adoption of SFAS 150 requires
dividends on the 15% Senior Preferred Stock to be recorded as interest expense
in the condensed consolidated statement of operations for all periods starting
January 1, 2004. The dividends on the 15% Senior Preferred Stock for the
three-months ended March 31, 2004 increased interest expense by $5.2 million.
Interest expense as a percentage of net revenue increased to 33.9% from 15.1%
for the same period in 2003.

Adjusted EBITDA. For the three-months ended March 31, 2004, Adjusted EBITDA
decreased $6.0 million, or 58.3%, to $4.3 million from $10.3 million for the
same period in 2003. This decrease was primarily attributable to the factors
described above. Adjusted EBITDA represents (loss) before interest expense,
taxes, depreciation, amortization and other (income) charges including
restructuring costs and other non-recurring expenses of $0.5 million for the
three-months ended March 31, 2003 and restructuring costs of $0.1 million for
the three-months ended March 31, 2004. Adjusted EBITDA is a non-GAAP measure and
is included in our discussion because we believe that this information may be
considered by investors as an additional basis on which to evaluate WRC Media's
performance. Because all companies do not calculate Adjusted EBITDA identically,
the presentation of Adjusted EBITDA in this report is not necessarily comparable
to similarly titled measures of other companies. Adjusted EBITDA is not intended
to represent cash flow from operating activities and should not be considered an
alternative to net income or loss (as determined in conformity with GAAP) as an
indicator of our operating performance or to cash flow as a measure of
liquidity. It is presented herein as we use it, in addition to operating income,
to evaluate and measure each business unit's performance. We also use Adjusted
EBITDA to evaluate management performance. Adjusted EBITDA may not be available
for our discretionary use as there are requirements to repay debt, among other
payments. The reconciliation of Adjusted EBITDA to net loss is as follows:


                                       41
<PAGE>

<TABLE>
<CAPTION>
                                                        For the three months ended March 31,
Adjusted EBITDA reconciliation to Net Loss                    2003             2004
                                                            --------         --------
<S>                                                        <C>              <C>
      Net Loss                                              $ (3,753)        $(16,277)
      Depreciation and amortization of intangibles**           5,663            5,163
      Income taxes                                               813              802
      Interest expense                                         7,132           14,502
      Restructuring costs                                        288               65
      Non-recurring expenses                                     192             --
                                                            --------         --------
Adjusted EBITDA                                             $ 10,335         $  4,255
                                                            ========         ========
</TABLE>

**       Amount includes amortization of capitalized software costs of $724 and
         $513 for 2003 and 2004, respectively which are included in cost of
         goods sold in the condensed consolidated statements of operations.

CONSOLIDATED RESULTS OF OPERATIONS FOR THE THREE-MONTHS ENDED MARCH 31, 2004 --
WEEKLY READER CORPORATION AND SUBSIDIARIES

The following table sets forth, for the periods indicated, consolidated
statements of operations data for Weekly Reader and its subsidiaries expressed
in millions of dollars and as a percentage of net revenue.

<TABLE>
<CAPTION>
                                                                 Three months ended March 31,
                                                                2003                         2004
                                                       ----------------------       ----------------------
                                                                     % of Net                     % of Net
                                                       Amount        Revenue        Amount        Revenue
                                                       ------        --------       ------        --------
                                                                                     (Dollars in millions)
<S>                                                    <C>           <C>            <C>           <C>
Revenue, net                                            $34.8         100.0%         $34.4         100.0%
Cost of goods sold                                        8.4          24.1%           8.5          24.7%
                                                        -----         -----          -----         -----
Gross profit                                             26.4          75.9%          25.9          75.3%
Costs and expenses:
       Sales and marketing                                6.3          18.1%           7.0          20.4%
       Distribution, circulation and fulfillment          3.5          10.1%           3.5          10.2%
       Editorial                                          2.6           7.5%           2.9           8.4%
       General and administrative                         4.5          12.9%           5.1          14.8%
       Depreciation                                       0.4           1.1%           0.4           1.2%
       Amortization of intangible assets                  2.1           6.0%           2.2           6.4%
                                                        -----         -----          -----         -----
       Total costs and expenses                          19.4          55.7%          21.1          61.3%
                                                        -----         -----          -----         -----

Income from operations                                    7.0          20.1%           4.8          14.0%

Interest expense                                         (6.8)        (19.5%)        (12.7)        (36.9%)
Other expense, net                                       (0.2)         (0.6%)         (0.2)         (0.6%)
                                                        -----         -----          -----         -----
Income (loss) before income tax provision                --             0.0%          (8.1)        (23.5%)
Income tax provision                                      0.2           0.6%           0.2           0.6%
                                                        -----         -----          -----         -----

Net loss                                                $(0.2)         (0.6%)        $(8.3)        (24.1%)
                                                        =====         =====          =====         =====

       Adjusted EBITDA(a)                               $ 9.3          26.7%         $ 7.2          20.9%
                                                        =====         =====          =====         =====
</TABLE>


                                       42
<PAGE>

(a)  Adjusted EBITDA represents (loss) before interest expense, taxes,
     depreciation, amortization and other (income) charges for the three-months
     ended March 31, 2004 and 2003. Adjusted EBITDA data is a non-GAAP measure
     and is included in our discussion because we believe that this information
     may be considered by investors as an additional basis on which to evaluate
     WRC Media's performance. Because all companies do not calculate Adjusted
     EBITDA identically, the presentation of Adjusted EBITDA in this report is
     not necessarily comparable to similarly titled measures of other companies.
     Adjusted EBITDA is not intended to represent cash flow from operating
     activities and should not be considered an alternative to net income or
     loss (as determined in conformity with GAAP) as an indicator of our
     operating performance or to cash flow as a measure of liquidity. It is
     presented herein as we use it, in addition to operating income, to evaluate
     and measure each business unit's performance. We also use Adjusted EBITDA
     to evaluate management performance. Adjusted EBITDA may not be available
     for our discretionary use as there are requirements to repay debt, among
     other payments.

