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                                   FORM 10-K
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                 ANNUAL REPORT
(Mark One)
[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

                   FOR THE FISCAL YEAR ENDED JANUARY 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 0-26040
                            ------------------------

                        COMPUTER LEARNING CENTERS, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S>                                           <C>
                  DELAWARE                         36-3501869
      (STATE OR OTHER JURISDICTION OF           (I.R.S. EMPLOYER
                INCORPORATION                    IDENTIFICATION
              OR ORGANIZATION)                       NUMBER)

           10021 BALLS FORD ROAD,
                 SUITE 200,
             MANASSAS, VIRGINIA                       20109
  (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)         (ZIP CODE)
</TABLE>

                                 (703) 367-7000
                    (TELEPHONE NUMBER, INCLUDING AREA CODE)
                            ------------------------

          Securities registered pursuant to Section 12(b) of the Act:
                                      NONE

          Securities registered pursuant to Section 12(g) of the Act:
                          COMMON STOCK, $.01 PAR VALUE
                            ------------------------

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

     Indicate by check mark 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 to Part III of this Form 10-K or any amendment to this
Form 10-K.  [X]

     Aggregate market value of the voting stock held by non-affiliates of the
Registrant based on the last sale price for such stock at May 11, 2000:

                                  $16,284,466

     Number of shares of Common Stock, $0.01 par value, outstanding at May 11,
2000.

                                   18,610,818

                      DOCUMENTS INCORPORATED BY REFERENCE

     The information called for by Part III is incorporated by reference to the
Company's definitive Proxy Statement for its 2000 Annual Meeting of
Stockholders, which will be filed pursuant to Regulation 14A within 120 days
after the end of the Company's last fiscal year.
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                        COMPUTER LEARNING CENTERS, INC.
                                   FORM 10-K
                                     INDEX

<TABLE>
<S>        <C>                                                           <C>
                                   PART I
Item 1.    Business....................................................     3
Item 2.    Properties..................................................    20
Item 3.    Legal Proceedings...........................................    21
Item 4.    Submission of Matters to a Vote of Security Holders.........    22
                                   PART II
Item 5.    Market for Registrant's Common Equity and Related
           Stockholder Matters.........................................    23
Item 6.    Selected Consolidated Financial Data........................    24
Item 7.    Management's Discussion and Analysis of Financial Condition
           and Results of Operations...................................    25
Item 7A.   Quantitative and Qualitative Disclosures about Market
           Risk........................................................    35
Item 8.    Consolidated Financial Statements and Supplementary Data....   F-1
Item 9.    Changes in and Disagreements With Accountants on Accounting
           and Financial Disclosure....................................   I-1
                                  PART III
Item 10.   Directors and Executive Officers of the Registrant..........   I-1
Item 11.   Executive Compensation......................................   I-2
Item 12.   Security Ownership of Certain Beneficial Owners and
           Management..................................................   I-2
Item 13.   Certain Relationships and Related Transactions..............   I-2
                                   PART IV
Item 14.   Exhibits, Consolidated Financial Statement Schedules, and
           Reports on Form 8-K.........................................   I-2
Signatures.............................................................   S-1
</TABLE>

     This Annual Report on Form 10-K contains forward-looking statements.
Additional written or oral forward-looking statements may be made by us from
time to time in filings with the Securities and Exchange Commission or
otherwise. The words "believe," "expect," "anticipate," and "project," and
similar expressions identify forward-looking statements, which speak only as of
the date the statement was made. Such forward-looking statements are within the
meaning of that term in Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended. Such
statements may include, but not be limited to, projections of revenues, income
or loss, expenses, capital expenditures, the effect of inflation, government
regulation and plans relating to programs of CLC, as well as assumptions
relating to the foregoing. We make no obligation to publicly update or revise
any forward looking statements, whether as a result of new information, future
events, or otherwise.

     Forward-looking statements are inherently subject to risks and
uncertainties, some of which cannot be predicted or quantified. Future events
and actual results could differ materially from those set forth in, contemplated
by, or underlying the forward-looking statements. Statements in this Annual
Report on Form 10-K, including the notes to the consolidated financial
statements and "Management's Discussion and Analysis of Financial Condition and
Results of Operations," describe factors, among others, that could contribute
to, or cause such differences. Additional factors that could cause actual
results to differ materially from those expressed in such forward-looking
statements are set forth in "Business," "Financial Aid and Regulation" and
"Certain Factors That May Affect Future Results" in this Annual Report on Form
10-K for the year ended January 31, 2000.

                                        2
<PAGE>   3

                                     PART I

ITEM 1.  BUSINESS

     You should keep in mind the following points as you read this report:

     - References in this document to "we," "us," "our" and "CLC" refer to
       Computer Learning Centers, Inc. and its subsidiaries.

     - The term "Learning Center" refers to an individual school owned and
       operated by CLC. The terms "institution" (in singular or plural form)
       refer to a main campus or school and its additional locations or branch
       campuses, if any.

     - References in this document to "fiscal 2001," "fiscal 2000," "fiscal
       1999" and fiscal 1998 refer to the years ended January 31, 2001, 2000,
       1999 and 1998, respectively.

     - References in this document to the "Department of Education" or
       "Department" refer to the U.S. Department of Education.

OVERVIEW

     We provide information technology and computer-related education and
training. We design programs and courses to meet current information technology
education needs, offering instruction in rapidly growing technologies such as
client/server, databases, networking and object-oriented programming. Through
our accredited career programs, we offer associate degrees and non-degree
diplomas in six primary areas of study to adults seeking entry-level jobs in
information technology including: business applications; electronics, systems
and hardware; programming; networking; information technology support; and
business applications with networking.

     We enrolled approximately 12,700 new students in fiscal 2000 at our
twenty-eight Learning Centers in the United States and Canada. We opened one new
Learning Center during the second quarter of fiscal 2000 in Norcross, GA. We
intend to close our San Jose, CA Learning Center by August 2001. CLC's Canadian
Learning Centers consist of three campuses located in and around Montreal,
Quebec, and collectively operate under the name of Delta College, Inc. ("CLC
Delta").

     CLC was incorporated in Delaware in March 1987. Effective March 2000, our
executive offices are located at 10021 Balls Ford Road, Manassas, Virginia 20109
(see Note 3 to Item 2). Our telephone number is 703-367-7000.

THE INFORMATION TECHNOLOGY EDUCATION AND TRAINING MARKET

     We believe that the rapidly growing role of information technology in
business and government organizations is creating a significant and increasing
demand for information technology education and training. We believe factors
driving this growth in demand include the following:

     - Information technology is evolving rapidly, often requiring those already
       skilled in the field to learn new technologies or broaden their
       understanding of existing applications. Examples include the widespread
       migration by businesses from mainframe computer systems to client/server
       architectures and from conventional software technologies to more
       contemporary approaches, such as relational databases, groupware and
       object-oriented programming.

     - According to the U.S. Department of Education, the number of students
       graduating from high school is expected to increase by approximately 1.5%
       annually from 1999 to 2008. This growth will enlarge the pool of
       candidates for career-oriented education and training, including
       education and training in information technology skills.

     Providers of information technology education and training include
vocational and technical training schools, degree-granting colleges and
universities, continuing education programs and commercial training

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programs. Vocational and technical training schools range from relatively small
local market schools focused on teaching a single or limited number of skills to
larger institutions that offer information technology training as a subset of a
more diversified curriculum. Colleges and universities are structured primarily
to serve the needs of the full-time 18- to 24-year old student through four-year
programs that are lecture-based and focused on a theoretical presentation of the
subject matter rather than on teaching specific career-oriented skills.
Continuing education programs tend to cover a broad range of technical and
non-technical topics, and such programs generally do not focus on providing
career placement for their students. Commercial training providers generally
offer fast-paced, one- to five-day courses that are based on the assumption that
individuals have a basic familiarity with information technology concepts. There
has been an increasing number of training providers of all types utilizing
internet based delivery systems; however, we have chosen to utilize strictly
traditional methods of classroom instruction.

THE CLC APPROACH

     We have designed a series of programs that we believe are well-suited to
meet the information technology education and training needs of adults pursuing
information technology-related careers. Our career programs are designed to meet
the needs of adult students in a number of ways. The focused nature of each
program of study enables our students to complete their education and training
and enter the work force in as little as 8 to 17 months, while maintaining
eligibility for financial aid programs. CLC's program schedules are designed to
accommodate our students' needs for flexibility through programs offered in
modular formats with new program start dates each month and convenient morning,
afternoon and evening hours. Each Learning Center is equipped with computer
hardware and software for students' in-class use, and each program requires
students to spend at least 50% of their in-school time working directly on a
computer. Learning Center faculty members generally have direct experience
working in the information technology industry, enabling them to provide
students with useful career-related insights and guidance in connection with
education and training. Finally, we provide our students with job placement
assistance, including assistance with resume writing, interview preparation and
employment searches for recent graduates and alumni.

BUSINESS STRATEGY

     Our objective is to strengthen and expand CLC's position as one of the
leading providers of information technology education and training programs for
adults. To achieve this objective, we intend to employ the following key
strategies:

     Increase Operating Margins and Improve our Financial Strength.  We have
invested heavily in our infrastructure and expended considerable working capital
to open new Learning Centers and upgrade existing locations over the last three
fiscal years. We now will work to optimize our Learning Centers' capacity by
seeking to increase our enrollments. We do not expect to open any new Learning
Centers in fiscal 2001 thereby using our cash from operations to reduce our debt
and add to our working capital in order to improve CLC's financial strength. In
fiscal 2001 we began employing benchmarking techniques to improve the
operational efficiency of all of our Learning Centers.

     Develop New Programs/Enhance Existing Programs.  We intend to capitalize on
new market opportunities by monitoring changes in the information technology
industry and developing new education and training programs or enhancing current
offerings in response to those changes. We are currently implementing programs
or program enhancements in Windows 2000, information technology support, and
Internet related technologies. We maintain relationships with a wide network of
employers who provide CLC with data on trends related to computer and
information technology skills.

     Improve Student Outcomes.  We seek to continuously improve the retention
and placement rates at our Learning Centers by providing extensive academic
services and placement assistance. CLC offers tutoring, academic counseling and
other services to its students to help them complete their programs of study. In
addition, CLC helps students prepare resumes, conduct employment searches and
sharpen interviewing skills through our Graduate Placement Services Resource
Center.

                                        4
<PAGE>   5

     Increase Enrollment and Availability of Associate Degree Programs.  We
currently offer associate degree programs at nine Learning Centers. We intend to
increase the number of our Learning Centers that offer degree-granting programs
in order to broaden available programs and increase student enrollments. In
addition, we intend to focus our recruiting efforts with a goal of enrolling
more of our students in associate degree curricula.

CAREER PROGRAMS

     Our Learning Centers offer comprehensive career programs of study in six
areas of information technology including: business applications; electronics,
systems and hardware; programming; networking; information technology support;
and business applications with networking. Each career program is designed to
teach the comprehensive information technology skills required to obtain an
entry-level job in the targeted information technology field. CLC offers career
programs that allow students to receive either a diploma or a degree. Each
diploma program generally follows a standard format ranging in length from 8
months for day and afternoon students to 21 months for evening students. Nine
Learning Centers offer associate degree programs in computer electronics,
information technology and network support; computer systems and networking
technology; client/server; computer applications and network administration; and
computer programming. These associate degree programs combine the curricula from
a diploma program with state-mandated general education requirements and
additional advanced material to create 17-month (day and afternoon) programs.

     Career programs are delivered year-round in a modular format that provides
for monthly start dates and allows students to complete their education in less
time than we believe is possible at many other institutions. Each program
consists of 8 to 17 modules, with each module lasting approximately one month
for day and afternoon students and consisting of a single course with an
intensive and focused format. Day and afternoon students typically attend
classes for approximately five hours per day, five days per week, with sessions
available three evenings per week for evening students.

     In CLC's career programs, students spend at least 50% of their time in
computer labs performing hands-on workplace simulations and their remaining time
in classrooms attending lectures and participating in group discussions. Each
module is delivered according to an outline and instructor's guide that links
appropriate textbooks together with visual aids and lab activities to achieve a
specific set of student performance outcomes and proficiencies. To foster a
professional work environment, we require that students attend classes in
business attire. We design and update curricula to meet current information
technology industry standards, offering instruction in widely-used computer
applications and information technologies to provide students with marketable
skills. In addition, we regularly evaluate our curricula and eliminate those
elements relating to technologies that have become obsolete or offer
significantly fewer or less attractive job opportunities for our graduates.

     The primary focus of each career program is to prepare students for
employment in their fields of study upon graduation. Graduates of the business
applications and networking programs have obtained employment as PC specialists,
help desk administrators and executive, technical and accounting support
personnel. Graduates of the electronics, systems and hardware program, have
obtained employment as technicians in computer support and network installation
and as specialists in the repair of commercial and industrial data processing
equipment. Our programming curriculum prepares graduates for employment as
computer programmers, database administrators and systems analysts. The
networking program is designed to prepare students to obtain certification as
Microsoft Certified Systems Engineers and to obtain employment as network
administrators, engineers and systems analysts. Graduates of the information
technology support program have obtained employment as computer support
specialists, help desk operators, and user support analysts.

     Tuition is fixed at the time of a student's initial enrollment, and varies
among Learning Centers based on local market conditions. At January 31, 2000,
tuition ranges were from $9,695 to $16,500 for diploma programs and from $17,250
to $23,874 for associate degree programs.

                                        5
<PAGE>   6

CURRICULUM CRITERIA, REVIEW AND DEVELOPMENT

     We have established specific criteria for CLC programs. Each career program
is designed to prepare students for information technology-related entry-level
jobs. Career programs are designed to engage adult students by employing
hands-on teaching methods; train students in computer technology widely used in
the work place; respond to market requirements and train students to satisfy
those requirements; and optimize use of CLC's resources.

     We use several means to ensure that our programs meet these criteria. We
regularly solicit input directly from employers through a system of Employer
Advisory Groups in each of our geographic market areas. These advisory groups
meet regularly to discuss the skills required in the information technology
field as well as to identify industry trends. In addition, an independent
marketing research firm conducts monthly student surveys to help us monitor
faculty, course and school effectiveness and to gather student input.
Historically, student surveys have identified opportunities for improvement,
which have been implemented where appropriate, and have provided a means of
setting quantitative benchmarks. We maintain an internal Strategic Product
Planning Group that includes senior managers, faculty and other employees. This
group meets regularly to analyze input from market research, the Employer
Advisory Groups, students, faculty, consultants and management. The Strategic
Product Planning Group uses the input to guide CLC's strategic direction and to
make recommendations regarding our curricula. Curriculum recommendations are
referred to faculty subject matter experts and academic managers for review
prior to formal development by curriculum product managers.

STUDENT CHARACTERISTICS

     Our programs are targeted at adults seeking to expand their career
opportunities through the acquisition of technical skills and knowledge. At
January 31, 2000, 49% of CLC's students (excluding CLC Delta) were college
graduates or had some college experience, including 8% who had four-year college
degrees or higher levels of educational attainment and 7% who had two-year
degrees. At that time, 29% of CLC's students (excluding CLC Delta) were between
18 and 22 years of age, 50% were between 23 and 34, and 21% were over 35.
Approximately 64% of the student population of U.S. Learning Centers was male
and 36% was female.

STUDENT RECRUITMENT

     We utilize a broad range of means to make prospective students aware of the
programs of study available at the Learning Centers. These activities include
television, radio and newspaper advertising, direct mail campaigns and listings
in the yellow pages. Currently, the majority of our advertising is directed at
local markets where Learning Centers are located. We monitor the effectiveness
of our various marketing efforts by measuring the number of resulting student
enrollments. We estimate that for our U.S. Learning Centers for fiscal 2000, 36%
of our new enrollments resulted from referrals by current students and
graduates, 27% of our new enrollments resulted from television advertising,
newspaper advertising accounted for 11%, yellow pages listings accounted for 7%
and the remaining 19% were classified as resulting from miscellaneous sources
and other media including the internet.

     The television advertising for each Learning Center is developed and
coordinated by CLC's senior management. All advertising includes a toll-free
telephone number for direct responses and information about the Learning Center.
These responses are received by the admissions department of each Learning
Center, where the direct responses are recorded and tracked and then forwarded
to an admissions representative who responds to student inquiries. All
prospective student inquiries are handled at the local level, where an
admissions representative is assigned to each student from initial contact to
graduation.

STUDENT ADMISSIONS AND RETENTION

     CLC maintains admissions standards that require each career program student
to have proof of a high school diploma or a recognized equivalent such as a
General Education Development ("GED") certificate. In addition, all career
program students must achieve a qualifying score on an independently developed
aptitude
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examination. We believe admission requirements are important in ensuring that
incoming career program students have the necessary academic background and
abilities to complete their selected program of study.

     Each Learning Center employs a director of admissions who oversees a staff
of admissions representatives. Admissions policies and procedures, along with
marketing materials, are established centrally and are monitored both centrally
and locally. Admissions representatives are responsible for scheduling an
initial appointment with an interested candidate, interviewing the candidate to
determine whether he or she meets admissions qualifications and has the
necessary motivation and ability to complete the Learning Center's intensive
programs of study, arranging for the testing of the candidate to determine his
or her aptitude for different programs and counseling qualified candidates about
available career paths. Our regulatory compliance department reviews the
admissions processes and practices of the admissions representatives to monitor
compliance with CLC's policies and applicable state, federal and accrediting
agency requirements.

     Once a student enrolls, we focus significant staff resources on assisting
students to overcome the academic, financial and personal obstacles that can
interfere with a student's ability to complete his or her career program.
Student withdrawals prior to program completion have negative financial and
marketing effects on an educational institution. To minimize withdrawals, each
Learning Center employs a student services manager who is available to advise
students encountering problems that interfere with their education. To help
students overcome financial obstacles, we assist students in finding part-time
employment when their resources in combination with available financial aid are
not adequate to meet their financial needs. Each Learning Centers' performance
is measured in part by their ability to ensure that students successfully
complete their programs of study. Our programs are designed to include frequent
progress reviews and performance measurements of both students and faculty.
Tutoring is available and encouraged for students who need additional academic
assistance. The weighted average Learning Center retention rates, as calculated
under standards of the Accrediting Council for Independent Colleges and Schools
("ACICS"), the accrediting agency that accredits the U.S. Learning Centers, were
77% and 76%, respectively, for the twelve-month periods ended June 30, 1999 and
1998.

GRADUATE PLACEMENT SERVICES

     The Graduate Placement Services Resource Center (the "Placement Center") is
a vital component of each Learning Center's programs. The Placement Center
maintains job postings, coordinates employers' recruiting efforts, provides
on-line job search capabilities and maintains a library of career and job search
related publications. All career program students are required to attend a
20-hour career development course, which is a series of seminars related to
resume writing, interview preparation and employment searches.

     Utilizing ACICS standards, for the twelve-month periods ended June 30, 1999
and 1998, approximately 76% and 79%, respectively, of our net placeable
graduates obtained employment in a field related to their program of study. Net
placeable graduates excludes graduates who were not seeking employment due to
health-related situations or continued education or who entered military
service. Students who graduated during the twelve-month period beginning July 1
and ending June 30 and obtained employment in a field related to their program
of study prior to the required filing date of September 15 of each respective
year are counted as graduates placed.

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     Based on information from students and employers who have responded to
inquiries, we estimate the average annual starting salaries for students who
obtained employment in fields related to their education during the twelve-month
period ended June 30, 1999 were as follows:

<TABLE>
<CAPTION>
                                                                                    ESTIMATED
                                                              LEARNING CENTER    AVERAGE ANNUAL
                          PROGRAM                             GRADUATES PLACED   STARTING SALARY
                          -------                             ----------------   ---------------
<S>                                                           <C>                <C>
Business Applications (Associate Degree and Diploma)........       1,536             $23,138
Programming (Associate Degree and Diploma)..................         792             $30,081
Networking (Diploma)........................................       1,099             $33,303
Electronics, Systems and Hardware (Associate Degree and
  Diploma)..................................................         927             $26,301
Information Technology & Support Professional (Diploma).....         730             $23,893
</TABLE>

     Average annual starting salaries for Learning Center graduates vary among
Learning Centers depending on local employment conditions and other factors.
Employers of CLC graduates include small technology-oriented companies as well
as major corporations and agencies and their affiliates, including Bell Atlantic
Corp., CompUSA, Inc., UUNet, Network Solutions, Media One, Aetna U.S. Healthcare
and Shared Medical Systems.

FACULTY

     We employ both full-time and part-time faculty who are hired in accordance
with criteria established by CLC, ACICS and applicable state licensing
authorities. Faculty members are carefully selected on the basis of their
knowledge and experience in the information technology field and their ability
to develop each student's potential. Faculty members generally have both
significant industry experience and educational and technical backgrounds.
Faculty members participate in a regular and systematic program of in-house
training to continuously improve instruction and curricula. Faculty members
participate in educational associations, professional organizations and
continuing education in their respective fields.

     After completing each module of instruction, students evaluate their
instructors using a confidential survey prepared, distributed and processed by
an independent third-party firm. The survey asks students to rate the faculty in
such areas as teaching effectiveness, substantive knowledge, fairness and
quality of delivery as well as course content.

ADMINISTRATION AND EMPLOYEES

     Each Learning Center is managed by a local administrative team headed by a
school director who is accountable for the maintenance of educational quality
and placement success of the Learning Center, regulatory compliance and
profitability. Within the framework of federal and state regulations as well as
the framework of CLC's own policies, we encourage Learning Center school
directors to act autonomously in responding to local market conditions. Each
school director reports to a regional manager who oversees the activities of
several Learning Centers grouped by geographic region. Learning Center school
directors work closely with the regional managers to implement marketing plans
and curricula, expand capacity and maintain facilities. Regional managers report
directly to CLC's Vice President of Operations, who in turn reports directly to
the President.

     Each Learning Center's administrative team also includes a director of
education, a director of admissions, a director of student financial services, a
business office director, and a director of placement. As of January 31, 2000,
CLC employed approximately 1,283 full-time and 594 part-time employees. In
addition, we employed 251 CLC students under the Federal Work-Study Program.
None of our employees are represented by a labor union or are subject to a
collective bargaining agreement. CLC has never experienced a work stoppage and
we believe that our employee relations are satisfactory.

     As of January 31, 2000, CLC employed 76 people at our corporate
headquarters in Fairfax, Virginia. CLC's corporate headquarters moved from
Fairfax, VA to a facility adjacent to the new Manassas, VA school location in
March 2000. CLC's corporate headquarters provides centralized services to all of
the Learning

                                        8
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Centers in the areas of accounting, marketing, public relations, curriculum
development, purchasing, human resources, regulatory affairs and real estate. In
addition, headquarters personnel develop policies and procedures and perform
oversight for the Learning Centers in the areas of admissions, education, career
services and administrative support.

     As of January 31, 2000, CLC employed 16 people at our student receivables
division in Plymouth Meeting, Pennsylvania. The student receivables division
provides centralized services to all of the Learning Centers related to the
collection of student loans financed directly by CLC for those students who
graduated or otherwise withdrew.

COMPETITION

     The postsecondary adult education and training market is highly fragmented,
with no single institution or company holding a dominant market share. We
compete for students with vocational and technical training schools,
degree-granting colleges and universities, continuing education programs and
commercial training programs. Certain public and private colleges may offer
programs similar to those of the Learning Centers at a lower tuition cost due in
part to government subsidies, foundation grants, tax deductible contributions or
other financial resources not available to proprietary institutions.

     We believe that the Learning Centers' fast paced and intensely focused
programs in information technology education and training help us attract
students. Students may choose CLC over its competitors because of our broad
course offerings, relatively short programs, placement services, reputation and
starting salaries after graduation. Students may choose CLC instead of a
four-year college because they want to enter the work force in a shorter period
of time or because a four-year institution does not provide students with the
type of focused, comprehensive program that we offer. In addition, flexible
morning, afternoon and evening courses allow students to maintain their current
jobs while attending our programs.

                          FINANCIAL AID AND REGULATION

FINANCING STUDENT EDUCATION

     Approximately 64% of the fiscal 2000 tuition revenues of our U.S. based
schools were funded either directly or indirectly from the federal student
financial aid programs under Title IV (referred to herein as "Title IV Programs"
or "Title IV") of the Higher Education Act of 1965, as amended (referred to
herein as "Higher Education Act"). The majority of our U.S. Learning Center
students receive some form of Title IV Program funding.

     The Title IV Programs provide financial assistance to students who are
enrolled at an eligible postsecondary institution. The Title IV Programs consist
of grants, subsidies for part-time work and several different types of loans. To
determine financial need and eligibility for need-based Title IV Program aid, we
use the national standard need analysis system established by the Higher
Education Act. The Higher Education Act also requires that all students who
receive financial aid maintain satisfactory academic progress toward completion
of their educational program. A student who does not meet the prescribed
academic standards will, after a probationary period, be denied further federal
aid.

     In addition to the Title IV Programs, CLC offers loans to certain students
that meet our criteria of creditworthiness. During the first quarter of fiscal
2000, we established a relationship with SLM Financial Corporation ("SLM"), a
subsidiary of the SLM Holding Corp. or "Sallie Mae," whereby SLM provides
student loans with terms generally more favorable than CLC's loan program to
students meeting SLM's standards of creditworthiness. As of January 31, 2000,
the SLM loan program is available to students at all of our U.S. Learning
Centers. In addition to CLC's and SLM's student loan programs, CLC participates
in several state administered financial aid programs in certain states in which
we operate.

