UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-K

/x/

Annual Report pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934 for the fiscal year ended December 31, 2000.or/ /

Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from            to


Commission File Number 0-22844

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CALIBER LEARNING NETWORK, INC.(Exact name of registrant as specified in its charter)

|Maryland(State or other jurisdiction of incorporation or organization)                       |  | 52-2001020(I.R.S. Employer
Identification No.)
|-------------------------------------------------------------------------------------------- |  | ----------------------------------------------
|509 South Exeter St., Suite 400,
Baltimore, Maryland(Address of principal executive offices) |  | 21202(Zip Code)                               

Registrant's telephone number, including area code:(410) 843-1000

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

|Title of each class          |  | Name of each exchange on which Registered
|---------------------------- |  | -----------------------------------------
|Common Stock, Par Value $.01 |  | NASDAQ                                   

Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes /x/  No / /

Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /

The aggregate market value of voting Common Stock held by non-affiliates of the registrant was approximately $5,619,594 as of March 22, 2001.

The registrant had 12,595,282 shares of Common Stock outstanding as of March 30, 2001.

DOCUMENTS INCORPORATED BY REFERENCE

Certain information in Caliber Learning Network, Inc.'s definitive Proxy Statement for its 2001 Annual Meeting of Shareholders, which will be filed with the Securities and
Exchange Commission pursuant to Regulation 14A no later than April 30, 2001, is incorporated by reference in Part III of this Form 10-K.

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INDEX

|                            |  |                                                                                                                                                                                                                       |  | Page No.
|--------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------
|PART I.                     |  |                                                                                                                                                                                                                      
|Item 1.                     |  | Business                                                                                                                                                                                                              |  | 3       
|Item 2.                     |  | Properties                                                                                                                                                                                                            |  | 7       
|Item 3.                     |  | Legal Proceedings                                                                                                                                                                                                     |  | 8       
|Item 4.                     |  | Submission of Matters to a Vote of Security Holders                                                                                                                                                                   |  | 8       
|PART II.                    |  |                                                                                                                                                                                                                      
|Item 5.                     |  | Market for Registrant's Common Equity and Related Stockholder Matters                                                                                                                                                 |  | 9       
|Item 6.                     |  | Selected Financial Data                                                                                                                                                                                               |  | 10      
|Item 7.                     |  | Management's Discussion and Analysis of Financial Condition and Results of Operations                                                                                                                                 |  | 12      
|Item 7A.                    |  | Quantitative and Qualitative Disclosures About Market Risk                                                                                                                                                            |  | 15      
|Item 8.                     |  | Financial Statements and Supplementary Data                                                                                                                                                                           |  | 16      
|Item 9.                     |  | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure                                                                                                                                  |  | 16      
|PART III.                   |  |                                                                                                                                                                                                                      
|Items 10.,
11., 12.
and 13. |  | Incorporated by reference from Caliber Learning Network, Inc.'s definitive Proxy Statement which will be filed with the Securities and Exchange Commission, pursuant to Regulation 14A, no later than April 30,
2001. |  | 17      
|PART IV.                    |  |                                                                                                                                                                                                                      
|Item 14.                    |  | Exhibits, Financial Statement Schedules, and Reports on Form 8-K                                                                                                                                                      |  | 17      
|SIGNATURES                  |  |                                                                                                                                                                                                                      

2

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PART I

Item 1. Business

Overview

The Company is a leading provider of e-learning infrastructure and services to major corporations in support of their strategic initiatives. The
Company has developed a proprietary technology platform that connects large numbers of enterprise constituents, including employees, suppliers, customers and business partners to enable the delivery
of targeted, timely information. Its Internet e-learning platform allows for two-way interactivity supported by a series of media rich assets including broadband video, audio, text and
graphics, creating dynamic and engaging programs that increase employee productivity, increase business partner and sales channel effectiveness, and improve customer loyalty and satisfaction. The
Company believes that its unique technology platform, combined with its comprehensive service and content offerings, provides it with a key competitive advantage in offering economical, flexible and
scalable solutions that reproduce an interactive and collaborative classroom environment on the Internet.

The Company's customers, consisting largely of Global 2000 corporations, use the Company's solutions to rapidly disseminate important corporate knowledge throughout their extended
enterprise. The primary applications of the Company's services include product rollouts, professional development programs and complex customer outreach initiatives. Its proprietary technology
platform, the Enterprise Learning Platform ("ELP"), enables both synchronous and asynchronous delivery with different levels of interactivity and collaboration based on specific customer needs. The
ELP is supplemented with an extensive array of professional services geared toward designing, producing and facilitating impactful presentations. In addition, the Company's customers may choose to
leverage its network of classroom facilities to combine different aspects of e-learning and instructor-led formats in order to maximize the effectiveness of the learning
experience.

The Company was founded in 1996 by Sylvan Learning Systems, Inc. ("Sylvan") and MCI Worldcom, Inc. ("MCI") to provide learning services to corporations and universities
using the Internet, telecommunications and multimedia technology within a network of specially equipped classroom facilities. The Company's efforts in the corporate market proved immedietely
successful in both client acquisition and revenue growth whereas its experience in the consumer-oriented academic market proved unsuccessful due to the slow adoption of e-learning
solutions and high student acquisition costs. The Company believes that its underlying solution continues to address the needs of the corporate marketplace, which is aggressively adopting new
technologies to rapidly disseminate knowledge across the enterprise.

During the first quarter of 2000, the Company discontinued its efforts in the academic market and shifted all of its resources toward building upon its solid position in the corporate
marketplace. In addition, it migrated from a primarily site-based model to an integrated site and web-based model in order to better serve its corporate clients. The Company
believes that this repositioning enables it to better scale its business at higher margins than under the prior business model. In simplifying its business, the Company has transitioned away from the
unprofitable, consumer-oriented academic business to focus on the enterprise learning needs of Global 2000 corporations.

The Company completed its initial public offering of Common Stock in May 1998. Caliber's principal executive offices are located at 509 South Exeter Street, Baltimore, MD
21202; Caliber's telephone number is (410) 843-1000; and Caliber's Common Stock is traded on the NASDAQ National Market under ticker symbol CLBR.

Products and Services

The Company has designed and developed a state-of-the-art, hosted e-learning platform to enable its customers
to quickly and easily develop high quality e-learning content and to deliver it effectively and

3

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economically to global audiences, either live or on-demand, using a variety of delivery methods. The following key elements underlie our three core solutions, CaliberSM Premier Live,
CaliberSM Express Live and CaliberSM Express onDemand:

United
States and Canada, Europe and also streamed directly to the Internet. The Company's Express Studios originate standard video productions, together with other course content, for distribution
through the Internet to the Company's classrooms and other Internet users. In addition, private Express Studios can be installed in client facilities and integrated seamlessly into the
CaliberSM Enterprise Learning Platform.



4

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Georgetown
University, Syracuse University, Babson College, the American Management Association, the Society for Human Resource Management and John Wiley and Sons.

Operations

Caliber operates and maintains a data center on a continuous, twenty-four hours per day, seven days per week basis. The data center consists of a
network of computers with access to the Internet and other telecommunications technology. The data center houses the computers on which the Company maintains and hosts recorded programs of
communications and training for its customers and which are used to furnish the Company's customers with access to and use of the Caliber services and the Enterprise Learning Platform. The data center
also houses the computers that operate the Company's Internet site on the World Wide Web.

Caliber operates dispersed classroom facilities linked by the Internet, satellite, telephone and computer-based communications systems to the Company data center and to Caliber
designed broadcast origination facilities. Caliber equips classroom facilities with personal computers, projection televisions and various telecommunications equipment. As of March 2001,
Caliber owned, leased or operated directly or indirectly through contractors fifty-two (52) classroom facilities in locations throughout the United States, Canada and Europe.

Caliber operates broadcast studio facilities equipped with the Company-designed ELP and software tools and the requisite telecommunications infrastructure. As of March 2001,
Caliber owned, leased or operated directly or indirectly through contractors twenty (20) broadcast studio facilities in locations throughout the United States.

5

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Marketing and Sales

As of December 31, 2000, Caliber had 85 employees and representatives dedicated to sales and marketing. The Company employs a targeted corporate sales
and marketing strategy that is designed to secure high value, long-term relationships with Global 2000 organizations. The Company uses a skilled, regionally based sales organization supported by an
integrated marketing, communications and product management function. The Company's sales and marketing operation is supplemented by a select group of resellers and distribution partners.

In early 2000, the Company made a strategic decision to invest in its corporate sales efforts in order to capture market share and to establish long-term relationships
with high value customers. Its team of sales executives is regionally based and supported by a Baltimore-based telesales and marketing team. Each of the sales regions is managed by a regional director
and supported by a sales engineering function. The Company also employs operation support teams that include full account and project management as well as content and instructional design support. A
typical sales executive has an average of ten years experience in the high technology, services and corporate training industries.

The marketing organization's mission is to cost-effectively promote the Company's solutions to the target market by surrounding the direct sales effort with strategically designed
marketing communications, publicity and support. The product management function ensures that the sales operation is properly targeted and that the Company's platform, services and content are in line
with market needs in pricing, features and functionality. The group is also responsible for establishing and maintaining the Company's brand visibility in secondary markets and in the financial
community. All efforts are ultimately focused on client acquisition and brand building, thereby extending the reach of the sales operation and creating a positive, consistent corporate message.

Employees

The Company's staff consists of technical integration personnel responsible for developing, maintaining and operating the technology platform and Caliber's
facilities, instructional design, video production and other professional consulting services personnel; sales and marketing staff; and on-site facilitators who assist in the delivery of
programs at Caliber classroom facilities. As of December 31, 2000, Caliber had 231 full-time employees, 56 full-time contractors and 59 part-time contractors. No Caliber
employees are covered by collective bargaining agreements. The Company considers its relationship with its employees to be good.

Competition

The Company believes that its principal competitors are other companies that offer live and/or on-demand e-learning experiences through
the Internet. Among such competitors are DigitalThink, Inc., Eloquent, Inc., VCampus Corporation, Centra Software, Inc. and click21earn.com, Inc. If the Company's concept
proves successful, the Company expects other competitors to enter the market. The Company also competes against a significant number of third party training companies that provide various training
programs to corporations delivered by conventional means.

Proprietary Rights

The Company relies upon a combination of nondisclosure and other contractual arrangements and trade secret, copyright and trademark laws to protect its
proprietary rights.