Three-Months Ended March 31, 2004 Compared to Three-Months Ended March 31, 2003

Revenue, net. For the three-months ended March 31, 2004, net revenue decreased
$0.4 million, or 1.1%, to $34.4 million from $34.8 million for the same period
in 2003. The decrease in net revenue at Weekly Reader was primarily due to (1) a
decrease in net revenue at World Almanac of $0.7 million, or 5.6% to $11.9
million from $12.6 million from the same period in 2003. This decrease was due
to lower net revenue of $0.2 million or 65.3% at World Almanac Books that
resulted from a timing difference related to consignment sales for the World
Almanac and Book of Facts and the World Almanac for Kids, lower net revenue of
$0.2 million or 3.2% at WAE Library Services as a result of the elimination of
their Prospect catalog and lower net revenue of $0.2 million or 15.6%, at Funk
and Wagnalls due to the natural attrition of their customer base; (2) a decrease
in net revenue at Weekly Reader, excluding World Almanac and AGS, of $0.4
million, or 3.8%, to $10.1 million from $10.5 million from the same period in
2003. This decrease was due to lower periodical net revenue of $0.6 million or
7.2%. The decline is a result of a weak educational funding environment. This
decrease at Weekly Reader was partially offset by increased net revenue at
Lifetime Learning Systems, Inc., a subsidiary of Weekly Reader of $0.1 million
or 5.5% related to increased custom publishing shipments and increased licensing
net revenue at Weekly Reader of $0.1 million or 126.8% from the same period in
2003 as a result of increased revenue from the QVC Shopping Network channel. The
revenue decreases at World Almanac and Weekly Reader were partially offset by
(3) $0.7 million or 6.0% higher net revenue at AGS. AGS revenue increased to
$12.4 million for the three-months ended March 31, 2004 from $11.7 million from
the same period in 2003. AGS assessment net revenue of $1.0 million or 16.3%
from the same period in 2003 as a result of: increases in net revenue of KABC II
(Kaufman Assessment Battery for Children) of $0.5 million released in the first
quarter of 2004, higher PPVT (Picture Peabody Vocabulary Test) of $0.5 million
due to large orders in the state of Florida, and higher revenue of GRADE (Group
Reading Assessment & Diagnostic Evaluation) and GMADE (Group Math Assessment &
Diagnostic Evaluation) of $0.2 million over the same period in 2003. These four
assessment products combined were up $1.2 million or 169.2% over the same period
in 2003. All other assessment products had reduced net revenue of $0.2 million
or 5.0% over the same period in 2003. The increase in Assessment net revenue was
partially offset by a decrease in curriculum net revenue $0.3 million or 4.9%
due to a market driven decline in test prep of $0.4 million or 35.7% and a
planned decline of $0.1 million or 14.4% in backlist net revenue partially
offset by an increase in Textbooks/Worktexts of $0.2 or 4.3% driven by growth
associated with the Algebra revision and a literature adoption in the State of
Florida.


                                       43
<PAGE>

The K-12 funding environment continues to be impacted by state budget deficits,
which has resulted in pressure to reduce state and local educational spending,
including spending on supplemental educational materials. While we believe
Weekly Reader Corporation will benefit from the provisions in the Federal No
Child Left Behind Act (the "NCLB Act"), most of the increase in Federal
educational funding in 2003 was offset by lower state and local education
funding in 2003. Although we anticipate that Federal educational funding will
increase in 2004 as a result of the NCLB Act, we do not believe this funding
improvement will be sufficient to offset cuts in state and local education
funding. These cuts and delayed purchases have negatively affected our top-line
net revenue and may continue to affect our top-line performance at least through
the first half of fiscal year 2004. The uncertainty in the current operating
environment makes it difficult to forecast future results.

Gross profit. Gross profit at Weekly Reader decreased $0.5 million or 1.9% to
$25.9 million from $26.4 million from the same period in 2003 primarily as a
result of (1) a decrease in gross profit at World Almanac of $0.7 million, or
8.1%, to $7.9 million from $8.6 million from the same period in 2003. Gross
profit at World Almanac as a percent of revenue decreased to 66.4% from 68.3%
from the same period in 2003 due to a write off of inventory at WA Books and the
impact of a discount offer at WAE Library Services that was not in effect for
the same period in 2003; (2) a decrease in gross profit at Weekly Reader,
excluding AGS and World Almanac of $0.3 million, or 3.4%, to $8.5 million from
$8.8 million from the same period in 2003 driven by the volume decrease
described above. Gross profit as a percent of revenue decreased slightly to
84.2% from 83.8% from the same period in 2003. The revenue decreases at World
Almanac and Weekly Reader, not including AGS and World Almanac, were partially
offset by (3) an increase in gross profit at AGS of $0.5 million, or 5.6% to
$9.5 million from $9.0 million from the same period in 2003 driven by the AGS
volume increase described above. Gross profit as a percent of revenue decreased
slightly to 76.6% from 76.9% from the same period in 2003 as a result of change
in revenue mix. Overall, Weekly Reader consolidated gross profit as a percent of
revenue decreased to 75.3% from 75.9% from the same period in 2003 due to the
factors described above.

Costs and expenses. For the three-months ended March 31, 2004, operating costs
and expenses increased by $1.7 million, or 8.8%, to $21.1 million from $19.4
million from the same period in 2003. Costs and expenses as a percentage of net
revenue increased to 61.3% from 55.7% from the same period in 2003. This
increase was primarily the result of: (i) $0.7 million or 11.1% increase in
sales and marketing expenses due in to a sales reorganization and the timing of
marketing initiatives related to product launches at AGS and to a change in
amortizing new business promotion expenses at Weekly Reader, not including AGS
or World Almanac (ii) $0.6 million or 13.3% increase in general and
administrative expenses due to increases in legal, audit, tax and consulting
professional fees; and (iii) higher editorial expenses of $0.3 million or 11.5%
due in part to testing expenditures at AGS associated with a high stakes test
developed for the NY City Department of Education and at Weekly Reader, not
including AGS or World Almanac, as a result of amortizing prepaid editorial
costs over the shorter period of time of when the related shipments occurred
rather than over the entire school year.

Information regarding costs and expenses of the Company's reporting segments is
set forth below. Parent Company expenses not allocated are included in
Corporate.


