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

                                   Form 10-KSB
(Mark One)
            [X]       ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                      SECURITIES EXCHANGE ACT OF 1934
                           For the fiscal year ended December 31, 2000
            [ ]       TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
                      SECURITIES EXCHANGE ACT OF 1934
                         For the transition period from          to           .
                                                       ----------   ----------

                        Commission File Number 000-29379
                                               ---------

                                 LEARNCOM, INC.
--------------------------------------------------------------------------------
                 (Name of small business issuer in its charter)
           Nevada                                         87-0622927
------------------------                     -----------------------------------
(State of incorporation)                    (I.R.S. Employer Identification No.)

      720 Industrial Drive, Bensenville, Illinois 60106         (630) 227-1080
---------------------------------------------------------     ------------------
          (Address of principal executive offices)            (Telephone Number)

Securities registered under Section 12(b) of the Act: NONE
                                                      ----
Securities registered under Section 12(g) of the
   Exchange Act:                                   COMMON STOCK, PAR VALUE $.001
                                                   -----------------------------

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 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 [ ]

Check  if no  disclosure  of  delinquent  filers  in  response  to  Item  405 of
Regulation S-B is contained in this form, and no disclosure is contained, to the
best  of  the  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. [X]

State issuer's revenues for its most recent fiscal year.  $4,370,987

As of March 15, 2001,  the aggregate  market value of the issuer's  common stock
held by non-affiliates  was $8,903,862 (based upon the price at which the common
stock was sold,  or the average bid and asked price of such common stock on such
date).

As of March 15,  2001,  the issuer  had  outstanding  796,666,667  shares of its
common stock.

Transitional Small Business Disclosure Format (check one)    Yes [    ]  No [X]


<PAGE>


                           FORWARD LOOKING STATEMENTS


         Certain   statements   in  this  Form  10-KSB  and  in  the   documents
incorporated by reference herein constitute "forward-looking  statements" within
the  meaning of the  Private  Securities  Litigation  Reform  Act of 1995.  Such
forward-looking  statements  involve known and unknown risks,  uncertainties and
other factors which may cause our actual results, performance or achievements to
be materially  different from any future  results,  performance or  achievements
expressed  or implied by such  forward-looking  statements.  Factors  that might
cause such a difference include, among others, uncertainties relating to general
economic and business  conditions;  industry  trends;  changes in demand for our
products;  uncertainties  relating to  customer  plans and  commitments  and the
timing of orders  received from customers;  announcements  or changes in pricing
policies by us or our  competitors;  unanticipated  delays in the development or
market  acceptance of our  products;  availability  of management  and other key
personnel;  availability,  terms and  deployment of capital;  and U.S.  economic
growth.  The words "believe",  "expect",  "anticipate",  "intend" and "plan" and
similar expressions identify forward-looking  statements.  Readers are cautioned
not to place undue  reliance on these  forward-looking  statements,  which speak
only as of the date the statement was made.


                                     PART I

ITEM 1.           DESCRIPTION OF BUSINESS.

DEVELOPMENT OF THE BUSINESS

         LearnCom,  Inc. (f/k/a Smoky Hill Services,  Inc.) was  incorporated on
March 28, 1986 under the laws of the State of Vermont.  On December 31, 1998, we
merged with a wholly-owned  subsidiary  organized under the laws of the State of
Nevada solely to change our domicile from Vermont to Nevada. On May 19, 2000, by
way  of a  reverse  acquisition  (the  "Reverse  Acquisition")  pursuant  to  an
agreement  and  plan  of  reorganization,  we  acquired  all of the  issued  and
outstanding shares of capital stock of LearnCom,  Inc., an Illinois  corporation
formed  on  May  27,  1998  ("LC-Illinois").  In  connection  with  the  Reverse
Acquisition, we commenced operations in our current line of business and changed
our name to LearnCom,  Inc. Prior to the Reverse  Acquisition,  we were inactive
and had nominal assets and liabilities.

OVERVIEW

         We are a leading  provider  of human  resource,  management  and safety
training  courseware and consulting  services to large and small  businesses and
organizations.  We offer  over  1000  courses  that  encompass  a wide  array of
management skills and business topics typically  characterized as "soft skills."
Our courseware and consulting  services have traditionally been delivered over a
variety of channels,  including  film,  videotape,  compact disk,  textbooks and
workbooks, and internal customer workshops.  However, our strategy is focused on
delivering our existing and all  newly-produced or acquired training content via
a variety of electronic



                                       2
<PAGE>

media,  including the  Internet,  organizational  intranets,satellites,  digital
video disk (DVD) and CD-ROM.

         We currently provide our courseware and consulting services through the
following operating units:

                  VIDEOLEARNING  SYSTEMS,  INC. (VLS). The VideoLearning Systems
         unit,  which we acquired on January 24, 2001, is a leading  distributor
         of training videotapes and compact disks. VLS markets over 6,000 titles
         through a team of 10 salespeople and VLS's website at www.videolrn.com.

                  HUMAN  RESOURCES  CONSULTING  AND TRAINING (HR C&T). The Human
         Resources   Consulting   and  Training  unit  consists  of  the  sexual
         harassment,  diversity and  employment  law  courseware  and consulting
         business of BNA Communications,  Inc. ("BNAC"),  a former subsidiary of
         The Bureau of National  Affairs  ("BNA") that we acquired on August 30,
         1999.   BNAC  has   been   the   leading   provider   of   modularized,
         video-supported workshops in the areas of sexual harassment prevention,
         diversity  management and employment law for over 50 years. HR C&T also
         operates  a  consulting  business  to provide  custom,  enterprise-wide
         solutions for major  corporations and organizations in these areas. The
         HR C&T unit has provided  courseware and consulting for over 90% of the
         Fortune 1000  organizations.  HR C&T's website can be accessed  through
         our website at WWW.LEARNCOM.COM.

                  SAFE EXPECTATIONS  INTERNATIONAL  (SEI). The Safe Expectations
         International  unit,  which was an  operating  division of BNAC that we
         acquired in August 1999, provides courseware and consulting in the area
         of business and government safety and environmental  health - primarily
         regulatory  compliance under the Federal Occupational Safety and Health
         Act ("OSHA"). The safety training market is growing rapidly to meet the
         needs of large and small  businesses  that continue to have  compliance
         issues  in  meeting   an   expanding   health  and  safety   regulatory
         environment.  SEI  offers  over  100  titles  to a  broad  spectrum  of
         customers.  In October 2000,  SEI introduced a library of 27 e-learning
         titles  (video-based)  for  the  safety  market,  all of  which  can be
         previewed at the SEI website at WWW.SAFEEXPECTATIONS.COM.

                  MANAGEMENT   DEVELOPMENT   RESOURCES   (MDR).  The  Management
         Development  Resources  unit was  established  as our initial  business
         operation  in  January  1999,  in  connection   with  our  purchase  of
         substantially all of the assets of WingsNet, Inc. (a successor to Video
         Publishing House,  Inc.), a major  producer/distributor  of video-based
         training   programs  since  1986.  This  unit  distributes  a  line  of
         video-based   training  and  development   content  for  executive  and
         management  development  that  includes  well-known  business  authors,
         consultants and educators, including Tom Peters, Ken Blanchard, Stephen
         Covey, Jim Belasco, Warren Bennis, John Kotter and Morris Massey. MDR's
         database



                                       3
<PAGE>

         includes over 25,000 customers.  The MDR unit operates both through our
         website at WWW.LEARNCOM.COM and through WWW.TRAINERSGOLD.COM.

         We  have  focused  on  acquiring  a  large  and  valuable   library  of
off-the-shelf,  customizable human resource and management  compliance  training
courses that we believe can quickly be converted to an interactive, feature-rich
e-learning  format on a cost-effective  basis. As our more than 75,000 customers
develop the  technical  infrastructure  and  broadband  capability  necessary to
purchase streaming video e-learning courseware, we expect to be in a position to
meet the e-learning content needs of our customers.

INDUSTRY BACKGROUND

         Businesses and other large organizations are facing significant changes
in their  environments  due to increased  competition,  an  increasingly  global
marketplace and economy,  and rapid technological  change. To remain competitive
in  this  dynamic   business   environment,   many  companies  and  other  large
organizations  are seeking to increase  their  competitiveness  by  implementing
educational programs to increase the depth, breadth and timeliness of the skills
and  knowledge  of  their  managers,  employees  and  customers.  As  a  result,
businesses are investing  increasing  amounts in corporate training and learning
programs.

         According  to  TRAINING  MAGAZINE,  U.S.  businesses  and  governmental
organizations  spent  approximately $62.5 billion on learning and skill training
in 1999, of which  approximately  $15.1 billion was spent on third-party vendors
of employee training goods and services.  In addition,  the American Society for
Training and  Development  estimates that companies with more than 100 employees
spent on average  approximately  1.8% of their payroll on training in 1999, with
technology  companies  spending  approximately  twice  that rate.  According  to
VERONIS,  SUHLER  &  ASSOCIATES  COMMUNICATIONS  INDUSTRY  FORCAST,   outsourced
training  expenditures  have  grown  at the  rate of 8.2%  since  1993,  and are
expected to reach $19.3 billion annually by 2003.

         Businesses  and other  large  organizations  are also  operating  in an
increasingly  more detailed and complex  regulatory  environment  and are facing
more frequent and larger  penalties and damage claims for failing to comply with
applicable regulatory  requirements and governmental  mandates. In addition, the
diversity  movement  has  grown  dramatically  over  the  past  decade  as  both
businesses and their  customers are populated by employees of all races,  color,
gender,  nationality and sexual  preferences.  More and more companies have been
subjected to sexual  harassment  claims that have resulted in large  settlements
and very damaging publicity. As a result, senior executives and management level
employees  now realize  that  training is one of the keys to the  prevention  of
internal and  third-party  discrimination  and  harassment  claims,  damages and
penalties.

         Historically,  organizations have addressed their learning and training
needs through  investments in  instructor-led  training from external vendors or
internal  training  departments.   While  most  organizations  continue  to  use
traditional  media   (approximately   88%  provide  classroom   instruction  and
approximately  70% use videotape),  new interactive  electronic  media delivered
over the Internet are rapidly gaining market share and are expected to be in use
by over



                                       4
<PAGE>

50% of  organizations  providing  learning or training  courses  during the year
2001. The training functions of large  organizations are undergoing  significant
changes, which has resulted in the following trends and results:

     o    There  has been a shift  away  from  stand-up,  teacher-centered
          classroom training to self-paced, PC-based training;

     o    Corporations  have moved the  responsibility  for training  away
          from  centralized  HR/training  departments to line managers and
          content experts;

     o    Demand for lower cost,  accountability  and flexibility is being
          met with e-learning solutions;

     o    The internet is emerging as the dominant delivery channel of the
          corporate learning market;

     o    Learning  outcomes are being better  matched to the needs of the
          organization;

     o    Learning  results are being  measured to provide  more  accurate
          estimates of return on investment;

     o    Corporate universities,  emulating the university structure, are
          now in place in over 1,600 corporations;

     o    "Learning  organizations"  are emerging with  lifelong  learning
          goals  for all  employees  and  with  employees  taking  greater
          responsibility for their own development;

     o    The Chief  Learning  Officer  is  emerging  as a top  management
          position  in  many  organizations,   replacing  the  traditional
          training department within the HR function; and

     o    Companies have  discovered  that employee  retention is directly
          related to employee  development,  resulting in greater emphasis
          being placed on training.

         Accordingly,  recent studies have  demonstrated  that the most vigorous
growth   segment   of  the   learning   industry   is   "e-learning".   IDC,   a
Massachusetts-based   research  firm,  recently  predicted  that  the  corporate
e-learning  market will grow to $11.4 billion by 2003,  representing a five-year
compound  annual  growth  rate of 83%.  The  principal  reasons  for this growth
include the following:

     o    e-learning  is less costly than other  methods of delivery,  and
          reduces  travel,  meeting and seminar  costs.  The Internet also
          provides  inexpensive  transmission  compared to other  delivery
          alternatives.

     o    e-learning  reduces the employee  downtime and  inflexibility of
          classroom training.


                                       5
<PAGE>

     o    e-learning  is  more  convenient  - it can be  delivered  to the
          desktop  on demand by the  learner  either on the job or at home
          and training can be worked in around  regular  assignments or at
          times when employees are less busy.

     o    Most  e-learning  courses are segmented  into smaller  chunks of
          information,     facilitating    flexibility    and    increased
          productivity.

     o    e-learning  provides more consistency than can be delivered by a
          team of facilitators of varying skills and motivation.

     o    e-learning  programs,  properly  produced and developed,  are as
          effective as facilitated instruction, and in some cases are more
          effective.

     o    e-learning is less intimidating, an important consideration when
          dealing  with   sensitive   subjects  like   diversity,   sexual
          harassment and conflict resolution.

     o    Studies show that e-learning increases retention over time.

     o    e-learning expands access to training.

     o    e-learning  fits the key concept of the  learning  organizations
          where employees take responsibility for their own learning.

     o    Organizations   can  deploy  e-learning  more  quickly  to  more
          employees in more places than traditional learning modalities.

STRATEGY

         Our  goal is to be the  leading  global  provider  of  human  resource,
management and safety training  courseware and consulting  services to large and
small businesses, government agencies and educational institutions. Key elements
of our strategy include the following:

                  CONTINUE OUR AGGRESSIVE  ACQUISITION PROGRAM. Our acquisitions
         (four since January 1999) have expanded our customer  base,  provided a
         large library of high quality video "soft  skills"  content,  expedited
         the  development of a strong  17-person  salesforce,  added  management
         talent,  and provided  excellent  opportunities for  consolidation/cost
         reduction.  We believe the training  industry is highly  fragmented and
         that there are many smaller  courseware and  e-learning  providers with
         successful  product  offerings  that are seeking  merger or acquisition
         partners.

                  CONTINUE TO AGGREGATE  HIGH  QUALITY  LEGACY  PROGRAMMING  FOR
         CONVERSION TO E-LEARNING.  Management  believes that video best sellers
         can be converted  into high quality  e-learning  courseware at moderate
         expense.  Management  believes  that  e-learning  is  an  exciting  new
         delivery channel that will supplement  rather than replace  traditional
         classroom,  instructor-lead training. Our approach will be to recommend
         and market  "blended"  learning  using a variety of techniques - videos
         for classroom use;  content-rich  e-learning  for didactic,



                                       6
<PAGE>

         measurable  learning;  and online mentoring and peer chat to respond to
         inquiries and for discussion purposes.