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<PAGE>   10

  Title IV Programs

     CLC students receive funding under the following Title IV Programs:

     - the Federal Family Education Loan ("FFEL") program, which includes the
       subsidized and unsubsidized Federal Stafford loans and PLUS (parental)
       loans. Tuition funded by FFEL loans accounted for approximately 29% of
       our U.S. revenues in fiscal 2000;

     - the William D. Ford Federal Direct Loan ("FDL") program, which includes
       subsidized and unsubsidized Federal Direct Stafford loans and Federal
       Direct PLUS loans. Tuition funded by FDL loans accounted for
       approximately 22% of our U.S. revenues in fiscal 2000;

     - the Federal Pell Grant ("Pell") program. Tuition funded by Pell grants
       accounted for approximately 11% of our U.S. revenues in fiscal 2000;

     - the Federal Supplemental Educational Opportunity Grant ("FSEOG") program.
       Tuition funded by FSEOG grants accounted for approximately 1% of our U.S.
       revenues in fiscal 2000;

     - the Federal Perkins Loan ("Perkins") program. Tuition funded by Perkins
       loans accounted for approximately 1% of our U.S. revenues in fiscal 2000;
       and

     - the Federal Work-Study ("FWS") program, which makes available federal
       funds to help subsidize the cost of part-time employment for needy
       students. In fiscal 2000, the Learning Centers employed approximately 560
       FWS students, who received a total of approximately $697,000.

     CLC matches every three dollars of FSEOG, Perkins and FWS federal funds
with one dollar of our own funds. In fiscal 2000, CLC's matching contribution
was $465,000 for FSEOG, $239,000 for Perkins loans and $174,000 for the FWS
program.

  Availability of Lenders and Guarantors

     The FFEL program provides government guaranteed loans through banks and
other private lenders. Although the number of lenders willing to make federally
guaranteed student loans has declined in recent years, this decline has not
affected the ability of Learning Center students to obtain federally guaranteed
loans. As of January 31, 2000, CLC students use approximately twenty private
lenders, one of which currently provides approximately 39% of the FFEL loans
provided to our students. We believe that other lenders, including the
Department of Education through participation in the FDL program, would be
willing to make federally guaranteed loans to our students if any or all of
CLC's current lenders ceased participating in the FFEL program or decided not to
make loans available to our students. Even if no private lenders were available
to provide loans to our students, the Higher Education Act provides for a
"lender of last resort" to make such loans. However, lenders of last resort are
not required to provide PLUS loans. Tuition derived from PLUS loans accounted
for approximately 7% of our revenues in fiscal 2000.

     FFEL loans made by private lenders are guaranteed by student loan guaranty
agencies. As of January 31, 2000, FFEL loans to Learning Center students are
guaranteed by 9 guaranty agencies, and one student loan guaranty agency
currently guarantees nearly 22% of such loans. We believe that other guaranty
agencies would be willing to guaranty loans to CLC students if any of our
existing guaranty agencies ceased guaranteeing such loans or limited the volume
of loans it would guarantee. As of January 31, 2000, each our U.S. Learning
Centers participating in the FFEL program had at least one guaranty agency. All
states have a designated guaranty agency that we believe would guarantee most
FFEL loans made to Learning Center students in that state. Based on the
safeguards built into the FFEL program, we do not believe that any reduction in
the number of agencies currently guaranteeing FFEL loans made to Learning Center
students would have a material adverse effect on CLC.

U.S. DEPARTMENT OF EDUCATION -- REGULATION AND REVIEW

     To provide students with access to financial aid provided through the Title
IV Programs, each Learning Center must meet specific legal standards. These
standards are prescribed by the Higher Education Act and

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regulations issued by the Department of Education. To be eligible to participate
in the Title IV Programs, each Learning Center must:

     - be authorized by the state within which it operates to offer its
       educational programs;

     - be accredited by an accrediting agency recognized by the Secretary of
       Education as a reliable authority as to the quality of the institution's
       educational programs; and

     - enter into a Program Participation Agreement with the Department of
       Education.

     Generally, each Learning Center must individually comply with applicable
regulatory standards with respect to the administration of Title IV funds on
behalf of its students. During fiscal 2000, twenty-three of the twenty-five U.S.
Learning Centers participated in the Title IV Programs. Of these twenty-three
U.S. Learning Centers, as of January 31, 2000, nine are considered to be main
campuses and fourteen are additional locations of a main campus. Each year every
institution that participates in the Title IV Programs must submit to the
Department of Education audited financial statements as well as the results of
an audit by an independent accounting firm of that institution's compliance with
Title IV Program requirements. Approximately every four years institutions
participating in the Title IV Programs are reviewed for continued participation
in the Title IV Programs. The Department of Education annually conducts its own
compliance reviews of hundreds of institutions, and the Department's Inspector
General, state education agencies and guaranty agencies conduct other reviews of
Title IV Program compliance. The Higher Education Act also requires accrediting
agencies to consider an institution's compliance with Title IV Program
requirements in making accrediting decisions. Each of the U.S. Learning Centers
is therefore subject to frequent and detailed oversight and must comply with a
complex framework of laws and regulations. The violation of regulatory standards
governing the Title IV Programs by us or any Learning Center could be the basis
for the Department of Education to initiate a proceeding to take one or more of
the following actions: (a) seek repayment of previously disbursed Title IV
Program funds, (b) seek repayment of interest or special allowance subsidies the
Department paid to lenders with respect to student loans, (c) impose a fine, or
(d) limit, suspend or terminate the participation of CLC or the particular
Learning Center in the Title IV Programs. The Department also may take emergency
action to suspend temporarily an institution's participation in the Title IV
Programs without advance notice if it determines that a regulatory violation
creates an imminent risk of material loss of public funds.

     The Department also has discretion to alter the way it provides Title IV
Program funds to participating institutions. It may transfer an institution from
the "advance" system of funding, under which an institution receives funding
from the Department in advance based on anticipated need, to the "reimbursement"
system of payment, under which an institution must disburse funds to students
and document their eligibility for Title IV Program funds before receiving funds
from the Department. The Department may also impose a requirement known as
"heightened cash monitoring," of which there are multiple levels, which requires
additional reporting to and review by the Department of all Title IV funds
requests.

     In addition, if as a result of a compliance review, a Learning Center were
required to repay more than 5% of the Title IV funds the Learning Center
received during the year under review, the Learning Center could be required to
post a letter of credit equal to not less than 10% of the Title IV Program funds
received by the Learning Center during its most recent fiscal year and take
additional steps, including receipt of its Title IV Program funds on the
reimbursement basis, to establish its financial responsibility to maintain its
participation in the Title IV Programs.

     On April 6, 1998, the Department placed all our U.S. Learning Centers on
heightened cash monitoring status I ("HCM1"), based on the Department's
monitoring of litigation then pending against us (refer to Item 3, "Legal
Proceedings") and certain student complaints lodged against us or individual
Learning Centers. Under HCM1, our Learning Centers have continued to receive all
of the Title IV Program funds to which our students are entitled, but the funds
are drawn after they have been credited to student accounts and we are required
subsequently to provide supporting documentation to the Department. The
Department does not consider HCM1 to represent either an adverse or punitive
action. This action by the Department has not had any effect on the availability
of Title IV funding to our students, or has it had a material effect on our cash

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<PAGE>   12

flow or operating results. This requirement has led to delays (estimated by us
as generally two to three days) in the timing of our cash receipts, but has not
impaired our business operations.

     In May 1998, the Department of Education initiated a program review of the
administration of the Title IV Programs by our Alexandria, VA and Manassas, VA
Learning Centers for the period July 1, 1996 through June 30, 1998. In September
1998, the Department issued a preliminary report containing a number of findings
alleging non-compliance with certain Title IV Program requirements. We have
performed file reviews at these schools and provided additional materials
requested by the Department. In order to conclude this review, the Department
has requested that we perform an additional file review of returns of federal
funds during the review period. The Department has expanded its review of that
issue to include our San Jose, Philadelphia and Houston Learning Centers. We
continue to work with the Department in an effort to conclude this matter. We do
not believe the resolution of this program review will have a material adverse
effect on our operations.

     The Department reviewed the results of our independent audit on
administration of our Title IV Programs for the year ended January 31, 1998 and
issued a preliminary audit determination report in December 1998. The
Department's report alleged that we failed to make certain student refunds at
our Learning Centers operating during fiscal 1998 within the timeframes
established by the Department. The Department required us to perform more
expansive reviews of student account files at five Learning Centers, which were
deemed to have findings of non-compliance in excess of rates acceptable to the
Department. By letter dated September 28, 1999, the Department of Education
issued its final audit determination letter ("FADL") related to this matter. In
the FADL, the Department assessed repayment liabilities of immaterial amounts.
In addition, the Department deferred resolution of any matters related to the
Alexandria, VA and Laurel, MD Learning Centers to the open program reviews
conducted by the Department related to those locations. Although the deferred
issues remain open as part of the Alexandria, VA and Laurel, MD Learning Center
program reviews, the Department's review of the fiscal 1998 compliance audit is
considered closed.

     In January 1999, the Department of Education initiated a program review of
the administration of the Title IV Programs by our Laurel, MD Learning Center
for the period July 1, 1997 through June 30, 1999. The Department issued a
preliminary report in February 2000, which contained a number of findings
alleging non-compliance with certain Title IV Program requirements similar to
those found in the Alexandria and Manassas program reviews discussed above. We
have submitted our initial response to the Department concerning all of the
findings in March and April 2000. We continue to work with the Department in an
effort to conclude this matter. We do not believe the resolution of this program
review will have a material adverse effect on our operations.

     In July 1999, we submitted the results of our independent audit of our
administration of the Title IV Programs for the year ended January 31, 1999 to
the Department. The audit identified certain findings of non-compliance with
respect to our administration of the Title IV Programs. The audit identified
eight Learning Centers with late refund frequency rates in excess of 5% for the
students sampled in the audit. In April and May of 1999, we introduced new
procedures in all of our Learning Centers to ensure that student refunds are
processed on a timely basis. Our submission to the Department incorporated a
supplemental report prepared by the same independent auditors, which found that
in the eight Learning Centers referred to above, there were no late refunds
during approximately a 45-day period beginning in May 1999.

     On December 10, 1999, we received a subpoena from the Office of Inspector
General of the Department of Education for the production of various documents
and materials related to the compensation of our admissions representatives and
the calculation of our student loan cohort default rates. The Office of
Inspector General also served subpoenas on the accounting firm that had audited
our financial statements and the accounting firm that had performed our Title IV
Programs compliance audits, for copies of certain of their audits, workpapers
and other materials prepared in the course of their work on our behalf. In
discussion with the responsible attorney at the U.S. Department of Justice in
December 1999 regarding the subpoena, our attorney determined that the subpoena
was issued with respect to a qui tam lawsuit filed against us in Federal
District Court in Texas alleging that our compensation of certain employees was
not in compliance with

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<PAGE>   13

provisions of Title IV of the Higher Education Act. We have submitted all the
documents requested by the Department. We believe that our compensation plans
are in compliance with the Higher Education Act.

     On March 8, 2000, the Department notified us that it was placing all of our
Learning Centers on heightened cash monitoring status II ("HCM2"). HCM2 does not
affect the ability of Learning Centers to obligate Title IV Program funds or the
ability of their students to receive all applicable forms of Title IV Program
aid. However, under HCM2, Learning Centers are required to document to the
Department each student's eligibility for Title IV funding before being
reimbursed by the Department for funds which they must advance to their eligible
students. Under HCM2, the affected Learning Centers submit to the Department
information supporting Title IV awards and disbursements every thirty days. The
Department then selects a sample of those awards for which we are required to
submit extensive documentation proving student eligibility. Those documents are
reviewed by the Department, a process that customarily requires a minimum of
thirty days. Management expects that this action will have a material impact on
the timing of the cash flows of the affected Learning Centers, such that the
funds would be delayed for approximately 75 days.

     The Department stated that this action was based on information obtained
during its program reviews, which indicated that we had failed to make refunds
for some students and had failed to make refunds on a timely basis for other
students. We vigorously disputed the Department's basis for this action and
explained the significant adverse financial effects such action would have. On
March 14, 2000, we reached an agreement with the Department resulting in a
modification of the terms of its March 8 action. The key terms of the agreement
are that only our Alexandria, VA and Laurel, MD Learning Centers would be placed
on HCM2, that our remaining Learning Centers would continue on HCM1 with the
condition that we submit additional reports and documentation regarding their
future Title IV funds requests, and that we must engage an independent
accountant to attest to the compliance with the Title IV regulations of refunds
and returns of funds at all of our Title IV eligible Learning Centers (the
"Special Attestation").

     The Special Attestation required by the Department as part of the March 14,
2000 agreement relates to the review of the payment of refunds and other returns
of federal funds by all of our Title IV eligible Learning Centers for the
seven-month period ended January 31, 2000. The results of the Special
Attestation must be submitted to the Department by June 1, 2000.

     As part of the March 14, 2000 agreement, the Department agreed it "will
re-evaluate CLC's funding methods upon the receipt and review of the Special
Attestation, and upon review of CLC's overall compliance with Title IV statutory
and regulatory requirements." We believe should the Special Attestation
substantiate compliance with Title IV requirements acceptable to the Department
and with our continued compliance with Title IV Program requirements, the
Department may return some or all of our Learning Centers to the "advance"
system of payment. However, should the Special Attestation demonstrate
noncompliance with Title IV Program requirements in excess of rates tolerable by
the Department, the Department may take additional actions against us, including
the possibility of placing additional Learning Centers on HCM2. If any further
adverse actions are initiated by the Department, including a change in status
from HCM1 to HCM2 for any of our Learning Centers, CLC could be materially and
adversely affected.

  Reauthorization of the Higher Education Act, as amended

     In October 1998, the U.S. Congress enacted legislation reauthorizing and
extending the Higher Education Act until September 30, 2004. In general, the
material Title IV Program provisions and requirements remain in the same form
and the Title IV Programs were authorized at the same or higher levels. However,
the new law did make certain potentially significant changes in the Title IV
Programs. Chief among these are:

     - a change in the requirements for determining the amount of Title IV
       Program funds that must be refunded when a student withdraws from our
       Learning Centers;

     - an increase in the adverse effect of high student loan default rates on
       schools;

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<PAGE>   14

     - an increase, from 85% to 90%, in the amount of revenues an institution
       may derive from the Title IV Programs; and

     - the streamlining of the process for recertifying an institution's
       participation in the Title IV Programs following a change of ownership or
       control so that the Department of Education may allow an institution to
       continue uninterrupted participation in the Title IV Programs in certain
       circumstances.

     Although Congress has consistently reauthorized the Higher Education Act,
and there is no present indication that Congress will fail to make annual
appropriations to properly fund the Title IV Programs, there can be no assurance
that government funding for the Title IV Programs will be maintained at current
levels or that the current requirements for student and institutional
participation in such programs will not change in ways that might be unfavorable
to CLC.

  Student Loan Defaults

     Under the Higher Education Act, an educational institution may lose its
eligibility to participate in some or all Title IV Programs if more than a
certain proportion of its former students default on the repayment of their
federal student loans. Each year the Department of Education calculates a rate
of student defaults (known as the "cohort default rate") for each institution
whose students participate in the FFEL or FDL loan programs. If an institution's
cohort default rate is at least 25% for three consecutive years, the school
loses its eligibility to participate in the FFEL and FDL programs as well as the
Pell program for the remainder of the year in which the Department makes that
determination and the subsequent two years. An institution whose cohort default
rate exceeds 40% for one year may lose its eligibility to participate in all of
the Title IV Programs. An institution has the right to appeal the Department of
Education's calculation of its cohort default rates. An institution would remain
eligible to participate in FFEL, FDL and Pell programs while its appeal is being
considered.

     The official FY 1997 cohort default rates published in October 1999 for our
nine U.S. Learning Centers that are institutions as defined by the Department,
and which were then participating in the FFEL or FDL programs, averaged 15.5%
and ranged from a low of 3.3% to a high of 20.4% for that period. The average
rate for all proprietary institutions in the United States offering programs of
studies less than two years in length for the same period was 18.2%. All of the
Learning Centers have well-established default management programs consisting of
student counseling and post-enrollment contacts to minimize the risk of
excessive loan defaults.

     If an institution has an FFEL or FDL cohort default rate of 25% or more in
any one of the three most recent years or a default rate on Perkins loans of
more than 15% in a year, the Department of Education can place the school on
"provisional certification" for up to four years. Provisional certification
allows an institution to continue to participate in the Title IV Programs
subject to conditions imposed by the Department. However, if the school violates
a Department requirement, it can lose its eligibility with less procedural
protection than is afforded a standard certified institution. Four of our U.S.
Learning Centers are provisionally certified through dates extending to July
2000 through September 2001 due either to their cohort default rates or the
change of control following our acquisition of those Learning Centers. We expect
to apply for recertification as the provisional certifications expire.

     We administer the Perkins loan program on a combined basis for seven of our
nine U.S. institutions, and these seven combined institutions share one Perkins
loan default rate. For the remaining two U.S. institutions, the Perkins loan
program is administered individually for one and the other institution does not
participate. For the year ending June 30, 1999, the most recent year for which
such rates have been calculated, we had a default rate for Perkins loans of
24.8% for the seven institutions combined and 0.0% for the remaining
institution. Tuition funded by the Perkins program accounted for approximately
1% of our revenues in fiscal 2000.

  Financial Responsibility

     The Higher Education Act and the Department of Education regulations
require institutions participating in the Title IV Programs to demonstrate that
they have sufficient resources to properly administer Title IV

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<PAGE>   15

funds on behalf of their students and provide appropriate educational services
to their students. The regulations allow the Department to evaluate an
institution based on its own financial condition or that of the consolidated
corporation. Historically, the Department has evaluated the financial condition
of the Learning Centers on a consolidated basis.

     The Department evaluates an institution's financial responsibility based on
three ratios: an equity ratio, a primary reserve ratio and a net income ratio:

     - the equity ratio measures an institution's capital resources, ability to
       borrow and financial viability;

     - the primary reserve ratio measures an institution's ability to support
       current operations from expendable resources; and

     - the net income ratio measures the ability of an institution to operate at
       a profit.

     The ratios are calculated each year based on an institution's annual
audited financial statements. The results of each ratio are assigned a strength
factor and then combined under a weighted formula to arrive at a composite score
for the institution ranging from minus one to three, the latter being the
highest possible score. An institution that achieves a composite score of at
least 1.5 is considered to be financially responsible without the need for
further oversight. If an institution achieves a composite score of at least 1.0
but less than 1.5, it may continue to participate in the Title IV Programs under
additional reporting and monitoring procedures as determined by the Department,
including the receipt of its Title IV Program funds on the "cash monitoring"
basis. Such reporting and monitoring procedures also would require the
institution to report significant financial or regulatory events, such as any
violation of a loan agreement. All of our U.S. Learning Centers that are
eligible to participate in the Title IV Programs currently operate under
"heightened cash monitoring." If an institution's composite score is less than
1.0, an institution may establish its financial responsibility by posting an
irrevocable letter of credit in favor of the Secretary of Education in an amount
equal to not less than 10 percent of the Title IV Program funds received by the
institution during its most recent fiscal year, as well as accepting additional
reporting and monitoring procedures, including using either the "cash
monitoring" or "reimbursement" methods of disbursing its Title IV Program funds,
and accepting provisional certification. In addition, regardless of its
financial condition, an institution may establish its financial responsibility
by posting an irrevocable letter of credit in favor of the Secretary of
Education in an amount equal to not less than one-half of the Title IV Program
funds received by the institution during its most recent fiscal year.

     Based on our audited financial statements for fiscal 2000, we have
calculated a composite score of 1.3 for CLC. Although we believe the
Department's emphasis is on CLC as a whole, the Department has the right to
apply the financial responsibility measures on an individual institution basis.
Based on our audited financial statements for fiscal 2000 we have determined
that two of our institutions have a composite score below 1.0, and the remaining
seven institutions have composite scores that exceed 1.5.

     Under a separate standard of administrative responsibility, an institution
that has made late student refunds in more than 5% of cases in either of its
last two fiscal years must post a letter of credit in favor of the Secretary of
Education in an amount equal to 25% of the total Title IV Program refunds paid
by the institution in its prior fiscal year. Based on this standard, CLC has
posted a letter of credit in the amount of $2.2 million with respect to all U.S.
Learning Centers except our Learning Center in Paramus, NJ, for which a letter
of credit was not required.

  Incentive Compensation

     The Higher Education Act prohibits an institution from providing any
commission, bonus or other incentive payment based directly or indirectly on
success in securing enrollments or financial aid to any person or entity engaged
in any student recruitment, admission or financial aid awarding activity. We
have implemented several compensation plans for admissions representatives and
other personnel involved in the operations of the Learning Centers. Although
there can be no assurance that the Department of Education will not find
deficiencies in our present or former compensation plans, we believe that our
compensation plans comply with the requirements of the Higher Education Act.

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<PAGE>   16

  The 90/10 Rule

     Under a provision of the Higher Education Act now known as the "90/10
Rule," a proprietary institution loses its eligibility to participate in the
Title IV Programs for at least one fiscal year if, under a modified cash basis
of accounting, more than 90% of the institution's applicable revenues for the
prior fiscal year was derived from Title IV Programs. Approximately 64% of CLC's
revenues in fiscal 2000 (ranging from a low of 56% and a high of 84% on an
individual institution basis) consisted of tuition funded by the Title IV
Programs.

     To reduce the risk that any Learning Center could lose its eligibility to
participate in the Title IV Programs under the 90/10 Rule, we closely monitor
the sources of revenue funding for each Learning Center. We also continuously
pursue alternative sources of revenue and student financial assistance. If any
Learning Center were to lose its eligibility to participate in the Title IV
Programs under this rule, such loss would have a material adverse effect on CLC.

  Restrictions on Adding Locations

     The Higher Education Act requires a proprietary institution to be in full
operation for two years before such institution can qualify to participate in
the Title IV Programs. However, the Higher Education Act and applicable
regulations permit an institution that is already certified to participate in
the Title IV Programs to establish an additional location that may immediately
qualify for such participation without satisfying the two-year requirement so
long as such location satisfies all other applicable requirements for
institutional eligibility, including approval of the additional location by the
institution's accrediting agency and the relevant state authorizing agency. We
opened one new U.S. Learning Center in fiscal 2000. Our long-term expansion
plans assume our continued ability to establish new Learning Centers as
additional locations of existing Learning Center main campuses without incurring
the two-year waiting period for Title IV Program participation that is applied
to new institutions.

     Although state requirements and accrediting agency standards may in certain
instances limit our ability to establish additional locations in certain areas
and certain situations, we do not believe, based on our current understanding of
how these standards will be applied, that these standards will have a material
adverse effect on CLC or our long-term expansion plans.

  CLC Recertification of Title IV Program Participation

     During fiscal 2000, six of our nine U.S. institutions were due for renewal
of certification for continued participation in the Title IV Programs. We
submitted all six of the renewal applications in September 1999. Additionally,
one of our U.S. institution's renewal was due and filed in March 2000. We have
received no written communication from the Department of Education regarding
these renewals. Each of our Learning Centers continues to participate in the
Title IV Programs while the Department reviews our recertification applications.
If a Learning Center lost its eligibility to participate in certain of the Title
IV Programs, or if the amount of Title IV funding was reduced, we would seek to
arrange alternative sources of funding for that Learning Center's students.
There are a number of private organizations that provide loans to students.
Although we believe that one or more private organizations would be willing to
provide loans to Learning Center students, there is no assurance that this would
be the case, and the interest rate and other terms of such student loans might
not be as favorable as for Title IV Program funds. Accordingly, the loss of
eligibility of a Learning Center to participate in the Title IV Programs would
be expected to have a material adverse effect on CLC even if we could arrange
alternative sources of funding for the Learning Center's students.

     Our two newest Learning Centers, Norcross, GA and Las Vegas, NV, have not
obtained Title IV Program participation. We do not have an application filed
with the Department; however, we may do so at any time. We continue to seek
additional third-party funding sources for the students at these locations as
well as providing our own direct financing to these students. The Department has
communicated to us that these new locations would not be approved for Title IV
Program eligibility until the Alexandria and Manassas program reviews are
resolved. Currently, the alternative funding sources for students at these
locations have been adequate; however, prolonged ineligibility for Title IV
Program participation at these Learning Centers

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<PAGE>   17

will continue to have a negative affect on our operations as self-pay
receivables have more credit risk than Title IV funding sources.

STATE AUTHORIZATION AND ACCREDITATION

     CLC is dependent on the authorization of the applicable agency or agencies
of each state within which a Learning Center is located to allow us to operate
and to grant degrees or diplomas to students. State authorization is also
required in order for an institution to become and remain eligible to
participate in the Title IV Programs. We are subject to extensive and varying
regulation in each of the states in which the Learning Centers currently
operate. State laws and regulations affect our operations and may limit our
ability to introduce degree programs or to initiate new programs of study, or to
obtain authorization to operate in certain additional states. State regulatory
requirements may overlap or exceed federal requirements.

     The loss of state authorization by an existing Learning Center or the
failure of a new or newly acquired Learning Center to obtain state authorization
would render the affected Learning Center ineligible to participate in the Title
IV Programs, would adversely affect its accreditation and would have a material
adverse effect on CLC.

     Accreditation by an accrediting agency recognized by the Department of
Education is required in order for an institution to become and remain eligible
to participate in the Title IV Programs. In addition, most states require
institutions operating within their borders to become and continue to be
accredited as a condition of continuing state authorization. All of our U.S.
Learning Centers are accredited by ACICS, which is an accrediting agency
recognized by the Department of Education. Three of our nine institutions
operating in the United States were due for renewal of accreditation during
fiscal 2000. All three received renewals of their accreditation during the third
and fourth quarters of fiscal 2000.

