##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


Form 10-K


|           |  |                                                                                                               
|---------- |  | --------------------------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                                               
|þ          |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934                      
|           |  | For the fiscal year ended December 31, 2005                                                                   
|Or        
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
|           |  | For the transition period
    from           to                                                               

Commission File Number:
333-109381


Haights Cross Communications, Inc.


(Exact Name of Registrant as Specified in its Charter)


|                                                                                           |  |                       
|------------------------------------------------------------------------------------------ |  | ----------------------
|Delaware                                                                                   |  | 13-4087398            
|(State or Other Jurisdiction of                                                            |  | (I.R.S. Employer      
|Incorporation)                                                                             |  | Identification Number)
|                                                                                          
|10 New King Street, Suite 102
    White Plains, NY(Address of Principal Executive Offices) |  | 10604(Zip Code)       

Registrants telephone number, including area code:


(914) 289-9400


Securities registered pursuant to Section 12(b) of the
Act:


None


Securities registered pursuant to Section 12(g) of the
Act:


None


o þ


þ o


þ o


S-K 10-K 10-K. þ


12b-2


o o þ


12b-2 o þ






DOCUMENTS INCORPORATED BY REFERENCE












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##### 










TABLE OF CONTENTS


|                                                                              |  |                                                                                                                         |     |  |     | 
|----------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------- | --- |  | --- | 
|Description                                                                   |  | Page No.                                                                                                                |    
|                                                                              |  |                                                                                                                         |    
|Part I                                                                       
|Item 1.                                                                       |  | Business                                                                                                                |     |  | 3   | 
|Item 1A                                                                       |  | Risk Factors                                                                                                            |     |  | 16  | 
|Item 1B.                                                                      |  | Unresolved Staff Comments                                                                                               |     |  | 24  | 
|Item 2.                                                                       |  | Properties                                                                                                              |     |  | 24  | 
|Item 3.                                                                       |  | Legal Proceedings                                                                                                       |     |  | 24  | 
|Item 4.                                                                       |  | Submission of Matters to a Vote of Security
    Holders                                                                 |     |  | 24  | 
|                                                                             
|Part II                                                                      
|Item 5.                                                                       |  | Market for Registrants Common Equity
    and Related Stockholder Matters And Issuer Purchases of Equity
    Securities |     |  | 25  | 
|Item 6.                                                                       |  | Selected Financial Data                                                                                                 |     |  | 26  | 
|Item 7.                                                                       |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                               |     |  | 30  | 
|Item 7A.                                                                      |  | Quantitative and Qualitative Disclosures
    about Market Risk                                                          |     |  | 52  | 
|Item 8.                                                                       |  | Financial Statements and Supplementary
    Data                                                                         |     |  | 52  | 
|Item 9.                                                                       |  | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure                                |     |  | 93  | 
|Item 9A.                                                                      |  | Controls and Procedures                                                                                                 |     |  | 93  | 
|Item 9B.                                                                      |  | Other Information                                                                                                       |     |  | 94  | 
|                                                                             
|Part III                                                                     
|Item 10.                                                                      |  | Directors and Executive Officers of the
    Registrant                                                                  |     |  | 94  | 
|Item 11.                                                                      |  | Executive Compensation                                                                                                  |     |  | 98  | 
|Item 12.                                                                      |  | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters                      |     |  | 102 | 
|Item 13.                                                                      |  | Certain Relationships and Related
    Transactions                                                                      |     |  | 103 | 
|Item 14.                                                                      |  | Principal Accounting Fees and Services                                                                                  |     |  | 104 | 
|                                                                             
|Part IV                                                                      
|Item 15.                                                                      |  | Exhibits, Financial Statements and
    Schedules                                                                        |     |  | 105 | 
|Signatures                                                                    |  |                                                                                                                         | 110 | 
|Exhibit List                                                                  |  |                                                                                                                         | 111 | 
|EX-12.1:STATEMENT REGARDING COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
|EX-21.1: SUBSIDIARIES                                                        
|EX-23.1: CONSENT OF ERNST & YOUNG LLP                                        
|EX-31.1: CERTIFICATION                                                       
|EX-31.2: CERTIFICATION                                                       
|EX-32.1: CERTIFICATION                                                       
|EX-32.2: CERTIFICATION                                                       



2



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##### Table of Contents






PART I







|        |          
|------- | ---------
|Item 1. | Business.

As used herein, unless otherwise indicated, the terms
we, our, ours,
us and our company refer, collectively,
to Haights Cross Communications, Inc. and its consolidated
subsidiaries, including our wholly owned subsidiary Haights
Cross Operating Company and its consolidated subsidiaries,
references to Haights Cross Communications refer to
Haights Cross Communications, Inc. and references to
Haights Cross refer to Haights Cross Operating
Company.


Company Overview






| |   |               
| | - | --------------
| |  | K-12 Education



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | K-12 Supplemental Education: We publish supplemental
    reading materials for the pre-kindergarten through eighth grade,
    or PreK-8, marketed under the well-recognized imprints
    Sundance Publishingand Newbridge Educational
    Publishing, and we also offer non-proprietary supplemental
    reading and literature products for the K-12 market. During
    2005, we sold the assets of our Chelsea Houseimprint,
    which results had previously been included within the K-12
    Supplemental Education segment. These results have been
    reclassified as a discontinued operation for all periods
    presented.
|
| |  | Test-prep and Intervention: We publish state-specific
    test preparation materials for K-12 competency tests under our
    well-recognized imprints and brands such as Triumph Learning,
    Coachand Buckle Down. We also publish skills
    assessment products and intervention materials for struggling
    math and reading students under the widely known Options
    Publishingimprint.                                                                                                                                                                                                                                    



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Library: We publish unabridged audiobooks for adults and
    children, under the Recorded Booksimprint and market
    these titles, as well as selected non-proprietary unabridged
    audiobooks, primarily to public libraries and schools.                                                                                                                                                                                                                                                                                
|
| |  | Medical Education: We publish continuing medical
    education products, or CME products primarily in audio format,
    for doctors and other health care professionals under the
    Oakstone Publishingimprint. We also produce Medical
    Board Review courses under our CMEinfoimprint, in audio
    and video format. We also publish personal wellness information
    products for companies seeking to improve employee awareness of
    health and wellness issues under the Top Healthand
    Personal Bestbrands.





3



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##### Table of Contents







Business Segments


10-K).




| |                            
| | ---------------------------
| | K-12 Supplemental Education

Sundance Publishing Newbridge Educational
Publishing.


Sundance Publishing/ Newbridge Educational Publishing. Sundance Sundance Newbridge Sundance Newbridge


4



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##### Table of Contents



Sundance/ Newbridge


|                                                                                                                                            |                 |              |            |                                                                                                                                                                                                               |                                                                          
|------------------------------------------------------------------------------------------------------------------------------------------- | --------------- | ------------ | ---------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------
|Product Line                                                                                                                                |                 | Grades       |            | Description                                                                                                                                                                                                  
|                                                                                                                                            |                 |              |            |                                                                                                                                                                                                              
|Newbridge Discovery Links  
    Science  Social Studies  Intermediate Plus                                                              |                 | K-5
    th   |            | Non-fiction, guided reading programs and teaching resources,
    containing real-life compelling photographs and supporting text
    designed to engage students.                                            
|Sundance Alpha Kids                                                                                                                         |                 | K-2
    nd   |            | Alphabet letter driven, guided readers, of graduating difficulty
    to support small group instruction.                                                                                                     
|Newbridge Big Books   Early
    Science  Early Math  Early Social Studies  Ranger Rick Science Spectacular  Thinking Like a Scientist |                 | K-6
    th   |            | Shared reading program, teacher directs group reading with big
    books (16 x 20), students engage in follow-up
    reading in student versions (5 x 7) of the big books.                               
|                                                                                                                                            |  Reading Quest |              | 6-8
    th |                                                                                                                                                                                                               | Leveled content-area reading for teaching social studies and
    science.
|Sundance Second Chance Readers                                                                                                              |                 | 2nd-8
    th |            | High-interest literature titles designed to give reluctant
    readers the support and enjoyment they need to build basic
    reading, writing and speaking skills.                                          
|Sundance Reading PowerWorks                                                                                                                 |                 | 1st-2
    nd |            | Standards-based, balanced literacy-theme units in science,
    social studies and math, with shared, guided and independent
    reading levels for students of differing abilities in the same
    classroom.

Sundance Sundance LEAP (Literature Enrichment
Activities Program), Chapter-by-Chapter, LIFT (Literature is For
Thinking) Novel Ideas.


Sundance/ Newbridge Sundance/ Newbridge Sundance/
Newbridge




| |                           
| | --------------------------
| | Test-prep and Intervention

Triumph Learning Options Publishing Coach Buckle Down


Triumph Learning/ Buckle Down. Triumph
Learning Buckle Down Triumph Learning


5



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##### Table of Contents



Triumph Learning Buckle Down


|             |  |        |           |  |             |                                                                                                                                                                                                                                                                      
|------------ |  | ------ | --------- |  | ----------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Product Line |  | Grades |           |  | Description
|             |  |        |           |  |            
|Coach        |  |        | K-12th    |  |             | Over 700 state-specific test-prep workbooks covering
    24 states; over 60 software titles covering 7 states;
    over 80 nationally standardized test preparation books; over
    100 complementary skills books; collections of
    state-specific practice tests.
|Buckle Down  |  |        | 3rd-12 th |  |             | Approximately 350 state-specific test-prep workbooks
    covering 17 states; over 40 nationally standardized
    test preparation books; collections of state-specific practice
    tests.                                                                           

Triumph Learning Buckle Down Triumph
Learnings Coach Buckle Down


Triumph Learning Buckle Down Coach Buckle Down


Options Publishing. Options Publishing Options Publishings


|                                                                                                                                                |  |              |  |                                                                                                                                                                                                                        
|----------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Product Line                                                                                                                                    |  | Grades       |  | Description                                                                                                                                                                                                            
|                                                                                                                                                |  |              |  |                                                                                                                                                                                                                        
|Comprehensive Reading Assessment Comprehensive Math
    Assessment Comprehensive Science Assessment Comprehensive Social
    Studies Assessment |  | K-8
    th   |  | Comprehensive assessment of students skills in the
    specific subject, extensive exercises and lessons to improve
    performance in one book.                                                                      
|Best Practices in Reading                                                                                                                       |  | 1st-8
    th |  | Each book uses research-based strategies, modeling in early
    lessons, and skills development to help students learn to become
    independent readers and thinkers.                                                 
|Intervention Packages  Math or Reading                                                                                                         |  | K-8
    th   |  | Programs for after school, summer school and special programs,
    ability to diagnose students current functioning levels,
    instruction for critical skills and strategies, and extensive
    additional practice.

Options Publishing


6



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##### Table of Contents



Options Options
Publishings Options
Publishing Options




| |        
| | -------
| | Library

Recorded Books Recorded Books


Recorded Books. Recorded Books Recorded
Books Recorded Books Recorded Books Recorded Books Recorded Books


Recorded Books Recorded Books Recorded Books


Recorded Books Recorded Books Recorded Books Audio Adventures Landmark


Recorded Books Recorded Books


7



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| |                  
| | -----------------
| | Medical Education

Oakstone Medical Oakstone Wellness info Oakstone Medical Scott Publishing,
Inc. Oakstone
Wellness Oakstone Medical Oakstone Wellness


Oakstone Medical Publishing. Oakstone Medical Practical Reviews 30-year Oakstone Medical Oakstone Medical Practical Reviews Practical Reviews Practical Reviews Practical Reviews Practical Reviews Neurology Practical Reviews Practical Reviews Oakstone Medical


Oakstone Medical


Oakstone Medical CMEinfo CMEinfo CMEinfo Practical Reviews CMEinfo brands, Oakstone Medical


Oakstone Wellness Publishing. Oakstone Wellness Top Health Oakstone
Wellness Personal Best


Oakstone Medical 30-year


8



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Seasonality


10-K.)


Customers




K-12 Supplemental Education. Sundance Newbridge


Test-prep and Intervention. Triumph Learning, Buckle Down Options Publishing


Library. Recorded Books Recorded Books


Medical Education. Oakstone Medical


Product and Content Development






Identification of New Product Lines.


9



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Development of New Titles. Recorded Books Oakstone Medical Oakstone
Wellness






| |                            
| | ---------------------------
| | K-12 Supplemental Education

Sundance/ Newbridge


Sundance/ Newbridge Sundance/ Newbridge


Sundance/ Newbridge Sundance/ Newbridge


Sundance/ Newbridge


Sundance Newbridge Sundance/ Newbridge


10



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##### Table of Contents





| |                           
| | --------------------------
| | Test-Prep and Intervention

Triumph Learnings Triumph Learning up-to Triumph Learning Triumph Learning


Triumph Learning Triumph Learning Triumph Learning Triumph
Learnings


Buckle
Down Buckle Down


Options Publishing Options Publishing Options
Publishing




| |        
| | -------
| | Library

Recorded Books Recorded Books Recorded Books Recorded Books Recorded Books Recorded Books


11



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Recorded Books Recorded Books


Recorded Books




| |        
| | -------
| | Medical

Oakstone Oakstone Oakstone Oakstone Oakstone Oakstone Oakstone Medicals


Oakstone Top Health, Personal Best Best of Health


Sales and Marketing




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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Build and Leverage a Knowledgeable and Committed Sales
    Force. We believe our sales personnel are deeply
    knowledgeable about and committed to the professional
    disciplines they serve. We emphasize the recruitment of
    full-time inside sales representatives, in particular,
    experienced education professionals and senior sales
    representatives and sales managers with a record of
    accomplishment and established networks of customers. Our focus
    on full-time inside sales representatives, rather than the use
    of independent sales agents, who represent multiple publishers,
    gives us a dedicated sales force with deeper customer
    relationships and more focused sales responsibilities than those
    of many of our competitors. These factors have allowed us to
    achieve greater market penetration with our highly recognizable
    brands and products.
|
| |  | Capitalize on our Extensive Expertise in Direct
    Marketing. We make extensive use of catalog mailings,
    product samplings, continuous order plans and various other
    forms of direct mail campaigns. We have built and maintain
    electronic databases of current, former and prospective
    customers in each of our segments. We carefully track customer
    purchasing history, contact data, feedback and current
    purchasing information. We use these databases to support our
    direct and indirect sales campaigns and regard this data as
    highly valuable and proprietary. We are deeply committed to
    building our direct marketing capabilities which will help us in
    targeting current and new customers with new product and content
    offerings.                                                                                                                        
|
| |  | Focus on Targeted, Consultative Solutions to Differentiate Us
    from Competition. We work with our customer base to provide
    targeted, customized solutions to their special classroom
    material needs, often leading to sales in excess of
    $1 million. This consultative sales process also provides
    valuable input to our product development effort, while
    providing one-stop-shopping for our customers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   







| |                            
| | ---------------------------
| | K-12 Supplemental Education

Sundance/ Newbridge Sundance/ Newbridge


Sundance/ Newbridge Sundance Newbridge
Educational




| |                           
| | --------------------------
| | Test-prep and Intervention

Triumph Learning Triumph Learning Triumph Learning Triumph Learning


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Triumph
Learning


Buckle Down Buckle Down Triumph Learning Buckle Down Options
Publishing


Options Publishing Options Publishing Options Publishing Options
Publishing Options Publishing Options Publishing




| |        
| | -------
| | Library

Recorded Books Recorded Books Recorded Books


Recorded Books Recorded Books


Recorded Books Recorded Books Recorded Books




| |                  
| | -----------------
| | Medical Education

Oakstone Oakstone up-to Oakstone Oakstone e-mail e-mail Oakstone


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Oakstone. Oakstone


Competition




K-12 Supplemental Education. Sundance/ Newbridge


Test-prep and Intervention. Triumph Learning Buckle Down Triumph Learning Buckle
Downs Options
Publishing


Library. Recorded Books Recorded Books Recorded Books


Medical Education. Oakstone Practical Reviews Oakstones


Production and Fulfillment






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Intellectual Property






Environmental Regulation




Employees









|         |              
|-------- | -------------
|Item 1A. | Risk Factors.

This annual report on
Form 10-K contains
forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of
the Securities Exchange Act of 1934. Forward-looking statements
include statements concerning our plans, objectives, goals,
strategies, future events, future sales or performance, capital
expenditures, financing needs, plans or intentions relating to
acquisitions, business trends and other information that is not
historical information. When used in this annual report on
Form 10-K, the
words estimates, expects,
anticipates, projects,
plans, intends, believes,
forecasts and variations of such words or similar
expressions are intended to identify forward-looking statements.
All forward-looking statements, including, without limitation,
managements examination of historical operating trends,
are based upon our current expectations and various assumptions.
Our expectations, beliefs and projections are expressed in good
faith and we believe there is a reasonable basis for them.
However, there can be no assurance that managements
expectations, beliefs and projections will result or be
achieved.


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Risks Related to Our Business




| |                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our substantial leverage and indebtedness may adversely
    affect our ability to operate our business and place us at a
    competitive disadvantage in our industry.

10-K.)








| |   |                                                                                                                                                                                                                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we are required to use a substantial portion of our cash flow
    from operations to pay interest on our debt, thereby reducing
    the availability of our cash flow to fund working capital,
    capital expenditures, product development efforts, strategic
    acquisitions, investments and alliances and other general
    corporate requirements;
|
| |  | our debt service requirements increase our vulnerability to
    economic downturns and adverse competitive and industry
    conditions and could place us at a competitive disadvantage
    compared to those of our competitors that have less debt;                                                                                                    
|
| |  | our debt service obligations could limit our flexibility in
    planning for, or reacting to, changes in our business and our
    industry and could limit our ability to pursue other business
    opportunities, borrow more money for operations or capital in
    the future and implement our business strategies;                                  
|
| |  | our level of debt may restrict us from raising additional
    financing on satisfactory terms to fund working capital, capital
    expenditures, product development efforts, strategic
    acquisitions, investments and alliances and other general
    corporate requirements; and                                                                    
|
| |  | our substantial leverage may make it more difficult for us to
    satisfy our debt service obligations.                                                                                                                                                                                                                                                  



| |                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------
| | We have a history of losses, which we expect to continue,
    and we might not ever achieve or maintain profitability.





| |                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------
| | A decrease in funding of schools and libraries by federal,
    state and local governments could reduce our sales and
    profits.



17



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| |                                                                                 
| | --------------------------------------------------------------------------------
| | We may be unable to compete successfully in our highly
    competitive industry.







| |                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our business is seasonal and our operating results may
    fluctuate; as a result of this seasonality, our common stock
    price may be volatile, which could cause the value of your
    investment to decline.





| |   |                                                                                     
| | - | ------------------------------------------------------------------------------------
| |  | general economic trends;                                                            
|
| |  | the traditional cyclical nature of educational material sales;                      
|
| |  | school, library and consumer purchasing decisions;                                  
|
| |  | funding cycles of schools and libraries by federal, state and
    local governments;
|
| |  | the need to increase inventories in advance of our primary
    selling season; and  
|
| |  | the timing of introductions of new products.                                        



| |                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------
| | Misuse, misappropriation or other loss of our proprietary
    rights could have a material adverse effect on our results of
    operations.





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| |                                                                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We may have to defend against intellectual property
    infringement claims and other claims which may cause us to incur
    significant costs and may divert management attention.







| |                                                                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our management has broad discretion over the application
    of cash and cash equivalents on hand, and investors will not
    have the opportunity to evaluate information concerning the
    application of such amounts.





| |                                         
| | ----------------------------------------
| | We are dependent upon our key personnel.





| |                                                                                         
| | ----------------------------------------------------------------------------------------
| | Growth of multimedia products may compete with and reduce
    our publishing activities.



19



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| |                                                           
| | ----------------------------------------------------------
| | Technological changes may reduce our sale of
    products.





| |                                                                                     
| | ------------------------------------------------------------------------------------
| | Our business may be adversely affected by an increase in
    paper or postage costs.





| |                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------
| | We may be unable to successfully complete acquisitions and
    our acquisitions may divert management attention from operating
    our business.







| |                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our principal stockholders own a large percentage of our
    common stock and will be able to influence or control
    substantially all corporate decisions.





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| |                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Changes in Media/ Communications Partners III Limited
    Partnerships beneficial ownership interest in us could
    result in an event of default under our senior revolving credit
    facility.





| |                                                                                       
| | --------------------------------------------------------------------------------------
| | Restrictive covenants in our debt instruments may
    adversely affect our operations.





| |   |                                                                     
| | - | --------------------------------------------------------------------
| |  | incur additional debt;                                              
|
| |  | pay dividends and make other distributions;                         
|
| |  | make investments and other restricted payments;                     
|
| |  | enter into sale and leaseback transactions;                         
|
| |  | incur liens;                                                        
|
| |  | engage in mergers, acquisitions and asset sales;                    
|
| |  | enter into transactions with affiliates;                            
|
| |  | make capital expenditures;                                          
|
| |  | amend or otherwise alter debt and other material
    agreements; and
|
| |  | alter the business we conduct.                                      

10-K.)




| |                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our success depends in large part on our ability to update
    and expand the content of existing products and develop new
    products in a cost-effective manner and on a timely
    basis.



21



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| |                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------
| | If the federal NCLB is materially changed, repealed, or
    found unconstitutional, our revenue and profitability could be
    adversely affected.





| |                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If there is a substantial reduction in the emphasis placed
    by federal and state governments on assessment and remediation
    in K-12 education, our business may be adversely
    affected.





| |                                                                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We are dependent on a limited number of suppliers and
    service providers, and any interruption of supply or services
    from these vendors could have a material adverse effect on our
    operations.





| |                                                                                                     
| | ----------------------------------------------------------------------------------------------------
| | Disruption in our distribution centers could significantly
    lower our revenues and profitability.





| |                                                                                                                                                                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We are dependent upon a central computer system and if we
    experience damage, service interruptions or failures in this
    system, or if our security measures are breached, our customer
    relationships and our ability to attract new customers may be
    adversely affected.



22



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| |                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------
| | We will incur increased costs as a result of our efforts
    to comply with the requirements of the Sarbanes-Oxley
    Act.





| |                                                                                           
| | ------------------------------------------------------------------------------------------
| | Future transactions may limit our ability to use our net
    operating loss carryforwards.



23



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|         |                           
|-------- | --------------------------
|Item 1B. | Unresolved Staff Comments.








|        |            
|------- | -----------
|Item 2. | Properties.



|                                           |  |                   |  |         |         |  |                 |                   
|------------------------------------------ |  | ----------------- |  | ------- | ------- |  | --------------- | ------------------
|Leased Locations                           |  | Use               |  | Sq. Ft. |         |  | Expiration Date
|                                           |  |                   |  |         |         |  |                
|Units 6 and 7 Victoria Mills, UK(1)        |  | Warehouse/Office  |  |         | 5,591   |  |                 | February 24, 2006 
|1008 Astoria Blvd, Cherry Hill, NJ(3)      |  | Warehouse/Office  |  |         | 7,480   |  |                 | August 31, 2006   
|2308 Heinz Road, Iowa City, IA(2)          |  | Warehouse/Office  |  |         | 45,000  |  |                 | September 30, 2006
|140 Bugeye Square, Prince Frederick, MD(1) |  | Warehouse         |  |         | 19,400  |  |                 | November 6, 2006  
|200 Skipjack Road, Prince Frederick, MD(1) |  | Warehouse         |  |         | 23,000  |  |                 | November 30, 2006 
|500 Corporate Parkway, Birmingham, AL(3)   |  | Office            |  |         | 30,248  |  |                 | November 30, 2007 
|11-13 E. 26thStreet,
    New York, NY(4)   |  | Office            |  |         | 5,500   |  |                 | December 31, 2007 
|8310 Capital of Tx Hy, Austin, TX(2)       |  | Office            |  |         | 2,910   |  |                 | April, 30, 2008   
|One Beeman Road, Northborough, MA(5)       |  | Warehouse/Office  |  |         | 150,000 |  |                 | July 31, 2009     
|136 Madison Avenue, New York, NY(2)        |  | Office            |  |         | 16,500  |  |                 | March 30, 2010    
|826-828 Broadway, New York, NY(1)          |  | Recording Studios |  |         | 11,500  |  |                 | August 31, 2010   
|2080 Cabot Blvd. West, Langhorne, PA(6)    |  | Office            |  |         | 9,955   |  |                 | March 31, 2011    
|3927 Second Ave., Birmingham, AL(3)        |  | Warehouse         |  |         | 5,000   |  |                 | Month-to-Month    






|    |                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------
|(1) | This property is used by our Library segment.                                                            
|   
|(2) | This property is used by our Test-prep and Intervention segment.                                         
|   
|(3) | This property is used by our Medical Education segment.                                                  
|   
|(4) | This property is used by our K-12 Supplemental Education segment.                                        
|   
|(5) | This property is used by our K-12 Supplemental Education and
    Test-prep and Intervention segments.    
|   
|(6) | This property was previously occupied by our Chelsea House
    business, and is being held for sub-lease.








|        |                   
|------- | ------------------
|Item 3. | Legal Proceedings.








|        |                                                         
|------- | --------------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security
    Holders.



24



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##### Table of Contents






PART II







|        |                                                                                                                       
|------- | ----------------------------------------------------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity, Related
    Stockholder Matters and Issuer Purchasers of Equity
    Securities.



Holders




Dividends




Securities Authorized for Issuance under Equity Compensation
Plans




Recent Sales of Unregistered Securities; Uses of Proceeds
from Registered Securities




25



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##### Table of Contents








|        |                         
|------- | ------------------------
|Item 6. | Selected Financial Data.

10-K.


|                                               |                                                |                         |         |         |      |   |         |         |   |   |         |        |   |      |         |         |   |   |         |         |  
|---------------------------------------------- | ---------------------------------------------- | ----------------------- | ------- | ------- | ---- | - | ------- | ------- | - | - | ------- | ------ | - | ---- | ------- | ------- | - | - | ------- | ------- | -
|                                               |                                                | Year Ended December 31, |        
|                                               |                                                |                         |        
|                                               |                                                | 2001                    |         |         | 2002 |   |         | 2003    |   |   | 2004    |        |   | 2005 |        
|                                               |                                                |                         |         |         |      |   |         |         |   |   |         |        |   |      |        
|                                               |                                                | (Dollars in thousands)  |        
|Consolidated Statements of Operations Data(1): |                                                |                         |         |         |      |   |         |         |   |   |         |        |   |      |         |         |   |   |         |        
|Revenue:                                       |                                                |                         |         |         |      |   |         |         |   |   |         |        |   |      |         |         |   |   |         |        
|                                               | K-12 Supplemental Education                    |                         | $       | 41,948  |      |   | $       | 42,656  |   |   | $       | 44,763 |   |      | $       | 48,450  |   |   | $       | 43,096  |  
|                                               | Test-prep and Intervention                     |                         |         | 19,479  |      |   |         | 21,682  |   |   |         | 25,171 |   |      |         | 34,421  |   |   |         | 64,501  |  
|                                               | Library                                        |                         |         | 51,964  |      |   |         | 65,451  |   |   |         | 61,137 |   |      |         | 68,878  |   |   |         | 76,626  |  
|                                               | Medical Education                              |                         |         | 16,441  |      |   |         | 18,297  |   |   |         | 18,188 |   |      |         | 19,144  |   |   |         | 26,262  |  
|                                               |                                                |                         |         |         |      |   |         |         |   |   |         |        |   |      |        
|Total revenue                                  |                                                |                         | 129,832 |         |      |   | 148,086 |         |   |   | 149,259 |        |   |      | 170,893 |         |   |   | 210,485 |        
|                                               | Cost of goods sold                             |                         |         | 39,198  |      |   |         | 46,424  |   |   |         | 45,925 |   |      |         | 52,998  |   |   |         | 60,864  |  
|                                               | Selling, general and administrative expense(2) |                         |         | 61,171  |      |   |         | 59,826  |   |   |         | 61,751 |   |      |         | 74,300  |   |   |         | 94,527  |  
|                                               | Amortization of pre-publication costs(3)       |                         |         | 4,921   |      |   |         | 5,311   |   |   |         | 6,835  |   |      |         | 9,106   |   |   |         | 13,150  |  
|                                               | Depreciation and amortization                  |                         |         | 12,237  |      |   |         | 1,945   |   |   |         | 2,099  |   |      |         | 2,954   |   |   |         | 5,038   |  
|                                               |                                                |                         |         |         |      |   |         |         |   |   |         |        |   |      |        
|                                               | Income from operations                         |                         |         | 12,305  |      |   |         | 34,580  |   |   |         | 32,649 |   |      |         | 31,535  |   |   |         | 36,906  |  
|                                               | Interest expense and other(4)(5)               |                         |         | 21,984  |      |   |         | 19,298  |   |   |         | 34,226 |   |      |         | 50,328  |   |   |         | 76,357  |  
|                                               |                                                |                         |         |         |      |   |         |         |   |   |         |        |   |      |        
|                                               | (Loss) income from continuing operations       |                         | $       | (9,679  | )    |   | $       | 15,282  |   |   | $       | (1,577 | ) |      | $       | (18,793 | ) |   | $       | (39,451 | )
|                                               | (Loss) income from discontinued operations     |                         |         | (27,413 | )    |   |         | 5,576   |   |   |         | (289   | ) |      |         | (3,788  | ) |   |         | (4,976  | )
|                                               | Cumulative effect of accounting change(6)      |                         |         |        |      |   |         | (48,610 | ) |   |         |       |   |      |         |        |   |   |         |        |  
|                                               |                                                |                         |         |         |      |   |         |         |   |   |         |        |   |      |        
|                                               | Net loss                                       |                         | $       | (37,092 | )    |   | $       | (27,752 | ) |   | $       | (1,866 | ) |      | $       | (22,581 | ) |   | $       | (44,427 | )
|                                               |                                                |                         |         |         |      |   |         |         |   |   |         |        |   |      |        
|Other Financial Data:                          |                                                |                         |         |         |      |   |         |         |   |   |         |        |   |      |         |         |   |   |         |        
|EBITDA(7)                                      |                                                | $                       | 29,463  |         |      | $ | 41,836  |         |   | $ | 41,583  |        |   | $    | 43,595  |         |   | $ | 55,094  |        
|Additions to pre-publication costs(3)          |                                                |                         | 8,430   |         |      |   | 8,806   |         |   |   | 10,833  |        |   |      | 12,163  |         |   |   | 21,877  |        
|Additions to property and equipment            |                                                |                         | 3,073   |         |      |   | 1,787   |         |   |   | 2,815   |        |   |      | 3,248   |         |   |   | 3,831   |        
|Interest expense(5)                            |                                                |                         | 20,024  |         |      |   | 17,993  |         |   |   | 19,928  |        |   |      | 48,194  |         |   |   | 59,328  |        
|Net cash provided by (used in):                |                                                |                         |         |         |      |   |         |         |   |   |         |        |   |      |         |         |   |   |         |        
|                                               | Operating activities                           |                         |         | 18,180  |      |   |         | 41,075  |   |   |         | 30,026 |   |      |         | 21,233  |   |   |         | 24,491  |  
|                                               | Investing activities                           |                         |         | (25,226 | )    |   |         | (10,594 | ) |   |         | (6,079 | ) |      |         | (93,306 | ) |   |         | (29,483 | )
|                                               | Financing activities                           |                         |         | 16,859  |      |   |         | (23,214 | ) |   |         | 6,798  |   |      |         | 116,569 |   |   |         | (1,802  | )
|Ratio of earnings to fixed charges(8)          |                                                |                         |        |         |      |   | 1.4     |         |   |   |        |        |   |      |        |         |   |   |        |        

26



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|                                 |  |                        |         |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   |          |  
|-------------------------------- |  | ---------------------- | ------- | - | ---- | - | -------- | ---- |  | - | -------- | - |  | ---- | -------- | - |  | - | -------- | -
|                                 |  | As of December 31,     |        
|                                 |  |                        |        
|                                 |  | 2001                   |         |   | 2002 |   |          | 2003 |  |   | 2004     |   |  | 2005 |         
|                                 |  |                        |         |   |      |   |          |      |  |   |          |   |  |      |         
|                                 |  | (Dollars in thousands) |        
|Consolidated Balance Sheet Data: |  |                        |         |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   |          |  
|Cash and cash equivalents        |  | $                      | 7,484   |   |      | $ | 2,701    |      |  | $ | 32,389   |   |  | $    | 78,581   |   |  | $ | 69,592   |  
|Working capital                  |  |                        | 57,459  |   |      |   | 16,630   |      |  |   | 49,588   |   |  |      | 94,647   |   |  |   | 76,483   |  
|Total assets                     |  |                        | 280,947 |   |      |   | 231,236  |      |  |   | 265,522  |   |  |      | 399,703  |   |  |   | 400,491  |  
|Total debt(5)                    |  |                        | 214,951 |   |      |   | 200,596  |      |  |   | 239,750  |   |  |      | 492,848  |   |  |   | 520,743  |  
|Redeemable preferred stock(5)    |  |                        | 109,410 |   |      |   | 126,191  |      |  |   | 143,663  |   |  |      | 36,882   |   |  |   | 39,930   |  
|Total stockholders deficit      |  |                        | (90,954 | ) |      |   | (135,435 | )    |  |   | (156,354 | ) |  |      | (181,443 | ) |  |   | (229,148 | )