                  INITIATE AND EXPAND E-LEARNING  PRODUCT  OFFERINGS.  Our first
         e-learning  release,  a library of 27 video-based  safety courses,  has
         received a favorable  reception in the  marketplace.  During  2001,  we
         expect to release courses on employment law, harassment  prevention and
         diversity.

                  INCREASE MARKETING AND DIRECT SALES EFFORTS.  Our direct sales
         organization  is primarily  organized by operating  unit.  We intend to
         leverage our  successes by devoting  significant  marketing  and direct
         sales  resources  to  cross-market  products  and  consulting  services
         offered  by our  operating  units.  We also  intend to add  established
         distributors  with  the  skills  necessary  to sell  our  comprehensive
         product lines.

                  FOSTER A CULTURE OF EXCELLENCE AND CUSTOMER SERVICE. We intend
         to continue to employ  rigorous  recruiting,  training  and  evaluation
         practices  to  help  us  attract  and  retain  employees  who  dedicate
         themselves to delivering  outstanding  products and consulting services
         to our customers.  We have emphasized the creation of an environment of
         excellence  and  customer  service,   and  believe  our  commitment  to
         excellence  will  continue  to  provide  new  customer  referrals  from
         satisfied  customers that have used our training courses and consulting
         services.

PROPOSED ACQUISITION

         On March 16, 2001,  we signed a purchase  agreement to acquire  certain
assets   of    TrainSeek    Inc.    ("TrainSeek"),    including    its   website
(WWW.TRAINSEEK.COM).  The purchase price for the assets to be acquired  includes
$200,000  in cash and 57.5  million  shares  of our  common  stock.  If  certain
performance  targets are reached over the five-year period following the closing
of the  acquisition,  the purchase price will be increased by up to 42.5 million
additional  shares of our common stock.  This  transaction is subject to certain
contingencies,  including the  completion  of our due  diligence  investigation.
Although  we  expect  this  transaction  to close in May  2001,  there can be no
assurances that such a closing will occur within that timeframe, if at all.

CONTENT AND COURSES

         We currently provide our courseware and consulting services through the
following operating units:

         VIDEO LEARNING SYSTEMS, INC. (VLS). We acquired VLS, founded in 1972 by
Homer H. Hewitt III, on January 24,  2001.  We believe VLS is one of the premier
pure  distributors  in  the  training  video  business.   Based  in  Bryn  Mawr,
Pennsylvania, VLS's 16 employees, including eight experienced sales people, sell
over 6,000  training  video  titles from 200  producers  and  publishers.  VLS's
customer base includes more than 30,000  organizations and departments,  as well
as large government agencies and non-profit institutions.

                                       7
<PAGE>


         VLS has non-exclusive sales or marketing  agreements in place with many
of  the  industry's  leading  providers  and  publishers,  including  SkillSoft,
GeoLearning, Vital Learning, Price Learning and Learn2Com. In additional, VLS is
expected  to sell our current  safety  e-learning  titles as well as  e-learning
titles  now  being  acquired  or  developed  by  our HR C&T  unit.  Building  on
e-learning  sales of $80,000 in 2000, VLS is expected to generate  approximately
5% of its 2001 revenues from sales of e-learning courses.

         HUMAN  RESOURCES  CONSULTING AND TRAINING (HR C&T). The Human Resources
Consulting  and  Training  unit  is  responsible  for the  product  development,
marketing  and sales of  BNAC's  sexual  harassment  prevention,  diversity  and
employment law courseware and consulting services. Approximately 60 titles, many
of which are major award winners, provide the product backbone of this division.
Of these proprietary sources,  seven have achieved sales of more than $1 million
and four have achieved sales of more than $4 million.

         In contrast to most of the human resources and management video market,
our human  resources,  diversity  and  employment  law  titles are  licensed  to
customers  on a per head basis.  We believe  this  pricing  model has  increased
orders from  customers  and  revenues per title.  In  addition,  we believe this
pricing model is largely responsible for increasing the revenues per salesperson
in this unit,  which over the past five years have  averaged  over  $400,000 per
year as compared to an industry average of approximately $275,000 per year.

         Virtually  all of the  courseware  titles  offered  by  this  unit  are
exclusive to us and are not available to agents or  sub-distributors in the U.S.
market.  Since 1994, BNAC has released 20 human resource  programs (46 modules).
We believe the courses  offered by this unit are superior to most offered by our
competitors, and many of these courses have won major industry awards, including
the following:

     o    DIVERSE  COMMUNICATIONS:  INVESTING  IN  RELATIONSHIPS,  Top  10
          Training  Products of 1999, HUMAN RESOURCE  EXECUTIVE  MAGAZINE;
          CINE Golden Eagle Award, 1999

     o    JACK CADE'S NIGHTMARE III: CAUGHT IN THE CROSSFIRE (INTRODUCTORY
          GUIDE TO PERFORMANCE MANAGEMENT), CINDY Silver Award, 1999

     o    RESPECT VS. HARASSMENT,  Top 10 Training Products of 1998, HUMAN
          RESOURCE EXECUTIVE MAGAZINE

     o    SEXUAL HARASSMENT PLAIN AND SIMPLE,  INTERCOM International Film
          and Video Festival Gold Plaque Award, 1995

     o    BRAINWAVES, Chicago International Film Festival, Intercom, 1995

     o    THE COST OF INTOLERANCE,  Chicago  International  Film Festival,
          Intercom, 1994

     o    A WINNING BALANCE,  Telly Award, 1994; CINE, Golden Eagle Award,
          1993


                                       8
<PAGE>

         The HR C&T unit provides  comprehensive  consulting services for larger
         organizations  that  are  seeking  turnkey  solutions,   including  the
         following:

     o    EXECUTIVE  CONSULTING:  Meeting  with  top-level  managers,  our
          consultants discuss organizational challenges and clearly define
          needs based on the business  case.  This lays the groundwork for
          enterprise-wide  solutions  in all EEOC  subject  areas with the
          commitment of top management.

     o    TRAINING AUDITS: Our consultants develop and conduct surveys and
          focus groups to determine the types of training experiences that
          will maximize organizational benefits.

     o    STRATEGY   PLANNING/NEEDS   ANALYSIS:  Our  consultants  provide
          thorough  assessments  regarding  organization focus, issues and
          culture  and  develop   unique  plans  that   address   specific
          strategic,  operational and budgetary  concerns.  Our assessment
          tools  help  organizations  differentiate  training  needs  from
          organizational issues.

     o    CUSTOM PROGRAM DEVELOPMENT:  We provide  customization  services
          that increase the relevance of training and help insure training
          success.  Custom programs can range from materials and exercises
          developed to address  customer's  workplace  specifics to videos
          shot on location using an organization's own employees.

     o    ON-SITE  IMPLEMENTATION/PILOT  SESSIONS: We conduct high-impact,
          respectful and organizationally-challenging seminars at customer
          locations.     Each    facilitator    conducts     participative
          programs/workshops   in  an  atmosphere  that  is  sensitive  to
          individual  differences.  Pilot sessions allow customers to test
          program content, focus and credibility.

     o    AWARD-WINNING  TRAINING  PROGRAMS/RESOURCES:  A key part of most
          consulting   engagements  is  our   proprietary,   award-winning
          courseware   resources   that  are  licensed  to  customers  for
          enterprise-wide utilization. The availability of this courseware
          is  one  of  our   principal   competitive   advantages  in  the
          marketplace.

     o    TRAIN-THE-TRAINER  WORKSHOPS:  Our  consultants  coach corporate
          trainers,  assist in developing  techniques  for  delivering the
          programs and offer advice on methods to overcome  resistance  to
          sensitive topics.  Train-the-trainer services include instructor
          certifications.

     o    EVALUATION  AND  ANALYSIS:  We create and build  evaluation  and
          analysis  measurements into our training programs.  Measurements
          are based on feedback from training participants and longer-term
          attitudinal surveys.

                                       9
<PAGE>

We are in the  process of  expanding  the scope of our  consulting  services  to
include  other  categories of consulting  and  training,  including  leadership,
management and communications skills and the skills of negotiation.

         SAFE   EXPECTATIONS   INTERNATIONAL   (SEI).   The  Safe   Expectations
International unit, which we acquired as part of the BNAC acquisition,  has over
100  high  quality  courses  targeted  at the  needs  of both  large  and  small
organizations.  Driven largely by the large and complex  regulatory  environment
underlying  the Federal  Occupational  Safety and Health Act (OSHA),  the safety
training  market is  relatively  large and very  competitive.  We are seeking to
aggressively  grow this  unit  through  third-party  partnerships  or  strategic
alliances and through acquisitions.  As a result, many of the courses offered by
this  unit  have been  produced  by third  parties  and are  offered  by us on a
non-exclusive basis under royalty arrangements.

         Since 1994, BNAC has released 27 safety programs (66 modules), of which
24 are  available on CD-ROM and will be  re-released  as part of our  e-learning
initiative.  Our most recent  release,  SAFETY LOTTO,  uses a humorous game show
format to point out the hazards created by mental lapses on and off the job.

         MANAGEMENT  DEVELOPMENT  RESOURCES  (MDR).  The Management  Development
Resources unit,  which  commenced  operations in January 1999 in connection with
our acquisition of the operating  assets of WingsNet,  Inc., has over 300 titles
that provide high quality proprietary and distributed  video-based  training and
development content for executive and management development. Many of the titles
offered by this unit feature well-known business authors, consultants, educators
and thought  leaders,  including Tom Peters,  Ken Blanchard,  Stephen Covey, Jim
Belasco, Warren Bennis, John Kotter and Morris Massey. A typical video sells for
approximately $600.

         The MDR unit  sells  our  products  primarily  through  our own  direct
telemarketing  sales force, as well as through a distributor network of over 100
additional  telemarketers.  More  recent  distribution  initiatives  include the
development of  WWW.TRAINERSGOLD.COM,  an Internet catalog that offers a preview
of selected videos we offer.

         In March  2000,  the MDR unit  released  a new  videotape  based on ONE
MINUTE  MANAGER,  the  best-selling  book by Ken Blanchard that has sold over 10
million copies since its release 18 years ago. Revenues from the videotape,  THE
STORY OF A NEW ONE MINUTE  MANAGER,  exceeded  $75,000 for the first year of its
release, and we expect this title to be a training industry best seller.

E-LEARNING INITIATIVE

         We have examined dozens of programs  designed for  e-learning.  Most to
date are what are derisively  called "page  turners"...  uninteresting  programs
with  heavy  reading  requirements,  little  interactivity  and  poor use of the
Internet's graphical interface.  In general,  they are text-based workbooks that
have been ported to the Internet. The result is low cost delivery, but



                                       10
<PAGE>

virtually ineffective learning methodology.  Students rarely finish the courses,
finding the materials boring and the presentation tiring.

         Our  e-learning  strategy  is  video-centric.  Studies  have shown that
compelling  content is critical in  capturing  and holding the  attention of the
computer learner. Our objective is not just to sign up learners,  but to provide
an  interesting  and engaging video based learning  experience  that  encourages
successful  completion of course materials with a high level of retention.  This
will be particularly  true as the workforce  fills up with a younger  generation
reared on television, VCRs, DVDs, videos and computer games.

         E-LEARNING  RESOURCES.  Our e-learning  courseware will come from three
sources:
<TABLE>
<CAPTION>

------------------------ ---------------------- ------------------- ------------------------ -------------------------
        SOURCES                 PROCESS                COST               ADVANTAGES              DISADVANTAGES
------------------------ ---------------------- ------------------- ------------------------ -------------------------
------------------------ ---------------------- ------------------- ------------------------ -------------------------
<S>                      <C>                    <C>                 <C>                      <C>
E-Purposing              Partnering with        Out of pocket       Speed to market,         Double royalties,
                         existing producers     costs plus          lowest risk, dealing     possible market
                         to convert existing    override            with best sellers.       saturation with some
                         best sellers for       royalties.                                   companies already using
                         e-learning delivery.                                                the video version.
                         Full conversions
                         with assessments,
                         pre-test, post-test,
                         learning management
                         system, etc.
------------------------ ---------------------- ------------------- ------------------------ -------------------------
------------------------ ---------------------- ------------------- ------------------------ -------------------------
New Production           Independent            Out of pocket       Product will be          Time consuming.  High
                         producers retained     plus single         uniquely created for     front end costs.
                         by us will create      royalties.          the market. New titles   Riskier.
                         new multi-platform                         usually sell well.
                         courses (see below).                       More creative freedom.
------------------------ ---------------------- ------------------- ------------------------ -------------------------
------------------------ ---------------------- ------------------- ------------------------ -------------------------
Acquisition of           Aggregate content      Lowest cost.        Speed to market. Fill    Usually non-exclusive
Existing Titles          from producers         Often royalties     in gaps in product       deals. Dilutes the idea
                         willing to use         only (variable      line.                    of single source for
                         distributors.          cost).                                       proprietary products.
------------------------ ---------------------- ------------------- ------------------------ -------------------------
</TABLE>

         Our first  e-learning  course will be a repurposing  of training  video
best-seller RESPECT VS. HARASSMENT. The re-purposing of this video was performed
by the  instructional  design  department of a major oil company under a $60,000
licensing agreement that permits us to distribute the finished e-learning course
on a royalty-free basis.  Release of this e-learning course is currently planned
for the  second  quarter  2001.  We have also  recently  acquired  non-exclusive
distribution  rights to two new titles on  harassment  prevention  and diversity
from  one of our  video  producers,  and  have  licensed  27  safety  titles  in
e-learning format from Systran, Inc., a Texas developer of electronic programs.

         PRODUCTION  METHODOLOGY.   Although  we  will  start  with  e-purposing
existing successful programs,  we also intend to develop new programs.  In order
to minimize  risk and maximize  revenues,  production of all new courses will be
completed for as many delivery platforms as possible.  Because of the complexity
of e-learning, new courses will be scripted and produced for the Internet first,
and then reformatted for DVD, CD-ROM and videotape.  All new programming will be
completed with the following modalities in mind:

                                       11
<PAGE>

     o    INDIVIDUAL, SELF-PACED LEARNING: This is the basic learning mode
          for  which  we will  design  our  e-learning  courseware.  It is
          assumed the personal  computer will be the  instrument of choice
          for most e-learning customers. As a result, all images initially
          will be based on 14"  Monitor  screen  size.  Likewise,  DVD and
          CD-ROM versions will focus on this mode.

     o    GROUP  INSTRUCTION:  Derivative  videotapes will be designed for
          use in classroom settings, usually with a facilitator in charge.

     o    EPSS (ELECTRONIC  PERFORMANCE  SUPPORT  SYSTEMS).  These are job
          aids or problem  solvers as compared to traditional  full-length
          training  productions.  With  over  500  videotapes  and our new
          production  capabilities,  we believe we are well  positioned to
          develop a family of digital  problem solvers  utilizing  footage
          and/or scripts from existing courseware.

