### FORM 10-K

### SECURITIES AND EXCHANGE COMMISSION

### WASHINGTON, D.C. 20549

(Mark One)

|[X]   | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]       
|----- | ----------------------------------------------------------------------------------------------------------
|      | For the fiscal year ended December 31, 2000 OR                                                            
|      |                                                                                                           
|[   ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the transition period from Not Applicable to
________________________

Commission file number 0-17840

NEW HORIZONS WORLDWIDE, INC.
(Exact name of Registrant as specified in its charter)

|Delaware                                                       |                | 22-2941704                          
|-------------------------------------------------------------- | -------------- | ------------------------------------
|(State of other jurisdiction of incorporation or organization) |                | (I.R.S. Employer Identification No.)
|                                                               |                |                                     
|1231 East Dyer Road, Santa Ana, California                     |                | 92705                               
|(Address of principal executive offices)                       |                | (Zip Code)                          
|                                                               |                |                                     
|Registrant's telephone number, including area code:            | (714) 432-7600

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

|Title of each Class | Name of each exchange on which registered
|------------------- | -----------------------------------------
|Not Applicable      | Not Applicable                           

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

Common Stock, $.01 Par Value
Title of Class

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

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

The aggregate market value of the Common Stock held by  non-affiliates  of the Registrant as of March 23, 2001 was approximately
$110,541,102  computed  on the basis of the last  reported  sales  price per share  ($15.50)  of such stock on The Nasdaq  Stock
Market.

The number of shares of the
Registrants Common Stock outstanding as of March 23, 2001 was 9,960,397.

DOCUMENTS OR PARTS THEREOF INCORPORATED BY REFERENCE

|Part of Form 10-K                  | Documents Incorporated  by Reference                                                                                                              
|---------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------
|Part III (Items 10, 11, 12 and 13) | Portions of the Registrants definitive Proxy Statement to be used in connection
with its Annual Meeting of Stockholders to be held on May 8, 2001

NEW HORIZONS WORLDWIDE, INC.
INDEX TO ANNUAL REPORT
ON FORM 10K

PART I

|Item 1.  | Business                                                                               | 1 
|-------- | -------------------------------------------------------------------------------------- | --
|         | General                                                                                | 1 
|         | Information Technology Education and Training Market                                   | 2 
|         | New Horizons Business Model                                                            | 2 
|         | Company-Owned Training Centers                                                         | 3 
|         | Franchising                                                                            | 3 
|         | Customers                                                                              | 6 
|         | Sales and Marketing                                                                    | 6 
|         | Training Authorizations                                                                | 7 
|         | Competition                                                                            | 7 
|         | Information About Forward-Looking Statements                                           | 8 
|         | Regulations                                                                            | 8 
|         | Insurance                                                                              | 8 
|         | Trademarks                                                                             | 9 
|         | Employees                                                                              | 9 
|Item 2.  | Properties                                                                             | 9 
|Item 3.  | Legal Proceedings                                                                      | 9 
|Item 4.  | Submission of Matters to a Vote of Security Holders                                    | 9 
|PART II 
|Item 5.  | Market for Registrant's Common Equity and Related Shareholder Matters                  | 10
|Item 6.  | Selected Consolidated Financial Data                                                   | 11
|Item 7.  | Management's Discussion and Analysis of Financial Condition and Results of Operations  | 12
|Item 7A. | Quantitative and Qualitative Disclosures About Market Risk                             | 16
|Item 8.  | Financial Statements and Supplementary Data                                            | 16
|Item 9.  | Changes in and Disagreements with Accountants on Accounting and Financial   Disclosure | 16
|PART III
|Item 10. | Directors and Executive Officers of the Registrant                                     | 19
|Item 11. | Executive Compensation                                                                 | 20
|Item 12. | Security Ownership of Certain Beneficial Owners and Management                         | 20
|Item 13. | Certain Relationships and Related Transactions                                         | 20
|PART IV 
|Item 14. | Exhibits and Reports on Form 8-K                                                       | 21
|         | SIGNATURES                                                                             | 22

### PART I

## ITEM 1.  BUSINESS

This Annual Report on Form
10-K contains forward-looking statements which involve risks and uncertainties.
The Companys actual results may differ significantly from the results
discussed in the forward-looking statements. Factors that may cause such a
difference include, but are not limited to, those discussed throughout this
document and under the caption Information About Forward-Looking
Statements.

New Horizons Worldwide,
Inc., (the Company or New Horizons) formerly Handex
Corporation, through various subsidiaries, both owns and franchises computer
training centers. The Company sold its environmental business segment and
changed its name to New Horizons in late 1996, in order to concentrate its
resources on the technology training market. The Companys common stock
trades on The Nasdaq Stock Market under the symbol NEWH.

## GENERAL

New Horizons 2000
system-wide revenues of $530 million makes it the largest independent provider
in the fragmented PC software applications and technical certification training
industry. Through various subsidiaries, the Company both owns and franchises
computer training centers. Through these training centers the Company offers a
variety of flexible training choices including instructor-led training,
Internet-based training, often referred to as eLearning, computer-based training
via CD-ROM, computer labs, certification exam preparation tools, and 24-hours,
seven-days-a-week, free help desk support. The goal of the training is to
deliver to the student information and skills which have immediate and practical
value in the workplace.

The New Horizons worldwide
network delivered over 2.8 million student-days of information technology
training in 2000, generating system-wide revenues, which include both the
results of company-owned and franchised operations, of $530 million, up 21.8%
from $435 million in 1999. The network has over 2000 classrooms, 2,700
instructors and 2,100 account executives.

New Horizons specializes in
instructor-led training which is the industrys dominant delivery method
for information technology training. The Company has become a leader in the
industry by developing the processes for delivering quality training for the
largest technology training segments: PC software applications and technical
certification training. The networks training centers offer a broad range
of courses for several of the major software vendors, including Microsoft,
Novell, Lotus, Cisco, Linux, Adobe, Aldus, Apple Computer, Corel, Symantec, Sun
Microsystems, and Unix. New Horizons has the largest network of Microsoft
Certified Technical Education Centers and Novell Authorized Education Centers in
the world. Additionally, with certification testing becoming increasingly
important, New Horizons also has established the largest number of Authorized
Prometric Testing Centers in the world. Classes can be held at New Horizons
locations or on-site at the clients facility. Curriculum can be tailored
to the clients specific needs. The Company can also provide training and
courseware for the customers proprietary software. Additionally, using its
courseware as the source material, the Company has entered into an arrangement
with a company to develop its own line of computer-based products, entitled
Masterware, which became available to franchisees for sale in the third quarter
of 1997. The Company also has a reseller agreement with a company that has an
extensive offering of computer-based training courses that will prepare
customers for certification exams.

New Horizons owns and
operates 26 computer training facilities located in Santa Ana, Burbank, Los
Angeles, Long Beach, Sacramento, Stockton, Modesto and Redding, California;
Albuquerque, New Mexico; Charlotte, North Carolina; San Antonio, Texas; and
Denver, Englewood, Broomfield, Loveland and Colorado Springs, Colorado; two in
Chicago, Illinois; Cleveland and Akron, Ohio; two in New York City, New York;
Memphis, Jackson and Nashville, Tennessee; and Hartford, Connecticut. On January
31, 2001, the Company also purchased the business conducted by its franchisee in
Indianapolis, Indiana.

As of December 31, 2000,
the Companys franchisees operated 138 locations in the United States and
Canada and 116 locations in 42 other countries around the world. An additional
25 franchises had been sold as of that date and are scheduled for future
openings.

Page 1

The Company was
incorporated in Delaware on December 15, 1988, and its principal executive
offices are located 1231 East Dyer Road, Suite 140, Santa Ana, California 92705.
The Company maintains a website at http://www.newhorizons.com.

## THE
INFORMATION TECHNOLOGY EDUCATION AND TRAINING MARKET

The rapidly growing role of
information technology in business organizations and the emergence of the
Internet are creating significant and increasing demand for information
technology training. A 2000 International Data Corporation (IDC)
study estimated that in 1999 the worldwide market for information technology
education and training was about $19.4 billion and is expected to grow at a pace
of 12% per year to over $34 billion in the year 2004.

The growing need for
technology training is driven by several developments including: (i) increased
use of computers in the workplace requiring employees to acquire and apply
information technology skills; (ii) rapid and complex technological changes in
operating systems, new software development, and technical training; (iii)
continuing emphasis by industry on productivity, increasing the number of
functions being automated throughout organizations; (iv) greater focus by
organizations on core competencies with a shifting emphasis to outsourcing of
non-core activities; (v) corporate downsizing requiring remaining personnel to
develop a greater variety of skills; (vi) increasing interest in information
technology certification from both a companys and an employees
perspective; and (vii) development of the Internet.

Although a significant
portion of technology training is provided by in-house training departments,
IDC, in its study, identified a decided shift towards outsourcing to external
training professionals. This outsourcing is motivated by several factors,
including: (i) the lack of internal trainers experienced in the latest software;
(ii) the cost of maintaining an in-house staff of trainers; and (iii) the cost
of developing and maintaining internal courseware.

Organizations are searching
out and selecting outside technology training services that can provide the
following: (i) cost effective delivery of high quality instruction; (ii)
qualified, technically expert instructors; (iii) flexibility to deliver a
consistent training product at geographically dispersed facilities; (iv) ability
to tailor the training products to specific customers needs; (v)
definitive, current courseware; (vi) testing and certification of technical
competency; (vii) effective training methods delivering knowledge and skills
with immediate practical value in the workplace; (viii) a depth and breadth of
curriculum; and (ix) flexible and convenient scheduling of classes.

Instructor-led classroom
training is the dominant delivery method for technology training in the U.S.
with 71% of the information technology education market according to the 2000
IDC report. IDC projects that instructor-led training will continue to maintain
a significant share of the market because trainees value the personalized
attention, interaction with classmates and instructors, and insulation from
workplace interruptions. While IDC projects instructor-led training will
continue to be the leading delivery method in the market through 2002, the role
of technology-based training, primarily consisting of eLearning and
computer-based training, is gaining greater acceptance. IDC estimates that
technology-based training will have 51% of the information technology education
market by 2004 while instructor-led classroom training will have 40%.

## THE NEW
HORIZONS BUSINESS MODEL

New Horizons
company-owned and franchised operations both provide an instructor-led training
delivery system to customers that is executed by certified employee instructors
primarily in fully equipped classrooms maintained by New Horizons or its
franchises. Approximately 10% of classes are given on site at the
customers location. New Horizons often supplies the computer hardware for
these on-site classes.

Curriculum is centered on
technical certification programs (approximately 54%) and software applications
(approximately 46%). Classes are concise, generally ranging from one to five
days, and are designed to be intensive skill-building experiences. The Company
offers a broad array of information technology courses covering the most popular
software applications and technical certification programs. The Company also
provides customized training for customers proprietary software
applications. The Company believes it offers more classes more often than any
other company in the industry.

Page 2

In addition to certified
instructors and broad curriculum, the New Horizons business model is designed to
provide its customers significant training value by featuring: (i) guaranteed
training through the Companys free, six-month repeat privileges; (ii)
skills assessment for both standard or proprietary software; (iii) professional certification training;
(iv) the largest network of authorized training centers in the industry; (v)
free, 24 hours-a-day, seven-days-a-week help desk service for a full sixty-day
period after a class has been completed; (vi) on-site training at
customers facilities; (vii) customized courseware from a library of over
1,400 titles in 14 languages; (viii) club memberships providing a series of
classes for one platform at one low price; (ix) flexible scheduling including
evening and weekend classes; (x) the CES program which coordinates a
national/international referral system and delivery network of training for
major clients which have training requirements in multiple locations; and (xi)
its integrated eLearning program which allows customers to integrate the
delivery methodology between instructor-led training and technology-based
training.

Realizing the impact of the
Internet and growing customer demand for eLearning, New Horizons is introducing
an Internet learning program consisting of two components: New Horizons Online
LIVE Learning and New Horizons Online Learning. Online LIVE Learning is
synchronous, interactive classrooms on the Web featuring
instructor-facilitated classes delivered over the Internet. Online Learning is
asynchronous instruction, identical in content to our classroom instruction, but
self-paced and available to those students who prefer a more independent
learning method.

The Company has
historically grown through the sale of franchises, the opening of new
company-owned facilities, the buyback of franchises in certain markets, and
revenue growth from the existing training centers. Revenues at locations open
more than twelve months grew approximately 17%, up from 15% in 1999. The Company
believes a mix of franchised and company-owned centers will enable it to combine
the accelerated expansion opportunities provided by franchising while
maintaining ownership of a significant number of training centers. The Company
plans to continue to grow through (i) improvement of revenues and profits at
both current company-owned and franchised operating locations; (ii) the sale of
additional franchises; (iii) the selective buyback of existing franchises in the
United States which have demonstrated the ability to achieve above average
profitability while increasing market share, and (iv) the potential acquisition
of companies in similar or complementary businesses.

## Company-Owned
Training Centers

At the end of 2000 the
Company owned and operated 26 training centers that generated $111.3 million in
revenue up from $86.5 million in 1999. No new locations were acquired or opened
in 2000 and the locations open at the end of 2000 were as follows:

|California  | Connecticut | Illinois    | Colorado         | Ohio      | Tennessee
|----------- | ----------- | ----------- | ---------------- | --------- | ---------
|Santa Ana   | Hartford    | Chicago     | Denver           | Cleveland | Memphis  
|Los Angeles |             | Rosemont    | Englewood        | Akron     | Nashville
|Burbank     |             |             | Broomfield       |           | Jackson  
|Long Beach  |             |             | Colorado Springs |           |          
|Sacramento  |             |             | Loveland         |           |          
|Stockton    |             |             |                  |           |          
|Modesto     |             |             |                  |           |          
|Redding     |             |             |                  |           |          
|            |             |             |                  |           |          
|
|Albuquerque | Charlotte   | San Antonio | New York City(2) |           |          

The acquisitions were a
result of the Companys strategy to acquire well performing franchises in
select United States markets. The selling shareholders, other than the former
owners of the Albuquerque, Sacramento and Stockton franchises, have continued to
manage the acquired training centers, and will receive additional consideration
if certain performance criteria are met. The acquisitions have been recorded
using the purchase method of accounting and the operating results have been
included in the Companys financial statements from the date of
acquisition. On January 31, 2001 the Company also purchased the business
conducted by its franchisee in Indianapolis, Indiana.