                                       44
<PAGE>

<TABLE>
<CAPTION>
                                                           Weekly     World
      (amounts in millions)                                Reader    Almanac      AGS    Corporate  Elimination    Total
                                                           ------    -------      ---    ---------  -----------    -----
<S>                                                        <C>       <C>         <C>       <C>         <C>        <C>
Three months ended March 31, 2004
Sales and marketing                                         $1.8      $1.8        $3.4                  --        $ 7.0
Distribution, circulation and fulfillment                    1.6       1.4         0.5      --          --          3.5
Editorial                                                    1.5       0.9         0.5      --          --          2.9
General and administrative                                   1.3       1.5         1.0       1.3        --          5.1
Restructuring costs and other non-recurring expenses        --        --          --        --          --         --
Depreciation                                                 0.1       0.1         0.2      --          --          0.4
Amortization of intangible assets                           --         0.4         1.8      --          --          2.2
Total costs and expenses                                     6.3       6.1         7.4       1.3        --         21.1
Three months ended March 31, 2003
Sales and marketing                                          1.5       1.7         3.1      --          --          6.3
Distribution, circulation and fulfillment                    1.6       1.3         0.6      --          --          3.5
Editorial                                                    1.4       0.9         0.3      --          --          2.6
General and administrative                                   1.1       1.5         1.0       0.9        --          4.5
Restructuring costs and other non-recurring expenses        --        --          --        --          --         --
Depreciation                                                 0.2       0.1         0.1      --          --          0.4
Amortization of intangible assets                           --         0.5         1.6      --          --          2.1
Total costs and expenses                                     5.8       6.0         6.7       0.9        --         19.4
</TABLE>

Interest expense. For the three-months ended March 31, 2004, interest expense,
including amortization of deferred financing costs, increased by $5.9 million,
or 86.8%, to $12.7 million from $6.8 million from the same period in 2003 as a
result of writing off the deferred financing fees of $0.5 million attributable
to the First-Lien Credit Facility that was replaced by the Second-Lien Credit
Facility, which closed on March 29, 2004. In addition the adoption of SFAS 150
requires dividends on the 15% Senior Preferred Stock to be recorded as interest
expense in the condensed consolidated statement of operations for all periods
starting after January 1, 2004. The dividends on the 15% Senior Preferred Stock
for the three-months ended increased interest expense by $5.2 million. Interest
expense as a percentage of net revenue increased to 36.9% from 19.5% for the
same period in 2003.

Adjusted EBITDA. For the three-months ended March 31, 2004, Adjusted EBITDA
decreased $2.1 million, or 22.6%, to $7.2 million from $9.3 million for the same
period in 2003. This decrease is primarily attributable to the factors described
above. Adjusted EBITDA represents (loss) before interest expense, taxes,
depreciation, amortization and other (income) charges. Adjusted EBITDA is a
non-GAAP measure and is included in our discussion because we believe that this
information may be considered by investors as an additional basis on which to
evaluate WRC Media's performance. Because all companies do not calculate
Adjusted EBITDA identically, the presentation of Adjusted EBITDA in this report
is not necessarily comparable to similarly titled measures of other companies.
Adjusted EBITDA is not intended to represent cash flow from operating activities
and should not be considered an alternative to net income or loss (as determined
in conformity with GAAP) as an indicator of our operating performance or to cash
flow as a measure of liquidity. It is presented herein as we use it, in addition
to operating income, to evaluate and measure each business unit's performance.
We also use Adjusted EBITDA to evaluate management performance. Adjusted EBITDA
may not be available for our discretionary use as there are requirements to
repay debt, among other payments. The reconciliation of Adjusted EBITDA to net
loss is as follows:


                                       45
<PAGE>

<TABLE>
<CAPTION>
                                                     For the three months ended March 31,
Adjusted EBITDA reconciliation to Net Loss                  2003             2004
                                                          --------         --------
<S>                                                      <C>              <C>
      Net loss                                            $   (226)        $ (8,308)
      Depreciation and amortization of intangibles           2,545            2,616
      Income taxes                                             190              158
      Interest expense                                       6,822           12,748
      Restructuring costs                                     --                  1
                                                          --------         --------
Adjusted EBITDA                                           $  9,331         $  7,215
                                                          ========         ========
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

General

At March 31, 2004, WRC Media's sources of cash were its (1) operating
subsidiaries, Weekly Reader, CompassLearning, and ChildU and (2) a $30.0 million
revolving credit facility. As of March 31, 2004, there were no outstanding
advances under the revolving credit facility. Additionally, the Company has
stand-by letters of credit, renewable annually, in the amount of $2.1 million,
which serve as security for a real estate lease entered into by the Company and
certain surety bonds issued on behalf of the Company. While these letters of
credit are in effect, it reduces available borrowing capacity under the
revolving credit facility by $2.1 million. At March 31, 2004, the Company had
$27.9 of available credit under the revolving credit facility.

For the January through June time period, WRC Media and its subsidiaries usually
experience negative cash flow due to the seasonality of its business. As a
result of this business cycle, borrowings usually increase during the period
January through June time period, and borrowings generally will be at its lowest
point in the fourth quarter.

On March 29, 2004, we refinanced all of our term loans under our Senior Bank
Credit Facilities (the "First-Lien Credit Facility") with a $145.0 million
senior, second-priority lien secured financing that was provided to the Company
pursuant to a term loan facility (the "Second-Lien Facility"). The proceeds of
the Second-Lien Facility were used (i) to refinance in full all term loans
outstanding under the First-Lien Facility, (ii) to pay fees and expenses related
to the Second-Lien Facility and all transactions contemplated in connection
therewith and (iii) for general corporate purposes of the Company.

All payment obligations under the Second-Lien Facility are secured by a
second-priority lien on the collateral securing the First-Lien Facility;
provided that all obligations under the Second-Lien Facility will rank equally
in right of payment with all payment obligations under the First-Lien Facility
and will not be subordinated in any respect to the First-Lien Facility. The
final maturity of the Second-Lien Facility is March 29, 2009. At the Company's
option, the loans will bear interest at either the Administrative Agent's (i)
alternate base rate ("base rate loans") or (ii) reserve-adjusted LIBO rate
("LIBO rate loans") plus, in each case, the "Applicable Margin" (as defined).
"Applicable Margin" means, with respect to (i) Base Rate Loans, a rate of 4.00%
per annum and (ii) LIBO Rate Loans, a rate of 5.00% per annum.


