<PAGE>

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

                                  FORM 10-QSB

                                  (Mark One)

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

                 For the quarterly period ended March 31, 2001

                                      OR

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

                  For the transition period from ____ to ____

                        Commission file number 0-29615

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

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

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

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

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

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


         Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports); and (2) has been subject to such
filing requirements for the past 90 days.

[X] Yes   [_] No

         There were 15,451,564 shares outstanding of the Registrant's common
stock, $0.001 par value, as of May 11, 2001.
<PAGE>

                       COMPASS KNOWLEDGE HOLDINGS, INC.
                                  FORM 10-QSB
                     For the Quarter ended March 31, 2001

PART I - Financial Information

Item 1  Financial Statements

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

        Consolidated  Statements of Operations  for the Three Months ended
        March 31, 2001 and 2000                                               4

        Consolidated Statements of Cash Flows for the Three
        Months Ended March 31, 2001 and 2000                                  5

        Notes to Financial Statements                                         6

Item 2  Management's Discussion and Analysis of Results
        of Operations and Financial Condition                                 6

PART II - Other Information

Item 2  Changes in Securities                                                 15

Item 6  Exhibits and Reports on Form 8-K                                      16

        Signatures                                                            16

                                       2
<PAGE>

                         PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

               COMPASS KNOWLEDGE HOLDINGS, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                  AS OF MARCH 31, 2001 AND DECEMBER 31, 2000

<TABLE>
<CAPTION>
                                                      March 31, 2001  December 31, 2000
                                                      --------------  -----------------
<S>                                                   <C>            <C>
                                 ASSETS
                                 ------
CURRENT ASSETS:
  Cash                                                 $   908,823    $   840,785
  Accounts Receivable                                      219,649         45,074
 Prepaid expenses                                          229,291        108,737
 Other assets, net                                         507,745        446,904

                                                       -----------   ------------
  Total current assets                                   1,865,508      1,441,500

PROPERTY AND EQUIPMENT, net                                314,972        280,413

GOODWILL, NET                                            3,200,878      3,278,948

OTHER ASSETS, net                                          793,661        704,616

                                                       -----------   ------------
  Total assets                                         $ 6,175,019   $  5,705,477
                                                       ===========   ============

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

 Accounts payable and accrued expenses                 $   483,801   $    371,518
 Deferred student fees                                     869,456        467,032
 Note payable-current portion (Note 6)                      75,000              -
                                                       -----------   ------------
  Total current liabilities                              1,428,257        838,550
                                                       -----------   ------------

NOTE PAYABLE-LONG TERM PORTION (Note 6)                     50,000              -
                                                       -----------  -------------
  Total liabilities                                      1,478,257        838,550

STOCKHOLDERS' EQUITY:
 Preferred stock, 5,000,000 shares authorized,           1,667,026      1,667,026
  2,000 shares issued and outstanding
 Common stock, $0.001 par value; 50,000,000                 15,366         14,875
  shares authorized, 15,365,938 and 14,875,000 shares
  issued and outstanding at March 31, 2001 and
  December 31, 2000 respectively
 Additional paid-in-capital                              4,816,666      4,571,688
 Unearned compensation                                      (5,764)        (7,574)
 Accumulated deficit                                    (1,796,532)    (1,379,088)

                                                       -----------   ------------
  Total stockholders' equity                             4,696,762      4,866,927
                                                       -----------   ------------
  Total liabilities and stockholders'equity            $ 6,175,019   $  5,705,477
                                                       ===========   ============
</TABLE>

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

                                       3
<PAGE>

               COMPASS KNOWLEDGE HOLDINGS, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
              FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000

<TABLE>
<CAPTION>
                                                          For the Three Months Ended March 31,
                                                          ------------------------------------
                                                                 2001             2000
                                                                 ----             ----
<S>                                                          <C>             <C>
TOTAL STUDENT FEE REVENUE
  Net student fee revenue from degree programs               $    657,746    $    579,234
  Gross student fee revenue from non-degree programs              259,248         112,490
  Gross revenue from subscriptions and consulting services        377,610               -
  Other revenue                                                     4,760           2,674
                                                             ------------    ------------
                      Total revenue                             1,299,364         694,398