## Franchising

At the end of 2000 the
Company supported a worldwide network of independent franchises which provide
information technology training at 254 locations in 44 countries. There were an
additional 25 franchised locations which had been sold and which are scheduled
to open at various times during 2001. The franchisee is given a non-exclusive
license and franchise to participate in
and use the business model and sales system developed and refined by the
Company. The Company initially offered franchises for sale in 1991 and sold its
first franchise in 1992. The Company had 194 franchised locations operating at
the end of 1998; 204 at the end of 1999; and 254 at the end of 2000, of which
138 were in the United States and Canada and 116 were abroad.

Page 3

The offer and sale of
franchises are subject to regulation by the United States Federal Trade
Commission and certain foreign countries. There also exist numerous state laws
that regulate the offer and sale of franchises and business opportunities, as
well as the ongoing relationship between franchisors and franchisees, including
the termination, transfer, and renewal of franchise rights. The failure to
comply with these laws could adversely affect the Companys operations.

New Horizons estimates the
initial investment required to acquire and start a franchise operation,
including the initial franchise fee, ranges from approximately $250,000 to
$450,000.

United States and Canada

Franchise Fees

A franchisee in the United
States and Canada is charged an initial franchise fee and ongoing monthly
royalties, which become effective a specified period of time after the center
begins operation. The initial franchise fee is based on the size of the
territory granted as defined in the Franchise Agreement. In the United States
and Canada, the size of a territory is measured by the number of personal
computers (PCs) in the territory. The initial franchise fee
for a start-up center for a Type 1 territory (150,000 or more PCs) is
$75,000; for a Type 2 territory (75,000 to 149,999 PCs) is $50,000; and a
Type 3 territory (50,000 to 75,000 PCs) is $25,000. Entrepreneurs
converting an existing training center to a New Horizons center receive a 20%
reduction in the initial fee as a conversion allowance. Based on information
furnished by IDC concerning the number of PCs in various geographic areas,
as of December 31, 2000, the Company has identified 25 Type 1 territories, 23
Type 2 territories, and 16 Type 3 territories as the remaining territories
currently available for sale as franchises in the United States and Canada.

The initial franchise fee
is payable upon execution of the Franchise Agreement and is not refundable under
any circumstances. The territory is a limited exclusive territory in
that New Horizons agrees not to own or franchise any other New Horizons Computer
Learning Center provided the franchisee operates in compliance with the terms of
its franchise agreement. The geographic boundaries of a territory are typically
determined by United States Postal Service zip codes. Unless the Franchise
Agreement terminates or is amended by mutual agreement, a territory will not be
altered. Franchises are expected to market their business to customers located
within the defined territory and not to customers within territories of other
New Horizons franchises or affiliates. Franchisees generally have six months
from the date of the execution of the Franchise Agreement to open a center.

Royalties

In addition to the initial
franchise fee, franchisees pay the following fees to New Horizons: (i) a monthly
continuing royalty fee, consisting of the greater of 3% to 6% of monthly gross
revenues or a minimum flat fee of $1,500 for a Type 1 territory or $1,000 for a
Type 2 and Type 3 territory; (ii) a monthly marketing and advertising fee of 1%
of gross revenues; and (iii) a course materials and proprietary computer-based
training products surcharge of 9% of the gross revenues from course materials
and proprietary computer-based training products sold to third parties. Each
franchisee also pays a $50 per month maintenance fee for customized software
developed and maintained by New Horizons. The 6% royalty fee rate was effective
for franchises sold during September 1996 or later.

Franchise Agreement

The Franchise Agreement
runs for an initial term of ten years and is renewable for additional five-year
terms. The franchise is exclusive within the specific defined territory and is
subject to a number of limitations and conditions. These limitations and
conditions include, but are not limited to: (i) staffing requirements, including
a General Manager plus a minimum number of account executives based on the
territory type; (ii) a minimum number of classrooms depending on the territory
type; (iii) full-time and continuous operations; (iv) a pre-defined minimum
required curriculum; (v) computer equipment and system requirements; (vi)
signage and display material requirements; (vii) minimum insurance requirements;
and (viii) record keeping requirements. The agreement also contains
non-competition restrictions which bar: (i) competing with New Horizons during
the term of the Franchise Agreement and for one year after termination of the
franchise within a 25 mile radius of any New Horizons center; (ii) diverting or
attempting to divert any customer or business of the franchise
business to any competitor; (iii) performing any act that is injurious or
prejudicial to the goodwill associated with the New Horizons service marks or
operating system; and (iv) soliciting any person who is at that time employed by
the franchisor or any of its affiliated corporations to leave his or her
employment. In addition, there are certain restrictions on the franchisees
rights to transfer the franchise license. New Horizons also maintains a
right of first refusal if a transfer effects a change of control.
The agreement also contains default and termination remedies.

Page 4

International

Franchise Fees

Initial franchisee fees and
territories for international franchises are market/country specific. While the
Company does have some unit franchises internationally, the Company has
predominantly entered into Master Franchise Agreements providing franchisees
with the right to award subfranchises to other parties within a particular
region. The Master Franchisee pays an initial master franchise fee that is based
upon the expected number of subfranchises to be sold. The master franchise fee
is then earned ratably over the opening of the subfranchises. Under the terms of
these Master Franchise Agreements, the franchisee commits to open or cause to be
opened a specified number of locations within a specified time frame. The Master
Franchisee is responsible for the pre-opening and ongoing support of the
subfranchises. The Company shares with the Master Franchisee in the proceeds of
subsequent sales of individual franchises and also receives a percentage of the
royalties received by the Master Franchisee. In 2000 the Company entered into
Master Franchise Agreements for the development of China, Ecuador, Israel, and
Central America. Approximately 18% of the Companys system-wide revenues
were generated by international locations in 2000. In addition to those markets
currently served by its franchisees, the Company has identified over 90
additional international markets that may support a training center.

The initial franchise fee
is payable upon execution of the Franchise Agreement and is not refundable under
any circumstances. The territory is a limited exclusive territory in
that New Horizons agrees not to own or franchise any other New Horizons Computer
Learning Center provided the franchisee operates in compliance with the terms of
its Franchise Agreement. Unless the Franchise Agreement terminates or is amended
by mutual agreement, a territory will not be altered. Franchises are expected to
market their business to customers located within the defined territory and not
to customers within territories of other New Horizons franchises or affiliates.
Franchisees generally have six months from the date of the execution of the
Franchise Agreement to open a center.

Royalties

In addition to the initial
franchise fee, franchisees pay the following fees to New Horizons: (i) Unit
Franchisees: a monthly continuing royalty fee, ranging from 3% to 6% of monthly
gross revenues with minimum royalties ranging from $350 to $3,000, depending on
the marketplace; (ii) Master Franchisees: 40% of the royalties received from
their Subfanchisees with those royalties ranging from 3% to 6% with the
aforementioned minimums; and (iii) a course materials and proprietary
computer-based training products surcharge of 9% of the gross revenues from
course materials and proprietary computer-based training products sold to third
parties. Each franchisee also pays a $50 per month maintenance fee for
customized software developed and maintained by New Horizons. The 6% royalty fee
rate was effective for franchises sold during September 1996 or later.

Master Franchise Agreement

A Master Franchisee
receives a territory which is typically a country or a region encompassing
multiple countries. Under the Master Franchise Agreement the Master Franchisee
shall: (i) license and service third party Unit Subfranchises operated by
persons other than the Master Franchisee and (ii) own and operate at least one
New Horizons location under a separate Unit Franchise Agreement. The Master
Franchise Agreement runs for an initial term of ten years and is renewable for
additional ten-year terms. The Master Franchisee is expected to: (i) grant unit
franchises in a form of Unit Franchise Agreement as prescribed by New Horizons;
(ii) perform and enforce against each Unit Subfranchise the terms of any Unit
Subfranchise Agreement it enters into; (iii) provide the initial training in the
New Horizons system to each Unit Subfranchise; and (iv) provide ongoing support,
consulting and assistance to each Unit Subfranchise after the initial training.
For these obligations the Master Franchisee retains 60% of the initial franchise
fees and the ongoing royalties received from the Unit Subfranchises.

Page 5

Unit Franchise Agreement

The Franchise Agreement
runs for an initial term of ten years and is renewable for additional five-year
terms. The franchise is exclusive within the specific defined territory,
typically a city, and is subject to a number of limitations and conditions.
These limitations and conditions include, but are not limited to: (i) staffing
requirements, including a General Manager plus a minimum number of account
executives based on the territory; (ii) a minimum number of classrooms depending
on the territory; (iii) full-time and continuous operations; (iv) a pre-defined
minimum required curriculum; (v) computer equipment and system requirements;
(vi) signage and display material requirements; (vii) minimum insurance
requirements; and (viii) record keeping requirements. The agreement also
contains non-competition restrictions which bar: (i) competing with New Horizons
during the term of the Franchise Agreement; (ii) diverting or attempting to
divert any customer or business of the franchise business to any competitor;
(iii) performing any act that is injurious or prejudicial to the goodwill
associated with the New Horizons service marks or operating system; and (iv)
soliciting any person who is at that time employed by the franchisor or any of
its affiliated corporations to leave his or her employment. In addition, there
are certain restrictions on the franchisees rights to transfer the
franchise license. New Horizons also maintains a right of first
refusal if a transfer effects a change of control. The agreement also
contains default and termination remedies.

Franchise Support

In return for the initial
franchise fee and the other monthly fees, the Company provides franchisees with
the following services, products, and managerial support: (i) two weeks of
initial franchise training at the Companys operating headquarters in Santa
Ana, California, and one week of field training at the franchisees
location; (ii) franchise and sales system information contained in the
Companys Confidential Operations Manual and other training manuals; (iii)
ongoing operating support via on-site visits from Regional Franchise Support
Managers, access to troubleshooting and business planning assistance; (iv)
current applications courseware at printing cost only (over 1,400 titles in
fourteen languages); (v) access to the CES program which coordinates a
national/international referral system and delivery network of training for
major clients which have training requirements in multiple locations; (vi) site
selection assistance; (vii) periodic regional and international meetings and
conferences; and (viii) advisory councils and monthly communications.

## CUSTOMERS

Customers for the training
provided at New Horizons company-owned and franchised training centers are
predominantly employer-sponsored individuals from a wide range of public and
private corporations, service organizations, government agencies and
municipalities. Little, if any, of the Companys revenues are generated
from Title IV entitlement programs.

No single customer accounted for more than 10% of New Horizons revenues in 2000.

The New Horizons system
delivered over 2.8 million student-days of technology training in 2000.

## SALES AND
MARKETING

New Horizons markets its
services primarily through account executives who utilize telesales to target
and contact potential customers. The New Horizons sales system is organized and
disciplined. After undergoing a formal initial training program, account
executives are expected to generate their own database of customers through
telephone sales, make a minimum number of calls per day, and invoice and collect
a minimum amount of revenue each month. These minimums escalate over the first
eight months an account executive is selling and are designed to move the
account executive from being compensated with a non-recoverable draw against
commission to a full commission compensation program. Account executives
target sales areas are local and regional. Sales opportunities that involve
national and international accounts and involve delivery of training at multiple
locations are turned over to the Companys CES program.

The CES program is designed
to market computer training services to large organizations which have
facilities and training needs throughout the world. This program provides New
Horizons national and international customers with a single point of
contact to the entire New Horizons network of training and support services.
During 2000 New Horizons competed for and won national and international
contracts with Charles Schwab, Cigna Insurance, Lockheed Martin, Nextel, Philip
Morris, Seibel Systems, Thompson Corporation, and Wells Fargo Bank amongst
others.

The Company maintains a web
site for marketing its products over the Internet (http://www.newhorizons.com).
The Company believes that the Internet will become an increasingly important
tool in its marketing program.

Page 6

## TRAINING
AUTHORIZATIONS

New Horizons is authorized
to provide certified training by more than 30 software publishers, including
Microsoft, Novell, Apple, and Sun Microsystems. Many of the industrys
major software vendors do not offer training, but support their products through
independent training companies using a system of standards and performance
criteria. In support of these vendors, the Company has 166 Microsoft (CTEC), 98
Novell (NAEC), 86 SAIR Linux ACE, 83 Corel CTP, and 22 Lotus (LAEC) authorized
centers worldwide. The authorization agreements are typically annual in length
and are renewable at the option of the publishers. While New Horizons believes
that its relationships with software publishers are good, the loss of any one of
these agreements could have a material adverse impact on its business. In In
2000 New Horizons became the largest Certified Internet Webmaster (CIW)
Authorized Training Partner (ATP) network with 230 CIW ATPs worldwide.
Additionally, with certification testing becoming increasingly important, New
Horizons has grown its number of Authorized Prometric Testing Centers to 172.

## COMPETITION

The information technology
training market is highly competitive, highly fragmented, has low barriers to
entry, and has no single competitor which accounts for a dominant share of the
market. The Companys competitors are primarily in-house training
departments and independent education and training organizations. Computer
retailers, computer resellers, and others also compete with the Company.
Periodically, some of these competitors offer instruction and course titles
similar to those offered by New Horizons at lower prices. In addition, some of
these competitors may have greater financial strength and resources than New
Horizons.

New Horizons believes that
competition in the industry is based on a combination of pricing, breadth of
offering, quality of training, and flexibility and convenience of service.

The Company recognizes that
the emergence of technology-based training, primarily consisting of eLearning
and computer-based training, are important and growing competitive developments
in the industry.