                                       46
<PAGE>

The Second-Lien Facility has one financial covenant, a maximum ratio (the
"Senior Leverage Ratio") of Senior Secured Debt to trailing four quarter EBITDA
not to exceed 4.25:1.00 for any fiscal quarter, except the fiscal quarter ended
June 30, 2005 for which the Senior Leverage Ratio may not exceed 4.50:1.00, in
each case to be tested on the last day of each fiscal quarter and computed for
the Company and its consolidated subsidiaries. We were in compliance with this
financial covenant for the period ended March 31, 2004. The Company's senior
leverage ratio was 3.24:1:00 for the period ended March 31, 2004.

In connection with entering into the Second-Lien Credit Facility, we entered
into an amendment and restatement of our First-Lien Credit Facility, which now
consists solely of a $30.0 million revolving credit facility. The cash available
under our First-Lien Credit Facility, together with the cash from our operating
subsidiaries, Weekly Reader, CompassLearning and ChildU, is considered adequate
for the Company's needs for the foreseeable future.

The First-Lien Credit Facility, as amended and restated, has a maturity of
December 29, 2008, and has one financial covenant, a Senior Leverage Ratio of
senior secured debt to trailing four quarter EBITDA not to exceed 4.00:1.00 for
any fiscal quarter, except the fiscal quarter ended June 30, 2005 for which the
Senior Leverage Ratio may not exceed 4.25:1.00, in each case to be tested on the
last day of the fiscal quarter and computed for the Company and its consolidated
subsidiaries. We were in compliance with this financial covenant for the period
ended March 31, 2004. As discussed above, the Company's senior leverage ratio
was 3.25:1:0 for the period ended March 31, 2004. Interest on revolving loan
borrowings under the First-Lien Credit Facility will bear interest at a rate per
annum equal to the LIBO rate as defined in the First-Lien Credit Facility plus
3.5% or the alternate base rate as defined in the First-Lien Credit Facility
plus 2.5%.

The credit agreement for our First-Lien Credit Facility is secured by liens on
substantially all of our assets, and the credit agreement for our Second-Lien
Credit Facility is secured by second-priority liens on all the assets securing
the First-Lien Facility.

Liquidity, Working Capital and Capital Resources

As of March 31, 2004, WRC Media and its subsidiaries had negative working
capital of $ 17.6 million. WRC Media's cash and cash equivalents were
approximately $6.4 million at March 31, 2004. WRC Media and its subsidiaries'
operations used approximately $9.9 million in cash for the three-months ended
March 31, 2004. WRC Media and its subsidiaries' principal uses of cash are for
debt service and working capital.

WRC Media and its subsidiaries' investing activities for the year ended March
31, 2004, included investments in software development of approximately $0.6
million and capital expenditures of approximately $0.1 million.

WRC Media and its subsidiaries' financing activities consist of making drawings
from, and repayments to, our revolving credit facility and retiring amounts due
under our senior secured term loans. For the three-months ended March 31, 2004,
financing activities provided net cash of $15.2 million, which primarily
resulted from proceeds of $145.0 million from the Second-Lien Credit Facility
which were used in part to repay $118.7 million of the First Lien Credit
Facility. The Second Lien Credit Facility does not amortize and we do not expect
our financing activities going forward to include regular periodic retirement of
term loans prior to maturity. The Second Lien Credit Facility matures on March
29, 2009.


                                       47
<PAGE>

Derivative Financial Instruments

The Company uses derivative financial instruments to reduce its exposure to
interest rate volatility. In 2004, the Company used interest rate swaps and caps
to reduce exposure to interest rate changes. At March 31, 2004, Weekly Reader
had one outstanding derivative financial instrument in place, an interest rate
cap on 50% of its senior secured term loans as required by the First-Lien
Facility as then in effect. Our amended and restated First-Lien Facility and our
Second-Lien Facility require us to obtain interest rate protection that, when
taken together with the aggregate principal amount of our indebtedness subject
to a fixed interest rate, will result in at least 50% of our total indebtedness
being either fixed, hedged or capped for the duration of the applicable
facility. On November 15, 2003, we entered into financial instruments with a
notional value of $61.0 million, which terminates on November 15, 2004 and
requires us to pay a floating rate of interest based on the three-month LIBO
rate as defined in that arrangement with a cap rate of 2.5%. The fair value of
this interest rate cap as of March 31, 2004 was de-minimus.

Accounting Policies and Estimates

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations
is based upon our condensed consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements require
us to make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses and related disclosures of contingent assets
and liabilities. On an on-going basis, we evaluate our estimates, including
those related to allowances for doubtful accounts, reserves for sales returns
and allowances and the recoverability of long-lived assets. We base our
estimates on historical experience and on various other assumptions that we
believe are reasonable under the circumstances. These form the basis of our
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ materially from
these estimates, which would affect our reported results from operations. The
following is a description of what we believe to be the critical accounting
policies and estimates used in the preparation of our condensed consolidated
financial statements.

Revenue Recognition

The Company's revenue recognition policies for its principal businesses are as
follows:

         o        Periodicals - Revenue is deferred and recognized ratably over
                  the subscription period, as the periodicals are delivered.


                                       48
<PAGE>

         o        Educational Publishing - For shipments to schools, revenue is
                  recognized on passage of title, which occurs upon shipment.
                  Shipments to depositories are on consignment. Revenue is
                  recognized based on reported shipments from the depositories
                  to the schools. Likewise, shipments to the distributor of the
                  World Almanac and Book Of Facts and the World Almanac For Kids
                  books are treated similar to a consignment sale. Revenue is
                  recognized based on reported shipments from the distributor to
                  its customers (primarily retail book stores). For certain
                  software-based product, the Company offers new customers
                  installation and training. In such cases, revenue is
                  recognized when installation and training are complete.

         o        Reference and Trade - Revenue from the sale of children's
                  books through the wholesale channel are recognized when books
                  are shipped to wholesalers. Sales to school and public
                  libraries made through the telemarketing preview channel are
                  recorded upon notification from the customer of their
                  intention to retain the previewed product.. The sale of
                  children's books to bookstores and mass merchandisers
                  primarily are recognized by the Company at the time the
                  distributor ships these products to its customers. Concurrent
                  with the recording of this revenue, the Company records
                  distribution fees as a reduction of revenue.