INSTRUCTION COSTS AND SERVICES                                    456,860         196,906
                                                             ------------    ------------
                        Gross profit                              842,504         497,492
                                                             ------------    ------------

OPERATING EXPENSES
  Selling and promotional                                         150,296          89,673
  General and administrative                                    1,081,266         457,717
                                                             ------------    ------------
                        Total operating expenses                1,231,562         547,390
                                                             ------------    ------------

LOSS FROM OPERATIONS                                             (389,058)        (49,898)
                                                             ------------    ------------

OTHER INCOME (EXPENSE)
  Interest income                                                   6,614          93,289
  Interest expense                                                     -             (155)
                        Total other income                          6,614          93,134
                                                             ------------    ------------

(LOSS) INCOME BEFORE PREFERRED DIVIDENDS                         (382,444)         43,236

LESS: PREFERRED STOCK DIVIDENDS                                   (35,000)        (39,822)
                                                             ------------    ------------

NET (LOSS) INCOME AVAILABLE TO COMMON STOCKHOLDERS           $   (417,444)   $      3,414
                                                             ============    ============

EARNINGS PER SHARE
  Basic                                                      $     (0.028)   $      0.000
                                                             ============    ============
  Diluted                                                    $     (0.028)   $      0.000
                                                             ============    ============

WEIGHTED AVERAGE SHARES OUTSTANDING
  Basic                                                        14,908,132      14,750,000
                                                             ============    ============
  Diluted                                                      14,908,132      15,648,720
                                                             ============    ============
</TABLE>

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

                                       4
<PAGE>

               COMPASS KNOWLEDGE HOLDINGS, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
               FOR THE THREE MONTHS ENDED MARCH 31, 2001 & 2000

<TABLE>
<CAPTION>
                                                                         2001             2000
                                                                         ----             ----
<S>                                                                   <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net (loss) income                                                    $  (382,444)   $    43,236
 Adjustments to reconcile net (loss) income to net cash
     provided by (used in) operating activities-
         Depreciation and amortization                                    303,124         56,330
         Amortization of unearned compensation                              1,810          4,467

         Decrease (increase) in operating assets and liabilities-
            Accounts receivable                                          (174,575)       443,949
            Prepaid expenses                                             (125,000)        19,668
            Other current assets                                           10,176         (5,209)
            Other long-term assets                                       (358,895)      (198,093)
            Accounts payable and accrued expenses                         112,283        (53,318)
            Deferred revenue                                              402,425       (218,983)
            Due to related parties                                              -       (301,220)

                                                                      -----------    -----------
                Net cash used in operating activities                    (211,097)      (209,173)
                                                                      -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
 Purchases of property and equipment                                      (56,334)       (25,457)

                                                                      -----------    -----------
                Net cash used in investing activities                     (56,334)       (25,457)
                                                                      -----------    -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of common stock and warrants                     245,469              -
  Proceeds from issuance of note payable (Note 6)                         125,000
  Payment of notes payable to stockholders                                      -        (12,510)
  Payment of preferred stock dividends                                    (35,000)       (57,321)
                                                                      -----------    -----------
                Net cash provided by (used in) financing activities       335,469        (69,831)
                                                                      -----------    -----------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                       68,038       (304,461)

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

CASH AND CASH EQUIVALENTS, end of period                              $   908,823    $ 4,476,572
                                                                      ===========    ===========
</TABLE>


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

                                       5
<PAGE>

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

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

        The results of operations for the three months ended March 31, 2001 are
        not necessarily indicative of results to be expected for the entire
        year.