     The loss of state authorization by an existing Learning Center or the
failure of a new or newly acquired Learning Center to obtain state authorization
would render the affected Learning Center ineligible to enroll students or award
credentials and to participate in the Title IV Programs and would have a
material adverse effect on our results of operations and financial condition.
The loss of accreditation by an existing Learning Center or the failure of a
newly acquired Learning Center to obtain accreditation would render the affected
Learning Center ineligible to participate in the Title IV Programs and would
have a material adverse effect on our results of operations and financial
condition.

  Change of Control

     Upon a change of ownership resulting in a change of control as that term is
defined in the Higher Education Act and Department of Education regulations, an
institution participating in the Title IV Programs must be recertified to
continue its participation. A change of control could also trigger similar
reapproval requirements at the state level and with an institution's accrediting
agency. For a publicly traded corporation like CLC, Department of Education
regulations specify that a change of control occurs when there is an event that
would obligate the corporation to file a current report on Form 8-K with the
Securities and Exchange Commission disclosing a change of control. Each state
and accrediting agency has its own requirements with respect to what constitutes
a change of control and the consequences of such a change. A change of control
could, depending on the nature of such change, have a material adverse effect on
CLC.

     When CLC acquires an institution that participates in the Title IV
Programs, that institution undergoes a change of control and must demonstrate
that it meets the standards of institutional eligibility to be recertified by
the Department for such participation under its new ownership. Pursuant to the
1998 reauthorization of the Higher Education Act, the Department may temporarily
and provisionally certify an institution undergoing a change of control while
the Department reviews the institution's application. To obtain such temporary
certification, the institution must submit a "materially complete" application
for recertification within 10 business days of the closing date of the sale. A
"materially complete" application normally would include all state and
accrediting agency approvals that those agencies require to be obtained before
the closing date. If the Department finds the application to be "materially
complete," it then issues a temporary provisional Program Participation
Agreement, and affords the institution a further period to submit additional
required
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<PAGE>   18

materials. If all the remaining documentation is timely submitted, the
Department will continue the temporary provisional Program Participation
Agreement until it issues a new certification, which, in the case of changes of
ownership, is always provisional for at least one year. If an institution fails
to file a "materially complete" application or the additional required materials
within the prescribed times, it would become ineligible to participate in the
Title IV Programs until the Department completes its review and recertifies the
institution under its new ownership.

     The standards and practices of ACICS, the accrediting agency that accredits
all of the Learning Centers, generally provide that, after an institution
obtains confirmation of continued authorization by the appropriate states
following a change of control, and submits a complete application, ACICS will
determine whether to temporarily reinstate the institution's accreditation,
during which period the institution must apply for permanent reinstatement of
its accreditation. The states with jurisdiction over the Learning Centers have
widely varying requirements for an institution to confirm its reauthorization
following a change of control as defined by each state.

     A material adverse effect on CLC's financial position, results of
operations and cash flows could result if, in connection with a change in
control, we experienced significant delay in obtaining or failed to obtain the
accreditation of any Learning Center, experienced significant delay in obtaining
or failed to obtain authorization from any state in which we have a Learning
Center or experienced significant delay in reestablishing or failed to
reestablish the eligibility of any Learning Center to participate in Title IV
Programs. A change of control may also delay our ability to establish new
institutions and may have other adverse regulatory effects.

  Canadian Regulation

     Students who are residents of the province of Quebec are eligible to
receive loans and bursaries ("grants") from the Quebec Loans and Bursaries
Program ("QLBP"). Under the QLBP, student financial assistance is initially
provided in the form of a loan. CLC Delta is subject to the Act Respecting
Private Education ("ARPE") in Quebec. In accordance with ARPE, in order to
operate a private educational institution, CLC Delta must hold a permit issued
by the Quebec Minister of Education (the "QME") for the institution itself and
for the educational services to be provided. The QME will issue the permit after
consulting with the Commission Consultative de l'Enseignement Prive (the
"Commission") concerning the particular institution and the educational services
to determine if such institution and services meet certain qualifying
conditions. Permits cannot be transferred without the written authorization of
the QME, and any entity holding a permit must advise the QME of any
consolidation, sale or transfer affecting such entity. Prior to any action, the
QME, after consultation with the Commission, has the authority to modify or
revoke a permit where the holder of the permit, among other things: does not
comply with the conditions, restrictions or prohibitions relating to the
institution or, is about to become insolvent. Prior to any action, the QME must
provide the institution with an opportunity to present its views before revoking
a permit. Given that the QME periodically revises its regulations and other
requirements and changes its interpretations of existing laws and regulations,
there can be no assurance that the QME will agree with our understanding of each
requirement of the QME.

     We do not believe that the QME's requirements would limit our plans to add
new educational programs at CLC Delta, in Quebec. In addition, we do not believe
that there will be any impediment to renewal of the permit issued to CLC Delta,
in Quebec, under the ARPE.

     During fiscal 2000, the legislative and regulatory requirements that relate
to student financial assistance programs in Quebec were changed. Effective May
1, 1999, the amount of financial assistance a student is eligible to receive
became significantly less than the amount of financial assistance historically
available. For students that have a remaining tuition balance not funded by
Quebec's financial assistance programs, CLC Delta may make available to
qualifying students alternative financing arrangements to help fund their
education.

                                       18
<PAGE>   19

  Federal Income Tax Relief

     Federal income tax relief in the form of tax credits, tax deductions and
income exclusions is available to eligible students and their families beginning
in 1998 under the Taxpayer Relief Act of 1997, as amended by the Internal
Revenue Service ("IRS") Restructuring and Reform Act of 1998 ("TRA-97"). The
TRA-97:

     - provides an annual Hope Scholarship tax credit of up to $1,500 for
       tuition and related expenses incurred on or after January 1, 1998, for
       each of a student's first two years of postsecondary education.

     - provides an annual Lifetime Learning tax credit of up to $1,000 in 1998
       through 2002 and up to $2,000 in subsequent years for tuition and related
       expenses incurred on or after July 1, 1998. The Lifetime Learning tax
       credit is not available in any tax year in which the taxpayer is claiming
       the Hope Scholarship tax credit.

     - provides an annual tax deduction, ranging from $1,000 in 1998 to up to
       $2,500 in 2001 and thereafter, for interest paid during the first 60
       months in which interest payments are required on any student loans
       incurred solely to pay qualified higher education expenses.

     - provides an annual income exclusion of up to $5,250 for undergraduate
       educational expenses incurred on or after January 1, 1998, and before
       June 1, 2000, that are paid by the student's employer.

     - allows taxpayers to establish Education IRAs, for taxable years beginning
       on or after January 1, 1998, that can be funded with non-deductible
       contributions of up to $500 annually for any child up to the age of 18
       years.

     The tax benefits provided by the TRA-97 may reduce the effective cost of
postsecondary education to the student and his or her family, which may decrease
student dependence on Title IV Program funds and may decrease Title IV Program
loan defaults. Educational institutions are required to submit certain
information about the student and the student's family to the IRS in order for
the student and the student's family to qualify for some of the tax benefits
under the TRA. Although these IRS reporting requirements have increased the
administrative burden on us, such compliance is not expected to have a material
adverse effect on CLC's financial condition, results of operations or cash
flows.

                                       19
<PAGE>   20

ITEM 2.  PROPERTIES

     All Learning Center facilities are leased by CLC. The table below sets
forth certain information regarding these facilities as of January 31, 2000.

<TABLE>
<CAPTION>
                                                              APPROXIMATE
                                                                SQUARE
LOCATION                                                        FOOTAGE
--------                                                      -----------
<S>                                                           <C>
Alexandria, VA..............................................     60,300
Alexandria, VA(1)...........................................      7,300
Anaheim, CA.................................................     26,800
Brossard, Quebec............................................      5,400
Cherry Hill, NJ.............................................     21,000
Chicago, IL.................................................     24,100
Denver, CO(2)...............................................     22,000
Fairfax, VA(3)..............................................     17,500
Garland, TX.................................................     16,400
Hurst, TX...................................................     21,600
Houston, TX.................................................     26,700
Las Vegas, NV...............................................     20,000
Laval, Quebec...............................................     13,100
Laurel, MD..................................................     38,100
Los Angeles, CA.............................................     46,700
Lowell, MA..................................................     20,300
Madison Heights, MI.........................................     29,500
Manassas, VA(3).............................................     89,200
Marietta, GA................................................     16,100
Montreal, Quebec............................................     44,900
Norcross, GA................................................     26,900
Paramus, NJ.................................................     26,500
Philadelphia, PA............................................     29,000
Pittsburgh, PA..............................................     28,900
Plymouth Meeting, PA(4).....................................     32,800
San Francisco, CA...........................................     22,000
San Jose, CA(5).............................................     20,000
Schaumburg, IL..............................................     30,000
Somerville, MA..............................................     33,200
South Plainfield, NJ........................................     20,000
Woodhaven, PA...............................................     21,500
                                                               --------
Total.......................................................    857,100
                                                               ========
</TABLE>

---------------
(1)  This was an additional administrative facility primarily used for employee
     training. Effective May 2000, this facility was subleased to a third-party.

(2)  We had executed a lease for this space expected to begin in October 2000
     with the intent to open a new Learning Center at the location in the
     future.

(3)  CLC's corporate headquarters moved from Fairfax, VA to a facility adjacent
     to the new Manassas, VA school location (consisting of 15,000 square feet)
     in March 2000. CLC's existing Manassas Learning Center (consisting of
     20,200 square feet) will move to the new Manassas, VA facility (consisting
     of 54,000 square feet) during May 2000.

(4)  Two locations, one (consisting of 3,200 square feet) for administrate
     support personnel only, the other (consisting of 29,600 square feet)
     represents a Learning Center location.

(5)  We expect to close this location by August 2001. The lease expires in
     December 2001.

     Learning Center site selection is based upon a number of factors, including
population density, incomes, occupations, education levels, projected demand for
our programs, concentration of technology-oriented employers and applicable
state and accrediting agency requirements. We believe our facilities are
suitable, adequate and well utilized.

                                       20
<PAGE>   21

ITEM 3.  LEGAL PROCEEDINGS

  Active Litigation

     On May 5, 1998, a class action lawsuit was filed against CLC in the
Superior Court of New Jersey in Bergen County, New Jersey. The complaint
alleges, among other things, that our Learning Centers in New Jersey failed to
provide certain educational services and resources, misrepresented certain
information respecting services, resources, occupational opportunities and
student outcomes and violated certain provisions of the New Jersey Consumer
Fraud Act. On November 19, 1999, the Court certified a class consisting of all
persons who, during the six years immediately preceding the commencement of this
action, had enrolled in a course or courses of study, education or training
provided by CLC at our New Jersey locations for which they incurred tuition
expenses. On December 6, 1999, CLC filed a motion with the Appellate Division of
the Superior Court of New Jersey to appeal the November 19, 1999 decision to
certify a class. On January 19, 2000, that motion was denied. We are unable to
estimate the outcome of the matter or any potential liability.

     On July 9, 1999, a class action lawsuit was filed against CLC in the Court
of Common Pleas in Philadelphia County, Pennsylvania, on behalf of all students
who attended the Learning Center located on Market Street in Philadelphia within
six years of July 9, 1999, who have not obtained employment in a
computer-related job through our placement services. On August 2, 1999, the case
was removed to the United States District Court for the Eastern District of
Pennsylvania. On October 12, 1999, the United States District Court for the
Eastern District of Pennsylvania remanded the case to the Court of Common Pleas
in Philadelphia County, Pennsylvania. The complaint alleges, among other things,
that this Learning Center failed to provide certain educational services and
resources, misrepresented certain information respecting services, resources,
occupational opportunities and student outcomes, and violated certain provisions
of the Pennsylvania Unfair Trade Practices and Consumer Protection Law. We are
unable to estimate the outcome of the matter or any potential liability.

     Between June 1, 1998 and October 31, 1999, CLC was named as defendant in
three other lawsuits in Texas and New Jersey by individual students or groups of
students who formerly attended one of our Learning Centers. In two of these
lawsuits, various present and former officers, directors and employees of CLC
have also been named as defendants. The complaints allege, among other things,
that our affected Learning Centers failed to provide plaintiffs with certain
educational services and resources and misrepresented certain information
respecting services, resources, and student outcomes and violated certain
provisions of the applicable state consumer laws. We are unable to estimate the
outcome of these matters or any potential liability.

     In addition to the lawsuits discussed above, CLC is a defendant in a number
of civil lawsuits involving current and former employees, which we consider
incidental to our business and unlikely to have a material effect on our
business, financial condition and future operations. However, there can be no
assurance that these matters will not have a material adverse effect on our
results of operations in a future period, depending in part on the results for
such period.

     We intend to defend CLC vigorously in the lawsuits referred to above;
however, there can be no assurance that we will be successful in defending CLC
in any of these proceedings. Even if we prevail on the merits in such
litigation, we expect to continue to incur significant legal and other defense
costs as a result of such proceedings. These proceedings could involve
substantial diversion of the time of some members of management, and an adverse
determination in, or settlement of, such litigation could involve the payment of
significant amounts, or could include terms in addition to such payments, which
could have a severe impact on our business, financial condition and results of
operations.

     There can be no assurance that additional significant legal proceedings
will not be filed or that adverse action will not be initiated against us,
either by federal or state regulators, or other parties. Any such legal
proceedings or adverse action could have a severe impact on our business,
financial condition and results of operations.

                                       21
<PAGE>   22

  Settled Litigation

     During fiscal year 1999 and 2000, CLC was named as defendant in five other
lawsuits in California, Michigan, Texas and Virginia by individual students or
groups of students who formerly attended one of our Learning Centers. The
complaints alleged, among other things, that our affected Learning Centers
failed to provide plaintiffs with certain educational services and resources and
misrepresented certain information respecting services, resources, and student
outcomes and violated certain provisions of the applicable state consumer laws.
During the course of fiscal 2000, these cases were settled resulting in
aggregate payments to the former students of immaterial amounts. Settlement
expenses are combined with legal fees and included within general and
administrative expenses in the consolidated financial statements.

     The Attorney General of Illinois filed a complaint against CLC in Circuit
Court in Cook County, Illinois, on March 10, 1998, asserting that we had
violated the Illinois Private Business and Vocational Schools Act and the
Illinois Consumer Fraud and Deceptive Business Practices Act (the "Acts") at our
Schaumburg, Illinois Learning Center. The complaint alleged that at the
Schaumburg Learning Center, we failed to provide certain educational services
and resources and misrepresented certain information respecting services,
resources, occupational opportunities and student outcomes. On June 8, 1998, we
reached an agreement with the Attorney General settling the litigation in the
form of a final judgment and Consent Decree approved by the court ("Consent
Decree"). The settlement includes payment of a voluntary contribution of $90,000
to the Attorney General's consumer education fund, a provision annually for a
four year period of $95,000 worth of computer hardware and software to schools,
programs, community sites and other non-profit and public institutions in the
Chicago area designated by the Attorney General, and $10,000 worth of training
in computer skills annually at our Schaumburg or Chicago Learning Centers for
teachers and other community based personnel to enable them to make effective
use of the computer equipment. We also agreed to take certain measures to assure
compliance with state regulatory requirements, and to establish an ombudsman
program and binding arbitration for the resolution of certain student
complaints. We have implemented the measures called for under the first and
second years of the Consent Decree. Failure by us to continue to comply with the
terms of the Consent Decree could result in adverse action against the Learning
Centers located in Illinois, including suspension or termination of our licenses
to operate within Illinois and other sanctions. The loss of operating authority
in Illinois could have a material adverse effect on CLC.

     On March 13, 1998, a class action lawsuit was filed against CLC in the
United States District Court for the Central District of California on behalf of
all purchasers of CLC Common Stock from October 31, 1997 through March 10, 1998.
Over the following two months, eight additional similar cases were filed in
United States District Courts. The complaints alleged violations of the
Securities Exchange Act of 1934, including allegations that the Company was
experiencing "operations difficulties" and failed to disclose the alleged
difficulties. The complaints also alleged that CLC insiders realized profits by
trading their shares of CLC stock while in possession of material adverse
information. All of these shareholder lawsuits were consolidated and transferred
to the United States District Court for the Eastern District of Virginia. We
entered into a settlement agreement with the plaintiffs in February 1999,
whereby we settled these allegations and agreed to compensation to members of
the plaintiffs' class. The terms of the settlement, which received final
judicial approval on July 9, 1999 and have been approved by the plaintiffs,
provided for the payment of $3.0 million in cash ($2.35 million was covered by
our insurance policy) and the issuance of 550,000 shares of CLC Common Stock,
subject to certain price protection features, which resulted in an additional
463,152 shares of CLC Common Stock being issued to guarantee a total settlement
of $7.5 million. All cash settlements were paid in fiscal 2000.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters were submitted to a vote of the stockholders of CLC during the
fourth quarter of fiscal 2000.

                                       22
<PAGE>   23

                                    PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

                          PRICE RANGE OF COMMON STOCK

     Our Common Stock is traded on the NASDAQ National Market under the symbol
"CLCX." The following table sets forth the high and low sales prices for the
Common Stock reported by NASDAQ for the periods indicated.

<TABLE>
<CAPTION>
                                                               HIGH     LOW
                                                              ------   ------
<S>                                                           <C>      <C>
FISCAL YEAR 1999:
  First Quarter.............................................  $39.38   $ 8.63
  Second Quarter............................................   30.63    11.13
  Third Quarter.............................................   28.25     4.50
  Fourth Quarter............................................   12.75     4.69

FISCAL YEAR 2000:
  First Quarter.............................................  $ 7.13   $ 4.00
  Second Quarter............................................    6.47     3.69
  Third Quarter.............................................    5.88     2.94
  Fourth Quarter............................................    4.19     1.75
</TABLE>

     These over-the-counter market quotations may reflect inter-dealer prices
without retail mark-up, markdown or commission and may not necessarily represent
actual transactions.

     At May 11, 2000, there were approximately 121 holders of record of our
Common Stock. We estimate that, including shareholders whose shares are held in
nominee accounts by brokers, there are approximately 7,400 total holders of our
Common Stock.

     We have never paid cash dividends on our Common Stock and we do not
anticipate paying cash dividends in the foreseeable future. It is the current
policy of our Board of Directors to retain earnings to finance the operations
and expansion of CLC's business.

                                       23
<PAGE>   24

ITEM 6.  SELECTED FINANCIAL DATA

     The following selected financial and operating data is qualified by
reference to, and should be read in conjunction with, the consolidated financial
statements and notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included in Items 7 and 8 of this
Form 10-K. The Consolidated Statements of Operations for each of the three years
in the period ended January 31, 2000 and the Consolidated Balance Sheets as of
January 31, 2000 and 1999, and the independent accountant's report thereon are
included in Item 8 of this Form 10-K.

<TABLE>
<CAPTION>
                                                              YEAR ENDED JANUARY 31,
                                               ----------------------------------------------------
                                                          1999(a)    1998(a)    1997(a)    1996(a)
                                                 2000     RESTATED   RESTATED   RESTATED   RESTATED
                                               --------   --------   --------   --------   --------
                                                     (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                            <C>        <C>        <C>        <C>        <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues.....................................  $134,640   $$144,189  $95,761    $63,480    $45,849
                                               --------   --------   -------    -------    -------
Costs and expenses:
  Costs of instruction and services..........   100,252     93,802    53,845     35,405     26,041
  Selling and promotional....................    21,315     21,729    15,289     11,407      7,884
  General and administrative.................    17,299     15,614     7,657      5,584      4,052
  Provision for doubtful accounts............     8,911      8,388     4,794      3,084      2,613
  Amortization of intangible assets..........       562        558       362        362        363
                                               --------   --------   -------    -------    -------
                                                148,339    140,091    81,947     55,842     40,953
                                               --------   --------   -------    -------    -------
(Loss) income from operations................   (13,699)     4,098    13,814      7,638      4,896
Litigation settlement expense................        --     (5,599)       --         --         --
Interest (expense) income, net...............      (249)       513     1,391        721        (96)
Gain on sale of investment securities........        --        279        --        332         --
                                               --------   --------   -------    -------    -------
(Loss) income before income taxes and
  cumulative effect of accounting change.....   (13,948)      (709)   15,205      8,691      4,800
(Benefit from) provision for income taxes....    (5,827)      (383)    6,234      3,370      1,997
                                               --------   --------   -------    -------    -------
(Loss) income from operations before
  cumulative effect of accounting change.....    (8,121)      (326)    8,971      5,321      2,803
Cumulative effect of accounting change.......        --       (245)       --         --         --
                                               --------   --------   -------    -------    -------
Net (loss) income............................  $ (8,121)  $   (571)  $ 8,971    $ 5,321    $ 2,803
                                               ========   ========   =======    =======    =======
Earnings (loss) per share
     Basic...................................  $  (0.45)  $  (0.03)  $  0.56    $  0.39         --(b)
                                               ========   ========   =======    =======    =======
     Diluted.................................  $  (0.45)  $  (0.03)  $  0.52    $  0.35    $  0.25
                                               ========   ========   =======    =======    =======
Weighted average number of shares
  outstanding --
     Basic...................................    18,061     17,318    15,893     13,719         --(b)
                                               ========   ========   =======    =======    =======
     Diluted.................................    18,061     17,318    17,189     15,018     11,393
                                               ========   ========   =======    =======    =======
</TABLE>

<TABLE>
<CAPTION>
                                                                 JANUARY 31,
                                              --------------------------------------------------
                                                2000     1999(A)    1998(A)    1997(A)   1996(A)
                                              --------   --------   --------   -------   -------
<S>                                           <C>        <C>        <C>        <C>       <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents...................  $  7,819   $  7,691   $ 24,377   $26,950   $ 8,260
Total current assets........................    73,957     78,389     78,617    59,016    29,776
Total assets................................   124,308    132,507    116,529    76,565    40,481
Total current liabilities...................    72,397     71,016     62,316    35,749    22,586
Long term liabilities.......................     6,752      8,649      5,167     2,124     1,559
Total stockholders' equity..................    45,159     52,842     49,046    38,692    16,336
</TABLE>

---------------
(a) See Note 2 of Item 8, "Consolidated Financial Statements and Supplementary
    Data," regarding restatement of fiscal 1999 and prior financial statements.
(b) Basic earnings per share is not presented for fiscal 1996 as such amount
    does not present a meaningful comparison to fiscal 1997 thru 2000 amounts
    due to the differing capital structures as a result of public offerings.

                                       24
<PAGE>   25

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

     You should keep in mind the following points as you read this report:

     - References in this document to "we," "us," "our" and "CLC" refer to
       Computer Learning Centers, Inc. and its subsidiaries.

     - The term "Learning Center" refers to an individual school owned and
       operated by CLC. The terms "institution" (in singular or plural form)
       refer to a main campus or school and its additional locations or branch
       campuses, if any.

     - References in this document to "fiscal 2001," "fiscal 2000," "fiscal
       1999" and "fiscal 1998" refer to the years ended January 31, 2001, 2000,
       1999 and 1998, respectively.

     - References in this document to "Department of Education" or "Department"
       refer to the U.S. Department of Education.

     The following discussion should be read with the Selected Financial Data
and the Consolidated Financial Statements and Notes to Consolidated Financial
Statements included elsewhere in the Annual Report on Form 10-K.

  Background and Overview

     We provided information technology education and training to over 13,600
students in fiscal 2000. CLC provides programs and courses to meet current
information technology education needs, offering instruction in rapidly growing
technologies such as client/server, internet, database, networking and
object-oriented programming through its twenty-eight locations throughout the
United States and Canada.

     During fiscal 2000, we derived approximately 98% of revenues from Learning
Centers course tuition, with the remaining revenues derived from sales of books,
interest on CLC loans to our students and fees charged directly to students. We
enroll students on a monthly basis and deliver our curricula over an 8- to
17-month period for "day" students and over a 15- to 21-month period for
"evening" students. Our revenues in any period are directly related to the
number of enrolled students (or student population), the number of new
enrollments and the student retention rate.

     The majority of our students qualify for financial assistance under various
government-supported student financial aid programs, especially the Title IV
Programs. We are highly dependent on the continued availability of
government-supported student financial aid.

     We manage the collection risks associated with student accounts receivable
for withdrawn and graduate students by utilizing an in-house centralized credit
and collection function staffed with personnel whose primary responsibility is
the collection effort. The collection effort includes reviewing internally
produced reports detailing student accounts receivable balances, following up on
student delinquencies via telephone and letters as well as employing other
activities related to collection. We make available to qualifying students
alternative financing arrangements ("CLC financing"), which help fund their
education. Dependent upon the creditworthiness of the individual, CLC financing
may be offered to assist students with meeting their financial obligations
related to attending our schools. We require students receiving CLC financing to
make regular monthly payments. Depending on the level of financing extended to
students, payment plans offered generally range from six months to three years.
All amounts due to CLC in periods beyond one year are classified as long-term
receivables. Additionally, our employees help students overcome financial
obstacles to completing their educational programs by assisting students in
finding part-time employment when their own resources, CLC financing and Title
IV financial aid are not adequate to meet their financial needs.

     Costs of instruction and services consist primarily of costs related to the
delivery and administration of CLC's programs, including faculty compensation,
salaries for administrative personnel who provide services directly to students,
the costs of educational materials sold, facility leases and related occupancy
costs, equipment rental and depreciation and amortization of Learning Centers
property and equipment. Selling and promotional costs consist primarily of
advertising, admission representative salaries and benefits and other

                                       25
<PAGE>   26

costs related to the selling and promotional functions. General and
administrative costs consist primarily of salaries for administrative personnel,
occupancy costs, depreciation and amortization of property and equipment, legal
expenses and other related costs for functions such as executive management,
corporate accounting, human resources, regulatory compliance, product strategy
and curricula development, new business development and other functions that do
not provide direct services to our students. Provision for doubtful accounts
represents our estimate of student accounts receivable balances, that we will be
unable to collect. Amortization of intangible assets consists primarily of
amortization of capitalized costs of original Department of Education
certifications.