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Our consolidated statements of operations data includes the
    results of operations of our acquired businesses beginning on
    the date of acquisition. Beginning with the quarter ended
    March 31, 2005, we re-organized our segment financial
    reporting. Prior periods have been restated to conform to the
    current presentation. Additionally, the operations of Chelsea
    House, which was discontinued in the third quarter of 2005, have
    been removed from K-12 Supplemental Education segment for all
    periods presented (See Note 18 to our audited consolidated
    financial statements included elsewhere in this Annual Report on
    Form 10-K.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   
|(2) | Selling, general and administrative expense is a summary of the
    following captions from our consolidated statement of
    operations: marketing and sales, fulfillment and distribution,
    general and administrative, and restructuring. For the years
    ended December 31, 2001 and December 31, 2002, our
    selling, general and administrative expense includes
    non-recurring and restructuring and restructuring related
    charges of $2.9 million and $(0.1) million,
    respectively, related to severance accruals and warehouse and
    information technology expenses. For the year ended
    December 31, 2003, our selling, general and administrative
    expense includes restructuring and restructuring related charges
    of $2.0 million, relating to the consolidation of the
    warehousing, customer service and order fulfillment functions of
    our Sundance/ Newbridge and Triumph Learning businesses. For the
    years ended December 31, 2004 and 2005, our selling,
    general and administrative expense includes restructuring and
    restructuring related charges of $0.4 million and
    $0.4 million, respectively, relating to IT system
    implementation costs at our Recorded Books and Triumph Learning
    businesses.
|   
|(3) | We capitalize and amortize the pre-publication costs associated
    with the development of our new products. These costs primarily
    include author fees under work-for-hire agreements (excluding
    royalties), the costs associated with artwork, photography and
    master tapes, other external creative costs, internal editorial
    staff costs and pre-press costs that are directly attributable
    to the product. Also included is the intangible value assigned
    to the backlist of acquired companies. These capitalized
    pre-publication and intangible costs are amortized over the
    anticipated life of the product, for a period not exceeding five
    years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|(4) | For the year ended December 31, 2003, our interest expense
    and other expense includes a redemption premium of
    $9.2 million incurred in connection with our redemption of
    subordinated debt with proceeds from our August 20, 2003
    refinancing. For the year ended December 31, 2005 our
    interest expense and other includes deferred income tax expense
    of $14.8 million. Prior to the Chelsea House disposition
    the deferred taxes related to goodwill were in an asset position
    that was fully reserved and resulted in no deferred income tax
    expense. With the Chelsea House disposition during the third
    quarter of 2005, our tax basis in goodwill exceeded our book
    value creating a deferred tax liability that could not be used
    to offset our other deferred tax assets which resulted in an
    increase in the deferred tax valuation allowance.                                                                                                                                                                                                                                                                                                                                                                            
|   
|(5) | On May 15, 2003, the FASB issued Statement of Financial
    Accounting Standards No. 150, Accounting for Certain
    Financial Instruments with Characteristics of both Liabilities
    and Equity (SFAS No. 150).
    SFAS No. 150 establishes standards for classifying and
    measuring as liabilities certain financial instruments that
    embody obligations of the issuer and have characteristics of
    both liabilities and equity. We adopted SFAS No. 150
    as of January 1, 2004. The adoption of
    SFAS No. 150 requires that our Series B senior
    preferred stock be classified as debt on our consolidated
    balance sheet                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

27



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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | because it is mandatorily redeemable at a fixed and determinable
    date. Dividends and accretion related to the Series B
    senior preferred stock of $16.1 million, which previously
    have been recorded after net income (loss) as a charge in
    determining net income (loss) available to common stockholders,
    has been charged to interest expense since the January 1,
    2004 adoption of this standard. Our Series A preferred
    stock and Series C preferred stock, which are redeemable
    beginning in the year 2019 and 2012, respectively, are
    redeemable at the option of the holders and are not mandatorily
    redeemable. Accordingly, SFAS No. 150 is not
    applicable to our Series A preferred stock or Series C
    preferred stock. However, in accordance with SEC accounting
    guidance the Series A preferred stock and Series C
    preferred stock have been treated as mezzanine equity.                                                                                                                                                                                                                                                                                               
|   
|(6) | On January 1, 2002 we adopted SFAS No. 142,
    Goodwill and Other Intangible Assets. Under
    SFAS No. 142, amortization of intangible assets
    considered to have indefinite lives, such as goodwill, is no
    longer required. Accordingly, we ceased amortization of goodwill
    and other indefinite lived intangible assets on that date. Under
    SFAS No. 142, goodwill and other indefinite lived
    intangible assets are subject to impairment tests, both at the
    date of initial adoption of SFAS No. 142 and annually
    thereafter. In addition, goodwill is required to be tested at
    interim times if there is indication of impairment. We performed
    the initial impairment test as of January 1, 2002 and
    recorded a goodwill writedown of $48.6 million, which is
    presented in our consolidated statements of operations as a
    cumulative effect of accounting change. We performed the annual
    impairment test on October 1, 2005, and determined that the
    carrying value of our goodwill and other indefinite lived
    intangible assets at that date were not impaired.                                                                                                       
|   
|(7) | We define EBITDA as net income (net loss) before
    interest, taxes, depreciation, amortization, discontinued
    operations and cumulative effect of a change in accounting for
    goodwill. We present EBITDA because we believe that EBITDA
    provides useful information regarding our operating results. We
    rely on EBITDA as a primary measure to review and assess the
    operational performance of our company and our management team
    in connection with executive compensation and bonus plans. We
    also use EBITDA to compare our current operating results with
    corresponding historical periods and with the operating
    performance of other publishing companies and for evaluating
    acquisition targets. We believe it is useful to investors to
    provide disclosures of our operating results on the same basis
    as that used by our management. We also believe it can assist
    investors in comparing our performance to that of other
    publishing companies on a consistent basis without regard to
    depreciation, amortization, interest, taxes, and cumulative
    effects of accounting changes and discontinued operations that
    do not directly affect our operations.



| |                                                                                                                                                                                                                                                                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | EBITDA has limitations as an analytical tool, and you should not
    consider it in isolation, or as a substitute for net income (net
    loss), cash flows from operating activities and other
    consolidated income or cash flow statement data prepared in
    accordance with accounting principles generally accepted in the
    United States. Some of the limitations are:



| |   |                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | EBITDA does not reflect our cash expenditures or future
    requirements for capital expenditures or capitalized
    pre-publication costs;                                                                                                  
|
| |  | EBITDA does not reflect changes in, or cash requirements for,
    our working capital needs;                                                                                                                                                 
|
| |  | EBITDA does not reflect the significant interest expense, or the
    cash requirements necessary to service interest or principal
    payments on our debt;                                                                                  
|
| |  | Although depreciation and amortization are non-cash charges, the
    assets being depreciated and amortized will often have to be
    replaced in the future, and EBITDA does not reflect any cash
    requirements for such replacements and
|
| |  | Other companies in our industry may calculate EBITDA differently
    than we do, thereby limiting its usefulness as a comparative
    measure.                                                                                               

28



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##### Table of Contents





| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Because of these limitations, EBITDA should not be considered a
    measure of discretionary cash available to us to invest in the
    growth of our business or as a measure of performance in
    compliance with GAAP. We compensate for these limitations by
    relying primarily on our GAAP results and using EBITDA on a
    supplementary basis. See our consolidated statements of
    operations and our consolidated statement of cash flows included
    in our financial statements included elsewhere in this annual
    report on
    Form 10-K. The
    following table reconciles our net loss to EBITDA for the
    periods presented:

|                                                   |  |                         |         |   |      |   |         |      |  |   |        |   |  |      |         |   |  |   |         |  
|-------------------------------------------------- |  | ----------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------ | - |  | ---- | ------- | - |  | - | ------- | -
|                                                   |  | Year Ended December 31, |        
|                                                   |  |                         |        
|                                                   |  | 2001                    |         |   | 2002 |   |         | 2003 |  |   | 2004   |   |  | 2005 |        
|                                                   |  |                         |         |   |      |   |         |      |  |   |        |   |  |      |        
|                                                   |  | (Dollars in thousands)  |        
|Reconciliation of net loss to EBITA (1):           |  |                         |         |   |      |   |         |      |  |   |        |   |  |      |         |   |  |   |         |  
|Net loss                                           |  | $                       | (37,092 | ) |      | $ | (27,752 | )    |  | $ | (1,866 | ) |  | $    | (22,581 | ) |  | $ | (44,427 | )
|Cumulative effect of accounting change             |  |                         |        |   |      |   | 48,610  |      |  |   |       |   |  |      |        |   |  |   |        |  
|Net loss (income) from discontinued operations     |  |                         | 27,413  |   |      |   | (5,576  | )    |  |   | 289    |   |  |      | 3,788   |   |  |   | 4,976   |  
|Interest expense and other, including income taxes |  |                         | 21,984  |   |      |   | 19,298  |      |  |   | 34,226 |   |  |      | 50,328  |   |  |   | 76,357  |  
|                                                   |  |                         |         |   |      |   |         |      |  |   |        |   |  |      |        
|Income from operations                             |  |                         | 12,305  |   |      |   | 34,580  |      |  |   | 32,649 |   |  |      | 31,535  |   |  |   | 36,906  |  
|Amortization of pre-publication costs              |  |                         | 4,921   |   |      |   | 5,311   |      |  |   | 6,835  |   |  |      | 9,106   |   |  |   | 13,150  |  
|Depreciation and amortization of intangibles       |  |                         | 12,237  |   |      |   | 1,945   |      |  |   | 2,099  |   |  |      | 2,954   |   |  |   | 5,038   |  
|                                                   |  |                         |         |   |      |   |         |      |  |   |        |   |  |      |        
|EBITDA                                             |  | $                       | 29,463  |   |      | $ | 41,836  |      |  | $ | 41,583 |   |  | $    | 43,595  |   |  | $ | 55,094  |  
|                                                   |  |                         |         |   |      |   |         |      |  |   |        |   |  |      |        



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(8) | The ratio of earnings to fixed charges is an
    analytical tool used to assist investors in evaluating a
    companys ability to meet the interest requirements of debt
    securities or the dividend requirements of preferred stock.
    Earnings for the purpose of this calculation are defined as
    pretax income before the effects of discontinued operations,
    extraordinary items and the cumulative effect of accounting
    change. Fixed charges are defined as the sum of interest
    expense, amortization of deferred financing costs, and the
    interest portion of rental expense. For the year ended
    December 31, 2003, interest expense includes
    $3.2 million of charges for the write off of deferred
    financing costs associated with our August 20, 2003
    financing and a redemption premium of $9.2 million incurred
    in connection with our redemption of subordinated debt with
    proceeds from our August 20, 2003 refinancing. For the
    years ended December 31, 2001, 2003, 2004, and 2005
    earnings were inadequate to cover fixed charges by
    $9.7 million, $1.6 million, $18.8 million and
    $24.3 million, respectively.

29



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##### Table of Contents








|        |                                                                                           
|------- | ------------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations.

Safe Harbor Statement under Private Securities
Litigation Reform Act of 1995


10-K 10-K,


10-K.


Overview






| |   |                
| | - | ---------------
| |  | K-12 Education:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | K-12 Supplemental Education: We publish supplemental
    reading materials for the kindergarten through eighth grade, or
    K-8, market under the well-recognized imprints Sundance
    Publishingand Newbridge Educational Publishing, and
    we also offer non-proprietary supplemental reading and
    literature products for the K-12 market. During 2005, we sold
    the assets of our Chelsea Houseimprint which had
    previously been included within the K-12 Supplemental Education
    segment; these results have been reclassified as a discontinued
    operation for all periods presented.
|
| |  | Test-prep and Intervention: We publish state-specific
    test preparation materials for K-12 competency tests under our
    well-recognized imprints and brands such as Triumph Learning,
    Coach and                                                                                                                                                                                                                                                                                                                                                                                                       

30



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##### Table of Contents



| |  |                                                                                                                                                                                    
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Buckle Down. We also offer skills assessment products and
    intervention materials for struggling math and reading students
    under the widely known Options Publishingimprint.



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Library: We publish unabridged audiobooks and other
    products for adults and children, under the Recorded Booksbrand, and market these titles, as well as selected
    non-proprietary audiobooks and other products, primarily to
    public libraries and schools.                                                                                                                                                                       
|
| |  | Medical Education: We publish audio-based continuing
    medical education, or CME, materials for doctors and other
    health care professionals under the Oakstone Publishingimprint and self-study CME courses under our CMEinfoimprint. We also publish personal wellness information
    products for companies seeking to improve employee awareness of
    health and wellness issues under the Top Healthand
    Personal Bestbrands .

Business Segments




K-12 Supplemental Education. Sundance/ Newbridge


Test-prep and Intervention. Triumph
Learning, Buckle Down Publishing Options Publishing


Library. Recorded Books


Medical Education. Oakstone Publishing


Critical Accounting Policies








| |                                
| | -------------------------------
| | Revenue and Expense Recognition



31



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##### Table of Contents









| |                      
| | ---------------------
| | Pre-Publication Costs





| |                                     
| | ------------------------------------
| | Goodwill and Other Intangible Assets







| |                                  
| | ---------------------------------
| | Direct Response Advertising Costs



32



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##### Table of Contents









| |                                   
| | ----------------------------------
| | Inventory and Related Obsolescence

first-in,




| |                         
| | ------------------------
| | Stock-Based Compensation







| |             
| | ------------
| | Income Taxes



33



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##### Table of Contents







| |                         
| | ------------------------
| | Redeemable Capital Stock



Recent Developments




1 2


34



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##### Table of Contents



Results of Operations




|                                                  |                                   |                               |         |        |        |  |       |      |      |   |         |        |        |  |       |      |      |   |         |        |        |  |       |      |      |  
|------------------------------------------------- | --------------------------------- | ----------------------------- | ------- | ------ | ------ |  | ----- | ---- | ---- | - | ------- | ------ | ------ |  | ----- | ---- | ---- | - | ------- | ------ | ------ |  | ----- | ---- | ---- | -
|                                                  |                                   | Year Ended December 31,       |        
|                                                  |                                   |                               |        
|                                                  |                                   | 2003                          |         |        | 2004   |  |       | 2005 |     
|                                                  |                                   |                               |         |        |        |  |       |      |     
|                                                  |                                   | (Dollar amounts in thousands) |        
|Revenue                                           |                                   |                               |         |        |        |  |       |      |      |   |         |        |        |  |       |      |      |   |         |        |        |  |       |     
|K-12 Supplemental Education(1)                    |                                   | $                             | 44,763  |        |        |  | 30.0  | %    |      | $ | 48,450  |        |        |  | 28.4  | %    |      | $ | 43,096  |        |        |  | 20.5  | %   
|Test-Prep and Intervention(2)                     |                                   |                               | 25,171  |        |        |  | 16.9  | %    |      |   | 34,421  |        |        |  | 20.1  | %    |      |   | 64,501  |        |        |  | 30.6  | %   
|Library                                           |                                   |                               | 61,137  |        |        |  | 40.9  | %    |      |   | 68,878  |        |        |  | 40.3  | %    |      |   | 76,626  |        |        |  | 36.4  | %   
|Medical Education(3)                              |                                   |                               | 18,188  |        |        |  | 12.2  | %    |      |   | 19,144  |        |        |  | 11.2  | %    |      |   | 26,262  |        |        |  | 12.5  | %   
|                                                  |                                   |                               |         |        |        |  |       |      |      |   |         |        |        |  |       |      |      |  
|Total revenue                                     |                                   |                               | 149,259 |        |        |  | 100.0 | %    |      |   | 170,893 |        |        |  | 100.0 | %    |      |   | 210,485 |        |        |  | 100.0 | %   
|Cost of goods sold                                |                                   |                               | 45,925  |        |        |  | 30.8  | %    |      |   | 52,998  |        |        |  | 31.0  | %    |      |   | 60,864  |        |        |  | 28.9  | %   
|Selling, general and administrative expense:      |                                   |                               |         |        |        |  |       |      |      |   |         |        |        |  |       |      |      |   |         |        |        |  |       |     
|                                                  |                                   | Marketing and sales           |         |        | 32,903 |  |       |      | 22.0 | % |         |        | 38,820 |  |       |      | 22.7 | % |         |        | 52,491 |  |       |      | 24.9 | %
|                                                  |                                   | Fulfillment and distribution  |         |        | 10,511 |  |       |      | 7.0  | % |         |        | 13,295 |  |       |      | 7.8  | % |         |        | 16,083 |  |       |      | 7.7  | %
|                                                  |                                   | General and administrative    |         |        | 17,100 |  |       |      | 11.6 | % |         |        | 22,185 |  |       |      | 13.0 | % |         |        | 25,953 |  |       |      | 12.4 | %
|                                                  |                                   | Restructuring charges         |         |        | 1,237  |  |       |      | 0.8  | % |         |        |       |  |       |      |     | % |         |        |       |  |       |      | 0.0  | %
|                                                  |                                   |                               |         |        |        |  |       |      |      |   |         |        |        |  |       |      |      |  
|Total Selling, general and administrative expense |                                   |                               | 61,751  |        |        |  | 41.4  | %    |      |   | 74,300  |        |        |  | 43.5  | %    |      |   | 94,527  |        |        |  | 45.0  | %   
|Amortization of pre-publication costs             |                                   |                               | 6,835   |        |        |  | 4.6   | %    |      |   | 9,106   |        |        |  | 5.3   | %    |      |   | 13,150  |        |        |  | 6.2   | %   
|Depreciation/ amortization of intangibles         |                                   |                               | 2,099   |        |        |  | 1.3   | %    |      |   | 2,954   |        |        |  | 1.7   | %    |      |   | 5,038   |        |        |  | 2.4   | %   
|                                                  |                                   |                               |         |        |        |  |       |      |      |   |         |        |        |  |       |      |      |  
|                                                  | Income from continuing operations |                               | $       | 32,649 |        |  |       | 21.9 | %    |   | $       | 31,535 |        |  |       | 18.5 | %    |   | $       | 36,906 |        |  |       | 17.5 | %   
|                                                  |                                   |                               |         |        |        |  |       |      |      |   |         |        |        |  |       |      |      |  






|    |                                                                                                                                                                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The results of operations of K-12 Supplemental Education
    excludes the results of operations of Chelsea House
    Publishingfor all periods presented. We sold the Chelsea
    House Publishingbusiness on August 9, 2005.                                                                           
|   
|(2) | The results of operations of Test-Prep and Intervention include
    the results of operations of Buckle Down Publishingprospectively from its acquisition date of April 15,
    2004 and the results of operations of Options Publishingprospectively from its acquisition date of December 2,
    2004.
|   
|(3) | The results of operations of Medical Education include the
    results of operations of Scott Publishingprospectively
    from its acquisition date of April 14, 2005 and the results
    of operations of CMEinfoprospectively from its
    acquisition date of June 17, 2005.                         

35



---



##### Table of Contents



Year Ended December 31, 2005 Compared To Year Ended
December 31, 2004




|                                                   |                                     |                              |         |         |   |  |       |       |    |  |         |         |   |  |       |       |   
|-------------------------------------------------- | ----------------------------------- | ---------------------------- | ------- | ------- | - |  | ----- | ----- | -- |  | ------- | ------- | - |  | ----- | ----- | --
|                                                   |                                     | 2005                         |         |         |   |  |      
|                                                   |                                     |                              |         |         |   |  |      
|                                                   |                                     | Years Ended December 31,     |        
|                                                   |                                     |                              |        
|                                                   |                                     |                              |         | 2004    |  
|                                                   |                                     |                              |         |         |  
|                                                   |                                     | )                            |        
|                                                   |                                     | (Dollar amounts in thousands |        
|Revenue                                            |                                     |                              |         |         |   |  |       |       |    |  |         |         |   |  |       |      
|                                                   | K-12 Supplemental Education(1)      |                              | $       | 43,096  |   |  |       | 20.5  | %  |  | $       | 48,450  |   |  |       | 28.4  | % 
|                                                   | Test-Prep and Intervention(2)       |                              |         | 64,501  |   |  |       | 30.6  | %  |  |         | 34,421  |   |  |       | 20.1  | % 
|                                                   | Library                             |                              |         | 76,626  |   |  |       | 36.4  | %  |  |         | 68,878  |   |  |       | 40.3  | % 
|                                                   | Medical Education(3)                |                              |         | 26,262  |   |  |       | 12.5  | %  |  |         | 19,144  |   |  |       | 11.2  | % 
|                                                   |                                     |                              |         |         |   |  |       |       |    |  |         |        
|Total Revenue                                      |                                     |                              | 210,485 |         |   |  | 100.0 | %     |    |  | 170,893 |         |   |  | 100.0 | %    
|Cost of goods sold                                 |                                     |                              | 60,864  |         |   |  | 28.9  | %     |    |  | 52,998  |         |   |  | 31.0  | %    
|Selling, general and administrative expenses:      |                                     |                              |         |         |   |  |       |       |    |  |         |         |   |  |       |      
|                                                   | Marketing and sales                 |                              |         | 52,491  |   |  |       | 24.9  | %  |  |         | 38,820  |   |  |       | 22.7  | % 
|                                                   | Fulfillment and distribution        |                              |         | 16,083  |   |  |       | 7.7   | %  |  |         | 13,295  |   |  |       | 7.8   | % 
|                                                   | General and administrative          |                              |         | 25,953  |   |  |       | 12.4  | %  |  |         | 22,185  |   |  |       | 13.0  | % 
|                                                   |                                     |                              |         |         |   |  |       |       |    |  |         |        
|Total selling, general and administrative expenses |                                     |                              | 94,527  |         |   |  | 45.0  | %     |    |  | 74,300  |         |   |  | 43.5  | %    
|Amortization of pre-publication costs              |                                     |                              | 13,150  |         |   |  | 6.2   | %     |    |  | 9,106   |         |   |  | 5.3   | %    
|Depreciation/amortization of intangibles           |                                     |                              | 5,038   |         |   |  | 2.4   | %     |    |  | 2,954   |         |   |  | 1.7   | %    
|                                                   |                                     |                              |         |         |   |  |       |       |    |  |         |        
|                                                   | Income from continuing operations   |                              |         | 36,906  |   |  |       | 17.5  | %  |  | $       | 31,535  |   |  |       | 18.5  | % 
|Interest expense                                   |                                     |                              | 59,328  |         |   |  | 28.2  | %     |    |  | 48,194  |         |   |  | 28.2  | %    
|Other expenses and tax provision                   |                                     |                              | 17,029  |         |   |  | 8.0   | %     |    |  | 2,134   |         |   |  | 1.3   | %    
|                                                   |                                     |                              |         |         |   |  |       |       |    |  |         |        
|                                                   | Loss before discontinued operations |                              |         | (39,451 | ) |  |       | (18.7 | %) |  |         | (18,793 | ) |  |       | (11.0 | )%
|Loss from discontinued operations                  |                                     |                              | (4,976  | )       |   |  | (2.4  | )%    |    |  | (3,788  | )       |   |  | (2.2  | )%   
|                                                   |                                     |                              |         |         |   |  |       |       |    |  |         |        
|                                                   | Net loss                            |                              | $       | (44,427 | ) |  |       | (21.1 | %) |  | $       | (22,581 | ) |  |       | (13.2 | )%
|                                                   |                                     |                              |         |         |   |  |       |       |    |  |         |        






|    |                                                                                                                                                                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The results of operations of K-12 Supplemental Education
    excludes the results of operations of Chelsea House
    Publishingfor all periods presented. We sold the Chelsea
    House Publishingbusiness on August 9, 2005.                                                                           
|   
|(2) | The results of operations of Test-Prep and Intervention include
    the results of operations of Buckle Down Publishingprospectively from its acquisition date of April 15,
    2004 and the results of operations of Options Publishingprospectively from its acquisition date of December 2,
    2004.
|   
|(3) | The results of operations of Medical Education include the
    results of operations of Scott Publishingprospectively
    from its acquisition date of April 14, 2005 and the results
    of operations of CMEinfoprospectively from its
    acquisition date of June 17, 2005.                         

Revenue


Buckle Down Publishing Options
Publishing Scott Publishing info Buckle Down Publishing Options Publishing


36



---



##### Table of Contents



K-12 Supplemental Education. Sundance/ Newbridge Sundance/
Newbridge Sundance/ Newbridge Sundance/ Newbridge


Test-prep and Intervention. Buckle Down Publishing Options Publishing Buckle Down Publishing Options
Publishing Triumph Learning Sundance/ Newbridge, Triumph Learning Buckle Down Triumph Learnings Buckle
Downs Triumph
Learning Buckle Down Triumph Learnings 2005-2006 Triumph Learning Triumph Learning Buckle Down Triumph Learning Buckle Down


Library. Recorded Books Recorded Books Recorded Books Recorded Books start-up Recorded Books


37



---



##### Table of Contents



Medical Education. Scott Publishing info Scott
Publishing info Oakstone Medical Wellness Oakstone Medical Oakstone
Medical Oakstone Medical Oakstone Medical CMEinfo Oakstone


Cost of Goods Sold




K-12 Supplemental Education.


Test-prep and Intervention. Buckle Down Publishing Options Publishing. Options Publishing


Library.


Medical Education. Scott Publishing info. Scott Publishing


38



---



##### Table of Contents



Selling, General & Administrative Expense




K-12 Supplemental Education.


Test-prep and Intervention. Options Publishing Buckle Down Publishing. Triumph Learning.


Library.


Medical Education. Scott Publishing info


Corporate.


Amortization of pre-publication costs


Buckle Down Publishing, Options Publishing, Scott Publishing info


39



---



##### Table of Contents





Depreciation Expense and Amortization of Intangibles


Buckle Down Publishing, Options Publishing, Scott Publishing info


Interest Expense


3 4 1 2


3 4




|                     |                                             |                            |        |        |      |   |        |        |    | 
|-------------------- | ------------------------------------------- | -------------------------- | ------ | ------ | ---- | - | ------ | ------ | -- | 
|                     |                                             | Year Ended                 |       
|                     |                                             | December 31,               |       
|                     |                                             |                            |       
|                     |                                             | 2005                       |        |        | 2004 |  
|                     |                                             |                            |        |        |      |  
|                     |                                             | (In thousands)             |       
|Interest expense:    |                                             |                            |        |        |      |   |        |       
|                     | Senior secured term loans                   |                            | $      | 9,945  |      |   | $      | 6,596  |   
|                     | 113/4% senior
    notes                     |                            |        | 19,974 |      |   |        | 16,600 |   
|                     | 121/2% senior
    discount notes  non-cash |                            |        | 10,605 |      |   |        | 8,617  |   
|                     | Series B senior preferred stock  non-cash  |                            |        | 18,463 |      |   |        | 16,115 |   
|                     | Other                                       |                            |        | 383    |      |   |        | 305    |   
|                     |                                             |                            |        |        |      |  
|                     | Total interest expense                      |                            |        | 59,370 |      |   |        | 48,233 |   
|                     |                                             | Less: capitalized interest |        |        | 42   |   |        |        | 39 | 
|                     |                                             |                            |        |        |      |  
|Net Interest expense |                                             | $                          | 59,328 |        |      | $ | 48,194 |       
|                     |                                             |                            |        |        |      |  



Discontinued Operations


Chelsea House Publishers Chelsea House Chelsea
House Triumph Learning College


40



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##### Table of Contents





Provision for Income Taxes




Net Loss




Year Ended December 31, 2004 Compared to Year Ended
December 31, 2003




|                                                   |                                     |                              |         |         |   |  |       |       |    |  |         |        |   |  |       |      |   
|-------------------------------------------------- | ----------------------------------- | ---------------------------- | ------- | ------- | - |  | ----- | ----- | -- |  | ------- | ------ | - |  | ----- | ---- | --
|                                                   |                                     | 2004                         |         |         |   |  |      
|                                                   |                                     |                              |         |         |   |  |      
|                                                   |                                     | Year Ended December 31,      |        
|                                                   |                                     |                              |        
|                                                   |                                     |                              |         | 2003    |  
|                                                   |                                     |                              |         |         |  
|                                                   |                                     | )                            |        
|                                                   |                                     | (Dollar amounts in thousands |        
|Revenue                                            |                                     |                              |         |         |   |  |       |       |    |  |         |        |   |  |       |     
|                                                   | K-12 Supplemental Education(1)      |                              | $       | 48,450  |   |  |       | 28.4  | %  |  | $       | 44,763 |   |  |       | 30.0 | % 
|                                                   | Test-prep and Intervention(2)       |                              |         | 34,421  |   |  |       | 20.1  | %  |  |         | 25,171 |   |  |       | 16.9 | % 
|                                                   | Library                             |                              |         | 68,878  |   |  |       | 40.3  | %  |  |         | 61,137 |   |  |       | 40.9 | % 
|                                                   | Medical Education                   |                              |         | 19,144  |   |  |       | 11.2  | %  |  |         | 18,188 |   |  |       | 12.2 | % 
|                                                   |                                     |                              |         |         |   |  |       |       |    |  |         |       
|Total Revenue                                      |                                     |                              | 170,893 |         |   |  | 100.0 | %     |    |  | 149,259 |        |   |  | 100.0 | %   
|Cost of goods sold                                 |                                     |                              | 52,998  |         |   |  | 31.0  | %     |    |  | 45,925  |        |   |  | 30.8  | %   
|Selling, general and administrative expenses:      |                                     |                              |         |         |   |  |       |       |    |  |         |        |   |  |       |     
|                                                   | Marketing and sales                 |                              |         | 38,820  |   |  |       | 22.7  | %  |  |         | 32,903 |   |  |       | 22.0 | % 
|                                                   | Fulfillment and distribution        |                              |         | 13,295  |   |  |       | 7.8   | %  |  |         | 10,511 |   |  |       | 7.0  | % 
|                                                   | Restructuring charges               |                              |         |        |   |  |       | 0.0   | %  |  |         | 1,237  |   |  |       | 0.8  | % 
|                                                   | General and administrative expense  |                              |         | 22,185  |   |  |       | 13.0  | %  |  |         | 17,100 |   |  |       | 11.6 | % 
|                                                   |                                     |                              |         |         |   |  |       |       |    |  |         |       
|Total selling, general and administrative expenses |                                     |                              | 74,300  |         |   |  | 43.5  | %     |    |  | 61,751  |        |   |  | 41.4  | %   
|Amortization of pre-publication costs              |                                     |                              | 9,106   |         |   |  | 5.3   | %     |    |  | 6,835   |        |   |  | 4.6   | %   
|Depreciation/ amortization of intangibles          |                                     |                              | 2,954   |         |   |  | 1.7   | %     |    |  | 2,099   |        |   |  | 1.3   | %   
|                                                   |                                     |                              |         |         |   |  |       |       |    |  |         |       
|                                                   | Income from continuing operations   |                              |         | 31,535  |   |  |       | 18.5  | %  |  |         | 32,649 |   |  |       | 21.9 | % 
|Interest expense                                   |                                     |                              | 48,194  |         |   |  | 28.2  | %     |    |  | 19,928  |        |   |  | 13.4  | %   
|Redemption premium                                 |                                     |                              |        |         |   |  | 0.0   | %     |    |  | 9,236   |        |   |  | 6.2   | %   
|Other expenses and tax provision                   |                                     |                              | 2,134   |         |   |  | 1.3   | %     |    |  | 5,062   |        |   |  | 3.4   | %   
|                                                   |                                     |                              |         |         |   |  |       |       |    |  |         |       
|                                                   | Loss before discontinued operations |                              |         | (18,793 | ) |  |       | (11.0 | )% |  |         | (1,577 | ) |  |       | (1.1 | )%
|Loss from discontinued operations                  |                                     |                              | (3,788  | )       |   |  | (2.2  | )%    |    |  | (289    | )      |   |  | (0.2  | )%  
|                                                   |                                     |                              |         |         |   |  |       |       |    |  |         |       
|                                                   | Net loss                            |                              | $       | (22,581 | ) |  |       | (13.2 | )% |  | $       | (1,866 | ) |  |       | (1.3 | )%
|                                                   |                                     |                              |         |         |   |  |       |       |    |  |         |       






|    |                                                                                                                                                                                                                              
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The results of operations of K-12 Supplemental Education
    excludes the results of operations of Chelsea House
    Publishingfor all periods presented. We sold the Chelsea
    House Publishingbusiness on August 9, 2005.

41



---



##### Table of Contents





|    |                                                                                                                                                                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | The results of operations of Test-Prep and Intervention include
    the results of operations of Buckle Down Publishingfrom
    its acquisition date of April 15, 2004 and the results of
    operations of Options Publishingfrom its acquisition
    date of December 2, 2004.

Revenue


Buckle Down Publishing Options Publishing


K-12 Supplemental Education. Sundance Newbridge


Test-prep and Intervention. Buckle Down Options Publishing. Triumph Learning Buckle
Down Publishing. Buckle Down
Publishing Triumph Learning


Library.


Medical Education. Oakstone Medical Wellness


Cost of Goods Sold




K-12 Supplemental Education.


Test-prep and Intervention. Buckle Down Publishing Options Publishing


42



---



##### Table of Contents





Library. Recorded Books.


Medical Education. Oakstone.


Selling, General & Administrative Expense




K-12 Supplemental Education.


Test-prep and Intervention. Triumph
Learning Buckle Down Publishing Buckle Down Publishing Options Publishing Triumph Learning


Library. Recorded Books.


Medical Education. Oakstone


Corporate. Oakstone


43



---



##### Table of Contents



Amortization of Pre-Publication Costs




Depreciation Expense and Amortization of Intangibles


Buckle Down Options Publishing.


Interest Expense


1 2 3 4 1 2 3 4


paid-in 3 4




|                     |                                              |                            |        |        |      |   |        |        |   | 
|-------------------- | -------------------------------------------- | -------------------------- | ------ | ------ | ---- | - | ------ | ------ | - | 
|                     |                                              | Year Ended                 |       
|                     |                                              | December 31,               |       
|                     |                                              |                            |       
|                     |                                              | 2004                       |        |        | 2003 |  
|                     |                                              |                            |        |        |      |  
|                     |                                              | (In thousands)             |       
|Interest expense:    |                                              |                            |        |        |      |   |        |       
|                     | Senior secured term loans                    |                            | $      | 6,596  |      |   | $      | 2,362  |  
|                     | 113/4% senior
    notes                      |                            |        | 16,600 |      |   |        | 5,986  |  
|                     | 121/2% senior
    discount notes  non-cash  |                            |        | 8,617  |      |   |        |       |  
|                     | Series B senior preferred stock  non-cash   |                            |        | 16,115 |      |   |        |       |  
|                     | Old senior secured revolving credit facility |                            |        |       |      |   |        | 5,799  |  
|                     | Old senior subordinated notes  non-cash     |                            |        |       |      |   |        | 5,670  |  
|                     | Other                                        |                            |        | 305    |      |   |        | 111    |  
|                     |                                              |                            |        |        |      |  
|                     | Total interest expense                       |                            |        | 48,233 |      |   |        | 19,928 |  
|                     |                                              | Less: capitalized interest |        |        | 39   |   |        |        |  | 
|                     |                                              |                            |        |        |      |  
|Net Interest expense |                                              | $                          | 48,194 |        |      | $ | 19,928 |       
|                     |                                              |                            |        |        |      |  

44



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##### Table of Contents



Redemption Premium




Discontinued Operations


Triumph Learning College Chelsea. Chelsea House Chelsea
House.