         The  delivery  of  e-learning  courses  can be handled  via three major
alternatives - all using standard web-browsers:
<TABLE>
<CAPTION>
------------------------------- ---------------------------- ---------------------------- ----------------------------
     SYSTEM ALTERNATIVES              SERVER LOCATION                ADVANTAGES                  DISADVANTAGES
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
<S>                             <C>                          <C>                          <C>
Internet                        Generic service hosted by    Customer up and running      Customers have band width
                                McLeodUSA.                   quickly. No administrative   firewall/security
                                                             overhead. No need to         concerns.
                                                             integrate into existing
                                                             infrastructure.  We update
                                                             and maintain.
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
Intranet                        On customer premises.        Easiest for customers to     Slow implementation.
                                                             customize and add their      Requires full cooperation
                                                             own courses.                 of customer IT department.
                                                                                          Upgrades are more complex.
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
Extranet                        Customized system hosted     Customer branded. Ease of    Firewall issue.
                                by McLeodUSA.                adding their own courses.
------------------------------- ---------------------------- ---------------------------- ----------------------------
</TABLE>

         We expect that courseware selection,  design and the executive producer
role for our initial e-learning  products will be the responsibility of Dr. Paul
Selden, our Chief Technology Officer.

         We expect to own the copyright or exclusive  distribution rights to all
new e-learning courseware we produce.

CUSTOMERS

         We sell or license our  corporate  learning  courseware to Fortune 1000
companies and other major U.S. and international organizations in a wide variety
of industries, including manufacturing, technology, telecommunications,  retail,
utilities and  financial  services,  as well as to  governmental  agencies.  Our
courseware  and consulting  services are also marketed  through our direct sales
force to over 30,000  organizations  worldwide  (including  multiple  individual

                                    12
<PAGE>

customers/departments in many companies),  which include over 90% of the Fortune
1000  companies.  No  customer  accounted  for more than 10% of our  revenues in
fiscal year 1999 or 2000. Of particular  importance in our  e-learning  strategy
will be the  large  customers  of the HR  Consulting  &  Training  unit that are
accustomed to working with us on major contracts for enterprise solutions.

         Our customers include the following companies or organizations or their
affiliates:

    AT&T                       Hertz Corporation       Philip Morris
    Bayer Corporation          Hughes Aircraft         Prudential Insurance Co.
    Brooklyn Union Gas         Ingram Micro            Square D Corporation
    Dean Witter Reynolds       ITT                     US Postal Service
    Department of Defense      Merrill Lynch           Virginia Power
    Georgia Power              Mobil Oil               Westchester Co. Medical
    General Dynamics           Pathmark Stores           Center

SALES AND MARKETING

         We sell our products and consulting  services  through our direct sales
force.   As  of  March  15,  2001,  our  direct  sales  force  consisted  of  17
professionals, all of whom were organized by operating unit.

         Our sales  professionals  typically target their sales efforts at human
resources,  training  executives or other senior executives within the education
and/or  compliance  department  of our  potential  customer.  When a prospective
customer is  interested  in  purchasing  one or more titles within our extensive
course  offerings,  we will  generally  provide  previews of such titles for the
customer's  consideration,  submit a  comprehensive  proposal for both  training
resources and consulting  services and, in certain cases  involving  potentially
larger  customers,   visit  the  customer  for  high-level  presentations.   Our
consultants often participate in the selling process.  While our consultants are
typically  independent  contractors,  their  consulting  services are  generally
exclusive to us. The sales  professionals  of our four  operating  units operate
independently.  However,  we  recently  implemented  a  referral  system for our
salespeople  that rewards a salesperson from one unit for a sale made by another
unit on the basis of such salesperson's referral.

         To support our direct sales  organization,  we have devoted significant
resources  to  building  strong  marketing  support.   Our  principal  marketing
objectives are to generate  sales leads and increase the market's  awareness and
accurate  perception  of us and our  products  and  consulting  services.  These
efforts are focused on industry  advertising,  public  relations,  trade  shows,
direct mailings and participation in major industry seminars.


                                    13
<PAGE>


         The Internet is an important  part of our marketing  strategy.  We have
initially developed the following corporate websites:

     o    LEARNCOM.COM  - our  corporate  homepage  which  includes  press
          releases, officer biographies and hot links to our business unit
          sites;

     o    LEARNCOMHR.COM  - our HR C&T unit site  listing  our courses and
          consulting services;

     o    SAFEEXPECTATIONS.COM - our safety business unit site listing our
          courses,  and  providing  e-learning  demonstrations  and  pilot
          e-learning sites for customers;

     o    TRAINERSGOLD.COM - the website of our MDR unit listing top video
          and CD-ROM  sellers in a broad range of soft skills  categories;
          and

     o    VIDEOLRN.COM - our largest  e-commerce  site operated by our new
          VLS unit acquired in January 2001.

         The TRAINERSGOLD.COM  website is designed to use technology to simplify
the selection,  previewing and purchasing  process for our full line of over 500
training videotapes. When this site is fully operational, full, free previews of
each video  title will be  available  online at 56k.  Previews  can be viewed by
prospective  customers  in the office or at home  without  the  typical  two-way
shipping of VHS cassettes.  Secure online  ordering will complete the process in
minutes rather than hours.  For users wanting the human touch, our toll-free 800
number will be provided on all screens.  Online  chats and threaded  discussions
are also planned for the site to create a sense of community among professionals
utilizing corporate videos for training.

         As bandwidth  increases,  we plan to migrate  trainersgold.com  into an
e-learning  site  featuring  proprietary  titles  from  each  of  our  operating
divisions, as well as third party content of exceptional value.

COMPETITION

         The market for  business  education  and  training  solutions is highly
competitive,  constantly evolving and subject to rapidly emerging  technologies.
The  market is highly  fragmented  with no single  competitor  accounting  for a
dominant  market  share.  We compete  with  providers of  traditional  classroom
instruction,  publishing  companies and other vendors of textbooks,  videotapes,
application software and other traditional courseware,  training consultants and
internal  educational and  technological  personnel of our potential  customers.
Most recently, we began experiencing  significant increased competition from new
companies  entering the e-learning market and education platform  providers.  We
expect the e-learning market to become  increasingly  competitive due to the low
barriers  to  entry.  Increased  competition  may also  develop  as a result  of
consolidation within the industry.

                                    14
<PAGE>

         We believe the principal  competitive factors affecting our marketplace
are the depth,  breadth and variety of  content,  the ability to offer  complete
learning  solutions,  an installed customer base, the size and experience of the
sales force offering the courseware,  training or consulting,  product  quality,
adaptability  and  flexibility  of the  training  products  offered,  price  and
corporate  reputation.  Although we believe that we currently  compete favorably
with respect to these factors, there can be no assurance that we will be able to
maintain our competitive  position  against  current and potential  competitors,
particularly those with greater financial,  technical, sales, marketing, support
and  other  resources  or  greater  name  recognition  than us. We  believe  our
long-term  success  will  depend on our  ability  to  implement  and  expand our
e-learning  offerings  and to produce  and  distribute  the most  extensive  and
educationally-rich e-learning products in the marketplace.  However, the markets
for our products are still rapidly evolving,  and there can be no assurance that
we  will  be  able  to  compete   successfully   against  current  or  potential
competitors.

         A number of public and private  companies  currently offer  competitive
products  in our target  markets.  We believe  the  primary  competitors  of our
proposed  e-learning "soft skill" products will be SmartForce,  PLC; NETg, Inc.;
and SkillSoft Corporation. Competition for the large consulting contracts sought
by  our HR C&T  unit  is  vigorous,  although  we  believe  the  quality  of our
consulting  services  and of our  related  proprietary  library of  customizable
video-supported  courseware provides a significant strategic advantage. The most
significant  additional  competitors  for our HR C&T unit  include  J.  Howard &
Associates (a subsidiary of Provant), Patricia Pope & Associates and Prism Corp.
We believe our SEI unit  generally  competes with a number of larger  companies,
including Coastal Communications,  Summit Training Services, Inc., Comprehensive
Loss  Management,  Inc.  and  Marcom,  Inc.  Our MDR unit  operates  in the most
competitive end of the "soft skills" training market.  This unit competes with a
large number of distributors  that generally sell the same  management  training
titles to a shrinking  customer base of corporations and organizations that seek
videos as a management training aid.

INTELLECTUAL PROPERTY

         We rely on a combination of copyright, trademark and trade secret laws,
confidentiality and nondisclosure agreements and other contractual provisions to
establish, maintain and protect our proprietary rights. We have copyright rights
for our  proprietary  courseware  and license  certain  courseware for which the
copyrights  are  owned by  others.  Much of our  human  resource  courseware  is
licensed,  rather than sold,  and we require our customers to enter into license
agreements that impose  restrictions on their ability to utilize the courseware.
We  attempt to  protect  our trade  secrets  and other  proprietary  information
through a number of means,  including  agreements with suppliers,  nondisclosure
agreements with employees and consultants and other security measures.

         We  intend  to rely on  outside  vendors  for  technology  that will be
incorporated into our e-learning courseware products.

         Despite  our efforts to protect our  proprietary  rights,  unauthorized
parties  may  attempt  to copy  aspects  of our  products  or to obtain  and use
information  that we regard as  proprietary.



                                    15
<PAGE>

Policing unauthorized use of our products is difficult,  and while we are unable
to  determine  the extent to which  piracy of our  courseware  products  exists,
courseware piracy can be expected to be a persistent problem.  In addition,  the
laws of some foreign countries do not protect our proprietary rights to as great
an extent as do the laws of the  United  States.  Our  means of  protecting  our
proprietary  rights may not be adequate and our  competitors  may  independently
develop similar courseware or e-learning  technology,  duplicate our products or
design around our proprietary intellectual property.

EMPLOYEES

         As of March 15, 2001, we had 34 full-time employees and three part-time
employees,  of whom 17 were engaged in marketing and sales,  nine in management,
administration  and finance,  two in consulting  services and two in warehousing
and shipping.  None of these  employees is covered by any collective  bargaining
agreements, and to date, we have not experienced a work stoppage. We believe our
relationship with our employees is good.


ITEM 2.  DESCRIPTION OF PROPERTY.

         Our principal administrative, sales, marketing and warehouse facilities
occupy  approximately  11,000  square  feet of  office  and  warehouse  space in
Bensenville,  Illinois, a suburb of Chicago, under a lease that expires in March
2002.  The annual rental on this facility is  approximately  $66,000  (excluding
operating expenses,  insurance,  property taxes and assessments).  We also lease
sales  offices  for our HR C&T unit in Silver  Spring,  Maryland  (approximately
3,500 square  feet),  under a lease that expires in December  2004,  for our SEI
unit in Gaithersburg,  Maryland (approximately 1,000 square feet), under a lease
that  expires  in October  2002 and for our VLS unit in Bryn Mawr,  Pennsylvania
(approximately  4,000 square feet), under a lease that expires in December 2005.
The annual rental on these  facilities are  approximately  $72,000,  $15,000 and
$48,000,  respectively (excluding operating expenses,  insurance, property taxes
and  assessments).  We believe our facilities are adequate for our current needs
and that suitable  additional or substitute space will be available as needed to
accommodate expansion of our operations.


ITEM 3.           LEGAL PROCEEDINGS.

         We are not a party to any material legal proceedings.


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

         None.




                                       16
<PAGE>


                                     PART II

ITEM 5.           MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.

         Our common  stock has been listed on the OTC  Bulletin  Board under the
symbol  "LRCM" since May 19, 2000, as a result of the Reverse  Acquisition  (see
description of Reverse Acquisition in Part I Item 1). Prior to May 19, 2000, our
common  stock was listed on the OTC  Bulletin  Board  under the  symbol  "SMKY".
However,  prior to May 18,  2000,  no market  activity  in our common  stock had
occurred.

         The  following  table  represents  the  high  and  low  per  share  bid
information for our common stock for each quarterly  period in fiscal year 2000.
Such high and low bid information reflects  inter-dealer quotes,  without retail
mark-up, mark down or commissions and may not represent actual transactions.

               FISCAL 2000                         HIGH               LOW
               -----------                         ----               ---

        Quarter ended June 30                      $.1900           $.0300
        Quarter ended September 29                 $.0625           $.0156
        Quarter ended December 29                  $.0300           $.0100

         As of March 15, 2001, there were 796,666,667 shares of our common stock
outstanding  held by  approximately  74  shareholders  of record.  At such date,
249,975,000  shares of our common  stock were free  trading and the balance were
"restricted securities" as that term is defined in Rule 144 under the Securities
Act of 1933.

         We do not  currently  pay  dividends  on our  common  stock.  It is the
intention  of our board of  directors  not to  declare or pay  dividends  on our
common stock, but to retain earnings, if any, for the operation and expansion of
our business.

RECENT SALES OF UNREGISTERED SECURITIES

         Since  October  1, 2000,  we have  issued  the  following  unregistered
securities:

1.   On  December 1, 2000,  we issued  warrants  to  purchase  an  aggregate  of
     15,000,000 shares our common stock at a purchase price of $.0132 per share,
     pursuant  to an  exemption  from  registration  under  Section  4(2) of the
     Securities Act of 1933, in consideration of personal  guarantees of certain
     of our senior debt.

2.   On December 1, 2000, we issued  warrants to purchase  15,000,000  shares of
     our common  stock at a purchase  price of $.0132 per share,  pursuant to an
     exemption  from  registration  under Section 4(2) of the  Securities Act of
     1933, and received a $1,000,000 bridge loan.

                                       17
<PAGE>

3.   On  January  11,  2001,  we issued  9,375,000  shares of our  common  stock
     pursuant  to an  exemption  from  registration  under  Section  4(2) of the
     Securities Act of 1933 and received the sum of $125,000 for such sale.

4.   On January 24,  2001,  we issued  26,666,666  shares of our common stock as
     part of the  purchase  price for our  acquisition  of VLSI,  pursuant to an
     exemption  from  registration  under Section 4(2) of the  Securities Act of
     1933.