The Company has filed a comprehensive patent application with the U.S. Patent and Trademark Office ("PTO") covering certain features of the Caliber operational processes that Caliber
believes to be proprietary. The patent application describes these processes as a distance learning system that emulates a classroom setting using satellite links, two-way
videoconferencing, a PC-based network for directly linking

6

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each student to the instructor, BOSS technology and hardware, particular design features of the Caliber classrooms and furniture, and certain unique control and switching mechanisms. Caliber is unable
to predict whether it will be able to obtain this patent or if it does whether the patent will be effective to protect any portion of the Caliber operational processes from infringement.

Caliber employs a combination of proprietary and non-proprietary software in its operations. The Company considers proprietary certain applications software used in the
Caliber Enterprise Learning Platform. The Company may include the proprietary software in the patent application or, in the alternative, seek separate copyright protection for the software.

"Caliber" and the Caliber mountain peak logo are registered service marks of the Company. In July of 1999, Caliber introduced a new logo for the Company featuring a curved design
surrounding the Company name. Applications by the Company to register "BOSS," "Caliber Learning Campus," the new Company logo and certain other service marks of the Company are currently pending
before the U.S. Patent and Trademark Office. While the Company considers these marks to be proprietary and entitled to registration, there can be no assurance that these applications will be approved.

Item 2. Properties

The Company currently utilizes approximately 19,000 square feet of space in Baltimore, Maryland, for its corporate and administrative offices. Sylvan subleases
this space to Caliber and charges the
Company for its use as part of an Intercompany Management and Facility Use Agreement between Caliber and Sylvan (the "Sylvan Management Agreement").

As of March 2001, Caliber owned, leased or operated directly or indirectly through contractors fifty-two (52) classroom facilities throughout the United
States, Canada and Europe. The average size of a Caliber facility is between 4,000 and 5,000 square feet. Existing leases have terms expiring from 2001 to 2008. The Company also utilizes certain
affiliate sites noted below. Affiliate sites are Caliber classrooms co-located on third-party premises for which Caliber pays a fee based on actual usage. Currently, there are Caliber
facilities and affiliate sites located in each of the following cities:

|Atlanta
Austin
Baltimore
Barcelona*
Boston
Brussels*
Charlotte
Chicago
Chicago*
Cincinnati
Cleveland
Culver City*
Dallas
Denver
Detroit
Frankfurt*
Houston
Indianapolis* |  | Jacksonville
Kansas City
London*
Long Island*
Los Angeles
Miami
Milan*
Milwaukee
Minneapolis
Montreal*
Nashville
New Orleans
New York
Oklahoma City*
Orlando
Paramus
Paris*
Philadelphia |  | Phoenix
Pittsburgh
Portland
Raleigh*
Rochester*
Salt Lake City*
San Diego
San Francisco
San Jose
Santa Ana*
Seattle
St. Louis
Tampa
Toronto*
Utrecht*
Washington, DC
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

*Affiliate
site.

7

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Item 3. Legal Proceedings

At this time the Company is not a party, either as plaintiff or defendant, in any material litigation.

Item 4. Submission of matters to a vote of security holders

No matters were submitted to a vote of security holders during the fourth quarter ended December 31, 2000.

8

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PART II

Item 5. Market for Registrant's Common Equity and Related Shareholder Matters

The Company's common stock has been publicly traded on the NASDAQ National Market since May 5, 1998 under the symbol "CLBR". The quarterly ranges of
prices per share since May 5, 1998 are as follows:

Fiscal 1998

High

LowSecond Quarter (from May 5, 1998)

$
18
3/4

$
15
1/8Third Quarter


15
7/8


4
3/8Fourth Quarter


5
15/16


3
7/8Fiscal 1999

High

LowFirst Quarter


5
1/16


1
7/8Second Quarter


5
3/4


3Third Quarter


5
12


2Fourth Quarter


4



1
1/16Fiscal 2000

High

LowFirst Quarter


9
3/4


2Second Quarter


7
13/16


2
1/2Third Quarter


4
1/2


2
9/16Fourth Quarter


3
7/16



5/16


As of March 19, 2001 the approximate number of security holders of record was 44.

The
Company has never declared or paid any cash dividends on its common stock and does not expect to pay any cash dividends in the foreseeable future.

9

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Item 6. Selected Financial Data

|                                                                            |                                                    | For the Period
November 22, 1996
(Date of Inception)
Through
December 31, 1996 |            |           |   |             |           |   |             |            |  
|--------------------------------------------------------------------------- | -------------------------------------------------- | ------------------------------------------------------------------------------ | ---------- | --------- | - | ----------- | --------- | - | ----------- | ---------- | -
|
|
|Statement of Operations Data:                                               |                                                    |                                                                                |            |           |   |             |           |   |             |            |  
|Service fee revenue                                                         |                                                    | $                                                                              |           |           | $ |            |           | $ | 13,348,828  |            | $
|Service fee revenue from related party                                      |                                                    |                                                                                |           |           |   |            |           |   |            |            |  
|Management fee from Sylvan                                                  |                                                    |                                                                                |           |           |   | 1,199,293   |           |   | 2,066,250   |            |  
|                                                                            |                                                    |                                                                                |            |           |   |             |           |   |             |            |  
|                                                                            |                                                    |                                                                                |           |           |   | 1,199,293   |           |   | 15,415,078  |            |  
|Cost and expenses:                                                          |                                                    |                                                                                |            |           |   |             |           |   |             |            |  
|                                                                            | Operating expenses                                 |                                                                                |            |          |   |             | 4,442,880 |   |             | 24,256,603 |  
|                                                                            | Management fees to Sylvan                          |                                                                                |            | 480,000   |   |             | 2,400,500 |   |             | 2,000,000  |  
|                                                                            | Other selling, general and administrative expenses |                                                                                |            | 1,155,171 |   |             | 8,071,836 |   |             | 18,157,203 |  
|                                                                            |                                                    |                                                                                |            |           |   |             |           |   |             |            |  
|                                                                            |                                                    |                                                                                | 1,635,171  |           |   | 14,915,216  |           |   | 44,413,806  |            |  
|Other income (expense):                                                     |                                                    |                                                                                |            |           |   |             |           |   |             |            |  
|                                                                            | Other income                                       |                                                                                |            |          |   |             |          |   |             |           |  
|                                                                            | Interest income                                    |                                                                                |            |          |   |             | 536,100   |   |             | 1,571,078  |  
|                                                                            | Interest expense                                   |                                                                                |            |          |   |             | (391,312  | ) |             | (1,396,864 | )
|                                                                            |                                                    |                                                                                |            |           |   |             |           |   |             |            |  
|                                                                            |                                                    |                                                                                |           |           |   | 144,788     |           |   | 174,214     |            |  
|                                                                            |                                                    |                                                                                |            |           |   |             |           |   |             |            |  
|Net loss                                                                    |                                                    |                                                                                | (1,635,171 | )         |   | (13,571,135 | )         |   | (28,824,514 | )          |  
|Dividends accrued on preferred stock                                        |                                                    |                                                                                | (199,000   | )         |   | (796,000    | )         |   | (314,409    | )          |  
|                                                                            |                                                    |                                                                                |            |           |   |             |           |   |             |            |  
|Net loss attributable to common stockholders                                |                                                    | $                                                                              | (1,834,171 | )         | $ | (14,367,135 | )         | $ | (29,138,923 | )          | $
|                                                                            |                                                    |                                                                                |            |           |   |             |           |   |             |            |  
|Basic and diluted loss per common share attributable to common stockholders |                                                    | $                                                                              | (0.21      | )         | $ | (1.62       | )         | $ | (2.61       | )          | $
|                                                                            |                                                    |                                                                                |            |           |   |             |           |   |             |            |  

|                                                                   |  | December 31,
|------------------------------------------------------------------ |  | ------------
|
|Balance Sheet Data:                                                |  |             
|Cash, cash equivalents and available-for-sale securities           |  | $           
|Current assets                                                     |  |             
|Net property, plant and equipment                                  |  |             
|Total assets                                                       |  |             
|Current liabilities                                                |  |             
|Long-term debt and capital lease obligations, less current portion |  |             
|Stockholder's equity (deficit)                                     |  |             

10

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Quarterly Results of Operations

|                                                                            |  | Quarters Ended |           
|--------------------------------------------------------------------------- |  | -------------- | ----------
|
|Revenues                                                                    |  | $              | 4,557,762 
|Net loss                                                                    |  |                | (6,141,794
|Net loss attributable to common stockholders                                |  | $              | (6,156,794
|Basic and diluted loss per common share attributable to common stockholders |  | $              | (0.50     

11

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

All statements contained herein that are not historical facts, including but not limited to statements regarding the anticipated impact of uncollectible accounts receivable on
future liquidity, expenditures to lease property and equipment for the Caliber Learning Centers, future capital requirements, and the Company's future development plans are based on current
expectations. These statements are forward looking in nature and involve a number of risks and uncertainties. Actual results may differ materially. Among the factors that could cause actual results to
differ materially are the following: (1) the Company's ability to consummate financing transactions in amounts and on terms not materially disadvantageous to common stockholders; (2) the
Company's ability to grow new customer revenues and gain renewal business; (3) the Company's ability to control expenses; (4) price competition in the e-learning industry; (5) the
Company's ability to continue to deliver competitive technology solutions and services; (6) the ability of the Company's direct sales force to mature and achieve significant productivity;
(7) the Company's ability to recruit and retain key management, sales and executive personnel; (8) general business and economic conditions; and (9) other risk factors described
in the Company's Registration Statement (No. 333-47565) and subsequent reports filed from time to time with the Commission. The Company cautions readers not to place undue reliance
on any such forward looking statements, which statements are made pursuant to the Private Securities Litigation Reform Act of 1995 and, as such, speak only as of the date made.

Overview

Caliber Learning Network, Inc. (the "Company") was incorporated on March 28, 1996 under the laws of the state of Maryland for the purpose of
providing learning services to corporations and universities using Internet, telecommunications, and multimedia technology. The Company was organized by Sylvan Learning Systems, Inc. ("Sylvan")
and MCI WorldCom ("MCI") bringing together the educational services expertise of Sylvan and the technology and telecommunications expertise of MCI. Effective May 1, 1997, the Company entered
into an agreement with Sylvan to manage the operations of certain certification centers located throughout the United States which administer computer-based tests for major corporations, professional
associations and government agencies. In March 2000, the Company assigned its rights and duties under the agreement to an independent third party.