RESULTS OF OPERATIONS

     The following table sets forth certain items from our consolidated
statements of operations as a percentage of revenues for the periods indicated.

<TABLE>
<CAPTION>
                                                                   FOR THE YEARS ENDED
                                                                       JANUARY 31,
                                                              -----------------------------
                                                                       1999(A)     1998(A)
                                                              2000     RESTATED    RESTATED
                                                              -----    --------    --------
<S>                                                           <C>      <C>         <C>
Revenues....................................................  100.0%    100.0%      100.0%
                                                              -----     -----       -----
Costs and expenses:
Costs of instruction and services...........................   74.5      65.1        56.2
Selling and promotional.....................................   15.8      15.1        16.0
General and administrative..................................   12.8      10.8         8.0
Provision for doubtful accounts.............................    6.6       5.8         5.0
Amortization of intangible assets...........................    0.4       0.4         0.4
                                                              -----     -----       -----
                                                              110.1      97.2        85.6
                                                              -----     -----       -----
(Loss) income from operations...............................  (10.1)      2.8        14.4
Litigation settlement expense...............................     --      (3.9)         --
Interest (expense) income, net..............................   (0.2)      0.4         1.5
Gain on sale of investment securities.......................     --       0.2          --
                                                              -----     -----       -----
(Loss) income before income taxes and cumulative effect of
  accounting change.........................................  (10.3)%    (0.5)%      15.9%
                                                              =====     =====       =====
</TABLE>

---------------
(a) See (a) on page 24.

  Fiscal 2000 Compared with Fiscal 1999

     Revenues decreased approximately 7% to $134.6 million for fiscal 2000 from
$144.2 million for fiscal 1999 primarily due to a decrease in our student
population. The number of students attending Learning Center programs as of
January 31, 2000 decreased 8.5% to 10,158 from 11,095 at the end of fiscal 1999.

     When evaluating enrollment growth, we view all Learning Centers opened or
acquired during the last two fiscal years (current and preceding) as "new
centers" (eight Learning Centers in fiscal 2000) in order to account for the
start-up period inherent in new Learning Center openings. Learning Centers
opened for more than two fiscal years are "same centers" (twenty Learning
Centers in fiscal 2000). The following table shows a comparison of student
enrollments in new centers and same centers:

<TABLE>
<CAPTION>
                                                                FISCAL YEAR
                                                              ---------------   INCREASE/
                                                               2000     1999    (DECREASE)    %
                                                              ------   ------   ----------   ---
<S>                                                           <C>      <C>      <C>          <C>
New centers.................................................   2,512    2,086        426      20%
Same centers................................................  10,204   12,251     (2,047)    (17%)
                                                              ------   ------     ------     ---
          Total.............................................  12,716   14,337     (1,621)    (11%)
                                                              ======   ======     ======     ===
</TABLE>

                                       26
<PAGE>   27

     Accounts receivable, (both long and short-term), decreased 9% as compared
to the revenues decrease of 7%. The larger percentage decrease in accounts
receivable as compared to revenue can be attributed to the following:

     When students enroll in CLC, accounts receivables are established for the
balance of course tuition (however, only for the current year of multi-academic
year programs) with a corresponding amount recorded as deferred revenue. While
the accounts receivable balance may be paid at any time during the course,
deferred revenue is recognized ratably as tuition revenue over the period of
instruction, regardless of when accounts receivable are paid.

     Since accounts receivable increases immediately by the full tuition when
students enroll, while tuition revenues are earned ratably over the period of
instruction, there will not be a direct correlation between the percentage
increases in tuition revenues (and correspondingly deferred revenues) and in
accounts receivable balances. This "lag" effect of revenues to receivables is
further pronounced during the initial operations of a new Learning Center since
tuition revenues will be minimal when compared to the corresponding accounts
receivables. Additionally, Learning Centers in their second year of operations
(those opened in fiscal 1999) contribute significantly to the lag effect due to
the large levels of growth occurring in year two versus year one of operations.
Conversely, in periods of declining enrollments of the larger and more
established Learning Centers (as experienced in fiscal 2000), the relative
percentage of accounts receivable reduction will be greater than the relative
percentage of revenue reduction. The following summarizes the actual Learning
Center openings and acquisitions for the last three fiscal years.

<TABLE>
<CAPTION>
                                                              FISCAL   FISCAL   FISCAL
SCHOOL OPENINGS/ACQUISITIONS                                   2000     1999     1998
----------------------------                                  ------   ------   ------
<S>                                                           <C>      <C>      <C>
First Quarter...............................................   --        5       --
Second Quarter..............................................    1        1        2
Third Quarter...............................................   --       --        1
Fourth Quarter..............................................   --        1        3
                                                                --       --       --
Total.......................................................    1        7        6
                                                                ==       ==       ==
</TABLE>

     Costs of instruction and services increased 7% to $100.3 million in fiscal
2000 from $93.8 million in fiscal 1999 due primarily to approximately $3.0
million of costs at our Norcross, GA and Las Vegas, NV Learning Centers, as well
as general increases in instructional salaries. Costs of instruction and
services consist primarily of compensation and related benefits, facility costs
(including rent and depreciation) and textbook and other instructional
materials. Instruction costs and services as a percentage of revenues increased
to 74.5% in fiscal 2000 from 65.1% in fiscal 1999. This increase in cost of
instruction and services as a percentage of revenue is primarily attributable to
the costs incurred at our new centers, lower enrollments during fiscal 2000 at
several of our more established Learning Centers, and increased costs in
anticipation of growth that was not achieved at expected levels. Certain
expenses of our Learning Centers are fixed in nature, such as costs of
facilities and administrative support, while other expenses are variable, such
as textbook expenses and additional instructor salaries. Lower enrollments at
our more established U.S. Learning Centers resulted in a higher ratio of cost of
instruction due to decreased revenues without a corresponding decrease in fixed
costs. Same center enrollments have declined 17% in fiscal 2000 versus fiscal
1999. The decline in same center enrollments has been greatest in terms of
number of students at our Learning Centers in Houston, TX, the Chicago area, the
Washington, DC area and in Southern California which have had enrollment
declines of 56%, 33%, 31% and 31%, respectively, for fiscal 2000 compared to
fiscal 1999. We attribute the decreases in enrollments to negative publicity
generated by various regulatory actions, optimizing of class sizes and a reduced
lead conversion rate at these centers.

     Selling and promotional expenses decreased 2% to $21.3 million in fiscal
2000 from $21.7 million in fiscal 1999. We have expanded our geographic coverage
of advertising with the increase in number of cities CLC is now located.
However, we have offset this increase by cutting back in the breadth of our
advertising and expending our resources on those mediums that prove most
successful. Selling and promotional expenses as a percentage of revenues
increased to 15.8% in fiscal 2000 from 15.1% in fiscal 1999.

                                       27
<PAGE>   28

     General and administrative expenses increased 11% to $17.3 million in
fiscal 2000 from $15.6 million in fiscal 1999. Severance costs of our former
chief executive officer and chief financial officer account for approximately
$674,000 of this increase. Also contributing to this increase is approximately
$720,000 of costs related to developing a new proprietary administrative
software system, and $300,000 of increased legal fees and other legal expenses
incurred in defense of lawsuits brought by former students and employees of
certain Learning Centers and other regulatory matters. General and
administrative expenses as a percentage of revenues increased to 12.8% in fiscal
2000 from 10.8% in fiscal 1999.

     Provision for doubtful accounts increased 6% to $8.9 million in fiscal 2000
from $8.4 million in fiscal 1999. Provision for doubtful accounts as a
percentage of revenues increased to 6.6% in fiscal 2000 from 5.8% in fiscal
1999. We attribute this increase to a shift in student enrollments to higher
priced tuition programs, which typically have higher amounts of self-pay
accounts receivable after application of applicable financial aid. The self-pay
accounts receivable have historically had lower collection rates than loans from
third-party lenders.

     In fiscal 1999, we provided $5.1 million for CLC's obligation related to a
shareholder litigation settlement agreed to in February 1999. In addition to the
settlement obligation, the Company incurred $0.5 million of legal defense costs
during fiscal year 1999 in excess of reimbursements from its insurance carrier.

     We incurred net interest expense of $249,000 for fiscal 2000, compared to
net interest income of $513,000 for fiscal 1999, primarily as a result of a
substantial increase in our borrowings under our credit facility coupled with a
reduction of our average available cash balances.

     CLC's effective tax rate decreased to 42% in fiscal 2000 from 54% in fiscal
1999. The fiscal 2000 rates reflect greater losses (on an absolute basis) in our
U.S. operations than the operating income contributed by our Canadian
subsidiaries. Thus, the consolidated effective rate more closely approximates
our U.S. effective tax rate than those experienced in fiscal 1999.

  Fiscal 1999 Compared with Fiscal 1998

     Revenues increased 51% to $144.2 million for fiscal 1999 from $95.8 million
for fiscal 1998 primarily due to an increase in enrollments at our new Learning
Centers including the opening of four new Learning Centers in fiscal 1999. In
addition to the opening of the four new Learning Centers, we acquired five
Learning Centers in the fourteen-month period ending January 31, 1999, two in
Quebec, Canada and the others in Paramus, NJ and Somerville and Methuen, MA.

     The number of students attending Learning Center programs as of the end of
the year increased 10% to 11,095 in fiscal 1999 from 10,112 in fiscal 1998,
which was the result of student enrollment growth of 11%. In fiscal 1999,
enrollments at the fourteen Learning Centers opened for more than two fiscal
years declined 20% to 9,618 from 12,031 students in fiscal 1998. Enrollments at
the thirteen Learning Centers opened or acquired during the last two fiscal
years increased by 3,800 to 4,719 from 919 students in fiscal 1998.

     Accounts receivable, (both long and short-term), increased 21% as compared
to the revenues increase of 51%. The larger percentage increase in revenue as
compared to accounts receivable can be attributed to the lag effect previously
described.

     Costs of instruction and services increased 74% to $93.8 million in fiscal
1999 from $53.8 million in fiscal 1998 due primarily to the direct costs
necessary to support the increase in student population. These direct costs
consist primarily of compensation and related benefits, and depreciation.
Instruction costs and services as a percentage of revenues increased to 65.1% in
fiscal 1999 from 56.2% in fiscal 1998. This increase is primarily attributable
to the start up of four Learning Centers since January 1998, lower enrollments
during fiscal 1999 at several of our more established Learning Centers, the
elimination of new enrollments at Advantec Institutes as retail operations of
their programs were phased-out, and increased expense profiles of acquisitions
with respect to revenues generated at those Learning Centers. Due to the
start-up period inherent in Learning Centers open less than one year, the ratio
of cost of instruction and services to revenues generated typically is very high
as fixed costs typically exceed revenues during their first year. Lower
enrollments at some of our

                                       28
<PAGE>   29

more established Learning Centers resulted in a higher ratio of cost of
instruction due to decreased revenues without a corresponding decrease in fixed
costs.

     Selling and promotional expenses increased 42% to $21.7 million in fiscal
1999 from $15.3 million in fiscal 1998 due primarily to increased marketing and
advertising necessary to support the growth in student enrollments as well as to
support the increase in the number of Learning Center locations. Selling and
promotional expenses as a percentage of revenues decreased to 15.1% in fiscal
1999 from 16.0% in fiscal 1998 primarily due to increased efficiencies
associated with our marketing.

     General and administrative expenses increased 104% to $15.6 million in
fiscal 1999 from $7.7 million in fiscal 1998, primarily as a result of
increasing the level of infrastructure needed to support the growth of the
business. Also impacting the relative increase was increased legal fees
associated with regulatory matters coupled with the payment of student refunds
and related costs of $2.2 million associated with concluding these issues.
General and administrative expenses as a percentage of revenues increased to
10.8% in fiscal 1999 from 8.0% in fiscal 1998.

     Provision for doubtful accounts increased 75% to $8.4 million in fiscal
1999 from $4.8 million in fiscal 1998, primarily due to the increase in revenues
of 51% and related accounts receivable balances. Provision for doubtful accounts
as a percentage of revenues increased to 5.8% in fiscal 1999 from 5.0% in fiscal
1998. We attribute this increase to a shift in student enrollments to higher
priced tuition programs, which typically have higher amounts of self-pay
accounts receivable after application of available financial aid. The self-pay
receivables have historically had lower collection rates than loans from
traditional third-party lenders.

     We provided $5.1 million for our obligations related to a shareholder
litigation settlement agreed to in February 1999. In addition to the settlement
obligation, we incurred $0.5 million of legal defense costs during fiscal 1999
in excess of reimbursements from our insurance carrier.

     We realized net interest income of $0.5 million for fiscal 1999, compared
to net interest income of $1.4 million for fiscal 1998, primarily as a result of
the reduction of cash balances.

     CLC's effective income tax rate increased to 54% in fiscal 1999 from 41% in
fiscal 1998. This is a result of relative higher tax rates applied to losses
sustained our U.S. operations principally offset by income from operations of
our Canadian subsidiary. The statutory rates in Quebec, Canada, are lower than
those of our U.S. operations on a weighted average basis.

CYCLICAL PATTERN OF ENROLLMENTS

     New enrollments in Learning Center programs tend to be higher in the third
and fourth fiscal quarters than in the first and second fiscal quarters because
the third and fourth quarters include the times of year traditionally associated
with the beginning of school semesters. We believe CLC is less affected by this
seasonal pattern than many other educational institutions because we permit
students to enroll in Learning Center programs in any month of the year. In
addition, the impact of seasonality in new enrollments on results of operations
has been moderated to some extent by growth in the prior years in the number of
students attending Learning Center programs, the varying lengths of such
programs, and Learning Centers opened during fiscal 1999 and 1998.

HEIGHTENED CASH MONITORING

     The Department of Education has discretion to alter the way it provides
Title IV Program funds to participating institutions. It may transfer an
institution from the "advance" system of payment of Title IV Program funds,
under which an institution receives funding from the Department in advance based
on anticipated need, to the "reimbursement" system of payment, under which an
institution must disburse funds to students and document their eligibility for
Title IV Program funds before receiving funds from the Department.

     The Department may also impose a modified requirement known as "heightened
cash monitoring." On April 6, 1998, the Department placed all our U.S. Learning
Centers on heightened cash monitoring status I

                                       29
<PAGE>   30

("HCM1"), based on the Department's monitoring of litigation then pending
against us (refer to Item 3, "Legal Proceedings") and certain student complaints
lodged against us or individual Learning Centers. Under HCM1, the Learning
Centers have continued to receive all of the Title IV Program funds to which
their students are entitled, but the funds are drawn after they have been
credited to student accounts and we are required subsequently to provide
supporting documentation to the Department. The Department does not consider
HCM1 to represent either an adverse or punitive action. This action by the
Department has not had any effect on the availability of Title IV funding to our
students, nor has it had a material effect on our cash flow or operating
results. This requirement has led to delays (estimated by us as generally two to
three days) in the timing of our cash receipts, but has not impaired our
business operations.

     On March 8, 2000, the Department notified us that it was placing all our
U.S. Learning Centers on heightened cash monitoring status II ("HCM2"). HCM2
does not affect the ability of Learning Centers to obligate Title IV funds or
the ability of their students to receive all applicable forms of Title IV
Program aid. However, under HCM2, Learning Centers are required to document to
the Department each student's eligibility for Title IV Program funding before
being reimbursed by the Department for funds which we must advance to the
eligible students. Under HCM2, we submit to the Department information
supporting Title IV Program awards and disbursements of the affected Learning
Centers every thirty days. The Department then selects a sample of those awards
for which we are required to submit extensive documentation proving student
eligibility. Those documents are reviewed by the Department, a process that
customarily requires a minimum of thirty days. We expect that HCM2 would delay
the timing of Title IV cash flows for approximately 75 days.

     The Department stated that this action was based on information obtained
during its Alexandria, VA, Manassas, VA and Laurel, MD program reviews, which
indicated that we had failed to make refunds for some students and had failed to
make refunds on a timely basis for other students. We vigorously disputed the
Department's basis for this action and explained the significant adverse
financial effects such action would have. On March 14, 2000, we reached an
agreement with the Department resulting in a modification of the terms of its
March 8 action. The key terms of the agreement are that only our Alexandria, VA
and Laurel, MD Learning Centers would be placed on HCM2, that our remaining
Learning Centers would continue on HCM1 with the condition that we submit
additional reports and documentation in conjunction with their future Title IV
funds requests, and that we must engage an independent accountant to attest to
the compliance with Title IV regulations of refunds and returns of funds at all
of our Title IV eligible Learning Centers (the "Special Attestation"). we expect
that this action will have a significant impact on the timing of the cash flows
at these Learning Centers and estimate the impact of the 75 day delay will
approximate $3 million.

     The Special Attestation required by the Department as part of the March 14,
2000 agreement relates to the review of the payment of refunds and other returns
of federal funds by all of our Title IV eligible Learning Centers for the
seven-month period ended January 31, 2000. The results of the Special
Attestation must be submitted to the Department by June 1, 2000.

     As part of the March 14, 2000 agreement, the Department agreed it "will
re-evaluate CLC's funding methods upon the receipt and review of the Special
Attestation, and upon review of CLC's overall compliance with Title IV statutory
and regulatory requirements." We believe should the Special Attestation
substantiate compliance with Title IV requirements acceptable to the Department
and with our continued compliance with Title IV Program requirements, the
Department may return some or all of our Learning Centers to the "advance"
system of payment. However, should the Special Attestation demonstrate
noncompliance with Title IV Program requirements in excess of rates tolerable by
the Department, the Department may take additional actions against us, including
the possibility of placing additional Learning Centers on HCM2. If the
Department initiates any further adverse actions against us, including a change
in status from HCM1 to HCM2 for any of our Learning Centers, CLC could be
materially and adversely affected.

LIQUIDITY AND CAPITAL RESOURCES

     During the last three fiscal years, CLC has financed its operating and
capital expenditure requirements principally through a combination of cash on
hand and cash provided by operating activities and bank

                                       30
<PAGE>   31

borrowings. Cash (used in) provided by operating activities for fiscal 2000,
1999 and 1998 was $(261,000), $(2.3) million, and $16.2 million, respectively.

     Our principal sources of funds at January 31, 2000 were cash and cash
equivalents of approximately $7.8 million and net current accounts receivable of
$51.1 million. Additionally, we had a credit agreement with a bank that provided
for a $15.0 million (as amended, from $12.0 million) revolving credit facility,
expiring in February 2001. We have granted the bank a security interest in
substantially all of our assets. The interest on the facility was based on the
bank's U.S. prime rate plus one percent. The bank's prime rate was 8.5% at
January 31, 2000. We had borrowings outstanding of approximately $11.0 million
on our line of credit as of January 31, 2000. In addition, the Company had
outstanding letters of credit of $4.0 million primarily to the Department of
Education, and an insurance company, for surety bonds required by various states
and to our lessors on behalf of certain Learning Centers. These outstanding
letters of credit reduced the amount available under the credit facility.

     We obtained an amendment of our credit facility from our bank on January
29, 2000. The terms of the amendment temporarily increased the facility from $12
million to $15 million on that date. The credit agreement, as amended required
maintenance of certain financial ratios and contained other restrictive
covenants including limitations on purchases and sales of assets. As of January
31, 2000, we failed to meet three of the four financial ratio requirements and
certain non-financial covenants. We obtained a waiver of these covenant
violations from our lender in May 2000. We are in compliance with all other
covenants as of and for the year ended January 31, 2000. We are also required to
maintain a certain financial responsibility score and satisfy other measures to
maintain compliance with regulatory standards. As of January 31, 2000, we fell
below certain minimum measures for certain institutions and for CLC as a whole.
If our financial condition continues to deteriorate, we may no longer be able to
meet minimum regulatory standards which could lead the Department to place
additional Learning Centers on HCM2 or require that we post an additional letter
of credit on behalf of some or all of our Learning Centers.

     We obtained an amendment of our credit facility from our lender dated May
15, 2000. This amendment separates the maximum amount of letters of credit we
may extend from the maximum borrowing capacity of the facility. The borrowing
capacity was established at $9.2 million with scheduled reductions through
November 1, 2000 when the maximum borrowing capacity will be $2.5 million. We
have pledged our expected income tax refunds of $6.1 million for immediate
prepayment on this facility. Both the facilities expire on May 31, 2001. In
addition, the interest rate on outstanding balances increases to the bank's U.S.
prime rate plus two percent with a facility charge of up to 3% dependent on the
outstanding borrowings. We have extended approximately $3.3 million in letters
of credit at May 15, 2000. The amendment provides for $3.3 million as the
maximum limit for the facility through July 31, 2000 and reduces to $2.6 million
thereafter. Furthermore, the financial ratio covenants were modified to include
only a fixed charge ratio and a minimum tangible net worth requirement.

     As previously discussed, we began operating under HCM2 procedures at two of
our Learning Centers as of March 14, 2000. These procedures delay the receipt of
Title IV Program funding for approximately 75 days. While implementing these
procedures with the Department, we have experienced a delay in Title IV Program
funding for two of our other Learning Centers, since they are a part of the same
institution or campus group. We estimate that this delay has required us to use
additional working capital to fund operations during the delay period of
approximately $3 million.

     Historically, our investment activity has primarily consisted of capital
asset purchases. Capital expenditures, including expenditures for furniture,
computer software and hardware and tenant improvements related to new Learning
Centers, were $7.7 million, $18.4 million, and $19.6 million for fiscal 2000,
1999, and 1998, respectively. CLC leases all of its facilities under operating
lease agreements. We continue to expand current facilities and upgrade
equipment, as necessary; however, we do not expect to open any new Learning
Centers during fiscal 2001. We expect fiscal 2001 capital expenditures to be
approximately $2.6 million.

     A majority of our revenues are derived from tuitions funded by the Title IV
Programs. Disbursement of Title IV Program funds is dictated by federal
regulations. For students enrolled in programs of one academic

                                       31
<PAGE>   32

year or less in length, disbursements generally are made in two equal
increments, one in the first 35 days following the student's enrollment in a
program and the second when the student reaches the midpoint of the program. For
students enrolled in programs greater than one academic year in length,
disbursements also are made at the beginning and midpoint of the subsequent
academic year. Although the timing of loan disbursements to CLC is subject to a
student's directions to the lender and to existing regulatory requirements
regarding such disbursements, we typically receive student loan funds upon their
disbursement by the lender. During fiscal 2000, we collected approximately
$125.0 million, of accounts receivable, which was utilized for various operating
activities and capital expenditures.

     On April 17, 2000, we made a decision to close our San Jose, CA Learning
Center. This school had 114 students as of March 31, 2000 and accounted for
approximately $1.9 million and $3.5 million of our revenue in fiscal 2000 and
1999, respectively. We decided to close this school as it had contributed
approximately $(1.1) million to CLC's pre-tax operating loss in fiscal 2000 and
our evaluation of the market indicates that this school could not return to
profitable operations. This Learning Center will continue to teach existing
students through approximately July 31, 2001.

     We continuously review our cash flow, and seek strategies to provide
favorable returns on our capital. Our Board of Directors authorized a program to
repurchase up to 1,000,000 shares of our Common Stock over a two-year period
ending August 31, 2000. As of April 29, 2000, we had not purchased any stock
under this program and the terms of our credit facility restrict us from making
any future purchases of our Common Stock. We were required to issue 1,013,152
shares of our Common Stock in settlement of a shareholder lawsuit, which
received judicial approval in July 1999.

     We have undertaken the development of a new proprietary administrative
software system, which we believe will serve to mitigate deficiencies in our
record-keeping systems identified by previous regulatory reviews. We expect to
expend approximately $3 million to develop and implement this system, which we
anticipate will be completed by January 31, 2001. To date, we have expended
approximately $1.9 million to develop and implement this system.

     We have experienced a decline in our working capital over the last several
quarterly periods. During this time, we have utilized an increasing amount of
our available line of credit with our principal bank and as of January 31, 2000
there were no additional borrowings available under the line. However, when
considering our projected enrollments over the next twelve months, we expect our
available cash on hand and cash from operating activities will be sufficient to
meet our cash requirements for at least the next twelve months (see "Certain
Factors That May Affect Future Results -- Financial Condition," contained
herein). During this time, we will continue to evaluate all sources of capital
available to us, including bank financing or additional equity or debt
offerings, to satisfy ongoing working capital and capital expenditure
requirements.

YEAR 2000

     We have not experienced any significant disruptions to our financial or
operating activities caused by failure of our computerized systems resulting
from Year 2000 issues. We do not expect Year 2000 issues to have a material
adverse effect on CLC's operations or financial results in fiscal 2001. We
estimated that direct costs for CLC's Year 2000 readiness would approximate $300
during fiscal 2000, not including salaries of our employees involved in the
process, costs of replacements to our information technology and other equipment
in the normal course of operations. Our actual costs did not vary materially
from this original estimate.

IMPACT OF INFLATION

     Inflation has not had a significant impact on our historical operations.

CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS

     The following factors, among others, could cause actual results to differ
materially from those contained in forward-looking statements made in this
Annual Report on Form 10-K and presented elsewhere by management from time to
time.