ITEM 6.           MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
                  CONDITION AND RESULTS OF OPERATIONS.

         The following  discussion  and analysis of the financial  condition and
results  of  operations  should  be  read  in  conjunction  with  our  financial
statements and notes  appearing  elsewhere in this Annual Report on Form 10-KSB.
This discussion and analysis  contains  forward-looking  statements that involve
risks and  uncertainties.  Our actual results may differ  materially  from those
anticipated in these forward-looking  statements as a result of certain factors,
including but not limited to those set forth below.

         During the period from our formation on March 28, 1986 to May 19, 2000,
we did not generate any  significant  revenue,  and  accumulated  no significant
assets, as we explored various business opportunities. On May 19, 2000, the date
of the  Reverse  Acquisition,  in  exchange  for a  controlling  interest in our
publicly-held "shell" corporation, we acquired all of the issued and outstanding
capital stock of LC-Illinois. For financial reporting purposes,  LC-Illinois was
considered  the  acquirer  in such  transaction.  As a  result,  our  historical
financial  statements  for  any  period  prior  to May 19,  2000  are  those  of
LC-Illinois.

RESULTS OF OPERATIONS

THE YEAR ENDED DECEMBER 31, 2000 COMPARED TO THE YEAR ENDED DECEMBER 31, 1999.

         The following  table sets forth our net sales by operating unit for the
years ended December 31, 1999 and 2000.

                                        2000                         1999
                               ----------------------     ----------------------
         MDR Unit                      $1,007,178                  $1,194,713
         SEI Unit(1)                      917,113                     216,733
         HR C&T Unit(1)                 2,446,696                     879,858
                                     ------------                   ---------

         Net sales                     $4,370,987                  $2,291,304
                                        =========                   =========

--------
(1) Represents nets sales for a unit of BNA Communications, Inc., a wholly owned
    subsidiary of LC-Illinois.

                                       18
<PAGE>


         Net sales for the year ended  December  31,  2000 were  $4,370,987,  an
increase of $2,079,683  over net sales of $2,291,304 for the year ended December
31, 1999. The year-to-year increase was primarily attributable to the receipt of
revenues  of BNAC (HR C&T and SEI) for 12 months in the year 2000 as compared to
only four months in the year 1999.  Net sales  decreased  by $187,000 in the MDR
unit for the year  ended  December  31,  2000 in  comparison  to the year  ended
December 31, 1999.

         Cost of sales for the year ended December 31, 2000 were $1,845,086,  or
42% of net sales,  compared to $746,752, or 33% of net sales, for the year ended
December 31, 1999. The higher cost of sales for the year ended December 31, 2000
was attributable,  in part, to increased  consulting sales in fiscal 2000, which
historically  have  a  higher  cost  of  sales,  increased  amortization  of our
publishing  rights and masters,  and a higher percentage of sales of third party
distributed titles as compared to Company-produced titles.

         Selling and  marketing  expenses  for the year ended  December 31, 2000
were $1,211,564, or 28% of net sales, compared to $590,377, or 26% of net sales,
for the year ended December 31, 1999. At the time of the BNAC purchase in August
1999, we employed only two  salespeople in our HR C&T unit.  During fiscal 2000,
we added four additional  salespeople  plus associated costs in our HR C&T unit,
which resulted in significantly increased direct sales expense.

         General and  administrative  expenses  for the year ended  December 31,
2000 were $2,116,042,  or 49% of net sales,  compared to $932,601, or 41% of net
sales,  for the year ended  December  31, 1999.  Our general and  administrative
expenses  increased  in fiscal  2000 as we  ramped  up to handle a three  office
business  as  compared  to a one office  business.  In  addition,  the legal and
accounting  costs  associated  with the  reverse  merger in fiscal  2000 and our
subsequent public filing  requirements were  approximately  $250,000 compared to
approximately  $56,000 for the year ended  December  31, 1999.  Computer  costs,
telecommunication  costs and  associated  equipment  leases  were  approximately
$300,000 for fiscal 2000 compared to $125,000 in fiscal 1999.

         As a result of the above, we incurred an operating loss of $801,705 for
the year ended December 31, 2000 compared to operating income of $21,574 for the
year ended December 31, 1999, a decrease in operating income of $823,279.

         Interest expense for the year ended December 31, 2000 was $197,193,  or
5% of net sales,  compared to $121,446,  or 5% of net sales,  for the year ended
December 31, 1999. The increase in interest cost was  associated  with financing
for the  acquisition of BNAC and increases in our term loan and working  capital
line of credit.

         For both periods  presented,  there were no taxes on income  because of
the pretax loss generated. The notes to our audited financial statements include
detailed  information on our net operating loss carryforwards and an analysis of
our  deferred tax  benefits.  The minimum  annual  taxable  income  necessary to
realize our net operating loss carryforwards before they expire is $457,275.

                                       19
<PAGE>

         During  the  second  half of fiscal  2000 our sales  slowed  from their
stronger pace of the first six months, due primarily to the following factors:

     1.   We believe all our units were affected by the general  slowdown in the
          U.S.  economy  as  many  purchase  decisions  by  our  customers  were
          postponed.  Our  products  tend to be  discretionary,  and we  believe
          purchase postponements during economic slowdowns are to be expected.

     2.   Our HR C&T unit lost some of its momentum as no major  contracts  were
          closed during the second half of the year. In addition,  our new hires
          in the sales  department had slower learning curves than expected.  We
          also had  difficulty in shifting  product  orientation  to a more full
          product line mentality.

          For the full year  2000,  revenues  of the HR C&T  business  unit were
          $2,446,696.  Average  monthly  revenues for the HR C&T unit during the
          first six months of 2000 were  approximately  $211,000  as compared to
          average monthly revenues of  approximately  $187,000 during the second
          six months.  Despite the slowing sales of major  purchases  during the
          second six months of fiscal 2000, our  day-to-day  sales of courseware
          were less affected.

     3.   Like most of our competitors in the safety training marketing, our SEI
          unit is transitioning from video-based  training to e-learning.  While
          many safety  training  directors  believe  that  e-learning,  with its
          relatively  low cost,  flexibility  and  measurability,  is the future
          solution to their  training  needs,  the  challenges of technology and
          infrastructure  are creating longer sales cycles. As a result, our SEI
          unit  was  adversely  impacted  by an  industry-wide  perception  that
          e-learning was the primary  solution to safety training  needs,  which
          resulted  in a "make do"  attitude  among many  customers  relative to
          video purchases.  While we believe our 27-title e-learning library can
          fill most e-learning  demand,  e-learning sales are more difficult and
          slower to close because  customers need the  infrastructure to deliver
          video-based  e-learning courses  internally and a learning  management
          system to register learners and record their course  completion.  Many
          customers had neither element in place.

          For the full year 2000,  our SEI unit's net sales were  $917,000.  Net
          sales during the first half of the year averaged approximately $88,000
          per month and  averaged  approximately  $64,000  per month  during the
          second  half.  We expect  the pace of SEI's  net  sales to  accelerate
          during fiscal 2001 as an increasing number of customers overcome their
          technology and infrastructure limitations.

     4.   Our MDR unit's net sales for fiscal 2000 were  $1,007,178.  We believe
          customer  indecision  over the use of  video-based  training  products
          rather than  products  offered in e-learning  formats,  created a soft
          market for our video-based library.

         Given the  decreased  revenues in our HR C&T and SEI units,  management
implemented a cost reduction strategy in the third and fourth quarters of fiscal
2000 to lower our  break-even  point to levels that more closely match  revenues
with expenses.  We reduced our workforce by 16 employees  since October 1, 2000,
from 50 employees  to 34 employees  (including  VLS),  to

                                       20
<PAGE>

eliminate  many of the  inefficiencies  and  redundancies  that often occur as a
result of acquisitions. We believe our more streamlined workforce and management
team will bring us closer to positive cash  operations and is appropriate  given
our strategy of acquiring  "content"  assets at attractive  multiples  using our
common stock as a major component of the purchase price.

         During the second half of fiscal  2000,  we also  changed our  business
model to an "open" sales model,  which added  additional  sales power behind our
courseware.  Prior to this change,  the  salepeople in the HR C&T unit only sold
that unit's products.  We also decided that the consulting and training services
should be marketed  using this model.  We expect this strategy to boost revenues
during fiscal 2001.

     Our acquisition of VLS in January 2001 is expected to provide the following
benefits in fiscal 2001:

     o    A large product line to help satisfy  customers'  needs across a
          broad spectrum of training subjects.

     o    A  well-trained  sales  staff of nine  telemarketers  that  will
          complement our existing sales team.

     o    An excellent management staff.

     o    A customer base in excess of 35,000.

As a result of our new "open"  sales  model,  our VLS sales team will be selling
the HR C&T  courseware  and  consulting  services,  which  should  result  in an
increase of HR C&T product and services  sales.  VLS is also already  engaged in
sales of e-learning  courses from third party producers.  During fiscal 2001, 5%
of our net sales are expected to be derived from the sale of e-learning courses.

LIQUIDITY AND CAPITAL RESOURCES

         Our  principal  capital  requirements  have  been  the  funding  of (i)
acquisitions, (ii) working capital, (iii) capital expenditures for fixed assets,
publishing  rights and masters and (iv) the conversion of products to electronic
media. We have met our liquidity needs over the last two years primarily through
equity  offerings,  long-term  borrowings,  a working capital line of credit and
bridge loans.

         Net cash used by operating  activities  for the year ended December 31,
2000 was $159,148 and net cash  provided by  operating  activities  for the year
ended December 31, 1999 was $249,318.  The decrease of $408,466 in cash provided
from  operations  from  fiscal  1999 to  fiscal  2000 was  primarily  due to the
operating loss  generated for the year ended December 31, 2000. In addition,  we
experienced  a decrease in accounts  receivable  of $228,333  and an increase in
accounts  payable  and accrued  expenses of $411,706  from fiscal 1999 to fiscal
2000 due to the

                                    21
<PAGE>

decline in our sales volume for the full  12-month  period.  The  deficiency  in
operating cash flows is expected to be reduced by the implementation of the cost
reduction strategies discussed above.

         Net cash used in investing  activities for the years ended December 31,
2000 and 1999 was $224,038 and $624,651,  respectively. The decrease of $400,613
was primarily  due to the net impact of $382,884 used for business  acquisitions
less  $127,925  used for payments of  publishing  rights and masters in 2000. In
addition,  capital  expenditures,  which consisted primarily of expenditures for
computer and telephone equipment, for the years ended December 31, 2000 and 1999
were $96,113 and $209,921, respectively.

         We estimate that our expenditures for computer equipment,  software and
website  development  will  be  approximately   $200,000  in  fiscal  2001.  The
acquisition  of VLS in  January  2001  required  net  cash of  $533,000  and the
acquisition  of TrainSeek is expected to require net cash of $200,000.  The cash
for the two  acquisitions  will be financed in the short term by the  $1,000,000
bridge loan facility we entered into with Doerge Capital Management (the "Bridge
Lender") in December 2000 (the "Bridge  Loan"),  and in the long term through an
anticipated private placement and through cash provided by these acquisitions.

         Our financing activities include equity offerings,  new borrowings from
our Bridge  Lender (a  significant  shareholder  and related  party) and working
capital lines of credit;  and repayment of installment notes used principally to
finance acquisitions. Our financing activities provided net cash of $409,514 and
$454,500 for the years ended December 31, 2000 and 1999, respectively.  The cash
provided  was  primarily  due to new  borrowings  from our  Bridge  Lender and a
shareholder,  and the working  capital line of credit net of  repayments on term
loans.  Since our inception,  we have been funded by a term loan and a revolving
line of credit provided by American National Bank ("ANB"). At December 31, 2000,
the original  $1,000,000 term loan had a remaining principal balance of $857,500
and the revolving line of credit had a principal  balance of $450,000.  The term
loan and the revolving line of credit are personally  guaranteed by three of our
major  shareholders.  Additional  shareholder  loans  from  time  to  time  have
contributed to working  capital or facilitated  acquisitions.  The ANB term loan
and revolving  line of credit are due on April 28, 2002. The Bridge Loan matures
on June 1, 2001;  however,  the Bridge  Lender (a  significant  shareholder  and
related  party) has agreed that it will not call the Bridge Loan until we obtain
alternative  financing.  To date, we have utilized approximately $600,000 of the
$1,000,000 Bridge Loan.

         In April 2001, we executed a Payoff and Termination  Agreement with the
Bureau of National  Affairs  that reduced our debt  obligation  to the Bureau of
National  Affairs  by  approximately  $1  million to  $125,000.  The  obligation
resulted  from our  acquisition  of BNAC from the Bureau of National  Affairs in
August 1999. This settlement  decreased the purchase price of the acquisition to
approximately $1.5 million and decreased the purchase consideration payable from
its balance of $1,150,000 at December 31, 1999 to $125,000 at December 31, 2000.

         Cash and cash  equivalents  at  December  31,  2000 were  $105,495,  an
increase of $26,328 from $79,167 at December 31, 1999.

                                       22
<PAGE>

         The Company's capital  requirements  depend on many factors,  including
the level and timing of revenue,  new product  development  and the expansion of
sales and marketing.  However,  the Company is limited to its current cash, cash
equivalents  and short term  investment  balances and available  unused lines of
credit for funding such internal growth and  development,  unless the Company is
able in the  future  to raise  significant  additional  funds.  To fund  working
capital and provide for future growth,  management is currently seeking to raise
additional capital through a private financing.  The inability of the Company to
raise  additional  funds when needed will have a material  adverse effect on its
business,  operating results and financial condition.  There can be no assurance
that  the  Company  will be able to  raise  any such  financing.  Under  present
circumstances,  the  Company's  existing cash and cash  equivalents,  short term
investments  and unused lines of credit will be sufficient to meet the Company's
currently  anticipated  operating and working  capital and software  development
requirements for the next 12 months.


ITEM 7.           FINANCIAL STATEMENTS.

         The  Report  of  Independent  Auditors  and  our  audited  consolidated
financial statements appear immediately following the signature page.

                                                                    Form 10-KSB
         INDEX TO CONSOLIDATED FINANCIAL STATEMENTS                 Page Numbers

Report of Independent Auditors....................................       F-2

Consolidated Balance Sheets.......................................       F-3

Consolidated Statements of Operations ............................       F-5

Consolidated Statements of Shareholders' Equity...................       F-6

Consolidated Statements of Cash Flows.............................       F-7

Notes to Consolidated Financial Statements........................       F-8




ITEM 8.           CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
                  AND FINANCIAL DISCLOSURE.