Net Loss


Buckle Down Publishing Options Publishing. Triumph Learning College


Contractual Obligations and Commitments




| |                       
| | ----------------------
| | Financing Arrangements



| |                                         
| | ----------------------------------------
| | Senior Secured Revolving Credit Facility





| |                          
| | -------------------------
| | Senior Secured Term Loans



45



---



##### Table of Contents







| |             
| | ------------
| | Senior Notes

3 4 3 4






| |                      
| | ---------------------
| | Senior Discount Notes

1 2 pari passu




| |                          
| | -------------------------
| | Series B Senior Preferred

1 2




46



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##### Table of Contents







| |                               
| | ------------------------------
| | Off Balance Sheet Arrangements





|                                 |  |                        |        |  |           |   |        |           |  |   |         |  |  |       |         |  |  |   |         | 
|-------------------------------- |  | ---------------------- | ------ |  | --------- | - | ------ | --------- |  | - | ------- |  |  | ----- | ------- |  |  | - | ------- | 
|                                 |  | Payments Due by Period |       
|                                 |  |                        |       
|                                 |  | Less Than              |        |  |           |   | After  |           |  |  
|Contractual Obligations          |  | 1 Year                 |        |  | 1-2 Years |   |        | 3-5 Years |  |   | 5 Years |  |  | Total |        
|                                 |  |                        |        |  |           |   |        |           |  |   |         |  |  |       |        
|                                 |  | (In thousands)         |       
|Operating leases                 |  | $                      | 3,010  |  |           | $ | 2,611  |           |  | $ | 4,248   |  |  | $     |        |  |  | $ | 9,869   | 
|Senior secured term loans(1)     |  |                        | 11,550 |  |           |   | 11,445 |           |  |   | 132,389 |  |  |       |        |  |  |   | 155,384 | 
|113/4% Senior
    notes          |  |                        | 19,975 |  |           |   | 19,975 |           |  |   | 59,925  |  |  |       | 189,975 |  |  |   | 289,850 | 
|121/2% Senior
    discount notes |  |                        |       |  |           |   |       |           |  |   | 25,313  |  |  |       | 152,531 |  |  |   | 177,844 | 
|Series B senior preferred(2)     |  |                        |       |  |           |   |       |           |  |   |        |  |  |       | 129,468 |  |  |   | 129,468 | 
|                                 |  |                        |        |  |           |   |        |           |  |   |         |  |  |       |        
|Total                            |  | $                      | 34,535 |  |           | $ | 34,031 |           |  | $ | 221,875 |  |  | $     | 471,974 |  |  | $ | 762,415 | 
|                                 |  |                        |        |  |           |   |        |           |  |   |         |  |  |       |        






|    |                                                                                                                                                                                                                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The senior secured term loans are floating rate instruments. The
    interest for this schedule was calculated using year end rates.
    A one percent increase in interest rates would result in
    payments of $12.8 million, $12.7 million,
    $133.3 million in less than 1 year, 1-2 year, and
    3-5 year respectively, for the senior secured term loans.                        
|   
|(2) | Series B senior preferred is presented at its
    December 31, 2005 liquidation value and does not include
    future dividend payments which will be not be paid in cash,
    based on restrictions in our
    121/2% Senior
    Discount Note agreement (see Note 12 to our audited
    consolidated financial statements included elsewhere in this
    Annual Report on
    Form 10-K).

Liquidity and Capital Resources




1 2


Buckle Down Publishing


3 4 Options Publishing


Scott Publishing


47



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info




1 2


info Scott Publishing Chelsea House








Cash Flows




Scott Publishing info Options Publishing Buckle Down Publishing Chelsea House Publishers Buckle Down Publishing Options Publishing Triumph Learning Buckle Down.


48



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1 2 3 4 1 2


Capital Expenditures




Recorded Books


Restatement






49



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|                                                                       |                                                 |                    |        |        |                    |   |               |             |  |   |          |        |   |            |         |        |             |   |         |   |  |   |         |        |  
|---------------------------------------------------------------------- | ----------------------------------------------- | ------------------ | ------ | ------ | ------------------ | - | ------------- | ----------- |  | - | -------- | ------ | - | ---------- | ------- | ------ | ----------- | - | ------- | - |  | - | ------- | ------ | -
|                                                                       |                                                 | Three Months Ended |        |        | Nine Months Ended  |  
|                                                                       |                                                 | September 30, 2005 |        |        | September 30, 2005 |  
|                                                                       |                                                 |                    |        |        |                    |  
|                                                                       |                                                 | As Previously      |        |        |                    |   | As Previously |             |  |  
|                                                                       |                                                 | Reported           |        |        | Adjustment         |   |               | As Restated |  |   | Reported |        |   | Adjustment |         |        | As Restated |  
|                                                                       |                                                 |                    |        |        |                    |   |               |             |  |   |          |        |   |            |         |        |             |  
|Loss before provision for income taxes and discontinued
    operations |                                                 | $                  | (5,424 | )      |                    | $ |              |             |  | $ | (5,424   | )      |   | $          | (16,164 | )      |             | $ |        |   |  | $ | (16,164 | )     
|Provision for income taxes                                             |                                                 |                    | 57     |        |                    |   | 13,461        |             |  |   | 13,518   |        |   |            | 274     |        |             |   | 13,461  |   |  |   | 13,735  |       
|                                                                       |                                                 |                    |        |        |                    |   |               |             |  |   |          |        |   |            |         |        |             |  
|Loss before discontinued operations                                    |                                                 |                    | (5,481 | )      |                    |   | (13,461       | )           |  |   | (18,942  | )      |   |            | (16,438 | )      |             |   | (13,461 | ) |  |   | (29,899 | )     
|Discontinued Operations:                                               |                                                 |                    |        |        |                    |   |               |             |  |   |          |        |   |            |         |        |             |   |         |   |  |   |         |       
|                                                                       | Loss from operations of discontinued operations |                    |        | (25    | )                  |   |               |            |  |   |          | (25    | ) |            |         | (3,724 | )           |   |         |  |  |   |         | (3,724 | )
|                                                                       | Loss on disposal of discontinued operations     |                    |        | (1,057 | )                  |   |               |            |  |   |          | (1,057 | ) |            |         | (1,050 | )           |   |         |  |  |   |         | (1,050 | )
|                                                                       |                                                 |                    |        |        |                    |   |               |             |  |   |          |        |   |            |         |        |             |  
|Net Loss                                                               |                                                 |                    | (6,563 | )      |                    |   | (13,461       | )           |  |   | (20,024  | )      |   |            | (21,212 | )      |             |   | (13,461 | ) |  |   | (34,673 | )     
|Preferred stock dividends and accretion                                |                                                 |                    | (776   | )      |                    |   |              |             |  |   | (776     | )      |   |            | (2,255  | )      |             |   |        |   |  |   | (2,255  | )     
|Net loss available to common stockholders                              |                                                 | $                  | (7,339 | )      |                    | $ | (13,461       | )           |  | $ | (20,800  | )      |   | $          | (23,467 | )      |             | $ | (13,461 | ) |  | $ | (36,928 | )     
|                                                                       |                                                 |                    |        |        |                    |   |               |             |  |   |          |        |   |            |         |        |             |  



10-Q 10-K.


Seasonality and Quarterly Results of Operations






|                          |  |                              |        |   |         |   |        |         |  |   |         |   |  |   |         |  
|------------------------- |  | ---------------------------- | ------ | - | ------- | - | ------ | ------- |  | - | ------- | - |  | - | ------- | -
|                          |  | Year Ended December 31, 2004 |       
|                          |  |                              |       
|                          |  | First                        |        |   | Second  |   |        | Third   |  |   | Fourth  |  
|                          |  | Quarter                      |        |   | Quarter |   |        | Quarter |  |   | Quarter |  
|                          |  |                              |        |   |         |   |        |         |  |   |         |  
|                          |  | (Dollars in thousands)       |       
|Revenue                   |  | $                            | 36,753 |   |         | $ | 47,396 |         |  | $ | 46,407  |   |  | $ | 40,337  |  
|Income from operations(1) |  |                              | 6,872  |   |         |   | 11,298 |         |  |   | 10,845  |   |  |   | 2,521   |  
|Net loss(1)               |  |                              | (5,314 | ) |         |   | (3,210 | )       |  |   | (1,954  | ) |  |   | (12,103 | )

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|                       |  |                              |        |   |         |   |        |         |  |   |         |   |  |   |        |  
|---------------------- |  | ---------------------------- | ------ | - | ------- | - | ------ | ------- |  | - | ------- | - |  | - | ------ | -
|                       |  | Year Ended December 31, 2005 |       
|                       |  |                              |       
|                       |  | First                        |        |   | Second  |   |        | Third   |  |   | Fourth  |  
|                       |  | Quarter                      |        |   | Quarter |   |        | Quarter |  |   | Quarter |  
|                       |  |                              |        |   |         |   |        |         |  |   |         |  
|                       |  | (Dollars in thousands)       |       
|                       |  | As restated                  |        |   |        
|Revenue                |  | $                            | 46,366 |   |         | $ | 56,661 |         |  | $ | 56,318  |   |  | $ | 51,140 |  
|Income from operations |  |                              | 6,120  |   |         |   | 13,178 |         |  |   | 9,987   |   |  |   | 7,621  |  
|Net loss(2)            |  |                              | (9,169 | ) |         |   | (5,481 | )       |  |   | (20,024 | ) |  |   | (9,753 | )






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The fourth quarter of 2004 income from operations was impacted
    by seasonally lower revenues, investments in marketing and sales
    initiatives, an increase in our inventory obsolescence reserves,
    additional cost of public company filings and our Sarbanes Oxley
    implementation. The fourth quarter Net loss was impacted by the
    lower income from operations and higher amortization of
    pre-publication costs due to increased investment and increased
    amortization of intangibles resulted from our Buckle Down
    Publishingand Options Publishingacquisitions.                                                         
|   
|(2) | The third quarter 2005 net loss was impacted by the recording of
    a $13.5 million increase in the deferred tax valuation
    allowance. Prior to the Chelsea House disposition the deferred
    taxes related to goodwill were in an asset position that was
    fully reserved and resulted in no deferred income tax expense.
    With the Chelsea House disposition during the third quarter of
    2005, our tax basis in goodwill was less than our book value
    creating a deferred tax liability that could not be used to
    offset our other deferred tax assets which resulted in an
    increase in the deferred tax valuation allowance.

Inflation




Recent Accounting Pronouncements






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|         |                                                                
|-------- | ---------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures About Market
    Risk.














|        |                                            
|------- | -------------------------------------------
|Item 8. | Financial Statements and Supplementary Data

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
















| |                   
| | ------------------
| | Ernst & Young, LLP





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HAIGHTS CROSS COMMUNICATIONS, INC. AND SUBSIDIARIES





CONSOLIDATED BALANCE SHEETS


|                                                                      |                                                                                                                                                                                                                              |                                                                             |         |          |          |   |         |          |          |  
|--------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------- | ------- | -------- | -------- | - | ------- | -------- | -------- | -
|                                                                      |                                                                                                                                                                                                                              | December 31,                                                                |        
|                                                                      |                                                                                                                                                                                                                              |                                                                             |        
|                                                                      |                                                                                                                                                                                                                              | 2005                                                                        |         |          | 2004     |  
|                                                                      |                                                                                                                                                                                                                              |                                                                             |         |          |          |  
|                                                                      |                                                                                                                                                                                                                              | (In thousands, except per                                                   |        
|                                                                      |                                                                                                                                                                                                                              | share data)                                                                 |        
|ASSETS                                                               
|Current assets:                                                       |                                                                                                                                                                                                                              |                                                                             |         |          |          |   |         |         
|                                                                      | Cash and cash equivalents                                                                                                                                                                                                    |                                                                             | $       | 69,592   |          |   | $       | 78,581   |         
|                                                                      | Accounts receivable, net                                                                                                                                                                                                     |                                                                             |         | 22,804   |          |   |         | 19,405   |         
|                                                                      | Inventory, net                                                                                                                                                                                                               |                                                                             |         | 22,304   |          |   |         | 20,920   |         
|                                                                      | Direct response advertising costs  current portion,
    net                                                                                                                                                                 |                                                                             |         | 3,534    |          |   |         | 2,516    |         
|                                                                      | Prepaid royalties                                                                                                                                                                                                            |                                                                             |         | 5,456    |          |   |         | 5,199    |         
|                                                                      | Prepaid expenses and other current assets                                                                                                                                                                                    |                                                                             |         | 4,127    |          |   |         | 3,457    |         
|                                                                      | Assets of businesses held for sale                                                                                                                                                                                           |                                                                             |         |         |          |   |         | 12,648   |         
|                                                                      |                                                                                                                                                                                                                              |                                                                             |         |          |          |  
|                                                                      |                                                                                                                                                                                                                              | Total current assets                                                        |         |          | 127,817  |   |         |          | 142,726  |  
|Pre-publication costs, net                                            |                                                                                                                                                                                                                              |                                                                             | 42,841  |          |          |   | 34,938  |         
|Direct response advertising costs, net                                |                                                                                                                                                                                                                              |                                                                             | 7,159   |          |          |   | 6,620   |         
|Property and equipment, net                                           |                                                                                                                                                                                                                              |                                                                             | 11,303  |          |          |   | 9,926   |         
|Goodwill                                                              |                                                                                                                                                                                                                              |                                                                             | 169,424 |          |          |   | 166,179 |         
|Intangible assets, net                                                |                                                                                                                                                                                                                              |                                                                             | 26,934  |          |          |   | 20,988  |         
|Deferred financing costs, net                                         |                                                                                                                                                                                                                              |                                                                             | 13,522  |          |          |   | 16,589  |         
|Other assets                                                          |                                                                                                                                                                                                                              |                                                                             | 1,491   |          |          |   | 1,737   |         
|                                                                      |                                                                                                                                                                                                                              |                                                                             |         |          |          |  
|Total assets                                                          |                                                                                                                                                                                                                              | $                                                                           | 400,491 |          |          | $ | 399,703 |         
|                                                                      |                                                                                                                                                                                                                              |                                                                             |         |          |          |  
|                                                                     
|LIABILITIES, REDEEMABLE PREFERRED STOCK AND
    STOCKHOLDERS DEFICIT
|Current liabilities:                                                  |                                                                                                                                                                                                                              |                                                                             |         |          |          |   |         |         
|                                                                      | Accounts payable and accrued liabilities                                                                                                                                                                                     |                                                                             | $       | 28,533   |          |   | $       | 25,039   |         
|                                                                      | Accrued interest                                                                                                                                                                                                             |                                                                             |         | 8,871    |          |   |         | 8,387    |         
|                                                                      | Deferred subscription revenue                                                                                                                                                                                                |                                                                             |         | 12,630   |          |   |         | 12,341   |         
|                                                                      | Liabilities of businesses held for sale                                                                                                                                                                                      |                                                                             |         |         |          |   |         | 1,012    |         
|                                                                      | Current portion of long term debt                                                                                                                                                                                            |                                                                             |         | 1,300    |          |   |         | 1,300    |         
|                                                                      |                                                                                                                                                                                                                              |                                                                             |         |          |          |  
|                                                                      |                                                                                                                                                                                                                              | Total current liabilities                                                   |         |          | 51,334   |   |         |          | 48,079   |  
|Long term liabilities:                                                |                                                                                                                                                                                                                              |                                                                             |         |          |          |   |         |         
|                                                                      | Senior secured term loan                                                                                                                                                                                                     |                                                                             |         | 126,150  |          |   |         | 127,450  |         
|                                                                      | 113/4% senior
    notes                                                                                                                                                                                                      |                                                                             |         | 172,630  |          |   |         | 173,122  |         
|                                                                      | 121/2% senior
    discount notes                                                                                                                                                                                             |                                                                             |         | 92,875   |          |   |         | 82,270   |         
|                                                                      | Series B senior preferred stock, redeemable, $.001 par
    value, 6,000,000 shares authorized, 2,000,230 shares
    issued and outstanding (approximate aggregate liquidation value
    as of December 31, 2005 of $129,468) |                                                                             |         | 127,788  |          |   |         | 108,706  |         
|                                                                      | Deferred tax liability                                                                                                                                                                                                       |                                                                             |         | 14,830   |          |   |         |         |         
|                                                                      | Deferred gain on Series B cancellation and other long term
    liabilities                                                                                                                                                   |                                                                             |         | 4,102    |          |   |         | 4,637    |         
|                                                                      |                                                                                                                                                                                                                              |                                                                             |         |          |          |  
|                                                                      |                                                                                                                                                                                                                              | Total long term liabilities                                                 |         |          | 538,375  |   |         |          | 496,185  |  
|Commitments(Note 14)                                                  |                                                                                                                                                                                                                              |                                                                             |         |          |          |   |         |         
|Redeemable preferred stock:                                           |                                                                                                                                                                                                                              |                                                                             |         |          |          |   |         |         
|                                                                      | Series A preferred stock, redeemable, $.001 par value,
    30,000 shares authorized, 22,476 shares issued and
    outstanding (approximate aggregate liquidation value as of
    December 31, 2005 of $36,333)               |                                                                             |         | 38,404   |          |   |         | 35,627   |         
|                                                                      | Series C preferred stock, redeemable, $.001 par value,
    3,500 shares authorized, issued and outstanding
    (approximate aggregate liquidation value as of December 31,
    2005 of $3,810)                               |                                                                             |         | 1,526    |          |   |         | 1,255    |         
|                                                                      |                                                                                                                                                                                                                              |                                                                             |         |          |          |  
|                                                                      |                                                                                                                                                                                                                              | Total redeemable preferred stock                                            |         |          | 39,930   |   |         |          | 36,882   |  
|Stockholders deficit:                                                |                                                                                                                                                                                                                              |                                                                             |         |          |          |   |         |         
|                                                                      | Common stock, $.001 par value, 30,000,000 shares
    authorized, 20,008,300 and 20,000,000 shares issued and
    outstanding as of December 31, 2005 and 2004, respectively                                                  |                                                                             |         | 20       |          |   |         | 20       |         
|                                                                      | Accumulated other comprehensive income                                                                                                                                                                                       |                                                                             |         | 284      |          |   |         | 526      |         
|                                                                      | Accumulated deficit                                                                                                                                                                                                          |                                                                             |         | (229,452 | )        |   |         | (181,989 | )       
|                                                                      |                                                                                                                                                                                                                              |                                                                             |         |          |          |  
|                                                                      |                                                                                                                                                                                                                              | Total stockholders deficit                                                 |         |          | (229,148 | ) |         |          | (181,443 | )
|                                                                      |                                                                                                                                                                                                                              |                                                                             |         |          |          |  
|                                                                      |                                                                                                                                                                                                                              | Total liabilities, redeemable preferred stock and
    stockholders deficit |         | $        | 400,491  |   |         | $        | 399,703  |  
|                                                                      |                                                                                                                                                                                                                              |                                                                             |         |          |          |  



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HAIGHTS CROSS COMMUNICATIONS, INC. AND SUBSIDIARIES





CONSOLIDATED STATEMENTS OF OPERATIONS


|                                                                       |                                                          |                         |         |        |      |   |         |        |   |   |         |        |  
|---------------------------------------------------------------------- | -------------------------------------------------------- | ----------------------- | ------- | ------ | ---- | - | ------- | ------ | - | - | ------- | ------ | -
|                                                                       |                                                          | Year Ended December 31, |        
|                                                                       |                                                          |                         |        
|                                                                       |                                                          | 2005                    |         |        | 2004 |   |         | 2003   |  
|                                                                       |                                                          |                         |         |        |      |   |         |        |  
|                                                                       |                                                          | (In thousands)          |        
|Revenue                                                                |                                                          | $                       | 210,485 |        |      | $ | 170,893 |        |   | $ | 149,259 |       
|Costs and expenses:                                                    |                                                          |                         |         |        |      |   |         |        |   |   |         |       
|                                                                       | Cost of goods sold                                       |                         |         | 60,864 |      |   |         | 52,998 |   |   |         | 45,925 |  
|                                                                       | Marketing and sales                                      |                         |         | 52,491 |      |   |         | 38,820 |   |   |         | 32,903 |  
|                                                                       | Fulfillment and distribution                             |                         |         | 16,083 |      |   |         | 13,295 |   |   |         | 10,511 |  
|                                                                       | General and administrative                               |                         |         | 25,953 |      |   |         | 22,185 |   |   |         | 17,100 |  
|                                                                       | Restructuring charges                                    |                         |         |       |      |   |         |       |   |   |         | 1,237  |  
|                                                                       | Amortization of pre-publication costs                    |                         |         | 13,150 |      |   |         | 9,106  |   |   |         | 6,835  |  
|                                                                       | Depreciation expense and amortization of intangibles     |                         |         | 5,038  |      |   |         | 2,954  |   |   |         | 2,099  |  
|                                                                       |                                                          |                         |         |        |      |   |         |        |  
|Total costs and expenses                                               |                                                          |                         | 173,579 |        |      |   | 139,358 |        |   |   | 116,610 |       
|                                                                       |                                                          |                         |         |        |      |   |         |        |  
|Income from operations                                                 |                                                          |                         | 36,906  |        |      |   | 31,535  |        |   |   | 32,649  |       
|Other (income) expenses:                                               |                                                          |                         |         |        |      |   |         |        |   |   |         |       
|                                                                       | Interest expense                                         |                         |         | 59,328 |      |   |         | 48,194 |   |   |         | 19,928 |  
|                                                                       | Interest income                                          |                         |         | (1,872 | )    |   |         | (777   | ) |   |         | (250   | )
|                                                                       | Amortization and write-off of deferred financing costs   |                         |         | 3,579  |      |   |         | 2,937  |   |   |         | 5,215  |  
|                                                                       | Redemption premiums                                      |                         |         |       |      |   |         |       |   |   |         | 9,236  |  
|                                                                       | Other expense (income)                                   |                         |         | 180    |      |   |         | (73    | ) |   |         | 97     |  
|                                                                       |                                                          |                         |         |        |      |   |         |        |  
|Total other expenses                                                   |                                                          |                         | 61,215  |        |      |   | 50,281  |        |   |   | 34,226  |       
|                                                                       |                                                          |                         |         |        |      |   |         |        |  
|Loss before provision for income taxes and discontinued
    operations |                                                          |                         | (24,309 | )      |      |   | (18,746 | )      |   |   | (1,577  | )     
|Provision for income taxes                                             |                                                          |                         | 15,142  |        |      |   | 47      |        |   |   |        |       
|                                                                       |                                                          |                         |         |        |      |   |         |        |  
|Loss before discontinued operations                                    |                                                          |                         | (39,451 | )      |      |   | (18,793 | )      |   |   | (1,577  | )     
|Discontinued operations:                                               |                                                          |                         |         |        |      |   |         |        |   |   |         |       
|                                                                       | (Loss) income from operations of discontinued operations |                         |         | (3,731 | )    |   |         | (2,076 | ) |   |         | 622    |  
|                                                                       | Loss on disposal of discontinued operations              |                         |         | (1,245 | )    |   |         | (1,712 | ) |   |         | (911   | )
|                                                                       |                                                          |                         |         |        |      |   |         |        |  
|Net loss                                                               |                                                          | $                       | (44,427 | )      |      | $ | (22,581 | )      |   | $ | (1,866  | )     
|Preferred stock dividends and accretion                                |                                                          |                         | (3,048  | )      |      |   | (2,735  | )      |   |   | (17,472 | )     
|                                                                       |                                                          |                         |         |        |      |   |         |        |  
|Net loss available to common stockholders                              |                                                          | $                       | (47,475 | )      |      | $ | (25,316 | )      |   | $ | (19,338 | )     
|                                                                       |                                                          |                         |         |        |      |   |         |        |  



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HAIGHTS CROSS COMMUNICATIONS, INC. AND SUBSIDIARIES





CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS
DEFICIT


|                                |                                                   |                                         |                          |             |               |                |    |             |   |       |               |   |      |         |          |         |   |   |          |         |      |         |  
|------------------------------- | ------------------------------------------------- | --------------------------------------- | ------------------------ | ----------- | ------------- | -------------- | -- | ----------- | - | ----- | ------------- | - | ---- | ------- | -------- | ------- | - | - | -------- | ------- | ---- | ------- | -
|                                |                                                   |                                         |                          | Accumulated |               |                |    |             |  
|                                |                                                   | Common Stock                            |                          |             | Other         |                |    |             |   | Total |              
|                                |                                                   |                                         |                          |             | Comprehensive |                |    | Accumulated |   |       | Stockholders |  
|                                |                                                   | Shares                                  |                          |             | Amount        |                |    | Income      |   |       | Deficit       |   |      | Deficit |         
|                                |                                                   |                                         |                          |             |               |                |    |             |   |       |               |   |      |         |         
|                                |                                                   |                                         |                          |             |               | (In thousands) |    |             |  
|Balance as of January 1, 2003   |                                                   |                                         | 20,000                   |             |               | $              | 20 |             |   | $     |              |   |      | $       | (135,455 | )       |   | $ | (135,435 | )      
|                                | Comprehensive loss: Net loss                      |                                         |                          |            |               |                |    |            |   |       |               |  |      |         |          | (1,866  | ) |   |          | (1,866  | )   
|                                |                                                   | Foreign currency translation adjustment |                          |             |              |                |    |             |  |       |               |   | 299  |         |          |         |  |   |          |         | 299  |        
|                                |                                                   |                                         |                          |             |               |                |    |             |   |       |               |   |      |         |         
|                                |                                                   |                                         | Total comprehensive loss |             |               |                |    |             |   |       |               |   |      |         |          |         |   |   |          |         |      | (1,567  | )
|                                | Cancellation of Series A preferred stock warrants |                                         |                          |            |               |                |    |            |   |       |               |  |      |         |          | (1,880  | ) |   |          | (1,880  | )   
|                                | Preferred stock dividends and accretion           |                                         |                          |            |               |                |    |            |   |       |               |  |      |         |          | (17,472 | ) |   |          | (17,472 | )   
|                                |                                                   |                                         |                          |             |               |                |    |             |   |       |               |   |      |         |         
|Balance as of December 31, 2003 |                                                   |                                         | 20,000                   |             |               |                | 20 |             |   |       | 299           |   |      |         | (156,673 | )       |   |   | (156,354 | )      
|                                | Comprehensive loss: Net loss                      |                                         |                          |            |               |                |    |            |   |       |               |  |      |         |          | (22,581 | ) |   |          | (22,581 | )   
|                                |                                                   | Foreign currency translation adjustment |                          |             |              |                |    |             |  |       |               |   | 227  |         |          |         |  |   |          |         | 227  |        
|                                |                                                   |                                         |                          |             |               |                |    |             |   |       |               |   |      |         |         
|                                |                                                   |                                         | Total comprehensive loss |             |               |                |    |             |   |       |               |   |      |         |          |         |   |   |          |         |      | (22,354 | )
|                                | Preferred stock dividends and accretion           |                                         |                          |            |               |                |    |            |   |       |               |  |      |         |          | (2,735  | ) |   |          | (2,735  | )   
|                                |                                                   |                                         |                          |             |               |                |    |             |   |       |               |   |      |         |         
|Balance as of December 31, 2004 |                                                   |                                         | 20,000                   |             |               |                | 20 |             |   |       | 526           |   |      |         | (181,989 | )       |   |   | (181,443 | )      
|                                | Comprehensive loss: Net loss                      |                                         |                          |            |               |                |    |            |   |       |               |  |      |         |          | (44,427 | ) |   |          | (44,427 | )   
|                                |                                                   | Foreign currency translation adjustment |                          |             |              |                |    |             |  |       |               |   | (242 | )       |          |         |  |   |          |         | (242 | )      
|                                |                                                   |                                         |                          |             |               |                |    |             |   |       |               |   |      |         |         
|                                |                                                   |                                         | Total comprehensive loss |             |               |                |    |             |   |       |               |   |      |         |          |         |   |   |          |         |      | (44,669 | )
|                                | Stock based compensation expense                 |                                         |                          |            |               |                |    |            |   |       |               |  |      |         |          | 3       |   |   |          | 3       |     
|                                | Issuances pursuant to stock options               |                                         |                          | 8           |               |                |    |            |   |       |               |  |      |         |          | 9       |   |   |          | 9       |     
|                                | Preferred stock dividends and accretion           |                                         |                          |            |               |                |    |            |   |       |               |  |      |         |          | (3,048  | ) |   |          | (3,048  | )   
|                                |                                                   |                                         |                          |             |               |                |    |             |   |       |               |   |      |         |         
|Balance as of December 31, 2005 |                                                   |                                         | 20,008                   |             |               | $              | 20 |             |   | $     | 284           |   |      | $       | (229,452 | )       |   | $ | (229,148 | )      
|                                |                                                   |                                         |                          |             |               |                |    |             |   |       |               |   |      |         |         



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HAIGHTS CROSS COMMUNICATIONS, INC. AND SUBSIDIARIES





CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                                                                                               |                                                                                                    |                                                             |         |        |        |   |         |        |        |   |          |       |        |  
|-------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------- | ----------------------------------------------------------- | ------- | ------ | ------ | - | ------- | ------ | ------ | - | -------- | ----- | ------ | -
|                                                                                                               |                                                                                                    | Year Ended December 31,                                     |        
|                                                                                                               |                                                                                                    |                                                             |        
|                                                                                                               |                                                                                                    | 2005                                                        |         |        | 2004   |   |         | 2003   |       
|                                                                                                               |                                                                                                    |                                                             |         |        |        |   |         |        |       
|                                                                                                               |                                                                                                    | (In thousands)                                              |        
|Operating activities from Continuing Operations                                                                |                                                                                                    |                                                             |         |        |        |   |         |        |        |   |          |      
|Net loss from continuing operations                                                                            |                                                                                                    | $                                                           | (39,451 | )      |        | $ | (18,793 | )      |        | $ | (1,577   | )    
|Adjustments to reconcile net loss from continuing operations to
    net cash provided by operating activities: |                                                                                                    |                                                             |         |        |        |   |         |        |        |   |          |      
|                                                                                                               | Redemption premiums                                                                                |                                                             |         |       |        |   |         |       |        |   |          | 9,236 |       
|                                                                                                               | Non-cash interest expense                                                                          |                                                             |         | 29,069 |        |   |         | 24,671 |        |   |          | 5,670 |       
|                                                                                                               | Allowance for doubtful accounts and obsolescence                                                   |                                                             |         | 4,995  |        |   |         | 3,999  |        |   |          | 3,343 |       
|                                                                                                               | Depreciation and amortization of property and equipment,
    pre-publication costs and intangibles |                                                             |         | 18,188 |        |   |         | 12,060 |        |   |          | 8,934 |       
|                                                                                                               | Amortization of deferred financing costs                                                           |                                                             |         | 3,579  |        |   |         | 2,937  |        |   |          | 2,027 |       
|                                                                                                               | Write-off of deferred financing costs                                                              |                                                             |         |       |        |   |         |       |        |   |          | 3,188 |       
|                                                                                                               | Deferred taxes  non-cash                                                                          |                                                             |         | 14,830 |        |   |         |       |        |   |          |      |       
|                                                                                                               | Other non-operating income  non-cash                                                              |                                                             |         | (475   | )      |   |         | (98    | )      |   |          | 162   |       
|                                                                                                               | Changes in operating assets and liabilities:                                                       |                                                             |         |        |        |   |         |        |        |   |          |       |       
|                                                                                                               |                                                                                                    | Accounts receivable                                         |         |        | (5,235 | ) |         |        | (6,009 | ) |          |       | 311    |  
|                                                                                                               |                                                                                                    | Inventory                                                   |         |        | (2,451 | ) |         |        | (2,726 | ) |          |       | 124    |  
|                                                                                                               |                                                                                                    | Prepaid expenses, royalty advances and other current assets |         |        | (497   | ) |         |        | (439   | ) |          |       | (2,306 | )
|                                                                                                               |                                                                                                    | Direct response advertising costs                           |         |        | (1,556 | ) |         |        | (435   | ) |          |       | (268   | )
|                                                                                                               |                                                                                                    | Other assets                                                |         |        | (21    | ) |         |        | (478   | ) |          |       | (56    | )
|                                                                                                               |                                                                                                    | Accounts payable, accrued and other liabilities             |         |        | 2,938  |   |         |        | 5,830  |   |          |       | (4,881 | )
|                                                                                                               |                                                                                                    | Accrued interest                                            |         |        | 483    |   |         |        | 1,646  |   |          |       | 6,509  |  
|                                                                                                               |                                                                                                    | Deferred subscription revenue                               |         |        | 95     |   |         |        | (932   | ) |          |       | (390   | )
|                                                                                                               |                                                                                                    |                                                             |         |        |        |   |         |        |       
|Net cash provided by operating activities from continuing
    operations                                       |                                                                                                    |                                                             | 24,491  |        |        |   | 21,233  |        |        |   | 30,026   |      
|                                                                                                               |                                                                                                    |                                                             |         |        |        |   |         |        |       
|Investing activities from Continuing Operations                                                                |                                                                                                    |                                                             |         |        |        |   |         |        |        |   |          |      
|Additions to pre-publication costs                                                                             |                                                                                                    |                                                             | (21,877 | )      |        |   | (12,163 | )      |        |   | (10,833  | )    
|Additions to property and equipment                                                                            |                                                                                                    |                                                             | (3,831  | )      |        |   | (3,248  | )      |        |   | (2,815   | )    
|Additions to intangible assets                                                                                 |                                                                                                    |                                                             | (20     | )      |        |   | (28     | )      |        |   |         |      
|Acquisitions, net of cash acquired                                                                             |                                                                                                    |                                                             | (12,255 | )      |        |   | (77,896 | )      |        |   |         |      
|Proceeds from sale of businesses                                                                               |                                                                                                    |                                                             | 8,500   |        |        |   |        |        |        |   | 7,550    |      
|Proceeds from sale of assets                                                                                   |                                                                                                    |                                                             |        |        |        |   | 29      |        |        |   | 19       |      
|                                                                                                               |                                                                                                    |                                                             |         |        |        |   |         |        |       
|Net cash used in investing activities from continuing operations                                               |                                                                                                    |                                                             | (29,483 | )      |        |   | (93,306 | )      |        |   | (6,079   | )    
|                                                                                                               |                                                                                                    |                                                             |         |        |        |   |         |        |       
|Financing activities from Continuing Operations                                                                |                                                                                                    |                                                             |         |        |        |   |         |        |        |   |          |      
|Proceeds from
    121/2% senior
    discount notes                                                             |                                                                                                    |                                                             |        |        |        |   | 73,653  |        |        |   |         |      
|Proceeds from
    113/4% senior
    notes                                                                      |                                                                                                    |                                                             |        |        |        |   | 33,150  |        |        |   | 140,000  |      
|Proceeds from senior secured term loan                                                                         |                                                                                                    |                                                             |        |        |        |   | 30,000  |        |        |   | 100,000  |      
|Repayment of senior secured term loan                                                                          |                                                                                                    |                                                             | (1,300  | )      |        |   | (1,000  | )      |        |   | (250     | )    
|Proceeds from senior credit facility                                                                           |                                                                                                    |                                                             |        |        |        |   |        |        |        |   | 12,000   |      
|Repayment of senior credit facility                                                                            |                                                                                                    |                                                             |        |        |        |   |        |        |        |   | (154,350 | )    
|Repayment of subordinated notes                                                                                |                                                                                                    |                                                             |        |        |        |   |        |        |        |   | (75,211  | )    
|Repurchase of Series B Senior preferred stock                                                                  |                                                                                                    |                                                             |        |        |        |   | (13,999 | )      |        |   |         |      
|Proceeds from exercise of stock options                                                                        |                                                                                                    |                                                             | 9       |        |        |   |        |        |        |   |         |      
|Additions to deferred financing costs                                                                          |                                                                                                    |                                                             | (511    | )      |        |   | (5,235  | )      |        |   | (15,391  | )    
|                                                                                                               |                                                                                                    |                                                             |         |        |        |   |         |        |       
|Net cash (used in) provided by financing activities from
    continuing operations                             |                                                                                                    |                                                             | (1,802  | )      |        |   | 116,569 |        |        |   | 6,798    |      
|                                                                                                               |                                                                                                    |                                                             |         |        |        |   |         |        |       
|Effect of exchange rates on cash                                                                               |                                                                                                    |                                                             | (154    | )      |        |   | 162     |        |        |   | 211      |      
|Cash flows of discontinued operations                                                                          |                                                                                                    |                                                             |         |        |        |   |         |        |        |   |          |      
|Operating cash flows                                                                                           |                                                                                                    |                                                             | 1       |        |        |   | 4,023   |        |        |   | 2,110    |      
|Investing cash flows                                                                                           |                                                                                                    |                                                             | (2,042  | )      |        |   | (2,489  | )      |        |   | (3,378   | )    
|                                                                                                               |                                                                                                    |                                                             |         |        |        |   |         |        |       
|Net cash (used in) provided by discontinued operations                                                         |                                                                                                    |                                                             | (2,041  | )      |        |   | 1,534   |        |        |   | (1,268   | )    
|Net (decrease) increase in cash and cash equivalents                                                           |                                                                                                    |                                                             | (8,989  | )      |        |   | 46,192  |        |        |   | 29,688   |      
|Cash and cash equivalents at beginning of year                                                                 |                                                                                                    |                                                             | 78,581  |        |        |   | 32,389  |        |        |   | 2,701    |      
|                                                                                                               |                                                                                                    |                                                             |         |        |        |   |         |        |       
|Cash and cash equivalents at end of year                                                                       |                                                                                                    | $                                                           | 69,592  |        |        | $ | 78,581  |        |        | $ | 32,389   |      
|                                                                                                               |                                                                                                    |                                                             |         |        |        |   |         |        |       
|Supplemental disclosure                                                                                        |                                                                                                    |                                                             |         |        |        |   |         |        |        |   |          |      
|Cash paid during the year for:                                                                                 |                                                                                                    |                                                             |         |        |        |   |         |        |        |   |          |      
|                                                                                                               | Interest                                                                                           |                                                             | $       | 29,740 |        |   | $       | 21,855 |        |   | $        | 7,517 |       
|                                                                                                               | Income taxes                                                                                       |                                                             | $       | 44     |        |   |         |       |        |   |          |      |       