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

   2.   As of March 31, 2001 there were 2,000 shares of Preferred Stock
        outstanding, convertible into 875,000 common shares. Also, there were
        options to purchase 2,021,200 shares of common stock and warrants to
        purchase 245,469 shares of common stock outstanding at March 31, 2001.
        The impact of the assumed conversion of the preferred stock, options and
        warrants were not included in the computation of diluted earnings per
        share because the effect of the assumed conversion had an antidilutive
        effect.

   3.   During the quarter ended March 31, 2001, the Company granted 59,000
        options to directors and employees of the Company to purchase common
        stock of the Company at an exercise price of $0.45 with respect to
        34,000 of such options and $0.55 with regard to the balance which will
        be accounted for under APB 25. Accordingly, no compensation expense will
        be recognized in the statement of operations, since the option price was
        greater or equal to the market value of the Company's common stock at
        the time of grant.

   4.   In accordance with Statement of Financial Accounting Standards No. 128,
        "Earnings Per Share," the Company has reported basic earnings per share
        and diluted earnings per share. The diluted weighted average common
        shares outstanding include no impact of the assumed exercise of
        2,021,200 stock options with an exercise price of $1.14 or 245,469
        warrants with an exercise price of $0.50 per share because the effect of
        the assumed conversion had an antidilutive effect.

   5.   No provision for income taxes has been recorded for the period ending
        March 31, 2001, as the benefit resulting from the operating loss has
        been entirely offset by a valuation allowance due to the uncertainty
        surrounding the Company's ability to realize the deferred tax assets in
        the future.

   6.   On March 30, 2001, the Company entered into a loan agreement (the "Loan
        Agreement") with Cloverleaf Capital Advisors, LLC ("Cloverleaf") whereby
        Cloverleaf agreed to loan the Company $125,000 (the "Loan"). Pursuant to
        the promissory note (the "Note") issued by the Company in connection
        with the Loan, the Company agreed to repay Cloverleaf the principal sum
        loaned plus interest accruing at the rate of 12% per annum in three
        payments as follows: $25,000 plus accrued interest on or before June 1,
        2001, $50,000 plus accrued interest on or before December 1, 2001 and
        $50,000 plus accrued interest on or before June 1, 2002. As of the
        period ending March 31, 2001, Cloverleaf had loaned $100,000. As of
        March 31, 2001 the Company had recorded an accounts receivable due from
        Cloverleaf in the amount of $25,000, $75,000 has been classified as a
        current liability and $50,000 as a long-term liability.

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

The following discussion should be read in conjunction with the more detailed
information included in our consolidated financial statements and accompanying
notes, as well as the other financial

                                       6
<PAGE>

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

  OVERVIEW

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

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

  RESULTS OF OPERATIONS

     Set forth below is certain of our selected consolidated financial and
  operating information for the three months ended March 31, 2001 and the
  comparable period in 2000. The selected consolidated financial information is
  derived from our consolidated financial statements for such periods. The
  information set forth below should be read in conjunction with Management's
  Discussion and Analysis of Financial Conditions and Results of Operations and
  our Consolidated Financial Statements and Notes thereto.

                                       7
<PAGE>

<TABLE>
<CAPTION>
                                                                                      Three months ended
                                                                                           March 31
                                                                                -----------------------------

                                                                                      2001              2000
                                                                                      ----              ----
          <S>                                                                   <C>               <C>
          Total revenue                                                         $  1,299,364      $   694,398
          Gross Profit                                                          $    842,504      $   497,492
          Net (Loss)/ Income                                                    $   (382,444)     $    43,236
          Earnings per share, basic                                             $     (0.028)     $     0.000
          Earnings per share, diluted                                           $     (0.028)     $     0.000

          Weighted average shares outstanding
                                  Basic                                           14,908,132       14,750,000
                                  Diluted                                         14,908,132       15,648,720

                                                                                At March 31, 2001
                                                                                -----------------