         None.



                                       23
<PAGE>


                                    PART III

ITEM 9.           DIRECTORS,  EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
                  COMPLIANCE WITH SECTIONS 16(A) OF THE EXCHANGE ACT.

         The following table sets forth certain information with respect to each
of our officers or directors as of March 15, 2001:
<TABLE>
<CAPTION>

              NAME                   AGE                              POSITION
              ----                   ---                              --------
<S>                                  <C>   <C>
Denis Armand Mola..............      53    Chairman of the Board
Lloyd W. Singer................      70    Chief Executive Officer, President and Director
Dr. Paul Selden................      52    Chief Operating Officer, Chief Technology Officer
Robert R. Redwitz..............      54    Chief Financial Officer and Director
Homer H. Hewitt III............      74    President of VLS Subsidiary
</TABLE>

         DENIS ARMAND MOLA.  Mr. Mola was a co-founder and Chairman of the Board
of  LC-Illinois,  and became our  Chairman of the Board in  connection  with the
Reverse  Acquisition.  Since 1976, Mr. Mola has been a Managing  Director of The
Armand  Group,  an  investment  banking firm with offices in Chicago,  Brussels,
Belgium  and New York City,  of which Mr. Mola was the  founder.  Mr. Mola has a
B.A. in  Economics  from St.  John's  University  and an M.B.A.  in Finance from
Fordham University.

         LLOYD W. SINGER.  Mr. Singer was a co-founder  and the Chief  Executive
Officer and President of LC-Illinois,  and became our Chief  Executive  Officer,
President and Director in connection with the Reorganization.  Prior to founding
LC-Illinois  in  September  1998,  Mr.  Singer was from January 1997 to December
1998,  Chief  Operating  Officer of WingsNet,  Inc., a producer/  distributor of
video-based  training  programs  that  filed an  assignment  for the  benefit of
creditors under the laws of the State of Illinois in November 1998. From 1994 to
December 1996, Mr. Singer was the founder and Chief  Executive  Officer of Media
Alliance,  Ltd.,  a designer  and  distributor  of CD-ROM  database and learning
products that was sold to WingsNet, Inc. in January 1997. Mr. Singer has over 40
years of experience in the electronics,  training and publishing industries. Mr.
Singer has a B.A. and a B.S. in Industrial Engineering from Columbia College and
Columbia  Engineering School,  respectively.  Mr. Singer is the father-in-law of
Dr. Selden.

         DR. PAUL SELDEN.  Dr. Selden was Chief Operating and Technology Officer
of  LC-Illinois,  and  became  our Chief  Operating  and  Technology  Officer in
connection with the Reorganization.  Prior to founding  LC-Illinois in September
1998,  Dr.  Selden was from  January  1997 to December  1998,  Chief  Technology
Officer of  WingsNet,  Inc.,  a  producer/distributor  of  video-based  training
programs that filed an assignment for the benefit of creditors under the laws of
the State of Illinois in November  1998.  From 1994 to December 1996, Dr. Selden
was the Chief  Technology  Officer  of Media  Alliance,  Ltd.,  a  designer  and
distributor of CD-ROM database and

                                       24
<PAGE>

learning  products that was sold to WingsNet,  Inc. in January 1997.  Dr. Selden
has a B.A. from Yale University and a Ph.D. in Social Ethics from The University
of Southern California. Dr. Selden is the son-in-law of Mr. Singer.

         ROBERT R. REDWITZ.  Mr. Redwitz was the acting Chief Financial  Officer
and a director of LC-Illinois, and became our acting Chief Financial Officer and
Director in connection with the Reorganization. Since 1995, Mr. Redwitz has been
the founding and managing  partner of Robert R. Redwitz & Co.,  certified public
accountants  and  consultants,  and since  1997,  Mr.  Redwitz has also been the
founding  member of The GDR Group,  LLC, a company that  specializes in computer
systems design,  software and hardware sourcing,  and web page development.  Mr.
Redwitz was a founder and  financial  advisor to WingsNet,  Inc.,  the assets of
which were acquired by LC-Illinois in January 1999. Mr. Redwitz is a graduate of
St.  John's  Seminary  College  with a B.A.  in  Philosophy  and  has a B.S.  in
Accounting from the University of Southern California in Los Angeles.

         HOMER H. HEWITT III. Mr. Hewitt became our President of the VLS unit in
January 2001,  upon our  acquisition  of VLS. Mr. Hewitt founded VLS in 1972 and
has served as its  President and Chief  Executive  Officer from its inception to
January 2001.  Mr. Hewitt is a graduate of Princeton  University and Harvard Law
School.  Mr.  Hewitt  was one of the  founding  members  of the  Training  Media
Association,  a professional  organization of training  providers that developed
copyright  protection  policies and provided a forum to help its members improve
their businesses.


                                       25
<PAGE>


ITEM 10. EXECUTIVE COMPENSATION.

         The  table  below  sets  forth the  compensation  earned  for  services
rendered  to us in all  capacities  for  the  past  three  fiscal  years  by our
executive officers.
<TABLE>
<CAPTION>

                           Annual Compensation                                         Long Term Compensation

                                                                               Awards                         Payouts

Name                Title          Year     Salary     Bonus  Other Annual   Restricted   Stock Underlying
                                                              Compensation   Stock         Options           LTIP       All Other
                                                                             Awarded        SARs             Payouts    Compensation

<S>                 <C>            <C>      <C>          <C>       <C>        <C>          <C>               <C>           <C>
Lloyd W. Singer     President/CEO  2000     $60,000(1)   $0        $          -0-            -0-             -0-           -0-
                                   1999     $78,000      $0        $          -0-          28,761,624(2)     -0-           -0-

Dr. Paul Selden     COO/CTO        2000     $60,000      $0        $          -0-            -0-             -0-           -0-
                                   1999     $59,000      $0        $          -0-          11,140,132(3)     -0-           -0-

Robert R. Redwitz   CFO            2000     $60,000(4)   $0        $          -0-           6,116,551(5)     -0-           -0-
</TABLE>
-----------------------------

(1)  In March,  2001,  we entered into a three-year  employment  agreement  with
     Lloyd W. Singer  whereby Mr. Singer is entitled to receive as a base salary
     $125,000 per year.

(2)  Mr. Singer's options were granted on August 16, 1999, at an exercise price
     of $0.006867, and with an expiration date of August 16, 2004.

(3)  Dr. Selden's options were granted on August 16, 1999, at an exercise price
     of $0.006867, and with an expiration date of August 16, 2009.

(4)  We pay a retainer  fee of $5,000 per month plus  expenses  to R.  Redwitz &
     Co., an accounting  and financial  consulting  firm of which Mr. Redwitz is
     the Managing  Partner,  for certain  accounting  and  financial  consulting
     services.

(5)  Mr.  Redwitz'  options were granted on May 1, 2000, at an exercise price of
     $0.011771, and with an expiration date of May 1, 2010.

(6)  In January  2001,  we entered into a five-year  employment  agreement  with
     Homer H.  Hewitt III,  whereby Mr.  Hewitt is entitled to receive as a base
     salary $60,000 per year.

OPTION GRANTS  DURING LAST FISCAL YEAR. In fiscal year 2000, we granted  options
to purchase up to an aggregate of 24,665,114 shares to employees,  directors and
consultants.  All such options were granted at exercise prices that the Board of
Directors  believed to be equal to the fair market  value of our common stock on
the date of grant and have a term of ten years.  Optionees  may pay the exercise
price by cash or certified check. Option shares generally vest over three years,
with  one-third  of the  option  shares  vesting  on  each  of the  first  three
anniversaries of the date of the option grant.


                                       26
<PAGE>


         The following table sets forth the Options/SARs granted to our officers
and directors during the fiscal year ended December 31, 2000.
<TABLE>
<CAPTION>

          Name                Number of Securities         % of Total Options/SARs      Exercise or      Expiration
                            Underlying Options/SARs         Granted to Employees         Base Price         Date
<S>                                <C>                              <C>                   <C>             <C>
Robert Redwitz                     6,116,551                        24.8%                 .011771         5/1/2010
</TABLE>

DIRECTORS' COMPENSATION

         Our  directors  are  reimbursed  for  expenses  incurred  in  attending
meetings  of the  Board  of  Directors.  Directors  generally  are not  paid any
separate fees for serving as directors.

EMPLOYMENT AGREEMENTS

         In March 2001, we entered into a three-year  employment  agreement with
Lloyd W. Singer for his continued  employment in his current executive  position
with us.  Under the terms of this  agreement,  Mr.  Singer  will  receive a base
salary of $125,000. Mr. Singer has agreed that during the term of his employment
agreement and for a period of one year  thereafter  (in the event of termination
of employment for other than "cause" or "good  reason") or two years  thereafter
(in the event of termination of employment  for "cause"),  he will not,  without
our prior  written  consent,  compete with us by engaging in any capacity in any
business which is competitive with our business.

         In January 2001, we entered into a five-year  employment agreement with
Homer  H.  Hewitt  III for his  employment  as the  President  of our VLS  unit.
Pursuant to the agreement,  Mr. Hewitt will receive a base salary of $60,000 per
year.

STOCK OPTION PLAN

         In May 2000, we adopted the LearnCom,  Inc. 2000 Equity  Incentive Plan
(the "Option Plan") for the purpose of attracting,  retaining and maximizing the
performance  of executive  officers and key  employees and  consultants,  and to
enable us to  exchange  outstanding  employee  options  of  LC-Illinois  for our
substantially  identical  options.  We have reserved  102,000,000  shares of our
common stock for issuance  under the Option Plan.  The Option Plan has a term of
ten years.  The Option Plan provides for the grant of "incentive  stock options"
within the  meaning of Section  422 of the  Internal  Revenue  Code of 1986,  as
amended,  non-statutory stock options,  stock appreciation rights and restricted
stock awards. The Option Plan is administered by a Compensation Committee of the
Board of Directors.  The exercise price for  non-statutory  stock options may be
equal to or more or less than 100 percent of the fair market  value of shares of
our common stock on the date of grant.  The exercise  price for incentive  stock
options may not be less than 100  percent of the fair market  value of shares of
our common  stock on the date of grant (110  percent of fair market value in the
case of incentive  stock  options  granted to  employees  who hold more than ten
percent of the voting power of our issued and  outstanding  shares of our common
stock).

                                       27
<PAGE>

         Options  granted under the Option Plan may not have a term of more than
a ten-year  period (five years in the case of incentive stock options granted to
employees  who hold more than ten  percent  of the  voting  power of our  common
stock) and generally vest over a three-year period.  Options generally terminate
three months after the optionee's termination of employment by us for any reason
other than death,  disability or  retirement,  and are not  transferable  by the
optionee other than by will or the laws of descent and distribution.

         The Option Plan also provides for grants of stock  appreciation  rights
("SARs"),  which entitle a participant  to receive a cash payment,  equal to the
difference  between the fair market  value of a share of our common stock on the
exercise  date and the  exercise  price of SAR.  The  exercise  price of any SAR
granted  under the Option Plan will be  determined  by the Board of Directors in
its discretion at the time of the grant.  SARs granted under the Option Plan may
not be exercisable for more than a ten year period. SARs generally terminate one
month after the grantee's  termination  of employment by us for any reason other
than death,  disability or  retirement.  Although the Board of Directors has the
authority to grant SARs, it does not have any present plans to do so.

         Restricted stock awards, which are grants of shares of our common stock
that are  subject to a  restricted  period  during  which such shares may not be
sold, assigned,  transferred,  made subject to a gift, or otherwise disposed of,
or mortgaged, pledged or otherwise encumbered, may also be made under the Option
Plan. At this time,  the Board of Directors  has not granted,  and does not have
any plans to grant, restricted shares of common stock.

         As of March 15, 2001,  options to purchase an  aggregate of  84,281,813
shares of our common stock have been granted to our  employees  under the Option
Plan. Of these options, five-year options to purchase an aggregate of 28,761,624
shares of our common  stock at an exercise  price of $.006867  have been granted
under the Option Plan to one of our employees,  ten-year  options to purchase an
aggregate  of  29,355,075  shares of our common  stock at an  exercise  price of
$.006867  per  share  have  been  granted  under  the  Option  Plan to 15 of our
employees,  ten-year options to purchase an aggregate of 8,665,114 shares of our
common stock at an exercise  price of  $.0011771  per share have been granted to
four of our employees,  ten-year  options to purchase  14,500,000  shares of our
common stock at an exercise  price of $.013 per share have been granted to 14 of
our employees and ten-year  options to purchase  3,000,000  shares of our common
stock at an exercise  price of $.022 per share have been  granted to five of our
employees.


ITEM 11.         SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         The following table sets forth as of March 15, 2001 certain information
regarding the beneficial ownership of our common stock by (a) each person who is
known to us to be the  beneficial  owner of more than five  percent  (5%) of the
common stock,  (b) each of our  directors and executive  officers and (c) all of
our directors and executive officers as a group. Except as otherwise  indicated,
the persons or entities listed below have sole voting and investment  power



                                       28
<PAGE>

with respect to all shares of common stock beneficially owned by them, except to
the extent such power may be shared with a spouse.  The percentage of beneficial
ownership is based on 796,666,667 shares of common stock outstanding as of March
15, 2001.
<TABLE>
<CAPTION>

                           Beneficial Ownership Table(1)
                Class                  Name and Address              Amount           % of Class

                <S>            <C>                                <C>                   <C>
                Common         David Doerge                       269,904,850(2)        32.95%
                               Doerge Capital Management
                               30 S. Wacker Drive
                               Chicago, Illinois  60606

                Common         *Denis Armand Mola                 106,893,951(3)        13.29%
                               980 N. Michigan Avenue
                               Chicago, Illinois  60611

                Common         *Lloyd W. Singer                    85,056,829(4)        10.30%
                               3 Bristol Court
                               Lincolnshire, Illinois 60069

                Common         *Dr. Paul Selden                    39,429,180(5)         4.88%
                               1235 Maple Avenue
                               Evanston, Illinois  60602

                Common         *Robert R. Redwitz                  17,330,227(6)         2.17%
                               220 Technology Drive
                               Irvine, California  92618

                Common         *Homer H. Hewitt III                26,666,667            3.33%
                               Unit 15, Cricket Square
                               Ardmore, Pennsylvania 19003

                Common         Directors and executive            275,376,854(7)        32.55%
                               officers as a group (five)
</TABLE>


--------------------------------
* Denotes an Executive Officer/Director.