Revenue

Revenue is generated primarily from learning services provided to corporations, graduate-level learning courses, hourly classroom rental and related services.
Revenue from learning courses and training events is recognized over the contract period as the events are delivered. Services unrelated to learning courses or training events are recognized in the
period the services are provided. The Company also generates revenue from hourly classroom rental, which is recognized when the service is provided. Management fees under an agreement with Sylvan to
manage certain certification centers were calculated based on a fixed amount per month, plus an additional fee per test delivered above a specified number of test examinations. These fees were
recognized as revenue upon delivery of the examination through February 2000, at which time the Company assigned its rights and responsibilities under this agreement to an independent third
party.

Costs and expenses

The Company incurs operating costs and expenses related to center operating expenses, marketing costs, programming and productions costs, management fees
payable to Sylvan and selling, general and administrative expenses. Center operating expenses consist primarily of payroll, lease expense, depreciation and telecommunications costs associated with the
Caliber facilities.

Since
its organization in November 1996, the Company has relied on Sylvan for certain resources, systems and personnel for management, administrative, legal and accounting
functions. Additionally, Sylvan provides office space for the Company's operations. Under the Intercompany Management and

12

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Facility Use Agreement, the Company paid Sylvan $6.9 million of management fees from November 22, 1996 through December 31, 1999. The Company incurred charges from Sylvan of
$1.8 million for these services in 2000. During 2000, the Company continued to develop some of its own systems to replace those currently provided by Sylvan but intends to lease space from
Sylvan for the foreseeable future. The Company renegotiated the terms of the Intercompany Management and Facility Use Agreement at the end of 2000. The Company has agreed to pay $1.7 million
for services provided by Sylvan in 2001.

Selling, general and administrative expenses consist primarily of payroll and employee benefits, travel, marketing costs and consulting fees. The Company expenses all
start-up costs related to program development and center development when incurred. Course production costs related to the creation of various media and course materials are expensed as
incurred. Advertising and marketing costs are expensed when incurred.



Fiscal 2000 Compared to Fiscal 1999

The Company generates revenues from two operating segments: Corporate and Other Products and Services. See Note 14 to the financial statements for a
description of the operating segments.

|                         |  | Year ended December 31, 2000
|------------------------ |  | ----------------------------
|
|Revenue                  |  | $                           
|Direct Costs             |  |                             
|                         |  |                             
|Segment operating income |  | $                           
|                         |  |                             

|                         |  | Year ended December 31, 1999
|------------------------ |  | ----------------------------
|
|Revenue                  |  | $                           
|Direct Costs             |  |                             
|                         |  |                             
|Segment operating income |  | $                           
|                         |  |                             

Revenues in 2000 were $20.9 million, a decrease of $5.1 million from the $26.0 million in 1999. The decrease in revenues in 2000 was primarily attributable to a
$3.5 million reduction in the Company's Other Products and Services segment revenue as the Company assigned its rights and duties under its test administration agreement to an independent third
party in March 2000. In addition, revenues decreased by $1.6 million in the Company's Corporate segment primarily due to the Company's discontinuance of its efforts in the academic
market. Revenues of $2.0 million generated from LeapIT.com, LLC, a related party, are included in the Corporate segment in 1999 compared to approximately $1.8 million in 2000.

Direct costs for the segments were $6.9 million in 2000, a decrease of $3.2 million when compared to $10.1 million in 1999. This decrease was primarily
attributable to a $3.9 million decrease in direct costs in the Other Products and Services segment due to the Company's assignment of its rights and duties under its test administration
agreement to an independent third party in March 2000. The decrease was offset by an increase in direct costs of $647,000 in the Corporate segment due to the event mix between years.

Center
operating expenses and depreciation and amortization in 2000 increased to $18.7 million, an increase of $1.2 million, when compared to the $17.5 million in
1999. This increase was primarily attributable to a $860,000 increase in depreciation and amortization expense due to a larger fixed asset base.

13

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Selling, general and administrative expenses in 2000 increased to $27.6 million, an increase of $9.0 million, when compared to $18.6 million in 1999. This
increase in primarily attributable to a significant increase in the sales force and other personnel to support anticipated future revenue growth. In addition, the Company incurred increased marketing
expenses to build brand awareness and increased technology costs to support additional services offered to customers.

Management fees to Sylvan were $1.8 million in 2000, a decrease of $155,000, compared to $2.0 million in 1999 due to the contractually negotiated terms between Caliber
and Sylvan under the Intercompany Management and Facility Use Agreement.

Interest
income in 2000 was $666,000, a decrease of $683,000 compared to the $1.3 million in 1999. This decrease was due to the decrease in the balance of the Company's
short-term investments between years which has been used for operating purposes. Interest expense in 2000 was $1.0 million, a decrease of $409,000 compared to the
$1.4 million in 1999. The decrease was due primarily to interest expense being incurred on a smaller capital lease balance in 2000.

The Company entered into a confidential settlement of a previously disclosed legal proceeding and the case has been dismissed by both parties. Amounts related to this settlement are
included in other income in the accompanying statements of operations.

Fiscal 1999 Compared to Fiscal 1998

The Company generates revenues from two operating segments: Corporate and Other Products and Services. See Note 14 to the financial statements for a
description of the operating segments.

Year ended December 31, 1999Corporate

Other Products and Services

TotalRevenue

$
17,199,385

$
8,833,364

$
26,032,749Direct Costs


4,941,712


5,205,890


10,147,602Segment operating income

$
12,257,673

$
3,627,474

$
15,885,147


Year ended December 31, 1998Corporate

Other Products and Services

TotalRevenue

$
11,518,107

$
3,896,971

$
15,415,078Direct Costs


5,178,406


5,306,519


10,484,925Segment operating income

$
6,339,701

$
(1,409,548
)
$
4,930,153


Revenues in 1999 were $26.0 million, an increase of $10.6 million from the $15.4 million in 1998. The increase in revenues in 1999 was primarily a result of a
revenue increase of $5.7 million in the Company's Corporate segment and a $4.9 million increase in the Company's Other Products and Services segment. The Company's Corporate segment
revenues have grown from the prior year due to the increase in the number of events. Revenues of $2.0 million generated from LeapIT.com, LLC, a related party, are included in the Corporate
segment in 1999 compared to zero in 1998. The Company's Other Products and Services segment increased primarily due to an increase of $3.0 million in training


services business and an increase of $1.9 million associated with the test administration contract with Sylvan.

Direct costs for the segments were $10.1 million in 1999, a decrease of $337,000 when compared to $10.5 million in 1998. This decrease was primarily attributable to a
$237,000 decrease in direct costs in the Corporate segment due to a smaller amount of costs related to the Company's former academic business.

14

---

Center operating expenses and depreciation and amortization in 1999 increased to $17.5 million, an increase of $3.7 million, when compared to the $13.8 million in
1998. This increase was primarily attributable to a $2.6 million increase in depreciation and amortization expense due to a larger fixed asset base and a $1.1 million increase in center
operating expenses due to a larger number of Caliber centers being operational in 1999 for a full year compared to 1998.

Selling, general and administrative expenses in 1999 increased to $18.6 million, an increase of $399,000, when compared to $18.2 million in 1998. This increase in
primarily attributable to increased personnel costs.

Management fees to Sylvan remained constant at $2.0 million due to the contractually negotiated terms between Caliber and Sylvan under the Intercompany Management and Facility
Use Agreement.

Interest income in 1999 was $1.3 million, a decrease of $222,000 compared to the $1.6 million in 1998. This decrease was due to the decrease in the balance of the
Company's short-term investments during 1999. Interest expense in 1999 was $1.4 million, an increase of $44,000 compared to 1998. The increase was due primarily to no interest being
incurred on borrowings from Sylvan in 1999 as these borrowings were repaid in full concurrent with the Company's initial public offering in May 1998, offset by interest expense being incurred
on a larger capital lease balance in 1999.

Liquidity and Capital Resources

Net cash used in operating activities increased to $23.3 million in 2000 compared to $15.0 million in 1999. This increase was primarily
attributable to a larger net loss before depreciation and amortization of $10.9 million in 2000 offset by changes in working capital balances.

Net cash used in investing activities was $1.4 million in 2000 compared to net cash provided by investing activities of $5.5 million in 1999. This change was primarily
attributable to the sale of available-for-sale securities in 1999, offset by proceeds received from a sale-leaseback transaction in 2000.

Net cash provided by financing activities decreased to $6.4 million in 2000 compared to $11.5 million in 1999. This decrease was primarily attributable to proceeds of
approximately $11.0 milion from the Company's issuance of Series B Redeemable Convertible Preferred Stock in December 2000 compared to $15.0 million from the issuance of
Series A Redeemable Convertible Preferred Stock in October 1999. The Company also paid approximately $1.2 million more capital lease principal payments in 2000 compared to 1999.

As of December 31, 2000, the Company had cash and cash equivalents of $7.6 million. The Company believes that these resources, along with the additional
$4.0 million in proceeds received from the issuance of additional Series B Redeemable Convertible Preferred Stock in March 2001, will be sufficient to fund the acquisition of property
and equipment and to fund negative cash flow from operations into May 2001. In the first quarter of 2001, the Company paid cash of $1,000,000 to acquire Fulcrum Information Services, Inc., as
described more fully in Note 16 to the audited financial statements. The Company is currently seeking additional long-term financing to provide for its anticipated cash needs until
cash flows from operations are sufficient to sustain the growth of the business. Management believes that sufficient capital can be obtained to support planned operations through December 31,
2001. However, there can be no assurance that the Company will be able to obtain this financing on acceptable terms to satisfy its cash requirements or to implement its growth strategy successfully.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

The following discussion about the Company's market risk disclosures involves forward looking statements. Actual results could differ materially from those
projected in the forward looking statements.

15

---

The Company is exposed to market risk related to changes in interest rates. Interest expense and interest income is most sensitive to changes in the general level of U.S. interest
rates. The Company's investments consist principally of high quality corporate debt instruments and commercial paper. Generally, these instruments have maturities of less than three months which
mitigates their sensitivity to changes in interest rates. The Company does not use derivative financial instruments to manage exposure to interest rate changes.

Item 8. Financial Statements and Supplementary Data

The financial statements of the Company are included on pages F-1 through F-18 of the report.

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

There were no changes in accountants, disagreements, or other events requiring reporting under this item.

16

---



PART III

Item 10. Directors and Executive Officers of Caliber Learning Network, Inc.

Information required will be set forth under the caption "Election of Directors" in the Proxy Statement relating to the 2001 Annual Meeting of Shareholders, to
be filed on or before April 30, 2001, which is incorporated by reference.