                                       32
<PAGE>   33

FINANCIAL CONDITION

     We have experienced a decline in our working capital and available cash
balances over the last several quarterly periods. During this time, we have
utilized an increasing amount of our available line of credit with our principal
bank and as of January 31, 2000, there were no additional borrowings available
under the line. In addition, we have utilized significant financial resources to
improve and expand existing Learning Centers. These uses of capital combined
with the operating losses we have experienced has resulted in a deterioration of
our financial condition as evidenced by our declining financial ratios. We have
had to seek modification of our credit facility covenants and obtain waivers of
these covenants when we have failed to meet the lender's minimum requirements.
We are also required to maintain a certain financial responsibility score and
satisfy other measures to maintain compliance with regulatory standards. As of
January 31, 2000, for certain institutions, as defined by the Department, and
for CLC as a whole, we fell below the financial responsibility score and other
minimum measures. In order for us to meet our long-term plan of expanding in new
and existing markets, we may need additional capital resources either from a
financial institution or the capital markets. If we are unable to obtain capital
from these or other sources, we may not meet these long-term plans. In addition,
if our financial condition continues to deteriorate, we may not meet minimum
regulatory standards, which could lead the Department to place additional
Learning Centers on HCM2 or require that we post an additional letter of credit
on behalf of some or all of our Learning Centers.

LITIGATION

     CLC has been named as defendant in numerous lawsuits filed by former
students and employees and other parties. We intend to defend CLC vigorously in
these lawsuits; however, there can be no assurance that we will be successful in
defending CLC in any of these proceedings. Even if we prevail on the merits in
such litigation, we expect to continue to incur significant legal and other
defense costs as a result of such proceedings. These proceedings could involve
substantial diversion of the time of some members of management, and an adverse
determination in, or settlement of, such litigation could involve the payment of
significant amounts, or could include terms in addition to such payments, which
could have a severe impact on our business, financial condition and results of
operations. Refer to Item 3 -- "Legal Proceedings" herein.

     There can be no assurance that additional legal proceedings will not be
filed or that adverse actions will not be initiated against CLC, either by
federal or state regulators or other parties. Any such legal proceedings or
adverse action could have a severe impact on CLC's business, financial condition
and results of operations.

POTENTIAL ADVERSE EFFECTS OF REGULATION

     CLC is dependent on the authorization of the applicable agency or agencies
of each state within which a Learning Center is located to allow it to operate
and to grant degrees or diplomas to students. State authorization is also
required in order for an institution to become and remain eligible to
participate in the Title IV Programs. We are subject to extensive and varying
regulation in each of the states in which the Learning Centers currently
operate.

     The loss of state authorization by an existing Learning Center or the
failure of a new or newly acquired Learning Center to obtain state authorization
would render the affected Learning Center ineligible to participate in the Title
IV Programs, could affect its accreditation and would have a material adverse
effect on CLC. Refer to Item 1 -- "Business -- Financial Aid and Regulation"
contained herein.

     As educational institutions that participate in various foreign and
domestic federal and state financial aid programs, CLC is subject to extensive
governmental regulation. In particular, the U.S. Higher Education Act of 1965,
as amended, and the regulations promulgated thereunder, subject us and all other
higher education institutions eligible to participate in the various Title IV
Programs, to significant regulatory scrutiny. The termination or material
limitation of the ability of CLC or any of our Learning Centers or its students
to participate in government sponsored financial aid programs would have a
material adverse effect on CLC.

     The violation of federal requirements governing participation in the Title
IV Programs or of state or accrediting agency requirements governing the
provision of educational services by CLC or any Learning Center could result in
the restriction or loss of a Learning Center's ability to participate in
government funding programs or to offer education and training programs. Any
such loss or restriction would have a material

                                       33
<PAGE>   34

adverse effect on CLC. For further information on CLC's current regulatory
matters, refer to Item 1 -- "Business -- U.S. Department of
Education -- Regulation and Review" and "Business -- State Authorization and
Accreditation" contained herein. Any unfavorable outcomes or adverse actions
resulting from regulatory reviews could have a material adverse effect on CLC's
business, financial condition and results of operations.

POTENTIAL ADVERSE REGULATORY EFFECTS OF CHANGE OF CONTROL

     General Atlantic Corporation ("GAC"), General Atlantic Partners II, L.P.
("GAP") and GAP-CLC Partners, L.P. ("GAP-CLC") (collectively, the "General
Atlantic Entities") beneficially own approximately 16.0% of the outstanding
shares of our Common Stock. Consequently, the General Atlantic Entities, and GAC
in particular, will continue to have significant influence over the policies and
affairs of CLC and may be in a position to determine the outcome of corporate
actions requiring stockholder approval, including the election of directors, the
adoption of amendments to our Certificate of Incorporation and the approval of
mergers and sales of our assets.

     Because of the control position of the General Atlantic Entities, any
disposition of our Common Stock by the General Atlantic Entities or issuance of
stock by us that results in a loss of control by the General Atlantic Entities
may give rise to a change of ownership resulting in a change of control of CLC
under applicable federal and state regulations and accrediting agency
requirements, resulting in potential interruption of the eligibility of Learning
Centers to participate in the Title IV Programs. Upon a change of ownership
resulting in a change of control of CLC, as defined in the Higher Education Act
and the Department of Education's regulations, each Learning Center would have
to be recertified to continue to participate in the Title IV Programs with the
possible loss of a portion, or all, of its Title IV Program funding during the
reapproval period. Refer to Item 1 -- "Business -- Financial Aid and Regulation"
contained herein.

CHANGE IN TITLE IV PROGRAM FUNDING ADMINISTRATIVE AGENT

     We utilize a third-party agent to perform maintenance of the required
regulatory requirements associated with transfers of Title IV Program funds to
our bank accounts. This responsibility will be transferred to a new third-party
administrative agent in June 2000. We expect this transfer of responsibility to
occur without significant impact on our business. However, should we experience
impediments related to this transition, it may result in delays in the timing of
our cash receipts, which could result in material adverse effects on our
business, results of operations, and financial condition.

COMPETITION

     The postsecondary adult education and training market is highly fragmented,
with no single institution or company holding a dominant market share. We
compete for students with vocational and technical training schools,
degree-granting colleges and universities, continuing education programs and
commercial training programs. Certain public and private colleges may offer
programs similar to those of the Learning Centers at a lower tuition cost due in
part to government subsidies, foundation grants, tax-deductible contributions or
other financial resources not available to proprietary institutions.

DEPENDENCE ON NEW PROGRAMS AND LOCATIONS; RISKS ASSOCIATED WITH CHANGES IN
TECHNOLOGY AND GROWTH

     The market for our programs and services is characterized by rapidly
changing requirements and characteristics. Our ability to develop and offer new
programs and services and to open new locations is subject to extensive state
and federal regulation and accrediting agency requirements. If we are unable,
for financial, regulatory or other reasons, to develop and offer new programs
and services in a timely manner in response to changes in the industry, or if
programs and services offered by CLC fail to gain or maintain widespread
commercial acceptance, our business may be materially and adversely affected.

     We offer training programs and services for rapidly changing information
technology. The introduction of information products embodying new technologies
and the emergence of new information system standards or services may adversely
affect our ability to market CLC's programs and services. This may require us to
make substantial expenditures to develop new programs and services and to
acquire new faculty, equipment and

                                       34
<PAGE>   35

facilities. If we are unable, for financial, regulatory or other reasons, to
make those expenditures or acquisitions, our business may be materially and
adversely affected.

     CLC's ability to meet future operating and financial goals will depend upon
our ability to successfully implement our financial strategy and meet enrollment
growth plans, which will include the introduction of new programs as well as
obtaining alternative sources of financing for our students. CLC's success in
this area will depend on our ability to find strategic partners, effectively
anticipate facility needs and maintain successful admission campaigns. There can
be no assurance that we will be able to accomplish or manage this change
effectively.

DEPENDENCE UPON KEY EMPLOYEES

     CLC's success depends to a significant extent upon the continued service of
its executive officers and other key personnel. Certain of our executive
officers are subject to employment or non-competition agreements. The loss of
the services of any of our executive officers or other key employees could have
a material adverse effect on CLC. CLC's future success will depend in part upon
our continuing ability to attract and retain highly qualified personnel. There
can be no assurance that we will be successful in attracting and retaining such
personnel.

GENERAL

     Because of these and other factors, past financial performance should not
be considered an indicator of future performance. Investors should not use
historical trends to anticipate future results and should be aware that the
trading price of CLC's common stock may be subject to wide fluctuations in
response to quarter-to-quarter variations in operating results, general
conditions in the education and training industry, changes in earnings estimates
and recommendations by analysts or other events.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     CLC has minimal exposure to market risks as it relates to effects of
changes in interest rates and foreign currency exchange rates. We do not hold or
issue derivative financial instruments.

  Interest Rate Risk

     We principally invest our available cash balances in U.S. government
securities with maturity dates less than 90 days as well as overnight repurchase
agreements with its primary banking institution. These investments are
classified as cash and cash equivalents in our financial statements. The fair
value of these instruments would not be significantly impacted by either a 100
basis point increase or decrease in interest rates due primarily to the
short-term nature of the investments. CLC's credit facility is directly impacted
by changing interest rates in the Commercial Prime Rate of its lender. Assuming
we maintained a $5 million outstanding loan balance, and an instantaneous
increase or decrease of one percentage point in the Commercial Prime Rate, our
after-tax earnings would change by $40,000 over a twelve month period. We
believe that any material changes to interest rates on sources of loans for our
students may have a material effect on enrollments and an indirect effect on our
financial condition and results of operation; however, such change would be
deemed extraordinary and is not expected to occur in the foreseeable future.

  Foreign Currency Exchange Risk

     We began transacting business in Quebec, Canada upon acquisition of our
subsidiary, CLC Delta, in February 1998. We do not currently hedge our exposure
to the effects of changes in the exchange rate of the Canadian to U.S. dollar.
We experienced an unrealized loss due to foreign currency translation of
approximately $11,000 in fiscal 2000 recorded as other comprehensive loss in the
consolidated statement of changes in stockholders' equity. We had revenues of
approximately $7 million from our Canadian operations during fiscal 2000.
Assuming the same level of activity for fiscal 2001, and an instantaneous
increase or decrease of ten percent in the Canadian exchange rate, CLC's
comprehensive income could change by approximately $91,000 during fiscal 2001.

                                       35
<PAGE>   36

ITEM 8.  CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                        COMPUTER LEARNING CENTERS, INC.
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Report of Independent Accountants...........................  F-2
Consolidated Statements of Operations for the Years Ended
  January 31, 2000, 1999 and 1998...........................  F-3
Consolidated Balance Sheets at January 31, 2000 and 1999....  F-4
Consolidated Statements of Stockholders' Equity at January
  31, 2000, 1999, and 1998..................................  F-5
Consolidated Statements of Cash Flows for the Years Ended
  January 31, 2000, 1999 and 1998...........................  F-6
Notes to Consolidated Financial Statements..................  F-7
Consolidated Financial Statement Schedules for the Years
  Ended January 31, 2000, 1999 and 1998
Schedule II--Valuation and Qualifying Accounts..............  I-7
</TABLE>

     All other schedules are omitted because they are not applicable or the
required information is shown in the consolidated financial statements or notes
thereto.

                                       F-1
<PAGE>   37

                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
Computer Learning Centers, Inc.

     In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Computer Learning Centers, Inc. and its subsidiaries at January 31,
2000 and 1999, and the results of their operations and their cash flows for each
of the three years in the period ended January 31, 2000, in conformity with
accounting principles generally accepted in the United States of America. In
addition, in our opinion, the financial statement schedule listed in the
accompanying index presents fairly, in all material respects, the information
set forth therein when read in conjunction with the related consolidated
financial statements. These financial statements and financial statement
schedule are the responsibility of the Company's management; our responsibility
is to express an opinion on these financial statements and financial statement
schedule based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States of
America, which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

     As discussed in Notes 1 and 3 to the accompanying consolidated financial
statements, the Company is subject to significant regulatory oversight and
ongoing reviews by the U.S. Department of Education. Management's progress to
date and future plans with respect to regulatory and related matters are also
discussed in Notes 1 and 3.

     As discussed in Note 2, the Company has restated its financial statements
for the years ended January 31, 1999 and 1998.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
New York, New York
May 15, 2000

                                       F-2
<PAGE>   38

                        COMPUTER LEARNING CENTERS, INC.
                     CONSOLIDATED STATEMENTS OF OPERATIONS

            (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                               FOR THE YEARS ENDED JANUARY 31,
                                                              ---------------------------------
                                                                            1999        1998
                                                                          RESTATED    RESTATED
                                                                2000      (NOTE 2)    (NOTE 2)
                                                              ---------   ---------   ---------
<S>                                                           <C>         <C>         <C>
Revenues....................................................  $134,640    $144,189     $95,761
                                                              --------    --------     -------
  Costs and expenses:
     Costs of instruction and services......................   100,252      93,802      53,845
     Selling and promotional................................    21,315      21,729      15,289
     General and administrative.............................    17,299      15,614       7,657
     Provision for doubtful accounts........................     8,911       8,388       4,794
     Amortization of intangible assets......................       562         558         362
                                                              --------    --------     -------
                                                               148,339     140,091      81,947
                                                              --------    --------     -------
(Loss) income from operations...............................   (13,699)      4,098      13,814
Litigation settlement expense...............................        --      (5,599)         --
Interest (expense) income, net..............................      (249)        513       1,391
Gain on sale of investment securities.......................        --         279          --
                                                              --------    --------     -------
(Loss) income before income taxes and cumulative effect of
  accounting change.........................................   (13,948)       (709)     15,205
(Benefit from) provision for income taxes...................    (5,827)       (383)      6,234
                                                              --------    --------     -------
(Loss) income before cumulative effect of accounting
  change....................................................    (8,121)       (326)      8,971
Cumulative effect of accounting change (Note 1).............        --        (245)         --
                                                              --------    --------     -------
Net (loss) income...........................................  $ (8,121)   $   (571)    $ 8,971
                                                              ========    ========     =======
Earnings (loss) per share (Notes 1 and 6):
     Basic --
       (Loss) income before cumulative effect of accounting
          change............................................  $  (0.45)   $  (0.02)    $  0.56
       Cumulative effect of accounting change...............        --       (0.01)         --
                                                              --------    --------     -------
       Net (loss) income....................................  $  (0.45)   $  (0.03)    $  0.56
                                                              ========    ========     =======
     Diluted --
       (Loss) income before cumulative effect of accounting
          change............................................  $  (0.45)   $  (0.02)    $  0.52
       Cumulative effect of accounting change...............        --       (0.01)         --
                                                              --------    --------     -------
       Net loss income......................................  $  (0.45)   $  (0.03)    $  0.52
                                                              ========    ========     =======
</TABLE>

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

                                       F-3
<PAGE>   39

                        COMPUTER LEARNING CENTERS, INC.
                          CONSOLIDATED BALANCE SHEETS

            (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                  JANUARY 31,
                                                              -------------------
                                                                           1999
                                                                         RESTATED
                                                                2000     (NOTE 2)
                                                              --------   --------
<S>                                                           <C>        <C>
                                     ASSETS
Current assets:
     Cash and cash equivalents..............................  $  7,819   $  7,691
     Accounts receivable, net...............................    51,074     56,697
     Income taxes receivable................................     6,083      3,658
     Deferred tax assets....................................     5,541      4,671
     Prepaid expenses and other current assets..............     3,440      5,672
                                                              --------   --------
          Total current assets..............................    73,957     78,389
Fixed assets, net...........................................    34,558     37,604
Long-term accounts receivable, net..........................    10,439     10,660
Other long-term assets......................................     5,354      5,854
                                                              --------   --------
          Total assets......................................  $124,308   $132,507
                                                              ========   ========
                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Trade accounts payable.................................  $  3,520   $  6,503
     Accrued employee expenses..............................     3,091      1,775
     Accrued other expenses.................................     6,498      8,341
     Current portion of long-term debt, net of the current
      portion...............................................     8,455         --
     Deferred revenues......................................    50,833     54,397
                                                              --------   --------
          Total current liabilities.........................    72,397     71,016
Long-term deferred revenues.................................     1,191      3,073
Long-term debt..............................................     2,500      3,000
Other long-term liabilities.................................     3,061      2,576
                                                              --------   --------
          Total liabilities.................................    79,149     79,665
                                                              --------   --------
Stockholders' equity:
     Preferred stock $.01 par value, 1,000,000 authorized
      shares, no shares issued or outstanding...............        --         --
     Common stock, $.01 par value, 35,000,000 authorized
      shares, 18,610,818 shares issued and
      outstanding -- 2000; 17,493,251 issued and outstanding
      shares -- 1999........................................       186        175
     Additional paid-in capital.............................    41,120     40,682
     Accumulated other comprehensive loss...................       (59)       (48)
     Retained earnings......................................     3,912     12,033
                                                              --------   --------
          Total stockholders' equity........................    45,159     52,842
                                                              --------   --------
       Commitments and contingencies (Note 12)
          Total liabilities and stockholders' equity........  $124,308   $132,507
                                                              ========   ========
</TABLE>

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

                                       F-4
<PAGE>   40

                        COMPUTER LEARNING CENTERS, INC.
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                         (DOLLAR AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                          ACCUMULATED
                                                                             OTHER                      TOTAL       COMPREHENSIVE
                                          PREFERRED   COMMON   PAID-IN   COMPREHENSIVE   RETAINED   STOCKHOLDERS'      INCOME
                                            STOCK     STOCK    CAPITAL      INCOME       EARNINGS      EQUITY          (LOSS)
                                          ---------   ------   -------   -------------   --------   -------------   -------------
<S>                                       <C>         <C>      <C>       <C>             <C>        <C>             <C>
BALANCE AT FEBRUARY 1, 1997, AS
  REPORTED..............................     $--       $156    $32,104       $112        $ 7,420       $39,792
                                             --        ----    -------       ----        -------       -------
Restatement adjustment, net of $764 for
  income taxes (Note 2).................     --          --         --         --         (1,100)       (1,100)
Exercise of stock options...............     --           4        807         --             --           811
Employee stock purchase plan............     --          --        121         --             --           121
Tax benefit of nonqualified option
  exercises.............................     --          --      1,365         --             --         1,365
BEC acquisition (Note 5)................     --           2        128         --         (1,092)         (962)
Net income..............................     --          --         --         --          8,971         8,971           8,971
Unrealized gain on investment...........     --          --         --         48             --            48              48
                                                                                                                       -------
     Comprehensive income for fiscal
       1998.............................     --          --         --         --             --            --         $ 9,019
                                             --        ----    -------       ----        -------       -------         -------
BALANCE AT JANUARY 31, 1998.............     --         162     34,525        160         14,199        49,046
                                             --        ----    -------       ----        -------       -------
Exercise of stock options...............     --           2        472         --             --           474
CLC Paramus acquisition (Note 5)........     --           5         32         --            350           387
CLC Delta acquisition (Note 5)..........     --           5        680         --         (1,945)       (1,260)
Tax benefit of nonqualified option
  exercises.............................     --          --        250         --             --           250
Litigation settlement...................     --          --      4,500         --             --         4,500
Employee stock purchase plan............     --           1        223         --             --           224
Net loss................................     --          --         --         --           (571)         (571)           (571)
Unrealized gain, net of realized gain on
  investment............................     --          --         --       (160)            --          (160)           (160)
Foreign exchange translation
  adjustments...........................     --          --         --        (48)            --           (48)            (48)
                                                                                                                       -------
     Comprehensive loss for fiscal
       1999.............................     --          --         --         --             --            --         $  (779)
                                             --        ----    -------       ----        -------       -------         -------
BALANCE AT JANUARY 31, 1999.............     --         175     40,682        (48)        12,033        52,842
                                             --        ----    -------       ----        -------       -------
Exercise of stock options...............     --          --         18         --             --            18
Tax benefit of nonqualified option
  exercises.............................     --          --        273         --             --           273
Litigation settlement...................     --          10        (10)        --             --            --
Employee stock purchase plan............     --           1        157         --             --           158
Net loss................................     --          --         --         --         (8,121)       (8,121)         (8,121)
Foreign exchange translation
  adjustments...........................     --          --         --        (11)            --           (11)            (11)
                                                                                                                       -------
     Comprehensive loss for fiscal
       2000.............................     --          --         --         --             --            --         $(8,132)
                                             --        ----    -------       ----        -------       -------         =======
BALANCE AT JANUARY 31, 2000.............     $--        186    $41,120       $(59)       $ 3,912       $45,159
                                             ==        ====    =======       ====        =======       =======
</TABLE>

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

                                       F-5
<PAGE>   41

                        COMPUTER LEARNING CENTERS, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                         (DOLLAR AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                               FOR THE YEARS ENDED JANUARY 31,
                                                              ---------------------------------
                                                                            1999        1998
                                                                          RESTATED    RESTATED
                                                                2000      (NOTE 2)    (NOTE 2)
                                                              ---------   ---------   ---------
<S>                                                           <C>         <C>         <C>
Cash flows from operating activities:
Net (loss) income...........................................  $ (8,121)   $   (571)   $  8,971
     Adjustments to reconcile net (loss) income to cash from
       operating activities:
       Provision for doubtful accounts......................     8,911       8,388       4,794
       Depreciation.........................................    10,788       7,521       4,020
       Litigation settlement expense........................        --       4,500          --
       Amortization of intangible assets....................       562         558         362
       Deferred tax benefit.................................      (825)     (3,629)     (1,179)
     Changes in net assets and liabilities:
       Accounts receivable..................................    (3,288)    (13,850)    (22,405)
       Income taxes receivable..............................    (2,152)     (3,658)         --
       Prepaid expenses and other current assets............     2,232        (959)     (1,158)
       Long-term accounts receivable........................       221      (4,275)     (4,888)
       Other long-term assets...............................      (106)       (230)       (203)
       Trade accounts payable...............................    (2,983)      4,140        (795)
       Accrued employee expenses............................     1,316      (1,343)        654
       Accrued other expenses...............................    (1,843)      1,160       5,265
       Deferred revenues....................................    (3,564)       (885)     19,845
       Long-term deferred revenues..........................    (1,882)       (640)      2,371
       Other long-term liabilities..........................       473       1,455         581
                                                              --------    --------    --------
          Cash (used for) provided by operating
            activities......................................      (261)     (2,318)     16,235
                                                              --------    --------    --------
     Cash flows from investing activities:
       Capital expenditures.................................    (7,742)    (18,367)    (19,548)
       Other................................................        --        (113)       (215)
       Cash from acquired companies.........................        --         932         324
                                                              --------    --------    --------
          Cash used for investing activities................    (7,742)    (17,548)    (19,439)
                                                              --------    --------    --------
     Cash flows from financing activities:
       Exercise of stock options............................        18         474         811
       Proceeds from sales of common stock through employee
          stock purchase plan...............................       158         224         121
       Borrowing from debt..................................     8,455       3,000          --
       Repayments of debt...................................      (500)       (518)       (301)
                                                              --------    --------    --------
          Cash provided by financing activities.............     8,131       3,180         631
                                                              --------    --------    --------
       Net increase (decrease) in cash and cash
          equivalents.......................................       128     (16,686)     (2,573)
       Cash and cash equivalents, beginning of year.........     7,691      24,377      26,950
                                                              --------    --------    --------
       Cash and cash equivalents, end of year...............  $  7,819    $  7,691    $ 24,377
                                                              ========    ========    ========
</TABLE>

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

                                       F-6
<PAGE>   42

                        COMPUTER LEARNING CENTERS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        JANUARY 31, 2000, 1999, AND 1998

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS, UNLESS OTHERWISE STATED)

NOTE 1 -- NATURE OF THE BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

  Nature of the business

     Computer Learning Centers, Inc. (the "Company" or "CLC"), is a public
company traded on the NASDAQ National Market. As of January 31, 2000, the
Company had twenty-eight operating Learning Centers in the U.S. and Canada and
was headquartered in Manassas, Virginia.

     As described in Note 3, the Company is subject to significant regulatory
oversight and ongoing reviews by the U. S. Department of Education ("Department
of Education" or the "Department"). The failure to comply with requirements
promulgated by the Department could result in the restriction or loss by the
Company or its Learning Centers of their ability to participate in federal
financial aid programs. Since financial aid programs fund the majority of the
tuition revenues, such restrictions could have a severe impact on the Company's
business financial condition and results of operations. During fiscal 1999 and
2000, the Department conducted various program reviews of the Company's
administration of financial aid programs at the Alexandria VA, Manassas VA, and
Laurel MD Learning Centers. The Department issued reports alleging
non-compliance with certain Title IV Program requirements. The Company was
required to and has performed additional reviews of student files at these
Learning Centers and continues to cooperate with all subsequent Department
requests.

     On the basis of the above program reviews, on and effective March 8, 2000,
the Department placed all of the Company's Title IV eligible Learning Centers on
a cash monitoring program which would have delayed all cash receipts from
federal programs for up to 75 days (the "delay period"). The delay would be
caused while the Department conducted various reviews of student eligibility
data prior to disbursing the funds. The anticipated cash need during this delay
period was projected to be significantly in excess of the Company's available
cash or borrowing capability. On March 14, 2000, the Company reached an
agreement with the Department resulting in a modification of the terms of its
March 8 action. The modified terms were such that only the Alexandria, VA and
Laurel, MD Learning Centers were placed on this restricted cash status. This
modification was conditioned on certain additional reporting by the other
Learning Centers, and that the Company engage its independent accountants to
conduct an attestation engagement related to the Company's compliance with Title
IV regulations of student refunds for those students who attended and withdrew,
as well as returns of funds for federal aid received whereby the student was not
in attendance (the "Special Attestation"). The Special Attestation, as more
fully described in Note 3, is required to be completed by June 1, 2000. The
results of such engagement may cause the Department to change the federal
funding procedures at certain or all of the Learning Centers, including the
potential for the Department to reinstate the restrictive cash procedures, which
would have a severe impact on the Company.

     Further, the Company is required to complete certain of the open matters
relative to its program reviews. The completion of these reviews with results
that do not substantiate compliance with Title IV requirements acceptable to the
Department could similarly have a severe impact on the Company.