1.   For purposes of this table,  information as to the beneficial  ownership of
     shares of common stock is determined  in  accordance  with the rules of the
     Securities and Exchange Commission and includes general voting power and/or
     investment power with respect to securities. Except as otherwise indicated,
     all shares of our common stock are beneficially  owned, and sole investment
     and voting power is held, by the person named.  For purposes of this table,
     a person or group of persons is deemed to have  "beneficial  ownership"  of
     any  shares of common  stock  which  such  person  has the right to acquire
     within  60 days  after the date  hereof.  For  purposes  of  computing  the
     percentage  of  outstanding  shares of common  stock held by each person or
     group of persons  named above,  any shares which such person or persons has
     the right to acquire  within 60 days after the date of this Form  10-KSB is
     deemed  to be  outstanding,  but is not  deemed to be  outstanding  for the
     purpose of computing  the  percentage  ownership of any other  person.  The
     inclusion  herein  of  such  shares  listed  beneficially  owned  does  not
     constitute an admission of beneficial ownership.

2.   Includes  112,136,766  shares of our common stock owned of record by Doerge
     LearnCom LP, of which Mr. Doerge is a General  Partner,  61,165,509  shares
     owned of  record by Doerge  WingsNet  LP, of which Mr.



                                       29
<PAGE>

Doerge is a General  Partner,  warrants  to  purchase  15,000,000  shares of our
common  stock  issued to Doerge  Capital  Collaterialized  Bridge Fund L.P.  and
warrants to purchase 7,500,000 shares of our common stock issued to Mr. Doerge.

3.   Includes  21,025,644  shares of our common  stock owned of record by Armand
     Group,  Inc.,  of which Mr. Mola is a General  Partner,  15,291,377  shares
     owned of record  by  Armand  Video  Investors  LP,  of which Mr.  Mola is a
     General  Partner,  and warrants to purchase  7,500,000 shares of our common
     stock issued to Mr. Mola.

4.   Includes  28,761,624  shares of our common stock issuable upon the exercise
     of currently exercisable stock options.

5.   Includes  11,140,132  shares of our common stock issuable upon the exercise
     of currently exercisable stock options.

6.   Includes   15,291,377  shares  of  our  common  stock  held  by  Lighthouse
     Investments,  of which Mr. Redwitz is General Partner and 2,038,850  shares
     of our common stock  issuable  upon the  exercise of currently  exercisable
     stock options.

7.   Includes  50,440,606  shares of our common stock issuable upon the exercise
     of currently exercisable stock options.


ITEM 12.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         We have engaged The Armand Group,  an investment  banking firm of which
Denis Armand Mola, our Chairman of the Board, is a Managing Director, to provide
investment banking services and advice in connection with proposed acquisitions,
proposed  financings and other financial and strategic matters.  Under the terms
of the  engagement,  The Armand  Group is paid a  retainer  of $5,000 per month,
reimbursed  for  out-of-pocket  expenses and paid  commissions in amounts agreed
upon from time to time for services rendered in connection with specific merger,
acquisition  or financing  transactions.  During the fiscal years ended December
31, 1999 and December 31, 2000,  amounts paid by us to The Armand Group amounted
to $152,000 and $50,000, respectively.

         We  have  engaged  R.  Redwitz  &  Co.,  an  accounting  and  financial
consulting firm of which Robert R. Redwitz,  our acting Chief Financial  Officer
and director,  is the Managing  Partner,  to provide us with certain  accounting
services. Under the terms of the engagement, R. Redwitz & Co. is paid a retainer
of $5,000 per month and reimbursed for out-of-pocket expenses. During the fiscal
years ended  December 31, 1999 and  December 31, 2000,  amounts paid by us to R.
Redwitz & Co. amounted to approximately $18,201 and $57,160, respectively.

         Doerge  Capital  Management,  one  of  our  largest  shareholders,  has
assisted us with finding sources of financing and, in December 2000, provided us
with a bridge  loan in the amount of  $1,000,000  in  exchange  for  warrants to
purchase  15,000,000  shares of our common  stock.  During the fiscal year ended
December  31,  2000,  amounts paid by us to Doerge  Capital  Management  for its
services amounted to $80,711.

         As of December 1, 2000, we issued warrants to purchase 7,500,000 shares
of our  common  stock to each of Denis  Armand  Mola,  our  Chairman,  and David
Doerge, a major


                                       30
<PAGE>

shareholder,  in consideration of their personally  guaranteeing  certain of our
senior debt.


ITEM 13.          EXHIBITS AND REPORTS ON FORM 8-K.

(a)  Exhibits.  The following exhibits are filed herewith or are incorporated by
     reference to exhibits previously filed.
<TABLE>
<CAPTION>

    EXHIBIT NO.                                                DESCRIPTION
    -----------                                                -----------

<S>                  <C>
3.1                  Articles of  Incorporation  dated August 17, 1998  (incorporated by reference to Exhibit 2.1 our
                     Form 10-SB12G filed with the Commission on February 8, 2000).

3.2                  Articles of Merger  dated  December  31, 1998  (incorporated  by reference to Exhibit 2.2 to our
                     Form 10-SB12G filed with the Commission on February 8, 2000).

3.3                  Certificate of Amendment to the Articles of  Incorporation  dated May 11, 2000  (incorporated by
                     reference to Exhibit 3.1 to our Form 10-QSB filed with the Commission on May 15, 2000).

3.4                  Bylaws  (incorporated by reference to Exhibit 2.3 to our Form 10-SB12G filed with the Commission
                     on February 8, 2000).

10.1                 Warrant dated as of December 1, 2000 issued to The Doerge  Capital  Collateralized  Bridge Fund,
                     L.P.

10.2                 Warrant dated as of December 1, 2000 issued to Denis Armand Mola.

10.3                 Warrant dated as of December 1, 2000 issued to David Doerge.

10.4                 Settlement Agreement dated as of December 6, 2000 among Tom Peters, Excel and LearnCom, Inc.

10.5                 Promissory Note dated January 24, 2001 to Homer Hewitt.

10.6                 Promissory Note dated January 24, 2001 to Homer Hewitt.

10.7                 Employment Agreement dated as of January 24, 2001 among LearnCom,  Inc.,  VideoLearning Systems,
                     Inc. and Homer H. Hewitt.
</TABLE>


                                       31
<PAGE>

<TABLE>
<CAPTION>

    EXHIBIT NO.                                                DESCRIPTION
    -----------                                                -----------

<S>                  <C>
10.8                 Employment Agreement dated as of March 1, 2001 between LearnCom, Inc. and Lloyd W. Singer.

10.9                 LearnCom, Inc. 2000 Equity Incentive Plan.

10.10                Summary of Arrangement between LearnCom, Inc. and The Armand Group

10.11                Summary of Arrangement between LearnCom, Inc. and R. Redwitz & Co.

10.12                Payoff and Termination  Agreement dated April 10, 2001 between LearnCom,  Inc. and The Bureau of
                     National Affairs, Inc.

10.13                Loan  Agreement  dated as of  December  1,  2000  between  LearnCom,  Inc.  and  Doerge  Capital
                     Collateralized Bridge Fund, L.P.

10.14                Security  Agreement  dated as of December 1, 2000  between  LearnCom,  Inc.  and Doerge  Capital
                     Collateralized Bridge Fund, L.P.

10.15                Term Note dated December 1, 2000 to Doerge Capital Collateralized Bridge Fund, L.P.

10.16                Loan and Security  Agreement dated as of April 30, 2001 between LearnCom,  Inc.  (including each
                     subsidiary) and American National Bank and Trust Company of Chicago.

10.17                Revolving  Note  dated as of April 30,  2001 to  American  National  Bank and Trust  Company  of
                     Chicago.

10.18                Security  Agreement  dated  as  of  April  30,  2001  between  LearnCom,  Inc.  (including  each
                     subsidiary) and American National Bank and Trust Company of Chicago.

10.19                Term Note dated as of April 30, 2001 to American National Bank and Trust Company of Chicago.

21                   List of Subsidiaries

</TABLE>


                                       32
<PAGE>


(b)      Reports on Form 8-K

         We did not file any Current Reports on Form 8-K with the Securities and
Exchange Commission during the fourth quarter of fiscal year 2000.


                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, we have duly caused this report to be signed on our behalf
by the  undersigned  thereunto  duly  authorized  President and Chief  Executive
Officer on May 1, 2001.


                           LEARNCOM, INC.



                           By:  /S/ LLOYD W. SINGER
                                ------------------------------
                                   Name: Lloyd W. Singer
                                   Title:   President and Chief Executive
                                               Officer



         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this report has been signed below by the following  persons on our behalf and in
the capacities stated on the dates indicated.
<TABLE>
<CAPTION>

              SIGNATURE                                          TITLE                                   DATE

<S>                                     <C>                                                       <C>
/s/ Lloyd W. Singer                     President, Chief Executive Officer and Director           May 1, 2001
--------------------------------------  (Principal Executive Officer)
Lloyd W. Singer

/s/ Denis Armand Mola                   Chairman of the Board                                     May 1, 2001
--------------------------------------
Denis Armand Mola

/s/ Robert R. Redwitz                   Chief Financial Officer and Director                      May 1, 2001
--------------------------------------  (Principal Financial Officer)
Robert R. Redwitz
</TABLE>


                                       33
<PAGE>


                    AUDITED CONSOLIDATED FINANCIAL STATEMENTS

                          LearnCom, Inc. and Subsidiary
                 For the Years Ended December 31, 2000 and 1999






                                                                    Form 10-KSB
           INDEX TO CONSOLIDATED FINANCIAL STATEMENTS               Page Numbers

Report of Independent Auditors ...................................       F-2

Consolidated Balance Sheets ......................................       F-3

Consolidated Statements of Operations ............................       F-5

Consolidated Statements of Shareholders' Equity ..................       F-6

Consolidated Statements of Cash Flows ............................       F-7

Notes to Consolidated Financial Statements .......................       F-8




                                      F-1
<PAGE>


                         Report of Independent Auditors


To the Board of Directors
LearnCom, Inc. and Subsidiary
Bensenville, Illinois


We have audited the accompanying  consolidated balance sheets of LearnCom,  Inc.
and  Subsidiary as of December 31, 2000 and 1999,  and the related  consolidated
statements of operations, shareholders' equity and cash flows for the years then
ended.  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. Those standards require that we plan and perform the audit
to obtain reasonable  assurance about whether the financial  statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting  the amounts and  disclosures in the financial  statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by  management,  as well as  evaluating  the  overall  financial  statement
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the consolidated financial position of LearnCom, Inc. and
Subsidiary  as of December 31, 2000 and 1999,  and the  consolidated  results of
their  operations  and their cash flows for the years then ended,  in conformity
with accounting principles generally accepted in the United States.



                                             /s/ ERNST & YOUNG LLP


Cleveland, Ohio
March 26, 2001, except for Note 13,
as to which the date is April 30, 2001

                                      F-2
<PAGE>


                          LearnCom, Inc. and Subsidiary

                           Consolidated Balance Sheets


                                                               DECEMBER 31
                                                            2000         1999
                                                         -----------------------
ASSETS
Current assets:
   Cash and cash equivalents                             $  105,495   $   79,167
   Accounts receivable, net of allowance of
     $33,000 in 2000 and $54,000 in 1999                    425,410      653,743
   Inventory                                                359,027      404,152
   Prepaid expenses and other current assets                147,151       82,909
                                                         -----------------------
Total current assets                                      1,037,083    1,219,971

Furniture, fixtures and office equipment                    477,774      381,661
Less accumulated depreciation                               107,665       26,870
                                                         -----------------------
                                                            370,109      354,791
Other assets:
   Publishing rights and masters, net of amortization
     of $325,613 in 2000 and $123,225 in 1999             1,265,824    2,280,848
   Deferred financing costs, net                            191,667           --
   Other non-current assets                                  53,177       12,914
                                                         -----------------------
Total other assets                                        1,510,668    2,293,762








                                                         -----------------------
Total assets                                             $2,917,860   $3,868,524
                                                         =======================

                                      F-3
<PAGE>


                                                              DECEMBER 31
                                                          2000          1999
                                                      -----------   -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Accounts payable and accrued expenses-trade         $   890,095   $   548,392
  Accounts payable-related parties                         71,435         1,432
  Revolving line of credit                                450,000       375,000
  Note payable--employee                                  108,296            --
  Note payable--related party                              50,000        50,000
  Bridge loan payable--related party                      350,000            --
  Current portion of purchase consideration payable       125,000       275,000
  Current portion of note payable                         260,000     1,000,000
                                                      -----------   -----------
Total current liabilities                               2,304,826     2,249,824

Long-term liabilities:
  Note payable, net of current portion                    597,500            --
  Purchase consideration payable, net of
    current portion                                            --       875,000

Shareholders' equity:
  Common stock, $.001 par value, 2,000,000,000
     shares authorized, 757,500,000 and
     500,000,000 shares issued and outstanding
     at December 31, 2000 and 1999,
     respectively                                         757,500       500,000
  Additional paid in capital                              402,000       359,500
  Common stock subscribed                                 125,000            --
  Accumulated deficit                                  (1,268,966)     (115,800)
                                                      -----------   -----------
Total shareholders' equity                                 15,534       743,700
                                                      -----------   -----------
Total liabilities and shareholders' equity            $ 2,917,860   $ 3,868,524
                                                      ===========   ===========


SEE ACCOMPANYING NOTES

                                      F-4
<PAGE>


                          LearnCom, Inc. and Subsidiary

                      Consolidated Statements of Operations


                                                      YEAR ENDED DECEMBER 31
                                                      2000              1999
                                                -------------------------------

Product sales                                   $   3,479,725     $   2,192,186
Consulting service revenues                           891,262            99,118
                                                -------------------------------
                                                    4,370,987         2,291,304

Cost of sales and services                          1,845,086           746,752
                                                -------------------------------
Gross profit                                        2,525,901         1,544,552

Selling, marketing, general and
  administrative expenses                           3,327,606         1,522,978
                                                -------------------------------
Operating (loss) income                              (801,705)           21,574

Other expenses:
  Interest expense                                   (197,193)         (121,446)
  Other expense, net                                 (154,268)          (15,928)
                                                -------------------------------
Total other expenses                                 (351,461)         (137,374)
                                                -------------------------------

Net loss                                        $  (1,153,166)    $    (115,800)
                                                ===============================

Basic and diluted loss per share                           --                --
                                                ===============================

Weighted-average shares outstanding               671,667,666       347,086,000
                                                ===============================


SEE ACCOMPANYING NOTES.