         o        Educational Software and Related Products And Services -
                  Software revenues are recognized in accordance with the
                  provisions of Statement of Position (SOP) 97-2, Software
                  Revenue Recognition, as amended by SOP 98-9, Modification of
                  SOP 97-2, Software Revenue Recognition, with Respect to
                  Certain Transactions. Under SOP 97-2, we recognize revenue for
                  hardware and software sales upon shipment of the product,
                  provided collection of the receivable is probable, payment is
                  due within one year and the fee is fixed or determinable. If
                  an acceptance period is required, revenues are recognized upon
                  the earlier of customer acceptance or the expiration of the
                  acceptance period. If significant post-delivery obligations
                  exist, revenues are deferred until no significant obligations
                  remain. Revenue from service contracts, instruction and user
                  training is recognized as the services are performed and
                  post-contract support is recognized ratably over the related
                  contract. Deferred revenue represents the Company's obligation
                  to perform under signed contracts. For contracts with multiple
                  elements (e.g., deliverable and undeliverable products,
                  maintenance and other post-contract support), the Company
                  allocates revenue to each undelivered element of the contract
                  based on vendor specific objective evidence of its fair value,
                  which is specific to the Company. The Company recognizes
                  revenue allocated to delivered products on the residual method
                  when the criteria for product revenue set forth above are met.
                  Certain of the Company's customers are subject to fiscal
                  funding requirements. If the funding requirements are subject
                  to governmental approval, the likelihood of cancellation is
                  assessed. If the likelihood of cancellation is assessed as
                  remote, revenue is recognized. If the likelihood of
                  cancellation is assessed as other than remote, revenue is
                  deferred. If the funding requirements are subject to
                  non-governmental approval, revenue is deferred and recognized
                  in accordance with the remaining provisions of SOP 97-2. The
                  Company also enters into lease financing arrangements for its
                  software products and services. These leases are immediately
                  assigned to a third-party with no recourse to the Company. The
                  Company retains no risk in these arrangements and has no
                  history of granting concessions related to the arrangements.
                  Accordingly, the Company recognizes revenue upon delivery of
                  its products and services under these lease arrangements.


                                       49
<PAGE>

         o        Licensing - Licensing revenue is recorded in accordance with
                  royalty agreements at the time licensed materials are
                  available to the licensee and collections are reasonably
                  assured.

         o        Advertising - Revenue is recognized when the periodicals are
                  shipped and available to the subscribers.

         o        Pre-Publication Costs - Marketing, selling, distribution,
                  editorial, and other general and administrative expenses are
                  generally expensed as incurred. Certain editorial costs
                  relating to the American Guidance product lines are deferred
                  and amortized using both straight-line and accelerated methods
                  over periods ranging from three to ten years. The amortization
                  is based on the expected life of the publication which is
                  determined based on the Company's historical experience with
                  similar publications.

         o        Direct-Response Advertising Costs - Advertising and
                  subscription acquisition costs are expensed the first time the
                  advertising takes place, except for direct-response
                  advertising, the primary purpose of which is to elicit sales
                  from customers who can be shown to have responded specifically
                  to the advertising and that result in probable future economic
                  benefits. Direct-response advertising consists of product
                  promotional mailings, catalogs and subscription promotions.
                  These direct-response advertising costs are capitalized and
                  amortized over the estimated period of future benefit using a
                  ratio of current period revenues to total current and
                  estimated future period revenues. The amortization periods
                  range from ten months to thirty months subsequent to the
                  promotional event. Amortization of direct-response advertising
                  costs is included in marketing and selling expenses in the
                  Company's consolidated statement of operations.

Allowance For Doubtful Accounts

Allowances for doubtful accounts are estimated losses resulting from our
customers' failure to make required payments. The Company continually monitors
collections from customers and provides a provision for estimated credit losses
based upon historical experience. The Company aggressively pursues collection
efforts on these overdue accounts and upon collection reverses the write-off in
future periods. If future payments by our customers were to differ from our
estimates, we may need to increase or decrease our allowances for doubtful
accounts.

Reserve For Sales Returns

Reserves for sales returns and allowances are primarily related to our printed
publications. The Company estimates and maintains these reserves based primarily
on its distributors' historical return practices and our actual return
experience. If actual sales returns and allowances differ from the estimated
return and allowance rates used, we may need to increase or decrease our reserve
for sales returns and allowances.


                                       50
<PAGE>

Impairment Of Long-Lived Assets

The Company periodically evaluates the recoverability of our long-lived assets,
including property and equipment, and finite lived intangible assets, whenever
events or changes in circumstances indicate that the carrying amount may not be
recoverable or in connection with its annual financial review process. Our
evaluations include analyses based on the undiscounted cash flows generated by
the underlying assets, profitability information, including estimated future
operating results and/or trends. If the value of the asset determined by these
evaluations is less than its carrying amount, impairment is recognized for the
difference between the fair value and the carrying value of the asset. Future
adverse changes in market conditions or poor operating results of the related
business may indicate an inability to recover the carrying value of the assets,
thereby possibly requiring an impairment charge to the carrying value of the
asset, in the future.

Goodwill And Other Identified Intangible Assets

We test goodwill for impairment annually and whenever events or circumstances
make it more likely than not that an impairment may have occurred, such as a
significant adverse change in the business climate or a decision to sell or
dispose of a reporting unit. Determining whether an impairment has occurred
requires valuation of the respective reporting unit, which we estimate using a
discounted cash flow methodology. In applying this methodology, we rely on a
number of factors, including actual operating results, future business plans,
economic projections and market data.

If this analysis indicates goodwill is impaired, measuring its impairment
requires a fair value estimate of each identified tangible and intangible asset.

We test other identified intangible assets with defined useful lives and that
are subject to amortization by comparing the carrying amount to the sum of
undiscounted cash flows expected to be generated by the asset. We test
intangible assets with indefinite lives annually for impairment using a fair
value methodology such as discounted cash flows.

Valuation of Equity Instruments

The Company has granted stock options to certain of its employees. Certain of
these options contain a cashless exercise provision which require the Company to
account for such options using variable plan accounting. The Company recognizes
compensation expense related to those options with the cashless exercise
provision if fair market value of the Company's common stock, as estimated by
the Company's Board of Directors, exceeds the exercise price of the options.