In-House Training Departments

In-house training
departments provide companies with the highest degree of control over the
delivery and content of information technology training, allowing for customized
instruction tailored to specific needs. However, according to IDC, the demand
for outsourced training is expected to grow as more companies switch to outside
training organizations. By outsourcing, companies can choose to spend based on
real-time training needs while alleviating the overhead costs for in-house
instructors salaries and benefits.

Independent Education and Training Organizations

Although the majority of
independent training organizations are relatively small and focus on local or
regional markets, the Company competes directly on a national level with several
firms providing similar curriculum. Executrain, Productivity Point, Global
Knowledge Network, and Learning Tree target the same customer base and operate
in some of the same markets as New Horizons. The Company believes that the
combination of its market presence, the depth and breadth of its course
offerings, its flexible customer service approach, its centralized control of
delivery to national customers, its status as the worlds largest network
of Microsoft Certified Technical Education Centers and Novell Authorized
Education Centers, and its organized and disciplined sales system distinguishes
it from these competitors.

Technology-Based Training

Instructor-led training has
historically been the dominant delivery method for information technology
training. Technologybased training, consisting of CD-ROMs,
eLearning, videotape, and satellite video broadcast, has become a significant
delivery modality. According to IDC, technology-based training, which was 24% of
the U.S. information technology training market in 1999, is expected to grow at
a faster rate than instructor-led training through the year 2004. The IDC study
estimates that by 2004 technology-based training will have a 57% share of the
U.S. information technology training market while instructor-led training will
have a 40% share. Within technology-based training the dominant growth modality,
according to IDC, will be eLearning with an increase in market share from 3% in
1999 to 47% in 2004.

Page 7

The Company recognizes that
its future success depends on, among other factors, the markets continued
acceptance of instructor-led training as a delivery method for information
technology training, the Companys ability to continue to market
competitive instructor-led course offerings, and the Companys ability to
successfully capitalize on the potential of technology-based training
delivery methods, in particular, eLearning. The Company is currently developing
its eLearning product offering with the expectation that the synchronous
offering, OnLine LIVE Learning, will commence on a pilot basis near the end of
the first quarter of 2001 and the asynchronous offering, OnLine Learning, will
debut in the third quarter of the year. The competitors to the Company in the
eLearning environment will include SmartForce, DigitalThink, Knowledgenet, NETg
and others.

Using its courseware as the
source material, the Company has entered into an arrangement with a company to
develop its own line of CD-ROM products, entitled Masterware, which became
available to franchisees for sale in the third quarter of 1997. As of December
31, 2000 there were 70 Masterware titles available for sale. IDCs 1998
research found that information technology professionals use 2.8 methods of
study and preparation when preparing for certification exams. The Company has a
reseller agreement with a company that has an extensive offering of CD-ROM
courses that will prepare customers for certification exams.

Information technology
training can be broken into three segments: Segment 1 includes the most
sophisticated levels of training for programmers and software developers;
Segment 2 includes certification for engineers (Microsoft, Novell); and Segment
3 includes the end users of standard application software. While the Company
does very little training of programmers and software developers, it does
compete in Segments 2 and 3, with an estimated 54% of revenues from Segment 2
and 46% from Segment 3.

In instructor-led training,
the Company competes with Executrain, IKON, and Productivity Point in Segments 2
and 3. The Company competes with Learning Tree and Global Knowledge Network in
Segment 2.

## INFORMATION
ABOUT FORWARD-LOOKING STATEMENTS

The statements made in this
Annual Report on Form 10-K that are not historical facts are forward-looking
statements. Such statements are based on current expectations but involve risks,
uncertainties, and other factors which may cause actual results to differ
materially from those contemplated by such forward-looking statements. Important
factors which may result in variations from results contemplated by such
forward-looking statements include, but are by no means limited to: (i) the
Companys ability to respond effectively to potential changes in the manner
in which computer training is delivered, including the increasing acceptance of
technology-based training, including through the Internet, which could have more
favorable economics with respect to timing and delivery costs and the emergence
of just-in-time interactive training; (ii) the Companys ability to attract
and retain qualified instructors and management employees; (iii) the rate at
which new software applications are introduced by manufacturers and the
Companys ability to keep up with new applications and enhancements to
existing applications; (iv) the level of expenditures devoted to upgrading
information systems and computer software by customers; (v) the Companys
ability to compete effectively with low cost training providers who may not be
authorized by software manufacturers; and (vi) the Companys ability to
manage the growth of its business.

The Companys strategy
focuses on enhancing revenues and profits at current locations, and also
includes the possible opening of new company-owned locations, the sale of
additional franchises, the selective acquisition of existing franchises in the
United States which have demonstrated the ability to achieve above average
profitability while increasing market share, and the acquisition of companies in
similar or complementary businesses. The Companys growth strategy is
premised on a number of assumptions concerning trends in the information
technology training industry. These include the continuation of growth in the
market for information technology training and the trends toward outsourcing and
eLearning. To the extent that the Companys assumptions with respect to any
of these matters are inaccurate, its results of operations and financial
condition could be adversely affected.

## REGULATIONS

The offer and sale of
franchises and business opportunities are subject to regulation by the United
States Federal Trade Commission, as well as many states and foreign
jurisdictions. There also exist numerous laws that regulate the ongoing
relationship between franchisors and franchisees, including the termination,
transfer and renewal of franchise rights. The failure to comply with any such
laws could have an adverse effect on the Company.

## INSURANCE

The Company maintains
liability insurance in amounts it believes to be adequate based on the nature of
its business. While the Company believes that it operates its business safely
and prudently, there can be no assurance that liabilities incurred with respect
to a particular claim will be covered by insurance or, if covered, that the
dollar amount of such liabilities will not exceed coverage limits.

Page 8

## TRADEMARKS

The Company has issued
trademark registrations and pending trademark applications for the word mark
NEW HORIZONS and for other trademarks incorporating the words
NEW HORIZONS. The Company believes that the New Horizons name and
trademarks are important to its business. The Company is not aware of any
pending or threatened claims of infringement or challenges to the Companys
right to use the New Horizons name and trademarks in its business. However, the
Company has been advised that it cannot register the word mark NEW
HORIZONS in certain foreign countries and that it cannot register or use
any of the New Horizons trademarks in Australia and the Dominican Republic. The
Company has applications filed with the Australian trademark office to protect
Skill Master as its trademark in Australia, and its franchises there are using
that name and trademark. Additionally, the Company has applications filed with
the Dominican Republic trademark office to protect Skill Master as its trademark
in the Dominican Republic. The Company believes that the inability to register
certain of its trademarks in certain foreign countries will have a material
adverse effect on its financial condition or results of operations.

## EMPLOYEES

As of February 29, 2001,
the Company employed a total of 1,288 individuals in its corporate operations
and company-owned facilities. Of these employees, 390 are instructors, 361 are
account executives, and 537 are administrative and executive personnel. New
Horizons also utilizes the services of outside contract instructors to teach
some of its curriculum, primarily technical certification programs which require
instructors who are certified by Microsoft, Novell, and Lotus.

None of New Horizons
employees is represented by a labor organization. New Horizons considers
relations with its employees to be good.

## ITEM 2.  PROPERTIES

The Companys
corporate headquarters and its flagship training center are located in Santa
Ana, California, pursuant to a lease, which expires in 2002. The Company has
signed a lease to relocate its corporate headquarters and the Santa Ana training
facility to Anaheim, California in 2001. The lease provides for reimbursement of
its Santa Ana lease costs through its expiration.

In 1998 the Company
purchased 8.3 acres of undeveloped land in Santa Ana, California for
approximately $5.1 million. The Company had intended to construct a building on
the land that would serve as the world headquarters and training facility. The
land is currently in escrow and is expected to close in 2001 generating before
tax proceeds of approximately $6 million.

As of December 31, 2000,
New Horizons operated training centers at 25 other leased facilities in
California, Illinois, Ohio, Connecticut, New Mexico, North Carolina, Texas,
Tennessee and New York with leases that expire from 2001 to 2014.

The Company believes that
its facilities are well maintained and are adequate to meet current requirements
and that suitable additional or substitute space will be available as needed to
accommodate any expansion of operations and for additional offices, if
necessary.

## ITEM 3.   LEGAL
PROCEEDINGS

The Company is involved in
several lawsuits incidental to the ordinary conduct of its business. Under the
terms of the sale of the Companys environmental business, the Company is
also required to indemnify the purchaser against liabilities arising out of
pending litigation and from claims relating to the performance of services prior
to the sale. The Company does not believe that the outcome of any or all these
claims will have a material adverse effect upon its business or financial
condition or results of operations.

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

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

Page 9

### PART II

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

The common stock is traded
on The Nasdaq Stock Market under the symbol NEWH. The following table sets forth
the range of high and low bid closing quotations per share of common stock from
January 1, 1999, through December 31, 2000, as reported by The Nasdaq Stock
Market.

`2000                                                      HIGH       LOW
     --------------------------------------------------        -----     -----
     1st Quarter ........     (January 1 - March 31)           17.75     11.19
     2nd Quarter ........     (April 1 - June 30)              23.23     16.00
     3rd Quarter ........     (July 1 - September 30)          24.00     11.69
     4th Quarter ........     (October 1 - December 31)        16.75     12.63


     1999                                                      HIGH       LOW
     --------------------------------------------------        -----     -----
     1st Quarter ........     (January 1 - March 31)           18.30     15.00
     2nd Quarter ........     (April 1 - June 30)              19.75     14.30
     3rd Quarter ........     (July 1 - September 30)          19.75     15.38
     4th Quarter ........     (October 1 - December 31)        15.88     11.38`

As of March 9, 2001, the
Companys common stock was held by 395 holders of record. The Company has
never paid cash dividends on its common stock and has no present intention to
pay cash dividends in the foreseeable future. The Company currently intends to
retain any future earnings to finance the growth of the Company.

Page 10

ITEM 6.   SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in thousands, except per share)

Selected Consolidated Statements of Operations Data

|                                                      | 2000         | 1999         | 1998         | 1997         | 1996        
|----------------------------------------------------- | ------------ | ------------ | ------------ | ------------ | ------------
|Total revenues                                        | $  142,698   | $  111,476   | $   72,629   | $   52,633   | $   41,269  
|Cost of revenues                                      | 65,850       | 50,301       | 32,749       | 26,814       | 20,599      
|Selling, general and administrative expenses          | 58,752       | 46,407       | 31,354       | 23,368       | 19,063      
|Write-off of management system                        |             | 3,338        |             |             |            
|Settlement of franchise arbitration                   |             | 303          |             |             |            
|                                                      |              |              |              |              |             
|Operating income                                      | 18,096       | 11,127       | 8,526        | 2,451        | 1,607       
|Interest income                                       | 503          | 643          | 1,424        | 1,301        | 211         
|Interest expense                                      | (318)        | (354)        | (255)        | (469)        | (351)       
|Gain from release of certain franchise obligations    |             |             |             | 2,600        |            
|                                                      |              |              |              |              |             
|Income from continuing operations before income taxes | 18,281       | 11,416       | 9,695        | 5,883        | 1,467       
|Provision for income taxes                            | 7,312        | 4,153        | 3,813        | 2,269        | 669         
|                                                      |              |              |              |              |             
|Income from continuing operations                     | 10,969       | 7,263        | 5,882        | 3,614        | 798         
|                                                      |              |              |              |              |             
|Income (loss) from discontinued operations            |             |             |             | 349          | (130)       
|Loss on disposal of discontinued operations           |             |             |             |             | (7,303)     
|                                                      |              |              |              |              |             
|Net Income (loss) from discontinued operations        |             |             |             | 349          | (7,433)     
|                                                      |              |              |              |              |             
|Net income (loss)                                     | $   10,969   | $    7,263   | $    5,882   | $    3,963   | $   (6,635) 
|                                                      |              |              |              |              |             
|                                                     
|                                                     
|Basic Earnings Per Share                              |             
|Income per share from continuing operations           | $      1.12  | $      0.76  | $      0.64  | $      0.41  | $      0.09 
|Income (loss) per share from discontinued operations  |             |             |             | 0.04         | (0.86)      
|                                                      |              |              |              |              |             
|Net income (loss) per share                           | $      1.12  | $      0.76  | $      0.64  | $      0.45  | $     (0.77)
|                                                      |              |              |              |              |             
|                                                     
|Diluted Earnings Per Share                            |             
|Income per share from continuing operations           | $      1.06  | $      0.72  | $      0.61  | $      0.40  | $      0.09 
|Income (loss) per share from discontinued operations  |             |             |             | 0.04         | (0.86)      
|                                                      |              |              |              |              |             
|Net income (loss) per share                           | $      1.06  | $      0.72  | $      0.61  | $      0.44  | $     (0.77)
|                                                      |              |              |              |              |             
|                                                     
|                                                      | Dec. 31,     | Dec. 31,     | Dec. 31,     | Dec. 31,     | Dec. 31,    
|Selected Consolidated Balance Sheet Data              | 2000         | 1999         | 1998         | 1997         | 1996        
|Working capital                                       | $        983 | $      6,010 | $     20,951 | $     27,030 | $     23,066
|Total assets                                          | 123,068      | 105,084      | 86,746       | 66,571       | 60,472      
|Long term obligations less current portion            |             | 6,730        | 267          | 1,516        | 2,330       
|Total stockholders equity                            | 88,621       | 72,677       | 61,569       | 49,056       | 43,757      

|(1) | Certain
reclassifications were made to previous years statements to conform with
the presentation in 2000.                 
|--- | ----------------------------------------------------------------------------------------------------------------------------
|   
|(2) | Per Share amounts have been adjusted to reflect the five-for-four split of the
Companys common stock effected June 8, 1999.

Page 11

ITEM 7.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share data)

The following discussion
should be read in conjunction with the Consolidated Financial Statements and
related notes and SELECTED CONSOLIDATED FINANCIAL DATA included
elsewhere in this report.