Information
required pertaining to compliance with Section 16 (a) of the Securities and Exchange Act of 1934 will be set forth under the caption "Election of Directors"
in the Proxy Statement relating to the 2001 Annual Meeting of Shareholders, which is incorporated by reference.

Item 11. Executive Compensation

Information required will be set forth under the caption "Executive Compensation" in the Proxy Statement relating to the 2001 Annual Meeting of Shareholders,
which is incorporated by reference.

Item 12. Security Ownership and Certain Beneficial Owners and Management

Information required will be set forth under the caption "Security Ownership" in the Proxy Statement relating to the 2001 Annual Meeting of Shareholders, which
is incorporated by reference.

Item 13. Certain Relationships and Related Transactions

Information required will be set forth under the caption "Certain Transactions" in the Proxy Statement relating to the 2001 Annual Meeting of Shareholders,
which is incorporated by reference.

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

1. Financial Statements



2. Financial Statement Schedules

Schedule IIValuation and Qualifying Accounts  Caliber Learning Network, Inc.

|                        |  | Year ended December 31 |          
|----------------------- |  | ---------------------- | ---------
|
|Beginning balance       |  | $                      |         
|Provision for bad debts |  |                        | 2,676,000
|Writeoffs               |  |                        |         
|                        |  |                        |          
|Ending Balance          |  | $                      | 2,676,000
|                        |  |                        |          

All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or
are inapplicable and therefore have been omitted.



17

---

3. Exhibits

|Exhibit No. |     | Description                                                                                                                                                                             
|----------- | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.01        |     | Articles of Amendment and Restatement of the Charter*                                                                                                                                   
|3.02        |     | Bylaws *                                                                                                                                                                                
|4.01        |     | Specimen Common Stock Certificate*                                                                                                                                                      
|4.02        |     | Warrant issued to MCI Communications Corporation, dated as of November 22, 1996, as amended*                                                                                            
|4.03        |     | Preferred Stock Purchase Agreement among Caliber Learning Network, Inc. and Fleming US Discovery Fund III, L.P.**                                                                       
|4.04        |     | Preferred Stock Purchase Agreement among Caliber Learning Network, Inc. and Fleming US Discovery Offshore Fund III, L.P.**                                                              
|4.05        |     | Preferred Stock Purchase Agreement among Caliber Learning Network, Inc. and Robert Fleming Nominees Limited**                                                                           
|4.06        |     | Articles Supplementary Classifying Series A-1 Preferred Stock***                                                                                                                        
|4.07        |     | Preferred Stock Purchase Agreement among Caliber Learning Network, Inc., Sylvan Ventures, LLC, Fleming US Discovery Fund III, L.P., and Fleming US Discovery Offshore Fund III, L.P.****
|4.08        |     | Articles Supplementary Classifying Series B Preferred Stock****                                                                                                                         
|4.09        |     | Articles Supplementary Classifying Series A-2 Preferred Stock****                                                                                                                       
|10.01       | (a) | 1997 Stock Option Plan*                                                                                                                                                                 
|10.01       | (b) | 1998 Stock Incentive Plan*                                                                                                                                                              
|10.10       |     | Intercompany Management and Facility Use Agreement between Caliber Learning Network, Inc. and Sylvan Learning Systems, Inc. dated January 1, 1998*                                      
|10.11       |     | Testing Center Management and CBT Services Agreement, as amended, between Caliber Learning Network, Inc. and Sylvan Learning Systems, Inc. dated May 1, 1997*                           
|23.01       |     | Consent of Ernst & Young LLP                                                                                                                                                            



18

---



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and
in the capacities on March 30, 2001.

| |  | CALIBER LEARNING NETWORK, INC.
| |  | ------------------------------
| |  | BY:                           

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities on
March 30, 2001.

|Signature                                               |  | Title                                                                                   |  | Date          
|------------------------------------------------------- |  | --------------------------------------------------------------------------------------- |  | --------------
|                                                        |  |                                                                                         |  |               
|/s/R. CHRISTOPHER HOEHN-SARICR. Christopher Hoehn-Saric |  | Chairman of the Board of Directors                                                      |  | March 30, 2001
|/s/ED MULLENEd Mullen                                   |  | Vice Chairman of the Board of Directors                                                 |  | March 30, 2001
|/s/CHRIS L. NGUYENChris L. Nguyen                       |  | President, Chief Executive Officer and Director (Principal Executive Officer)           |  | March 30, 2001
|/s/MARK YANSONMark Yanson                               |  | Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) |  | March 30, 2001
|/s/ERNEST ANASTASIOErnest Anastasio                     |  | Director                                                                                |  | March 30, 2001
|/s/JANEEN M. ARMSTRONGJaneen M. Armstrong               |  | Director                                                                                |  | March 30, 2001
|/s/DOUGLAS L. BECKERDouglas L. Becker                   |  | Director                                                                                |  | March 30, 2001
|/s/ROBERT L. BURRRobert L. Burr                         |  | Director                                                                                |  | March 30, 2001
|/s/JOHN P. HILLJohn P. Hill                             |  | Director                                                                                |  | March 30, 2001

19

---



REPORT OF INDEPENDENT AUDITORS

The
Board of Directors and Stockholders
Caliber Learning Network, Inc.

We
have audited the accompanying balance sheets of Caliber Learning Network, Inc. as of December 31, 1999 and 2000, and the related statements of operations,
stockholders' equity and cash flows for each of the three years in the period ended December 31, 2000. Our audits also included the financial statement schedule listed in the Index at Item
14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our
audits.

We
conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In
our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Caliber Learning Network, Inc. at
December 31, 1999 and 2000, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

As discussed in Note 15 to the financial statements, the Company has a deficiency of working capital of $662,672 at December 31, 2000 and has incurred operating losses
since inception. This condition raises substantial doubt about the Company's ability to continue as a going concern. Management's plans to


address this matter are also described in Note 15. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of
assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.



Baltimore,
Maryland
February 14, 2001

except for Note 16, as to which the date is
March 26, 2001

F-1

---



Caliber Learning Network, Inc.  Balance Sheets

|                                                                                                                                                    |                                                                                                                                                                                                                                         | December 31, |           
|--------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------ | ----------
|
|Assets                                                                                                                                              |                                                                                                                                                                                                                                         |              |           
|Current assets:                                                                                                                                     |                                                                                                                                                                                                                                         |              |           
|                                                                                                                                                    | Cash and cash equivalents                                                                                                                                                                                                               |              | $         
|                                                                                                                                                    | Accounts receivable, net of allowance of $3,727,944 in 1999 and $294,949 in 2000                                                                                                                                                        |              |           
|                                                                                                                                                    | Receivable from related party                                                                                                                                                                                                           |              |           
|                                                                                                                                                    | Prepaid expenses and other current assets                                                                                                                                                                                               |              |           
|                                                                                                                                                    |                                                                                                                                                                                                                                         |              |           
|Total current assets                                                                                                                                |                                                                                                                                                                                                                                         |              | 31,765,330
|Property and equipment:                                                                                                                             |                                                                                                                                                                                                                                         |              |           
|                                                                                                                                                    | Furniture and fixtures                                                                                                                                                                                                                  |              |           
|                                                                                                                                                    | Computer equipment and software                                                                                                                                                                                                         |              |           
|                                                                                                                                                    | Leasehold improvements                                                                                                                                                                                                                  |              |           
|                                                                                                                                                    |                                                                                                                                                                                                                                         |              |           
|                                                                                                                                                    |                                                                                                                                                                                                                                         |              | 32,512,001
|                                                                                                                                                    | Accumulated depreciation and amortization                                                                                                                                                                                               |              |           
|                                                                                                                                                    |                                                                                                                                                                                                                                         |              |           
|                                                                                                                                                    |                                                                                                                                                                                                                                         |              | 21,127,664
|Other assets                                                                                                                                        |                                                                                                                                                                                                                                         |              | 391,183   
|                                                                                                                                                    |                                                                                                                                                                                                                                         |              |           
|Total assets                                                                                                                                        |                                                                                                                                                                                                                                         | $            | 53,284,177
|                                                                                                                                                    |                                                                                                                                                                                                                                         |              |           
|Liabilities and stockholders' equity                                                                                                                |                                                                                                                                                                                                                                         |              |           
|Current liabilities:                                                                                                                                |                                                                                                                                                                                                                                         |              |           
|                                                                                                                                                    | Accounts payable and accrued expenses                                                                                                                                                                                                   |              | $         
|                                                                                                                                                    | Payable to Sylvan                                                                                                                                                                                                                       |              |           
|                                                                                                                                                    | Current portion of note payable to Sylvan                                                                                                                                                                                               |              |           
|                                                                                                                                                    | Accrued dividends payable                                                                                                                                                                                                               |              |           
|                                                                                                                                                    | Current portion of deferred tenant allowances                                                                                                                                                                                           |              |           
|                                                                                                                                                    | Current portion of capital lease obligations due to related party                                                                                                                                                                       |              |           
|                                                                                                                                                    |                                                                                                                                                                                                                                         |              |           
|Total current liabilities                                                                                                                           |                                                                                                                                                                                                                                         |              | 12,570,299
|Note payable to Sylvan, less current portion                                                                                                        |                                                                                                                                                                                                                                         |              |          
|Deferred tenant allowances, less current portion                                                                                                    |                                                                                                                                                                                                                                         |              | 1,190,757 
|Capital lease obligations due to related party, less current portion                                                                                |                                                                                                                                                                                                                                         |              | 9,059,318 
|Commitments and contingencies                                                                                                                       |                                                                                                                                                                                                                                         |              |          
|7.5% Series A Redeemable Convertible Preferred Stock, $.01 par value;
authorized shares of 225,000; issued and oustanding shares of 150,000 in 1999 |                                                                                                                                                                                                                                         |              | 15,152,807
|Stockholders' equity:                                                                                                                               |                                                                                                                                                                                                                                         |              |           
|                                                                                                                                                    | 7.5% Series B Redeemable Convertible Preferred Stock, $.01 par value; authorized shares500,000; issued and oustanding shares of 110,000 in 2000; liquidation preference of $100 per share aggregating
$11,000,000                      |              |           
|                                                                                                                                                    | 7.5% Series A-2 Redeemable Convertible Preferred Stock, $.01 par value; authorized shares225,000; issued and oustanding shares 150,000 in 2000; liquidation preference of $100 per share plus accrued interest
aggregating $16,337,558 |              |           
|                                                                                                                                                    | 6% Non-Voting Convertible Preferred Stock, $.01 par value; authorized shares of 5,167,328; issued and outstanding shares of 5,167,328 in 1999 and 2000                                                                                  |              |           
|                                                                                                                                                    | Common stock, $.01 par value; authorized shares- 50,000,000; issued and oustanding shares of 12,443,797 in 1999 and 12,595,282 in 2000                                                                                                  |              |           
|                                                                                                                                                    | Additional paid-in capital                                                                                                                                                                                                              |              |           
|                                                                                                                                                    | Accumulated deficit                                                                                                                                                                                                                     |              |           
|                                                                                                                                                    |                                                                                                                                                                                                                                         |              |           
|Total stockholders' equity                                                                                                                          |                                                                                                                                                                                                                                         |              | 15,310,996
|                                                                                                                                                    |                                                                                                                                                                                                                                         |              |           
|Total liabilities and stockholders' equity                                                                                                          |                                                                                                                                                                                                                                         | $            | 53,284,177
|                                                                                                                                                    |                                                                                                                                                                                                                                         |              |           