          Working Capital                                                       $    437,251
          Total Current Assets                                                  $  1,845,508
          Total Property and Equipment, net                                     $    314,972
          Total Current Liabilities                                             $  1,428,257
          Stockholders' Equity                                                  $  4,696,762
</TABLE>

THREE MONTHS ENDED MARCH 31, 2001 COMPARED TO THREE MONTHS ENDED MARCH 31, 2000

     Total revenues increased by $604,966 to $1,299,364 for the three months
ended March 31, 2001 from $694,398 for the comparable 2000 period, representing
an increase of 87.1%. Revenues increased in all three of our principal sources
of revenue: Degree, Non-degree and Subscriptions and Consulting services. The
majority of the increase is from our subsidiary, Educators' Learning Network,
Inc., formerly known as Jamita ("eLNet"), which was acquired in August 2000, and
contributed $330,559 in revenues for the three months ended March 31, 2001. Non-
degree program revenue also increased, growing by $146,758, or 130%, for the
three months ended March 31, 2001 to $259,248 from $112,490 in the comparable
2000 period. The revenue increases from non-degree programs are due to strong
growth in existing offerings combined with the revenues from three new programs
launched subsequent to the comparable 2000 period. Degree program revenue
increased by 13.6%, or $78,512, for the three months ended March 31, 2001 to
$657,746 from $579,234 in the comparable 2000 period. Degree program revenue
growth came from the combination of a new program launched during the third
quarter of 2000 and enrollment growth from an existing program, partially offset
by lower enrollments in another existing program.

     Gross profit increased by 69.4%, to $842,504 for the three months ended
March 31, 2001 from $497,492 for the comparable 2000 period. The $345,012
increase in gross profit is primarily due to $156,489 in gross profit
contribution from eLNet, combined with an $119,857 increase in gross profit
contribution from non-degree programs. Our gross profit margin declined to 64.8%
for the three months ended March 31, 2001 from 71.6% in the comparable 2000
period, primarily reflecting a higher proportion of revenues derived from lower
margin products such as new degree programs, existing non-degree programs and
our eLNet business.

                                       8
<PAGE>

     Operating expenses increased by $684,172 to $1,231,471 for the three months
ended March 31, 2001 from $547,390 in the comparable 2000 period, representing
an increase of 125%. The increase is primarily due to the growth in our
personnel, from 23 full-time employees on March 31, 2000 to 40 full time
employees on March 31, 2001, which resulted in a significant increase in payroll
and other employee related costs as well as higher infrastructure related
expenses. The increases in personnel and infrastructure costs are directly
related to administering the new programs launched during the past twelve months
as well as developing new programs and partnerships. We believe our current team
is adequate to support our planned growth for the remainder of this fiscal
period. Travel expenses, amortization of goodwill, primarily related to our
August 2000 acquisition of eLNet and Rutherford Learning Group, Inc., marketing
expenses, and professional fees increased over the year ago period, reflecting
our aggressive efforts to grow our business.

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

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

     As a result of the above changes, net income before dividends declined by
$425,680, resulting in a net loss before dividends of $382,444 for the three
months ended March 31, 2001 compared with net income before dividends of $43,236
in the comparable 2000 period.

LIQUIDITY AND CAPITAL RESOURCES

     Our cash amounted to $908,823 at March 31, 2001, compared to $840,785 at
December 31, 2000. The net cash used in our operations was $211,097 for the
three months ended March 31, 2001 compared to operations using $209,173 in the
comparable 2000 period. Net cash used in operating activities consisted
primarily of investing in direct marketing activities, in the amount of $181,171
and repurposing, converting and developing content in the amount of $177,285.

     We used $56,334 from investing activities during the three months ended
March 31, 2001 compared with $25,457 in the comparable 2000 period to purchase
computer and other office equipment due to the increase in personnel.