## GENERAL

The Company operates
computer training centers in the United States and franchises computer training
centers in the United States and abroad. Prior to 1997, the Company also
operated an environmental remediation business. As a result of the completion of
the sale of Handex Environmental, Inc. to ECB, Inc. in December 1996, the
results of operations for the Companys environmental business segment have
been classified as discontinued operations for all periods presented in the
accompanying consolidated financial statements. The Company operates in two
business segments: one operates wholly-owned computer training centers and the
other supplies systems of instruction, sales, and management concepts concerning
computer training to independent franchisees.

Corporate revenues are
defined as revenues from company-owned training centers, initial franchise fees,
royalties, and other revenues from franchise operations. System-wide revenues
are defined as total revenues from all centers, both company-owned and
franchised. System-wide revenues are used to gauge the growth rate of the entire
New Horizons training network.

Revenues from company-owned
training centers operated by New Horizons consist primarily of training fees and
fees derived from the sale of courseware material. Cost of revenues consists
primarily of instructor costs, rent, utilities, classroom equipment, courseware
costs, and computer hardware, software and peripheral expenses. Included in
selling, general and administrative expenses are personnel costs associated with
technical and facilities support, scheduling, training, accounting and finance,
and sales.

Revenues from franchising
consist primarily of initial franchise fees paid by franchisees for the purchase
of specific franchise territories and franchise rights, training royalty and
advertising fees based on a percentage of gross training revenues realized by
the franchisees, percentage royalty fees received on the sale of courseware,
revenue earned from the sale of third-party courseware to the franchisees
through Nova Vista, its product procurement company, and revenue earned from the
CES program, a program to service large corporate customers. Cost of revenues
consists primarily of costs associated with courseware development and
procurement and franchise support personnel who provide system guidelines and
advice on daily operating issues including sales, marketing, instructor
training, and general business problems. Included in selling, general and
administrative expenses are technical support, accounting and finance support,
CES support, advertising expenses, and franchise sales expenses.

## RESULTS OF
OPERATIONS 2000 VERSUS 1999

## Revenues

Revenues for 2000 increased
$31,222 to $142,698 or 28.0% over the $111,476 realized in 1999. The increase in
revenues was attributable to significant growth in royalties and the inclusion
of the Albuquerque, New Mexico, Charlotte, North Carolina, Sacramento and
Stockton, California, San Antonio, Texas, and Denver, Colorado centers for a
full year in 2000.

Revenues at company-owned
centers increased 28.7% to $111,319 from $86,520 in 1999. The increase was
primarily attributable to increased revenues at the New York and Chicago centers
and the acquisition of the Albuquerque, Charlotte, Sacramento, Stockton, San
Antonio, and Denver centers.

In the Companys
franchising segment, royalty fees for 2000 were $23,609, up 20.9% over the 1999
total of $19,532. The increase was principally due to a 17.8% revenue increase
at locations open more than one year and the addition of 50 franchise locations
during the year. Franchise fees for 2000 were $2,191, down 15.9% from the 1999
total of $2,606. At the end of 2000, there were 254 franchise locations in
operation, up 24.5% over the 204 in operation at the end of 1999. One hundred
thirty eight locations operate in the U.S. and Canada while 116 operate in 42
other countries around the world. Other franchising revenues for 2000 increased
$2,761, up 98.0% from the 1999 total of $2,818. The increase was due mainly to
higher revenues from the the sale of NHIPP and A+ certification products by Nova
Vista.

System-wide revenues, which
are defined as revenues from all centers, both company-owned and franchised,
increased to $530,272 at the end of 2000, up 21.9% from $435,124 in 1999.

Page 12

## Cost of
Revenues

Cost of revenues increased
$15,549 or 30.9% for 2000 compared to 1999. As a percentage of revenues, cost of
revenues increased to 46.1% for 2000 from 45.1% in 1999. The increase in cost of
revenues in absolute dollars was primarily due to the inclusion of the
Albuquerque, Charlotte, Sacramento, Stockton, San Antonio, and Denver centers
for a full year. The increase as a percentage of revenue resulted from lower
revenue growth in the company-owned centers.

## Selling,
General and Administrative Expenses

Selling, general and administrative
expenses increased $12,345 or 26.6% for 2000 compared to 1999. As a percentage
of revenues, selling, general and administrative expenses declined to 41.2% for
2000 from 41.6% for 1999. The increase in absolute dollars for selling, general
and administrative expenses was due primarily to the inclusion of the
Albuquerque, Charlotte, Sacramento, Stockton, San Antonio, and Denver centers
for a full year in 2000. The decrease in selling, general and administrative
expense as a percentage of revenues was principally due to the significant
growth in revenuesand control of the addition of non-revenue producing
employees.

## Interest
Income (Expense)

Interest income for 2000
decreased $140 or 21.8% to $503 compared with $643 in 1999. As a percentage of
revenues, interest income decreased to 0.4% for 2000 from 0.6% for 1999. The
Company did not earn any tax-free income in 2000 and earned $137 in 1999.

Interest expense decreased
$36 to $318 for 2000 or 10.2% compared to $354 in 1999. As a percentage of
revenues, interest expense was 0.2% in 2000 and 0.3% in 1999. The decrease in
interest expense in absolute dollars was due to lower outstanding debt in 2000
as compared to 1999.

## Income Taxes

The provision for income
taxes as a percentage of income before income taxes was 40.0% for 2000 compared
to 36.4% for 1999. The increase in the effective tax rate was due principally to
the decrease of foreign tax credits and state enterprise zone tax credits.

## RESULTS OF
OPERATIONS 1999 VERSUS 1998

## Revenues

Revenues for 1999 increased
$38,847 to $111,476 or 53.5% over the $72,629 realized in 1998. The increase in
revenues was attributable to significant growth in royalties, the inclusion of
the Memphis and Nashville, Tennessee and Hartford, Connecticut centers for a
full year in 1999 and the acquisition of the Albuquerque, Charlotte, Sacramento,
Stockton, San Antonio, and Denver franchises. The centers owned on January 1,
1999 had an aggregate year over year growth of 8.1%.

Revenues at company-owned
centers increased 64.7% to $86,520 from $52,545 in 1998. The increase was
primarily attributable to increased revenues at the New York and Cleveland
centers, the inclusion of the Memphis, Nashville and Hartford centers for a full
year, and the acquisition of the Albuquerque, Charlotte, Sacramento, Stockton,
San Antonio, and Denver franchises.

In the Companys
franchising segment, royalty fees for 1999 were $19,532, up 20.6% over the 1998
total of $16,189. The increase was principally due to a 16.2% revenue increase
at locations open more than one year and the addition of 21 franchise locations
during the year, less 11 locations purchased by the Company and operated as
company-owned centers. Franchise fees for 1999 were $2,606, up 52.9% from the
1998 total of $1,704. At the end of 1999, there were 204 franchise locations in
operation, up 5.2% over the 194 in operation at the end of 1998. One hundred
twenty one locations operate in the U.S. and Canada while 83 operate in 38 other
countries around the world. Other franchising revenues for 1999 increased $627,
up 28.6% from the 1998 total of $2,191. The increase was due mainly to higher
revenues from the CES program.

System-wide revenues, which
are defined as revenues from all centers, both company-owned and franchised,
increased to $435,124 at the end of 1999, up 21.7% from $357,503 in 1998.

Page 13

## Cost of
Revenues

Cost of revenues increased
$17,552 or 53.6% for 1999 compared to 1998. As a percentage of revenues, cost of
revenues remained at 45.1% for 1999 and 1998. The increase in cost of revenues
in absolute dollars was primarily due to the inclusion of the Memphis,
Nashville, and Hartford franchises for a full year and the acquisition of the
Albuquerque, Charlotte, Sacramento, Stockton, San Antonio, and Denver
franchises.

## Selling,
General and Administrative Expenses

Selling, general and administrative
expenses increased $15,053 or 48.0% for 1999 compared to 1998. As a percentage
of revenues, selling, general and administrative expenses declined to 41.6% for
1999 from 43.2% for 1998. The increase in absolute dollars for selling, general
and administrative expenses was due primarily to the inclusion of the Memphis,
Nashville and Hartford centers for a full year in 1999, the acquisition of the
Albuquerque, Charlotte, Sacramento, Stockton, San Antonio, and Denver
franchises, and franchise support for international operations. The decrease in
selling, general and administrative expense as a percentage of revenues was
principally due to the significant growth in revenues, synergies created through
the acquisition of these centers, and control of the addition of non-revenue
producing employees.

## Interest
Income (Expense)

Interest income for 1999
decreased $781 or 54.8% to $643 compared with $1,424 in 1998. As a percentage of
revenues, interest income decreased to 0.6% for 1999 from 2.0% for 1998. The
Company earned $137 in tax-free income, down from $938 in 1998.

Interest expense increased
$99 to $354 for 1999 or 38.8% compared to $255 in 1998. As a percentage of
revenues, interest expense was 0.3% in 1999 and 0.4% in 1998. The increase in
interest expense in absolute dollars was due to an increase in debt resulting
from the franchise buybacks in 1999.

## Income Taxes

The provision for income
taxes as a percentage of income before income taxes was 36.4% for 1999 compared
to 39.3% for 1998. The decrease in the effective tax rate was due principally to
the increase of foreign tax credits and state enterprise zone tax credits. The
decrease was partially offset by a smaller percentage of the tax-free investment
income to total income before taxes.

## LIQUIDITY AND
CAPITAL RESOURCES

As of December 31, 2000,
the Companys current ratio was 1.0 to 1, working capital was $983, and its
cash and cash equivalents totaled $5,515. Working capital as of December 31,
2000, reflected a decrease of $5,027 from $6,010 as of December 31, 1999. The
decrease was due principally to the use of cash for the payment of additional
consideration required under the terms of previous acquisitions and additions to
property, plant and equipment.

Cash provided by operating
activities was $27,809, an increase of $14,916 compared to 1999. The increase
was primarily due to an increase of $3,706 in net income, an increase in
non-cash charges for depreciation and amortization of $1,637, and the cash flow
effect of the increase in other current liabilities of $7,359 and accounts
payable of $1,650.

In 2000 cash used by
investing activities increased by $297 to $19,801. This was due primarily to an
increase in additions to property, plant and equipment of $1,949 and a decrease
in the redemption of marketable securities of $16,100, partially offset by a
decrease in cash paid for acquired companies and previous acquisitions of
$17,296.

The Company currently
maintains a $25 million credit facility with a commercial bank, $20 million of
which is for future business acquisitions and $5 million of which is for
short-term financing requirements, at an interest rate of LIBOR (6.56% at
December 31, 2000) plus 1.75%. Total borrowings in 2000 were $4,550 under the
acquisition portion of the line of credit agreement. There was no outstanding
balance as of December 31, 2000. The Company is currently working with its bank
to establish a larger credit facility and expects the new facility to be in
place in April 2001.

Page 14

The nature of the
information technology and training industry requires substantial cash
commitments for the purchase of computer equipment, software, and training
facilities. During 2000 New Horizons spent approximately $8,697 on capital
items. Capital expenditures for 2001 are expected to total approximately $16
million. The increase is due mainly to the relocation of the
world headquarters and the New York and Santa Ana training centers and to the
development of the Companys eLearning capabilities and an integrated
software package for the training centers.

The Company owns 8.3 acres
of undeveloped land in Santa Ana, California and expects to sell that land in
2001 realizing approximately $6 million in proceeds before tax.

Management believes that
its current working capital position and cash flows from operations, along with
its credit facility, will be adequate to support its current and anticipated
capital and operating expenditures and its strategies to grow its computer
training business.

## IMPACT OF
ACCOUNTING PRONOUNCEMENTS

Statement of Financial
Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and
Hedging Activities, is effective for all fiscal years beginning after June 15,
2000. SFAS 133, as amended, establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts and for hedging activities. Under SFAS 133, certain contracts
that were not formerly considered derivatives may now meet the definition of a
derivative. The Company adopted SFAS 133 effective January 1, 2001. The adoption
of SFAS 133 did not have a significant impact on the financial position, results
of operations, or cash flows of the Company.

In December 1999, the Securities and Exchange  Commission issued Staff Accounting  Bulletin ("SAB") No. 101, Revenue Recognition
in  Financial  Statements,  which we  adopted in the fourth  quarter  of 2000.  Adoption  of SAB No. 101 did not have a material
impact on the Company's financial statements.

In March 2000, the FASB
issued FASB Interpretation No. 44, Accounting for Certain Transactions Involving
Stock Compensation, an Interpretation of Accounting Principles Board
(APB) Opinion No. 25, Accounting for Stock Issued to Employees
(FIN 44). FIN 44 clarifies the application of APB No. 25 for the
following: the definition of employee for purposes of applying APB NO. 25; the
criteria for determining whether a plan qualifies as a non-compensatory plan;
the accounting consequence for various modifications to the terms of a
previously fixed stock option or award; and the accounting for an exchange of
stock compensation awards in a business combination. The Company adopted FIN 44
effective July 1, 2000 and such adoption did not have a material impact on its
consolidated financial statements.

Page 15

## ITEM 7A.  
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to
market risk related to changes in interest rates. A discussion of the
Companys accounting policies for financial instruments and further
disclosures relating to financial instruments are included in the Notes to
Consolidated Financial Statements. The Company monitors the risks associated
with interest rates and financial instrument positions.

The Companys primary
interest rate risk exposure results from floating rate debt on its line of
credit. At December 31, 2000 the Company did not have any long-term debt.
Therefore, there would be no additional annual expense if interest rates were to
increase from December 31, 2000 rates and assuming no changes in long-term debt
from the December 31, 2000 levels. The Company currently does not hedge its
exposure to floating interest rate risk.

The Company's risk related to foreign currency exchange rates is not material.

## ITEM 8.  
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Pages F-1 to F-18 contain
the Financial Statements and supplementary data specified for Item 8 of Part II
of Form 10-K.

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

None

Page 16

# Independent
Auditors Report

The Board of Directors and Stockholders
New Horizons Worldwide, Inc.