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HAIGHTS CROSS COMMUNICATIONS, INC. AND SUBSIDIARIES





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


December 31, 2005


(In thousands)




|   |                                    
|-- | -----------------------------------
|1. | Nature of Business and Organization











| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | K-12 Supplemental Education: The Company publishes
    supplemental reading materials for the kindergarten through
    eighth grade, or PreK-8, marketed under the well-recognized
    imprints Sundance Publishingand Newbridge Educational
    Publishing, and the Company also offers non-proprietary
    supplemental reading and literature products for the K-12 market.                                                                                                              
|
| |  | Test-prep and Intervention:The Company publishes
    state-specific test preparation materials for K-12 competency
    tests under our well-recognized imprints and brands such as
    Triumph Learning, Coachand Buckle Down. The
    Company also offers skills assessment products and intervention
    materials for struggling math and reading students under the
    widely known Options Publishingimprint.                                                                         
|
| |  | Library: The Company publishes unabridged audiobooks and
    other products for adults and children, under the Recorded
    Booksimprint, and market these titles, as well as selected
    non-proprietary audiobooks and other products, primarily to
    public libraries and schools.                                                                                                                                                                                                    
|
| |  | Medical Education:The Company publishes audio and
    video-based continuing medical education, or CME, materials for
    doctors and other health care professionals under the
    Oakstone Publishingimprint and self-study CME courses
    under the Companys CMEinfobrand. The Company also
    publishes personal wellness information products for companies
    seeking to improve employee awareness of health and wellness
    issues under the Top Healthand Personal Bestbrands.



|   |                                           
|-- | ------------------------------------------
|2. | Summary of Significant Accounting Policies



| |                            
| | ---------------------------
| | Principles of Consolidation

Buckle Down Publishing Options Publishing Scott Publishing info


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HAIGHTS CROSS COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Chelsea House Chelsea House




| |                 
| | ----------------
| | Use of Estimates





| |                              
| | -----------------------------
| | Concentrations of Credit Risk





| |                                                    
| | ---------------------------------------------------
| | Fair Value and Credit Risk of Financial Instruments

3 4 1 2




|                                 |  |                   |         |  |            |   |         | 
|-------------------------------- |  | ----------------- | ------- |  | ---------- | - | ------- | 
|                                 |  | December 31, 2005 |        
|                                 |  |                   |        
|                                 |  | Carrying Value    |         |  | Fair Value |  
|                                 |  |                   |         |  |            |  
|Senior secured term loan         |  | $                 | 127,450 |  |            | $ | 127,450 | 
|113/4% senior
    notes          |  |                   | 172,630 |  |            |   | 180,200 | 
|121/2% senior
    discount notes |  |                   | 92,875  |  |            |   | 75,600  | 



| |                 
| | ----------------
| | Cash Equivalents





| |                    
| | -------------------
| | Revenue Recognition



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HAIGHTS CROSS COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                      
| | ---------------------
| | Shipping and Handling





| |          
| | ---------
| | Inventory

first-in,




| |                  
| | -----------------
| | Prepaid Royalties





| |            
| | -----------
| | Advertising











| |                      
| | ---------------------
| | Pre-publication Costs



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HAIGHTS CROSS COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                       
| | ----------------------
| | Property and Equipment

Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use.




| |                               
| | ------------------------------
| | Goodwill and other intangibles

Goodwill and Other Intangible Assets






| |                  
| | -----------------
| | Long-Lived Assets

Accounting for
the Impairment or Disposal of Long-Lived Assets


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HAIGHTS CROSS COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                         
| | ------------------------
| | Stock-Based Compensation



Accounting for Stock-Based Compensation






|                        |  |      |         |   |      |  |         |      |  |  |         |  
|----------------------- |  | ---- | ------- | - | ---- |  | ------- | ---- |  |  | ------- | -
|                        |  | 2005 |         |   | 2004 |  |         | 2003 | 
|                        |  |      |         |   |      |  |         |      | 
|Risk free interest rate |  |      | 4.08    | % |      |  | 4.25    | %    |  |  | 3.79    | %
|Expected dividend yield |  |      | 0       | % |      |  | 0       | %    |  |  | 0       | %
|Expected lives          |  |      | 6 years |   |      |  | 6 years |      |  |  | 6 years |  
|                        |  |      |         |   |      |  |         |      | 





| |             
| | ------------
| | Income Taxes





| |                             
| | ----------------------------
| | Foreign Currency Translation



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HAIGHTS CROSS COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                         
| | ------------------------
| | Redeemable Capital Stock





| |                 
| | ----------------
| | Reclassification

Chelsea House Chelsea House




| |                                 
| | --------------------------------
| | Recent Accounting Pronouncements







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HAIGHTS CROSS COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|   |             
|-- | ------------
|3. | Acquisitions



| |                       
| | ----------------------
| | Buckle Down Publishing

Buckle Down


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HAIGHTS CROSS COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                               |  |                 |        | 
|---------------------------------------------- |  | --------------- | ------ | 
|                                               |  | As of April 15, |       
|                                               |  | 2004            |       
|                                               |  |                 |       
|Working capital, net (excluding cash acquired) |  | $               | 1,769  | 
|Pre-publication costs                          |  |                 | 3,600  | 
|Property and equipment                         |  |                 | 193    | 
|Intangibles                                    |  |                 | 9,000  | 
|                                               |  |                 |       
|Net assets acquired                            |  |                 | 14,562 | 
|Goodwill recorded                              |  |                 | 11,717 | 
|                                               |  |                 |       
|Net cost                                       |  | $               | 26,279 | 
|                                               |  |                 |       



| |                   
| | ------------------
| | Options Publishing





|                                               |  |                   |        | 
|---------------------------------------------- |  | ----------------- | ------ | 
|                                               |  | As of December 3, |       
|                                               |  | 2004              |       
|                                               |  |                   |       
|Working capital, net (excluding cash acquired) |  | $                 | 1,865  | 
|Pre-publication costs                          |  |                   | 5,570  | 
|Property and equipment                         |  |                   | 1,929  | 
|Intangibles                                    |  |                   | 14,930 | 
|                                               |  |                   |       
|Net assets acquired                            |  |                   | 24,294 | 
|Goodwill recorded                              |  |                   | 28,577 | 
|                                               |  |                   |       
|Net cost                                       |  | $                 | 52,871 | 
|                                               |  |                   |       



| |                 
| | ----------------
| | Scott Publishing

®


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HAIGHTS CROSS COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|                                               |  |                 |       | 
|---------------------------------------------- |  | --------------- | ----- | 
|                                               |  | As of April 15, |      
|                                               |  | 2005            |      
|                                               |  |                 |      
|Working capital, net (excluding cash acquired) |  | $               | 176   | 
|Intangibles                                    |  |                 | 1,560 | 
|                                               |  |                 |      
|Net assets acquired                            |  |                 | 1,736 | 
|Goodwill recorded                              |  |                 | 1,891 | 
|                                               |  |                 |      
|Net cost                                       |  | $               | 3,627 | 
|                                               |  |                 |      



| |        
| | -------
| | CMEinfo

info.com, Inc. info info info info


info


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HAIGHTS CROSS COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                               |  |                |       |  
|---------------------------------------------- |  | -------------- | ----- | -
|                                               |  | As of June 15, |      
|                                               |  | 2005           |      
|                                               |  |                |      
|Working capital, net (excluding cash acquired) |  | $              | (168  | )
|Pre-publication costs                          |  |                | 890   |  
|Property and equipment                         |  |                | 92    |  
|Intangibles                                    |  |                | 4,420 |  
|                                               |  |                |      
|Net assets acquired                            |  |                | 5,234 |  
|Goodwill recorded                              |  |                | 2,234 |  
|                                               |  |                |      
|Net cost                                       |  | $              | 7,468 |  
|                                               |  |                |      



| |                                
| | -------------------------------
| | Pro Forma Financial Information

Buckle Down Publishing Options
Publishing


|                                                     |  |          |         |   |             |          |       |            |  |   |          |   |  |   |         |  
|---------------------------------------------------- |  | -------- | ------- | - | ----------- | -------- | ----- | ---------- |  | - | -------- | - |  | - | ------- | -
|                                                     |  |          |         |   |             | Proforma |       |            | 
|                                                     |  | HCC as   |         |   | Proforma    |          |       | Options    |  |   | HCC      |  
|For the Year Ended December 31, 2004                 |  | Reported |         |   | Buckle Down |          |       | Publishing |  |   | Proforma |  
|                                                     |  |          |         |   |             |          |       |            |  |   |          |  
|Revenue                                              |  | $        | 170,893 |   |             | $        | 2,721 |            |  | $ | 18,259   |   |  | $ | 191,873 |  
|Cost of goods sold                                   |  |          | 52,998  |   |             |          | 634   |            |  |   | 3,187    |   |  |   | 56,819  |  
|Marketing and sales                                  |  |          | 38,820  |   |             |          | 634   |            |  |   | 6,159    |   |  |   | 45,613  |  
|Fulfillment and distribution                         |  |          | 13,295  |   |             |          | 295   |            |  |   | 936      |   |  |   | 14,526  |  
|General and administrative                           |  |          | 22,185  |   |             |          | 381   |            |  |   | 1,251    |   |  |   | 23,817  |  
|Amortization of pre-publication costs                |  |          | 9,106   |   |             |          | 540   |            |  |   | 1,332    |   |  |   | 10,978  |  
|Depreciation expense and amortization of intangibles |  |          | 2,954   |   |             |          | 520   |            |  |   | 1,441    |   |  |   | 4,915   |  
|                                                     |  |          |         |   |             |          |       |            |  |   |          |  
|Income (loss) from operations                        |  |          | 31,535  |   |             |          | (283  | )          |  |   | 3,953    |   |  |   | 35,205  |  
|Other expense                                        |  |          | 50,328  |   |             |          | 103   |            |  |   | 6,633    |   |  |   | 57,064  |  
|                                                     |  |          |         |   |             |          |       |            |  |   |          |  
|Loss before discontinued operations                  |  |          | (18,793 | ) |             |          | (386  | )          |  |   | (2,680   | ) |  |   | (21,859 | )
|Loss from discontinued operations                    |  |          | (3,788  | ) |             |          |      |            |  |   |         |   |  |   | (3,788  | )
|                                                     |  |          |         |   |             |          |       |            |  |   |          |  
|Net loss                                             |  | $        | (22,581 | ) |             | $        | (386  | )          |  | $ | (2,680   | ) |  | $ | (25,647 | )
|                                                     |  |          |         |   |             |          |       |            |  |   |          |  

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HAIGHTS CROSS COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|                                                     |  |          |         |   |             |          |        |            |  |   |          |   |  |   |         |  
|---------------------------------------------------- |  | -------- | ------- | - | ----------- | -------- | ------ | ---------- |  | - | -------- | - |  | - | ------- | -
|                                                     |  |          |         |   |             | Proforma |        |            | 
|                                                     |  | HCC as   |         |   | Proforma    |          |        | Options    |  |   | HCC      |  
|For the Year Ended December 31, 2003                 |  | Reported |         |   | Buckle Down |          |        | Publishing |  |   | Proforma |  
|                                                     |  |          |         |   |             |          |        |            |  |   |          |  
|Revenue                                              |  | $        | 149,259 |   |             | $        | 10,712 |            |  | $ | 16,278   |   |  | $ | 176,249 |  
|Cost of goods sold                                   |  |          | 45,925  |   |             |          | 2,116  |            |  |   | 3,734    |   |  |   | 51,775  |  
|Marketing and sales                                  |  |          | 32,903  |   |             |          |       |            |  |   | 6,178    |   |  |   | 39,081  |  
|Fulfillment and distribution                         |  |          | 10,511  |   |             |          |       |            |  |   | 322      |   |  |   | 10,833  |  
|General and administrative                           |  |          | 17,100  |   |             |          | 4,849  |            |  |   | 1,060    |   |  |   | 23,009  |  
|Restructuring charges                                |  |          | 1,237   |   |             |          |       |            |  |   |         |   |  |   | 1,237   |  
|Amortization of pre-publication costs                |  |          | 6,835   |   |             |          | 900    |            |  |   | 1,440    |   |  |   | 9,175   |  
|Depreciation expense and amortization of intangibles |  |          | 2,099   |   |             |          | 694    |            |  |   | 1,561    |   |  |   | 4,354   |  
|                                                     |  |          |         |   |             |          |        |            |  |   |          |  
|Income (loss) from operations                        |  |          | 32,649  |   |             |          | 2,153  |            |  |   | 1,983    |   |  |   | 36,785  |  
|Other expense                                        |  |          | 34,226  |   |             |          | 1,089  |            |  |   | 6,475    |   |  |   | 41,790  |  
|                                                     |  |          |         |   |             |          |        |            |  |   |          |  
|Loss before discontinued operations                  |  |          | (1,577  | ) |             |          | 1,064  |            |  |   | (4,492   | ) |  |   | (5,005  | )
|Loss from discontinued operations                    |  |          | (289    | ) |             |          |       |            |  |   |         |   |  |   | (289    | )
|                                                     |  |          |         |   |             |          |        |            |  |   |          |  
|Net loss                                             |  | $        | (1,866  | ) |             | $        | 1,064  |            |  | $ | (4,492   | ) |  | $ | (5,294  | )
|                                                     |  |          |         |   |             |          |        |            |  |   |          |  

info Scott Publishing




|   |                    
|-- | -------------------
|4. | Accounts Receivable



|                                     |                           |              |        |        |      |   |        |        | 
|------------------------------------ | ------------------------- | ------------ | ------ | ------ | ---- | - | ------ | ------ | 
|                                     |                           | December 31, |       
|                                     |                           |              |       
|                                     |                           | 2005         |        |        | 2004 |  
|                                     |                           |              |        |        |      |  
|Accounts receivable                  |                           | $            | 24,791 |        |      | $ | 22,756 |       
|Sundry receivables                   |                           |              | 1,500  |        |      |   |       |       
|                                     |                           |              |        |        |      |  
|                                     | Total accounts receivable |              |        | 26,291 |      |   |        | 22,756 | 
|                                     |                           |              |        |        |      |  
|Less allowance for doubtful accounts |                           |              | 3,487  |        |      |   | 3,351  |       
|                                     |                           |              |        |        |      |  
|Accounts receivable, net             |                           | $            | 22,804 |        |      | $ | 19,405 |       
|                                     |                           |              |        |        |      |  

info


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HAIGHTS CROSS COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |          
|-- | ---------
|5. | Inventory



|                                |  |              |        |  |      |   |        | 
|------------------------------- |  | ------------ | ------ |  | ---- | - | ------ | 
|                                |  | December 31, |       
|                                |  |              |       
|                                |  | 2005         |        |  | 2004 |  
|                                |  |              |        |  |      |  
|Supplies                        |  | $            | 1,059  |  |      | $ | 799    | 
|Work-in-process                 |  |              | 716    |  |      |   | 783    | 
|Finished goods                  |  |              | 23,278 |  |      |   | 21,370 | 
|                                |  |              |        |  |      |  
|                                |  |              | 25,053 |  |      |   | 22,952 | 
|Less allowance for obsolescence |  |              | 2,749  |  |      |   | 2,032  | 
|                                |  |              |        |  |      |  
|Inventory, net                  |  | $            | 22,304 |  |      | $ | 20,920 | 
|                                |  |              |        |  |      |  



|   |                      
|-- | ---------------------
|6. | Pre-publication Costs



|                              |  |              |        |  |      |   |        | 
|----------------------------- |  | ------------ | ------ |  | ---- | - | ------ | 
|                              |  | December 31, |       
|                              |  |              |       
|                              |  | 2005         |        |  | 2004 |  
|                              |  |              |        |  |      |  
|Pre-publication costs         |  | $            | 89,557 |  |      | $ | 71,279 | 
|Less accumulated amortization |  |              | 46,716 |  |      |   | 36,341 | 
|                              |  |              |        |  |      |  
|Pre-publication costs, net    |  | $            | 42,841 |  |      | $ | 34,938 | 
|                              |  |              |        |  |      |  





|   |                       
|-- | ----------------------
|7. | Property and Equipment



|                              |  |              |        |  |      |   |        | 
|----------------------------- |  | ------------ | ------ |  | ---- | - | ------ | 
|                              |  | December 31, |       
|                              |  |              |       
|                              |  | 2005         |        |  | 2004 |  
|                              |  |              |        |  |      |  
|Furniture and fixtures        |  | $            | 2,678  |  |      | $ | 2,605  | 
|Office equipment and software |  |              | 12,654 |  |      |   | 9,680  | 
|Land and building             |  |              | 4,782  |  |      |   | 4,753  | 
|Leasehold improvements        |  |              | 2,371  |  |      |   | 1,800  | 
|                              |  |              |        |  |      |  
|                              |  |              | 22,485 |  |      |   | 18,838 | 
|Less accumulated depreciation |  |              | 11,182 |  |      |   | 8,912  | 
|                              |  |              |        |  |      |  
|Property and equipment, net   |  | $            | 11,303 |  |      | $ | 9,926  | 
|                              |  |              |        |  |      |  





|   |                         
|-- | ------------------------
|8. | Goodwill and Intangibles



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HAIGHTS CROSS COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                            |                                |   |         |        |  
|--------------------------- | ------------------------------ | - | ------- | ------ | -
|Goodwill, January 1, 2004   |                                | $ | 125,005 |       
|Add:                        |                                |   |         |       
|                            | Buckle Down Acquisition        |   |         | 11,717 |  
|                            | Options Publishing acquisition |   |         | 29,416 |  
|                            | Other                          |   |         | 41     |  
|                            |                                |   |        
|Goodwill, December 31, 2004 |                                | $ | 166,179 |       
|                            | Scott Publishing acquisition   |   |         | 1,891  |  
|                            | CMEinfo acquisition            |   |         | 2,234  |  
|                            | Options Publishing acquisition |   |         | (839   | )
|                            | Other                          |   |         | (41    | )
|                            |                                |   |        
|Goodwill, December 31, 2005 |                                | $ | 169,424 |       
|                            |                                |   |        

Scott Publishing info


Buckle Down, Options
Publishing, Scott Publishing info


|                               |                       |                   |            |              |                   |   |      |             |         |   |            |       |  |            |        |        |         |   |     |              |  |   |              |       |  |   |        |        |  |   |        |        | 
|------------------------------ | --------------------- | ----------------- | ---------- | ------------ | ----------------- | - | ---- | ----------- | ------- | - | ---------- | ----- |  | ---------- | ------ | ------ | ------- | - | --- | ------------ |  | - | ------------ | ----- |  | - | ------ | ------ |  | - | ------ | ------ | 
|                               |                       | December 31, 2005 |            |              | December 31, 2004 |  
|                               |                       |                   |            |              |                   |  
|                               |                       |                   |            | HCC          |                   |   |      |             |        
|                               |                       |                   |            | Exclusive of |                   |   |      |             | Options |   |            | Scott |  |            |        |        |        
|Definite Life Assets           |                       | Lives             |            |              | Acquisitions      |   |      | Buckle Down |         |   | Publishing |       |  | Publishing |        |        | CMEinfo |   |     | Consolidated |  |   | Consolidated |      
|                               |                       |                   |            |              |                   |   |      |             |         |   |            |       |  |            |        |        |         |   |     |              |  |   |              |      
|Customer list                  |                       |                   | 10 years   |              |                   | $ |     |             |         | $ | 6,050      |       |  | $          | 14,330 |        |         | $ | 770 |              |  | $ | 2,090        |       |  | $ | 23,240 |        |  | $ | 18,050 |       
|Non-compete agreements         |                       |                   | 3-5 years  |              |                   |   |     |             |         |   | 250        |       |  |            | 600    |        |         |   | 50  |              |  |   | 1,000        |       |  |   | 1,900  |        |  |   | 750    |       
|Other                          |                       |                   | 5 years    |              |                   |   | 179  |             |         |   |           |       |  |            |       |        |         |   |    |              |  |   |             |       |  |   | 179    |        |  |   | 117    |       
|                               |                       |                   |            |              |                   |   |      |             |         |   |            |       |  |            |        |        |         |   |     |              |  |   |              |      
|                               |                       |                   |            |              |                   |   | 179  |             |         |   | 6,300      |       |  |            | 14,930 |        |         |   | 820 |              |  |   | 3,090        |       |  |   | 25,319 |        |  |   | 18,917 |       
|Less: accumulated amortization |                       |                   |            |              |                   |   | (123 | )           |         |   | (1,119     | )     |  |            | (1,670 | )      |         |   | (62 | )            |  |   | (222         | )     |  |   | (3,196 | )      |  |   | (670   | )     
|                               |                       |                   |            |              |                   |   |      |             |         |   |            |       |  |            |        |        |         |   |     |              |  |   |              |      
|                               |                       |                   |            |              |                   |   | 56   |             |         |   | 5,181      |       |  |            | 13,260 |        |         |   | 758 |              |  |   | 2,868        |       |  |   | 22,123 |        |  |   | 18,247 |       
|Trademarks                     |                       |                   | Indefinite |              |                   |   | 41   |             |         |   | 2,700      |       |  |            |       |        |         |   | 740 |              |  |   | 1,330        |       |  |   | 4,811  |        |  |   | 2,741  |       
|                               |                       |                   |            |              |                   |   |      |             |         |   |            |       |  |            |        |        |         |   |     |              |  |   |              |      
|                               | Net intangible assets |                   |            |              |                   |   | $    | 97          |         |   | $          | 7,881 |  |            | $      | 13,260 |         |   | $   | 1,498        |  |   | $            | 4,198 |  |   | $      | 26,934 |  |   | $      | 20,988 | 
|                               |                       |                   |            |              |                   |   |      |             |         |   |            |       |  |            |        |        |         |   |     |              |  |   |              |      



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HAIGHTS CROSS COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                             |  |       |        | 
|---------------------------- |  | ----- | ------ | 
|                             |  | Total |       
|                             |  |       |       
|Amortization of intangibles: |  |       |        | 
|2006                         |  | $     | 2,728  | 
|2007                         |  |       | 2,722  | 
|2008                         |  |       | 2,714  | 
|2009                         |  |       | 2,662  | 
|2010 and thereafter          |  |       | 11,297 | 
|                             |  |       |       
|                             |  | $     | 22,123 | 
|                             |  |       |       

Scott Publishing info




|   |                                         
|-- | ----------------------------------------
|9. | Accounts Payable and Accrued Liabilities



|                                                    |  |              |        |  |      |   |        | 
|--------------------------------------------------- |  | ------------ | ------ |  | ---- | - | ------ | 
|                                                    |  | December 31, |       
|                                                    |  |              |       
|                                                    |  | 2005         |        |  | 2004 |  
|                                                    |  |              |        |  |      |  
|Trade accounts payable                              |  | $            | 11,284 |  |      | $ | 9,247  | 
|Accrued liabilities                                 |  |              | 8,873  |  |      |   | 8,546  | 
|Accrued management incentive                        |  |              | 5,005  |  |      |   | 4,633  | 
|Accrued compensation and related taxes and benefits |  |              | 2,906  |  |      |   | 2,613  | 
|Accrued disposition costs                           |  |              | 238    |  |      |   |       | 
|Accrued acquisition costs                           |  |              | 227    |  |      |   |       | 
|                                                    |  |              |        |  |      |  
|Accounts payable and accrued liabilities            |  | $            | 28,533 |  |      | $ | 25,039 | 
|                                                    |  |              |        |  |      |  



|    |             
|--- | ------------
|10. | Income Taxes



|                                 |              |              |        |        |      |   |    |      |  |   |   |   | 
|-------------------------------- | ------------ | ------------ | ------ | ------ | ---- | - | -- | ---- |  | - | - | - | 
|                                 |              | December 31,
|                                 |              |             
|                                 |              | 2005         |        |        | 2004 |   |    | 2003
|                                 |              |              |        |        |      |   |    |     
|Current income tax expense:      |              |              |        |        |      |   |    |      |  |   |   |  
|                                 | Foreign      |              | $      | 312    |      |   | $  | 47   |  |   | $ |  | 
|                                 |              |              |        |        |      |   |    |      | 
|                                 | Total        |              |        | 312    |      |   |    | 47   |  |   |   |  | 
|                                 |              |              |        |        |      |   |    |      | 
|Deferred income tax expense:     |              |              |        |        |      |   |    |      |  |   |   |  
|                                 | U.S. federal |              |        | 14,830 |      |   |    |     |  |   |   |  | 
|                                 |              |              |        |        |      |   |    |      | 
|                                 | Total        |              |        | 14,830 |      |   |    |     |  |   |   |  | 
|                                 |              |              |        |        |      |   |    |      | 
|Total provision for income taxes |              | $            | 15,142 |        |      | $ | 47 |      |  | $ |  |  
|                                 |              |              |        |        |      |   |    |      | 



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HAIGHTS CROSS COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                   |                                                 |                           |         |         |        |   |        |         |        | 
|-------------------------------------------------- | ----------------------------------------------- | ------------------------- | ------- | ------- | ------ | - | ------ | ------- | ------ | 
|                                                   |                                                 | December 31,              |        
|                                                   |                                                 |                           |        
|                                                   |                                                 | 2005                      |         |         | 2004   |  
|                                                   |                                                 |                           |         |         |        |  
|Deferred tax assets:                               |                                                 |                           |         |         |        |   |        |        
|                                                   | Net operating loss carryforwards                |                           | $       | 39,927  |        |   | $      | 29,183  |       
|                                                   | Interest on
    121/2% Senior
    Discount Note |                           |         | 5,807   |        |   |        | 2,603   |       
|                                                   | Allowance for doubtful accounts and notes       |                           |         | 1,024   |        |   |        | 962     |       
|                                                   | Inventory reserves                              |                           |         | 573     |        |   |        | 816     |       
|                                                   | Goodwill and intangible assets                  |                           |         |        |        |   |        | 474     |       
|                                                   |                                                 |                           |         |         |        |  
|                                                   |                                                 | Total deferred tax assets |         |         | 47,331 |   |        |         | 34,038 | 
|Deferred tax liabilities:                          |                                                 |                           |         |         |        |   |        |        
|                                                   | Goodwill and intangible assets                  |                           |         | (13,785 | )      |   |        |        |       
|                                                   | Direct response advertising                     |                           |         | (4,277  | )      |   |        | (3,767  | )     
|                                                   | Other                                           |                           |         | (426    | )      |   |        | (894    | )     
|                                                   |                                                 |                           |         |         |        |  
|                                                   | Total deferred tax liabilities                  |                           |         | (18,488 | )      |   |        | (4,661  | )     
|                                                   |                                                 |                           |         |         |        |  
|Net deferred tax assets before valuation allowance |                                                 |                           | 28,843  |         |        |   | 29,377 |        
|                                                   | Less valuation allowance                        |                           |         | (43,673 | )      |   |        | (29,377 | )     
|                                                   |                                                 |                           |         |         |        |  
|Net deferred tax liabilities                       |                                                 | $                         | (14,830 | )       |        | $ |       |        
|                                                   |                                                 |                           |         |         |        |  









|                                                      |  |              |     |    |      |  |     |      |  |  |     |  
|----------------------------------------------------- |  | ------------ | --- | -- | ---- |  | --- | ---- |  |  | --- | -
|                                                      |  | Year Ended   |    
|                                                      |  | December 31, |    
|                                                      |  |              |    
|                                                      |  | 2005         |     |    | 2004 |  |     | 2003 | 
|                                                      |  |              |     |    |      |  |     |      | 
|Statutory rate                                        |  |              | 34  | %  |      |  | 34  | %    |  |  | 34  | %
|State and local income taxes (net of federal benefit) |  |              | 6   |    |      |  | 6   |      |  |  | 6   |  
|Change in valuation allowance                         |  |              | (48 | )  |      |  | (18 | )    |  |  | (39 | )
|Non-deductible interest expense                       |  |              | (29 | )  |      |  | (27 | )    |  |  |    |  
|Other                                                 |  |              | (14 | )  |      |  | 5   |      |  |  | (1  | )
|                                                      |  |              |     |    |      |  |     |      | 
|Effective tax rate                                    |  |              | (51 | )% |      |  |    | %    |  |  |    | %
|                                                      |  |              |     |    |      |  |     |      | 



|    |                       
|--- | ----------------------
|11. | Financing Arrangements



| |                                                                                                     
| | ----------------------------------------------------------------------------------------------------
| | Senior Secured Revolving Credit Facility, Senior Secured
    Term Loans,
    113/4%
    Senior Notes



72



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HAIGHTS CROSS COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