The fair market value of the Company's common stock is determined by its Board
of Directors based on information available to the Board of Directors at the
time of determination. The Board considers factors such as the Company's current
and expected future results of operations, current market conditions and the
values of other similar companies.


                                       51
<PAGE>

Software Development Costs

The Company capitalizes software development costs under the provisions of
either Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use" ("SOP 98-1") or Statement of
Financial Accounting Standards ("SFAS") 86, "Computer Software to be Sold,
Leased, or Otherwise Marketed" ("SFAS 86"), based on the intended use of the
software.

Research and development costs are charged to expense when incurred.
Additionally, the Company capitalizes acquired and developed technologies that
meet the provisions of SFAS 86. The establishment of technological feasibility
and the ongoing assessment of the recoverability of these costs require
considerable judgment by management with respect to certain external factors,
including, but not limited to, anticipated future gross product revenues,
estimated economic product lives and changes in software and hardware
technology. Software development costs are amortized on a straight-line basis
over four years or the expected life of the product, whichever is less. The
Company periodically evaluates the net realizable value of capitalized software
development costs based on factors such as budgeted sales, product development
cycles and management's market emphasis.

The Company capitalizes the costs of acquiring, developing and testing software
to meet the Company's internal needs. Under the provisions of SOP 98-1, the
Company capitalizes costs associated with software developed or obtained for
internal use when both the preliminary project stage is completed and management
has authorized further funding for the project which it deems probable will be
completed and used to perform the function intended. Capitalized cots include
only (1) external direct costs of materials and services consumed in developing
or obtaining internal-use software, (2) payroll and payroll-related costs for
employees who are directly associated with and devote time to the internal -use
software project and (3) interest costs incurred while developing internal-use
software. Capitalization of such costs ceases no later than the point at which
the project is substantially complete and ready for its intended use. Internal
use software development costs are amortized using the straight-line method over
a five-year period.

Valuation of Deferred Tax Assets

The Company is not currently recognizing income and due to its lack of
historical earnings has determined it is not likely to realize the benefit of
its net deferred tax assets, and accordingly, records a 100% valuation reserve
against its net deferred tax assets, exclusive of deferred tax liabilities that
cannot be offset as the result of the adoption of SFAS 142. To the extent the
Company recognizes income in future years, the tax provision will reflect the
realization of such benefits, with the exception of benefits attributable to
acquired deferred tax assets. The recognition of such amount in future years
will be allocated to reduce the excess of the purchase price over the net assets
acquired and other non-current intangible assets.


                                       52
<PAGE>

Recent Accounting Pronouncements

In January 2003, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 46, "Consolidation of Variables Interest Entities ("FIN 46").
FIN 46 clarifies the application of Accounting Research Bulletin No. 51,
"Consolidated Financial Statements" to certain entities in which equity
investors do not have the characteristics of a controlling financial interest or
do not have sufficient equity at risk for the entity to finance its activities
without additional subordinated financial support from other parties. In
December 2003, the FASB issued FIN No. 46 (Revised) ("FIN 46R") to address
certain FIN 46 implementation issues. This interpretation requires that the
assets, liabilities, and results of activities of a Variable Interest Entity
("VIE") be consolidated into the financial statements of the enterprise that is
the primary beneficiary of the VIE. FIN 46R also requires additional disclosures
by primary beneficiaries and other significant variable interest holders. This
interpretation is effective no later than the end of the first interim or
reporting period ending after March 15, 2004, except for those VIE's that are
considered to be special purpose entities, for which the effective date is no
later than the end of the first interim or annual reporting period ending after
December 15, 2003. The adoption of FIN 46R, effective March 31, 2004, did not
have any effect on the Company's consolidated financial position or results of
operations.

In April 2003, the FASB issued Statements of Financial Accounting Standards
("SFAS") No. 149 "Amendment of Statement 133 on Derivative Instruments and
Hedging Activities" ("SFAS 149"), which amends and clarifies accounting for
derivative instruments, and for hedging activities under SFAS 133. Specifically,
SFAS 149 requires that contracts with comparable characteristics be accounted
for similarly. Additionally, SFAS 149 clarifies the circumstances in which a
contract with an initial net investment meets the characteristics of a
derivative and when a derivative contains a financing component that requires
special reporting in the statement of cash flows. This Statement is generally
effective for contracts entered into or modified after June 30, 2003 and its
adoption did not have any effect on the Company's consolidated financial
position or results of operations.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity" ("SFAS 150").
SFAS 150 establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its scope
as a liability (or an asset in some circumstances). Many of those instruments
were previously classified as equity. This statement was effective for the
Company beginning January 1, 2004. For financial instruments created before the
issuance date of this statement and still existing at the beginning of the
interim period of adoption, transition shall be achieved by reporting the
cumulative effect of a change in an accounting principle by initially measuring
the financial instruments at fair value or other measurement attribute required
by this statement. The adoption of this statement required the Company to
reclassify its 15% Senior Preferred Stock from the mezzanine section of the
balance sheet to long-term liabilities. Effective January 1, 2004 dividend
payments for the 15% Senior Preferred Stock ("15% Senior Preferred") are
recorded as interest expense in the consolidated statement of operations. The
adoption of this statement did not result in any adjustment to the book value of
its 15% Senior Preferred as of January 1, 2004 as book value approximated fair
value at January 1, 2004. For the three-months ended March 31, 2004 the Company
recognized $5,199 of accrued dividends on 15% Senior Preferred as interest
expense.


                                       53
<PAGE>

On December 23, 2003, the FASB issued SFAS No. 132 (Revised 2003), Employers'
Disclosures about Pensions and Other Postretirement Benefits, an amendment of
FASB Statements No. 87, 88 and 106. It requires additional disclosures to those
in the original Statement 132 about the assets, obligations, cash flows and net
periodic benefit cost of defined benefit pension plans and other defined benefit
post-retirement plans. The majority of the provisions of this statement apply to
financial statements issued for fiscal years ending after December 15, 2003. The
Company has adopted such disclosure provisions.