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

F-2

---



Caliber Learning Network, Inc.  Statements of Operations

|                                                                            |                                                    | Year ended December 31, |            
|--------------------------------------------------------------------------- | -------------------------------------------------- | ----------------------- | -----------
|
|Revenues:                                                                   |                                                    |                         |            
|                                                                            | Service fee revenue                                |                         | $          
|                                                                            | Service fee revenue from related party             |                         |            
|                                                                            | Management fee from Sylvan                         |                         |            
|                                                                            |                                                    |                         |            
|                                                                            |                                                    |                         | 15,415,078 
|Cost and expenses:                                                          |                                                    |                         |            
|                                                                            | Operating expenses                                 |                         |            
|                                                                            | Management fees to Sylvan                          |                         |            
|                                                                            | Other selling, general and administrative expenses |                         |            
|                                                                            |                                                    |                         |            
|                                                                            |                                                    |                         | 44,413,806 
|Other income (expense):                                                     |                                                    |                         |            
|                                                                            | Other income                                       |                         |            
|                                                                            | Interest income                                    |                         |            
|                                                                            | Interest expense                                   |                         |            
|                                                                            |                                                    |                         |            
|                                                                            |                                                    |                         | 174,214    
|                                                                            |                                                    |                         |            
|Net loss                                                                    |                                                    |                         | (28,824,514
|Dividends accrued on preferred stock                                        |                                                    |                         | (314,409   
|                                                                            |                                                    |                         |            
|Net loss attributable to common stockholders                                |                                                    | $                       | (29,138,923
|                                                                            |                                                    |                         |            
|Basic and diluted loss per common share attributable to common stockholders |                                                    | $                       | (2.61      
|                                                                            |                                                    |                         |            

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

F-3

---



Caliber Learning Network, Inc.  Statements of Stockholders' Equity

|                                                                                                                                                        |  | Series A-2
Redeemable
Convertible
Preferred Stock |       | Series A-1
Redeemable
Convertible
Preferred Stock |   | Series B
Redeemable
Convertible
Preferred Stock |   | Non-voting
Convertible
Preferred Stock |       | Class A
Common
Stock |   | Class B
Common
Stock |  | Common
Stock |         | Additional
Paid-In
Capital |   | Subscription
Receivable |   | Accumulated
Deficit |         | Total
Stockholders' Equity |  
|------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------- | ----- | ------------------------------------------------- | - | ----------------------------------------------- | - | -------------------------------------- | ----- | -------------------- | - | -------------------- |  | ------------ | ------- | -------------------------- | - | ----------------------- | - | ------------------- | ------- | -------------------------- | -
|Balance at January 1, 1998                                                                                                                              |  | $                                                 |      |                                                   | $ |                                                |   | $                                      |      |                      | $ |                     |  | $            | 38,300  |                            | $ | 51,674                  |   | $                   |        |                            | $
|Issuance of 18,750 shares of Class A common stock                                                                                                       |  |                                                   |      |                                                   |   |                                                |   |                                        |      |                      |   |                     |  |              | 188     |                            |   |                        |   |                     |        |                            |  
|Conversion of 3,848,736 shares of Class A common stock into 3,848,736 shares of common stock                                                            |  |                                                   |      |                                                   |   |                                                |   |                                        |      |                      |   |                     |  |              | (38,488 | )                          |   |                        |   |                     | 38,488  |                            |  
|Conversion of 5,167,328 shares of Class B common stock into 5,167,328 shares of 6% Non-Voting Convertible Preferred Stock                               |  |                                                   |      |                                                   |   |                                                |   |                                        |      |                      |   | 51,674               |  |              |        |                            |   | (51,674                 | ) |                     |        |                            |  
|Conversion of 2,442,513 shares of Series B Redeemable Convertible Preferred Stock into 2,442,513 shares of common stock                                 |  |                                                   |      |                                                   |   |                                                |   |                                        |      |                      |   |                     |  |              |        |                            |   |                        |   |                     | 24,425  |                            |  
|Conversion of 1,227,393 shares of Series B Redeemable Junior Convertible Preferred Stock into 1,227,393 shares of common stock                          |  |                                                   |      |                                                   |   |                                                |   |                                        |      |                      |   |                     |  |              |        |                            |   |                        |   |                     | 12,274  |                            |  
|Payment of stock subscription                                                                                                                           |  |                                                   |      |                                                   |   |                                                |   |                                        |      |                      |   |                     |  |              |        |                            |   |                        |   |                     |        |                            |  
|Issuance of 4,775,000 shares of common stock                                                                                                            |  |                                                   |      |                                                   |   |                                                |   |                                        |      |                      |   |                     |  |              |        |                            |   |                        |   |                     | 47,750  |                            |  
|Proceeds from exercise of stock options                                                                                                                 |  |                                                   |      |                                                   |   |                                                |   |                                        |      |                      |   |                     |  |              |        |                            |   |                        |   |                     | 60      |                            |  
|Loss for the year ended December 31, 1998                                                                                                               |  |                                                   |      |                                                   |   |                                                |   |                                        |      |                      |   |                     |  |              |        |                            |   |                        |   |                     |        |                            |  
|Dividends on 6% Non-Voting Convertible Preferred Stock and 8% Series A Convertible Preferred Stock                                                      |  |                                                   |      |                                                   |   |                                                |   |                                        |      |                      |   |                     |  |              |        |                            |   |                        |   |                     |        |                            |  
|                                                                                                                                                        |  |                                                   |       |                                                   |   |                                                 |   |                                        |       |                      |   |                      |  |              |         |                            |   |                         |   |                     |         |                            |  
|Balance at December 31, 1998                                                                                                                            |  |                                                   |      |                                                   |   |                                                |   |                                        |      |                      |   | 51,674               |  |              |        |                            |   |                        |   |                     | 122,997 |                            |  
|Proceeds from exercise of stock options                                                                                                                 |  |                                                   |      |                                                   |   |                                                |   |                                        |      |                      |   |                     |  |              |        |                            |   |                        |   |                     | 45      |                            |  
|Proceeds from sale of 139,624 shares under the employee stock purchase program                                                                          |  |                                                   |      |                                                   |   |                                                |   |                                        |      |                      |   |                     |  |              |        |                            |   |                        |   |                     | 1,396   |                            |  
|Loss for the year ended December 31, 1999                                                                                                               |  |                                                   |      |                                                   |   |                                                |   |                                        |      |                      |   |                     |  |              |        |                            |   |                        |   |                     |        |                            |  
|Dividends on 6% Non-Voting Convertible Preferred Stock and 7.5% Series A Redeemable Convertible Preferred Stock                                         |  |                                                   |      |                                                   |   |                                                |   |                                        |      |                      |   |                     |  |              |        |                            |   |                        |   |                     |        |                            |  
|                                                                                                                                                        |  |                                                   |       |                                                   |   |                                                 |   |                                        |       |                      |   |                      |  |              |         |                            |   |                         |   |                     |         |                            |  
|Balance at December 31, 1999                                                                                                                            |  |                                                   |      |                                                   |   |                                                |   |                                        |      |                      |   | 51,674               |  |              |        |                            |   |                        |   |                     | 124,438 |                            |  
|Proceeds from exercise of stock options                                                                                                                 |  |                                                   |      |                                                   |   |                                                |   |                                        |      |                      |   |                     |  |              |        |                            |   |                        |   |                     | 271     |                            |  
|Exchange of 150,000 shares of Series A Redeemable                                                                                                       |  |                                                   |       |                                                   |   |                                                 |   |                                        |       |                      |   |                      |  |              |         |                            |   |                         |   |                     |         |                            |  
|Convertible Preferred Stock for 150,000 shares of Series A-1 Redeemable Convertible Preferred Stock                                                     |  |                                                   |      |                                                   |   | 1,500                                           |   |                                        |      |                      |   |                     |  |              |        |                            |   |                        |   |                     |        |                            |  
|Exchange of 150,000 shares of Series A-1 Redeemable Convertible Preferred Stock for 150,000 shares of Series A-2 Redeemable Convertible Preferred Stock |  |                                                   | 1,500 |                                                   |   | (1,500                                          | ) |                                        |      |                      |   |                     |  |              |        |                            |   |                        |   |                     |        |                            |  
|Issuance of 110,000 shares of Series B Redeemable Convertible Preferred Stock                                                                           |  |                                                   |      |                                                   |   |                                                |   |                                        | 1,100 |                      |   |                     |  |              |        |                            |   |                        |   |                     |        |                            |  
|Proceeds from sale of 124,413 shares under the employee stock purchase program                                                                          |  |                                                   |      |                                                   |   |                                                |   |                                        |      |                      |   |                     |  |              |        |                            |   |                        |   |                     | 1,244   |                            |  
|Loss for the year ended December 31, 2000                                                                                                               |  |                                                   |      |                                                   |   |                                                |   |                                        |      |                      |   |                     |  |              |        |                            |   |                        |   |                     |        |                            |  
|Dividends on 6% Non-Voting Convertible Preferred Stock, and 7.5% Series A-1 Redeemable Convertible Preferred Stock                                      |  |                                                   |      |                                                   |   |                                                |   |                                        |      |                      |   |                     |  |              |        |                            |   |                        |   |                     |        |                            |  
|                                                                                                                                                        |  |                                                   |       |                                                   |   |                                                 |   |                                        |       |                      |   |                      |  |              |         |                            |   |                         |   |                     |         |                            |  
|Balance at December 31, 2000                                                                                                                            |  | $                                                 | 1,500 |                                                   | $ |                                                |   | $                                      | 1,100 |                      | $ | 51,674               |  | $            |        |                            | $ |                        |   | $                   | 125,953 |                            | $
|                                                                                                                                                        |  |                                                   |       |                                                   |   |                                                 |   |                                        |       |                      |   |                      |  |              |         |                            |   |                         |   |                     |         |                            |  

The accompanying notes are an integral part of these finanical statements.