     The above matters, as well as state regulatory issues described in Note 3,
have had both direct and indirect negative impacts on the Company's financial
results for the periods in which the reviews have been ongoing. Direct costs
include those monies expended on legal and other professional services provided;
program reviews and refunds to students. Indirect costs include the shareholder
and student lawsuits discussed in Note 12 as well as the adverse effects caused
by negative publicity on student enrollments and therefore student populations.
The costs have resulted in the decline in working capital and available cash
balances over the last several quarterly periods. During this time, the Company
has utilized an increasing amount of its available line of credit borrowings
(see note 9) to fund its capital expenditure needs and operating losses. These
uses of capital, combined with the operating losses, have resulted in the
decline of the Company's

                                       F-7
<PAGE>   43
                        COMPUTER LEARNING CENTERS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 JANUARY 31, 2000, 1999 AND 1998 -- (CONTINUED)

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS, UNLESS OTHERWISE STATED)

NOTE 1 -- NATURE OF THE BUSINESS AND SIGNIFICANT ACCOUNTING
POLICIES -- (CONTINUED)
financial condition and financial ratios required to be maintained for
compliance with its credit agreement. Due to noncompliance with certain loan
covenants of this agreement, the Company has had to modify its credit agreement,
which has resulted in the reduction of available borrowing capability. The
Company is also required to maintain certain financial ratios and other measures
to maintain compliance with regulatory standards. As of January 31, 2000, the
Company met certain of these ratios, and for certain institutions, as defined by
the Department, the Company fell below these minimum measures. Should the
Department apply increased funding restrictions on the individual institutions
that were below these minimum ratios, as defined, resulting in further
limitation of financial aid funding, the Company's financial position would be
severely impacted.

     However, management believes that its progress to date and future plans
will provide cash from operations sufficient to meet the Company's obligations
as they become due. As discussed in Note 9, the Company has recently
restructured its credit facility to provide cash to support operations through
the expiration of the facility in May 2001. In addition, management's plans to
resolve the open regulatory compliance matters are discussed in Note 3.
Management believes that the resolution of these regulatory matters is unlikely
to have a material adverse effect on the Company's business, financial condition
and results of operations.

     The Company is involved in litigation incident to its business (See note
12).

     As used herein, the fiscal years ended January 31, 2000, 1999, and 1998 are
referred to as "2000", "1999," and "1998," respectively.

  Basis of presentation and principles of consolidation

     The consolidated financial statements include the Company and its wholly
owned subsidiaries, Computer Learning Centers of Quebec, Inc. and Delta College,
Inc. All significant intercompany balances and transactions have been
eliminated.

  (Loss) earnings per share

     (Loss) earnings per share are calculated as both basic earnings per share,
which is based on the weighted-average number of common shares outstanding and
diluted earnings per share, which is based on the weighted-average number of
common shares outstanding and all potentially dilutive common shares
outstanding.

  Revenue recognition

     The Company records accounts receivable and related deferred revenues when
students are billed tuition for the programs they are attending. The deferred
revenues are then recognized as tuition revenues on a pro rata basis over the
term of instruction. Revenue is recognized on an instructional day basis as
total instructional days elapsed divided by the total instructional days in the
program applied to the total course tuition. Refer to Note 2 for discussion of
CLC's change in its revenue recognition policy and the restatement of these
consolidated financial statements.

  Learning Center start-up costs

     Learning Center start-up costs consist of all direct costs incurred at a
new Learning Center (excluding advertising costs) from the date a lease for a
facility is entered into until the start of the first class. Prior to

                                       F-8
<PAGE>   44
                        COMPUTER LEARNING CENTERS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 JANUARY 31, 2000, 1999 AND 1998 -- (CONTINUED)

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS, UNLESS OTHERWISE STATED)

NOTE 1 -- NATURE OF THE BUSINESS AND SIGNIFICANT ACCOUNTING
POLICIES -- (CONTINUED)
1999, such capitalized costs were amortized on a straight-line basis over a
one-year period commencing with the date of the start of the first class. In the
fourth quarter of 1999, the Company adopted AICPA Statement of Position 98-5
"Reporting on the Costs of Start-Up Activities," which required that the Company
expense these start-up costs as they are incurred. Accordingly, the Company
recorded a charge of $245 (net of income tax benefit of $169) in 1999
representing the cumulative effect of this change in accounting principal.

  Fair value of financial instruments

     The carrying amount reported in the consolidated balance sheets for cash
and cash equivalents, accounts receivable, trade accounts payable, accrued other
expenses and deferred revenues approximate fair value because of the immediate
or short-term maturity of these financial instruments.

  Statement of cash flows

     For purposes of reporting cash flows, the Company considers investments
having a maturity of three months or less to be cash equivalents. Cash paid for
income taxes in 2000, 1999, and 1998 aggregated $160, $7,188, and $4,580,
respectively.

  Inventories

     Inventories consisting principally of program materials, books and supplies
are stated at the lower of cost, determined on a first-in, first-out basis, or
market. Total inventories, included in prepaid and other current assets in the
consolidated balance sheets, were $1,033, and $1,224 at January 31, 2000 and
1999, respectively.

  Fixed assets

     Furniture, equipment and leasehold improvements are recorded at cost.
Furniture and equipment are depreciated using the straight-line method over the
estimated useful lives of the assets for financial reporting purposes (three to
eight years) and accelerated methods over statutory lives for income tax
purposes. Leasehold improvements are amortized using the straight-line method
over the term of the lease for financial reporting purposes and over the
statutory lives for income tax purposes.

  Intangible assets

     Identifiable intangible net assets of $2,171 and $2,733 at January 31, 2000
and 1999, included in other long-term assets, consist primarily of U.S.
Department of Education certifications of Title IV Program eligibility. These
assets are being amortized through 2007, using a straight-line method.
Accumulated amortization for these assets aggregated $4,757 and $4,195 at
January 31, 2000 and 1999, respectively.

  Advertising costs

     The Company expenses all advertising costs as incurred. Total advertising
expense was $10,133, $9,389, and $6,212, for 2000, 1999, and 1998, respectively.

  Income taxes

     The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes" which
requires the recognition of deferred tax assets and

                                       F-9
<PAGE>   45
                        COMPUTER LEARNING CENTERS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 JANUARY 31, 2000, 1999 AND 1998 -- (CONTINUED)

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS, UNLESS OTHERWISE STATED)

NOTE 1 -- NATURE OF THE BUSINESS AND SIGNIFICANT ACCOUNTING
POLICIES -- (CONTINUED)
liabilities for the expected future tax consequences of temporary differences
between the book and tax bases of assets, liabilities and revenues.

  Impairment of Long-Lived and Intangible Assets

     The Company reviews long-lived assets, including intangible assets, for
impairment whenever events or changes in business circumstances indicate that
the carrying amount of the assets may not be fully recoverable or that the
useful lives of these assets are no longer appropriate. Each impairment test is
based on a comparison of the undiscounted cash flows to the recorded value of
the asset. If impairment is indicated, the asset is written down to its
estimated fair value of the discounted cash flow basis.

  Other Comprehensive Income (Loss)

     Comprehensive income includes net earnings or losses adjusted for gains and
losses that are excluded from net earnings under generally accepted accounting
principles. The components of accumulated other comprehensive income (loss)
include foreign currency translation adjustments and unrealized holding gains on
marketable securities.

  Use of estimates

     The preparation of financial statements in accordance with generally
accepted accounting principles requires the use of estimates by management that
affect the reported amounts of assets and liabilities and the disclosure of
contingent liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period, primarily in the
areas of allowance for doubtful accounts, useful lives of intangible assets,
regulatory provisions and deferred income taxes. Actual results could differ
from these estimates.

  Reclassifications

     Prior year financial statements have been reclassified to conform with
current year presentation.

NOTE 2 -- RESTATEMENT OF FINANCIAL STATEMENTS

     In the fourth quarter of fiscal 2000, management reviewed its policies with
respect to revenue recognition relative to other companies within the industry.
This review was predicated upon a heightened awareness of revenue recognition
policies. As previously disclosed, the Company recognized revenues on a pro rata
basis over the term of instruction, which varies based on the length of the
program. The Company recognized revenue using a half-month convention by
recognizing one-half month of tuition revenue during the starting and graduating
months of a student's program of study, without consideration of the number of
days scheduled for class during such start month. For all of the interim months,
a full month of revenue was recognized.

     CLC commences new classes every month and the start dates of these classes
are typically near the end of the month. For example, the Company determined
that on average, students were, and continue to be, in attendance for one-sixth
of a month in the start month, and five-sixths of a month in the graduating
month. The half-month convention was applied primarily for administrative ease.
As a result of the Company's review, the method of recognizing revenue has
changed to an instructional day basis, thereby matching the recognition of
revenue to the instructional term for all students.

                                      F-10
<PAGE>   46
                        COMPUTER LEARNING CENTERS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 JANUARY 31, 2000, 1999 AND 1998 -- (CONTINUED)

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS, UNLESS OTHERWISE STATED)

NOTE 2 -- RESTATEMENT OF FINANCIAL STATEMENTS -- (CONTINUED)
     In addition, the Company had historically expensed all direct student
acquisition costs as incurred. These costs primarily related to recruiting
representatives' salaries, employee benefits and other direct costs. As such,
the half-month revenue convention served to mitigate the impact of this
immediate expensing. Current accounting guidelines, notably the Securities and
Exchange Commission's Staff Accounting Bulletin No. 101, "Revenue Recognition in
Financial Statements," issued in December 1999, now require the deferral of
"incremental direct" acquisition costs over the contract period with the
expensing of all other acquisition costs. As a significant portion of student
acquisition costs defined above do not qualify as "incremental direct" costs,
these costs would not be eligible for deferral.

     Accordingly, the Company has also modified its policy to defer incremental
direct acquisition costs, which consist primarily of certain third party fees
paid on behalf of the students, net of nominal enrollment fees collected from
the students at the beginning of their programs. The impact of this net cost
deferral adjustment in the fourth quarter of 2000 was not material.

     The total effect of the adjustments was immaterial in Fiscal 2000,
decreased the net loss by $15 in 1999 and reduced net income by $609 in 1998.
Accordingly, the financial statements have been restated as follows (see Note 14
for the unaudited interim financial results for 2000 and 1999 restated for the
impact of these adjustments):

<TABLE>
<CAPTION>
                                                            1999                         1998
                                                   ----------------------       ----------------------
                                                   AS REPORTED   RESTATED       AS REPORTED   RESTATED
                                                   -----------   --------       -----------   --------
<S>                                                <C>           <C>            <C>           <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA
Revenues.........................................   $144,351     $144,189         $96,989     $95,761
Costs and Expenses...............................    140,278      140,091          82,143      81,947
Income from operations...........................      4,073        4,098          14,846      13,814
Net income (loss)................................       (586)        (571)          9,580       8,971
Net income (loss) per share
  Basic..........................................      (0.03)       (0.03)           0.60        0.56
  Diluted........................................      (0.03)       (0.03)           0.56        0.52
CONSOLIDATED BALANCE SHEETS DATA
Income taxes receivable..........................      3,835        3,658              --          --
Prepaid expenses and other current assets........      5,078        5,672           4,137       4,544
Other long term assets...........................      4,500        5,854           4,532       5,383
Accrued other expenses...........................      8,341        8,341           6,519       6,183
Deferred revenues................................     50,932       54,397          48,231      51,534
Retained earnings................................     13,727       12,033          15,908      14,199
</TABLE>

     The effect of these adjustments at February 1, 1997 decreased retained
earnings by $1,100, net of $764 for income taxes.

NOTE 3 -- FINANCIAL AID PROGRAMS AND REGULATORY MATTERS

  U.S. Department of Education -- Regulation and Review

     The Company is subject to extensive regulation as a participant in various
federal and state government supported financial aid programs. These regulations
require, among other things, that the Company and its Learning Centers comply
with certain financial responsibility and administrative capability
requirements. Failure to comply with these requirements could result in
restriction or loss by the Company or its Learning

                                      F-11
<PAGE>   47
                        COMPUTER LEARNING CENTERS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 JANUARY 31, 2000, 1999 AND 1998 -- (CONTINUED)

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS, UNLESS OTHERWISE STATED)

NOTE 3 -- FINANCIAL AID PROGRAMS AND REGULATORY MATTERS -- (CONTINUED)
Centers of their ability to participate in federal or other financial aid
programs or to provide educational and training services. Such restrictions
could have a severe impact on the Company's business, financial condition and
results of operations. For 2000, approximately 64% of the Company's revenues
were derived from tuitions that are funded by various federal student financial
aid programs.

     Under the Department of Education's regulations, an FFEL cohort default
rate equal to or exceeding 25% in any one of the three most recent federal
fiscal years can be a basis for the Department to place that institution on
provisional certification for up to four years for lack of administrative
capability. As of January 31, 2000, four of the Company's Learning Centers are
provisionally certified for participation in FFEL, due either to cohort default
rates or due to a change of control following the Company's acquisition of these
campuses. The provisional certifications on these four centers extend through
July 2000 to September 2001. The Company expects to apply for recertification as
the provisional certifications expire.

     Under the standards of financial responsibility of the Department of
Education, if an institution's annual financial aid compliance audit or a review
by another regulatory agency finds that the institution made refunds late (as
defined by the Department) to 5% or more of its students in either of the two
most recent fiscal years, the institution is required to post a letter of credit
in favor of the Department in an amount equal to 25% of the total Title IV
Program refunds paid by the institution in its prior fiscal year. During 1999,
the Company was required to post a letter of credit of $1.5 million with respect
to all U.S. Learning Centers except for the Somerville and Lowell, MA Learning
Centers for which a separate letter of credit had been required to meet the
Department's financial responsibility requirements, and the Paramus, NJ Learning
Center for which no letter of credit was required. During 2000, the Department
changed the Company's requirement to a single letter of credit of approximately
$2.2 million for all of the Company's U.S. Learning Centers, excluding the
Paramus Learning Center, for which no letter of credit was required.

     In May 1998, the Department of Education initiated a program review of the
administration of the Title IV Programs by the Company's Alexandria, VA and
Manassas, VA Learning Centers for the period July 1, 1996 through June 30, 1998.
In September 1998, the Department issued a preliminary report containing a
number of findings alleging non-compliance with certain Title IV Program
requirements. CLC has performed file reviews at these schools and provided
additional materials requested by the Department. In order to conclude this
review, the Department has requested CLC to perform an additional file review of
returns of federal funds during the review period. The Department has expanded
its review of that issue to include the Company's San Jose, Philadelphia and
Houston Learning Centers. The Company does not believe that the resolution of
these reviews will have a severe impact on the Company's business, financial
condition and results of operations.

     The Department reviewed the results of the independent audit on
administration of the Company's Title IV Programs for the year ended January 31,
1998 and issued a preliminary audit determination report in December 1998. The
Department's report alleged that the Company failed to make certain student
refunds at its Learning Centers operating during 1998 within the timeframes
established by the Department. The Department required the Company to perform
more expansive reviews of student account files at five of these Learning
Centers, which were deemed to have findings of non-compliance in excess of rates
acceptable to the Department. By letter dated September 28, 1999, the Department
of Education issued its final audit determination letter ("FADL") related to
this matter. In the FADL, the Department assessed repayment liabilities of
immaterial amounts. In addition, the Department deferred resolution of any
matters related to the Alexandria, VA and Laurel, MD Learning Centers to the
open program reviews conducted by the Department related to those locations.
Although the deferred issues remain open as part of the Alexandria, VA and
Laurel,

                                      F-12
<PAGE>   48
                        COMPUTER LEARNING CENTERS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 JANUARY 31, 2000, 1999 AND 1998 -- (CONTINUED)

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS, UNLESS OTHERWISE STATED)

NOTE 3 -- FINANCIAL AID PROGRAMS AND REGULATORY MATTERS -- (CONTINUED)
MD Learning Center program reviews, the Department's review of the 1998
compliance audit is considered closed.

     In January 1999, the Department of Education initiated a program review of
the administration of the Title IV Programs by the Company's Laurel, MD Learning
Center for the period July 1, 1997 through June 30, 1999. The Department issued
a preliminary report in February 2000, which contained a number of findings
alleging non-compliance with certain Title IV Program requirements similar to
those found in the Alexandria and Manassas program reviews discussed above. The
Company has submitted responses to the Department in March and April 2000
concerning all of the findings. The Company does not believe that the resolution
of this review will have a severe impact on the Company's business, financial
condition and results of operations.

     In July 1999, the Company submitted the results of its independent audit on
its administration of Title IV Programs for the year ended January 31, 1999 to
the Department. The audit identified certain findings of non-compliance with
respect to the Company's administration of the Title IV Programs. The Company
has not received any written communication from the Department with respect to
this compliance audit. The Company does not believe that the resolution of this
matter will have a severe impact on the Company's business, financial condition
and results of operations.

  Heightened Cash Monitoring

     The Department also has discretion to alter the way it provides Title IV
Program funds to participating institutions. It may transfer an institution from
the "advance" system of funding, under which an institution receives funding
from the Department in advance based on anticipated need, to the "reimbursement"
system of payment, under which an institution must disburse funds to students
and document their eligibility for Title IV Program funds before receiving funds
from the Department. The Department may also impose a requirement known as
"heightened cash monitoring," of which there are multiple levels, which requires
additional reporting to and review by the Department of all Title IV funds
requests.

     On April 6, 1998, the Company was notified by the Department of Education
that, based upon the Department's monitoring of litigation involving the Company
and certain student complaints lodged against the Company, it had placed all
Learning Centers on a heightened cash monitoring status 1 ("HCM1"). This status
allows all Learning Centers to continue to receive federal student financial
assistance funds so long as the funds requested are drawn after they have been
credited to student accounts and CLC subsequently provides evidence of such
credit and other supporting information to the Department. The Department does
not consider HCM1 to represent either an adverse or punitive action. This action
by the Department has not had an effect on the availability or timing of
financial assistance to the Company's students, nor has it had a material effect
on the Company's cash flow or operating results.

     On March 8, 2000, the Department notified the Company that is was placing
all of the Company's Learning Centers on heightened cash monitoring status 2
("HCM2"). HCM2 does not affect the ability of Learning Centers to obligate Title
IV Program funds or the ability of their students to receive all applicable
forms of federal student aid. However, under HCM2, Learning Centers are required
to document to the Department each student's eligibility for Title IV Program
funding before being reimbursed by the Department for funds which they must
advance to their eligible students. HCM2 procedures require the affected
Learning Centers to submit extensive documentation proving student eligibility.
Those documents are then reviewed by the Department, a process that customarily
requires a minimum of thirty days. Management expects that HCM2 would delay the
timing of Title IV cash flow for approximately 75 days.

                                      F-13
<PAGE>   49
                        COMPUTER LEARNING CENTERS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 JANUARY 31, 2000, 1999 AND 1998 -- (CONTINUED)

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS, UNLESS OTHERWISE STATED)

NOTE 3 -- FINANCIAL AID PROGRAMS AND REGULATORY MATTERS -- (CONTINUED)
     The Department stated that this action was based on information obtained
during its Alexandria, Manassas and Laurel program reviews, which indicated that
the Company had failed to make refunds for some students and had failed to make
refunds on a timely basis for other students. The Company vigorously disputed
the Department's basis for this action and explained the significant adverse
financial effects such action would have. On March 14, 2000, the Company reached
an agreement with the Department resulting in the modification of the terms of
its March 8 action. The key terms of the agreement are that only the Company's
Alexandria, VA and Laurel, MD Learning Centers would be placed on HCM2, that the
remaining Learning Centers would continue on HCM1 with the condition that the
Company submit additional reports and documentation in conjunction with their
future Title IV funds requests, and that the Company must engage an independent
accountant to attest to the compliance with Title IV regulation of refunds and
returns of funds at all of the Company's U.S. Learning Centers receiving Title
IV funds (the "Special Attestation"). Management expects HCM2 will have a
significant impact on the timing of cash flows at these Learning Centers and has
estimated the impact of the 75 day delay will approximate $3 million.

     The Special Attestation required by the Department as part of the March 14,
2000 agreement relates to the review of the payment of refunds and other returns
of federal funds for the seven-month period ended January 31, 2000. The results
of the Special Attestation must be submitted to the Department by June 1, 2000.
The Company's management believes that should the Special Attestation
substantiate compliance with Title IV requirements acceptable to the Department
and with CLC's continued compliance with Title IV Program requirements the
Department may remove HCM1 and HCM2 requirements at some or all of the Learning
Centers. However, should the Special Attestation demonstrate noncompliance with
Title IV Program requirements in excess of rates tolerable by the Department,
the Department may take additional actions against CLC, including the
possibility of placing additional Learning Centers on HCM2. Any further adverse
actions initiated by the Department, including a change in status from HCM1 to
HCM2 for any of the Learning Centers could have a severe impact on the Company's
business, financial condition and results of operations.

  State Authorization and Accreditation

     In addition to Federal oversight, the Company is subject to state level
regulation. During 1999, the Maryland Higher Education Commission ("MHEC") and
Texas Workforce Commission ("TWC") reviewed programs at the Company's Laurel,
Maryland, and Houston, Texas Learning Centers, respectively. In October 1998,
the MHEC and TWC both issued reports citing several findings of regulatory
noncompliance. During 2000 and 1999, the Company recorded expenses of $738 and
$2,226, respectively, representing the total of fines and expenditures for
agreed-upon student refunds as well as an accrual for estimated costs associated
with resolving the findings included in these regulatory matters. These matters
are now considered closed.

     The Company has no significant state regulatory actions open that
management expects to result in adverse action or material fines and
assessments.

NOTE 4 -- SEGMENT INFORMATION

     In accordance with Statement of Financial Accounting Standards ("SFAS") No.
131, "Disclosures about Segments of an Enterprise and Related Information," the
Company considers its U.S. and Canadian operations to be two separate reportable
segments. Segment assets are identifiable assets that can be directly associated
with the segments. The accounting policies of these segments are the same as
those described in

                                      F-14
<PAGE>   50
                        COMPUTER LEARNING CENTERS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 JANUARY 31, 2000, 1999 AND 1998 -- (CONTINUED)

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS, UNLESS OTHERWISE STATED)

NOTE 4 -- SEGMENT INFORMATION -- (CONTINUED)
Note 1. There are no significant revenue or expense transactions between the two
segments. The following table illustrates the financial information for both
segments for 2000 and 1999. The Company operated exclusively in the U.S. prior
to 1999.

<TABLE>
<CAPTION>
                                                              UNITED STATES   CANADA   CONSOLIDATED
                                                              -------------   ------   ------------
<S>                                                           <C>             <C>      <C>
AS OF AND FOR THE YEAR ENDED JANUARY 31, 2000:
Total revenues..............................................    $127,635      $7,005     $134,640
Long-lived assets...........................................      33,531       1,027       34,558
AS OF AND FOR THE YEAR ENDED JANUARY 31, 1999:
Total revenues..............................................    $136,708      $7,481     $144,189
Long-lived assets...........................................      36,564       1,040       37,604
</TABLE>

NOTE 5 -- ACQUISITIONS

     On December 23, 1997, the Company completed the acquisition of Boston
Education Corp. ("BEC"), a privately held provider of information technology
education and training. The acquisition, which qualified as a tax-free
organization, was accounted for as a pooling of interests in accordance with
Accounting Principles Bulletin No. 16, "Business Combinations" ("APB 16") and
was completed by issuing 200,148 shares of CLC common stock in exchange for
substantially all of the rights, title and interest in the assets and
substantially all of the liabilities of BEC. BEC had calendar 1997 revenues of
$5.2 million and had approximately 650 students enrolled at the date of
acquisition, at its two campuses: a main campus located in Somerville, MA and a
branch in Methuen, MA. In connection with this acquisition, the Company incurred
$400 of pooling expenses related to certain legal and accounting fees, which are
reflected in 1998 results of operations.

     On February 17, 1998 the Company acquired Markerdowne Corporation or
Computer Learning Centers Paramus ("Markerdowne"), a privately held provider of
information technology education and training based in Paramus, New Jersey. The
acquisition, which qualified as a tax-free reorganization, was accounted for as
a pooling of interests in accordance with APB 16. The acquisition was completed
by issuing 510,287 shares of CLC Common Stock in exchange for substantially all
of the rights, title and interest in the assets and substantially all of the
liabilities of Markerdowne. Markerdowne had calendar 1997 revenues of $6.7
million and had approximately 800 students enrolled at the date of acquisition.
In connection with this acquisition, the Company incurred $385 of pooling
expenses related to certain legal and accounting fees, which are reflected in
1999 results of operations.

     On February 20, 1998 the Company acquired Delta College, Inc. ("Delta
College"), a Montreal, Quebec-based, privately held provider of information
technology education and training. The acquisition, which was accounted for as a
pooling of interests in accordance with APB 16, was completed by means of an
exchange of all outstanding shares of Delta College for 548,408 shares of CLC
Common Stock. Delta College had revenues of $6.7 million for its fiscal year
ended June 30, 1997 and had enrollment of approximately 800 students at the date
of acquisition at two locations: Montreal and Laval, Quebec. In connection with
this acquisition, the Company incurred $467 of pooling expenses related to
certain legal and accounting fees, which are reflected in 1999 results of
operations.

     The prior years' financial statements were not restated to include the
operations of BEC, Markerdowne and Delta College on the basis of the
immateriality of these acquisitions to the Company.