Seasonality

Operating results have varied and are expected to continue to vary from quarter
to quarter as a result of seasonal patterns. Weekly Reader and CompassLearning's
net revenue are significantly affected by the school year. Weekly Reader's net
revenue in the third, and to a lesser extent the fourth, quarters are generally
the strongest as products are shipped for delivery during the school year.
CompassLearning's net revenues were historically strongest in the second
quarter, and to a lesser extent the fourth quarter. However, due to tight
funding environment in the last couple of year, the trend is shifting towards
the fourth quarter being the strongest, followed by the second quarter. The
strength in the second quarter is generally attributed to the end of the school
fiscal year (June 30th) and the need for the schools to spend the money prior to
year end. In addition, by purchasing in the second quarter, schools are able to
have the software products purchased and installed over the summer and ready to
train teachers when they return from summer vacation. CompassLearning's fourth
quarter revenue is strong as a result of sales patterns driven by new school
year money being appropriated and funded, CompassLearning's commissioned sales
force seeking to meet year-end sales goals as well as schools purchasing
software to be installed in time to take advantage of it during the second half
of the school year.

Inflation

We do not believe that inflation has had a material impact on our financial
position or results of operations for the periods discussed above. Although
inflationary increases in paper, postage, labor or operating costs could
adversely affect operations, we have generally been able to offset increases in
costs through price increases, labor scheduling and other management actions.

Factors That May Affect The Future Results And Financial Condition

This Quarterly Report on Form 10-Q/A contains forward-looking statements.
Additional written and oral forward-looking statements may be made by the
Company from time to time in SEC filings and otherwise. The Company cautions
readers that results predicted by forward-looking statements, including, without
limitation, those relating to the Company's future business prospects, revenues,
working capital, liquidity, capital needs, interest costs and income, are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those indicated in the forward-looking statements, due to
factors including the following and other risks and factors identified from time
to time in the Company's filings with the SEC:


                                       54
<PAGE>

The Company's ability to continue to produce successful supplemental education
material and software products;

Reductions in state and local funding for educational spending materials
resulting, among other things, from increasing state budget deficits;

Uncertainty in the current operating environment which makes it difficult to
forecast future results;

The ability of the Company's print and electronic supplemental instructional
materials to continue to successfully meet market needs;

The Company's ability to maintain relationships with its creative talent;

Changes in purchasing patterns in and the strength of educational, trade and
software markets;

Competition from other supplemental education materials companies;

Significant changes in the publishing industry, especially relating to the
distribution and sale of supplemental educational materials;

The effect on the Company of volatility in the price of paper and periodic
increases in postage rates;

The Company's ability to effectively use the Internet to support its existing
businesses and to launch successful new Internet initiatives;

The general risks inherent in the market and the impact of rising interest rates
with regard to its variable debt facilities; and

The terms of our First-Lien Facility and Second-Lien Facility require us on an
ongoing basis to meet certain maximum secured leverage ratio covenants. A
default under either credit agreement could result in acceleration of payment
obligations thereunder and would have a material adverse effect on our financial
condition and liquidity.

The preliminary SEC inquiry we previously disclosed in our Form 8-K filed with
the SEC on December 15, 2003, is ongoing, and we cannot predict the final
outcome of the inquiry at this time.

The foregoing list of factors should not be construed as exhaustive or as any
admission regarding the adequacy of disclosures made by the Company prior to the
date hereof. The Company disclaims any intention or obligation to update or
revise forward-looking statements, whether as a result of new information,
future events or otherwise.


                                       55
<PAGE>

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk. Market risk, with respect to our business, is the
potential loss arising from adverse changes in interest rates. We manage our
exposure to this market risk through daily operating and financing activities
and, when deemed appropriate, through the use of derivatives. We use derivatives
as risk management tools and not for trading purposes.

We were subject to market risk exposure related to changes in interest rates on
our $145.0 million senior secured term loans under our Second Lien Credit
Facility. Interest on revolving loan borrowings under our First Lien Credit
Facility maturing in December 2008 will bear interest at a rate per annum equal
to the LIBO rate as defined in the First Lien Credit Facility plus 3.5% or the
alternate base rate as defined in the First Lien Credit Facility plus 2.5%.
Interest on the term loans under our Second Lien Credit Facility maturing in
March 2009 will bear interest at a rate per annum equal to the LIBO rate as
defined in the Second Lien Credit Facility plus 5.0% or the alternate base rate
as defined in the Second Lien Credit Facility plus 4.0%. A 1% increase in
interest rates would result in an increase in our annual interest costs of
approximately $1.45 million.

The First Lien Credit Facility and the Second Lien Credit Facility require us to
obtain interest rate protection that, when taken together with the aggregate
principal amount of the Company's indebtedness subject to a fixed interest rate,
will result in at least 50% of our total indebtedness being either fixed, hedged
or capped for the duration of the applicable facility. On November 15, 2003, we
entered into an arrangement with a notional value of $61.0 million, which
terminates on November 15, 2004 and requires us to pay a floating rate of
interest based on the three-month LIBO rate as defined in that arrangement with
a cap rate of 2.5%. The fair value of the interest rate cap as of March 31, 2004
was de-minimus.

The following table sets forth information about the Company's debt instruments
as of March 31, 2004:

<TABLE>
<CAPTION>
           Debt                                 Less than                                  After
        Obligations                  Total       1 year    2-3 years     4-5 years        5 years
        -----------                  -----       ------    ---------     ---------        -------
<S>                               <C>            <C>        <C>          <C>             <C>
Revolving Credit                   $   --         $ --       $ --         $   --          $   --
Average Interest Rate
Second Lien Credit Facility         145,000         --         --          145,000            --
Average Interest Rate                 6.09% (A)
Senior Subordinated Notes           152,000         --         --             --           152,000
Average Interest Rate                12.75%
</TABLE>

(A)      Interest rate through April 29, 2004.