                                      F-5
<PAGE>


                          LearnCom, Inc. and Subsidiary

                 Consolidated Statements of Shareholders' Equity


<TABLE>
<CAPTION>
                                                                          ADDITIONAL
                                                                           PAID IN         COMMON
                                                               COMMON      CAPITAL          STOCK      ACCUMULATED
                                                SHARES         STOCK        AMOUNT       SUBSCRIBED      DEFICIT          TOTAL
                                           ----------------------------------------------------------------------------------------
<S>                                            <C>           <C>          <C>          <C>            <C>             <C>
Balance at May 24, 1998 (date of inception)
  Issuance of founders' stock                  270,629,342
                                           ----------------------------------------------------------------------------------------
Balance at December 31, 1998                   270,629,342   $      --    $      --    $       --     $         --    $         --
  Issuance of stock in exchange of notes
    payable to related parties                  84,102,575      84,103       15,897                                        100,000
  Issuance of stock for cash                   145,268,083     415,897      343,603                                        759,500
  Net loss                                                                                                (115,800)       (115,800)
                                           ----------------------------------------------------------------------------------------
Balance at December 31, 1999                   500,000,000     500,000      359,500                       (115,800)        743,700
  Merger with Smoky Hill Services, Inc.
    accounted for as a recapitalization
    (NOTE 5)                                   257,500,000     257,500     (257,500)
    Issuance of warrants to related
    parties (NOTE 6)                                                        150,000                                        150,000
  Issuance of warrant in connection with
    bridge loan financing (NOTE 6)                                          150,000                             --         150,000
  Proceeds from subscription of 3,125,000
    shares of common stock                                                                125,000               --         125,000
  Net loss                                                                                              (1,153,166)     (1,153,166)
                                           ----------------------------------------------------------------------------------------
Balance at December 31, 2000                   757,500,000   $ 757,500    $ 402,000    $  125,000     $ (1,268,966)    $    15,534
                                           ========================================================================================
</TABLE>


SEE ACCOMPANYING NOTES.

                                      F-6
<PAGE>


                          LearnCom, Inc. and Subsidiary

                            Statements of Cash Flows


                                                         YEAR ENDED DECEMBER 31
                                                            2000        1999
                                                        -----------------------
OPERATING ACTIVITIES
Net loss                                                $(1,153,166)  $(115,800)
Adjustments to reconcile net loss to net cash
  (used in) provided by operating activities:
    Depreciation expense                                     80,795      26,780
    Amortization expense                                    294,097     142,849
    Stock compensation expense                              150,000          --
    Loss on disposal of equipment                                --       7,094
    Changes in operating assets and liabilities:
      Accounts receivable                                   228,333      25,310
      Inventory                                             (28,439)      8,007
      Prepaid expenses and other assets                    (142,474)    (23,523)
      Accounts payable and accrued expenses                 411,706     178,601
                                                        -----------------------
Total adjustments                                           994,018     188,395
                                                        -----------------------
Net cash (used in) provided by operating activities        (159,148)    249,318

INVESTING ACTIVITIES
Purchases of property and equipment                         (96,113)   (209,921)
Payments for publishing rights and masters                 (127,925)    (31,846)
Business acquisitions, net of cash acquired                      --    (382,884)
                                                        -----------------------
Net cash used in investing activities                      (224,038)   (624,651)

FINANCING ACTIVITIES
Issuance of common stock                                         --     759,500
Proceeds from subscription of common stock                  125,000          --
Proceeds from revolving line of credit                       75,000     375,000
Proceeds from bridge loan payable--related party            270,000          --
Proceeds from note payable--employee and related party      120,000     250,000
Principal payments on notes payable                        (168,782)   (300,000)
Principal payments on notes payable--employee and
  related party                                             (11,704)   (630,000)
                                                        -----------------------
Net cash provided by financing activities                   409,514     454,500
                                                        -----------------------

Net increase in cash and cash equivalents                    26,328      79,167
Cash and cash equivalents at beginning of period             79,167          --
                                                        -----------------------
Cash and cash equivalents at end of period              $   105,495   $  79,167
                                                        =======================

NONCASH ACTIVITIES
Issuance of bridge loan payable for deferred
  financing costs                                       $    80,000
Adjustment to purchase price of
  BNA Communications, Inc. and reduction of
  purchase consideration payable                        $   998,718


SEE ACCOMPANYING NOTES.


                                      F-7
<PAGE>


                          LearnCom, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements

                               December 31, 2000


1.   ORGANIZATION AND NATURE OF BUSINESS

LearnCom,  Inc.  (LearnCom or the Company) was  incorporated  in Illinois in May
1998.  From May 1998 until January 1999, the Company had no operations,  and its
only  activity was to issue  270,629,342  shares of common stock to its founders
with no value  ascribed.  In January  1999,  the Company  acquired the operating
assets and liabilities of WingsNet,  Inc., at which point the actual  operations
of the Company began.  In August 1999,  the Company  acquired 100% of the common
stock of BNA  Communications,  Inc. These  acquisitions are further described in
Note 4.

LearnCom  operates  in a single  business  segment  producing  and  distributing
proprietary video programs,  ancillary materials and consulting services for use
in  management  and  employee  training,  motivational,  and skills  enhancement
programs.  The  programs  and  consulting  contracts  are sold to  corporations,
professional  organizations,  government  agencies,  and financial  institutions
primarily in North America.

Prior to the reverse acquisition with Smoky Hill Services,  Inc. (the Registrant
or Smoky Hill) in May 2000 (SEE NOTE  5--REVERSE  ACQUISITION),  LearnCom  was a
privately held corporation.  Subsequent to the reverse  acquisition,  the former
shareholders of LearnCom own 66% of the Registrant.

2.   BASIS OF PRESENTATION - GOING CONCERN CONSIDERATIONS

The accompanying  financial  statements have been prepared  assuming the Company
will  continue as a going  concern.  The Company has  incurred  losses since its
formation  due to efforts to define its  market in an  evolving  human  resource
training industry, an aggressive  acquisition strategy and the costs relative to
going from a privately  held  company to a publicly  traded  entity  through its
reverse  merger in May 2000.  The Company also has negative  working  capital of
approximately  $1,268,000  and positive  shareholders'  equity of  approximately
$15,500 at December 31, 2000.

To meet immediate liquidity  concerns,  during 2001 the Company has extended its
lending  agreement  with  American  National  Bank until  April 28, 2002 and has
obtained  a  subscription  for  equity  funding of  $125,000  (SEE NOTE 13).  In
addition,  agreements  have been  reached  with  related  party  lenders that no
principal payments will be made until the Company's  alternative financing is in
place.  Combining these actions with anticipated  positive cash flow of $287,000
in 2001, the Company's current obligations can be met. To further strengthen the
Company's  financial  position,  the  Company's  investment  banker,  who  is  a
significant  shareholder,  is  attempting  to  raise  a  total  of  $5  million,
consisting of $2 million of subordinated debt and $3 million in equity through a
private   placement.   During  April  2001,   the  Company  has  received   oral
communications   from   investors   who  intend  to  purchase  $1.5  million  of
subordinated  debt.  Both the  subordinated  debt and the capital  infusions are
anticipated to be completely funded by the end of the third quarter 2001.

                                      F-8
<PAGE>


                          LearnCom, Inc. and Subsidiary
             Notes to Consolidated Financial Statements (continued)


2.   BASIS OF PRESENTATION - GOING CONCERN CONSIDERATIONS (CONTINUED)

To meet  loan  maturity  requirements  in 2002 and to  further  its  acquisition
strategy,  the Company is in the process of  negotiating  a new senior bank debt
facility in the amount of $6.0 million. This new senior bank debt in combination
with the  subordinated  debt and capital stock infusions is expected to give the
Company the capability to pursue its acquisition strategy.

3.   SIGNIFICANT ACCOUNTING POLICIES

BASIS OF CONSOLIDATION

The consolidated  financial  statements  include the accounts of the Company and
BNA   Communications,   Inc.,  a  wholly  owned   subsidiary.   All  significant
intercompany accounts and transactions have been eliminated in consolidation.

CASH AND CASH EQUIVALENTS

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

CONCENTRATION OF CREDIT RISK

Credit is extended based on an evaluation of the customer's  financial condition
and generally  collateral is not required.  Credit terms are consistent with the
industry.  Losses from credit sales are provided for in the financial statements
and consistently have been within management's expectations.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying values of cash, cash equivalents,  accounts receivable and accounts
payable  are a  reasonable  estimate  of their fair value due to the  short-term
nature of these  instruments.  The Company's  long-term  bank  obligation  has a
variable rate and cost approximates fair value at December 31, 2000. The related
party  obligations do not have a ready market and cost is assumed to approximate
fair value. The aggregate  carrying value of these notes is $508,296 at December
31, 2000, with interest rates ranging from 12% to 16% and due dates between July
1, 2001 and December 31, 2001. The purchase  consideration payable to the Bureau
of National Affairs has been renegotiated (SEE NOTE 4).

INVENTORIES

Inventories  consist  of  program  tapes,  blank  tape  stock,  printed  program
materials,  tape cases,  and packaging  materials and are stated at the lower of
average cost or market.

                                      F-9
<PAGE>


                          LearnCom, Inc. and Subsidiary
             Notes to Consolidated Financial Statements (continued)


3.   SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

FURNITURE, FIXTURES AND OFFICE EQUIPMENT

Furniture,  fixtures and office  equipment are stated at cost.  Maintenance  and
repairs are charged to expense as incurred.  Major acquisitions and improvements
are capitalized.  Depreciation is computed  principally  using the straight-line
method over the  estimated  useful  lives of assets.  The useful lives are seven
years for  furniture  and  fixtures,  five years for office  equipment and three
years for computer equipment and software, including website development costs.

PUBLISHING RIGHTS AND MASTERS

Publishing  rights and masters  represents  the exclusive  rights to publish and
distribute  the  Company's  products.  Publishing  rights and  masters  consists
primarily  of  acquired  film  libraries  which are  amortized  using the income
forecast method.  Management periodically reviews the value of publishing rights
and masters and adjusts such amount if a permanent decline in value has occurred
relative to its unamortized value.

REVENUE RECOGNITION

The Company recognizes  revenue when product is shipped,  upon passage of title,
or when services are rendered.

ADVERTISING EXPENSE

Advertising  costs are  expensed as incurred.  Advertising  expense for the year
ended  December  31,  2000 and 1999 was  approximately  $405,000  and  $111,000,
respectively.

INCOME TAXES

The Company uses the  liability  method in measuring  the  provision  for income
taxes and recognizing  deferred tax assets and liabilities in the balance sheet.
The  liability  method  requires  that  deferred  income  taxes  reflect the tax
consequences  of  currently  enacted  rates  for  differences  between  tax  and
financial reporting basis of assets and liabilities.

STOCK COMPENSATION

The  Company has  elected to follow APB  Opinion  No. 25,  ACCOUNTING  FOR STOCK
ISSUED TO EMPLOYEES  ("APB 25"), and related  Interpretations  and  accordingly,
recognizes  no  compensation  expense for stock  options  granted at fair value.
Under APB 25, compensation expense is recognized for all options granted at less
than the fair market value of the Company's common shares on the date of grant.

                                      F-10
<PAGE>


                          LearnCom, Inc. and Subsidiary
             Notes to Consolidated Financial Statements (continued)


3.   SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

INCOME (LOSS) PER SHARE

Basic and diluted income (loss) per common share amounted to less than $0.01 for
all periods  presented and are based upon the weighted  average number of shares
of common stock  outstanding,  giving retroactive effect of the merger discussed
in Notes 1 and 5. The Company has excluded all  outstanding  stock  options from
the  calculation  of diluted  income (loss) per share because they would have an
anti-dilutive  effect.  The total number of options and warrants  exercisable at
December 31, 2000 was 68,926,910.

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 amounts reported in the financial  statements and accompanying notes.
Actual results could differ from those estimates.

RECLASSIFICATION

Certain  1999  amounts  have been  reclassified  to conform to the current  year
presentation.

4.   ACQUISITIONS

WINGSNET, INC.

On January 19, 1999, the Company purchased certain operating assets of WingsNet,
Inc.  for  $530,000  in notes  payable to related  parties,  $300,000  in a note
payable to a bank and the assumption of  approximately  $243,900 of liabilities.
WingsNet,  Inc.  produced  and  distributed  video-based  training  programs and
content for executive and management development courses and seminars.

BNA COMMUNICATIONS, INC.

On August 30, 1999, the Company  purchased 100% of the outstanding  common stock
of BNA  Communications,  Inc.  for  $341,756  in cash,  a note  payable  to bank
amounting  to  $1,000,000  and  purchase  consideration  payable  to  seller  of
$1,150,000. BNA Communications, Inc. was a wholly owned subsidiary of the Bureau
of National Affairs (BNA) and performed human resources  consulting and training
services and safe expectation services. The human resources operations consisted
of sexual harassment,  diversity and employment law video-based courseware,  and
the safe expectation  operations consisted of video-based courseware in the area
of business and  governmental  safety and  environmental  health,  primarily for
regulatory  compliance  under the  Federal  Occupational  Safety and Health Act.
During the fourth quarter of 2000, the Company  started  negotiating a change in
the terms and the amount of the purchase  consideration  payable with the former
owner of BNA Communications, Inc (SEE NOTE 13-- SUBSEQUENT EVENTS).

                                      F-11
<PAGE>


                          LearnCom, Inc. and Subsidiary
             Notes to Consolidated Financial Statements (continued)


4.   ACQUISITIONS (CONTINUED)

The  acquisitions   described  above  were  accounted  for  as  purchases.   The
consolidated  statements  of  operations  of the Company  include the results of
operations of the acquired businesses for the period subsequent to the effective
date of these acquisitions.

The pro forma  unaudited  consolidated  results of operations for the year ended
December 31, 1999 assuming the consummation of the acquisitions as of January 1,
1999 would have been as follows:

       Total revenue                                      $   4,311,304
       Net loss                                                (503,800)
       Basic and diluted net loss per share                          --


5.   REVERSE ACQUISITION

In May 2000,  LearnCom entered into an Agreement and Plan of Reorganization with
Smoky Hill Services,  Inc.  (Smoky Hill), a Nevada  corporation  incorporated in
1986,  whereby Smoky Hill acquired 100% of the issued and  outstanding  stock of
LearnCom in exchange  for  approximately  66% interest in its common  stock.  In
contemplation  of the merger Smoky Hill:  1)  increased  its  authorized  common
shares from 50,000,000 to 2,000,000,000; 2) received 14,000,000 shares that were
returned and  cancelled  from its parent  company,  VIP Worldnet,  Inc.;  and 3)
completed a 125-for-1  split of its stock,  increasing  its  outstanding  Common
Stock from 2,060,000 shares to 257,500,000.