     We received $335,469 in financing activities for the three months ended
March 31, 2001 compared with a use of $69,831 in the comparable 2000 period. The
increase is primarily due to our raising $245,469 through a board authorized
private placement of our common stock and warrants to purchase our common stock
pursuant to an exemption from registration under The Securities Act of 1933. We
first offered these securities for sale to certain accredited investors on
February 26, 2001, and through March 31, 2001 have sold 490,938 shares of
restricted common stock at $0.50 per share and 245,469 warrants at an exercise
price of $0.50 per share. We expect to close this private offering during the
second quarter of 2001.

     Based on our current cash position as well as our projected cash flows for
fiscal 2001, including the attendant risks and contingencies associated with the
expected realization of such cash flows, we believe that our cash position will
be sufficient to fund our business operations. However, we recognize there may
be limitations on our ability to continue to develop new product offerings,
expand our infrastructure and acquire new companies and businesses for which
significant amounts of cash would be required to consummate these transactions
without obtaining an infusion of additional capital. Further, to the extent that
recently developed program offerings, as well as offerings currently under
development or planned, do not prove financially viable within a reasonable
period of time, we intend to terminate the offering and/or production of such
programs. Further, to the extent that we experience a material adverse cash
position resulting from employee

                                       9
<PAGE>

and other infrastructure costs related to termination of such programs, it is
our intention to take all appropriate and reasonably necessary measures to
immediately eliminate all unnecessary employee and infrastructure costs and
expenses related to such terminated programs.

SEASONALITY

     We typically offer courses during all three semesters (fall-August through
December; spring-December through April; and summer-May through August) of the
school year. The summer semester typically experiences lower enrollment of new
students as well as an increase in the number of students taking a "break" from
their programs.

RISK FACTORS

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

A Failure to Manage Our Growth Could Adversely Affect Our Business

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

We might not be able to integrate our acquisitions successfully or to manage any
addition products and services resulting from such acquisitions. We might
experience slower than expected integration efforts. In addition, our
acquisitions of Jamita and the Rutherford Learning Group in August of 2000
involve products or services in areas in which we have not previously operated.
These acquisitions as well as similar types of acquisition or development will
require our management to develop expertise in new areas and to attract new
customers, both of which may be difficult to do.

We Have Restructured Our Operations

Recently, we have restructured our operations and intend to primarily
concentrate on our core competencies to provide, among other things, specialized
expertise in content repurposing and development and marketing in our primary
market niches and by adding certain additional vertical markets and product
offerings. Management will continue to monitor these adjustments in fiscal 2001
and will make additional adjustments within our organization, if necessary. The
transition issues associated with this restructuring may recur, and our revenue
growth rates may decline and expenses may increase in future quarters.

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

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

                                      10
<PAGE>

 .    expenditures of cash which may reduce our cash reserves to critical levels,
 .    difficulty of assimilating the operations and personnel of the targeted
     businesses,
 .    potential disruption of our ongoing business,
 .    distraction of management from our core business,
 .    inability of management to maximize our financial and strategic position,
 .    increase in general and administrative expenses,
 .    expansion of management information systems,
 .    need for greater facilities requirements,
 .    increase in overall headcount,
 .    maintenance of uniform standards, controls, procedures and policies, and
 .    impairment of relationships with employees and clients as a result of any
     integration of new management personnel.

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

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

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

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

Some of Our Products Are Less Profitable Than Others

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

Our Stock Price May Continue To Be Volatile

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

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

                                      11
<PAGE>

 .    regulatory changes or interpretations.

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

The Market For Distance Learning In Higher Education Continues To Develop

The market for distance learning continues to develop, but still remains only a
small portion of the overall higher education market. Our success will depend
upon colleges, universities, associations and companies continuing to implement
distance learning programs. We presently have entered into contracts with only
four universities. Any failure of online learning to gain continuing market
acceptance would have a material adverse effect on our business and financial
results.