3 4






3 4




121/2% Senior
Discount Notes


1 2 pari passu


73



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HAIGHTS CROSS COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                                 |            |          |          |  |      |  |          |            |  |   |               |  |  |            |         |   |         |  |       |   |  |   |         |         | 
|-------------------------------- | ---------- | -------- | -------- |  | ---- |  | -------- | ---------- |  | - | ------------- |  |  | ---------- | ------- | - | ------- |  | ----- | - |  | - | ------- | ------- | 
|                                 |            |          |          |  |      |  |          | Premium    |  |   | Interest Rate |  |  | Book Value |        
|                                 |            |          |          |  |      |  |          | (Discount) |  |   | As of         |  |  | As of      |        
|                                 |            | Issuance |          |  | Due  |  |          | Face       |  |   | At            |  |  | Dec 31,    |         |   | Dec 31, | 
|Instrument:                      |            | Date     |          |  | Date |  |          | Amount     |  |   | Issuance      |  |  | 2005       |         |   | 2005    | 
|                                 |            |          |          |  |      |  |          |            |  |   |               |  |  |            |         |   |         | 
|Haights Cross:                   |            |          |          |  |      |  |          |            |  |   |               |  |  |            |         |   |         |  |       |   |  |   |         |        
|Senior secured term loan         |            |          | 08/20/03 |  |      |  | 08/15/08 |            |  | $ | 100,000       |  |  |            |        |   |         |  | 8.84  | % |  | $ | 97,750  |        
|Senior secured term loan         |            |          | 12/10/04 |  |      |  | 08/15/08 |            |  | $ | 30,000        |  |  |            |        |   |         |  | 7.84  | % |  |   | 29,700  |        
|                                 |            |          |          |  |      |  |          |            |  |   |               |  |  |            |         |   |         | 
|                                 |            |          |          |  |      |  |          |            |  |   |               |  |  |            |         |   |         |  |       |   |  | $ | 127,450 |        
|113/4% Senior
    notes          |            |          | 08/20/03 |  |      |  | 08/15/11 |            |  | $ | 140,000       |  |  |            |        |   |         |  | 11.75 | % |  | $ | 140,000 |        
|113/4% Senior
    notes          |            |          | 12/10/04 |  |      |  | 08/15/11 |            |  | $ | 30,000        |  |  | $          | 3,150   |   |         |  | 11.75 | % |  |   | 32,630  |        
|                                 |            |          |          |  |      |  |          |            |  |   |               |  |  |            |         |   |         | 
|                                 |            |          |          |  |      |  |          |            |  |   |               |  |  |            |         |   |         |  |       |   |  | $ | 172,630 |        
|Haights Cross Communications:    |            |          |          |  |      |  |          |            |  |   |               |  |  |            |         |   |         |  |       |   |  |   |         |        
|121/2% Senior
    discount notes |            |          | 02/02/04 |  |      |  | 08/15/11 |            |  | $ | 135,000       |  |  | $          | (61,347 | ) |         |  | 12.5  | % |  | $ | 92,875  |        
|Series B preferred               |            |          | 12/10/99 |  |      |  | 12/10/11 |            |  | $ | 50,006        |  |  | $          | (3,410  | ) |         |  | 16.0  | % |  |   | 127,788 |        
|                                 |            |          |          |  |      |  |          |            |  |   |               |  |  |            |         |   |         | 
|                                 | Total debt |          |          |  |      |  |          |            |  |   |               |  |  |            |         |   |         |  |       |   |  |   | $       | 520,743 | 
|                                 |            |          |          |  |      |  |          |            |  |   |               |  |  |            |         |   |         | 



|                                      |            |   |         |         | 
|------------------------------------- | ---------- | - | ------- | ------- | 
|                                      | 2006       |   | $       | 1,300   | 
|                                      | 2007       |   |         | 1,300   | 
|                                      | 2008       |   |         | 124,850 | 
|                                      | 2009       |   |         |        | 
|                                      | Thereafter |   |         | 434,468 | 
|                                      |            |   |        
|Total                                 |            |   | 561,918 |        
|Less: Unamortized discounts and other |            |   | (41,175 | )      
|                                      |            |   |        
|                                      |            | $ | 520,743 |        
|                                      |            |   |        



|    |                                      
|--- | -------------------------------------
|12. | Equity and Redeemable Preferred Stock



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HAIGHTS CROSS COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




1 2










75



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HAIGHTS CROSS COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                                      |  |                         |        |   |             |   |         |             |  |   |        |  
|------------------------------------- |  | ----------------------- | ------ | - | ----------- | - | ------- | ----------- |  | - | ------ | -
|                                      |  | As of December 31, 2005 |       
|                                      |  |                         |       
|                                      |  | Preferred A             |        |   | Preferred B |   |         | Preferred C | 
|                                      |  |                         |        |   |             |   |         |             | 
|Issuance                              |  | $                       | 22,476 |   |             | $ | 50,006  |             |  | $ | 3,500  |  
|Accrued dividends                     |  |                         | 13,857 |   |             |   | 79,462  |             |  |   | 310    |  
|                                      |  |                         |        |   |             |   |         |             | 
|Liquidation value                     |  |                         | 36,333 |   |             |   | 129,468 |             |  |   | 3,810  |  
|Discount recorded on issuance         |  |                         | (203   | ) |             |   | (3,410  | )           |  |   | (2,407 | )
|Accumulated accretion of discount     |  |                         | 61     |   |             |   | 1,730   |             |  |   | 123    |  
|2,213 warrants for Series A Preferred |  |                         | 2,213  |   |             |   |        |             |  |   |       |  
|                                      |  |                         |        |   |             |   |         |             | 
|                                      |  | $                       | 38,404 |   |             | $ | 127,788 |             |  | $ | 1,526  |  
|                                      |  |                         |        |   |             |   |         |             | 







|    |                  
|--- | -----------------
|13. | Stock Option Plan







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HAIGHTS CROSS COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                |                   |           |           |          |                |   |      |      | 
|------------------------------- | ----------------- | --------- | --------- | -------- | -------------- | - | ---- | ---- | 
|                                |                   |           |           | Weighted |               
|                                |                   | Number of |           |          | Average        |  
|                                |                   | Shares    |           |          | Exercise Price |  
|                                |                   |           |           |          |                |  
|Balance as of December 31, 2002 |                   |           | 844,250   |          |                | $ | 1.58 |     
|                                | Granted in 2003   |           |           | 738,500  |                |   |      | 2.79 | 
|                                | Forfeited in 2003 |           |           | (159,750 | )              |   |      | 1.54 | 
|                                | Cancelled in 2003 |           |           | (88,800  | )              |   |      | 2.84 | 
|                                |                   |           |           |          |                |  
|Balance as of December 31, 2003 |                   |           | 1,334,200 |          |                |   | 1.61 |     
|                                | Granted in 2004   |           |           | 587,500  |                |   |      | 1.00 | 
|                                | Forfeited in 2004 |           |           | (366,555 | )              |   |      | 2.27 | 
|                                | Cancelled in 2004 |           |           |         |                |   |      |     | 
|                                |                   |           |           |          |                |  
|Balance as of December 31, 2004 |                   |           | 1,555,145 |          |                |   | 1.71 |     
|                                | Granted in 2005   |           |           | 254,000  |                |   |      | 1.12 | 
|                                | Exercised in 2005 |           |           | (8,300   | )              |   |      | 1.13 | 
|                                | Forfeited in 2005 |           |           | (218,485 | )              |   |      | 1.55 | 
|                                | Cancelled in 2005 |           |           | (12,203  | )              |   |      | 1.71 | 
|                                |                   |           |           |          |                |  
|Balance as of December 31, 2005 |                   |           | 1,570,157 |          |                | $ | 1.64 |     
|                                |                   |           |           |          |                |  





|               |  |                     |           |           |                     |  |            |          |  |   |             |           |  |          |         |  |  |   |      | 
|-------------- |  | ------------------- | --------- | --------- | ------------------- |  | ---------- | -------- |  | - | ----------- | --------- |  | -------- | ------- |  |  | - | ---- | 
|               |  | Options Outstanding |           |           |                    
|               |  |                     |           |           | Options Exercisable | 
|               |  |                     |           | Weighted- |                     |  |            |          |  |  
|               |  |                     |           | Average   |                     |  | Weighted-  |          |  |   |             | Weighted- | 
|               |  |                     |           | Remaining |                     |  | Average    |          |  |   |             | Average   | 
|               |  | Options             |           |           | Contractual         |  |            | Exercise |  |   | Options     |           |  | Exercise |        
|Exercise Price |  | Outstanding         |           |           | Life                |  |            | Price    |  |   | Exercisable |           |  | Price    |        
|               |  |                     |           |           |                     |  |            |          |  |   |             |           |  |          |        
|$0.83          |  |                     | 199,000   |           |                     |  | 6.0 years  |          |  | $ | 0.83        |           |  |          | 199,000 |  |  | $ | 0.83 | 
|$1.00          |  |                     | 658,610   |           |                     |  | 8.9 years  |          |  | $ | 1.00        |           |  |          | 88,610  |  |  | $ | 1.00 | 
|$1.19          |  |                     | 89,500    |           |                     |  | 6.0 years  |          |  | $ | 1.19        |           |  |          | 89,500  |  |  | $ | 1.19 | 
|$1.53          |  |                     | 57,500    |           |                     |  | 9.35 years |          |  | $ | 1.53        |           |  |          |        |  |  | $ | 1.53 | 
|$2.48          |  |                     | 157,500   |           |                     |  | 6.05 years |          |  | $ | 2.48        |           |  |          | 157,500 |  |  | $ | 2.48 | 
|$2.84          |  |                     | 408,047   |           |                     |  | 7.75 years |          |  | $ | 2.84        |           |  |          | 257,322 |  |  | $ | 2.84 | 
|               |  |                     |           |           |                     |  |            |          |  |   |             |           |  |          |        
|               |  |                     | 1,570,157 |           |                     |  |            |          |  | $ | 1.64        |           |  |          | 791,932 |  |  | $ | 1.87 | 
|               |  |                     |           |           |                     |  |            |          |  |   |             |           |  |          |        



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HAIGHTS CROSS COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |            
|--- | -----------
|14. | Commitments



|                         |            |           |       |       |           |   |     |     | 
|------------------------ | ---------- | --------- | ----- | ----- | --------- | - | --- | --- | 
|                         |            | Occupancy |       |       |          
|                         |            | Space     |       |       | Equipment |  
|                         |            |           |       |       |           |  
|Year ending December 31: |            |           |       |       |           |   |     |    
|                         | 2006       |           | $     | 2,652 |           |   | $   | 358 | 
|                         | 2007       |           |       | 2,333 |           |   |     | 278 | 
|                         | 2008       |           |       | 1,834 |           |   |     | 158 | 
|                         | 2009       |           |       | 1,387 |           |   |     | 111 | 
|                         | Thereafter |           |       | 676   |           |   |     | 82  | 
|                         |            |           |       |       |           |  
|Total minimum payments   |            | $         | 8,882 |       |           | $ | 987 |    
|                         |            |           |       |       |           |  







|    |             
|--- | ------------
|15. | Savings Plan







|    |                        
|--- | -----------------------
|16. | Discontinued Operations



| |         
| | --------
| | Coriolis





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HAIGHTS CROSS COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                       
| | ----------------------
| | Andrews Communications









| |                         
| | ------------------------
| | Triumph Learning College







79



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HAIGHTS CROSS COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |              
| | -------------
| | Chelsea House



th


|                                        |  |              |        |   |      |   |        |  
|--------------------------------------- |  | ------------ | ------ | - | ---- | - | ------ | -
|                                        |  | Years Ended  |       
|                                        |  | December 31, |       
|                                        |  |              |       
|                                        |  | 2005         |        |   | 2004 |  
|                                        |  |              |        |   |      |  
|Revenue                                 |  | $            | 6,594  |   |      | $ | 11,345 |  
|Cost of goods sold                      |  |              | 2,061  |   |      |   | 5,022  |  
|Marketing and sales                     |  |              | 1,622  |   |      |   | 2,215  |  
|Fulfillment and distribution            |  |              | 606    |   |      |   | 975    |  
|General and administrative              |  |              | 988    |   |      |   | 2,382  |  
|Amortization of pre-publication costs   |  |              | 1,770  |   |      |   | 2,698  |  
|Impairment loss  pre-publication costs |  |              | 3,211  |   |      |   |       |  
|Depreciation expense                    |  |              | 68     |   |      |   | 130    |  
|                                        |  |              |        |   |      |  
|Loss from operations                    |  | $            | (3,732 | ) |      | $ | (2,077 | )
|                                        |  |              |        |   |      |  



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HAIGHTS CROSS COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                      |  |           |        |  
|------------------------------------- |  | --------- | ------ | -
|                                      |  | August 8, |       
|                                      |  | 2005      |       
|                                      |  |           |       
|Assets and liabilities:               |  |           |        |  
|Working capital, net (excluding cash) |  | $         | 4,904  |  
|Pre-publication costs, net            |  |           | 3,897  |  
|Property and equipment, net           |  |           | 156    |  
|                                      |  |           |       
|Net assets on date of sale            |  | $         | 8,957  |  
|                                      |  |           |       
|Calculation of loss on sale:          |  |           |        |  
|Proceeds                              |  | $         | 9,000  |  
|Less: book value of net assets sold   |  |           | (8,957 | )
|                                      |  |           |       
|                                      |  |           | 43     |  
|Less: accrued transaction costs       |  |           | (935   | )
|                                      |  |           |       
|Loss on disposal of Chelsea House     |  | $         | 892    |  
|                                      |  |           |       



|    |                      
|--- | ---------------------
|17. | Restructuring Charges





|                                              |  |             |       |               |                 |   |    |               |  |           |   |  |               |                 |              |  |  |   |   |  |  |   |   | 
|--------------------------------------------- |  | ----------- | ----- | ------------- | --------------- | - | -- | ------------- |  | --------- | - |  | ------------- | --------------- | ------------ |  |  | - | - |  |  | - | - | 
|                                              |  |             |       | Accrued       |                 |   |    |               |  |           |   |  | Accrued      
|                                              |  |             |       | Restructuring |                 |   |    |               |  |           |   |  | Restructuring
|                                              |  | Amount      |       |               | Liability as of |   |    | Restructuring |  |           |   |  |               | Liability as of
|                                              |  | Expected to |       |               | December 31,    |   |    | Expense in    |  | Cash Paid |   |  |               |                 | December 31,
|                                              |  | be Incurred |       |               | 2003            |   |    | 2004          |  | in 2004   |   |  | Reversals     |                 | 2004        
|                                              |  |             |       |               |                 |   |    |               |  |           |   |  |               |                 |             
|Warehouse and Order Fulfillment Consolidation |  |             |       |               |                 |   |    |               |  |           |   |  |               |                 |              |  |  |   |   |  |  |   |   | 
|Severance and related                         |  | $           | 325   |               |                 | $ | 7  |               |  | $         |  |  |               | $               | 7            |  |  | $ |  |  |  | $ |  | 
|Lease terminations costs                      |  |             | 575   |               |                 |   | 86 |               |  |           |  |  |               |                 | 86           |  |  |   |  |  |  |   |  | 
|Relocation and other                          |  |             | 530   |               |                 |   |   |               |  |           |  |  |               |                 |             |  |  |   |  |  |  |   |  | 
|                                              |  |             |       |               |                 |   |    |               |  |           |   |  |               |                 |              |  |  |  
|                                              |  | $           | 1,430 |               |                 | $ | 93 |               |  | $         |  |  |               | $               | 93           |  |  | $ |  |  |  | $ |  | 
|                                              |  |             |       |               |                 |   |    |               |  |           |   |  |               |                 |              |  |  |  

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HAIGHTS CROSS COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|                                              |  |             |       |               |                 |   |               |  |  |           |       |               |           |                 |              |      |  |   |     |  |  |   |    | 
|--------------------------------------------- |  | ----------- | ----- | ------------- | --------------- | - | ------------- |  |  | --------- | ----- | ------------- | --------- | --------------- | ------------ | ---- |  | - | --- |  |  | - | -- | 
|                                              |  |             |       | Accrued       |                 |   |               |  |  |           |       | Accrued       |          
|                                              |  |             |       | Restructuring |                 |   |               |  |  |           |       | Restructuring |          
|                                              |  | Amount      |       |               | Liability as of |   | Restructuring |  |  |           |       |               |           | Liability as of |             
|                                              |  | Expected to |       |               | December 31,    |   | Expense in    |  |  | Cash Paid |       |               |           |                 | December 31, |     
|                                              |  | be Incurred |       |               | 2002            |   | 2003          |  |  | in 2003   |       |               | Reversals |                 |              | 2003 | 
|                                              |  |             |       |               |                 |   |               |  |  |           |       |               |           |                 |              |      | 
|Warehouse and Order Fulfillment Consolidation |  |             |       |               |                 |   |               |  |  |           |       |               |           |                 |              |      |  |   |     |  |  |   |    | 
|Severance and related                         |  | $           | 325   |               |                 | $ |              |  |  | $         | 336   |               |           | $               | 328          |      |  | $ | 1   |  |  | $ | 7  | 
|Lease terminations costs                      |  |             | 575   |               |                 |   |              |  |  |           | 421   |               |           |                 | 251          |      |  |   | 84  |  |  |   | 86 | 
|Relocation and other                          |  |             | 530   |               |                 |   |              |  |  |           | 597   |               |           |                 | 565          |      |  |   | 32  |  |  |   |   | 
|                                              |  |             |       |               |                 |   |               |  |  |           |       |               |           |                 |              |      |  |  
|                                              |  | $           | 1,430 |               |                 | $ |              |  |  | $         | 1,354 |               |           | $               | 1,144        |      |  | $ | 117 |  |  | $ | 93 | 
|                                              |  |             |       |               |                 |   |               |  |  |           |       |               |           |                 |              |      |  |  



|                    |  |             |       |               |                 |   |    |               |  |              |   |  |               |                 |              |      |  |           |           |  |  |   |   |  |  |  |   | 
|------------------- |  | ----------- | ----- | ------------- | --------------- | - | -- | ------------- |  | ------------ | - |  | ------------- | --------------- | ------------ | ---- |  | --------- | --------- |  |  | - | - |  |  |  | - | 
|                    |  |             |       | Accrued       |                 |   |    |               |  |              |   |  | Accrued       |                 |              |     
|                    |  |             |       | Restructuring |                 |   |    |               |  |              |   |  | Restructuring |                 |              |     
|                    |  | Amount      |       |               | Liability as of |   |    | Restructuring |  |              |   |  |               | Liability as of |              |      | 
|                    |  | Expected to |       |               | December 31,    |   |    | Expense in    |  | Cash Paid in |   |  |               |                 | December 31, |      |  | Headcount |          
|                    |  | be Incurred |       |               | 2003            |   |    | 2004          |  | 2004         |   |  | Reversals     |                 |              | 2004 |  |           | Reduction | 
|                    |  |             |       |               |                 |   |    |               |  |              |   |  |               |                 |              |      |  |           |           | 
|Sundance/ Newbridge |  | $           | 750   |               |                 | $ | 93 |               |  | $            |  |  |               | $               | 93           |      |  | $         | 0         |  |  | $ | 0 |  |  |  |  | 
|Triumph Learning    |  |             | 560   |               |                 |   |   |               |  |              |  |  |               |                 |             |      |  |           |          |  |  |   |  |  |  |  |  | 
|Corporate           |  |             | 120   |               |                 |   |   |               |  |              |  |  |               |                 |             |      |  |           |          |  |  |   |  |  |  |  |  | 
|                    |  |             |       |               |                 |   |    |               |  |              |   |  |               |                 |              |      |  |           |           |  | 
|                    |  | $           | 1,430 |               |                 | $ | 93 |               |  | $            |  |  |               | $               | 93           |      |  | $         |          |  |  | $ |  |  |  |  |  | 
|                    |  |             |       |               |                 |   |    |               |  |              |   |  |               |                 |              |      |  |           |           |  | 

|                    |  |             |       |               |                 |   |               |  |  |              |       |               |           |                 |              |      |  |           |           |  |  |   |    |  |  |  |    | 
|------------------- |  | ----------- | ----- | ------------- | --------------- | - | ------------- |  |  | ------------ | ----- | ------------- | --------- | --------------- | ------------ | ---- |  | --------- | --------- |  |  | - | -- |  |  |  | -- | 
|                    |  |             |       | Accrued       |                 |   |               |  |  |              |       | Accrued       |           |                 |             
|                    |  |             |       | Restructuring |                 |   |               |  |  |              |       | Restructuring |           |                 |             
|                    |  | Amount      |       |               | Liability as of |   | Restructuring |  |  |              |       |               |           | Liability as of |              |      | 
|                    |  | Expected to |       |               | December 31,    |   | Expense in    |  |  | Cash Paid in |       |               |           |                 | December 31, |      |  | Headcount |          
|                    |  | be Incurred |       |               | 2002            |   | 2003          |  |  | 2003         |       |               | Reversals |                 |              | 2003 |  |           | Reduction | 
|                    |  |             |       |               |                 |   |               |  |  |              |       |               |           |                 |              |      |  |           |           | 
|Sundance/ Newbridge |  | $           | 750   |               |                 | $ |              |  |  | $            | 652   |               |           | $               | 546          |      |  | $         | 13        |  |  | $ | 93 |  |  |  | 3  | 
|Triumph Learning    |  |             | 560   |               |                 |   |              |  |  |              | 582   |               |           |                 | 479          |      |  |           | 103       |  |  |   |   |  |  |  | 13 | 
|Corporate           |  |             | 120   |               |                 |   |              |  |  |              | 120   |               |           |                 | 119          |      |  |           | 1         |  |  |   |   |  |  |  | 1  | 
|                    |  |             |       |               |                 |   |               |  |  |              |       |               |           |                 |              |      |  |           |           |  | 
|                    |  | $           | 1,430 |               |                 | $ |              |  |  | $            | 1,354 |               |           | $               | 1,144        |      |  | $         | 117       |  |  | $ | 93 |  |  |  | 17 | 
|                    |  |             |       |               |                 |   |               |  |  |              |       |               |           |                 |              |      |  |           |           |  | 



|    |                  
|--- | -----------------
|18. | Segment Reporting



Chelsea House


Sundance/ Newbridge Triumph
Learning, Buckle Down Options Publishing Recorded
Books.


82



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HAIGHTS CROSS COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Oakstone Publishing Scott
Publishing info






|                                                     |                   |              |        |        |              |   |         |         |  |         |           |        |  |           |        |       |              |   |        |   |  |   |         |        | 
|---------------------------------------------------- | ----------------- | ------------ | ------ | ------ | ------------ | - | ------- | ------- |  | ------- | --------- | ------ |  | --------- | ------ | ----- | ------------ | - | ------ | - |  | - | ------- | ------ | 
|                                                     |                   | K-12         |        |        |              |   |         |         |  |         |           |        | 
|                                                     |                   | Supplemental |        |        | Test-Prep &  |   |         |         |  | Medical |           |        |  |           |       
|                                                     |                   | Education    |        |        | Intervention |   |         | Library |  |         | Education |        |  | Corporate |        |       | Consolidated |  
|                                                     |                   |              |        |        |              |   |         |         |  |         |           |        |  |           |        |       |              |  
|2005                                                 |                   |              |        |        |              |   |         |         |  |         |           |        |  |           |        |       |              |   |        |   |  |   |         |       
|Revenue                                              |                   | $            | 43,096 |        |              | $ | 64,501  |         |  | $       | 76,626    |        |  | $         | 26,262 |       |              | $ |       |   |  | $ | 210,485 |       
|                                                     | Cost of good sold |              |        | 10,927 |              |   |         | 13,521  |  |         |           | 28,623 |  |           |        | 7,793 |              |   |        |  |  |   |         | 60,864 | 
|Marketing and sales                                  |                   |              | 13,461 |        |              |   | 17,787  |         |  |         | 13,591    |        |  |           | 7,652  |       |              |   |       |   |  |   | 52,491  |       
|Fulfillment and distribution                         |                   |              | 4,074  |        |              |   | 4,040   |         |  |         | 5,236     |        |  |           | 2,733  |       |              |   |       |   |  |   | 16,083  |       
|General and administrative                           |                   |              | 3,046  |        |              |   | 6,884   |         |  |         | 5,796     |        |  |           | 3,426  |       |              |   | 6,801  |   |  |   | 25,953  |       
|Amortization of pre-publication costs                |                   |              | 3,731  |        |              |   | 4,706   |         |  |         | 4,139     |        |  |           | 574    |       |              |   |       |   |  |   | 13,150  |       
|Depreciation expense and amortization of intangibles |                   |              | 825    |        |              |   | 2,727   |         |  |         | 717       |        |  |           | 642    |       |              |   | 127    |   |  |   | 5,038   |       
|                                                     |                   |              |        |        |              |   |         |         |  |         |           |        |  |           |        |       |              |  
|Income (loss) from operations                        |                   | $            | 7,032  |        |              | $ | 14,836  |         |  | $       | 18,524    |        |  | $         | 3,442  |       |              | $ | (6,928 | ) |  | $ | 36,906  |       
|                                                     |                   |              |        |        |              |   |         |         |  |         |           |        |  |           |        |       |              |  
|Interest expense                                     |                   | $            | 2,576  |        |              | $ | 13,167  |         |  | $       | 6,009     |        |  | $         | 3,504  |       |              | $ | 34,072 |   |  | $ | 59,328  |       
|Capital expenditures 
    property and equipment    |                   |              | 817    |        |              |   | 831     |         |  |         | 1,164     |        |  |           | 943    |       |              |   | 76     |   |  |   | 3,831   |       
|Capital expenditures 
    pre-publication costs     |                   |              | 5,236  |        |              |   | 10,086  |         |  |         | 5,384     |        |  |           | 1,171  |       |              |   |       |   |  |   | 21,877  |       
|Goodwill                                             |                   |              | 24,393 |        |              |   | 60,906  |         |  |         | 64,513    |        |  |           | 19,612 |       |              |   |       |   |  |   | 169,424 |       
|Total assets                                         |                   |              | 52,634 |        |              |   | 123,342 |         |  |         | 99,360    |        |  |           | 41,402 |       |              |   | 83,753 |   |  |   | 400,491 |       

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HAIGHTS CROSS COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|                                                     |  |              |        |  |              |   |         |         |  |         |           |  |  |           |        |  |              |   |         |   |  |   |         | 
|---------------------------------------------------- |  | ------------ | ------ |  | ------------ | - | ------- | ------- |  | ------- | --------- |  |  | --------- | ------ |  | ------------ | - | ------- | - |  | - | ------- | 
|                                                     |  | K-12         |        |  |              |   |         |         |  |         |           |  | 
|                                                     |  | Supplemental |        |  | Test-Prep &  |   |         |         |  | Medical |           |  |  |           |       
|                                                     |  | Education    |        |  | Intervention |   |         | Library |  |         | Education |  |  | Corporate |        |  | Consolidated |  
|                                                     |  |              |        |  |              |   |         |         |  |         |           |  |  |           |        |  |              |  
|2004                                                 |  |              |        |  |              |   |         |         |  |         |           |  |  |           |        |  |              |   |         |   |  |   |         | 
|Revenue                                              |  | $            | 48,450 |  |              | $ | 34,421  |         |  | $       | 68,878    |  |  | $         | 19,144 |  |              | $ |        |   |  | $ | 170,893 | 
|Cost of good sold                                    |  |              | 12,530 |  |              |   | 7,846   |         |  |         | 27,480    |  |  |           | 5,142  |  |              |   |        |   |  |   | 52,998  | 
|Marketing and sales                                  |  |              | 13,144 |  |              |   | 7,656   |         |  |         | 12,497    |  |  |           | 5,523  |  |              |   |        |   |  |   | 38,820  | 
|Fulfillment and distribution                         |  |              | 4,556  |  |              |   | 2,443   |         |  |         | 4,459     |  |  |           | 1,837  |  |              |   |        |   |  |   | 13,295  | 
|General and administrative                           |  |              | 3,342  |  |              |   | 5,334   |         |  |         | 5,036     |  |  |           | 2,201  |  |              |   | 6,272   |   |  |   | 22,185  | 
|Amortization of pre-publication costs                |  |              | 3,076  |  |              |   | 2,218   |         |  |         | 3,564     |  |  |           | 248    |  |              |   |        |   |  |   | 9,106   | 
|Depreciation expense and amortization of intangibles |  |              | 680    |  |              |   | 827     |         |  |         | 734       |  |  |           | 504    |  |              |   | 209     |   |  |   | 2,954   | 
|                                                     |  |              |        |  |              |   |         |         |  |         |           |  |  |           |        |  |              |  
|Income (loss) from operations                        |  | $            | 11,122 |  |              | $ | 8,097   |         |  | $       | 15,108    |  |  | $         | 3,689  |  |              | $ | (6,481  | ) |  | $ | 31,535  | 
|                                                     |  |              |        |  |              |   |         |         |  |         |           |  |  |           |        |  |              |  
|Interest expense                                     |  | $            | 2,824  |  |              | $ | 6,818   |         |  | $       | 6,744     |  |  | $         | 2,716  |  |              | $ | 29,092  |   |  | $ | 48,194  | 
|Capital expenditures 
    property and equipment    |  |              | 858    |  |              |   | 891     |         |  |         | 1,255     |  |  |           | 188    |  |              |   | 56      |   |  |   | 3,248   | 
|Capital expenditures 
    pre- publication costs    |  |              | 4,149  |  |              |   | 3,469   |         |  |         | 4,438     |  |  |           | 107    |  |              |   |        |   |  |   | 12,163  | 
|Goodwill                                             |  |              | 24,393 |  |              |   | 61,786  |         |  |         | 64,513    |  |  |           | 15,487 |  |              |   |        |   |  |   | 166,179 | 
|Total assets                                         |  |              | 50,420 |  |              |   | 116,521 |         |  |         | 99,045    |  |  |           | 25,203 |  |              |   | 108,514 |   |  |   | 399,703 | 

|                                                     |  |              |        |  |              |   |        |         |  |         |           |  |  |           |        |  |              |   |        |   |  |   |         | 
|---------------------------------------------------- |  | ------------ | ------ |  | ------------ | - | ------ | ------- |  | ------- | --------- |  |  | --------- | ------ |  | ------------ | - | ------ | - |  | - | ------- | 
|                                                     |  | K-12         |        |  |              |   |        |         |  |         |           |  | 
|                                                     |  | Supplemental |        |  | Test-Prep &  |   |        |         |  | Medical |           |  |  |           |       
|                                                     |  | Education    |        |  | Intervention |   |        | Library |  |         | Education |  |  | Corporate |        |  | Consolidated |  
|                                                     |  |              |        |  |              |   |        |         |  |         |           |  |  |           |        |  |              |  
|2003                                                 |  |              |        |  |              |   |        |         |  |         |           |  |  |           |        |  |              |   |        |   |  |   |         | 
|Revenue                                              |  | $            | 44,763 |  |              | $ | 25,171 |         |  | $       | 61,137    |  |  | $         | 18,188 |  |              | $ |       |   |  | $ | 149,259 | 
|Cost of good sold                                    |  |              | 11,585 |  |              |   | 5,740  |         |  |         | 23,774    |  |  |           | 4,826  |  |              |   |       |   |  |   | 45,925  | 
|Marketing and sales                                  |  |              | 11,427 |  |              |   | 5,883  |         |  |         | 10,594    |  |  |           | 4,999  |  |              |   |       |   |  |   | 32,903  | 
|Fulfillment and distribution                         |  |              | 3,494  |  |              |   | 1,981  |         |  |         | 3,435     |  |  |           | 1,601  |  |              |   |       |   |  |   | 10,511  | 
|General and administrative and restructuring charges |  |              | 3,621  |  |              |   | 3,845  |         |  |         | 4,570     |  |  |           | 2,038  |  |              |   | 4,263  |   |  |   | 18,337  | 
|Amortization of pre-publication costs                |  |              | 2,228  |  |              |   | 1,565  |         |  |         | 2,778     |  |  |           | 264    |  |              |   |       |   |  |   | 6,835   | 
|Depreciation expense and amortization of intangibles |  |              | 562    |  |              |   | 101    |         |  |         | 659       |  |  |           | 557    |  |              |   | 220    |   |  |   | 2,099   | 
|                                                     |  |              |        |  |              |   |        |         |  |         |           |  |  |           |        |  |              |  
|Income (loss) from operations                        |  | $            | 11,846 |  |              | $ | 6,056  |         |  | $       | 15,327    |  |  | $         | 3,903  |  |              | $ | (4,483 | ) |  | $ | 32,649  | 
|                                                     |  |              |        |  |              |   |        |         |  |         |           |  |  |           |        |  |              |  
|Interest expense                                     |  | $            | 2,567  |  |              | $ | 3,755  |         |  | $       | 6,076     |  |  | $         | 2,272  |  |              | $ | 5,258  |   |  | $ | 19,928  | 
|Capital expenditures 
    property and equipment    |  |              | 1,418  |  |              |   | 69     |         |  |         | 935       |  |  |           | 310    |  |              |   | 83     |   |  |   | 2,815   | 
|Capital expenditures 
    pre-publication costs     |  |              | 4,780  |  |              |   | 1,743  |         |  |         | 4,115     |  |  |           | 195    |  |              |   |       |   |  |   | 10,833  | 
|Goodwill                                             |  |              | 24,393 |  |              |   | 20,612 |         |  |         | 64,513    |  |  |           | 15,487 |  |              |   |       |   |  |   | 125,005 | 
|Total assets                                         |  |              | 48,408 |  |              |   | 30,688 |         |  |         | 93,701    |  |  |           | 26,099 |  |              |   | 66,626 |   |  |   | 265,522 | 

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HAIGHTS CROSS COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                                            
|--- | -------------------------------------------
|19. | Condensed Consolidated Financial Statements

3 4 3-10(d) S-X.