F-4

---



Caliber Learning Network, Inc.  Statements of Cash Flows

|                                                                                              |                                                                                    | Year Ended December 31,                   |            
|--------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------- | ----------------------------------------- | -----------
|
|Operating activities                                                                          |                                                                                    |                                           |            
|Net loss                                                                                      |                                                                                    | $                                         | (28,824,514
|Adjustments to reconcile net loss to net cash used in operating activities:                   |                                                                                    |                                           |            
|                                                                                              | Depreciation and amortization                                                      |                                           |            
|                                                                                              | Negative amortization of capital lease obligations charged to interest expense     |                                           |            
|                                                                                              | Amortization of deferred tenant allowances recorded as a reduction of rent expense |                                           |            
|                                                                                              | Changes in operating assets and liabilities:                                       |                                           |            
|                                                                                              |                                                                                    | Accounts receivable, net                  |            
|                                                                                              |                                                                                    | Receivable from related party             |            
|                                                                                              |                                                                                    | Prepaid expenses and other current assets |            
|                                                                                              |                                                                                    | Accounts payable and accrued expenses     |            
|                                                                                              |                                                                                    | Payable to related party                  |            
|                                                                                              |                                                                                    | Management fee payable to Sylvan          |            
|                                                                                              |                                                                                    | Interest payable to Sylvan                |            
|                                                                                              |                                                                                    |                                           |            
|Net cash used in operating activities                                                         |                                                                                    |                                           | (28,313,999
|Investing activities                                                                          |                                                                                    |                                           |            
|Purchases of property and equipment                                                           |                                                                                    |                                           | (6,866,873 
|Proceeds from sale-leaseback of property and equipment                                        |                                                                                    |                                           | 540,690    
|Purchases of available-for-sale securities                                                    |                                                                                    |                                           | (8,254,174 
|Proceeds from sale of available-for-sale securities                                           |                                                                                    |                                           |           
|Proceeds from deferred tenant allowances                                                      |                                                                                    |                                           | 2,070,022  
|Change in other assets                                                                        |                                                                                    |                                           | (102,852   
|                                                                                              |                                                                                    |                                           |            
|Net cash (used in) provided by investing activities                                           |                                                                                    |                                           | (12,613,187
|Financing activities                                                                          |                                                                                    |                                           |            
|Issuance of common stock in initial public offering,
net of offering costs of $738,278        |                                                                                    |                                           | 61,432,222 
|Repayments of loan from Sylvan                                                                |                                                                                    |                                           | (3,000,000 
|Issuance of Class A common stock                                                              |                                                                                    |                                           | 150,000    
|Issuance of Series A Redeemable Convertible Preferred Stock, net of offering costs of $53,700 |                                                                                    |                                           |           
|Issuance of Series B Redeemable Convertible Preferred Stock, net of offering costs of $23,300 |                                                                                    |                                           |           
|Proceeds from exercise of stock options                                                       |                                                                                    |                                           | 7,508      
|Proceeds from purchase of shares under the employee stock purchase program                    |                                                                                    |                                           |           
|Payment of subscription receivable                                                            |                                                                                    |                                           | 5,364,358  
|Payment of accrued dividends on preferred stock                                               |                                                                                    |                                           | (1,210,689 
|Payment of capital lease obligations                                                          |                                                                                    |                                           | (1,787,852 
|                                                                                              |                                                                                    |                                           |            
|Net cash provided by financing activities                                                     |                                                                                    |                                           | 60,955,547 
|                                                                                              |                                                                                    |                                           |            
|Net increase (decrease) in cash and cash equivalents                                          |                                                                                    |                                           | 20,028,361 
|Cash and cash equivalents, beginning of year                                                  |                                                                                    |                                           | 3,850,440  
|                                                                                              |                                                                                    |                                           |            
|Cash and cash equivalents, end of year                                                        |                                                                                    | $                                         | 23,878,801 
|                                                                                              |                                                                                    |                                           |            

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

F-5

---



Caliber Learning Network, Inc.  Notes to Financial Statements            December 31, 2000

1. Summary of Significant Accounting Policies



The Company was founded in 1996 by Sylvan Learning Systems, Inc. ("Sylvan") and MCI WorldCom, Inc. ("MCI") to provide learning services to
corporations and universities using the Internet, telecommunications and multimedia technology within a network of specially equipped classroom facilities.

Currently, the Company is a leading provider of e-learning infrastructure and services to major corporations in support of their strategic initiatives. The Company has
developed a proprietary technology platform that connects large numbers of enterprise constituents, including employees, suppliers, customers and business partners to enable the delivery of targeted,
timely information. The Company's focus is on the enterprise learning needs of Global 2000 corporations located in the United States and internationally.



Certain amounts in the accompanying 1999 financial statements have been reclassified to conform to the presentation used in 2000.



The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that
affect reported amounts and related disclosures. Actual results could differ from those estimates.



The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.



Property and equipment is stated at cost. Depreciation is computed for owned assets using the straight-line method over the estimated useful lives
of the assets. Assets capitalized under capital leases are amortized using the straight-line method over the lesser of the lease terms or the estimated useful lives of the assets.



Payments made by landlords to the Company as incentives under operating leases are recorded as liabilities and recognized as reductions in rental expense
ratably over the terms of the leases.



Revenue is generated primarily from learning services provided to corporations, graduate level learning courses, hourly classroom rental and related services.
Revenue from learning courses and training events is recognized over the contract period as the events are delivered. Services unrelated to learning courses or training events are recognized in the
period the services are provided. The Company also generates revenue from hourly classroom rental, which is recognized when the service is provided.

F-6

---

Management fees under an agreement with Sylvan to manage certain computer-based certification centers were calculated based on a fixed amount per month, plus an additional fee per test delivered


above a specified number of test examinations. These fees were recognized as revenue upon delivery of the examination. In March 2000, the Company assigned its rights and responsibilities under
this agreement to an independent third party.



Costs of advertising are expensed as incurred. Advertising expense totaled $4,071,549, $2,012,240 and $1,826,140 in 1998, 1999 and 2000, respectively.



The Company records compensation expense for all stock-based compensation plans using the intrinsic value method prescribed by APB Opinion No. 25, Accounting for Stock Issued to
Employees. Financial Accounting Standards Board Statement No. 123,Accounting for
Stock-Based Compensation("Statement No. 123") encourages companies to recognize expense for stock-based awards based on their estimated value on the date of grant.
Statement No. 123 requires the disclosure of pro forma income and earnings per share data in the notes to the financial statements if the fair value method is not elected. The Company has
supplementally disclosed in these financial statements the required pro forma information as if the fair value method had been elected.



In June 1998, the Financial Accounting Standards Board issued Statement No. 133,Accounting for Derivative Instruments
and Hedging Activities.This statement, which is required to be adopted in January 2001, provides a comprehensive and consistent standard for the recognition and
measurement


of derivatives and hedging activities. Management does not anticipate that the adoption of the new Statement will have an effect on the financial position or results of operations of the Company.

In
December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin (SAB) No. 101,Revenue Recognition in Financial
Statements.The Company has adopted the provision of SAB No. 101 in its financial statements for the fiscal year ending December 31, 2000. The adoption of this
pronouncement did not have any impact on the Company's financial position or results of operations.

F-7

---

2. Loss Per Share

The following table sets forth the computation of basic and diluted loss per share:

|                                 |                                                                                 | Year ended December 31, |           
|-------------------------------- | ------------------------------------------------------------------------------- | ----------------------- | ----------
|
|Numerator:                       |                                                                                 |                         |           
|                                 | Net loss                                                                        |                         | $         
|                                 | Preferred stock dividends                                                       |                         |           
|                                 |                                                                                 |                         |           
|                                 | Net loss attributable to common stockholders                                    |                         | $         
|                                 |                                                                                 |                         |           
|Denominator:                     |                                                                                 |                         |           
|                                 | Weighted average number of shares of common stock outstanding during the period |                         |           
|                                 | Shares of common stock issued for a nominal value                               |                         |           
|                                 |                                                                                 |                         |           
|Denominator for loss per share   |                                                                                 |                         | 11,177,764
|                                 |                                                                                 |                         |           
|Basic and diluted loss per share |                                                                                 | $                       | (2.61     
|                                 |                                                                                 |                         |           

Basic
loss per share is based upon the average number of shares of common stock outstanding during each period. As required by the Securities and Exchange Commission in Staff
Accounting Bulletin No. 98, all securities issued by the Company for a nominal value have been included in the computations as if they were outstanding for all periods prior to the Company's
initial public offering of common stock in May 1998.

Diluted loss per common share is equal to basic loss per common share because if potentially dilutive securities were included in the computation the result would be
anti-dilutive. These potentially dilutive securities consist of convertible preferred stocks, warrants and stock options.

3. Supplemental Disclosure of Cash Flow Information

|                                             |                                                                                                                                          | Year ended December 31,
|-------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------- | -----------------------
|
|Non-cash investing and financing activities: |                                                                                                                                          |                        
|                                             | Equipment acquired under capital lease                                                                                                   |                        
|                                             | Dividends accrued on 7.5% Series A, 7.5% Series A-1 Redeemable Convertible Preferred Stock and
6% Non-Voting Convertible Preferred Stock |                        
|                                             | Interest paid                                                                                                                            |                        

4. Transactions with Sylvan and its Affiliates

Effective May 1, 1997, the Company entered into an agreement with Sylvan to manage the operations of certain certification centers located throughout
the United States which administer computer-based tests for major corporations, professional associations and government agencies. Revenues under this agreement are classified in the accompanying
statements of operations as management fee from Sylvan.

F-8

---

The Company's obligations under this agreement terminated in March 2000 after Caliber assigned the agreement to an independent third party.

During all periods presented, the Company purchased under a Management and Facility Use Agreement with Sylvan specified management, accounting and administrative services. In
addition, this agreement provides for the use by the Company of certain office space under lease to Sylvan. Annual management fees in 1998, 1999 and 2000 were $2,000,000, $2,000,000 and $1,845,024,
respectively.