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

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

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

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

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

Our Market Is Characterized By Rapid Technological Change

The market for our products and services is characterized by rapid technological
change, changes in customer demands and evolving industry standards. The
introduction of services embodying new technologies and the emergence of new
industry standards can render existing services obsolete and unmarketable. To
succeed, we must address the increasingly sophisticated needs of higher
education by improving our software and services to keep pace with technological
developments, emerging industry standards and customer requirements. Presently,
we purchase our technology from third party vendors as we have no proprietary
technology. While we continue to strive to upgrade our technology and seek to
acquire or partner with companies with state of the art technology, we may not
be competitively

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<PAGE>

successful in the future.

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

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

    .   our ability to attract and retain colleges, universities, associations
        and companies,
    .   our ability to successfully implement our proposed distributed learning
        programs,
    .   the amount and timing of operating costs and capital expenditures
        relating to expansion of our business,
    .   our introduction of new or enhanced services and products, and similar
        introductions by our competitors,
    .   our ability to upgrade and develop our systems and infrastructure,
    .   our ability to attract, motivate and retain personnel, and
    .   technical difficulties in delivering our services.

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

History of Losses

Prior to expanding our infrastructure and business in fiscal year 2000 the
Company was profitable, but during the fiscal year 2000 and for the first
quarter of 2001 the Company has been unable to generate revenue sufficient to
offset these additional expenses and charges. Consequently, the Company
sustained substantial losses in 2000 and additional losses for the quarter
ending March 31, 2001. Net losses for the twelve (12) months ended December 31,
2000 were approximately $1,154,511 ($1,299,335 after preferred dividends) or
$.087 per share and net losses for the three (3) months ending March 31, 2001
were approximately $382,353 ($417,353 after preferred dividends) or $0.028 per
share. The loss is primarily due to the growth in our personnel, from 17 full-
time employees on December 31, 1999 to 40 full time employees as of March 31,
2001, which resulted in a significant increase in payroll and other employee
related costs as well as higher infrastructure related expenses. The increases
in personnel and infrastructure costs are directly related to administering the
new programs launched during the past twelve months as well as developing new
programs and partnerships. We believe our current team is adequate to support
our planned growth for the remainder of this fiscal period. Travel expenses,
amortization of goodwill, primarily related to our August 2000 acquisition of
eLNet and Rutherford Learning Group, Inc., marketing expenses, and professional
fees increased over the year ago period, reflecting our aggressive efforts to
grow our business. There can be no assurance that the Company will ever achieve
the level of revenues needed to be profitable in the future or, if profitability
is achieved, that it will be sustained.

Future Capital Needs; Potential Need for Additional Financing

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

Considering our current cash position as well as our projected cash flows for
fiscal 2001 including the

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<PAGE>

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

Uncertainty With Respect To Technology

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

Early Stage Product Development

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

Limited Marketing and Sales Capability

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

Authorization and Discretionary Issuance of Preferred Stock

The Company's Articles of Incorporation authorize the issuance of "blank check"
preferred stock with

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<PAGE>

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

Absence of Dividends

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

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

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

Private Offering Exemption

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

Dependence Upon Management

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

PART II - OTHER INFORMATION

ITEM 2 - CHANGES IN SECURITIES

During the quarter ended March 31, 2001, we sold approximately 10 Units for
$245,469 consisting of 490,938 shares of our restricted common stock and 245,469
warrants to purchase our common stock for $0.50 per share at anytime within
three years of the date of sale to various officers, directors and other
"Accredited Investors." The Company paid no commissions with respect to these
transactions.

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<PAGE>

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

    Item 6 - Exhibits and Reports on Form 8-K

    (a)  List of Exhibits

         None.

    (b)  Reports on Form 8-K

         None.

                                  SIGNATURES

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

                                          COMPASS KNOWLEDGE HOLDINGS, INC.


Date:    May 14, 2001                      By: /s/ ROGERS W. KIRVEN, JR.
                                           -----------------------------
                                           Chief Executive Officer and Director

Date:    May 14, 2001                      By: /s/ ANTHONY RUBEN
                                           ---------------------
                                           Chief Financial Officer and Treasurer

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