                                      F-15
<PAGE>   51
                        COMPUTER LEARNING CENTERS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 JANUARY 31, 2000, 1999 AND 1998 -- (CONTINUED)

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS, UNLESS OTHERWISE STATED)

NOTE 6 -- (LOSS) EARNINGS PER SHARE

     The following table sets forth the basic and diluted earnings per share
calculations for the years 2000, 1999, and 1998 follow:

<TABLE>
<CAPTION>
                                                       NET INCOME                PER SHARE
                                                         (LOSS)       SHARES      AMOUNT
                                                       ----------   ----------   ---------
<S>                                                    <C>          <C>          <C>
2000
Loss per share of common stock -- basic and
  diluted............................................   $(8,121)    18,060,612    $(0.45)
                                                        =======     ==========    ======
1999
Loss per share of common stock -- basic and
  diluted............................................   $  (571)    17,318,049    $(0.03)
                                                        =======     ==========    ======
1998
Earnings per share of common stock -- basic..........   $ 8,971     15,892,943    $ 0.56
Dilutive securities:
  Stock options......................................        --      1,295,921        --
                                                        -------     ----------    ------
Earnings per share of common stock -- diluted........   $ 8,971     17,188,864    $ 0.52
                                                        =======     ==========    ======
</TABLE>

     The Company had 2,332,033 and 1,664,831 options outstanding as of January
31, 2000 and 1999, respectively, however, these options are not included in the
calculation of the number of dilutive securities outstanding as their impact is
antidulitive due to the net losses realized in 2000 and 1999. All options of the
Company's stock had a dilutive effect for 1998.

NOTE 7 -- ACCOUNTS RECEIVABLE

     Student accounts receivables are initially established for the balance of
course tuition (however, only for the current academic year of multi-academic
year programs) at the time a student enrolls in the Learning Center. An academic
year is determined based on the length of the student program and consideration
of regulatory guidelines. Accounts receivables consist of financial aid,
third-party and self-pay receivable balances. Financial aid receivables are
student receivable balances expected to be paid through Title IV program funds.
Third party student receivable balances are those to be paid by employer
companies or various non-Title IV federal, state and non-governmental agencies.
Self-pay student receivables consist of those amounts to be paid by the student.
The Company makes available to qualifying students alternative financing
arrangements ("CLC financing"), which help fund their education. Dependent upon
the credit worthiness of the individual, CLC financing may be offered to assist
students with meeting their financial obligations related to attending CLC. The
Company requires students receiving CLC financing to make regular monthly
payments. Depending on the level of financing extended to students, payment
plans offered generally range from six months to three years. All amounts due to
the Company in periods beyond one year are classified as long-term receivables.

     When a student withdraws, tuition paid in excess of earned tuition revenues
is refunded based on the applicable refund policy. Conversely, tuition revenues
earned in excess of tuition paid remains as an accounts receivable. Based on
comparison to historical levels, the Company provides for estimated student
withdrawals, as reductions to accounts receivable and related deferred revenue
balances, thus presenting these amounts at estimated net realizable value.

     Accounts receivable balances are reviewed no less than quarterly for the
purposes of determining appropriate levels of the allowance for doubtful
accounts. The Company establishes the allowance for doubtful accounts using an
objective model, which applies various expected loss percentages to aging
categories based

                                      F-16
<PAGE>   52
                        COMPUTER LEARNING CENTERS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 JANUARY 31, 2000, 1999 AND 1998 -- (CONTINUED)

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS, UNLESS OTHERWISE STATED)

NOTE 7 -- ACCOUNTS RECEIVABLE -- (CONTINUED)
on historical bad debt experience. The Company typically charges-off accounts
receivable balances deemed to be uncollectible usually after they are delinquent
120 days. All charge offs are recorded as reductions in the allowance for
doubtful accounts, with any recoveries of previously written off accounts
receivables recorded as increases to the allowance for doubtful accounts.

     As of January 31, 2000 and 1999, net accounts receivable consisted of the
following:

<TABLE>
<CAPTION>
                                                                JANUARY 31, 2000
                                                         ------------------------------
                                                         CURRENT   LONG TERM    TOTAL
                                                         -------   ---------   --------
<S>                                                      <C>       <C>         <C>
Accounts receivable....................................  $68,632    $14,623    $ 83,255
Student withdrawal allowance...........................   (9,380)    (2,463)    (11,843)
Allowance for doubtful accounts........................   (8,178)    (1,721)     (9,899)
                                                         -------    -------    --------
                                                         $51,074    $10,439    $ 61,513
                                                         =======    =======    ========
</TABLE>

<TABLE>
<CAPTION>
                                                               JANUARY 31, 1999
                                                        -------------------------------
                                                        CURRENT    LONG TERM    TOTAL
                                                        --------   ---------   --------
<S>                                                     <C>        <C>         <C>
Accounts receivable...................................  $ 75,360    $14,780    $ 90,140
Student withdrawal allowance..........................   (12,664)    (1,986)    (14,650)
Allowance for doubtful accounts.......................    (5,999)    (2,134)     (8,133)
                                                        --------    -------    --------
                                                        $ 56,697    $10,660    $ 67,357
                                                        ========    =======    ========
</TABLE>

NOTE 8 -- FIXED ASSETS

     Fixed assets consisted of the following:

<TABLE>
<CAPTION>
                                                                  JANUARY 31,
                                                              -------------------
                                                                2000       1999
                                                              --------   --------
<S>                                                           <C>        <C>
Furniture and equipment.....................................  $ 37,360   $ 36,829
Leasehold improvements......................................    23,544     20,567
                                                              --------   --------
                                                                60,904     57,396
Less: Accumulated depreciation and amortization.............   (26,346)   (19,792)
                                                              --------   --------
                                                              $ 34,558   $ 37,604
                                                              ========   ========
</TABLE>

     The Company performed an asset impairment analysis of two underperforming
Learning Centers as well as of an administrative training facility resulting in
a charge of $1,151 during the fourth quarter of 2000. This amount is recorded as
depreciation within cost of instruction and services in these consolidated
financial statements.

NOTE 9 -- LONG-TERM DEBT

     As of January 31, 2000, the Company had a $15 million revolving credit
facility with a bank expiring on February 28, 2001. The credit facility was
reduced, from the original $20 million, in December 1999, based on negotiations
with the bank relative to defaulted covenants as of October 31, 1999. At January
31, 2000 and 1999 there were $10,955 and $3,000 outstanding balances on this
facility, respectively. The interest rate associated with the facility was the
U.S. prime rate plus 1%, which was 9.5% at January 31, 2000. The

                                      F-17
<PAGE>   53
                        COMPUTER LEARNING CENTERS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 JANUARY 31, 2000, 1999 AND 1998 -- (CONTINUED)

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS, UNLESS OTHERWISE STATED)

NOTE 9 -- LONG-TERM DEBT -- (CONTINUED)
Company had outstanding letters of credit of $4,045 and $5,991 at January 31,
2000 and 1999, respectively, primarily to the Department of Education for
recertification for the Title IV Programs of its Learning Centers and an
insurance company for surety bonds required by various states in which the
Company operates. These outstanding letters of credit reduced the amount
available under the Company's credit facility.

     The credit agreement, as amended, requires maintenance of certain financial
ratios and contains other restrictive covenants including limitations on
purchases and sales of assets or Company stock. As of January 31, 2000, the
Company failed to meet three of the financial ratio requirements and certain
non-financial covenants. In May 2000, the Company obtained a waiver of these
financial ratio requirements and covenants from its lender. The Company was in
compliance with all other covenants as of and for the year ended January 31,
2000.

     Also, in May 2000, the Company obtained an amendment to the facility, which
created a stand-alone revolving credit facility with a maximum borrowing
capacity of $9.2 million as well as a separate facility for letters of credit of
$3.3 million. Both facilities were extended to May 31, 2001. The declining
amounts of available credit over the term of each facility is structured as
follows:

<TABLE>
<CAPTION>
                                                                   LETTER OF CREDIT
                                               CREDIT FACILITY*        FACILITY         TOTAL
                                               ----------------    ----------------    -------
<S>                                            <C>                 <C>                 <C>
May 15 -- July 31, 2000                             $9,200              $3,300         $12,500
August 1 -- September 30, 2000                       3,700               2,575           6,275
October 1 -- October 31, 2000                        3,000               2,575           5,575
November 1, 2000 -- May 31, 2001                     2,500               2,575           5,075
</TABLE>

* The facility provides for required prepayments based on tax refunds and other
  collateral which when received by the bank would reduce the available credit
  to the $2,500 level prior to November 1, 2000.

     In addition, effective with the amendment, the interest rate on outstanding
balances increases to the bank's U.S. prime rate plus two percent with an
additional interest fee of up to three percent based on the amount of
outstanding borrowings. The Company had extended approximately $3.3 million of
outstanding letters of credit at May 15, 2000. Furthermore, the financial ratio
covenants were modified to include only a fixed charge ratio and minimum
tangible net worth requirement. Lastly, beginning on August 1, 2000 and every
month thereafter, the Company is required to deposit $250 into a restricted cash
account, until the balance is equal to 110% of the outstanding letters of
credit, or the facility is terminated.

NOTE 10 -- INCOME TAXES

     The components of income (loss) before income taxes and cumulative effect
of accounting change are as follows:

<TABLE>
<CAPTION>
                                                          FOR THE YEARS ENDED JANUARY 31,
                                                          -------------------------------
                                                            2000        1999       1998
                                                          ---------   --------   --------
<S>                                                       <C>         <C>        <C>
United States...........................................  $(14,974)   $(2,107)   $15,205
Canadian................................................     1,026      1,398         --
                                                          --------    -------    -------
Total...................................................  $(13,948)   $  (709)   $15,205
                                                          ========    =======    =======
</TABLE>

                                      F-18
<PAGE>   54
                        COMPUTER LEARNING CENTERS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 JANUARY 31, 2000, 1999 AND 1998 -- (CONTINUED)

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS, UNLESS OTHERWISE STATED)

NOTE 10 -- INCOME TAXES -- (CONTINUED)
     The components of the provisions for (benefits from) income taxes are as
follows:

<TABLE>
<CAPTION>
                                                            FOR THE YEARS ENDED JANUARY 31,
                                                           ---------------------------------
                                                             2000        1999        1998
                                                           ---------   ---------   ---------
<S>                                                        <C>         <C>         <C>
Current:
  Federal................................................   $(4,428)    $ 2,069     $ 5,965
  State..................................................      (966)        634       1,448
  Canadian...............................................       392         543          --
Deferred:
  Federal and state......................................      (825)     (3,629)     (1,179)
                                                            -------     -------     -------
Net (benefit from) provision for income taxes............   $(5,827)    $  (383)    $ 6,234
                                                            =======     =======     =======
</TABLE>

     Deferred tax assets (liabilities) arise due to the recognition of income
and expense items for tax purposes which differ from those used for financial
statement purposes. At January 31, 2000 and 1999, the net deferred tax asset was
comprised of the following:

<TABLE>
<CAPTION>
                                                                JANUARY 31,
                                                              ---------------
                                                               2000     1999
                                                              ------   ------
<S>                                                           <C>      <C>
Allowance for doubtful accounts.............................  $2,897   $2,454
Shareholder litigation settlement obligation................   1,845    2,112
Revenue recognition method..................................   1,286    1,421
Deferred rent accrual.......................................   1,370    1,153
Vacation pay accrual........................................     310      341
Employee benefits...........................................     259      156
Other accruals..............................................     229       --
                                                              ------   ------
     Total deferred tax assets..............................   8,196    7,637
                                                              ------   ------
Depreciation and amortization...............................    (634)    (499)
Other deferred tax liabilities..............................      --     (401)
                                                              ------   ------
     Total deferred tax liabilities.........................    (634)    (900)
                                                              ------   ------
     Net deferred tax assets................................  $7,562   $6,737
                                                              ======   ======
</TABLE>

     Management believes, based on prior years' earnings and the non-recurring
nature of the past two years' losses, that future income from operations will
more likely than not be sufficient to fully recognize this net deferred tax
asset. The components of the net deferred tax asset include a current and
long-term portion. The long-term portion is included in other long-term assets
in the consolidated balance sheets.

                                      F-19
<PAGE>   55
                        COMPUTER LEARNING CENTERS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 JANUARY 31, 2000, 1999 AND 1998 -- (CONTINUED)

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS, UNLESS OTHERWISE STATED)

NOTE 10 -- INCOME TAXES -- (CONTINUED)
     Differences between effective income tax rates and the statutory U.S.
federal income tax rates are as follows:

<TABLE>
<CAPTION>
                                                                    FOR THE YEARS ENDED
                                                                        JANUARY 31,
                                                                  ------------------------
                                                                  2000      1999      1998
                                                                  ----      ----      ----
<S>                                                               <C>       <C>       <C>
Statutory U.S. federal income tax rate......................      35.0%     35.0%     35.0%
State income taxes, net of federal benefit..................       4.5       6.6       6.4
Taxes on foreign earnings under the U.S. tax rate...........      (0.2)     (2.0)       --
Permanent differences and other.............................       2.5      14.4      (0.4)
                                                                  ----      ----      ----
Effective income tax rate...................................      41.8%     54.0%     41.0%
                                                                  ====      ====      ====
</TABLE>

     The fiscal 1999 effective tax rate is the result of relative higher tax
rates applied to losses sustained in the Company's U.S. operations principally
offset by income from operations of the Company's Canadian subsidiary in 1999.
The statutory rates in Quebec, Canada, are lower than those of the Company's
U.S. operations on a weighted average basis. On an individual country basis,
effective income tax rates for the U.S. and Canada were 41.5% and 38.0% in 2000
and 43.9% and 38.9% in 1999, respectively.

NOTE 11 -- SAVINGS AND EMPLOYEE STOCK PURCHASE PLANS

     The Company maintains a 401(k) plan covering substantially all employees.
Under the terms of the plan, the Company will match 25% of employee
contributions up to a maximum of 6% of annual employee compensation. Company
contributions under the plan aggregated $271, $260 and $99 for 2000, 1999, and
1998, respectively.

     On March 13, 1997, the Board of Directors ("Board") adopted, and on July
10, 1997, the Company's stockholders approved the 1997 Employee Stock Purchase
Plan ("ESPP"). With certain limited exceptions, all full-time employees,
including executive officers, employed by the Company for at least one year, are
eligible to participate in the ESPP. The Company maintains payroll deduction
accounts for all participating employees and an employee may authorize a payroll
deduction in any whole percentage from 1% to 10% of the employee's eligible
compensation, not to exceed $25 per annum. Under the terms of the ESPP, the
Company's Common Stock may be acquired for an amount equal to 85% of the fair
market value per share of Common stock on either the first day or the last day
of the offering period, whichever is lower. The first offering period commenced
on August 1, 1997 and terminated on January 31, 1998. Thereafter, the offering
period commences on February 1 and terminates on January 31, unless otherwise
determined by the Board. A total of 400,000 shares are authorized and available
for purchase under the plan. There were 99,215, 51,064 and 5,392 shares of
Common Stock issued under the ESPP to eligible employees during 2000, 1999 and
1998, respectively.

NOTE 12 -- COMMITMENTS AND CONTINGENCIES

  Active Litigation

     On May 5, 1998, a class action lawsuit was filed against the Company in the
Superior Court of New Jersey in Bergen County, New Jersey. The complaint
alleges, among other things, that the Company, at its Learning Centers located
in the State of New Jersey failed to provide certain educational services and
resources, misrepresented certain information respecting services, resources,
occupational opportunities and student outcomes and violated certain provisions
of the New Jersey Consumer Fraud Act. On November 19,

                                      F-20
<PAGE>   56
                        COMPUTER LEARNING CENTERS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 JANUARY 31, 2000, 1999 AND 1998 -- (CONTINUED)

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS, UNLESS OTHERWISE STATED)

NOTE 12 -- COMMITMENTS AND CONTINGENCIES -- (CONTINUED)
1999, the court certified a class consisting of all persons who, during the six
years immediately preceding the commencement of this action, had enrolled in a
course or courses of study, education or training provided by the Company at its
New Jersey locations for which they incurred tuition expenses. On December 6,
1999, the Company filed a motion with the Appellate Division of the Superior
Court of New Jersey to appeal the November 19, 1999 decision to certify a class.
On January 19, 2000, that motion was denied. The Company is unable to estimate
the outcome of the matter or any potential liability.

     On July 9, 1999, a class action lawsuit was filed against the Company in
the Court of Common Pleas in Philadelphia County, Pennsylvania, on behalf of all
students who attended the Learning Center located on Market Street in
Philadelphia within six years of July 9, 1999, who have not obtained employment
in a computer-related job through the Company's placement services. On August 2,
1999, the case was removed to the United States District Court for the Eastern
District of Pennsylvania. On October 12, 1999, the United States District Court
for the Eastern District of Pennsylvania remanded the case to the Court of
Common Pleas in Philadelphia County, Pennsylvania. The complaint alleges, among
other things, that this Learning Center failed to provide certain educational
services and resources, misrepresented certain information respecting services,
resources, occupational opportunities and student outcomes, and violated certain
provisions of the Pennsylvania Unfair Trade Practices and Consumer Protection
Law. The Company is unable to estimate the outcome of the matter or any
potential liability.

     Between June 1, 1998 and October 31, 1999, the Company was named as
defendant in three other lawsuits in Texas and New Jersey by individual students
or groups of students who formerly attended one of its Learning Centers. In two
of these lawsuits, various present or former officers, directors and employees
of the Company have also been named as defendants. The complaints allege, among
other things, that the Company, at the affected Learning Centers, failed to
provide plaintiffs with certain educational services and resources and
misrepresented certain information respecting services, resources, student
outcomes and violated certain provisions of the applicable state consumer laws.
The Company is unable to estimate the outcome of these matters or any potential
liability.

     In addition to the lawsuits discussed above, the Company is a defendant in
a number of civil lawsuits involving current and former employees and other
third parties, which the Company considers incidental to its business and
unlikely to have a material effect on the Company's future operations. However,
there can be no assurance that these matters will not have a severe impact on
the results of operations of the Company in a future period, depending in part
on the results for such period.

     The Company intends to defend itself vigorously in the lawsuits referred to
above; however, there can be no assurance that the Company will be successful in
defending itself in any of these proceedings. Even if the Company prevails on
the merits in such litigation, the Company has incurred and expects to continue
to incur significant legal and other defense costs as a result of such
proceedings. These proceedings could involve substantial diversion of the time
of some members of management. An adverse determination in, or settlement of,
such litigation could involve the payment of significant amounts, or could
include terms in addition to such payments, or could lead to other adverse
consequences, including the suspension or termination of the Company's licenses
to operate within the respective state, which would have a severe impact on the
Company's business, financial condition and results of operations.

  Settled Litigation

     During fiscal 1999 and 2000, the Company was named as defendant in five
other lawsuits in California, Michigan, Texas and Virginia by individual
students or groups of students who formerly attended one of its

                                      F-21
<PAGE>   57
                        COMPUTER LEARNING CENTERS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 JANUARY 31, 2000, 1999 AND 1998 -- (CONTINUED)

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS, UNLESS OTHERWISE STATED)

NOTE 12 -- COMMITMENTS AND CONTINGENCIES -- (CONTINUED)
Learning Centers. The complaints alleged, among other things, that the affected
Learning Centers failed to provide plaintiffs with certain educational services
and resources and misrepresented certain information respecting services,
resources, and student outcomes and violated certain provisions of the
applicable state consumer laws. During fiscal 2000, these cases were settled
resulting in payments to the former students of immaterial amounts. Settlement
expenses are combined with legal fees and included within general and
administrative expenses in these consolidated financial statements.

     On March 13, 1998, a class action lawsuit was filed against the Company in
the United States District Court for the Central District of California on
behalf of all purchasers of Company Common Stock from October 31, 1997 through
March 10, 1998. Over the following two months, eight additional similar cases
were filed in United States District Courts. The complaints alleged violations
of the Securities Exchange Act of 1934, including allegations that the Company
was experiencing "operations difficulties" and failed to disclose the alleged
difficulties. The complaints also alleged that Company insiders realized profits
by trading their shares of Company stock while in possession of material adverse
information. All of these shareholder lawsuits were consolidated and transferred
to the United States District Court for the Eastern District of Virginia. The
Company entered into a settlement agreement with the plaintiffs in February
1999, whereby the Company settled these allegations and agreed to compensation
to members of the plaintiffs' class. The terms of the settlement, which received
final judicial approval on July 9, 1999 and have been approved by the
plaintiffs, provided for the payment of $3.0 million in cash ($2.35 million was
covered by the Company's insurance policy) and the issuance of 550,000 shares of
CLC Common Stock, subject to certain price protection features, which resulted
in an additional 463,152 shares of CLC Common Stock being issued to guarantee a
total settlement of $7.5 million. All cash settlements were paid in 2000.

  Employee Agreements

     The Company has various employment agreements with certain senior
executives. The employment agreements would entitle the executives to one to two
years of salary and benefits, which would be payable with respect to the year in
which any breach of such agreements occurred, including termination without
cause. In addition, if they were terminated as the result of a change of control
as defined in the agreements, they would receive amounts of one and one half
times base salary or total compensation, as defined.

     During the fourth quarter of 2000, the Company's former Chief Executive
Officer and Chief Financial Officer resigned, which resulted in the Company
incurring $674 of severance expenses. This amount is included in general and
administrative expenses in the fiscal 2000 results of operations. In addition,
the allowable exercise periods of the executives outstanding options were
extended based on the Board of Directors' discretion. The amount of compensation
expense relative to this additional option benefit is immaterial.

  Lease Commitments

     The Company leases substantially all of its facilities and certain of its
office equipment under operating lease agreements. A majority of the operating
leases contain renewal options that can be exercised after the initial lease
term. Renewal options are generally for periods of one to five years. All
operating leases will expire over the next twenty years, and management expects
that leases will be renewed or replaced by other leases in the normal course of
business. There are no material restrictions imposed by the lease agreements.
The Company has not entered into any significant guarantees related to the
leases. The Company is required to make additional payments under certain
operating lease terms for taxes, insurance and other operating expenses incurred
during the operating lease period.
                                      F-22
<PAGE>   58
                        COMPUTER LEARNING CENTERS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 JANUARY 31, 2000, 1999 AND 1998 -- (CONTINUED)

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS, UNLESS OTHERWISE STATED)

NOTE 12 -- COMMITMENTS AND CONTINGENCIES -- (CONTINUED)
     Future minimum rental payments required under operating leases that have
initial or remaining non-cancelable lease terms in excess of one year as of
January 31, 2000 are as follows:

<TABLE>
<S>                                                           <C>
2001........................................................  $ 12,828
2002........................................................    12,298
2003........................................................    10,272
2004........................................................     9,640
2005........................................................     8,923
Thereafter..................................................    48,198
                                                              --------
                                                              $102,159
                                                              ========
</TABLE>

     Rent expense under these lease agreements aggregated $12,960, $9,710, and
$6,299, for 2000, 1999, and 1998, respectively.

NOTE 13 -- STOCK INCENTIVE PLANS

     The Company has a Long-Term Incentive Plan that provides for award of
incentive and nonqualified common stock options and common stock appreciation
rights to certain directors, officers and key employees. The Company has
provided that no further grants may be made under the plan. As of January 31,
2000, options to purchase 95,465 shares of common stock were outstanding under
this plan.

     The 1995 Stock Incentive Plan ("1995 Stock Plan"), provides a variety of
awards, including stock options, stock appreciation rights and restricted and
unrestricted stock grants to the Company's employees, officers, consultants and
advisors. Stock options may be granted either in the form of incentive stock
options or non-qualified stock options. The option exercise price of incentive
stock options may not be less than the fair market value of the common stock on
the date of grant. The Company has reserved 1,460,460 shares of common stock for
grant under the plan. As of January 31, 2000 options to purchase 1,275,858
shares of common stock were outstanding under this plan, and 11,460 options were
available for grant.

     In August 1998 the stockholders' approved the Company's 1998 Stock
Incentive Plan, which provides for the same types of awards as under the 1995
Stock Plan. The Company has reserved 1,000,000 shares of common stock for grant
under this plan. As of January 31, 2000 options to purchase 779,650 shares of
common stock were outstanding under this plan, and 220,350 options were
available for grant.

     The 1995 Non-Employee Directors Stock Option Plan provides for the grant to
each of the current non-employee directors of an option exercisable for shares
of common stock. All options granted under the plan will have an exercise price
equal to the fair market value of the common stock on the date of grant. The
Company has reserved 210,534 shares for issuance under this plan. As of January
31, 2000, options to purchase 181,060 shares of common stock were outstanding
under this plan, and 15,434 options were available for grant.

     Incentive and nonqualified options are exercisable at a price not less than
100% and 50%, respectively, of the fair market value of the common stock at the
date of grant, as determined by the administration committee. Stock appreciation
rights provide for payments equal to the base amount of the right, as determined
by the administration committee. No stock appreciation rights are outstanding.
Options may be granted in tandem with stock appreciation rights; however,
holders of such tandem awards are subject to restrictions on the matter of
exercise as defined in the plan. Generally, stock options and rights vest
ratably over five years. All options and rights must be exercised within ten
years from the date of grant.

                                      F-23
<PAGE>   59
                        COMPUTER LEARNING CENTERS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 JANUARY 31, 2000, 1999 AND 1998 -- (CONTINUED)

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS, UNLESS OTHERWISE STATED)

NOTE 13 -- STOCK INCENTIVE PLANS -- (CONTINUED)
     The Company accounts for stock compensation costs in accordance with the
provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees." Accordingly, no compensation costs have been recognized
for its option plans.

     The following table sets forth pro forma information as if compensation
cost for its stock option plans had been determined based on the fair value at
the grant date for awards consistent with the requirements of SFAS No. 123,
"Accounting for Stock-Based Compensation."