The
Company utilizes a centralized disbursement function managed by Sylvan. During 1998, 1999 and 2000, Sylvan paid certain amounts on behalf of the Company related to payroll and
other expenses. Amounts payable to Sylvan related to these transactions were $1,345,776, $2,961,809 and $7,154,716 at December 31, 1998, 1999 and 2000, respectively.

In February 2001, the Company signed a $7,150,000 promissory note with Sylvan due March 31, 2004 as consideration for this amount payable to Sylvan. The accompanying
balance sheet at December 31, 2000 has been reclassified to present the obligation to Sylvan in accordance with its contractual payment terms. The note bears interest at 15% per annum and is
payable in installments consisting of (i) $1,000,000 upon signing the note, (ii) $736,000 on March 31, 2001, (iii) three quarterly payments of $400,000 commencing June 30, 2001, (iv)
eight quarterly payments of $500,000 in 2002 and 2003, and (v) a final payment of $214,000 on March 31, 2004. The interest rate of 15% per annum consists of a cash component equal to 8% per
annum payable quarterly and a component which accrues and is payable at maturity equal to 7% of principal. The promissory note is secured by a lien on all of the Company's assets.

In connection with the issuance of a note to Sylvan in February 2001, the Company granted Sylvan warrants to purchase 240,000 shares of common stock at an exercise price of $3.50 per
share. One half of the warrants vested upon the signing of the note, and the remaining half vest on December 31, 2001.

During the third quarter of 1999, the Company entered into a Course Conversion and Hosting Agreement with LeapIT.com, LLC, an affiliate of Sylvan. For the years ended
December 31, 1999 and 2000, service fee revenue from related party in the accompanying statements of operations includes $2,000,000 and $1,750,000, respectively, of revenues from LeapIT.com,
LLC. In addition, $2,000,000 and $750,000 is included as a receivable from related party in the accompanying balance sheets at December 31, 1999 and 2000, respectively, related to this
agreement. The Company provided consulting and other services under this agreement, which was concluded in 2000.

5. Capital Leases

MCI WorldCom, a stockholder of the Company, provided an aggregate of $20.0 million in lease financing guaranties for the purchase of furniture and
equipment.

F-9

---

Property and equipment includes the following amounts for leases that have been capitalized at December 31, 2000:

Furniture and fixtures

$
632,265Computer equipment and software


16,029,332Leasehold improvements


3,338,40320,000,000Less: accumulated amortization


(11,308,419
)$
8,691,581


Amortization
of leased assets is included in depreciation and amortization expense.

Future
minimum payments under capital lease obligations consist of the following at December 31, 2000:

2001

$
6,490,3402002


3,820,4042003


1,717,1842004


171,908Total minimum lease payments


12,199,836Amounts representing interest


(1,269,384
)Present value of net minimum lease payments (including current portion of $5,682,950)

$
10,930,452


6. Initial Public Offering and Recapitalization

In May 1998, the Company completed an initial public offering of its Common Stock. The net proceeds to the Company from the sale of the 4,500,000 shares
of Common Stock offered therein were approximately $58.1 million. Also during May 1998, the underwriters of the initial public offering exercised their over-allotment option
in full. The net proceeds to the Company from this sale of an additional 275,000 shares of its Common Stock was approximately $3.6 million.

The
initial public offering of Common Stock met the criteria for the automatic conversion of the outstanding 8% Series A Redeemable Convertible Preferred Stock and
Series B Redeemable Junior Convertible Preferred Stock into Common Stock and the repayment of all accrued and unpaid dividends on the 8% Series A Redeemable Convertible Preferred Stock.

Additionally,
the Company completed a recapitalization effective upon closing of the initial public offering referred to above. The Company's charter was amended to authorize a single
class of Common Stock, $0.01 par value, for which all shares of Class A Common Stock were exchanged on a share-for-share basis, and a series of 6% Non-Voting
Convertible Preferred Stock, for which all shares of Class B Common Stock were exchanged on a share-for-share basis.

F-10

---

7. Preferred Stock

The Company has three series of Preferred Stock outstanding at December 31, 2000, 6% Non-Voting Convertible Preferred Stock, 7.5%
Series A-2 Redeemable Convertible Preferred Stock and 7.5% Series B Redeemable Convertible Preferred Stock.

Each share of the 6% Non-Voting Convertible Preferred Stock issued in connection with the 1998 recapitalization described in Note 6 is convertible into one share of
common stock at the option of the holder at any time after May 2000. Dividends of $60,000 per year are cumulative and were first payable in May 1999.

In October 1999, the Company issued 150,000 shares of 7.5% Series A Redeemable Convertible Preferred Stock ("Series A") for a total aggregate purchase price of
$15.0 million. In September 2000, all of the holders of the Company's outstanding Series A Redeemable Convertible Preferred Stock exchanged their shares for a like number of
shares of a new series of preferred stock designated as Series A-1 Redeemable Convertible Preferred Stock ("Series A-1"). On December 29, 2000, all of the
holders of the Company's outstanding Series A-1 Redeemable Convertible Preferred Stock exchanged their shares for a like number of shares of a new series of preferred stock designated as Series
A-2 Redeemable Convertible Preferred Stock ("Series A-2") due to a change in conversion rights. On December 29, 2000, the Company also issued 110,000 shares of 7.5% Series B
Redeemable Convertible Preferred Stock ("Series B") for a total aggregate purchase price of $11.0 million. The Series A-2 and Series B were issued with the following
terms:



The Series A-2 and Series B are redeemable in whole on October 31, 2005 and June 30, 2005, respectively. Both series
are redeemable in cash or common stock at the option of the Company and have a redemption amount of $100 per share plus all accrued and unpaid dividends.



The Series A-2 and Series B are convertible into Common Stock at the option of the holder at any time. The Series A-2 and
Series B are convertible at a converison price of $3.50 per share. Both series will be adjusted to provide for certain subsequent issuances of Common Stock which would result in dilution.



The holders of both series are entitled to receive quarterly cumulative dividends at a rate of 7.5% per annum. The first dividend payment dates on the
Series A-2 and Series B are December 31, 2000 and March 31, 2001, respectively. Accrued dividends may be payable at the election of the Company in cash or additional
shares.



Both series have a preference on liquidation equal to $100 per share plus all accrued and unpaid dividends. The Series B has preference in liquidation
over Series A-2.



Both Series have substantially the same voting rights as the number of shares of Common Stock into which they can be converted.

F-11

---

8. Warrant and Shares Reserved for Future Issuance

The Company at December 31, 2000 has reserved 3,514,068 shares of common stock for future issuance upon the exercise of stock options eligible for
granting or previously granted under the 1997 and 1998 Plans and under other grants made to certain executives, 4,681,303 shares of common stock issuable upon the conversion of the 7.5%
Series A-2 Redeemable Convertible Preferred Stock, 8,571,429 shares of common stock issuable upon the conversion of the 7.5% Series B Redeemable Convertible Preferred Stock
assuming the issuance of $30.0 Million in 7.5% Series B Redeemable Convertible Preferred Stock at an initial conversion price of $3.50, 5,167,328 shares of common stock issuable upon the
conversion of the 6% Non-Voting Convertible Preferred Stock and 400,000 shares issuable under the Employee Stock Purchase Plan.

In
addition, a warrant to purchase 1,193,573 shares of common stock for $3.169 per share was outstanding at December 31, 2000. This warrant expires on November 22, 2006.

9. Stock Compensation Plan

Effective April 30, 1997, the Company adopted the Caliber Learning Network, Inc. 1997 Stock Option Plan (the "1997 Plan") which is administered
by the Board of Directors. The 1997 Plan provides for the granting of either qualified or non-qualified options to purchase an aggregate of up to 1,227,400 shares of Common Stock to
eligible employees, officers, and consultants of the Company. Effective February 17, 1998, the Company terminated the 1997 Plan except in respect to awards outstanding as of that date.

Effective February 17, 1998, the Company adopted the Caliber Learning Network, Inc. 1998 Stock Incentive Plan (the "1998 Plan") which is administered by the Board of
Directors. The 1998 Plan provides for the granting of either qualified or non-qualified options to purchase an aggregate of up to 1,416,603 shares of Common Stock to eligible employees,
officers, directors and consultants of the Company.

During 2000, the Company granted options to purchase 1,200,000 shares of Common Stock to certain executives of the Company. These grants were not made pursuant to the 1997 Plan or the
1998 Plan, but were specifically approved by the Board of Directors.

A summary of the Company's stock option activity, and related information for the years ended December 31, 1998, 1999 and 2000 is as follows:

|                               |  | Year ended December 31,
|------------------------------ |  | -----------------------
|
|
|Outstanding, beginning
of year |  | 1,070,047              
|Granted                        |  | 206,165                
|Excercised                     |  | (6,994                 
|Forfeited                      |  | (92,819                
|                               |  |                        
|Outstanding, end of year       |  | 1,176,399              
|                               |  |                        
|Excercisable at end
of year    |  | 195,420                
|                               |  |                        

F-12

---

During 2000, the Company granted options to purchase common stock when the quoted market price of common stock was equal to or less than the exercise price of the granted options. The
following table summarizes the weighted-average fair values and exercise prices of granted stock options during 2000:

Weighted Average Exercise Price

Weighted Average Fair ValueMarket price equal to exercise price on grant date

$
2.94

$
2.81Market price less than exercise price on grant date


3.00


1.47


Options granted in 1998 and 1999 had a fair value at the date of grant of $2.74 and $3.56, respectively.

Exercise
prices for options outstanding as of December 31, 2000 ranged from $1.02 to $14.31 as follows:

|Range of Exercise
Prices |  | Options
Outstanding |  | Weighted-Average
Excercise Prices
of Options Outstanding |       | Weighted-Average
Remaining Contractual
Life of Options
Outstanding |      | Options
Excercisable |         | Weighted-Average
Exercise Prices
of Options
Excercisable
|------------------------ |  | ------------------- |  | -------------------------------------------------------- | ----- | ------------------------------------------------------------------ | ---- | -------------------- | ------- | --------------------------------------------------------
|$1.02$2.44              |  | 746,737             |  | $                                                        | 1.11  |                                                                    | 6.83 |                      | 412,394 |                                                         
|$3.00$3.88              |  | 1,932,000           |  | $                                                        | 3.00  |                                                                    | 9.79 |                      | 2,000   |                                                         
|$4.12$5.38              |  | 158,000             |  | $                                                        | 4.67  |                                                                    | 9.00 |                      | 15,500  |                                                         
|$8.00$14.31             |  | 68,500              |  | $                                                        | 13.42 |                                                                    | 7.49 |                      | 27,400  |                                                         

To
determine the pro forma data required by Statement No. 123, the Company used option pricing models to measure the fair value of options at the date of grant. For all option
grants prior to May 5, 1998 (the initial public offering date), the Company used the minimum value method to calculate pro forma compensation expense. For all grants after May 5, 1998,
the Company used the Black-Scholes option pricing model.