|                                            |  |                              |         |   |      |   |           |              |  |   |              |   |  |              |        |   |  |   |         |  
|------------------------------------------- |  | ---------------------------- | ------- | - | ---- | - | --------- | ------------ |  | - | ------------ | - |  | ------------ | ------ | - |  | - | ------- | -
|                                            |  | Year Ended December 31, 2005 |        
|                                            |  |                              |        
|                                            |  | Parent                       |         |   |      |   | Guarantor |              |  |  
|                                            |  | Guarantor                    |         |   | HCOC |   |           | Subsidiaries |  |   | Eliminations |   |  | Consolidated |       
|                                            |  |                              |         |   |      |   |           |              |  |   |              |   |  |              |       
|                                            |  | (In thousands)               |        
|Revenue                                     |  | $                            |        |   |      | $ |          |              |  | $ | 210,485      |   |  | $            |       |   |  | $ | 210,485 |  
|Costs and expenses                          |  |                              | 787     |   |      |   | 6,140     |              |  |   | 166,652      |   |  |              |       |   |  |   | 173,579 |  
|                                            |  |                              |         |   |      |   |           |              |  |   |              |   |  |              |       
|Income (loss) from operations               |  |                              | (787    | ) |      |   | (6,140    | )            |  |   | 43,833       |   |  |              |       |   |  |   | 36,906  |  
|Equity in the income (loss) of subsidiaries |  |                              | 608     |   |      |   | 4,900     |              |  |   |             |   |  |              | (5,508 | ) |  |   |        |  
|Loss from discontinued operations           |  |                              |        |   |      |   | (1,245    | )            |  |   | (3,731       | ) |  |              |       |   |  |   | (4,976  | )
|Other (income)/expenses                     |  |                              | 44,248  |   |      |   | (3,093    | )            |  |   | 35,202       |   |  |              |       |   |  |   | 76,357  |  
|                                            |  |                              |         |   |      |   |           |              |  |   |              |   |  |              |       
|Net income (loss)                           |  | $                            | (44,427 | ) |      | $ | 608       |              |  | $ | 4,900        |   |  | $            | (5,508 | ) |  | $ | (44,427 | )
|                                            |  |                              |         |   |      |   |           |              |  |   |              |   |  |              |       

|                                            |  |                              |         |   |      |   |           |              |  |   |              |   |  |              |        |   |  |   |         |  
|------------------------------------------- |  | ---------------------------- | ------- | - | ---- | - | --------- | ------------ |  | - | ------------ | - |  | ------------ | ------ | - |  | - | ------- | -
|                                            |  | Year Ended December 31, 2004 |        
|                                            |  |                              |        
|                                            |  | Parent                       |         |   |      |   | Guarantor |              |  |  
|                                            |  | Guarantor                    |         |   | HCOC |   |           | Subsidiaries |  |   | Eliminations |   |  | Consolidated |       
|                                            |  |                              |         |   |      |   |           |              |  |   |              |   |  |              |       
|                                            |  | (In thousands)               |        
|Revenue                                     |  | $                            |        |   |      | $ |          |              |  | $ | 170,893      |   |  | $            |       |   |  | $ | 170,893 |  
|Costs and expenses                          |  |                              |        |   |      |   | 6,481     |              |  |   | 132,877      |   |  |              |       |   |  |   | 139,358 |  
|                                            |  |                              |         |   |      |   |           |              |  |   |              |   |  |              |       
|Income (loss) from operations               |  |                              |        |   |      |   | (6,481    | )            |  |   | 38,016       |   |  |              |       |   |  |   | 31,535  |  
|Equity in the income (loss) of subsidiaries |  |                              | 2,167   |   |      |   | 6,832     |              |  |   |             |   |  |              | (8,999 | ) |  |   |        |  
|Loss from discontinued operations           |  |                              |        |   |      |   | (1,780    | )            |  |   | (2,008       | ) |  |              |       |   |  |   | (3,788  | )
|Other (income)/expenses                     |  |                              | 24,748  |   |      |   | (3,596    | )            |  |   | 29,176       |   |  |              |       |   |  |   | 50,328  |  
|                                            |  |                              |         |   |      |   |           |              |  |   |              |   |  |              |       
|Net income (loss)                           |  | $                            | (22,581 | ) |      | $ | 2,167     |              |  | $ | 6,832        |   |  | $            | (8,999 | ) |  | $ | (22,581 | )
|                                            |  |                              |         |   |      |   |           |              |  |   |              |   |  |              |       

|                                            |  |                              |        |   |      |   |           |              |  |   |              |   |  |              |         |   |  |   |         |  
|------------------------------------------- |  | ---------------------------- | ------ | - | ---- | - | --------- | ------------ |  | - | ------------ | - |  | ------------ | ------- | - |  | - | ------- | -
|                                            |  | Year Ended December 31, 2003 |       
|                                            |  |                              |       
|                                            |  | Parent                       |        |   |      |   | Guarantor |              |  |  
|                                            |  | Guarantor                    |        |   | HCOC |   |           | Subsidiaries |  |   | Eliminations |   |  | Consolidated |        
|                                            |  |                              |        |   |      |   |           |              |  |   |              |   |  |              |        
|                                            |  | (In thousands)               |       
|Revenue                                     |  | $                            |       |   |      | $ |          |              |  | $ | 149,259      |   |  | $            |        |   |  | $ | 149,259 |  
|Costs and expenses                          |  |                              |       |   |      |   | 4,483     |              |  |   | 112,127      |   |  |              |        |   |  |   | 116,610 |  
|                                            |  |                              |        |   |      |   |           |              |  |   |              |   |  |              |        
|Income (loss) from operations               |  |                              |       |   |      |   | (4,483    | )            |  |   | 37,132       |   |  |              |        |   |  |   | 32,649  |  
|Equity in the income (loss) of subsidiaries |  |                              | (1,866 | ) |      |   | 13,318    |              |  |   |             |   |  |              | (11,452 | ) |  |   |        |  
|Income(loss) from discontinued operations   |  |                              |       |   |      |   |          |              |  |   | (289         | ) |  |              |        |   |  |   | (289    | )
|Other expenses                              |  |                              |       |   |      |   | 10,701    |              |  |   | 23,525       |   |  |              |        |   |  |   | 34,226  |  
|                                            |  |                              |        |   |      |   |           |              |  |   |              |   |  |              |        
|Net income (loss)                           |  | $                            | (1,866 | ) |      | $ | (1,866    | )            |  | $ | 13,318       |   |  | $            | (11,452 | ) |  | $ | (1,866  | )
|                                            |  |                              |        |   |      |   |           |              |  |   |              |   |  |              |        

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HAIGHTS CROSS COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                                            |                     |                             |         |          |          |   |           |              |        |   |              |         |         |              |          |          |          |   |         |          |          |  
|--------------------------------------------------------------------------- | ------------------- | --------------------------- | ------- | -------- | -------- | - | --------- | ------------ | ------ | - | ------------ | ------- | ------- | ------------ | -------- | -------- | -------- | - | ------- | -------- | -------- | -
|                                                                            |                     | As of December 31, 2005     |        
|                                                                            |                     |                             |        
|                                                                            |                     | Parent                      |         |          |          |   | Guarantor |              |        |  
|                                                                            |                     | Guarantor                   |         |          | HCOC     |   |           | Subsidiaries |        |   | Eliminations |         |         | Consolidated |         
|                                                                            |                     |                             |         |          |          |   |           |              |        |   |              |         |         |              |         
|                                                                            |                     | (In thousands)              |        
|Assets                                                                      |                     |                             |         |          |          |   |           |              |        |   |              |         |         |              |          |          |          |   |         |         
|Current assets                                                              |                     | $                           | 3,571   |          |          | $ | 65,533    |              |        | $ | 58,290       |         |         | $            |         |          |          | $ | 127,394 |         
|Investment in subsidiaries                                                  |                     |                             | 43,886  |          |          |   | 278,313   |              |        |   |             |         |         |              | (322,199 | )        |          |   |        |         
|Long term assets                                                            |                     |                             | 2,505   |          |          |   | 12,144    |              |        |   | 258,448      |         |         |              |         |          |          |   | 273,097 |         
|                                                                            |                     |                             |         |          |          |   |           |              |        |   |              |         |         |              |         
|Total assets                                                                |                     | $                           | 49,962  |          |          | $ | 355,990   |              |        | $ | 316,738      |         |         | $            | (322,199 | )        |          | $ | 400,491 |         
|                                                                            |                     |                             |         |          |          |   |           |              |        |   |              |         |         |              |         
|Liabilities, Redeemable Preferred Stock and Stockholders
    Deficit       |                     |                             |         |          |          |   |           |              |        |   |              |         |         |              |          |          |          |   |         |         
|Current liabilities                                                         |                     | $                           |        |          |          | $ | 13,324    |              |        | $ | 38,010       |         |         | $            |         |          |          | $ | 51,334  |         
|Long term liabilities                                                       |                     |                             | 239,180 |          |          |   | 298,780   |              |        |   | 415          |         |         |              |         |          |          |   | 538,375 |         
|Redeemable preferred stock                                                  |                     |                             | 39,930  |          |          |   |          |              |        |   |             |         |         |              |         |          |          |   | 39,930  |         
|Stockholders deficit:                                                      |                     |                             |         |          |          |   |           |              |        |   |              |         |         |              |          |          |          |   |         |         
|                                                                            | Common stock        |                             |         | 20       |          |   |           |             |        |   |              |        |         |              |          |         |          |   |         | 20       |         
|                                                                            | Accumulated deficit |                             |         | (229,168 | )        |   |           | 43,886       |        |   |              | 278,313 |         |              |          | (322,199 | )        |   |         | (229,168 | )       
|                                                                            |                     |                             |         |          |          |   |           |              |        |   |              |         |         |              |         
|                                                                            |                     | Total stockholders deficit |         |          | (229,148 | ) |           |              | 43,886 |   |              |         | 278,313 |              |          |          | (322,199 | ) |         |          | (229,148 | )
|                                                                            |                     |                             |         |          |          |   |           |              |        |   |              |         |         |              |         
|Total liabilities, redeemable preferred stock and
    stockholders deficit |                     | $                           | 49,962  |          |          | $ | 355,990   |              |        | $ | 316,738      |         |         | $            | (322,199 | )        |          | $ | 400,491 |         
|                                                                            |                     |                             |         |          |          |   |           |              |        |   |              |         |         |              |         

|                                                                            |                     |                             |         |          |          |   |           |              |        |   |              |         |         |              |          |          |          |   |         |          |          |  
|--------------------------------------------------------------------------- | ------------------- | --------------------------- | ------- | -------- | -------- | - | --------- | ------------ | ------ | - | ------------ | ------- | ------- | ------------ | -------- | -------- | -------- | - | ------- | -------- | -------- | -
|                                                                            |                     | As of December 31, 2004     |        
|                                                                            |                     |                             |        
|                                                                            |                     | Parent                      |         |          |          |   | Guarantor |              |        |  
|                                                                            |                     | Guarantor                   |         |          | HCOC     |   |           | Subsidiaries |        |   | Eliminations |         |         | Consolidated |         
|                                                                            |                     |                             |         |          |          |   |           |              |        |   |              |         |         |              |         
|                                                                            |                     | (In thousands)              |        
|Assets                                                                      |                     |                             |         |          |          |   |           |              |        |   |              |         |         |              |          |          |          |   |         |         
|Current assets                                                              |                     | $                           | 3,460   |          |          | $ | 74,375    |              |        | $ | 64,891       |         |         | $            |         |          |          | $ | 142,726 |         
|Investment in subsidiaries                                                  |                     |                             | 44,314  |          |          |   | 267,783   |              |        |   |             |         |         |              | (312,097 | )        |          |   |        |         
|Long term assets                                                            |                     |                             | 2,947   |          |          |   | 15,106    |              |        |   | 238,924      |         |         |              |         |          |          |   | 256,977 |         
|                                                                            |                     |                             |         |          |          |   |           |              |        |   |              |         |         |              |         
|Total assets                                                                |                     | $                           | 50,721  |          |          | $ | 357,264   |              |        | $ | 303,815      |         |         | $            | (312,097 | )        |          | $ | 399,703 |         
|                                                                            |                     |                             |         |          |          |   |           |              |        |   |              |         |         |              |         
|Liabilities, Redeemable Preferred Stock and Stockholders
    Deficit       |                     |                             |         |          |          |   |           |              |        |   |              |         |         |              |          |          |          |   |         |         
|Current liabilities                                                         |                     | $                           |        |          |          | $ | 12,378    |              |        | $ | 35,701       |         |         | $            |         |          |          | $ | 48,079  |         
|Long term liabilities                                                       |                     |                             | 195,282 |          |          |   | 300,572   |              |        |   | 331          |         |         |              |         |          |          |   | 496,185 |         
|Redeemable preferred stock                                                  |                     |                             | 36,882  |          |          |   |          |              |        |   |             |         |         |              |         |          |          |   | 36,882  |         
|Stockholders deficit:                                                      |                     |                             |         |          |          |   |           |              |        |   |              |         |         |              |          |          |          |   |         |         
|                                                                            | Common stock        |                             |         | 20       |          |   |           |             |        |   |              |        |         |              |          |         |          |   |         | 20       |         
|                                                                            | Accumulated deficit |                             |         | (181,463 | )        |   |           | 44,314       |        |   |              | 267,783 |         |              |          | (312,097 | )        |   |         | (181,463 | )       
|                                                                            |                     |                             |         |          |          |   |           |              |        |   |              |         |         |              |         
|                                                                            |                     | Total stockholders deficit |         |          | (181,443 | ) |           |              | 44,314 |   |              |         | 267,783 |              |          |          | (312,097 | ) |         |          | (181,443 | )
|                                                                            |                     |                             |         |          |          |   |           |              |        |   |              |         |         |              |         
|Total liabilities, redeemable preferred stock and
    stockholders deficit |                     | $                           | 50,721  |          |          | $ | 357,264   |              |        | $ | 303,815      |         |         | $            | (312,097 | )        |          | $ | 399,703 |         
|                                                                            |                     |                             |         |          |          |   |           |              |        |   |              |         |         |              |         

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HAIGHTS CROSS COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                    |                                                  |                                             |       |      |      |   |           |              |         |   |              |        |              |   |   |   |   |   |         |        |         |  
|--------------------------------------------------- | ------------------------------------------------ | ------------------------------------------- | ----- | ---- | ---- | - | --------- | ------------ | ------- | - | ------------ | ------ | ------------ | - | - | - | - | - | ------- | ------ | ------- | -
|                                                    |                                                  | Year Ended December 31, 2005                |      
|                                                    |                                                  |                                             |      
|                                                    |                                                  | Parent                                      |       |      |      |   | Guarantor |              |         |  
|                                                    |                                                  | Guarantor                                   |       |      | HCOC |   |           | Subsidiaries |         |   | Eliminations |        | Consolidated |  
|                                                    |                                                  |                                             |       |      |      |   |           |              |         |   |              |        |              |  
|                                                    |                                                  | (In thousands)                              |      
|Cash provided by (used in):                         |                                                  |                                             |       |      |      |   |           |              |         |   |              |        |              |   |   |   |   |   |         |       
|                                                    | Operating activities of continuing operations    |                                             | $     | (694 | )    |   | $         | 712          |         |   | $            | 24,473 |              |   | $ |  |   |   | $       | 24,491 |        
|                                                    | Investing activities from continuing operations: |                                             |       |      |      |   |           |              |         |   |              |        |              |   |   |   |   |   |         |        |        
|                                                    |                                                  | Additions to pre-publication costs          |       |      |     |   |           |              |        |   |              |        | (21,877      | ) |   |   |  |   |         |        | (21,877 | )
|                                                    |                                                  | Additions to property and equipment         |       |      |     |   |           |              | (76     | ) |              |        | (3,755       | ) |   |   |  |   |         |        | (3,831  | )
|                                                    |                                                  | Additions to intangibles                    |       |      |     |   |           |              |        |   |              |        | (20          | ) |   |   |  |   |         |        | (20     | )
|                                                    |                                                  | Intercompany activity                       |       |      | 796  |   |           |              | (2,871  | ) |              |        | 2,075        |   |   |   |  |   |         |        |        |  
|                                                    |                                                  | Acquisitions, net of cash acquired          |       |      |     |   |           |              | (12,255 | ) |              |        |             |   |   |   |  |   |         |        | (12,255 | )
|                                                    |                                                  | Proceeds from sale of businesses and assets |       |      |     |   |           |              | 8,500   |   |              |        |             |   |   |   |  |   |         |        | 8,500   |  
|                                                    |                                                  |                                             |       |      |      |   |           |              |         |   |              |        |              |   |  
|Net cash provided by (used in) investing activities |                                                  |                                             | 796   |      |      |   | (6,702    | )            |         |   | (23,577      | )      |              |   |  |   |   |   | (29,483 | )     
|                                                    | Financing activities of continuing operations:   |                                             |       |      |      |   |           |              |         |   |              |        |              |   |   |   |   |   |         |        |        
|                                                    |                                                  | Repayment of senior secured term loan       |       |      |     |   |           |              | (1,300  | ) |              |        |             |   |   |   |  |   |         |        | (1,300  | )
|                                                    |                                                  | Proceeds from exerciser of stock options    |       |      | 9    |   |           |              |        |   |              |        |             |   |   |   |  |   |         |        | 9       |  
|                                                    |                                                  | Additions to deferred financing costs       |       |      |     |   |           |              | (511    | ) |              |        |             |   |   |   |  |   |         |        | (511    | )
|                                                    |                                                  |                                             |       |      |      |   |           |              |         |   |              |        |              |   |  
|Net cash provided by (used in) financing activities |                                                  |                                             | 9     |      |      |   | (1,811    | )            |         |   |             |        |              |   |  |   |   |   | (1,802  | )     
|Effect of exchange rates on cash                    |                                                  |                                             |      |      |      |   |          |              |         |   | (154         | )      |              |   |  |   |   |   | (154    | )     
|Net cash used by discontinued operations            |                                                  |                                             |      |      |      |   | (1,488    | )            |         |   | (553         | )      |              |   |  |   |   |   | (2,041  | )     
|                                                    |                                                  |                                             |       |      |      |   |           |              |         |   |              |        |              |   |  
|Net change in cash and cash equivalents             |                                                  |                                             | 111   |      |      |   | (9,290    | )            |         |   | 190          |        |              |   |  |   |   |   | (8,989  | )     
|Cash and cash equivalents at beginning of period    |                                                  |                                             | 3,460 |      |      |   | 73,940    |              |         |   | 1,181        |        |              |   |  |   |   |   | 78,581  |       
|                                                    |                                                  |                                             |       |      |      |   |           |              |         |   |              |        |              |   |  
|Cash and cash equivalents at end of period          |                                                  | $                                           | 3,571 |      |      | $ | 64,650    |              |         | $ | 1,371        |        |              | $ |  |   |   | $ | 69,592  |       
|                                                    |                                                  |                                             |       |      |      |   |           |              |         |   |              |        |              |   |  

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HAIGHTS CROSS COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|                                                 |                                                  |                                                    |         |     |         |   |           |              |         |   |              |        |              |   |   |   |   |   |         |        |         |  
|------------------------------------------------ | ------------------------------------------------ | -------------------------------------------------- | ------- | --- | ------- | - | --------- | ------------ | ------- | - | ------------ | ------ | ------------ | - | - | - | - | - | ------- | ------ | ------- | -
|                                                 |                                                  | Year Ended December 31, 2004                       |        
|                                                 |                                                  |                                                    |        
|                                                 |                                                  | Parent                                             |         |     |         |   | Guarantor |              |         |  
|                                                 |                                                  | Guarantor                                          |         |     | HCOC    |   |           | Subsidiaries |         |   | Eliminations |        | Consolidated |  
|                                                 |                                                  |                                                    |         |     |         |   |           |              |         |   |              |        |              |  
|                                                 |                                                  | (In thousands)                                     |        
|Cash provided by (used in):                      |                                                  |                                                    |         |     |         |   |           |              |         |   |              |        |              |   |   |   |   |   |         |       
|                                                 | Operating activities of continuing operations    |                                                    | $       | 332 |         |   | $         | 1,088        |         |   | $            | 19,813 |              |   | $ |  |   |   | $       | 21,233 |        
|                                                 | Investing activities from continuing operations: |                                                    |         |     |         |   |           |              |         |   |              |        |              |   |   |   |   |   |         |        |        
|                                                 |                                                  | Additions to pre-publication costs                 |         |     |        |   |           |              |        |   |              |        | (12,163      | ) |   |   |  |   |         |        | (12,163 | )
|                                                 |                                                  | Additions to property and equipment                |         |     |        |   |           |              | (56     | ) |              |        | (3,192       | ) |   |   |  |   |         |        | (3,248  | )
|                                                 |                                                  | Additions to intangibles                           |         |     |        |   |           |              |        |   |              |        | (28          | ) |   |   |  |   |         |        | (28     | )
|                                                 |                                                  | Intercompany activity                              |         |     | (53,517 | ) |           |              | 57,596  |   |              |        | (4,079       | ) |   |   |  |   |         |        |        |  
|                                                 |                                                  | Acquisitions, net of cash acquired                 |         |     |        |   |           |              | (77,896 | ) |              |        |             |   |   |   |  |   |         |        | (77,896 | )
|                                                 |                                                  | Proceeds from sale of businesses and assets        |         |     |        |   |           |              |        |   |              |        | 29           |   |   |   |  |   |         |        | 29      |  
|                                                 |                                                  |                                                    |         |     |         |   |           |              |         |   |              |        |              |   |  
|Net cash used in investing activities            |                                                  |                                                    | (53,517 | )   |         |   | (20,356   | )            |         |   | (19,433      | )      |              |   |  |   |   |   | (93,306 | )     
|                                                 | Financing activities of continuing operations:   |                                                    |         |     |         |   |           |              |         |   |              |        |              |   |   |   |   |   |         |        |        
|                                                 |                                                  | Proceeds from
    121/2% senior
    discount notes |         |     | 73,653  |   |           |              |        |   |              |        |             |   |   |   |  |   |         |        | 73,653  |  
|                                                 |                                                  | Proceeds from
    113/4% senior
    notes          |         |     |        |   |           |              | 33,150  |   |              |        |             |   |   |   |  |   |         |        | 33,150  |  
|                                                 |                                                  | Proceeds from senior secured term loan             |         |     |        |   |           |              | 30,000  |   |              |        |             |   |   |   |  |   |         |        | 30,000  |  
|                                                 |                                                  | Purchase of Series B Senior preferred stock        |         |     | (13,999 | ) |           |              |        |   |              |        |             |   |   |   |  |   |         |        | (13,999 | )
|                                                 |                                                  | Repayment of senior secured term loan              |         |     |        |   |           |              | (1,000  | ) |              |        |             |   |   |   |  |   |         |        | (1,000  | )
|                                                 |                                                  | Additions to deferred financing costs              |         |     | (3,009  | ) |           |              | (2,226  | ) |              |        |             |   |   |   |  |   |         |        | (5,235  | )
|                                                 |                                                  |                                                    |         |     |         |   |           |              |         |   |              |        |              |   |  
|Net cash provided by financing activities        |                                                  |                                                    | 56,645  |     |         |   | 59,924    |              |         |   |             |        |              |   |  |   |   |   | 116,569 |       
|Effect of exchange rates on cash                 |                                                  |                                                    |        |     |         |   |          |              |         |   | 162          |        |              |   |  |   |   |   | 162     |       
|Net cash provided by discontinued operations     |                                                  |                                                    |        |     |         |   |          |              |         |   | 1,534        |        |              |   |  |   |   |   | 1,534   |       
|                                                 |                                                  |                                                    |         |     |         |   |           |              |         |   |              |        |              |   |  
|Net change in cash and cash equivalents          |                                                  |                                                    | 3,460   |     |         |   | 40,656    |              |         |   | 2,076        |        |              |   |  |   |   |   | 46,192  |       
|Cash and cash equivalents at beginning of period |                                                  |                                                    |        |     |         |   | 33,284    |              |         |   | (895         | )      |              |   |  |   |   |   | 32,389  |       
|                                                 |                                                  |                                                    |         |     |         |   |           |              |         |   |              |        |              |   |  
|Cash and cash equivalents at end of period       |                                                  | $                                                  | 3,460   |     |         | $ | 73,940    |              |         | $ | 1,181        |        |              | $ |  |   |   | $ | 78,581  |       
|                                                 |                                                  |                                                    |         |     |         |   |           |              |         |   |              |        |              |   |  

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HAIGHTS CROSS COMMUNICATIONS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|                                                    |                       |                                             |   |      |   |           |              |        |          |              |         |              |         |   |   |   |   |   |        |        |          |  
|--------------------------------------------------- | --------------------- | ------------------------------------------- | - | ---- | - | --------- | ------------ | ------ | -------- | ------------ | ------- | ------------ | ------- | - | - | - | - | - | ------ | ------ | -------- | -
|                                                    |                       | Year Ended December 31, 2003                |  
|                                                    |                       |                                             |  
|                                                    |                       | Parent                                      |   |      |   | Guarantor |              |        |         
|                                                    |                       | Guarantor                                   |   | HCOC |   |           | Subsidiaries |        |          | Eliminations |         | Consolidated |        
|                                                    |                       |                                             |   |      |   |           |              |        |          |              |         |              |        
|                                                    |                       | (In thousands)                              |  
|Cash provided by (used in):                         |                       |                                             |   |      |   |           |              |        |          |              |         |              |         |   |   |   |   |   |        |       
|                                                    | Operating activities  |                                             | $ |     |   |           | $            | 16,949 |          |              | $       | 13,077       |         |   | $ |  |   |   | $      | 30,026 |         
|                                                    | Investing activities: |                                             |   |      |   |           |              |        |          |              |         |              |         |   |   |   |   |   |        |        |         
|                                                    |                       | Additions to pre-publication costs          |   |      |  |           |              |        |         |              |         |              | (10,833 | ) |   |   |  |   |        |        | (10,833  | )
|                                                    |                       | Additions to property and equipment         |   |      |  |           |              |        | (83      | )            |         |              | (2,732  | ) |   |   |  |   |        |        | (2,815   | )
|                                                    |                       | Proceeds from sale of businesses and assets |   |      |  |           |              |        | 7,568    |              |         |              |        |   |   |   |  |   |        |        | 7,569    |  
|                                                    |                       |                                             |   |      |   |           |              |        |          |              |         |              |         |   |  
|Net cash provided by (used in) investing activities |                       |                                             |  |      |   |           | 7,485        |        |          |              | (13,564 | )            |         |   |  |   |   |   | (6,079 | )     
|                                                    | Financing activities: |                                             |   |      |   |           |              |        |          |              |         |              |         |   |   |   |   |   |        |        |         
|                                                    |                       | Proceeds from senior credit facility        |   |      |  |           |              |        | 12,000   |              |         |              |        |   |   |   |  |   |        |        | 12,000   |  
|                                                    |                       | Repayment of senior credit facility         |   |      |  |           |              |        | (154,350 | )            |         |              |        |   |   |   |  |   |        |        | (154,350 | )
|                                                    |                       | Repayment of subordinated notes             |   |      |  |           |              |        | (75,211  | )            |         |              |        |   |   |   |  |   |        |        | (75,211  | )
|                                                    |                       | Proceeds from
    113/4% senior
    notes   |   |      |  |           |              |        | 140,000  |              |         |              |        |   |   |   |  |   |        |        | 140,000  |  
|                                                    |                       | Proceeds from senior secured term loan      |   |      |  |           |              |        | 100,000  |              |         |              |        |   |   |   |  |   |        |        | 100,000  |  
|                                                    |                       | Repayment of senior secured term loan       |   |      |  |           |              |        | (250     | )            |         |              |        |   |   |   |  |   |        |        | (250     | )
|                                                    |                       | Additions to deferred financing costs       |   |      |  |           |              |        | (15,391  | )            |         |              |        |   |   |   |  |   |        |        | (15,391  | )
|                                                    |                       |                                             |   |      |   |           |              |        |          |              |         |              |         |   |  
|Net cash provided by financing activities           |                       |                                             |  |      |   |           | 6,798        |        |          |              |        |              |         |   |  |   |   |   | 6,798  |       
|Effect of exchange rates on cash                    |                       |                                             |  |      |   |           |             |        |          |              | 211     |              |         |   |  |   |   |   | 211    |       
|Net cash used by discontinued operations            |                       |                                             |  |      |   |           |             |        |          |              | (1,268  | )            |         |   |  |   |   |   | (1,268 | )     
|                                                    |                       |                                             |   |      |   |           |              |        |          |              |         |              |         |   |  
|Net change in cash and cash equivalents             |                       |                                             |  |      |   |           | 31,232       |        |          |              | (1,544  | )            |         |   |  |   |   |   | 29,688 |       
|Cash and cash equivalents at beginning of period    |                       |                                             |  |      |   |           | 2,052        |        |          |              | 649     |              |         |   |  |   |   |   | 2,701  |       
|                                                    |                       |                                             |   |      |   |           |              |        |          |              |         |              |         |   |  
|Cash and cash equivalents at end of period          |                       | $                                           |  |      |   | $         | 33,284       |        |          | $            | (895    | )            |         | $ |  |   |   | $ | 32,389 |       
|                                                    |                       |                                             |   |      |   |           |              |        |          |              |         |              |         |   |  

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HAIGHTS CROSS COMMUNICATIONS, INC.  PARENT
COMPANY





Schedule I  Condensed Financial
Information


Condensed Balance Sheets


|                                      |                                             |                    |         |          |      |   |         |          |  
|------------------------------------- | ------------------------------------------- | ------------------ | ------- | -------- | ---- | - | ------- | -------- | -
|                                      |                                             | As of December 31, |        
|                                      |                                             |                    |        
|                                      |                                             | 2005               |         |          | 2004 |  
|                                      |                                             |                    |         |          |      |  
|                                      |                                             | (In thousands)     |        
|ASSETS                               
|Current assets                        |                                             | $                  | 3,571   |          |      | $ | 3,460   |         
|Investment in subsidiary              |                                             |                    | 43,886  |          |      |   | 44,314  |         
|Long term assets                      |                                             |                    | 2,505   |          |      |   | 2,947   |         
|                                      |                                             |                    |         |          |      |  
|                                      | Total assets                                |                    | $       | 49,962   |      |   | $       | 50,721   |  
|                                      |                                             |                    |         |          |      |  
|                                     
|LIABILITIES AND STOCKHOLDERS DEFICIT
|Current liabilities                   |                                             | $                  |        |          |      | $ |        |         
|Long term debt                        |                                             |                    | 220,663 |          |      |   | 190,976 |         
|Other long term liabilities           |                                             |                    | 18,517  |          |      |   | 4,306   |         
|Redeemable preferred stock            |                                             |                    | 39,930  |          |      |   | 36,882  |         
|Stockholders deficit:                |                                             |                    |         |          |      |   |         |         
|                                      | Common stock                                |                    |         | 20       |      |   |         | 20       |  
|                                      | Accumulated deficit                         |                    |         | (229,168 | )    |   |         | (181,463 | )
|                                      |                                             |                    |         |          |      |  
|                                      | Total stockholders deficit                 |                    |         | (229,148 | )    |   |         | (181,443 | )
|                                      |                                             |                    |         |          |      |  
|                                      | Total liabilities and stockholders deficit |                    | $       | 49,962   |      |   | $       | 50,721   |  
|                                      |                                             |                    |         |          |      |  

Condensed Statements of Operations


|                                    |  |                         |         |   |      |   |         |      |  |   |        |  
|----------------------------------- |  | ----------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------ | -
|                                    |  | Year Ended December 31, |        
|                                    |  |                         |        
|                                    |  | 2005                    |         |   | 2004 |   |         | 2003 | 
|                                    |  |                         |         |   |      |   |         |      | 
|                                    |  | (In thousands)          |        
|Revenues                            |  | $                       |        |   |      | $ |        |      |  | $ |       |  
|General and administrative expenses |  |                         |        |   |      |   |        |      |  |   |       |  
|                                    |  |                         |         |   |      |   |         |      | 
|Operating income                    |  |                         |        |   |      |   |        |      |  |   |       |  
|Equity in net loss of subsidiary    |  |                         | (44,427 | ) |      |   | (22,581 | )    |  |   | (1,866 | )
|                                    |  |                         |         |   |      |   |         |      | 
|Net loss                            |  | $                       | (44,427 | ) |      | $ | (22,581 | )    |  | $ | (1,866 | )
|                                    |  |                         |         |   |      |   |         |      | 

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Condensed Statements of Cash Flows


|                            |  |                         |       |   |      |   |         |      |  |   |   | 
|--------------------------- |  | ----------------------- | ----- | - | ---- | - | ------- | ---- |  | - | - | 
|                            |  | Year Ended December 31,
|                            |  |                        
|                            |  | 2005                    |       |   | 2004 |   |         | 2003
|                            |  |                         |       |   |      |   |         |     
|                            |  | (In thousands)         
|Cash provided by (used in): |  |                         |       |   |      |   |         |      |  |   |   | 
|Operating activities        |  | $                       | (694  | ) |      | $ | 332     |      |  | $ |  | 
|Investing activities        |  |                         | 796   |   |      |   | (53,517 | )    |  |   |  | 
|Financing activities        |  |                         | 9     |   |      |   | 56,645  |      |  |   |  | 
|                            |  |                         |       |   |      |   |         |      | 
|Net change in cash          |  |                         | 111   |   |      |   | 3,460   |      |  |   |  | 
|Cash at beginning of period |  |                         | 3,460 |   |      |   |        |      |  |   |  | 
|                            |  |                         |       |   |      |   |         |      | 
|Cash at the end of the year |  | $                       | 3,571 |   |      | $ | 3,460   |      |  | $ |  | 
|                            |  |                         |       |   |      |   |         |      | 



|   |                      
|-- | ---------------------
|1. | Basis of Presentation



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HAIGHTS CROSS COMMUNICATIONS, INC. AND SUBSIDIARIES





Schedule II  Valuation and Qualifying Account
Summary


For the Years ended December 31, 2005, 2004 and 2003:


|                              |                                               |                                                  |   |           |            |   |  |              |        |            |                |      |            |       |             |   |          |   |  |       |     |  |   |         |        |  
|----------------------------- | --------------------------------------------- | ------------------------------------------------ | - | --------- | ---------- | - |  | ------------ | ------ | ---------- | -------------- | ---- | ---------- | ----- | ----------- | - | -------- | - |  | ----- | --- |  | - | ------- | ------ | -
|                              |                                               |                                                  |   | Additions |            |   |  |              |       
|                              |                                               |                                                  |   |           |            |   |  |              |       
|                              |                                               | Balance at                                       |   |           | Charged to |   |  |              |        | Charged to |                |      |            |       |            
|                              |                                               | Beginning of                                     |   |           | Costs and  |   |  |              |        | Other      |                |      |            |       | Balance at  |  
|                              |                                               | Year                                             |   |           | Expenses   |   |  |              |        | Accounts   |                |      |            |       | End of Year |  
|                              |                                               |                                                  |   |           |            |   |  |              |        |            |                |      | Deductions |       |             |   |         
|Description                   |                                               | (Credit)                                         |   |           | (Credit)   |   |  | Acquisitions |        |            | Debit/(Credit) |      |            | Debit |             |   | (Credit) |  
|                              |                                               |                                                  |   |           |            |   |  |              |        |            |                |      |            |       |             |   |          |  
|Year ended December 31, 2005: |                                               |                                                  |   |           |            |   |  |              |        |            |                |      |            |       |             |   |          |   |  |       |     |  |   |        
|                              | Allowance for doubtful accounts and returns   |                                                  | $ | (3,351    | )          |   |  | (3,831       | )(2)   |            |                | 53   | (1)        |       |             |  |          |   |  | 3,642 | (4) |  | $ | (3,487  | )     
|                              |                                               | Allowance for senior secured promissory note (7) |   | $         | (1,780     | ) |  |              | (300   | )          |                |      |           |       |             |   | (202     | ) |  |       |    |  |   | $       | (2,282 | )
|                              | Allowance for valuation of deferred tax asset |                                                  | $ | (29,377   | )          |   |  | (14,830      | )      |            |                |     |            |       |             |  |          |   |  | 534   | (5) |  | $ | (43,673 | )     
|                              | Allowance for inventory obsolescence          |                                                  | $ | (2,032    | )          |   |  | (1,163       | )      |            |                | (47  | )(2)       |       |             |  |          |   |  | 493   | (6) |  | $ | (2,749  | )     
|Year ended December 31, 2004: |                                               |                                                  |   |           |            |   |  |              |        |            |                |      |            |       |             |   |          |   |  |       |     |  |   |        
|                              | Allowance for doubtful accounts and returns   |                                                  | $ | (3,411    | )          |   |  | (3,023       | )      |            |                | (209 | )(3)       |       |             |  |          |   |  | 3,292 | (4) |  | $ | (3,351  | )     
|                              |                                               | Allowance for senior secured promissory note (7) |   | $         |           |   |  |              | (1,780 | )          |                |      |           |       |             |   |         |   |  |       |    |  |   | $       | (1,780 | )
|                              | Allowance for valuation of deferred tax asset |                                                  | $ | (33,351   | )          |   |  |             |        |            |                |     |            |       |             |  |          |   |  | 3,974 | (5) |  | $ | (29,377 | )     
|                              | Allowance for inventory obsolescence          |                                                  | $ | (1,120    | )          |   |  | (976         | )      |            |                | (437 | )(3)       |       |             |  |          |   |  | 501   | (6) |  | $ | (2,032  | )     
|Year ended December 31, 2003: |                                               |                                                  |   |           |            |   |  |              |        |            |                |      |            |       |             |   |          |   |  |       |     |  |   |        
|                              | Allowance for doubtful accounts and returns   |                                                  | $ | (3,912    | )          |   |  | (2,844       | )      |            |                |     |            |       |             |  |          |   |  | 3,345 | (4) |  | $ | (3,411  | )     
|                              | Allowance for valuation of deferred tax asset |                                                  | $ | (33,736   | )          |   |  |             |        |            |                |     |            |       |             |  |          |   |  | 385   | (5) |  | $ | (33,351 | )     
|                              | Allowance for inventory obsolescence          |                                                  | $ | (1,389    | )          |   |  | (499         | )      |            |                |     |            |       |             |  |          |   |  | 768   | (6) |  | $ | (1,120  | )     






|    |                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Relates to a $90k adjustment to the valuation of Options
    Publishingand reserves added with the Scott Publishingand CMEinfoacquisitions.
|   
|(2) | Relates to reserves added with the acquisitions of Scott
    Publishingand CMEinfo.                                                        
|   
|(3) | Relates to reserves added with the acquisitions of Buckle
    Downand OptionsPublishing.                                                   
|   
|(4) | Primarily relates to return of products.                                                                                                   
|   
|(5) | Relates to the reduction of net deferred tax assets.                                                                                       
|   
|(6) | Relates to the destruction of obsolete inventory.                                                                                          
|   
|(7) | Relates to sale of Triumph College (see Note 16 in the
    financial statements included elsewhere in this annual report on
    Form 10-K.)