                                       56
<PAGE>

ITEM 4.   CONTROLS AND PROCEDURES

WRC Media management, including the Chief Executive Officer and Principal
Financial Officer, have conducted an evaluation of the effectiveness of
disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based
on that evaluation, the Chief Executive Officer and Principal Financial Officer
concluded that the disclosure controls and procedures are effective in ensuring
that all material information to be filed in this quarterly report has been made
known to them in a timely fashion. There have been no significant changes in the
Company's internal controls, or in other factors that could significantly affect
internal controls, subsequent to the date the Chief Executive Officer and
Principal Financial Officer completed their evaluation. In making this
evaluation, WRC Media management considered the "material weaknesses" (as
defined under standards established by the American Institute of Certified
Public Accountants) that were identified and communicated to us by our
independent auditors in connection with the audit of our consolidated financial
statements for the year ended December 31, 2003. Our independent auditors
identified the following two such "material weaknesses": (1) numerous adjusting
entries proposed as a result of our 2003 audit were recorded by the Company to
correct the underlying books and records, including previously reported results
for 2002 and 2001, and (2) there were an insufficient number of qualified
accounting personnel appropriate for their positions, specifically within the
external financial reporting area. Prior to the identification of these
"material weaknesses" by our independent auditors, the Company began
implementing various policies and procedures in connection with its own review
of its accounting and external reporting functions.

In mid-2003, in connection with our review of the matter which led to the
restatement of revenue relating to a software and services sale, we reviewed our
revenue recognition policy for potential control weaknesses. At that time, our
software revenue recognition policy permitted deviations from our approved forms
of sales documentation with the approval of the operating unit's general
manager. We have changed our software revenue recognition policy to provide that
deviations from approved forms of sales documentation require both the approval
of a financial officer (Principal Financial Officer or Chief Accounting Officer)
of WRC Media, and the approval of legal counsel. We have taken a number of other
steps that will impact the effectiveness of our internal controls, including the
following:

         o        We have centralized our finance and accounting organization.
                  The operating unit controllers, who formerly reported to the
                  operating unit general managers, now report directly to the
                  parent company Principal Financial Officer;

         o        We restructured our finance group in a manner that places
                  greater emphasis on control and accountability issues;

         o        We have amended our Code of Conduct and Compliance Policies to
                  require all employees to sign a personal Code of Conduct
                  Statement that states that they have read the WRC Code of
                  Conduct and represent that they are in compliance, and that
                  they are not aware of any violations of the Company's Code of
                  Conduct by others at the Company or its affiliates. If they
                  are aware of, or become aware of a violation they are
                  obligated to document and report the incident to the Chief
                  Executive or Principal Financial Officer of the Company.


                                       57
<PAGE>

         o        We have established new policies and procedures for such
                  matters as complex transactions, and contract management
                  procedures.

         o        We established a Disclosure Committee, consisting of senior
                  personnel from the business units and the finance group, as
                  well as legal counsel, and we now follow an extensive review
                  and certification process in connection with our filings with
                  the SEC; and

         o        We hired an Assistant Treasurer/Controller in February 2004 to
                  increase resources in the external reporting area.

In addition, the Company is currently conducting a recruitment search for a
Chief Financial Officer.

We believe that these efforts address the "material weaknesses" identified by
our independent auditors. The Company continues to improve and refine its
internal controls. This process is ongoing, and the Company seeks to foster an
exemplary internal controls environment. Our management, including our Chief
Executive Officer and Principal Financial Officer, has concluded that, taking
into account the Company's efforts to address the matters described above, as of
the evaluation date, our disclosure controls and procedures are designed, and
are effective, to give reasonable assurance that information we must disclose in
reports filed with the SEC is properly recorded, processed, and summarized, and
then reported within the time periods specified in the rules and forms of the
SEC.


                                       58
<PAGE>

PART II.  OTHER INFORMATION

ITEM 5.   OTHER INFORMATION

Pre-approval of Non-Audit Services

In accordance with Section 10A(i) of the Exchange Act, the Audit Committee of
the Board of Directors of the Company will pre-approve the provision of all
non-audit services to be provided to the Company by its independent auditors,
Deloitte & Touche LLP, as permitted by Section 10A.

Investor Relations

The Company posts on its Web site, www.wrcmedia.com, the date of its upcoming
financial press releases and telephone investor calls at least five days prior
to the event. The Company's investor calls are open to the public and remain
available to the public through the Company's Web site for at least five days
thereafter.


                                       59
<PAGE>

PART II

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

(A) EXHIBITS

31.1     Certification of Martin E. Kenney, Jr., Chief Executive Officer of WRC
         Media Inc., CompassLearning, Inc. and Weekly Reader Corporation,
         pursuant to Rules 13a-14(a) and 15(d)-14(a) of the Securities Exchange
         Act of 1934, as amended, dated July 29, 2004.

31.2     Certification of Richard Nota, Senior Vice President of Finance and
         Principal Financial Officer of WRC Media Inc., and Weekly Reader
         Corporation dated July 29, 2004.

32       Certification of Chief Executive Officer and Principal Financial
         Officer of WRC Media Inc. and Subsidiaries and Weekly Reader
         Corporation pursuant to 18 U.S.C. ss. 1350, dated July 29, 2004.


(B)  REPORTS ON FORM 8-K

1.       Form 8-K, filed May 6, 2004, reporting date and time of investor call
         discussing first quarter results for the period ended March 31, 2004.

2.       Form 8-K, filed April 14, 2004, reporting investor conference call,
         Martin E. Kenney, Jr., WRC Media Inc.'s Chief Executive Officer.

3.       Form 8-K, filed April 5, 2004, reporting WRC Media Inc. announced the
         date and time of its year-end investor conference call which is set
         forth in the press release in an Exhibit hereto.

4.       Form 8-K, filed April 1, 2004, reporting WRC Media Inc., A Leading
         Supplemental Education Publisher, Secures Financial Liquidity By
         Closing $145 Million Senior Second-Lien Credit Facility.

5.       Form 8-K, filed March 31, 2004, reporting our audited consolidated
         balance sheets as of December 31, 2002 and 2003, and the related
         statements of stockholders' deficit and operations for the years ended
         December 31, 2002 and 2003.


                                       60
<PAGE>

                                   SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED.



/s/ Martin E. Kenney, Jr.                                    Date: July 29, 2004
-----------------------------------------------------             --------------
Martin E. Kenney, Jr.
Director: WRC Media Inc., Weekly Reader Corporation
and CompassLearning, Inc.; Chief Executive Officer:
WRC Media Inc. and CompassLearning, Inc.;
Principal Executive Officer and Executive Vice
President:
Weekly Reader Corporation



/s/ Richard Nota                                             Date: July 29, 2004
-----------------------------------------------------             --------------
Richard Nota
Senior Vice President-Finance and Principal Financial
Officer
WRC Media Inc. and Weekly Reader Corporation