The
minimum value method calculates the fair value of options as the excess of the estimated fair value of the underlying stock at the date of grant over the present value of both the
exercise price and the expected dividend payment, each discounted at the risk-free rate, over the expected life of the option. In determining the estimated fair value of granted stock
options under the minimum value method, the risk-free interest rate was assumed to be 5.5%, the dividend yield was estimated to be 0% and the expected life of granted options varied from
one to five years depending upon the vesting period.

Options valued using the Black-Scholes option pricing model assumed the following: risk-free interest rate of 5.5% in 1998, 1999 and 2000, dividend yields of 0% in 1998,
1999 and 2000, volatility factors of the expected market price of the Company's common stock of 1.04 in 1998, .792 in 1999 and 1.186 in 2000 and an expected life of the granted options of one to five
years, depending on the vesting period.

The
Black-Scholes option pricing model and other models were developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. Because the Company's stock options have
characteristics significantly different from those of traded options and because changes in the subjective input assumptions can materially affect the fair
value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its stock options.

F-13

---

For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. The Company's pro forma net loss attributable
to common stockholders was $29.3 million, $22.7 million and $36.0 million for the years ended December 31, 1998, 1999 and 2000, respectively. Pro forma basic and diluted
loss per share attributable to common stockholders was $(2.62), $(1.84) and $(2.88) for the years ended December 31, 1998, 1999 and 2000, respectively.

10. Income Taxes

At December 31, 2000, the Company had net operating loss carryforwards for income tax purposes of approximately $93.9 million, which will begin
to expire in 2011. Income tax regulations contain provisions which may limit the net operating loss carryforwards available to be used in any given year if certain events occur, including changes in
ownership interest.

Significant
components of the Company's deferred tax assets and liabilities are as follows:

|                                            |                                | December 31 |            
|------------------------------------------- | ------------------------------ | ----------- | -----------
|
|Net operating loss carryforwards            |                                | $           | 14,719,056 
|Start-up costs capitalized for tax purposes |                                |             | 182,850    
|Allowance for doubtful accounts             |                                |             | 1,033,471  
|Deferred revenue                            |                                |             | 93,396     
|Book over tax depreciation                  |                                |             | 869,386    
|Other                                       |                                |             | 114,118    
|                                            |                                |             |            
|                                            | Total deferred tax assets      |             |            
|                                            |                                |             |            
|                                            | Total deferred tax liabilities |             |            
|                                            |                                |             |            
|Net future income tax benefit               |                                |             | 16,977,938 
|Valuation allowance for deferred tax assets |                                |             | (16,977,938
|                                            |                                |             |            
|Net deferred tax assets                     |                                | $           |           
|                                            |                                |             |            

The
reconciliation of the reported income tax benefit to the amount that would result by applying the U.S. federal statutory tax rate to the reported net loss is as follows:

|                                           |       | December 31 |           
|------------------------------------------ | ----- | ----------- | ----------
|
|Tax benefit at U.S. federal statutory rate |       | $           | (9,800,335
|Effect of permanent differences            |       |             | 11,910    
|State income taxes                         |       |             | (1,331,693
|Increase in valuation allowance            |       |             | 11,120,118
|                                           |       |             |           
|                                           | Total |             | $         
|                                           |       |             |           

11. Major Customers and Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of accounts receivable. The Company
maintains an allowance for losses on receivables

F-14

---

based on the collectibility of all amounts owed. The Company generally does not require collateral for trade receivables. At December 31, 2000, 36% of accounts receivable was due from two
customers.

12. Operating Leases

The Company conducts all of its operations from leased facilities under operating leases that have terms of up to ten years and generally contain renewal
options and rental escalation clauses. The rental payments under certain leases are based on minimum fixed rentals plus a percentage of revenues earned at the location.

Future
minimum payments under noncancelable operating leases with initial terms of one year or more consisted of the following at December 31, 2000:

2001

$
3,113,0492002


2,996,8422003


2,066,1842004


1,420,9652005


386,747Thereafter


Total

$
9,983,787


The
Company incurred rent expense of $5,194,910, $5,148,566 and $4,330,739 in 1998, 1999 and 2000, respectively.

13. Defined Contribution Retirement Plan

Employees of the Company are eligible to participate in a defined contribution retirement plan sponsored by Sylvan. The provisions of the plan allow for
voluntary employee contributions, subject to


certain annual limitations, and discretionary contributions by the employer, which are allocated to eligible participants based upon compensation. All employees are eligible after meeting certain age
and service requirements. The Company made contributions of $30,337, $85,852 and $102,888 for the years ended December 31, 1998, 1999 and 2000, respectively.

14. Business Segment Information



The Company provides high-quality continuing education and training services. Prior to the first quarter of 2000, the Company operated in three
distinct operating segmentsAcademic, Corporate and Other Products and Services. During the first quarter of 2000, the Company changed the manner in which it manages its operations and
reports the activities of those operations. The Company is now organized into two distinct operating segmentsCorporate and Other Products and Services. A description of each segment is
provided below.

F-15

---



The Company markets its network to Global 2000 corporations, as a solution to their corporate communications, professional development and training needs. The
Company makes its network available to corporations to provide nationwide distribution of corporate communications, professional development and training programs. In addition, the Company has
partnered with universities having national reputations in various fields of expertise to market content to corporations.



The Company's Other Products and Services Segment principally consist of training services and test administration services, as well as a developing portfolio
of solutions designed to maximize the revenue generating capabilities of its network and achieve the fullest possible utilization of the network infrastructure and Company personnel.



The Company evaluates the performance of its operating segments and allocates resources based on an internally defined measure of operating income. Operating
income is defined as revenue less certain direct costs that are directly attributable to the activities of the operating segment. These direct costs include labor, production and delivery costs to
develop and facilitate various programs. Costs associated with the facilities used for test administration services are included in the direct costs of the Other Products and Services segment.
Unallocated expenses, consisting principally of Caliber center operating expenses and depreciation and amortization expense are not directly attributable to the operating segments and are not
allocated. The Company does not allocate assets to its reportable segments as assets are not specifically attributable to any particular segment. Accordingly, asset information by reportable segment
is not presented. The accounting policies used by the reportable segments are the
same as those used by the Company as described in Note 1 of the financial statements. There are no significant intersegment sales or transfers.



The Company's reportable segments are business lines that offer distinct products and services. The segments are managed separately as they have different
customer bases.

F-16

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The following table sets forth information on the Company's reportable segments:

Year ended December 31, 1998Corporate

Other Products
and Services

TotalRevenues

$
11,518,107

$
3,896,971

$
15,415,078Direct costs


5,178,406


5,306,519


10,484,925Segment operating income (loss)

$
6,339,701

$
(1,409,548
)
$
4,930,153


Year ended December 31, 1999Corporate

Other Products
and Services

TotalRevenues

$
17,199,385

$
8,833,364

$
26,032,749Direct costs


4,941,712


5,205,890


10,147,602Segment operating income

$
12,257,673

$
3,627,474

$
15,885,147


Year ended December 31, 2000Corporate

Other Products
and Services

TotalRevenues

$
15,609,142

$
5,295,429

$
20,904,571Direct costs


5,589,046


1,345,730


6,934,776Segment operating income

$
10,020,096

$
3,949,699

$
13,969,795


The following table reconciles the reported information on segment direct costs to total operating expenses as reported in the statement of operations for the year ended
December 31, 1998, 1999 and 2000:

1998

1999

2000Segment direct costs

$
10,484,925

$
10,147,602

$
6,934,776Fixed costsDepreciation and amortization


4,207,032


6,788,822


7,648,587Unallocated center operating expenses


9,564,646


10,689,864


11,079,759Operating expenses

$
24,256,603

$
27,626,288

$
25,663,122


F-17

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The following table reconciles the reported information on segment operating income to net loss as reported in the statements of operations for the year ended December 31,
1998, 1999 and 2000:

1998

1999

2000Segment operating income

$
4,930,153

$
15,885,147

$
13,969,795Unallocated operating expenses:Sales and marketing


(8,621,042
)

(9,745,788
)

(14,687,173
)Depreciation and amortization


(4,207,032
)

(6,788,822
)

(7,648,587
)Center operating expenses


(9,564,646
)

(10,689,864
)

(11,079,759
)General and administrative expenses


(9,536,161
)

(8,810,853
)

(12,944,977
)Management fee payable to Sylvan


(2,000,000
)

(2,000,000
)

(1,845,024
)Other income (expense)


174,214


(91,841
)

233,750Net loss

$
(28,824,514
)
$
(22,242,021
)
$
(34,001,975
)


Substantially all of the revenues and assets of the Company's reportable segments are located in the United States. The Company had one customer in the Corporate Segment that
represented 29% of revenues for the year ended December 31, 2000.

15. Going Concern

The Company's financial statements have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities in
the normal course of business. As of December 31, 2000, the Company had cash and cash equivalents of $7,578,511 and a working capital deficiency of $662,672. The Company believes that its cash
will be sufficient to meet its obligations in the ordinary course of business into May 2001. The Company is currently seeking additional long-term financing to provide for its anticipated cash needs
until cash flows from operations are sufficient to sustain the growth of the business. Management believes that sufficient capital can be obtained to support planned operations through
December 31, 2001. However, there can be no assurance that the Company will be able to obtain this financing on acceptable terms.

16. Subsequent Events

In March 2001, the Company issued 40,000 shares of 7.5% Series B Redeemable Convertible Preferred Stock for a total aggregate purchase price of
$4.0 million. The terms are the same as described in Note 7 for the Series B Redeemable Convertible Preferred Stock issued in December 2000.

In March 2001, the Company acquired all of the outstanding stock of Fulcrum Information Services, Inc. ("Fulcrum"), an established provider of high-level content and services
for corporations and professional services firms for an initial cash purchase price of $1.0 million. The acquisition was accounted for using the purchase method of accounting. In addition,
variable amounts of contingent consideration also are payable to Fulcrum's selling shareholders if specified levels of earnings are achieved in 2001 and 2002, payable in common stock. The Company will
record the contingent consideration as goodwill when the contingencies are resolved and the additional consideration is payable.

F-18

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