92



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|       |                                                                                                   
|------ | --------------------------------------------------------------------------------------------------
|Item 9 | .     Changes in and
    Disagreements with Accountants on Accounting and Financial
    Disclosure








|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures


15d-15




10-K


(b) Changes in Internal Controls over Financial
Reporting








| |   |                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Improving our documentation and training related to policies and
    procedures for the controls related to our significant accounts
    and processes;
|
| |  | Education and training of Company management and staff to
    improve technical expertise with respect to income tax
    accounting;                   
|
| |  | Engaging expert resources to assist with tax accounting;                                                                                               

93



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| |   |                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------
| |  | Re-allocating and/or relocating duties of finance personnel to
    enhance review and monitoring procedures.






Item 9B.     Other
Information.







Part III







|         |                                                   
|-------- | --------------------------------------------------
|Item 10. | Directors and Executive Officers of the Registrant



|                       |  |     |    |  |          |                                                                         
|---------------------- |  | --- | -- |  | -------- | ------------------------------------------------------------------------
|Name                   |  | Age |    |  | Position
|                       |  |     |    |  |         
|Peter J. Quandt        |  |     | 57 |  |          | Chairman, Chief Executive Officer and President                         
|Paul J. Crecca         |  |     | 48 |  |          | Director, Executive Vice President and Chief Financial Officer          
|Linda Koons            |  |     | 51 |  |          | Executive Vice President and Publisher                                  
|Kevin M. McAliley      |  |     | 46 |  |          | Executive Vice President and President of Triumph Learning              
|Mark Kurtz             |  |     | 41 |  |          | Vice President, Finance and Accounting, and Chief Accounting
    Officer
|Melissa L. Linsky      |  |     | 47 |  |          | Vice President, Finance and Planning, and Treasurer                     
|David Berset           |  |     | 51 |  |          | President, Recorded Books                                               
|Paul A. Konowitch(1)   |  |     | 51 |  |          | President, Sundance/ Newbridge                                          
|Nancy McMeekin         |  |     | 51 |  |          | President, Oakstone Publishing                                          
|Barbara Russell        |  |     | 58 |  |          | President, Options Publishing                                           
|Christopher S. Gaffney |  |     | 43 |  |          | Director                                                                
|Stephen F. Gormley     |  |     | 55 |  |          | Director                                                                
|Eugene I. Davis(2)     |  |     | 51 |  |          | Director                                                                






|    |                                                                                                                                                                                                                                                                                                                          
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Mr. Konowitch joined Haights Cross in September 2003 as
    Senior Vice President, Corporate and New Business Development
    and effective January 9, 2006 was appointed President of
    Sundance/ Newbridge publishing unit and as of such date is no
    longer an executive officer of Haights Cross Communications.
|   
|(2) | Mr. Davis was elected to our board of directors
    effective January 20, 2006 by the holders of a majority of
    our outstanding shares of Series B preferred stock, in
    accordance with the terms of the Series B preferred
    stock.                                                                             

Executive Officers


Peter J. Quandt


94



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Paul J. Crecca


Linda Koons Editor-in


Kevin M. McAliley


Mark Kurtz


Melissa L. Linsky magna cum laude


Business Presidents


David Berset


95



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Paul A. Konowitch


Nancy McMeekin


Barbara Russell


Directors


Christopher S. Gaffney summa cum laude


Stephen F. Gormley


Eugene I. Davis


96



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S-K


Investors Agreement




Compensation Committee Interlocks and Insider
Participation






Executive Officers




97



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|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation





Summary Compensation Table(1)


|                            |                            |                     |      |              |            |  |         |           |  |              |              |         |  |     |   |   |                     |  |   |   |  |   |       |       | 
|--------------------------- | -------------------------- | ------------------- | ---- | ------------ | ---------- |  | ------- | --------- |  | ------------ | ------------ | ------- |  | --- | - | - | ------------------- |  | - | - |  | - | ----- | ----- | 
|                            |                            |                     |      |              |            |  |         |           |  | Long Term    |             
|                            |                            |                     |      |              |            |  |         |           |  | Compensation |             
|                            |                            |                     |      |              |            |  |         |           |  | Awards       |             
|                            |                            |                     |      |              |           
|                            |                            | Annual Compensation |      |              | Securities |  |         |          
|                            |                            |                     |      |              | Underlying |  |         |          
|                            |                            |                     |      | Other Annual |            |  | Options |           |  | All Other    |             
|Name and Principal Position |                            | Year                |      |              | Salary ($) |  |         | Bonus ($) |  |              | Compensation |         |  | (#) |   |   | Compensation ($)(2) | 
|                            |                            |                     |      |              |            |  |         |           |  |              |              |         |  |     |   |   |                     | 
|Peter J. Quandt             |                            |                     | 2005 |              |            |  | 470,819 |           |  | $            | 265,272      |         |  |     |  |   |                     |  |  |   |  | $ | 7,113 |      
|                            | Chairman, Chief Executive  |                     |      | 2004         |            |  |         | 447,782   |  |              |              | 256,838 |  |     |   |  |                     |  |   |  |  |   |       | 4,330 | 
|                            | Officer and President      |                     |      | 2003         |            |  |         | 445,770   |  |              |              | 208,950 |  |     |   |  |                     |  |   |  |  |   |       | 5,719 | 
|Paul J. Crecca              |                            |                     | 2005 |              |            |  | 333,252 |           |  |              | 142,858      |         |  |     |  |   |                     |  |  |   |  |   | 5,114 |      
|                            | Director, Executive Vice   |                     |      | 2004         |            |  |         | 319,072   |  |              |              | 146,410 |  |     |   |  |                     |  |   |  |  |   |       | 4,330 | 
|                            | President and Chief        |                     |      | 2003         |            |  |         | 318,700   |  |              |              | 119,500 |  |     |   |  |                     |  |   |  |  |   |       | 5,239 | 
|                            | Financial Officer          |                     |      |              |            |  |         |           |  |              |              |         |  |     |   |   |                     |  |   |   |  |   |       |       | 
|Kevin M. McAliley           |                            |                     | 2005 |              |            |  | 312,792 |           |  |              | 181,012      |         |  |     |  |   |                     |  |  |   |  |   | 3,519 |      
|                            | Executive Vice President   |                     |      | 2004         |            |  |         | 306,251   |  |              |              | 138,920 |  |     |   |  |                     |  |   |  |  |   |       | 3,559 | 
|                            | and President of Triumph   |                     |      | 2003         |            |  |         | 309,400   |  |              |              | 164,150 |  |     |   |  |                     |  |   |  |  |   |       | 3,211 | 
|                            | Learning                   |                     |      |              |            |  |         |           |  |              |              |         |  |     |   |   |                     |  |   |   |  |   |       |       | 
|Linda Koons(3)              |                            |                     | 2005 |              |            |  | 309,923 |           |  |              | 127,741      |         |  |     |  |   |                     |  |  |   |  |   | 5,462 |      
|                            | Executive Vice President,  |                     |      | 2004         |            |  |         | 206,250   |  |              |              | 94,640  |  |     |   |  |                     |  |   |  |  |   |       |      | 
|                            | Publisher                  |                     |      |              |            |  |         |           |  |              |              |         |  |     |   |   |                     |  |   |   |  |   |       |       | 
|Paul Konowitch(4)           |                            |                     | 2005 |              |            |  | 254,834 |           |  |              | 73,245       |         |  |     |  |   |                     |  |  |   |  |   | 5,545 |      
|                            | Senior Vice President,     |                     |      | 2004         |            |  |         | 200,000   |  |              |              | 57,358  |  |     |   |  |                     |  |   |  |  |   |       |      | 
|                            | Corporate and New Business |                     |      | 2003         |            |  |         | 66,667    |  |              |              | 15,623  |  |     |   |  |                     |  |   |  |  |   |       |      | 
|                            | Development                |                     |      |              |            |  |         |           |  |              |              |         |  |     |   |   |                     |  |   |   |  |   |       |       | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The compensation in this table does not include certain
    perquisites and other personal benefits received by the named
    executive officers that did not exceed 10% of any officers
    total compensation reported in this table.                                                                                                                                                                                                                                           
|   
|(2) | Excludes medical, life insurance and other benefits received by
    the named executive officers which are available generally to
    all of our salaried employees and certain perquisites and other
    personal benefits received by the named executive officers which
    do not exceed the lesser of $50,000 or 10% of any such named
    executive officers total annual compensation. Represents
    our contributions to the named executive officers 401(k)
    account
|   
|(3) | Ms. Koons joined Haights Cross in March 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(4) | Mr. Konowitch joined Haights Cross in September 2003.
    Effective January 9, 2006 Mr. Konowitch was appointed
    President of Sundance/ Newbridge publishing unit. and as of such
    date is no longer an executive officer of Haights Cross
    Communications.                                                                                                                                                                                                               

Option Grants in Last Fiscal Year




98



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Aggregate Option Exercises in Last Fiscal Year and Fiscal
Year-End Option Values




In-the


|                  |  |                          |         |  |                              |  |        |             |  |   |               |  |  |  |   | 
|----------------- |  | ------------------------ | ------- |  | ---------------------------- |  | ------ | ----------- |  | - | ------------- |  |  |  | - | 
|                  |  | Number of Common Shares  |         |  | Value of Unexercised In-the- | 
|                  |  | Underlying Options as of |         |  | Money Options as of          | 
|                  |  | December 31, 2005        |         |  | December 31, 2005            | 
|                  |  |                          |         |  |                              | 
|Name              |  | Exercisable              |         |  | Unexercisable                |  |        | Exercisable |  |   | Unexercisable | 
|                  |  |                          |         |  |                              |  |        |             |  |   |               | 
|Peter J. Quandt   |  |                          |        |  |                              |  |       |             |  |   |              |  |  |  |  | 
|Paul J. Crecca    |  |                          | 49,274  |  |                              |  | 64,375 |             |  |   |              |  |  |  |  | 
|Kevin M. McAliley |  |                          | 130,166 |  |                              |  | 44,250 |             |  | $ | 13,600        |  |  |  |  | 
|Linda Koons       |  |                          | 19,830  |  |                              |  | 80,000 |             |  |   |              |  |  |  |  | 
|Paul Konowitch    |  |                          | 5,898   |  |                              |  | 24,000 |             |  |   |              |  |  |  |  | 

Employee Benefit Plans and Arrangements


2000 Stock Option and Grant Plan.




| |   |                                               
| | - | ----------------------------------------------
| |  | incentive and non-qualified stock options; and
|
| |  | restricted and unrestricted stock awards.     









99



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401(k) Savings Plan.


Bonus and Incentive Plans


2002 Equity Plan.


Employment and Severance Agreements.




100



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Annual Management/ Employee Bonus Plan.




2005 Cost Savings Incentive Plan.


Director Compensation


out-of


101



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|         |                                                                                                    
|-------- | ---------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial Owners and
    Management and Related Stockholder Matters.

Securities Authorized for Issuance Under Equity Compensation
Plans




|                                                           |       |                   |           |           |                  |            |      |                      |  |  |         |         | 
|---------------------------------------------------------- | ----- | ----------------- | --------- | --------- | ---------------- | ---------- | ---- | -------------------- |  |  | ------- | ------- | 
|                                                           |       |                   |           |           |                  | Number of  |     
|                                                           |       |                   |           |           |                  | Securities |     
|                                                           |       | Number of         |           |           | Weighted-        |            |      | Remaining Available  | 
|                                                           |       | Securities to be  |           |           | Average Exercise |            |      | for Future Issuance  | 
|                                                           |       | Issued Upon       |           |           | Price of         |            |      | under Equity         | 
|                                                           |       | Exercise of       |           |           | Outstanding      |            |      | Compensation         | 
|                                                           |       | Outstanding       |           |           | Options,         |            |      | Plans (Excluding     | 
|                                                           |       | Options, Warrants |           |           | Warrants and     |            |      | Securities Reflected | 
|                                                           |       | and Rights        |           |           | Rights           |            |      | in Column (a))       | 
|Plan Category                                              |       | (a)               |           |           | (b)              |            |      | (c)                  | 
|                                                           |       |                   |           |           |                  |            |      |                      | 
|Equity compensation plans approved by security holders     |       |                   | 1,570,157 |           |                  | $          | 1.64 |                      |  |  | 819,543 |        
|                                                           |       |                   |           |           |                  |            |      |                      | 
|Equity compensation plans not approved by security holders |       |                   | 0         |           |                  |            | 0    |                      |  |  | 0       |        
|                                                           |       |                   |           |           |                  |            |      |                      | 
|                                                           | Total |                   |           | 1,570,157 |                  |            | $    | 1.64                 |  |  |         | 819,543 | 
|                                                           |       |                   |           |           |                  |            |      |                      | 

Security Ownership






| |   |                                                                                        
| | - | ---------------------------------------------------------------------------------------
| |  | each person known by us to be the beneficial owner of more than
    5.0% of such stock;
|
| |  | each of our directors;                                                                 
|
| |  | each named executive officer; and                                                      
|
| |  | all of our directors and named executive officers as a group.                          







102



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|                                                                          |  |                           |            |          |                 |  |              |         |  |  |      |  
|------------------------------------------------------------------------- |  | ------------------------- | ---------- | -------- | --------------- |  | ------------ | ------- |  |  | ---- | -
|                                                                          |  | Shares Beneficially Owned |            |          |                
|                                                                          |  |                           |            |          |                
|                                                                          |  |                           |            | Series A |                 |  | Total Voting |        
|Name of Beneficial Owner                                                  |  | Common Stock              |            |          | Preferred Stock |  |              | Percent | 
|                                                                          |  |                           |            |          |                 |  |              |         | 
|Media/ Communications Partners III Limited Partnership and
    affiliates |  |                           | 14,342,193 | (1)      |                 |  | 20,397       | (2)     |  |  | 71.7 | %
|Peter J. Quandt                                                           |  |                           | 4,784,406  |          |                 |  | 1,362        |         |  |  | 23.9 | %
|Paul J. Crecca                                                            |  |                           | 419,274    | (3)      |                 |  | 0            |         |  |  | 2.1  | %
|Linda Koons                                                               |  |                           | 19,830     | (4)      |                 |  | 0            |         |  |  | *    |  
|Kevin M. McAliley                                                         |  |                           | 130,166    | (4)      |                 |  | 0            |         |  |  | *    |  
|Paul Konowitch                                                            |  |                           | 5,898      | (4)      |                 |  | 0            |         |  |  | *    |  
|Christopher S. Gaffney                                                    |  |                           | 14,342,192 | (1)      |                 |  | 20,397       | (2)     |  |  | 71.7 | %
|Stephen F. Gormley                                                        |  |                           | 14,342,192 | (1)      |                 |  | 20,397       | (2)     |  |  | 71.7 | %
|Eugene I. Davis                                                           |  |                           | 0          |          |                 |  | 0            |         |  |  | *    |  
|All directors and named executive officers as a group
    (ten persons)   |  |                           | 19,773,477 |          |                 |  | 21,759       |         |  |  | 97.5 | %






| |   |             
| | - | ------------
| | * | Less than 1%



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | This total includes 13,625,218 shares of common stock owned
    by Media/ Communications Partners III Limited Partnership
    and 716,975 shares of common stock owned by M/ C Investors
    L.L.C. Each of Messrs. Gaffney and Gormley is a limited
    partner and a member of the general partner of Media/
    Communications Partners III Limited Partnership and an
    investor in and managing member of M/ C Investors L.L.C. Each of
    Messrs. Gaffney and Gormley disclaims beneficial ownership
    of such shares, except to the extent of his pecuniary interest
    therein.                       
|   
|(2) | This total includes 19,377 shares of Series A
    preferred stock owned by Media/ Communications Partners III
    Limited Partnership and 1,020 shares of Series A
    preferred stock owned by M/ C Investors, L.L.C. Each of
    Messrs. Gaffney and Gormley is a limited partner and a
    member of the general partner of Media/ Communications
    Partners III Limited Partnership and an investor in and
    managing member of M/ C Investors L.L.C. Each of
    Messrs. Gaffney and Gormley disclaims beneficial ownership
    of such shares, except to the extent of his pecuniary interest
    therein.
|   
|(3) | This total includes 49,274 shares of common stock issuable
    upon exercise of options which were exercisable as of
    March 22, 2006 or within 60 days thereafter.                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|(4) | Consists of shares of common stock issuable upon exercise of
    options which were exercisable as of March 22, 2006 or
    within 60 days thereafter.                                                                                                                                                                                                                                                                                                                                                                                                                                                              






|         |                                                
|-------- | -----------------------------------------------
|Item 13. | Certain Relationships and Related Transactions.

Indemnification Matters






103



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Registration Rights


S-3







|         |                                        
|-------- | ---------------------------------------
|Item 14. | Principal Accounting Fees and Services.



Audit Fees. 10-Q,


Audit-Related Fees.


Tax Fees.


All Other Fees.


104



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PART IV





Item 15.     Exhibits,
Financial Statements and Schedules






| |                                                                                                    
| | ---------------------------------------------------------------------------------------------------
| | 1. Financial Statements. The following financial
    statements are filed as a part of this report.

|                                                                               |  |  |    | 
|------------------------------------------------------------------------------ |  |  | -- | 
|Report of Ernst & Young LLP,
    Independent Registered Public Accounting Firm |  |  | 53 | 
|Consolidated Balance Sheets                                                    |  |  | 54 | 
|Consolidated Statements of Operations                                          |  |  | 55 | 
|Consolidated Statements of Changes in
    Stockholders Deficit                |  |  | 56 | 
|Consolidated Statements of Cash Flows                                          |  |  | 57 | 
|Notes to Consolidated Financial
    Statements                                 |  |  | 58 | 



| |                                 
| | --------------------------------
| | 2. Financial Statement Schedules

|                                                           |  |  |    | 
|---------------------------------------------------------- |  |  | -- | 
|Schedule I  Condensed
    Financial Information           |  |  | 90 | 
|Schedule II  Valuation and
    Qualifying Account Summary |  |  | 92 | 





| |                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 3. Exhibits. Haights Cross Communications, Inc. has
    filed the Exhibits listed in the accompanying Index to Exhibits
    on page      as part of this
    Report.



| |    |                 
| | -- | ----------------
| | 3. | List of Exhibits

|        |   |                     |  |                                                                                                                                                                                                                                                                                                                                                                                                                             
|------- | - | ------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |   |                    
|No.     |   | Exhibit Description
|        |   |                    
|        | 2 | .1                  |  | Asset Purchase Agreement, dated as of March 6, 2004, by and
    among Haights Cross Communications, Inc., Buckle Down Publishing
    Company and the other parties named therein, incorporated by
    reference to Exhibit 2.1 of Haights Cross Communications,
    Inc.s Current Report on Form 8-K filed April 20,
    2004                                                                                              
|        | 2 | .2                  |  | Asset Purchase Agreement, dated as of November 11, 2004, by
    and among Haights Cross Communications, Inc., Haights Cross
    Operating Company, Options Publishing, LLC, Options Publishing,
    Inc., and certain stockholders of Options Publishing, Inc. named
    therein, incorporated by reference to Exhibit 2.1 of
    Haights Cross Communications, Inc.s Current Report on
    Form 8-K filed December 6, 2004
|       
|        | 2 | .3                  |  | Purchase and Sale Agreement, dated as of November 11, 2004,
    by and between Options Publishing, LLC and Merrimack M&R
    Realty LLC, incorporated by reference to Exhibit 2.2 of
    Haights Cross Communications, Inc.s Current Report on
    Form 8-K filed December 6, 2004                                                                                                                                         

105



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|        |   |                     |  |                                                                                                                                                                                                                                                                                                                
|------- | - | ------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |   |                    
|No.     |   | Exhibit Description
|        |   |                    
|       
|        | 3 | .1                  |  | Second Amended and Restated Certificate of Incorporation of
    Haights Cross Communications, Inc., incorporated by reference to
    Exhibit 3.1 of Haights Cross Communications, Inc.s
    Special Report on Form 10-K filed April 19, 2004                                                                  
|        | 3 | .1(a)               |  | Certificate of Designations, Preferences and Rights of
    Series C Preferred Stock of Haights Cross Communications,
    Inc., incorporated by reference to Exhibit 3.1(a) of
    Haights Cross Communications, Inc.s Registration Statement
    on Form S-4 (Reg. No. 333-122750) filed
    February 11, 2005
|       
|        | 3 | .2                  |  | Bylaws of Haights Cross Communications, Inc., incorporated by
    reference to Exhibit 3.2 of Haights Cross Communications,
    Inc.s Registration Statement on Form S-4 (Reg.
    No. 333-109381) filed October 2, 2003                                                                                      
|       
|        | 3 | .3                  |  | Certificate of Incorporation of Haights Cross Operating Company,
    incorporated by reference to Exhibit 3.3 of Haights Cross
    Communications, Inc.s Registration Statement on
    Form S-4 (Reg. No. 333-109381) filed October 2,
    2003                                                               
|       
|        | 3 | .4                  |  | Bylaws of Haights Cross Operating Company, incorporated by
    reference to Exhibit 3.4 of Haights Cross Communications,
    Inc.s Registration Statement on Form S-4 (Reg.
    No. 333-109381) filed October 2, 2003                                                                                         
|       
|        | 3 | .5                  |  | Certificate of Formation of Triumph Learning, LLC, incorporated
    by reference to Exhibit 3.7 of Haights Cross
    Communications, Inc.s Registration Statement on
    Form S-4 (Reg. No. 333-109381) filed October 2,
    2003                                                                             
|       
|        | 3 | .6                  |  | Amended and Restated Limited Liability Company Agreement of
    Triumph Learning, LLC, incorporated by reference to
    Exhibit 3.8 of Haights Cross Communications, Inc.s
    Registration Statement on Form S-4 (Reg.
    No. 333-109381) filed October 2, 2003                                             
|       
|        | 3 | .7                  |  | Certificate of Formation of Oakstone Publishing, LLC,
    incorporated by reference to Exhibit 3.9 of Haights Cross
    Communications, Inc.s Registration Statement on
    Form S-4 (Reg. No. 333-109381) filed October 2,
    2003                                                                          
|       
|        | 3 | .8                  |  | Amended and Restated Limited Liability Company Agreement of
    Oakstone Publishing, LLC, incorporated by reference to
    Exhibit 3.10 of Haights Cross Communications, Inc.s
    Registration Statement on Form S-4 (Reg.
    No. 333-109381) filed October 2, 2003                                         
|       
|        | 3 | .9                  |  | Certificate of Formation of Recorded Books, LLC, incorporated by
    reference to Exhibit 3.11 of Haights Cross Communications,
    Inc.s Registration Statement on Form S-4 (Reg.
    No. 333-109381) filed October 2, 2003                                                                                  
|       
|        | 3 | .10                 |  | Amended and Restated Limited Liability Company Agreement of
    Recorded Books, LLC, incorporated by reference to
    Exhibit 3.12 of Haights Cross Communications, Inc.s
    Registration Statement on Form S-4 (Reg.
    No. 333-109381) filed October 2, 2003                                              
|       
|        | 3 | .11                 |  | Certificate of Formation of Sundance/ Newbridge Educational
    Publishing, LLC, incorporated by reference to Exhibit 3.13
    of Haights Cross Communications, Inc.s Registration
    Statement on Form S-4 (Reg. No. 333-109381) filed
    October 2, 2003                                                  
|       
|        | 3 | .12                 |  | Amended and Restated Limited Liability Company Agreement of
    Sundance/ Newbridge Educational Publishing, LLC, incorporated by
    reference to Exhibit 3.14 of Haights Cross Communications,
    Inc.s Registration Statement on Form S-4 (Reg.
    No. 333-109381) filed October 2, 2003                  
|       
|        | 3 | .13                 |  | Certificate of Formation of The Coriolis Group, LLC,
    incorporated by reference to Exhibit 3.15 of Haights Cross
    Communications, Inc.s Registration Statement on
    Form S-4 (Reg. No. 333-109381) filed October 2,
    2003                                                                          
|       
|        | 3 | .14                 |  | Third Amended and Restated Limited Liability Company Agreement
    of The Coriolis Group, LLC, incorporated by reference to
    Exhibit 3.16 of Haights Cross Communications, Inc.s
    Registration Statement on Form S-4 (Reg.
    No. 333-109381) filed October 2, 2003                                    
|       
|        | 3 | .15                 |  | Articles of Association of W F Howes Limited, incorporated by
    reference to Exhibit 3.17 of Haights Cross Communications,
    Inc.s Registration Statement on Form S-4 (Reg.
    No. 333-109381) filed October 2, 2003                                                                                     
|       
|        | 3 | .16                 |  | Memorandum of Association of W F Howes Limited, incorporated by
    reference to Exhibit 3.18 of Haights Cross Communications,
    Inc.s Registration Statement on Form S-4 (Reg.
    No. 333-109381) filed October 2, 2003                                                                                   

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|        |    |                     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------- | -- | ------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                    
|No.     |    | Exhibit Description
|        |    |                    
|       
|        | 3  | .17                 |  | Certificate of Formation of Options Publishing, LLC,
    incorporated by reference to Exhibit 3.19 of Haights Cross
    Communications, Inc.s Registration Statement on
    Form S-4 (Reg. No. 333-122750) filed February 11,
    2005                                                                                                                                                                                                                                                                                                          
|       
|        | 3  | .18                 |  | Limited Liability Company Agreement of Options Publishing, LLC,
    incorporated by reference to Exhibit 3.20 of Haights Cross
    Communications, Inc.s Registration Statement on
    Form S-4 (Reg. No. 333-122750) filed February 11,
    2005                                                                                                                                                                                                                                                                                               
|       
|        | 4  | .1                  |  | Indenture, dated as of August 20, 2003, by and between
    Haights Cross Operating Company and Wells Fargo Bank Minnesota,
    N.A., as Trustee, incorporated by reference to Exhibit 4.1
    of Haights Cross Communications, Inc.s Registration
    Statement on Form S-4 (Reg. No. 333-109381) filed
    October 2, 2003                                                                                                                                                                                                                     
|       
|        | 4  | .2                  |  | Form of Haights Cross Operating Company
    113/4% Senior
    Note due 2011, incorporated by reference to Exhibit 4.2 of
    Haights Cross Communications, Inc.s Registration Statement
    on Form S-4 (Reg. No. 333-109381) filed
    October 2, 2003                                                                                                                                                                                                                                                                                         
|       
|        | 4  | .3                  |  | Registration Rights Agreement, dated as of August 20, 2003,
    by and among Haights Cross Operating Company, the Guarantors
    listed therein and Bear, Stearns & Co. Inc., BNY
    Capital Markets, Inc., Jefferies & Company, Inc. and
    Lane, Berry & Co. International, LLC, incorporated by
    reference to Exhibit 4.3 of Haights Cross Communications,
    Inc.s Registration Statement on Form S-4 (Reg.
    No. 333-109381) filed October 2, 2003                                                                                 
|       
|        | 4  | .4                  |  | Indenture, dated as of February 2, 2004, by and between
    Haights Cross Communications, Inc. and Wells Fargo Bank
    Minnesota, N.A., as Trustee, incorporated by reference to
    Exhibit 4.4 of Haights Cross Communications, Inc.s
    Special Report on Form 10-K filed April 19, 2004                                                                                                                                                                                                                                                   
|       
|        | 4  | .5                  |  | Form of Haights Cross Communications, Inc.
    121/2% Senior
    Discount Note due 2011, incorporated by reference to
    Exhibit 4.5 of Haights Cross Communications, Inc.s
    Special Report on Form 10-K filed April 19, 2004                                                                                                                                                                                                                                                                                                               
|       
|        | 4  | .6                  |  | Registration Rights Agreement, dated as of February 2,
    2004, by and between Haights Cross Communications, Inc. and
    Bear, Stearns & Co. Inc., incorporated by reference to
    Exhibit 4.6 of Haights Cross Communications, Inc.s
    Special Report on Form 10-K filed April 19, 2004                                                                                                                                                                                                                                                   
|       
|        | 4  | .7                  |  | Registration Rights Agreement, dated as of December 10,
    2004, by and among Haights Cross Operating Company, Bear
    Stearns & Co. Inc. and the Guarantors named therein,
    incorporated by reference to Exhibit 4.1 of Haights Cross
    Communications, Inc.s Current Report on Form 8-K
    filed December 15, 2004                                                                                                                                                                                                                    
|       
|        | 4  | .8                  |  | Supplemental Indenture, dated as of December 10, 2004, by
    and among Options Publishing, LLC, Haights Cross Operating
    Company, the guarantors signatory thereto, and Wells Fargo Bank,
    N.A., as trustee, supplementing the Indenture, dated as of
    August 20, 2003, among Haights Cross Operating Company, the
    guarantors named therein and Wells Fargo Bank, N.A., as trustee,
    incorporated by reference to Exhibit 4.2 of Haights Cross
    Communications, Inc.s Current Report on Form 8-K
    filed December 15, 2004
|       
|        | 10 | .1                  |  | Lease Agreement, dated as of January 15, 2003, by and
    between Sundance Publishing, LLC and LIT Industrial Limited
    Partnership, incorporated by reference to Exhibit 10.1 of
    Haights Cross Communications, Inc.s Registration Statement
    on Form S-4 (Reg. No. 333-109381) filed
    October 2, 2003                                                                                                                                                                                                                              
|       
|        | 10 | .2                  |  | Director Indemnification Agreement, dated as of
    December 10, 1999, by and between Haights Cross
    Communications, Inc. and Christopher S. Gaffney, incorporated by
    reference to Exhibit 10.2 of Haights Cross Communications,
    Inc.s Registration Statement on Form S-4 (Reg.
    No. 333-109381) filed October 2, 2003                                                                                                                                                                                                            
|       
|        | 10 | .3                  |  | Director Indemnification Agreement, dated as of
    December 10, 1999, by and between Haights Cross
    Communications, Inc. and Stephen F. Gormley, incorporated by
    reference to Exhibit 10.3 of Haights Cross Communications,
    Inc.s Registration Statement on Form S-4 (Reg.
    No. 333-109381) filed October 2, 2003                                                                                                                                                                                                                