We
have audited the accompanying consolidated balance sheets of New Horizons
Worldwide, Inc. and subsidiaries (the Company) as of December 31, 2000 and 1999
and the related consolidated statements of income, comprehensive income,
stockholders equity, and cash flows for each of the three years in the
period ended December 31, 2000. These financial statements are the
responsibility of the Companys management. Our responsibility is to
express an opinion on these financial statements based on our audits.

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

In
our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of New Horizons Worldwide, Inc. and
subsidiaries as of December 31, 2000 and 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2000, in conformity with accounting principles generally accepted
in the United States of America.

DELOITTE & TOUCHE LLP 
Costa Mesa, California
February 23, 2001

F-1

# CONSOLIDATED
BALANCE SHEETS

# New Horizons Worldwide,
Inc. and Subsidiaries

December 31,
2000 and December 31, 1999
(Dollars in thousands except share data)

`Assets                                                    2000           1999
                                                       ---------      ---------
Current assets:
     Cash and cash equivalents ...................     $   5,515      $   2,868
     Accounts receivable, less allowance for
        doubtful accounts of $717 in 2000
        and $943 in 1999 (Note 2) ................        21,671         20,991
     Inventories .................................         1,362          1,226
     Prepaid expenses ............................         1,932          1,438
     Deferred income tax assets (Note 6) .........         2,796          2,526
     Other current assets ........................           469            791
                                                       ---------      ---------
         Total current assets ....................        33,745         29,840

Property, plant and equipment, net (Note 4) ......        18,193         14,797

Excess of cost over net assets of acquired
        companies, net of accumulated
        amortization of $5,830 in 2000 and
        $3,420 in 1999 (Note 12) .................        67,234         55,718
Cash surrender value of life insurance ...........         1,100          1,070
Other assets (Note 7) ............................         2,796          3,659
                                                       ---------      ---------

Total Assets .....................................     $ 123,068      $ 105,084
                                                       =========      =========

Liabilities & Stockholders' Equity
Current liabilities:
     Current portion of long-term obligations
        (Note 3) .................................     $     103      $     189
     Accounts payable ............................         3,215          2,155
      Deferred revenue ...........................        10,120          8,318
     Income taxes payable (Note 6) ...............         1,600            918
     Other current liabilities (Note 8) ..........        17,724         12,250
                                                       ---------      ---------
         Total current liabilities ...............        32,762         23,830

Long-term obligations, excluding current
         portion (Note 3) ........................          --            6,730
Deferred income tax liability (Note 6) ...........           849            835
Deferred rent (Note 11) ..........................           833            885
Other long-term liabilities ......................             3            127
                                                       ---------      ---------
         Total liabilities .......................        34,447         32,407
                                                       ---------      ---------
Commitments and contingencies (Note 11) ..........          --             --

Stockholders' equity (Note 10):
     Preferred stock without par value,
         2,000,000 shares authorized, no
         shares issued ...........................          --             --
     Common stock, $.01 par value,
        15,000,000 shares authorized; issued
        and outstanding 10,083,038 shares in
        2000 and 9,788,583 shares in 1999 ........           101             97
     Additional paid-in capital ..................        42,069         37,098
     Retained earnings ...........................        47,749         36,780
     Treasury stock at cost - 185,000 shares
        in 2000 and 1999 .........................        (1,298)        (1,298)
                                                       ---------      ---------
         Total stockholders' equity ..............        88,621         72,677
                                                       ---------      ---------

Total Liabilities & Stockholders' Equity .........     $ 123,068      $ 105,084
                                                       =========      =========`

See accompanying notes to consolidated financial statements

F-2

## CONSOLIDATED STATEMENTS OF INCOME
 New Horizons Worldwide, Inc. and Subsidiaries

Years ended December 31, 2000, December 31, 1999, and December 31, 1998
(Dollars in thousands, except per share)

`2000        1999        1998
                                               --------    --------    --------
Revenues
     Franchising
         Franchise fees ..................     $  2,191    $  2,606    $  1,704
         Royalties .......................       23,609      19,532      16,189
         Other ...........................        5,579       2,818       2,191
                                               --------    --------    --------
         Total franchising revenues ......       31,379      24,956      20,084
     Company-owned training centers ......      111,319      86,520      52,545
                                               --------    --------    --------
         Total revenues ..................      142,698     111,476      72,629

Cost of revenues .........................       65,850      50,301      32,749

Selling, general and administrative expenses     58,752      46,407      31,354

Write-off of management system (Note 5) ..         --         3,338        --

Settlement of franchise arbitration (Note 5)       --           303        --
                                               --------    --------    --------

Operating income .........................       18,096      11,127       8,526

Interest income ..........................          503         643       1,424

Interest expense
                                                   (318)       (354)       (255)
                                               --------    --------    --------

Income before income taxes ...............       18,281      11,416       9,695

Provision for income taxes (Note 6) ......        7,312       4,153       3,813
                                               --------    --------    --------

Net income ...............................     $ 10,969    $  7,263    $  5,882
                                               ========    ========    ========

Basic Earnings Per Share .................     $   1.12    $   0.76    $   0.64
                                               ========    ========    ========

Diluted Earnings Per Share ...............     $   1.06    $   0.72    $   0.61
                                               ========    ========    ========`

See accompanying notes to consolidated financial statements

F-3

## CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

## New Horizons Worldwide, Inc. and Subsidiaries

Years ended December 31, 2000, December 31, 1999, and December 31, 1998
(Dollars in thousands)

`2000        1999        1998
                                               --------    --------    --------
Net income ...............................     $ 10,969    $  7,263    $  5,882

Other comprehensive income:
     Unrealized holding gains on available
       for sale securities arising during
       the year ..........................           --          --          53

       Reclassification adjustment for
          gains included in net income ...           --         (53)         --
                                               --------    --------    --------

Comprehensive income .....................     $ 10,969    $  7,210    $  5,935
                                               =========   ========    ========`

See accompanying notes to consolidated financial statements

F-4

# CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

New Horizons Worldwide, Inc. and Subsidiaries

Years ended December 31, 2000, December 31, 1999, and December 31, 1998
(In thousands)

|                                                                     |        |          |          |          |           | Accumulated |         
|-------------------------------------------------------------------- | ------ | -------- | -------- | -------- | --------- | ----------- | --------
|
|
|
|                                                                    
|Balance at January 1, 1998                                           | 9,112  | $     91 | $ 26,628 | $ 23,635 | $ (1,298) | $          | $ 49,056
|Issuance of common stock from exercise of stock options and warrants | 75     | 1        | 396      |         |          |            | 397     
|Income tax benefit from the exercise of stock options and warrants   |       |         | 180      |         |          |            | 180     
|Issuance of common stock for acquisitions                            | 371    | 3        | 5,451    |         |          |            | 5,454   
|Unrealized gain on investments                                       |       |         |         |         |          | 53          | 53      
|Compensatory stock options and warrant grants                        |       |         | 547      |         |          |            | 547     
|Net income                                                           |       |         |         | 5,882    |          |            | 5,882   
|                                                                     |        |          |          |          |           |             |         
|Balance at December 31, 1998                                         | 9,558  | 95       | 33,202   | 29,517   | (1,298)   | 53          | 61,569  
|Issuance of common stock from exercise of stock options              | 8      |         | 75       |         |          |            | 75      
|Income tax benefit from the exercise of stock options                |       |         | 18       |         |          |            | 18      
|Issuance of common stock for acquisitions                            | 223    | 2        | 3,665    |         |          |            | 3,667   
|Compensatory  warrant grants                                         |       |         | 138      |         |          |            | 138     
|Other comprehensive income                                           |       |         |         |         |          | (53)        | (53)    
|Net income                                                           |       |         |         | 7,263    |          |            | 7,263   
|                                                                     |        |          |          |          |           |             |         
|Balance at December 31, 1999                                         | 9,789  | 97       | 37,098   | 36,780   | (1,298)   |            | 72,677  
|Issuance of common stock from exercise of stock options              | 149    | 2        | 1,577    |         |          |            | 1,579   
|Income tax benefit from the exercise of stock options                |       |         | 544      |         |          |            | 544     
|Issuance of common stock for acquisitions                            | 145    | 2        | 2,850    |         |          |            | 2,852   
|Net income                                                           |       |         |         | 10,969   |          |            | 10,969  
|                                                                     |        |          |          |          |           |             |         
|Balance at December 31, 2000                                         | 10,083 | $    101 | $ 42,069 | $ 47,749 | $ (1,298) |            | $ 88,621
|                                                                     |        |          |          |          |           |             |         

See accompanying notes to consolidated financial statements
F-5

## CONSOLIDATED STATEMENTS OF CASH FLOWS

## New Horizons Worldwide, Inc. and Subsidiaries

Years ended December 31, 2000, December 31, 1999, and December 31, 1998
(Dollars in thousands)

`2000        1999        1998
                                               --------    --------    --------
Cash flows from operating activities
   Net income ..............................   $ 10,969    $  7,263    $  5,882
Adjustments to reconcile net income to net
  cash provided by operating activities:
     Depreciation and amortization .........      7,711       6,074       4,006
     Write-off of management system (Note 5)       --         2,860        --
     Deferred income taxes .................       (256)       (470)       (355)
     Stock-based compensation ..............       --           138         547
     Cash provided (used) from the change
      in (net of effects of acquisitions):
       Accounts receivable .................       (680)     (1,689)     (3,270)
       Inventories .........................       (136)       (113)        133
       Prepaid expenses and other current
          assets ...........................       (172)       (198)       (192)
       Other assets ........................        863        (723)       (195)
       Accounts payable ....................      1,060        (590)       (477)
       Deferred revenue ....................      1,802       1,523       1,085
       Other current liabilities ...........      5,474      (1,885)      3,776
       Income taxes payable ................      1,226         582        (515)
       Deferred rent .......................        (52)        121          60
                                               --------    --------    --------
          Net cash provided by operating
             activities ....................     27,809      12,893      10,485
                                               --------    --------    --------

Cash flows from investing activities
   Purchase of marketable securities .......       --          (279)    (21,810)
   Redemption of marketable securities .....       --        16,100      29,100
   Cash surrender value of life insurance ..        (30)       (207)       (105)
   Additions to property, plant and equipment    (8,697)     (6,748)     (8,359)
   Cash paid for acquired companies,
     net of cash acquired (Note 12) ........       --       (26,034)     (3,773)
   Cash paid for previous acquisitions
      (Note 12)                                 (11,074)     (2,336)       --
                                               --------    --------    --------
       Net cash used by investing activities    (19,801)    (19,504)     (4,947)
                                               --------    --------    --------

Cash flows from financing activities
   Proceeds from issuance of common stock ..      1,579          75         397
   Proceeds from debt obligations ..........      4,480      12,906         181
   Principal payments on debt obligations ..    (11,420)    (10,375)     (2,372)
                                               --------    --------    --------
       Net cash (used) provided by financing
          activities .......................     (5,361)      2,606      (1,794)
                                               --------    --------    --------

Net increase (decrease) in cash and  cash
   equivalents .............................      2,647      (4,005)      3,744

Cash and cash equivalents at beginning of year    2,868       6,873       3,129
                                               --------    --------    --------
Cash and cash equivalents at end of  year ..   $  5,515    $  2,868    $  6,873
                                               ========    ========    ========

Supplemental disclosure of cash flow information
     Cash was paid for:
         Interest ..........................   $    282    $    339    $    180
                                               ========    ========    ========

         Income taxes ......................   $  5,589    $  4,091    $  4,303
                                               ========    ========    ========`

See accompanying notes to consolidated financial statements

F-6

## CONSOLIDATED STATEMENTS OF CASH FLOWS

## New Horizons Worldwide, Inc. and Subsidiaries

Years ended December 31, 2000, December 31, 1999, and December 31, 1998
 (Dollars in thousands)

Supplemental Disclosure of Non-Cash Transactions

`2000       1999       1998
                                                 --------   --------   --------
Non-cash investing and financing activities:
     Income tax benefit from exercise of stock
       options ...............................   $    544   $     18   $    180
                                                 ========   ========   ========

     Unrealized gain on investments ..........   $   --     $   --     $     53
                                                 ========   ========   ========`

The Company completed six acquisitions in 1999 and three in 1998 summarized as follows (Note 12):

`1999          1998
                                                         --------      --------
Fair value of assets acquired ......................     $ 34,076      $ 14,833

Short-term debt and other obligations incurred .....         (921)       (3,559)

Value of stock issued ..............................       (2,983)       (5,454)

Cash paid, net of cash acquired ....................      (26,034)       (3,773)
                                                         --------      --------

Liabilities assumed ................................     $  4,138      $  2,047
                                                         ========      ========`

During the year ended December 31, 2000 the Company issued common stock with a value of $2,852 as additional
      consideration for previous acquisitions.

F-7

# NEW HORIZONS WORLDWIDE,
INC. AND SUBSIDIARIES

# Notes to
Consolidated Financial Statements

December 31,
2000, December 31, 1999, and December 31, 1998
(Dollars in thousands, except per share data)

## 1.
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

## Nature of
Operations

New Horizons  Worldwide,  Inc.  (New Horizons or the Company)  owns and  franchises  computer  training  centers.  The Company's
training centers provide
application software and technical certification training to a wide range of
individuals and employer-sponsored individuals from national and international
public and private corporations, service organizations and government agencies.
As of December 31, 2000, the Company and its franchisees delivered training in
26 company-owned and 254 franchised locations in 44 countries around the world.

## Basis of
Accounting and Principles of Consolidation

The consolidated financial
statements include the accounts of New Horizons Worldwide, Inc. and its
subsidiaries, all of which are wholly owned. All significant inter-company
balances and transactions have been eliminated in consolidation.