<TABLE>
<CAPTION>
                                                                 FOR THE YEARS ENDED
                                                                     JANUARY 31,
                                                              --------------------------
                                                               2000      1999      1998
                                                              -------   -------   ------
<S>                                                           <C>       <C>       <C>
Net (loss) income -- as reported............................  $(8,121)  $  (571)  $8,971
Net (loss) income -- pro forma..............................   (9,019)   (1,515)   7,270
(Loss) earnings per share -- as reported:
          Basic.............................................  $ (0.45)  $ (0.03)  $ 0.56
          Diluted...........................................    (0.45)    (0.03)    0.52
(Loss) earnings per share -- pro forma:
          Basic.............................................  $ (0.50)  $ (0.09)  $ 0.46
          Diluted...........................................  $ (0.50)  $ (0.09)  $ 0.42
</TABLE>

     The fair value of options at date of grant was estimated using the
Black-Scholes model with the following weighted average assumptions:

<TABLE>
<CAPTION>
                                                                    FOR THE YEARS ENDED
                                                                        JANUARY 31,
                                                                  ------------------------
                                                                  2000      1999      1998
                                                                  ----      ----      ----
<S>                                                               <C>       <C>       <C>
Expected life (years).......................................         5         5         5
Interest rate...............................................       5.9%      4.8%      5.6%
Volatility..................................................      67.3%     64.3%     43.3%
</TABLE>

                                      F-24
<PAGE>   60
                        COMPUTER LEARNING CENTERS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 JANUARY 31, 2000, 1999 AND 1998 -- (CONTINUED)

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS, UNLESS OTHERWISE STATED)

NOTE 13 -- STOCK INCENTIVE PLANS -- (CONTINUED)
     The calculated weighted average fair values of stock options granted during
2000, 1999 and 1998, using the Black-Scholes model, were $1.44, $3.20 and $7.61
per option, respectively.

<TABLE>
<CAPTION>
                                                                             NON      WEIGHTED
                                                              INCENTIVE   QUALIFIED   AVERAGE
                                                                STOCK       STOCK     EXERCISE
                                                               OPTIONS     OPTIONS     PRICES
                                                              ---------   ---------   --------
<S>                                                           <C>         <C>         <C>
Outstanding at February 1, 1997.............................  1,679,162     23,550     $ 5.22
                                                              ---------    -------     ------
  Options granted...........................................    160,050         --      16.43
  Options exercised.........................................   (399,196)        --       2.03
                                                              ---------    -------     ------
Outstanding at January 31, 1998.............................  1,440,016     23,550       7.31
                                                              ---------    -------     ------
  Options granted...........................................    311,505      1,245       5.54
  Options exercised.........................................    (84,935)   (23,550)      3.91
  Options cancelled.........................................     (3,000)        --      10.16
                                                              ---------    -------     ------
Outstanding at January 31, 1999.............................  1,663,586      1,245       6.77
                                                              ---------    -------     ------
  Options granted...........................................    790,650    150,000       2.65
  Options exercised.........................................    (43,950)        --       5.16
  Options cancelled.........................................   (229,498)        --       7.25
                                                              ---------    -------     ------
Outstanding at January 31, 2000.............................  2,180,788    151,245     $ 4.98
                                                              =========    =======     ======
</TABLE>

     The weighted average exercise prices for the nonqualified stock options
outstanding, included above, as of January 31, 2000, 1999 and 1998 was $1.88,
$5.06 and $4.84, respectively. Incentive stock options and nonqualified stock
options exercisable were 1,069,796 and 249 at January 31, 2000, 747,313 and none
at January 31, 1999, and 535,615 and 23,550 at January 31, 1998, respectively.

     The following table summarizes information about options outstanding at
January 31, 2000:

<TABLE>
<CAPTION>
                        OPTIONS OUTSTANDING OPTIONS
                                OUTSTANDING                                OPTIONS EXERCISABLE OPTIONS
                       ------------------------------                              EXERCISABLE
                                         WEIGHTED                        -------------------------------
                                         AVERAGE           WEIGHTED                        WEIGHTED
      RANGE OF           NUMBER         REMAINING          AVERAGE         NUMBER           AVERAGE
   EXERCISE PRICES     OUTSTANDING   CONTRACTUAL LIFE   EXERCISE PRICE   EXERCISABLE   EXERCISABLE PRICE
   ---------------     -----------   ----------------   --------------   -----------   -----------------
<S>                    <C>           <C>                <C>              <C>           <C>
$ 1.84 to $ 2.25.....     829,606       9.4 years           $ 1.87           99,606         $ 1.84
$ 2.26 to $ 6.67.....     839,181       7.6 years             4.16          347,565           3.72
$ 6.68 to $12.00.....     589,946       6.9 years             8.36          564,240           8.30
$12.01 to $22.25.....      73,300       7.4 years            22.25           58,634          22.25
                       ----------       ---------           ------       ----------         ------
                        2,332,033       8.1 years           $ 4.98        1,070,045         $ 6.98
                       ==========       =========           ======       ==========         ======
</TABLE>

                                      F-25
<PAGE>   61
                        COMPUTER LEARNING CENTERS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 JANUARY 31, 2000, 1999 AND 1998 -- (CONTINUED)

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS, UNLESS OTHERWISE STATED)

NOTE 14 -- QUARTERLY FINANCIAL DATA (UNAUDITED)

     As discussed in Note 2, the Company has restated financial statements for
fiscal 1999 and prior. The previously reported fiscal 2000 quarterly periods
have also been restated as follows:

<TABLE>
<CAPTION>
                                                                       FISCAL YEAR 2000
                                                                      THREE MONTHS ENDED
                              ---------------------------------------------------------------------------------------------------
                              APRIL 30,   APRIL 30,   JULY 31,   JULY 31,   OCTOBER 31,   OCTOBER 31,                 JANUARY 31,
                                1999        1999        1999       1999        1999          1999                        2000
                              REPORTED    RESTATED    REPORTED   RESTATED    REPORTED      RESTATED                    RESTATED
                              ---------   ---------   --------   --------   -----------   -----------                 -----------
<S>                           <C>         <C>         <C>        <C>        <C>           <C>           <C>           <C>
Revenues....................   $35,982     $36,289    $32,845    $33,087      $32,955       $32,817                     $32,447
Costs and expenses..........    38,652      38,674     35,341     35,357       35,560        35,504                      38,804
Loss from operations........    (2,670)     (2,385)    (2,496)    (2,270)      (2,605)       (2,687)                     (6,357)
Interest expense, net.......        (9)         (9)       (66)       (66)         (74)          (74)                       (100)
Net loss....................   $(1,568)    $(1,400)   $(1,497)   $(1,363)     $(1,533)      $(1,581)                    $(3,776)
Loss per share:
  Basic and Diluted.........   $ (0.09)    $ (0.08)   $ (0.08)   $ (0.08)     $ (0.08)      $ (0.09)                    $ (0.20)
</TABLE>

<TABLE>
<CAPTION>
                                                                       FISCAL YEAR 1999
                                                                      THREE MONTHS ENDED
                              ---------------------------------------------------------------------------------------------------
                              APRIL 30,   APRIL 30,   JULY 31,   JULY 31,   OCTOBER 31,   OCTOBER 31,   JANUARY 31,   JANUARY 31,
                                1999        1999        1999       1999        1999          1999          2000          2000
                              REPORTED    RESTATED    REPORTED   RESTATED    REPORTED      RESTATED      REPORTED      RESTATED
                              ---------   ---------   --------   --------   -----------   -----------   -----------   -----------
<S>                           <C>         <C>         <C>        <C>        <C>           <C>           <C>           <C>
Revenues....................   $36,056     $35,864    $35,273    $35,371      $37,076       $36,932       $35,946       $36,022
Costs and expenses..........    31,133      31,073     34,025     33,995       36,322        36,256        38,798        38,767
Income (loss) from
  operations................     4,923       4,791      1,248      1,376          754           676        (2,852)       (2,745)
Interest income, net........       284         284        135        135           36            36            58            58
Gain on sale of investment
  securities................       279         279         --         --           --            --            --            --
Litigation settlement
  expense...................      (210)       (210)        --         --           --            --        (5,389)       (5,389)
Cumulative effect of
  accounting change.........        --          --         --         --           --            --          (245)         (245)
Net income (loss)...........   $ 3,143     $ 3,065    $   862    $   938      $   473       $   427       $(5,064)      $(5,001)
Earnings (loss) per share:
  Basic.....................   $  0.18     $  0.18    $  0.05    $  0.05      $  0.03       $  0.02       $ (0.29)      $ (0.29)
  Diluted...................   $  0.17     $  0.17    $  0.05    $  0.05      $  0.03       $  0.02       $ (0.29)      $ (0.29)
</TABLE>

NOTE 15 -- SUBSEQUENT EVENTS

     Due to recurring operating losses and declining student enrollment trends,
the Company announced its intent to close its San Jose, CA Learning Center. This
Learning Center had 114 students at March 31, 2000 and had $1.9 million and $3.5
million in revenues in 2000 and 1999, respectively. The Company expects to incur
expenses of approximately $250 during the quarter ended April 30, 2000 related
to the closing of this Learning Center. The Learning Center is scheduled to
teach existing students through July 31, 2001.

                                      F-26
<PAGE>   62

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

     None

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS

     Information regarding directors of CLC will be set forth in CLC's
definitive Proxy Statement for our 2000 Annual Meeting of the Stockholders which
will be filed pursuant to Regulation 14A within 120 days after the end of CLC's
last fiscal year, and is incorporated herein by reference. The following sets
forth information as of April 30, 2000 concerning our executive officers:

<TABLE>
<CAPTION>
                NAME                  AGE                      POSITION
                ----                  ---                      --------
<S>                                   <C>   <C>
John L. Corse                         58    President, Chief Executive Officer and Director
Mark M. Nasser                        35    Vice President and Chief Financial Officer
Susan L. Luster                       48    Vice President of Operations
Marie A. Bennett                      51    Vice President of Regulatory Compliance
Harry H. Gaines                       62    Chairman of the Board of Directors
</TABLE>

     Mr. Corse joined CLC in November 1998 as President and Chief Operating
Officer and has served as a Director of CLC since October 1994. Mr. Corse was
appointed Chief Executive Officer of CLC in February 2000. Since September 1997,
Mr. Corse had been a self-employed business consultant. From February 1995 to
August 1997, he served as President of Hughes Advanced Systems, a subsidiary of
Hughes Aircraft Corporation and a provider of information systems and services
to businesses. From 1993 to 1995, Mr. Corse was a self-employed business
consultant. From 1992 to 1993, he served as President and Chief Executive
Officer of Security Software America, Inc., a software publisher serving
government contractors and government agencies. From 1990 to 1992, Mr. Corse was
a self-employed business consultant.

     Mr. Nasser joined CLC in 1992 as Controller of CLC. He was promoted to Vice
President, Chief Financial Officer and Secretary of CLC in January 2000. Prior
to CLC, he served as Controller of ESI Engineering Services, Inc., a commercial
subsidiary of Planning Research Corporation ("PRC"), now PRC/ Litton, Inc. Prior
to that, Mr. Nasser served in various financial management capacities in PRC's
Government Services Division. Mr. Nasser is a Certified Public Accountant.

     Ms. Luster joined CLC in November 1995 as Vice President. She served as
Chief Operating Officer of CLC from November 1995 until November 1998. From
April 1994 to November 1995, she was a partner of Tower Technologies, Inc., an
information technology consulting company. From January 1992 to April 1994, she
was Senior Vice President of Infodata Systems, Inc., a document management
software company, and from May 1986 to January 1992, she served as Senior Vice
President of Operations with AGS Information Services, a systems development
company.

     Ms. Bennett joined CLC in December 1998 as Vice President of Regulatory
Compliance. From February 1998 to December 1998, she was Title IV Project
Liaison for National Computer Systems, Inc. From September 1995 to October 1997
she served as Director of Education for ACCSCT, a national accreditation agency.

     Mr. Gaines has been Chairman of the Board of Directors since October 1994
and has served as a director since 1987. From 1987 to October 1994 and from 1988
to October 1994, he served as President and Chief Executive Officer of CLC and
of Mohr Development Incorporated, respectively. From 1989 through September
1995, Mr. Gaines served as President of Blessing/White.

                                       I-1
<PAGE>   63

ITEM 11.  EXECUTIVE COMPENSATION

     This information required by this Item 11 concerning remuneration of CLC's
officers and directors and information concerning material transactions
involving such officers and Directors is incorporated herein by reference to
CLC's definitive Proxy Statement for its 2000 Annual Meeting of Stockholders
which will be filed pursuant to Regulation 14A within 120 days after the end of
fiscal 2000.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information required by this Item 12 concerning the stock ownership of
management and five percent beneficial owners is incorporated herein by
reference to CLC's definitive Proxy Statement for its 2000 Annual Meeting of
Stockholders which will be filed pursuant to Regulation 14A within 120 days
after the end of fiscal 2000.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

EMPLOYMENT AGREEMENTS

     The Company has various employment agreements with certain senior
executives. The employment agreements would entitle the executives to one to two
years of salary and benefits, which would be payable with respect to the year in
which any breach of such agreements occurred, including termination without
cause. In addition if they were terminated as the result of a change of control
as defined in the agreements, they would receive amounts of one and one half of
base salary or total compensation, as defined.

     In January 2000, the Company's former Chief Executive Officer and Chief
Financial Officer resigned, which resulted in the Company incurring $674 of
severance expenses. These amounts have been recorded in the Company's fiscal
2000 results of operations.

OTHER RELATED PARTY TRANSACTIONS

     We have adopted a policy that all transactions between CLC and its
officers, directors and other affiliates must be approved by a majority of the
members of CLC's Board of Directors and by a majority of the disinterested
members of CLC's Board of Directors and on terms no less favorable to us than
could be obtained from unaffiliated third parties. In addition, this policy
requires that any loans by CLC to our officers, directors or other affiliates be
for bona fide business purposes only.

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

     The following documents are filed as part of this report:

     A.  Consolidated Financial Statements, see index in Item 8 on page F-1

        (1) Report of Independent Accountants

        (2) Consolidated Financial Statements

           (a) Consolidated Statements of Operations for the years ended January
               31, 2000, 1999 and 1998;

           (b) Consolidated Balance Sheets as of January 31, 2000 and 1999;

           (c) Consolidated Statements of Stockholders' Equity as of January 31,
               2000, 1999, 1998 and 1997;

           (d) Consolidated Statements of Cash Flows for the years ended January
               31, 2000, 1999 and 1998;

           (e) Notes to Consolidated Financial Statements

     B.  Consolidated Financial Statement Schedules, see index in Item 8 on page
         F-1

                                       I-2
<PAGE>   64

     C.  Exhibits

<TABLE>
<CAPTION>
EXHIBIT
NUMBER             DESCRIPTION OF EXHIBIT                   SEQUENTIALLY NUMBERED PAGE
-------            ----------------------                   --------------------------
<S>       <C>                                        <C>
2.1       Asset Purchase Agreement dated November    Incorporated by reference to Exhibit 2 of
          7, 1997, by and among the Company, BEC,    the Registrant's Form S-3 Registration
          CTG, David F. Carney and Sandra E. Carney  Statement filed January 22, 1998 (No.
                                                     333-44729)

2.2       Asset Purchase Agreement dated December    Incorporated by reference to Exhibit 99.1
          31, 1997 by and among the Company,         of the Company's Current Report on Form
          Markerdowne Corporation, Graeme Dorras,    8-K filed March 10, 1998 (the "Form 8-K")
          Randy Proto and Chris Coutts

2.3       Amended and Restated Share Purchase        Incorporated by reference to Exhibit 99.2
          Agreement dated February 20, 1998 by and   of the Form 8-K
          among Computer Learning Centers, Inc.,
          Computer Learning Centers of Quebec,
          Inc., Delta College, Inc., Roger Matte,
          Marie Josee-Matte, Dominique Matte,
          Johanne Matte, Suzanne Matte and Dolmen
          (1994) Inc.

3.1       Second Amended and Restated Certificate    Incorporated by reference to Exhibit 3.1
          of Incorporation, as amended               of the Registrant's report on Form 10-Q
                                                     for the quarter ended July 31, 1997 filed
                                                     September 9, 1997

3.2       Second Amended and Restated Certificate    Incorporated by reference to Exhibit 3.3
          of Incorporation of the Registrant         of the Registrant's Report on Form 10-Q
                                                     filed July 14, 1995 (the "1995 Form
                                                     10-Q")

3.3       Amended and Restated Bylaws of the         Incorporated by reference to Exhibit 3.4
          Registrant                                 of the Registrant's Form S-1 Registration
                                                     Statement, as amended, filed March 29,
                                                     1995 (No. 33-90716) (the "Form S-1")

4.1       Form of Certificate for Shares of          Incorporated by reference to Exhibit 4.1
          Registrant's Common Stock                  of Form S-1

10.1      Severance Agreement, dated January 15,     Incorporated by reference to Exhibit 10
          1998, by and between Charles L. Cosgrove   of the Registrant's S-3 Registration
          and the Registrant                         Statement filed January 22, 1998

10.2*     Long-Term Incentive Plan, as amended       Incorporated by reference to Exhibit 10.1
                                                     of the Form S-1

10.3*     1995 Stock Incentive Plan, as amended by   Incorporated by reference to Exhibit 10.1
          the Board of Directors on March 23, 1996   of the Registrant's Report on Form 10-Q
                                                     filed June 13, 1996

10.4*     1995 Non-Employee Directors Stock Option   Incorporated by reference to Exhibit 10.3
          Plan                                       of the Form S-1

10.5      Second Amended and Restated Shareholders'  Incorporated by reference to Exhibit 10.1
          Agreement                                  of the 1995 Form 10-Q

10.6      Assignment Agreement, dated as of          Incorporated by reference to Exhibit 10.6
          February 27, 1995, by and among Blessing/  of the Form S-1
          White Inc., Harry H. Gaines and the
          Registrant
</TABLE>

                                       I-3
<PAGE>   65

<TABLE>
<CAPTION>
EXHIBIT
NUMBER             DESCRIPTION OF EXHIBIT                   SEQUENTIALLY NUMBERED PAGE
-------            ----------------------                   --------------------------
<S>       <C>                                        <C>
10.7      Voting Agreement dated May 5, 1995 by and  Incorporated by reference to Exhibit
          among General Atlantic Corporation,        10.16 of the Form S-1
          General Atlantic Partners II, L.P. and
          GAP-CLC Partners, L.P.

10.8      Stock Repurchase Agreement, dated May 5,   Incorporated by reference to Exhibit
          1995, by and between Bankers Trust         10.17 of the Form S-1
          (Delaware) and the Registrant

10.9      Stock Repurchase Agreement, dated May 5,   Incorporated by reference to Exhibit
          1995 by and between BancBoston Capital,    10.18 of the Form S-1
          Inc. and the Registrant

10.10     Stock Repurchase Agreement, dated May 5,   Incorporated by reference to Exhibit
          1995 by and between GAP-CLC Partners,      10.19 of the Form S-1
          L.P. and the Registrant

10.11     Tax Sharing and Indemnification Agreement  Incorporated by reference to Exhibit
          by and between the Registrant and          10.26 of the Form 1996 10-K
          Blessing/White, Inc.

10.13     Employment Agreement, dated February 1,    Incorporated by reference to Exhibit
          1997, by and between Reid Bechtle and the  10.33 of the Registrant's Form 10-K filed
          Registrant                                 April 30, 1997

10.15     Severance Agreement, dated June 15, 1998,  Incorporated by reference to Exhibit 10.1
          by and between Susan L. Luster and the     of the Form 10-Q filed September 14, 1998
          Registrant

10.16     Severance Agreement, dated November 3,     Incorporated by reference to Exhibit
          1998, by and between John L. Corse and     10.16 of the Form 10-K filed May 3, 1999
          the Registrant

10.17*    1998 Stock Incentive Plan                  Incorporated by reference to Exhibit 99.1
                                                     of the Registrant's Form S-8 filed
                                                     December 23, 1998

10.18     Severance Agreement, dated July 20, 1999   Incorporated by reference to Exhibit 10.2
          by and between Christine Strachota and     of the Registrant's report on Form 10-Q
          the Registrant                             for the quarter ended July 31, 1999 filed
                                                     September 13, 1999.

10.20     Stipulation and Agreement of Settlement,   Incorporated by reference to Exhibit
          dated February 17, 1999, by and between    10.20 of the Form 10-K filed May 3, 1999
          Ganesh, L.L.C., et al., On Behalf of
          themselves and All Others Similarly
          Situated and the Registrant (Civil Action
          No. 98-859-A filed in the U.S. District
          Court-Eastern District of Virginia)

10.21     First Amendment of Credit Agreement,       Incorporated by reference to Exhibit 10.1
          dated October 31, 1998 by and between      of the Registrant's report on Form 10-Q
          First Union National Bank and the          for the quarter ended April 30, 1999
          Registrant                                 filed June 14, 1999
</TABLE>

                                       I-4
<PAGE>   66

<TABLE>
<CAPTION>
EXHIBIT
NUMBER             DESCRIPTION OF EXHIBIT                   SEQUENTIALLY NUMBERED PAGE
-------            ----------------------                   --------------------------
<S>       <C>                                        <C>
10.22     Second Amendment of Credit Agreement,      Incorporated by reference to Exhibit 10.2
          dated June 10, 1999 by and between First   of the Registrant's report on Form 10-Q
          Union National Bank and the Registrant     for the quarter ended April 30, 1999
                                                     filed June 14, 1999

10.23     Second Amended and Restated Credit         Filed herewith
          Agreement, dated May 15, 2000 by and
          between First Union National Bank and the
          Registrant

10.24     First Loan Modification Agreement, dated   Filed herewith
          January 29, 2000 by and between First
          Union National Bank and the Registrant

10.25     Second Amended and Restated Pledge and     Filed herewith
          Security Agreement dated May 15, 2000 by
          and between First Union National Bank and
          the Registrant

10.26     Severance Agreement, dated January 15,     Filed herewith
          2000, by and between Mark M. Nasser and
          the Registrant

10.27     Severance Agreement, dated October 27,     Filed herewith
          1999, by and between Marie Bennett and
          the Registrant

10.28     Third Amended and Restated Revolving       Filed herewith
          Credit Note dated May 15, 2000 by and
          between First Union National Bank and the
          Registrant

21.1      List of subsidiaries                       Incorporated by reference to Exhibit 21.1
                                                     of the Form S-1

23.1      Consent of PricewaterhouseCoopers LLP      Filed herewith

27        Financial Data Schedule                    Filed herewith

99.1*     Computer Learning Centers, Inc. Employee   Incorporated by reference to Exhibit 99.1
          Stock Purchase Plan dated July 10, 1998    of the Registrant's Form S-8 Registration
                                                     Statement filed December 31, 1997
          * This exhibit is a compensatory plan or
            arrangement in which executive officers
            or directors of the Registrant
            participate.
</TABLE>

     D.  Reports on Form 8-K

<TABLE>
<CAPTION>
   REPORT DATE                          EVENT REPORTED
   -----------                          --------------
<S>                <C>
November 4, 1999   The Registrant announced that it had retained an
                   investment bank to explore opportunities to maximize
                   shareholder value, including the possible sale of the
                   Company.

December 31, 1999  The Registrant entered into an Amended and Restated
                   Credit Agreement with its commercial bank lender.
</TABLE>

                                       I-5
<PAGE>   67

                                  SCHEDULE II
                        COMPUTER LEARNING CENTERS, INC.
                       VALUATION AND QUALIFYING ACCOUNTS
                         (DOLLAR AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                     BALANCE AT    CHARGED TO
                                                    BEGINNING OF   COSTS AND       NET       BALANCE AT
                                                        YEAR        EXPENSES    WRITE-OFFS   END OF YEAR
                                                    ------------   ----------   ----------   -----------
<S>                                                 <C>            <C>          <C>          <C>
January 31, 1998
  Allowance for doubtful accounts.................     2,250         4,794        (3,131)       3,913
January 31, 1999
  Allowance for doubtful accounts.................     3,913         8,388        (4,168)       8,133
January 31, 2000
  Allowance for doubtful accounts.................     8,133         8,911        (7,145)       9,899
</TABLE>

     The Company's allowance for doubtful accounts at January 31, 2000 and 1999
includes amounts applicable to current accounts receivable ($8,178 and $5,999,
respectively) and long-term accounts receivable ($1,721 and $2,134,
respectively).

                                       I-6
<PAGE>   68

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                          COMPUTER LEARNING CENTERS, INC.

                                          By:       /s/ JOHN L. CORSE
                                            ------------------------------------
                                                       John L. Corse
                                               President and Chief Executive
                                                           Officer

Dated: May 16, 2000

     Pursuant to the requirements of the Securities Act of 1934, this report has
been signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
                      SIGNATURE                                       TITLE                    DATE
                      ---------                                       -----                    ----
<C>                                                      <S>                               <C>

                  /s/ JOHN L. CORSE                      President, Chief Executive        May 16, 2000
-----------------------------------------------------    Officer, and Director (Principal
                    John L. Corse                        Executive Officer)

                 /s/ MARK M. NASSER                      Vice President, Chief Financial   May 16, 2000
-----------------------------------------------------    Officer and Controller
                   Mark M. Nasser                        (Principal Financial Officer)

                 /s/ HARRY H. GAINES                     Director                          May 16, 2000
-----------------------------------------------------
                   Harry H. Gaines

                 /s/ RALPH W. CLARK                      Director                          May 16, 2000
-----------------------------------------------------
                   Ralph W. Clark

                 /s/ REID R. BECHTLE                     Director                          May 16, 2000
-----------------------------------------------------
                   Reid R. Bechtle

               /s/ STEPHEN P. REYNOLDS                   Director                          May 16, 2000
-----------------------------------------------------
                 Stephen P. Reynolds
</TABLE>

                                       S-1