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##### Table of Contents



|        |    |                     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------- | -- | ------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                    
|No.     |    | Exhibit Description
|        |    |                    
|       
|        | 10 | .4                  |  | Director Indemnification Agreement, dated as of
    December 10, 1999, by and between Haights Cross
    Communications, Inc. and Peter J. Quandt, incorporated by
    reference to Exhibit 10.4 of Haights Cross Communications,
    Inc.s Registration Statement on Form S-4 (Reg.
    No. 333-109381) filed October 2, 2003                                                                                                                                                                                   
|       
|        | 10 | .5                  |  | Investors Agreement, dated as of December 10, 1999, by and
    among Haights Cross Communications, Inc., Haights Cross
    Operating Company, the Existing Stockholders (as defined
    therein) and the DLJMB Investors (as defined therein), as
    amended by Amendment to Investors Agreement, dated as of
    June 27, 2003, incorporated by reference to
    Exhibit 10.5 of Haights Cross Communications, Inc.s
    Registration Statement on Form S-4 (Reg.
    No. 333-109381) filed October 2, 2003   
|       
|        | 10 | .6                  |  | Investors Registration Rights Agreement, dated as of
    December 10, 1999, by and among Haights Cross
    Communications, Inc., Haights Cross Operating Company and the
    Holders (as defined therein), incorporated by reference to
    Exhibit 10.6 of Haights Cross Communications, Inc.s
    Registration Statement on Form S-4 (Reg.
    No. 333-109381) filed October 2, 2003                                                                                                                          
|       
|        | 10 | .7+                 |  | Haights Cross Communications, Inc. Restated 2000 Stock Option
    and Grant Plan, incorporated by reference to Exhibit 10.1
    of Haights Cross Communications, Inc.s Current Report on
    Form 8-K filed September 28, 2004                                                                                                                                                                                                                                                                                  
|       
|        | 10 | .8+                 |  | Haights Cross Communications, Inc. 2002 Equity Plan,
    incorporated by reference to Exhibit 10.8 of Haights Cross
    Communications, Inc.s Registration Statement on
    Form S-4 (Reg. No. 333-109381) filed October 2,
    2003                                                                                                                                                                                                                                                                            
|       
|        | 10 | .9+                 |  | Haights Cross Communications, Inc. 401(k) Savings Plan,
    incorporated by reference to Exhibit 10.9 of Haights Cross
    Communications, Inc.s Registration Statement on
    Form S-4 (Reg. No. 333-109381) filed October 2,
    2003                                                                                                                                                                                                                                                                         
|       
|        | 10 | .10                 |  | Term Loan Agreement, dated as of August 20, 2003, by and
    among Haights Cross Operating Company, the Several Lenders from
    time to time parties thereto and Bear Stearns Corporate Lending
    Inc., as Administrative Agent, incorporated by reference to
    Exhibit 10.10 of Haights Cross Communications, Inc.s
    Registration Statement on Form S-4 (Reg.
    No. 333-109381) filed October 2, 2003                                                                                                
|       
|        | 10 | .11                 |  | Revolving Credit Agreement, dated as of August 20, 2003, by
    and among Haights Cross Operating Company, the Several Lenders
    from time to time parties thereto, Bear Stearns Corporate
    Lending Inc., as Syndication Agent and The Bank of New York, as
    Administrative Agent, incorporated by reference to
    Exhibit 10.11 of Haights Cross Communications, Inc.s
    Registration Statement on Form S-4 (Reg.
    No. 333-109381) filed October 2, 2003                                         
|       
|        | 10 | .12                 |  | Amendment No. 1 and Consent No. 1 to Revolving Credit
    Agreement, dated as of January 26, 2003, by and among
    Haights Cross Operating Company, the Several Lenders from time
    to time parties thereto, Bear Stearns Corporate Lending Inc., as
    Syndication Agent and The Bank of New York, as
    Administrative Agent, incorporated by reference to
    Exhibit 10.11 of Haights Cross Communications, Inc.s
    Special Report on Form 10-K filed April 19, 2004                                 
|       
|        | 10 | .13                 |  | Amendment No. 2 and Consent No. 2 to Revolving Credit
    Agreement, dated as of January 26, 2003, by and among
    Haights Cross Operating Company, the Several Lenders from time
    to time parties thereto, Bear Stearns Corporate Lending Inc., as
    Syndication Agent and The Bank of New York, as
    Administrative Agent, incorporated by reference to
    Exhibit 10.12 of Haights Cross Communications, Inc.s
    Registration Statement on Form S-4 (Reg.
    No. 333-115017) filed April 30, 2004
|       
|        | 10 | .14+                |  | Employment Agreement, dated as of December 18, 2003, by and
    between Haights Cross Communications, Inc. and Peter J. Quandt,
    incorporated by reference to Exhibit 10.12 of Haights Cross
    Communications, Inc.s Amendment No. 2 to Registration
    Statement on Form S-4 (Reg. No. 333-109381) filed
    January 12, 2004                                                                                                                                                                            
|       
|        | 10 | .15+                |  | Form of incentive stock option agreement for options with time
    based vesting schedules, incorporated by reference to
    Exhibit 10.2 of Haights Cross Communications, Inc.s
    Current Report on Form 8-K filed September 28, 2004                                                                                                                                                                                                                                                                        

108



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##### Table of Contents



|        |    |                     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|------- | -- | ------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                    
|No.     |    | Exhibit Description
|        |    |                    
|       
|        | 10 | .16+                |  | Form of incentive stock option agreement for options with
    performance based vesting schedules, incorporated by reference
    to Exhibit 10.3 of Haights Cross Communications,
    Inc.s Current Report on Form 8-K filed
    September 28, 2004                                                                                                                                                                                                                                                                   
|       
|        | 10 | .17                 |  | Term Loan Agreement, dated as of December 10, 2004, by and
    among Haights Cross Operating Company, Bear Stearns &
    Co. Inc., as lead arranger, Bear Stearns Corporate Lending Inc.,
    as Administrative Agent, and the lenders party thereto,
    incorporated by reference to Exhibit 1.1 of Haights Cross
    Communications, Incs Current Report on Form 8-K filed
    December 15, 2004                                                                                                                   
|       
|        | 10 | .18                 |  | Amendment No. 4 and Waiver No. 3, dated as of
    April 12, 2005, to the Revolving Credit Agreement, dated as
    of August 20, 2003, by and among the Company, the several
    lenders from time to time parties thereto, Bear Stearns
    Corporate Lending, Inc., as Syndication Agent, and The Bank of
    New York, as administrative agent, incorporated by reference to
    Exhibit 10.1 of Haights Cross Communications, Incs
    Current Report on Form 8-K filed April 15, 2005                             
|       
|        | 10 | .19                 |  | Amendment No. 5 and Consent No. 4, dated as of
    August 9, 2005, to the Revolving Credit Agreement, dated as
    of August 20, 2003, by and among the Company, the several
    lenders from time to time parties thereto, Bear Stearns
    Corporate Lending, Inc., as Syndication Agent, and The Bank of
    New York, as administrative agent, incorporated by reference to
    Exhibit 10.1 of Haights Cross Communications, Incs
    Quarterly Report on Form 10-Q for the quarter ended
    September 30, 2005.
|       
|        | 10 | .20+                |  | Description of the Haights Cross Communications, Inc. Annual
    Management/ Employee Bonus Plan, incorporated by reference to
    Exhibit 10.1 of Haights Cross Communications, Incs
    Current Report on Form 8-K filed March 16, 2005                                                                                                                                                                                                                                                                             
|       
|        | 10 | .21+                |  | Description of the Haights Cross Communications, Inc. 2005 Cost
    Savings Incentive Plan, incorporated by reference to
    Exhibit 10.2 of Haights Cross Communications, Incs
    Current Report on Form 8-K filed March 16, 2005                                                                                                                                                                                                                                                                                   
|       
|        | 10 | .22                 |  | Amendment No. 3 and Consent No. 3, dated as of
    December 1, 2004, to the Revolving Credit Agreement, dated
    as of August 20, 2003, by and among the Company, the
    several lenders from time to time parties thereto, Bear Stearns
    Corporate Lending, Inc., as Syndication Agent, and The Bank of
    New York, as administrative agent, incorporated by reference to
    Exhibit 10.17 of Haights Cross Communications, Incs
    Annual Report on Form 10-K for the year ended
    December 31, 2004     
|       
|        | 12 | .1*                 |  | Statement Regarding Computation of Ratio of Earnings to Fixed
    Charges                                                                                                                                                                                                                                                                                                                                                                                                                                              
|       
|        | 14 | .1                  |  | Code of Business Code and Ethics, incorporated by reference to
    Exhibit 14 of Haights Cross Communications, Incs
    Current Report on Form 8-K filed September 28, 2004                                                                                                                                                                                                                                                                                                                                           
|       
|        | 21 | .1*                 |  | Subsidiaries of Haights Cross Communications, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       
|        | 21 | .2                  |  | Subsidiaries of Haights Cross Operating Company, incorporated by
    reference to Exhibit 21.1 of Haights Cross Communications,
    Inc.s Registration Statement on Form S-4 (Reg.
    No. 333-122750) filed February 11, 2005                                                                                                                                                                                                                                                                                        
|       
|        | 21 | .3                  |  | Subsidiaries of Recorded Books, LLC, incorporated by reference
    to Exhibit 21.3 of Haights Cross Communications,
    Inc.s Registration Statement on Form S-4 (Reg.
    No. 333-109381) filed October 2, 2003                                                                                                                                                                                                                                                                                                      
|       
|        | 23 | .1*                 |  | Consent of Ernst & Young LLP                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       
|        | 24 | .1*                 |  | Power of Attorney (Included in signature page)                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|       
|        | 31 | .1*                 |  | Rule 13a-14(a)/15d-14(a) Certification of Peter J. Quandt                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|       
|        | 31 | .2*                 |  | Rule 13a-14(a)/15d-14(a) Certification of Paul J. Crecca                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       
|        | 32 | .1**                |  | Certification of Chief Executive Officer Pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                              
|       
|        | 32 | .2**                |  | Certification of Chief Financial Officer Pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                              








|  |               
|- | --------------
|* | filed herewith



|   |                   
|-- | ------------------
|** | furnished herewith

109



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##### Table of Contents






SIGNATURES






| |                                   
| | ----------------------------------
| | HAIGHTS CROSS COMMUNICATIONS, INC.



| |     |                    
| | --- | -------------------
| | By: | /s/ PETER J. QUANDT

| |                                          
| | -----------------------------------------
| |                                          
| | Peter J. Quandt                          
| | Chairman of the Board of Directors, Chief
| | Executive Officer and President          
| | (Principal Executive Officer)            



POWER OF ATTORNEY




attorney-in 10-K, attorney-in


|                                                     |  |                                                                               |  |                |  | 
|---------------------------------------------------- |  | ----------------------------------------------------------------------------- |  | -------------- |  | 
|Signature                                            |  | Title                                                                         |  | Date          
|                                                     |  |                                                                               |  |               
|                                                    
|/s/ PETER J. QUANDTPeter J. Quandt                   |  | Chairman of the Board of Directors, Chief Executive Officer and
    President |  | March 22, 2006
|                                                    
|/s/ PAUL J. CRECCAPaul J. Crecca                     |  | Director, Executive Vice President and Chief Financial Officer                |  | March 22, 2006
|                                                    
|/s/ MARK KURTZMark Kurtz                             |  | Vice President, Finance and Accounting and Chief Accounting
    Officer       |  | March 22, 2006
|                                                    
|/s/ CHRISTOPHER S.
    GAFFNEYChristopher S. Gaffney |  | Director                                                                      |  | March 22, 2006
|                                                    
|/s/ STEPHEN F. GORMLEYStephen F. Gormley             |  | Director                                                                      |  | March 22, 2006
|                                                    
|/s/ EUGENE I. DAVISEugene I. Davis                   |  | Director                                                                      |  | March 22, 2006





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##### Table of Contents






EXHIBIT INDEX


|        |   |                     |  |                                                                                                                                                                                                                                                                                                                                                                                                                             
|------- | - | ------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |   |                    
|No.     |   | Exhibit Description
|        |   |                    
|        | 2 | .1                  |  | Asset Purchase Agreement, dated as of March 6, 2004, by and
    among Haights Cross Communications, Inc., Buckle Down Publishing
    Company and the other parties named therein, incorporated by
    reference to Exhibit 2.1 of Haights Cross Communications,
    Inc.s Current Report on Form 8-K filed April 20,
    2004                                                                                              
|        | 2 | .2                  |  | Asset Purchase Agreement, dated as of November 11, 2004, by
    and among Haights Cross Communications, Inc., Haights Cross
    Operating Company, Options Publishing, LLC, Options Publishing,
    Inc., and certain stockholders of Options Publishing, Inc. named
    therein, incorporated by reference to Exhibit 2.1 of
    Haights Cross Communications, Inc.s Current Report on
    Form 8-K filed December 6, 2004
|       
|        | 2 | .3                  |  | Purchase and Sale Agreement, dated as of November 11, 2004,
    by and between Options Publishing, LLC and Merrimack M&R
    Realty LLC, incorporated by reference to Exhibit 2.2 of
    Haights Cross Communications, Inc.s Current Report on
    Form 8-K filed December 6, 2004                                                                                                                                         
|       
|        | 3 | .1                  |  | Second Amended and Restated Certificate of Incorporation of
    Haights Cross Communications, Inc., incorporated by reference to
    Exhibit 3.1 of Haights Cross Communications, Inc.s
    Special Report on Form 10-K filed April 19, 2004                                                                                                                                                                               
|       
|        | 3 | .1(a)               |  | Certificate of Designations, Preferences and Rights of
    Series C Preferred Stock of Haights Cross Communications,
    Inc., incorporated by reference to Exhibit 3.1(a) of
    Haights Cross Communications, Inc.s Registration Statement
    on Form S-4 (Reg. No. 333-122750) filed
    February 11, 2005                                                                                                             
|       
|        | 3 | .2                  |  | Bylaws of Haights Cross Communications, Inc., incorporated by
    reference to Exhibit 3.2 of Haights Cross Communications,
    Inc.s Registration Statement on Form S-4 (Reg.
    No. 333-109381) filed October 2, 2003                                                                                                                                                                                                   
|       
|        | 3 | .3                  |  | Certificate of Incorporation of Haights Cross Operating Company,
    incorporated by reference to Exhibit 3.3 of Haights Cross
    Communications, Inc.s Registration Statement on
    Form S-4 (Reg. No. 333-109381) filed October 2,
    2003                                                                                                                                                                            
|       
|        | 3 | .4                  |  | Bylaws of Haights Cross Operating Company, incorporated by
    reference to Exhibit 3.4 of Haights Cross Communications,
    Inc.s Registration Statement on Form S-4 (Reg.
    No. 333-109381) filed October 2, 2003                                                                                                                                                                                                      
|       
|        | 3 | .5                  |  | Certificate of Formation of Triumph Learning, LLC, incorporated
    by reference to Exhibit 3.7 of Haights Cross
    Communications, Inc.s Registration Statement on
    Form S-4 (Reg. No. 333-109381) filed October 2,
    2003                                                                                                                                                                                          
|       
|        | 3 | .6                  |  | Amended and Restated Limited Liability Company Agreement of
    Triumph Learning, LLC, incorporated by reference to
    Exhibit 3.8 of Haights Cross Communications, Inc.s
    Registration Statement on Form S-4 (Reg.
    No. 333-109381) filed October 2, 2003                                                                                                                                                          
|       
|        | 3 | .7                  |  | Certificate of Formation of Oakstone Publishing, LLC,
    incorporated by reference to Exhibit 3.9 of Haights Cross
    Communications, Inc.s Registration Statement on
    Form S-4 (Reg. No. 333-109381) filed October 2,
    2003                                                                                                                                                                                       
|       
|        | 3 | .8                  |  | Amended and Restated Limited Liability Company Agreement of
    Oakstone Publishing, LLC, incorporated by reference to
    Exhibit 3.10 of Haights Cross Communications, Inc.s
    Registration Statement on Form S-4 (Reg.
    No. 333-109381) filed October 2, 2003                                                                                                                                                      
|       
|        | 3 | .9                  |  | Certificate of Formation of Recorded Books, LLC, incorporated by
    reference to Exhibit 3.11 of Haights Cross Communications,
    Inc.s Registration Statement on Form S-4 (Reg.
    No. 333-109381) filed October 2, 2003                                                                                                                                                                                               
|       
|        | 3 | .10                 |  | Amended and Restated Limited Liability Company Agreement of
    Recorded Books, LLC, incorporated by reference to
    Exhibit 3.12 of Haights Cross Communications, Inc.s
    Registration Statement on Form S-4 (Reg.
    No. 333-109381) filed October 2, 2003                                                                                                                                                           
|       
|        | 3 | .11                 |  | Certificate of Formation of Sundance/ Newbridge Educational
    Publishing, LLC, incorporated by reference to Exhibit 3.13
    of Haights Cross Communications, Inc.s Registration
    Statement on Form S-4 (Reg. No. 333-109381) filed
    October 2, 2003                                                                                                                                                               

111



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##### Table of Contents



|        |   |                     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------- | - | ------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |   |                    
|No.     |   | Exhibit Description
|        |   |                    
|       
|        | 3 | .12                 |  | Amended and Restated Limited Liability Company Agreement of
    Sundance/ Newbridge Educational Publishing, LLC, incorporated by
    reference to Exhibit 3.14 of Haights Cross Communications,
    Inc.s Registration Statement on Form S-4 (Reg.
    No. 333-109381) filed October 2, 2003                                                                                                                                                                                                                                                    
|       
|        | 3 | .13                 |  | Certificate of Formation of The Coriolis Group, LLC,
    incorporated by reference to Exhibit 3.15 of Haights Cross
    Communications, Inc.s Registration Statement on
    Form S-4 (Reg. No. 333-109381) filed October 2,
    2003                                                                                                                                                                                                                                                                                                            
|       
|        | 3 | .14                 |  | Third Amended and Restated Limited Liability Company Agreement
    of The Coriolis Group, LLC, incorporated by reference to
    Exhibit 3.16 of Haights Cross Communications, Inc.s
    Registration Statement on Form S-4 (Reg.
    No. 333-109381) filed October 2, 2003                                                                                                                                                                                                                                                                      
|       
|        | 3 | .15                 |  | Articles of Association of W F Howes Limited, incorporated by
    reference to Exhibit 3.17 of Haights Cross Communications,
    Inc.s Registration Statement on Form S-4 (Reg.
    No. 333-109381) filed October 2, 2003                                                                                                                                                                                                                                                                                                                       
|       
|        | 3 | .16                 |  | Memorandum of Association of W F Howes Limited, incorporated by
    reference to Exhibit 3.18 of Haights Cross Communications,
    Inc.s Registration Statement on Form S-4 (Reg.
    No. 333-109381) filed October 2, 2003                                                                                                                                                                                                                                                                                                                     
|       
|        | 3 | .17                 |  | Certificate of Formation of Options Publishing, LLC,
    incorporated by reference to Exhibit 3.19 of Haights Cross
    Communications, Inc.s Registration Statement on
    Form S-4 (Reg. No. 333-122750) filed February 11,
    2005                                                                                                                                                                                                                                                                                                          
|       
|        | 3 | .18                 |  | Limited Liability Company Agreement of Options Publishing, LLC,
    incorporated by reference to Exhibit 3.20 of Haights Cross
    Communications, Inc.s Registration Statement on
    Form S-4 (Reg. No. 333-122750) filed February 11,
    2005                                                                                                                                                                                                                                                                                               
|       
|        | 4 | .1                  |  | Indenture, dated as of August 20, 2003, by and between
    Haights Cross Operating Company and Wells Fargo Bank Minnesota,
    N.A., as Trustee, incorporated by reference to Exhibit 4.1
    of Haights Cross Communications, Inc.s Registration
    Statement on Form S-4 (Reg. No. 333-109381) filed
    October 2, 2003                                                                                                                                                                                                                     
|       
|        | 4 | .2                  |  | Form of Haights Cross Operating Company
    113/4% Senior
    Note due 2011, incorporated by reference to Exhibit 4.2 of
    Haights Cross Communications, Inc.s Registration Statement
    on Form S-4 (Reg. No. 333-109381) filed
    October 2, 2003                                                                                                                                                                                                                                                                                         
|       
|        | 4 | .3                  |  | Registration Rights Agreement, dated as of August 20, 2003,
    by and among Haights Cross Operating Company, the Guarantors
    listed therein and Bear, Stearns & Co. Inc., BNY
    Capital Markets, Inc., Jefferies & Company, Inc. and
    Lane, Berry & Co. International, LLC, incorporated by
    reference to Exhibit 4.3 of Haights Cross Communications,
    Inc.s Registration Statement on Form S-4 (Reg.
    No. 333-109381) filed October 2, 2003                                                                                 
|       
|        | 4 | .4                  |  | Indenture, dated as of February 2, 2004, by and between
    Haights Cross Communications, Inc. and Wells Fargo Bank
    Minnesota, N.A., as Trustee, incorporated by reference to
    Exhibit 4.4 of Haights Cross Communications, Inc.s
    Special Report on Form 10-K filed April 19, 2004                                                                                                                                                                                                                                                   
|       
|        | 4 | .5                  |  | Form of Haights Cross Communications, Inc.
    121/2% Senior
    Discount Note due 2011, incorporated by reference to
    Exhibit 4.5 of Haights Cross Communications, Inc.s
    Special Report on Form 10-K filed April 19, 2004                                                                                                                                                                                                                                                                                                               
|       
|        | 4 | .6                  |  | Registration Rights Agreement, dated as of February 2,
    2004, by and between Haights Cross Communications, Inc. and
    Bear, Stearns & Co. Inc., incorporated by reference to
    Exhibit 4.6 of Haights Cross Communications, Inc.s
    Special Report on Form 10-K filed April 19, 2004                                                                                                                                                                                                                                                   
|       
|        | 4 | .7                  |  | Registration Rights Agreement, dated as of December 10,
    2004, by and among Haights Cross Operating Company, Bear
    Stearns & Co. Inc. and the Guarantors named therein,
    incorporated by reference to Exhibit 4.1 of Haights Cross
    Communications, Inc.s Current Report on Form 8-K
    filed December 15, 2004                                                                                                                                                                                                                    
|       
|        | 4 | .8                  |  | Supplemental Indenture, dated as of December 10, 2004, by
    and among Options Publishing, LLC, Haights Cross Operating
    Company, the guarantors signatory thereto, and Wells Fargo Bank,
    N.A., as trustee, supplementing the Indenture, dated as of
    August 20, 2003, among Haights Cross Operating Company, the
    guarantors named therein and Wells Fargo Bank, N.A., as trustee,
    incorporated by reference to Exhibit 4.2 of Haights Cross
    Communications, Inc.s Current Report on Form 8-K
    filed December 15, 2004

112



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##### Table of Contents



|        |    |                     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|------- | -- | ------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                    
|No.     |    | Exhibit Description
|        |    |                    
|       
|        | 10 | .1                  |  | Lease Agreement, dated as of January 15, 2003, by and
    between Sundance Publishing, LLC and LIT Industrial Limited
    Partnership, incorporated by reference to Exhibit 10.1 of
    Haights Cross Communications, Inc.s Registration Statement
    on Form S-4 (Reg. No. 333-109381) filed
    October 2, 2003                                                                                                                                                                                           
|       
|        | 10 | .2                  |  | Director Indemnification Agreement, dated as of
    December 10, 1999, by and between Haights Cross
    Communications, Inc. and Christopher S. Gaffney, incorporated by
    reference to Exhibit 10.2 of Haights Cross Communications,
    Inc.s Registration Statement on Form S-4 (Reg.
    No. 333-109381) filed October 2, 2003                                                                                                                                                                         
|       
|        | 10 | .3                  |  | Director Indemnification Agreement, dated as of
    December 10, 1999, by and between Haights Cross
    Communications, Inc. and Stephen F. Gormley, incorporated by
    reference to Exhibit 10.3 of Haights Cross Communications,
    Inc.s Registration Statement on Form S-4 (Reg.
    No. 333-109381) filed October 2, 2003                                                                                                                                                                             
|       
|        | 10 | .4                  |  | Director Indemnification Agreement, dated as of
    December 10, 1999, by and between Haights Cross
    Communications, Inc. and Peter J. Quandt, incorporated by
    reference to Exhibit 10.4 of Haights Cross Communications,
    Inc.s Registration Statement on Form S-4 (Reg.
    No. 333-109381) filed October 2, 2003                                                                                                                                                                                
|       
|        | 10 | .5                  |  | Investors Agreement, dated as of December 10, 1999, by and
    among Haights Cross Communications, Inc., Haights Cross
    Operating Company, the Existing Stockholders (as defined
    therein) and the DLJMB Investors (as defined therein), as
    amended by Amendment to Investors Agreement, dated as of
    June 27, 2003, incorporated by reference to
    Exhibit 10.5 of Haights Cross Communications, Inc.s
    Registration Statement on Form S-4 (Reg.
    No. 333-109381) filed October 2, 2003
|       
|        | 10 | .6                  |  | Investors Registration Rights Agreement, dated as of
    December 10, 1999, by and among Haights Cross
    Communications, Inc., Haights Cross Operating Company and the
    Holders (as defined therein), incorporated by reference to
    Exhibit 10.6 of Haights Cross Communications, Inc.s
    Registration Statement on Form S-4 (Reg.
    No. 333-109381) filed October 2, 2003                                                                                                                       
|       
|        | 10 | .7+                 |  | Haights Cross Communications, Inc. Restated 2000 Stock Option
    and Grant Plan, incorporated by reference to Exhibit 10.1
    of Haights Cross Communications, Inc.s Current Report on
    Form 8-K filed September 28, 2004                                                                                                                                                                                                                                                                               
|       
|        | 10 | .8+                 |  | Haights Cross Communications, Inc. 2002 Equity Plan,
    incorporated by reference to Exhibit 10.8 of Haights Cross
    Communications, Inc.s Registration Statement on
    Form S-4 (Reg. No. 333-109381) filed October 2,
    2003                                                                                                                                                                                                                                                                         
|       
|        | 10 | .9+                 |  | Haights Cross Communications, Inc. 401(k) Savings Plan,
    incorporated by reference to Exhibit 10.9 of Haights Cross
    Communications, Inc.s Registration Statement on
    Form S-4 (Reg. No. 333-109381) filed October 2,
    2003                                                                                                                                                                                                                                                                      
|       
|        | 10 | .10                 |  | Term Loan Agreement, dated as of August 20, 2003, by and
    among Haights Cross Operating Company, the Several Lenders from
    time to time parties thereto and Bear Stearns Corporate Lending
    Inc., as Administrative Agent, incorporated by reference to
    Exhibit 10.10 of Haights Cross Communications, Inc.s
    Registration Statement on Form S-4 (Reg.
    No. 333-109381) filed October 2, 2003                                                                                             
|       
|        | 10 | .11                 |  | Revolving Credit Agreement, dated as of August 20, 2003, by
    and among Haights Cross Operating Company, the Several Lenders
    from time to time parties thereto, Bear Stearns Corporate
    Lending Inc., as Syndication Agent and The Bank of New York, as
    Administrative Agent, incorporated by reference to
    Exhibit 10.11 of Haights Cross Communications, Inc.s
    Registration Statement on Form S-4 (Reg.
    No. 333-109381) filed October 2, 2003                                      
|       
|        | 10 | .12                 |  | Amendment No. 1 and Consent No. 1 to Revolving Credit
    Agreement, dated as of January 26, 2003, by and among
    Haights Cross Operating Company, the Several Lenders from time
    to time parties thereto, Bear Stearns Corporate Lending Inc., as
    Syndication Agent and The Bank of New York, as Administrative
    Agent, incorporated by reference to Exhibit 10.11 of
    Haights Cross Communications, Inc.s Special Report on
    Form 10-K filed April 19, 2004                              

113



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##### Table of Contents



|        |    |                     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|------- | -- | ------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                    
|No.     |    | Exhibit Description
|        |    |                    
|       
|        | 10 | .13                 |  | Amendment No. 2 and Consent No. 2 to Revolving Credit
    Agreement, dated as of January 26, 2003, by and among
    Haights Cross Operating Company, the Several Lenders from time
    to time parties thereto, Bear Stearns Corporate Lending Inc., as
    Syndication Agent and The Bank of New York, as
    Administrative Agent, incorporated by reference to
    Exhibit 10.12 of Haights Cross Communications, Inc.s
    Registration Statement on Form S-4 (Reg.
    No. 333-115017) filed April 30, 2004      
|       
|        | 10 | .14+                |  | Employment Agreement, dated as of December 18, 2003, by and
    between Haights Cross Communications, Inc. and Peter J. Quandt,
    incorporated by reference to Exhibit 10.12 of Haights Cross
    Communications, Inc.s Amendment No. 2 to Registration
    Statement on Form S-4 (Reg. No. 333-109381) filed
    January 12, 2004                                                                                                                                                                                  
|       
|        | 10 | .15+                |  | Form of incentive stock option agreement for options with time
    based vesting schedules, incorporated by reference to
    Exhibit 10.2 of Haights Cross Communications, Inc.s
    Current Report on Form 8-K filed September 28, 2004                                                                                                                                                                                                                                                                              
|       
|        | 10 | .16+                |  | Form of incentive stock option agreement for options with
    performance based vesting schedules, incorporated by reference
    to Exhibit 10.3 of Haights Cross Communications,
    Inc.s Current Report on Form 8-K filed
    September 28, 2004                                                                                                                                                                                                                                                                   
|       
|        | 10 | .17                 |  | Term Loan Agreement, dated as of December 10, 2004, by and
    among Haights Cross Operating Company, Bear Stearns &
    Co. Inc., as lead arranger, Bear Stearns Corporate Lending Inc.,
    as Administrative Agent, and the lenders party thereto,
    incorporated by reference to Exhibit 1.1 of Haights Cross
    Communications, Incs Current Report on Form 8-K filed
    December 15, 2004                                                                                                                   
|       
|        | 10 | .18                 |  | Amendment No. 4 and Waiver No. 3, dated as of
    April 12, 2005, to the Revolving Credit Agreement, dated as
    of August 20, 2003, by and among the Company, the several
    lenders from time to time parties thereto, Bear Stearns
    Corporate Lending, Inc., as Syndication Agent, and The Bank of
    New York, as administrative agent, incorporated by reference to
    Exhibit 10.1 of Haights Cross Communications, Incs
    Current Report on Form 8-K filed April 15, 2005                             
|       
|        | 10 | .19                 |  | Amendment No. 5 and Consent No. 4, dated as of
    August 9, 2005, to the Revolving Credit Agreement, dated as
    of August 20, 2003, by and among the Company, the several
    lenders from time to time parties thereto, Bear Stearns
    Corporate Lending, Inc., as Syndication Agent, and The Bank of
    New York, as administrative agent, incorporated by reference to
    Exhibit 10.1 of Haights Cross Communications, Incs
    Quarterly Report on Form 10-Q for the quarter ended
    September 30, 2005.
|       
|        | 10 | .20+                |  | Description of the Haights Cross Communications, Inc. Annual
    Management/ Employee Bonus Plan, incorporated by reference to
    Exhibit 10.1 of Haights Cross Communications, Incs
    Current Report on Form 8-K filed March 16, 2005                                                                                                                                                                                                                                                                             
|       
|        | 10 | .21+                |  | Description of the Haights Cross Communications, Inc. 2005 Cost
    Savings Incentive Plan, incorporated by reference to
    Exhibit 10.2 of Haights Cross Communications, Incs
    Current Report on Form 8-K filed March 16, 2005                                                                                                                                                                                                                                                                                   
|       
|        | 10 | .22                 |  | Amendment No. 3 and Consent No. 3, dated as of
    December 1, 2004, to the Revolving Credit Agreement, dated
    as of August 20, 2003, by and among the Company, the
    several lenders from time to time parties thereto, Bear Stearns
    Corporate Lending, Inc., as Syndication Agent, and The Bank of
    New York, as administrative agent, incorporated by reference to
    Exhibit 10.17 of Haights Cross Communications, Incs
    Annual Report on Form 10-K for the year ended
    December 31, 2004     
|       
|        | 12 | .1*                 |  | Statement Regarding Computation of Ratio of Earnings to Fixed
    Charges                                                                                                                                                                                                                                                                                                                                                                                                                                              
|       
|        | 14 | .1                  |  | Code of Business Code and Ethics, incorporated by reference to
    Exhibit 14 of Haights Cross Communications, Incs
    Current Report on Form 8-K filed September 28, 2004                                                                                                                                                                                                                                                                                                                                           
|       
|        | 21 | .1*                 |  | Subsidiaries of Haights Cross Communications, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       
|        | 21 | .2                  |  | Subsidiaries of Haights Cross Operating Company, incorporated by
    reference to Exhibit 21.1 of Haights Cross Communications,
    Inc.s Registration Statement on Form S-4 (Reg.
    No. 333-122750) filed February 11, 2005                                                                                                                                                                                                                                                                                        
|       
|        | 21 | .3                  |  | Subsidiaries of Recorded Books, LLC, incorporated by reference
    to Exhibit 21.3 of Haights Cross Communications,
    Inc.s Registration Statement on Form S-4 (Reg.
    No. 333-109381) filed October 2, 2003                                                                                                                                                                                                                                                                                                      

114



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##### Table of Contents



|        |    |                     |  |                                                                                                                                                          
|------- | -- | ------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                    
|No.     |    | Exhibit Description
|        |    |                    
|       
|        | 23 | .1*                 |  | Consent of Ernst & Young LLP                                                                                                                             
|       
|        | 24 | .1*                 |  | Power of Attorney (Included in signature page)                                                                                                           
|       
|        | 31 | .1*                 |  | Rule 13a-14(a)/15d-14(a) Certification of Peter J. Quandt                                                                                                
|       
|        | 31 | .2*                 |  | Rule 13a-14(a)/15d-14(a) Certification of Paul J. Crecca                                                                                                 
|       
|        | 32 | .1**                |  | Certification of Chief Executive Officer Pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes Oxley Act of 2002
|        | 32 | .2**                |  | Certification of Chief Financial Officer Pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes Oxley Act of 2002






|  |                                                                                       
|- | --------------------------------------------------------------------------------------
|+ | Indicates a management contract or any compensatory plan,
    contract or arrangement.
| 
|* | filed herewith                                                                        



|   |                   
|-- | ------------------
|** | furnished herewith

115