## Franchise Sales

The terms of a typical
franchise agreement allow for the sale of individual franchises to operators of
computer learning centers for an initial fee. The initial fees are $25, $50 or
$75 depending on the estimated number of personal computers within a given
territory. Operators of existing computer training centers receive a 20%
reduction in the initial fee as a conversion allowance. Additionally,
franchisees are assessed the following fees, among other fees, as defined by the
franchise agreement:

|a. | Continuing Monthly Royalty                                                                                                                                                                                                                                                                                                                                                                             
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | The fee amount is equal to the greater of 3% to 6% of gross revenues or certain
minimums as defined depending on the size of the territory. Amounts commence
accruing on the effective date of the franchise agreement for new operators and
in the sixth month after the effective date of the franchise agreement for
operators converting their existing computer learning center to a New Horizons.
|  
|b. | Course Material and Computer-Based Training Royalty                                                                                                                                                                                                                                                                                                                                                    
|  
|   | The
fee amount is equal to 9% of gross revenues from course materials and
proprietary computer-based training products sold to third parties.                                                                                                                                                                                                                                                          
|  
|c. | Marketing and Advertising Fee                                                                                                                                                                                                                                                                                                                                                                          
|   | The fee amount is equal to 1% of gross revenues for franchisees in the United States
and Canada and 0.2% for international franchisees who elect to participate.
Amounts commence accruing on the date the franchise commences operation of the
franchise business.                                                                                                                                    

## Revenue
Recognition

Revenues for training  services and franchise  royalty fees are  recognized as earned.  Initial  franchise  fees are  recognized when the Company has
supplied substantially all of the services and met all of the conditions of the
sale of the franchise rights. Master franchise fees are earned ratably over the
opening of subfranchises.

F-8

## Investments

The Company accounts for
investments pursuant to Statement of Financial Accounting Standards (SFAS) No.
115, Accounting for Certain Investments in Debt and Equity
Securities. The Companys investments have been categorized as
available for sale and, as a result, are stated at fair value.
Accordingly, any unrealized holding gains and losses are to be included as a
component of accumulated other comprehensive income, net of tax, until realized.
As of December 31, 2000, the Company had no investments.

## Inventories

Inventories are stated at
the lower of cost or market. Inventory costs are determined using the first-in,
first-out (FIFO) method.

## Property,
Plant and Equipment

Property, plant and
equipment are stated at cost. Depreciation is provided over the estimated useful
lives of the respective assets, using the straight line method as follows:

| | Equipment              | 3 to 5 years                            
| | ---------------------- | ----------------------------------------
| | Furniture and fixtures | 5 to 10 years                           
| | Leasehold improvements | Useful life or term of lease, if shorter

## Income Taxes

The Company accounts for
income taxes under the asset and liability method in accordance with SFAS No.
109, Accounting for Income Taxes. Under this method, deferred tax
assets and liabilities are recognized for the estimated future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years when those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.

When options granted under
the Companys stock option plans are exercised, the Company receives a tax
deduction related to the difference between the market value of its common stock
at the date of exercise and the sum of the exercise price and any compensation
expense recognized for financial reporting purposes. The tax benefit resulting
from this tax deduction is reflected as a decrease in the Companys income
tax liability and an increase to additional paid-in capital.

## Intangibles
and Other Long-Lived Assets

The excess of cost over net
assets acquired is being amortized on a straight-line basis over periods ranging
from 25 to 40 years. The Company assesses the recoverability of its long-lived
assets whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. The Company periodically reviews the
carrying value of long-lived assets on an undiscounted cash flow basis to
determine whether an impairment to such value has occurred. Management has
concluded that there was no impairment of its intangibles or other long-lived
assets at December 31, 2000.

## Cash and Cash
Equivalents

The Company considers all highly
liquid debt instruments with original maturities of three months or less to be
cash equivalents.

## Concentration
of Credit Risk

The Companys credit risk
on trade receivables is diversified over a wide geographic area and many
customers. Ongoing customer credit evaluations are performed with respect to the
Companys trade receivables and collateral is generally not required to be
provided by the customer.

F-9

## Earnings Per
Share

The Company calculates
earnings per share (EPS) pursuant to (SFAS) No. 128 Earnings Per
Share. The computation of Basic EPS is based on the weighted average
number of shares outstanding during each year. The computation of Diluted EPS is
based upon the weighted average number of shares outstanding, plus the shares
that would be outstanding assuming the exercise of all outstanding options and
warrants, computed using the treasury stock method. Dilutive options and
warrants are not considered in the calculation of net loss per share.

The weighted average number
of shares outstanding used in determining Basic EPS was 9,778,672 in 2000,
9,521,621 in 1999, and 9,164,709 in 1998. The weighted average number of shares
outstanding used in determining Diluted EPS was 10,327,827 in 2000, 10,021,991
in 1999, and 9,601,776 in 1998. The difference between the shares used for
calculating Basic and Diluted EPS relates to common stock equivalents consisting
of stock options and warrants outstanding during the respective periods.

During 1999 the
Companys Board of Directors approved a five-for-four split of the
Companys common stock. This split was effected on June 8, 1999 for
shareholders of record on May 18, 1999. All per share and share information has
been restated to reflect this stock split.

## Stock-Based
Compensation

The Company applies Accounting  Principles Board Opinion 25 and related  interpretations in accounting for employee  stock-based
compensation.  The  Company  adopted  the  pro  forma  and  other  disclosure  requirements  of SFAS  No.  123,  which  requires
presentation  of the pro forma effect of the  fair-value  based  method on net income and net income per share in the  financial
statement footnotes.  (See Note 10)

## Use of
Estimates

The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

## Fair Value of Fiancial Instruments

The Companys consolidated balance sheets include the following financial instruments:
trade accounts receivable, trade accounts payable, and notes receivable.  The Company considers the carrying amounts in the financial statements to approximate fair value of these
financial instruments due to the relatively short period of time between the origination of the instruments and their expected
realization.  The interest rates on notes receivable approximate current market rates.

## New Accounting
Pronouncements

Statement of Financial
Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and
Hedging Activities, is effective for all fiscal years beginning after June 15,
2000. SFAS 133, as amended, establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts and for hedging activities. Under SFAS 133, certain contracts
that were not formerly considered derivatives may now meet the definition of a
derivative. The Company adopted SFAS 133 effective January 1, 2001. The adoption
of SFAS 133 did not have a significant impact on the financial position, results
of operations, or cash flows of the Company.

In December 1999, the Securities and Exchange  Commission issued Staff Accounting  Bulletin ("SAB") No. 101, Revenue Recognition
in  Financial  Statements,  which the  Company  adopted in the fourth  quarter of 2000.  Adoption  of SAB No. 101 did not have a
material impact on the Company's financial statements.

F-10

In March 2000, the FASB
issued FASB Interpretation No. 44, Accounting for Certain Transactions Involving
Stock Compensation, an Interpretation of Accounting Principles Board
(APB) Opinion No. 25, Accounting for Stock Issued to Employees
(FIN 44). FIN 44 clarifies the application of APB No. 25 for the
following: the definition of employee for purposes of applying APB NO. 25; the
criteria for determining whether a plan qualifies as a non-compensatory plan;
the accounting consequence for various modifications to the terms of a
previously fixed stock option or award; and the accounting for an exchange of
stock compensation awards in a business combination. The Company adopted FIN 44
effective July 1, 2000 and such adoption did not have a material impact on its
consolidated financial statements.

## Reclassification

Certain items on the 1999
and 1998 consolidated statements have been reclassified to conform to the 2000
presentation.

## 2.   ALLOWANCE
FOR DOUBTFUL ACCOUNTS

Allowance for doubtful accounts includes the following:

`2000         1999         1998
                                           ---------    ---------    ---------
              Balance, beginning of year   $     943    $     927    $   1,693

              Provisions ...............         203          169          156

              Deductions ...............        (429)        (153)        (922)
                                           ---------    ---------    ---------
              Balance, end of year .....   $     717    $     943    $     927
                                           =========    =========    =========`

## 3.   NOTES
PAYABLE AND LONG-TERM OBLIGATIONS

The Company's debt and capital lease obligations are as follows:

`2000             1999
                                                      --------         --------
Amount  outstanding  on line of credit with bank,
  bearing interest at LIBOR (6.1% at December 31,
  1999) plus 1.75%, interest payable monthly;
  repaid in 2000                                       $    --         $  6,700

Amounts due under capital leases with effective
  interest rates ranging from 8.5% to 14.6% per
  annum (Note 11)                                          103              219
                                                        ------          -------
                                                           103            6,919

Less: Current portion of notes payable and long-term
  obligations                                             (103)            (189)
                                                       -------         --------
                                                       $    --         $  6,730
                                                       =======         ========`

The Company has a credit facility with a bank providing for borrowings not to exceed
$25 million in the form of two credit facilities. The Tranche A facility
provides for borrowing of up to $20 million and is available for business
acquisitions and has a term repayment option. The Tranche B facility provides
for borrowing not to exceed $5 million and is available for general working
capital needs. The Tranche A facility expiration date is March 31, 2001.
Management is currently in negotiation with the bank for an extension and an
increase to the Tranche A facility. The Tranche B facility expires September 30,
2002. As of December 31, 2000, there was no borrowing against either facility.
The credit facility is unsecured and subject to certain restrictive covenants
including minimum earnings before interest, taxes, depreciation and
amortization. The Company was in compliance with these covenants at December 31,
2000.

F-11

## 4.   PROPERTY,
PLANT AND EQUIPMENT

The components of property, plant and equipment are summarized below:

`2000            1999
                                                      --------        --------
    Land ..........................................   $  5,099        $  5,099
    Leasehold improvements ........................      2,857           2,720
    Equipment and software ........................     21,953          17,917
    Furniture and fixtures ........................      4,914           4,220
    Construction in progress ......................      3,474              --
                                                      --------        --------
                                                        38,297          29,956
    Less accumulated depreciation and amortization     (20,104)        (15,159)
                                                      --------        --------
                                                      $ 18,193        $ 14,797
                                                      ========        ========`

On October 2, 1998, the Company purchased 8.3 acres of undeveloped land in Santa
Ana, California for approximately $5.1 million. The Company had intended to
construct a building on the land that would serve as the world headquarters.
Instead, the Company has signed a lease to relocate its world headquarters and
the Santa Ana training facility to Anaheim, California in 2001. The land in
Santa Ana is currently in escrow.

Included in the Companys property, plant and equipment are equipment and leasehold
improvements under capital leases amounting to $125 (2000) and $359 (1999), net
of accumulated depreciation of $4,850 (2000) and $4,582 (1999).

## 5.  WRITE-OFF OF MANAGEMENT SYSTEM AND SETTLEMENT OF FRANCHISE ARBITRATION

In
the fourth quarter of 1999 the Company decided to discontinue the development of
its proprietary management system and, accordingly, recorded a charge of $3,338
comprised primarily of capitalized development costs.

During
the year ended December 31, 1999, the Company settled a dispute with a
previously terminated master franchisee resulting in a charge of $303, which is
included in the accompanying statements of income.

## 6.   INCOME TAXES

Income
tax expense for the periods below differs from the amounts computed by applying
the U.S. federal income tax rate of 35% to the pretax income as a result of the
following:

`2000        1999        1998
                                               -------     -------     -------
Computed "expected" tax expense ............   $ 6,398     $ 3,996     $ 3,393
Amortization of excess of cost over net
     assets acquired .......................        72          63          15
State and local tax expense, net of federal
     income tax effect .....................     1,016         494         578
Interest income from tax-free investments ..      --           (48)       (319)
Other ......................................      (174)       (352)        146
                                               -------     -------     -------
Income tax expense .........................   $ 7,312     $ 4,153     $ 3,813
                                               =======     =======     =======

Effective rates ............................      40.0%       36.4%       39.3%

Income tax expense consists of:
     Federal:
       Current .............................   $ 5,388     $ 3,258     $ 2,843
       Deferred ............................      (256)       (389)       (332)
     State and local:
       Current .............................     1,563         783         952
       Deferred ............................      --           (81)        (23)
     Foreign ...............................       617         582         373
                                               -------     -------     -------
Income Tax Expense .........................   $ 7,312     $ 4,153     $ 3,813
                                               =======     =======     =======`

F-12

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and
liabilities at    December 31, 2000 and 1999, are presented below:

`2000     1999
                                                                 ------   ------
Deferred tax assets:
     Accounts receivable, principally due to allowance for
          doubtful accounts ..................................   $  897   $  340
     Reserve for uninsured losses and litigation .............      280      163
     Accrued expenses ........................................    1,383    1,106
     Property, plant and equipment, principally due to
          differences in depreciation ........................    1,292    1,147
     Foreign Tax Credit carryforward .........................     --        157
     Deferred revenue ........................................      359      464
     Other ...................................................       65       64
                                                                 ------   ------
                                                                  4,276    3,441
                                                                 ------   ------

Deferred tax liabilities:
     Excess of cost over net assets of acquired companies ....    2,206    1,611
     Loss on joint venture ...................................     --        139
     Other ...................................................      123     --
                                                                 ------   ------
                                                                  2,329    1,750
                                                                 ------   ------

Net deferred income taxes ....................................   $1,947   $1,691
                                                                 ======   ======`

## 7.   OTHER ASSETS

Other assets consist of:

`2000             1999
                                                       -------          -------
Notes receivable from ECB, Inc. ..............         $ 2,933          $ 3,681
Notes receivable from officers ...............           1,385            1,385
Other ........................................           1,438            1,553
Valuation reserves ...........................          (2,960)          (2,960)
                                                       -------          -------
                                                       $ 2,796          $ 3,659
                                                       =======          =======`

Included
in other assets are notes receivable from officers of the Company in the
aggregate amount of $1,385. The notes receivable are demand notes, $860 of which
is collateralized by the proceeds from certain life insurance policies and bear
interest at 7.3%. The remaining $525 relates primarily to non-interest bearing
loans in connection with officers relocation expenses. The Company does not
intend to demand repayment of these notes during fiscal 2001.

The
note receivable of $2,933 from ECB, Inc. arose in connection with the 1996 sale
of the Companys environmental business and bears interest, payable
quarterly, at a rate of 6%. Annual principal payments commenced in April 1999 with the minimum
principal payments being $250, $500, and $750, for 1999, 2000, and 2001,
respectively, with the balance due April 30, 2002.

F-13

## 8.   OTHER
CURRENT LIABILITIES

Other current liabilities consist of:

`2000             1999
                                                       -------          -------
Accounts payable to franchisees ....................   $ 5,788          $ 3,882
Salaries, wages and commissions payable ............     4,356            3,266
Unexpended advertising fund ........................       783              509
Payable to former franchisees pursuant to
    franchise acquisitions .........................     3,975              294
Accrued franchise arbitration expenses .............      --                279
Accrued expenses in connection with the disposition
    of the environmental segment ...................       188              667
Accrued operating expenses and other liabilities ...     2,634            3,353
                                                       -------          -------
                                                       $17,724          $12,250
                                                       =======          =======`

## 9.   EMPLOYEE
SAVINGS PLAN

The
Company has a 401(k) Profit Sharing Trust and Plan in which employees not
currently covered by a collective bargaining agreement are eligible to
participate. None of the Companys employees is currently covered by a
collective bargaining agreement. The plan was established in 1995 and through
December 31, 1998, was non-contributory. Effective January 1, 1999, the Board of
Directors elected to match 25% of the employees contributions. The Company
contributed $526 and $425 for 2000 and 1999, respectively.

## 10.   STOCK
OPTION PLAN

The
Company maintains a Key Employees Stock Option Plan and an Omnibus Equity Plan
which provide for the issuance of non-qualified options, incentive stock
options, and stock appreciation rights. These plans currently provide for the
granting of options to purchase up to 1,267,572 shares of common stock.
Incentive stock options are exercisable for up to ten years, at an option price
of not less than the fair market value on the date the option is granted or at a
price of not less than 110% of the fair market price in the case of an option
granted to an individual who, at the time of grant, owns more than 10% of the
Companys common stock. Non-qualified stock options may be issued at such
exercise price and on such other terms and conditions as the Compensation
Committee of the Board of Directors may determine. Optionees may also be granted
stock appreciation rights under which they may, in lieu of exercising an option,
elect to receive cash or common stock, or a combination thereof, equal to the
excess of the fair market value of the common stock over the option price. All
options were granted at fair market value at dates of grant.

In
1999 and 1998 the Company granted to certain officers of the Company options to
purchase up to a maximum of 57,916 shares and 51,875 shares, respectively, of
the Companys common stock. The options had an exercise price of $17.00 and
$10.22 per share, respectively, which was the fair market value on the dates of
grant. The number of options was dependent on the officers meeting certain
performance criteria. As of December 31, 1999 and 1998, the officers had been
granted options to purchase 16,250 shares and 49,441 shares of common stock. For
the years ended December 31, 1999 and 1998 the Company recorded compensation
expense of zero and $410 associated with the option grants. In 2000 the Company
did not grant options to purchase the Companys common stock that were
dependent upon meeting certain performance criteria.

Directors
of the Company who are not employees currently hold options to acquire a total
of 310,000 shares pursuant to option plans and agreements, including 60,000
awarded in 2000 under the Companys Omnibus Equity Plan. The exercise price
under all of such options was the fair market value as of the date of grant.

F-14

Changes
in shares, under all current and former plans and other arrangements, for 2000,
1999 and 1998 are summarized as follows:

| | 2000 | 1999 |  | 1998
| | ---- | ---- |  | ----

|                                                               | Shares    | Weighted Average  Price | Shares    | Weighted Average  Price | Shares    | Weighted Average  Price
|-------------------------------------------------------------- | --------- | ----------------------- | --------- | ----------------------- | --------- | -----------------------
|
|Outstanding, beginning of year                                 | 1,278,249 | $  9.97                 | 1,102,878 | $  8.75                 | 840,312   | $ 7.26                 
|Granted                                                        | 277,750   | 12.41                   | 273,808   | 15.81                   | 312,566   | 12.29                  
|Exercised                                                      | (149,000) | 10.14                   | (7,812)   | 10.06                   | (43,750)  | 5.20                   
|Canceled                                                       | ( 28,125) | 11.43                   | (90,625)  | 12.87                   | (6,250)   | 10.22                  
|                                                               |           |                         |           |                         |           |                        
|Outstanding, end of year                                       | 1,378,874 | 10.39                   | 1,278,249 | 9.97                    | 1,102,878 | 8.75                   
|
|Options exercisable, end of year                               | 900,974   | $ 8.88                  | 876,125   | $ 8.22                  | 669,062   | $ 7.32                 
|
|Weighted average fair value of options granted during the year | $ 6.51    |                         | $ 6.58    |                         | $ 6.31    |                        
|

Outstanding stock options at December 31, 2000 consist of the following:

| | Options Outstanding | Options Exercisable
| | ------------------- | -------------------

|Range of Exercise Prices | Shares    | Weighted Average Remaining Life | Weighted Average Price | Shares  | Weighted Average Price
|------------------------ | --------- | ------------------------------- | ---------------------- | ------- | ----------------------
|
|                         |           | (Years)                         |                        |         |                       
|$ 5.20 - $ 9.28          | 581,250   | 3.2                             | $ 6.44                 | 566,250 | $ 6.37                
|10.22 -  14.44           | 634,999   | 3.8                             | 12.28                  | 301,849 | 12.70                 
|15.15 -  23.19           | 162,625   | 4.2                             | 17.15                  | 32,875  | 17.03                 
|
|$ 5.20 - $23.19          | 1,378,874 | 3.6                             | $  10.39               | 900,974 | $ 8.88                
|

The
fair value of each option grant was estimated as of the grant date using the
Black-Scholes option-pricing model assuming a risk-free interest rate of 6.6%,
volatility of 74%, and zero dividend yield for 2000; a risk-free interest
rate of 6.1%, volatility of 27%, and zero dividend yield for 1999; and a risk-free interest rate of 6.5%, volatility of 55% and zero dividend yield for 1998, with expected
lives of six years for all periods. The Company applies Accounting Principles
Board Opinion 25 and related interpretations in accounting for its plans. If
compensation expense was determined based on the fair value method under the
provisions of SFAS No. 123, the Companys net income and net income per
share would have been reduced to the pro forma amounts indicated below:

`2000         1999         1998
                                             --------     --------     --------
Net income ..................  As reported   $ 10,969     $  7,263     $  5,882
                               Pro forma       10,194        6,803        5,581

Basic earnings per share ....  As reported   $   1.12     $   0.76     $   0.64
                               Pro forma         1.04         0.71         0.61

Diluted earnings per share ..  As reported   $   1.06     $   0.72     $   0.61
                               Pro forma         0.99         0.68         0.58`

As of December 31, 2000, there were 922,264 shares of common stock under the Stock Option Plans that were available for
     future grant.

F-15

## 11.  COMMITMENTS AND CONTINGENCIES

## Leases

The
Company leases its offices, training facilities, and certain equipment under
operating and capitalized lease obligations. Operating leases expire on various
dates through 2014. The Company recognizes rent expense on a straight line basis
and records deferred rent based on the difference between cash paid and straight
line expense. Rent expense was $7,342, $5,457, and $3,331 for 2000, 1999, and
1998, respectively.

The
Company has entered into a contract with a provider to purchase $15,000 in
courseware through June 30, 2004. That contract specifies minimum purchases of
$2,000, $4,500, $5,500, and $3,000 in 2001. 2002, 2003, and 2004, respectively.

Under
the terms of the leases, future minimum commitments at December 31, 2000 are as
follows:

`Capital       Operating
                                                          Leases         Leases
                                                        ---------      ---------
     Year ending December 31
          2001 ....................................     $     113      $   7,497
          2002 ....................................          --            8,941
          2003 ....................................          --            8,735
          2004 ....................................          --            8,263
          2005 ....................................          --            7,045
          2006 & after ............................          --           31,839
                                                        ---------      ---------
      Total future minimum lease payment ..........           113      $  72,320
                                                                       =========
     Less: Amount representing interest ...........           (10)
                                                        ---------
                                                              103
     Less: Current portion ........................          (103)
                                                        ---------
                                                        $    --
                                                        =========`

## Litigation

The
Company is involved in various claims and legal actions arising in the ordinary
course of business. In the opinion of management, the ultimate disposition of
these matters will not have a material adverse effect on the Companys
consolidated financial position or results of operations.

## 12.   ACQUISTIONS

In
1999 the Company purchased the assets of its franchises in Albuquerque, New
Mexico, Charlotte, North Carolina, Sacramento and Stockton, California, San
Antonio, Texas, and Denver, Colorado. The consideration paid included $26,034 in
cash, net of cash acquired, and 183,679 shares of the Companys common
stock. Based upon the average price of the Companys stock seven days
before and after the date of the transaction, total consideration paid for the
acquisitions was $29,017. The selling shareholders will receive additional cash
consideration if certain performance targets are achieved. The acquisitions have
been recorded using the purchase method of accounting and the operating results
have been included in the Companys financial statements from the date of
acquisition. The acquisitions resulted in goodwill of $29,049 which is being
amortized over 25 years.

Additional consideration for previous acquisitions

During
the twelve months ended December 31, 2000, the Company granted additional
consideration for previous acquisitions consisting of $10,126 in cash and
201,459 in shares of the Companys stock valued at $3,792 due to the
acquired centers meeting certain performance targets.

F-16

If
the results from the acquired locations had been included in the results of
operations at the beginning of 1999, the Companys revenue, net income, and
earnings per share would have approximated the following:

`1999
                                                                     -----------
           Revenue ........................................          $   123,114

           Net Income .....................................                7,020

           Basic Earnings Per Share .......................                 0.72

           Diluted Earnings Per Share .....................                 0.69`

## 13.   QUARTERLY FINANCIAL DATA (UNAUDITED)

Summarized
quarterly financial data for continuing operations for 2000 and 1999 is as
follows:

`First     Second      Third      Fourth
                                       Quarter    Quarter    Quarter    Quarter
                                       -------    -------    -------    -------
Year ended December 31, 2000
Revenues ...........................   $34,025    $36,649    $35,970    $36,054
Operating income ...................     4,546      5,265      4,533      3,752
Net income .........................     2,704      3,169      2,752      2,344
Basic earnings per share ...........      0.28       0.33       0.28       0.24
Diluted earnings per share .........      0.27       0.31       0.26       0.23

                                        First     Second      Third      Fourth
                                       Quarter    Quarter    Quarter    Quarter
                                       -------    -------    -------    -------
Year ended December 31, 1999
Revenues ...........................   $22,102    $27,900    $30,581    $30,893
Operating income ...................     2,410      3,922      4,712         83
Net income .........................     1,619      2,474      3,011        159
Basic earnings per share ...........      0.17       0.26       0.32       0.02
Diluted earnings per share .........      0.16       0.25       0.30       0.02`

## 14.   SEGMENT
REPORTING

The Company operates in two
business segments  company-owned training centers and franchising
operations. The company-owned training centers segment operates wholly-owned
computer training centers in the United States and derives its revenues from the
operating revenues of those centers. The franchising segment franchises computer
training centers domestically and internationally and supplies systems of
instruction and sales and management concepts concerning computer training to
independent franchisees. The franchising segment revenues are from the initial
franchise fees and royalties from the franchise operations and other revenue
such as from Nova Vista and the Corporate Education Solutions (CES) program. The two segments are managed
separately because of the differences in the source of revenues and the services
offered. Information on the Companys segments is as follows:

F-17

`Company-
                                       owned                Executive   Consol-
                                      Centers  Franchising   Office     idated
                                      --------   --------   --------   ---------
For the year ended December 31, 2000
------------------------------------
Revenues from external customers .... $111,319   $ 31,379   $   --     $142,698
Interest income .....................      314        189       --          503
Interest expense ....................     (259)       (59)      --         (318)
Depreciation and amortization expense    6,879        832       --        7,711
Income tax expense ..................    2,798      4,514       --        7,312
Net income ..........................    4,124      6,845       --       10,969
Net deferred tax asset ..............      900      1,047       --        1,947
Total assets ........................   96,554     21,268      5,246    123,068
Additions to property, plant and
     equipment ......................    4,798      3,899       --        8,697

For the year ended December 31, 1999
------------------------------------
Revenues from external customers .... $ 86,520   $ 24,956   $   --     $111,476
Interest income .....................      453        190       --          643
Interest expense ....................     (331)       (23)      --         (354)
Depreciation and amortization expense    5,183        891       --        6,074
Write-off of management system ......     --        3,338       --        3,338
Income tax expense ..................    2,853      1,300       --        4,153
Net income ..........................    5,027      2,236       --        7,263
Net deferred tax asset ..............      (80)     1,771       --        1,691
Total assets ........................   85,537     16,294      3,253    105,084
Additions to property, plant and
     equipment ......................    4,840      1,922        (14)     6,748

For the year ended December 31, 1998
------------------------------------
Revenues from external customers .... $ 52,545   $ 20,084   $   --     $ 72,629
Interest income .....................      971        453       --        1,424
Interest expense ....................     (229)       (26)      --         (255)
Depreciation and amortization expense    3,456        550       --        4,006
Income tax expense ..................    1,308      2,505       --        3,813
Net income ..........................    2,526      3,356       --        5,882
Net deferred tax asset ..............      249        972       --        1,221
Total assets ........................   45,194     21,631     19,921     86,746
Additions to property, plant and
     equipment ......................    2,445      5,914       --        8,359`

## 15.   SUBSEQUENT
EVENT

On
January 31, 2001 the Company purchased its franchise in Indianapolis, Indiana.
The consideration paid included $4,892 in cash, net of cash acquired. The
selling shareholders will receive additional cash consideration if certain
performance targets are achieved.

F-18

# PART III

## ITEM 10.  
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

## DIRECTORS

The information required by
this Item 10 as to the Directors of the Company is incorporated herein by
reference to the information set forth under the caption Election of
Directors in the Companys definitive Proxy Statement for the Annual
Meeting of Stockholders to be held on May 8, 2001, since such Proxy Statement
will be filed with the Securities and Exchange Commission not later than 120
days after the end of the Companys fiscal year pursuant to Regulation 14A.

## EXECUTIVE
OFFICERS OF THE REGISTRANT*

The following is a list of
the executive officers of the Company. The executive officers are elected each
year and serve at the pleasure of the Board of Directors.

`NAME                       AGE    POSITION
----                       ---    --------

Curtis Lee Smith, Jr ....   73    Chairman of the Board

Thomas J. Bresnan .......   48    President and Chief Executive Officer

Stuart O. Smith .........   67    Vice Chairman of the Board and Secretary

Robert S. McMillan ......   49    Vice President, Treasurer and Chief Financial
                                  Officer

Kenneth M. Hagerstrom ...   42    President - Company-owned Center Division
                                  Executive Vice President - New Horizons
                                  Computer Learning Centers, Inc.`

*The description of
executive officers called for in this Item is included pursuant to Instruction 3
to Section (b) of Item 401 of Regulation S-K.

Set forth below is a brief
description of the background of those executive officers of the Company who are
not Directors of the Company. Information with respect to the background of
those executive officers who are also Directors of the Company is incorporated
herein by reference as set forth under the caption Election of
Directors in the Companys definitive Proxy Statement for the Annual
Meeting of Stockholders to be held on May 8, 2001.

Page 19

ROBERT S. MCMILLAN was named Vice President,  Treasurer and Chief Financial  Officer of the Company in August 1997. He served as
Chief Financial Officer of New Horizons Computer  Learning  Centers,  Inc.  beginning in 1995 and became a Senior Vice President
in January 1997. From 1992 to 1995, Mr. McMillan was Chief  Financial  Officer of ZNYX  Corporation,  Fremont  California.  From
1990 to 1992, he was Chairman, Chief Executive Officer and Chief Financial Officer of Omnivar, in Burbank, California.

KENNETH HAGERSTROM was
named President of the Company-owned Center Division of New Horizons in November
1997. Additionally, in October 1999 he was named Executive Vice President of New
Horizons Computer Learning Centers, Inc. From June 1997 until November 1997 Mr.
Hagerstrom was the Director of Field Support for New Horizons Computer Learning
Centers, Inc. From October 1995 to June 1997 he was General Manager of the
Company-owned center in New York, NY. He originally joined New Horizons network
in 1994 at the Boston, MA franchise as an Account Executive and was promoted in
1995 to Sales Manager. Before then, from 1982 to 1994, Mr. Hagerstrom was
President of KMS Enterprises of Boston, MA.

## ITEM 11.  
EXECUTIVE COMPENSATION

The information required by
this Item 11 is incorporated by reference to the information set forth under the
caption Compensation of Directors and Executive Officers in the
Companys definitive Proxy Statement for the Annual Meeting of Stockholders
to be held on May 8, 2001, since such Proxy Statement will be filed with the
Securities and Exchange Commission not later than 120 days after the end of the
Companys fiscal year pursuant to Regulation 14A.

## ITEM 12.  
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by
this Item 12 is incorporated by reference to the information set forth under the
caption Share Ownership of Principal Holders and Management in the
Companys definitive Proxy Statement for the Annual Meeting of Stockholders
to be held on May 8, 2001, since such Proxy Statement will be filed with the
Securities and Exchange Commission not later than 120 days after the end of the
Companys fiscal year pursuant to Regulation 14A.

## ITEM 13.  
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by
this Item 13 is incorporated by reference to the information set forth under the
caption Certain Transactions in the Companys definitive Proxy
Statement for the Annual Meeting of Stockholders to be held on May 8, 2001,
since such Proxy Statement will be filed with the Securities and Exchange
Commission not later than 120 days after the end of the Companys fiscal
year pursuant to Regulation 14A.

Page 20

# PART IV

## ITEM 14.  
EXHIBITS AND REPORTS ON FORM 8-K

|(a) (1) | Financial Statements                                                                                                   
|------- | -----------------------------------------------------------------------------------------------------------------------
|        | The
following Consolidated Financial Statements of the Registrant and its
subsidiaries are included in Part II, Item 8:

| |                                                 | Page       
| | ----------------------------------------------- | -----------
| |                                                 |            
| | Reports  of Independent Auditors                | F-1        
| | Consolidated Balance Sheets                     | F-2        
| | Consolidated Statements of Earnings             | F-3        
| | Consolidated Statements of Comprehensive Income | F-4        
| | Consolidated Statements of Stockholders Equity | F-5        
| | Consolidated Statements of Cash Flows           | F-6 to F-7 
| | Notes to Consolidated Financial Statements      | F-8 to F-18

|(a) (2) | All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable and, therefore, have been
omitted.
|------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       
|(a) (3) | Exhibits                                                                                                                                                                                                                                
|       
|        | Reference is made to the Exhibit Index at sequential page 23 hereof.                                                                                                                                                                    
|       
|(b)     | Reports on Form 8-K                                                                                                                                                                                                                     
|       
|        | No
reports on Form 8-K were filed by the Registrant during the quarter ending
December 31, 2000.                                                                                                                                        

Page 21

# SIGNATURES

Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized at Santa Ana, California this 30th day of
March, 2001.

NEW HORIZONS WORLDWIDE, INC.

By:  /s/  Curtis Lee Smith, Jr.
Curtis Lee Smith, Jr., Chairman

Pursuant
to the requirements of the Securities Exchange Act of 1934, this Report has been
signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated:

`Signature                     Title                                Date
---------                     -----                                ----

/s/Curtis Lee Smith, Jr.     Chairman,                      )
------------------------     (Principal Executive Officer)  )
Curtis Lee Smith, Jr.                                       )
                                                            )
                                                            )
                                                            )
/s/Robert S. McMillan        Vice President, Treasurer and  )
---------------------        Chief Financial Officer        )
Robert S. McMillan           (Principal Financial and       )
                             Accounting Officer)            )
                                                            )
                                                            )
/s/Stuart O. Smith           Director                       )
------------------                                          )
Stuart O. Smith                                             )
                                                            )
                                                            )   March 30, 2000
/s/Thomas J. Bresnan         Director                       )
--------------------                                        )
Thomas J. Bresnan                                           )
                                                            )
                                                            )
/s/David A. Goldfinger       Director                       )
----------------------                                      )
David A. Goldfinger                                         )
                                                            )
                                                            )
/s/Richard L. Osborne        Director                       )
---------------------                                       )
Richard L. Osborne                                          )
                                                            )
                                                            )
/s/Scott R. Wilson           Director                       )
------------------                                          )
Scott R. Wilson                                             )
                                                            )
                                                            )
/s/William H. Heller         Director                       )
--------------------                                        )
William H. Heller                                           )
                                                            )`

Page 22

# EXHIBIT INDEX

|Exhibit Number | Exhibit Description                                                                                                                                            
|-------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|              
|3.1            | Amended Certificate of Incorporation of the Registrant(1)                                                                                                      
|              
|3.2            | By-laws of the Registrant(1)                                                                                                                                   
|              
|3.3            | Amendment to Certificate of Incorporation of the Registrant(3)                                                                                                 
|              
|4.1            | Specimen Certificate for Share of Common Stock, $.01 par value, of the Registrant(6)                                                                           
|              
|4.2            | Business Loan Agreement between the Registrant and Bank of America, N. A.(8)                                                                                   
|              
|4.3            | Amendment No. 1 to the Business Loan Agreement between the Registrant and Bank of America, NA *                                                                
|              
|4.4            | Amendment No. 2 to the Business Loan Agreement between the Registrant and Bank of America, NA *                                                                
|              
|4.5            | Amendment No. 3 to the Business Loan Agreement between the Registrant and Bank of America, NA *                                                                
|              
|4.6            | Amendment No. 4 to the Business Loan Agreement between the Registrant and Bank of America, NA *                                                                
|              
|4.7            | Amendment No. 5 to the Business Loan Agreement between the Registrant and Bank of America, NA *                                                                
|              
|10.1          | Omnibus Equity Plan of the Registrant(2)                                                                                                                       
|              
|10.2          | Standard form of Stock Option Agreement executed by recipients of options under Omnibus Equity Plan(9)                                                         
|              
|10.3          | Key Employees Stock Option Plan of the Registrant(1)                                                                                                           
|              
|10.4          | Amendment No. 1 to the Key Employees Stock Option Plan of the Registrant(6)                                                                                    
|              
|10.5          | Stock Option Agreement dated August 6, 1992, between the Registrant and Thomas J. Bresnan(6)                                                                   
|              
|10.6          | Stock Option Agreement dated January 22, 1998, between the Registrant and Kenneth Hagerstrom based on performance criteria(5)                                  
|              
|10.7          | Stock Option Agreement dated January 22, 1998, between the Registrant and Robert S. McMillan based on performance criteria(5)                                  
|              
|10.8          | Stock Option Agreement dated January 15, 1999, between the Registrant and Kenneth Hagerstrom based on performance criteria(7)                                  
|              
|10.9          | Stock Option Agreement dated January 15, 1999, between the Registrant and Robert S. McMillan based on performance criteria(7)                                  
|              
|10.10         | Outside Directors Stock Option Plan of the Registrant(1)                                                                                                       
|              
|10.11         | Amendment No. 1 to the Outside Directors Stock Option Plan of the Registrant(6)                                                                                
|              
|10.12         | 1997 Outside Directors Elective Stock Option Plan of the Registrant(2)                                                                                         
|              
|10.13         | Form of Option Agreement executed by recipients of options under 1997 Outside Directors Elective Stock Option Plan(2)                                          
|              
|10.14         | Stock Option Agreement dated September 19, 1996, between the Registrant and David A. Goldfinger(2)                                                             
|              
|10.15         | Stock Option Agreement dated September 19, 1996, between the Registrant and William Heller(2)                                                                  
|              
|10.16         | Stock Option Agreement dated September 19, 1996, between the Registrant and Richard L. Osborne(2)                                                              
|              
|10.17         | Stock Option Agreement dated September 19, 1996, between the Registrant and Scott R. Wilson(2)                                                                 
|              
|10.18         | Stock Option Agreement dated December 15, 2000, between the Registrant and David A. Goldfinger *                                                               
|              
|10.19         | Stock Option Agreement dated December 15, 2000, between the Registrant and William Heller *                                                                    
|              
|10.20         | Stock Option Agreement dated December 15, 2000, between the Registrant and Richard L. Osborne *                                                                
|              
|10.21         | Stock Option Agreement dated December 15, 2000, between the Registrant and Scott R. Wilson *                                                                   
|              
|10.22         | Form of Indemnity Agreement with Directors and Officers of the Registrant(6)                                                                                   
|              
|10.23         | New Horizons Worldwide 401(k) Profit Sharing Trust and Plan (6)                                                                                                
|              
|10.24         | Warrants for the purchase of 43,750 shares of Common Stock, $.01 par value per share, of the Registrant issued to The Nassau Group, Inc. - December 31, 1997(4)
|              
|10.25         | Relocation agreement dated July 27, 1999, between the Registrant and Thomas J. Bresnan(8)                                                                      
|              
|10.26         | Promissory note dated August 31, 1999, between the Registrant and Thomas J. Bresnan(9)                                                                         
|              
|10.27         | Amendment dated January 4, 2000, to relocation agreement between the Registrant and Thomas J. Bresnan(9)                                                       
|              
|10.28         | Promissory note dated October 14, 1999, between the Registrant and Kenneth M. Hagerstrom(9)                                                                    
|              
|10.29         | Severance agreement dated January 4, 2000, between the Registrant and Kenneth M. Hagerstrom(9)                                                                 
|              
|10.30         | Severance agreement dated January 4, 2000, between the Registrant and Robert S. McMillan(9)                                                                    
|              
|10.31          | Lease Agreement dated February 15, 2000, between New Horizons Worldwide, Inc. and Stadium Gateway Associates, LLC, guaranteed by the Registrant(9)             
|              
|10.32          | Lease Agreement dated April 27, 2000, between New Horizons Worldwide, Inc. and 1114 Trizechahn-Swig, guaranteed by the Registrant(10)                          
|              
|21.1           | Subsidiaries to the Registrant *                                                                                                                               
|              
|23.1           | Consent of Deloitte & Touche LLP *                                                                                                                             
|              

|(1)  | Incorporated  herein by reference to the appropriate  exhibits to the Registrant's  Registration  Statement on Form S-1  (File No. 33-28798).         
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------
|(2)  | Incorporated herein by reference to the appropriate exhibits to the Registrant's Registration Statement on Form S-8 (Reg. No. 333-56585).             
|(3)  | Incorporated  herein by reference to the appropriate  exhibit to the Registrant's Annual Report on Form 10-K for the year ended December 28, 1996.    
|(4)  | Incorporated  herein by reference to the appropriate  exhibit to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1997.    
|(5)  | Incorporated herein by reference to the appropriate exhibit to the Registrants Quarterly Report on Form 10-Q for the period ended March 31, 1998.    
|(6)  | Incorporated herein by reference to the appropriate exhibit to the Registrants Annual Report on Form 10-K for the year ended December 31, 1998.      
|(7)  | Incorporated herein by reference to the appropriate exhibit to the Registrants Quarterly Report on Form 10-Q for the period ended March 31, 1999.    
|(8)  | Incorporated herein by reference to the appropriate exhibit to the Registrants Quarterly Report on Form 10-Q for the period ended September 30, 1999.
|(9)  | Incorporated herein by reference to the appropriate exhibit to the Registrants Annual Report on Form 10-K for the year ended December 31, 1999.      
|(10) | Incorporated herein by reference to the appropriate exhibit to the Registrants Annual Report on Form 10-Q for the period ended June 30, 2000.        
|    
|*    | Filed herewith                                                                                                                                        
|    
|    | Compensatory plan or arrangement