At the time of the transaction Smoky Hill was inactive,  and Smoky Hill's assets
and liabilities were nominal.  Shortly before the merger, Smoky Hill changed its
name to LearnCom, Inc. and is the legal successor. The transaction was accounted
for as a reverse acquisition, which results in a recapitalization of the Company
as it is deemed to be the acquiring entity for accounting purposes. Accordingly,
the capital  accounts,  number of shares of common stock and loss per share have
been  retroactively  restated  to give  effect to the  recapitalization  for all
periods presented.

                                      F-12
<PAGE>


                          LearnCom, Inc. and Subsidiary
             Notes to Consolidated Financial Statements (continued)


6.   LONG-TERM OBLIGATIONS

Long-term obligations consist of the following:

                                                               DECEMBER 31
                                                             2000        1999
                                                          ----------  ----------
     Note payable--employee, interest at 12% per annum,
      principal  and  accrued  interest  due in full on
      December 31, 2001                                   $  108,296  $       --

     Note payable--related  party,  interest at 12% per
      annum,  principal  and  accrued  interest  due on
      demand,    secured   by    inventory,    accounts
      receivable, equipment and general intangibles           50,000      50,000

     Note payable to  American  National  Bank,  due in
      monthly  installments of $10,000 plus interest at
      the  bank's  prime  rate  plus  1.25%  per  annum
      (10.75% at December 31, 2000).  Final payment due
      April 30, 2001.  Secured by  inventory,  accounts
      receivable, equipment and general intangibles          857,500   1,000,000

     Bridge loan  payable--related  party,  interest at
      16% per annum,  principal subordinate to the note
      payable to American  National Bank and secured by
      inventory,  accounts  receivable,  equipment  and
      general intangibles                                    350,000          --

     Purchase   consideration   payable  to  Bureau  of
      National Affairs                                       125,000   1,150,000
                                                          ----------  ----------
     Total                                                 1,490,796   2,200,000
     Less current portion                                    893,296   1,325,000
                                                          ----------  ----------
                                                          $  597,500  $  875,000
                                                          ==========  ==========

                         F-13
<PAGE>


                          LearnCom, Inc. and Subsidiary
             Notes to Consolidated Financial Statements (continued)


6.   LONG-TERM OBLIGATIONS (CONTINUED)

Cash payments of interest on these notes were approximately $102,000 and $52,000
for the years ended December 31, 2000 and 1999, respectively.  Annual maturities
of the note payable to American National Bank are: $260,000 in 2001 and $597,500
in 2002.

On April 30, 2001, the Company  entered into a loan and security  agreement with
American  National Bank extending the maturity of the Note Payable and Revolving
Line of Credit to April 28, 2002 (SEE NOTE 7 AND NOTE 13). The classification of
the Note Payable to American  National Bank and the maturity  schedule  reflects
the terms of the new loan and security  agreement.  Certain  shareholders of the
Company have  guaranteed the amounts  outstanding  under American  National Bank
financing  arrangements  (SEE NOTE 7). The Company  issued  warrants to purchase
15,000,000 shares of common stock to these shareholders for signing the personal
guarantees.  The  warrants  were valued at $150,000,  have an exercise  price of
$0.01, vested immediately and have a life of five years.

On December 1, 2000,  the Company  entered into a bridge loan  agreement  with a
significant  shareholder.  The bridge  loan  allows the  Company to borrow up to
$1,000,000  and  bears  interest  at a  rate  of  16%  per  annum.  The  amounts
outstanding  on the bridge loan plus accrued  interest are due on or before July
1, 2001. In connection  with the bridge loan,  the Company  granted  warrants to
purchase  15,000,000 shares of common stock resulting in approximately  $150,000
of finance cost,  using the Black Scholes  method of valuation and the risk-free
rate,  dividend rate,  volatility and weighted average expected life information
discussed  in Note 9. The  warrants  have an exercise  price of $0.01 per share,
vested immediately and have a life of five years.

The Company also incurred other finance costs from related parties  amounting to
$80,000.  The  deferred  finance  costs  related  to the  bridge  loan have been
capitalized and are being  amortized on a  straight-line  basis over the life of
the loan. The total  amortization  recorded during 2000 was $38,333 and has been
reported as interest expense.

7.   REVOLVING LINE OF CREDIT

The Company has a $500,000 line of credit from American National Bank secured by
cash deposits,  accounts  receivable and other  business  assets.  The available
balance  under the line was $50,000 and  $125,000 at December 31, 2000 and 1999,
respectively.  Interest is payable  monthly at the bank's prime rate plus 1% per
annum  (10.5%  and 9.5% at  December  31,  2000  and  1999,  respectively).  The
outstanding principal and any accrued interest, as extended (SEE NOTE 6 AND 13),
are due April 28, 2002.  Interest paid for the years ended December 31, 2000 and
1999 was approximately $40,000 and $7,000, respectively.

                         F-14
<PAGE>


                          LearnCom, Inc. and Subsidiary
             Notes to Consolidated Financial Statements (continued)


8.   LEASES

The Company leases office space and office  equipment under operating leases due
to expire at dates varying from April 2001 to August 2004.  Rent expense totaled
approximately  $184,000  and  $41,000  during 2000 and 1999,  respectively.  The
following is a schedule of future  minimum  rental  payments  required under the
above operating leases as of December 31, 2000:


       YEAR ENDED DECEMBER 31                            AMOUNT
       ------------------------------------------------------------

       2001                                          $    169,000
       2002                                               113,000
       2003                                                99,000
       2004                                               100,000
                                                   ----------------
                                                     $    481,000
                                                   ================

9.   STOCK OPTION PLAN

Under the  Company's  stock option  plan,  shares of common stock have been made
available  to grant at the  discretion  of the Board of  Directors  to officers,
directors and key  employees in the form of stock  options,  stock  appreciation
rights and  restricted  stock  awards.  Currently  only stock  options have been
granted.  The options have a maximum  ten-year  term and  generally  vest over a
three-year period.

In connection with the reverse  acquisition  (SEE NOTE 5--REVERSE  ACQUISITION),
the options  outstanding  under the Company's  plan were assumed by the LearnCom
2000  Employee  Stock  Option Plan (the  "Option  Plan").  LearnCom has reserved
102,000,000 shares of common stock for issuance under the Option Plan.

                                      F-15
<PAGE>


                          LearnCom, Inc. and Subsidiary
             Notes to Consolidated Financial Statements (continued)


9.   STOCK OPTION PLAN (CONTINUED)

The number of options and  weighted-average  exercise  prices of options for the
periods indicated are as follows (adjusted for the effect of the 125 for 1 split
in May 2000 as part of the reverse acquisition):

                                                  NUMBER OF          EXERCISE
                                                   OPTIONS            PRICES
                                                 ---------------------------

     Options outstanding at January 1, 1999              --               --
     Granted                                     65,482,047           $0.007
     Exercised                                           --               --
     Cancelled                                           --               --
                                                 ---------------------------

     Options outstanding at December 31, 1999    65,482,047            0.007
     Granted                                     14,213,678            0.014
     Exercised                                           --               --
     Cancelled                                    9,913,912            0.008
                                                 ---------------------------
     Options outstanding at December 31, 2000    69,781,813            0.011

     Exercisable at December 31, 1999            19,236,310           $0.007
     Exercisable at December 31, 2000            38,926,910           $0.007

As of December 31, 2000 and 1999,  the weighted  average  remaining  contractual
life of the options is 7.49 and 7.85 years, respectively.  The fair value of all
options is $0.01.

The Company has  elected to follow APB 25 and its  related  interpretations  and
accordingly,  recognizes no  compensation  expense for stock options  granted at
fair value.  Management  believes  that the  alternative  fair value  accounting
provided  for  under  FASB  Statement  No.  123,   ACCOUNTING  FOR  STOCK  BASED
COMPENSATION  ("SFAS 123"),  requires use of option valuation  methods that were
not developed for use in valuing employee stock options.  Pro forma  information
regarding net income and earnings per share is required by SFAS 123 and has been
determined as if the Company had accounted for its employee  stock options under
the fair value method of that Statement.  For purposes of pro forma disclosures,
the  estimated  value of the options is  amortized  to expense over the options'
vesting  period.  The pro forma results are not  necessarily  indicative of what
would have  occurred had the Company  adopted SFAS 123. The  Company's pro forma
information  as of December  31, 2000 and 1999  indicates an increase in the net
loss of  approximately  $85,000 and $20,000,  and no change in basic and diluted
loss per share.

                                      F-16
<PAGE>


                          LearnCom, Inc. and Subsidiary
             Notes to Consolidated Financial Statements (continued)


9.   STOCK OPTION PLAN (CONTINUED)

The fair  value  of the  options  was  estimated  at the  date of grant  using a
Black-Scholes option-pricing model. The Company assumed a dividend yield rate of
0% and a  weighted-average  expected  life of the options of 3 years for options
granted in 1999 and 2000. The risk-free  interest  factor  utilized was 6.0% and
6.5%,  and the volatility  factor of the expected  market price of the Company's
stock was 1.22 and 1.15 for 2000 and 1999, respectively.

10.  INCOME TAXES

Deferred  income  taxes  reflect  the net tax  effect of  temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets are as follows:

                                               DECEMBER 31
                                            2000         1999
                                         ---------     --------

     Accrued expenses                    $  69,125     $ 63,500
     Fixed assets                          (40,745)          --
     Net operating loss carryforwards      457,275       30,700
     Valuation allowance                  (485,655)     (94,200)
                                         ---------     --------
     Net deferred taxes                  $      --     $     --
                                         =========     ========

As  of  December  31,  2000,   the  Company  had  Federal  net  operating   loss
carryforwards  of  approximately  $1,203,354,  which will expire in fiscal years
ending 2014 and 2020.

The  Company's  effective  tax rate  differs  from the  expected  benefit at the
federal statutory tax rate as follows:

                                                 DECEMBER 31
                                              2000        1999
                                              ----        ----

     Federal statutory tax rate                (34)%       (34)%
     State taxes, net of federal benefit        (4)         (4)
     Valuation allowance                        38          38
                                              ----        ----
     Net deferred taxes                          0%          0%
                                              ====        ====

                                      F-17
<PAGE>


                          LearnCom, Inc. and Subsidiary
             Notes to Consolidated Financial Statements (continued)


11.  COMMITMENTS AND CONTINGENCIES

The  Company  has an  irrevocable  standby  letter of credit  for  $50,000  from
American  National Bank as security for rental  payments on leased office space.
The letter of credit  expires  June 30,  2001 and is  secured by cash  deposits,
accounts  receivable  and other  business  assets.  As of December  31, 2000 the
balance was $0.

The Company is involved in various  disputes,  arising in the ordinary course of
its business,  which may result in pending or threatened litigation.  Management
does not expect these matters to have a material adverse effect on the Company's
financial position, results of operations or cash flows.

During  December  2000,  the Company  settled a dispute  with the producer and a
distributor of video and ancillary  material  products.  In connection  with the
settlement, the Company paid the producer and distributor $120,000 for the right
to sell the remaining  inventory  related to the producer for a term of not more
that one year. This payment has been  capitalized as prepaid  expenses and other
current assets and is being amortized on a straight-line  basis over the term of
the settlement agreement.

12.  RELATED PARTY TRANSACTIONS

The Company has engaged The Armand Group,  an  investment  banking firm of which
the Chairman of the Board of Directors of the Company is a Managing Director, to
provide banking  services and advice in connection  with proposed  acquisitions,
proposed  financings and other financial and strategic matters.  Under the terms
of the engagement,  The Armand Group is paid a monthly retainer,  reimbursed for
out-of-pocket  expenses and paid commissions in amounts agreed upon from time to
time for services  rendered in connection with specific  merger,  acquisition or
financing  transactions.  During the year ended  December 31, 2000 and 1999, the
cost of services  provided by The Armand  Group  totaled  $50,000 and  $152,000,
respectively.

The Company has engaged R. Redwitz & Co., an accounting and financial consulting
firm, of which the acting Chief Financial  Officer and a director of the Company
is the Managing Partner,  to provide certain accounting services to the Company.
Under the terms of the engagement, R. Redwitz & Co. is paid a retainer of $5,000
per  month,  is  paid  for  special  services  provided  and is  reimbursed  for
out-of-pocket  expenses.  During the year ended  December 31, 2000 and 1999, the
cost of services provided by R. Redwitz & Co. amounted to approximately $122,000
and $28,000, respectively.

                                      F-18
<PAGE>


                          LearnCom, Inc. and Subsidiary
             Notes to Consolidated Financial Statements (continued)


12.  RELATED PARTY TRANSACTIONS (CONTINUED)

The Company has obtained bridge financing from The Doerge Capital Collateralized
Bridge Fund,  L.P. One of the Company's  shareholders  is the general partner of
this fund.  In  conjunction  with the bridge loan  agreement,  the Company  paid
another Doerge  affiliated  fund $80,000 in fees and issued warrants to purchase
15,000,000  shares of common  stock with a value of  $150,000.  These costs have
been  capitalized as deferred  financing  costs and are being amortized over the
life of the bridge financing agreement (SEE NOTE 6).

13.  SUBSEQUENT EVENTS

During  January 2001, the Company  consummated a subscription  agreement for the
sale of common  stock in a private  placement  with  proceeds of  $125,000.  The
shares in this  transaction are not registered under the Securities Act of 1933,
as amended, or any state securities laws.

On January 24, 2001, the Company executed the acquisition of all the outstanding
stock of VideoLearning  Systems,  Inc. for $533,000 in cash,  26,666,000 million
shares of  unregistered  common  stock  with a value of  $400,000  and a $67,000
promissory noted to the previous owner.  VideoLearning  Systems is a distributor
of  training  resources  with over  30,000  customers  and  annual  revenues  of
approximately  $2,500,000.  The cash used for this acquisition was obtained from
the bridge loan from related party and a short-term line of credit from American
National Bank.

On March 16, 2001,  the Company  entered  into an agreement to purchase  certain
assets  of  Trainseek,  Inc.  for  $200,000  in cash and  57,500,000  shares  of
unregistered common stock with a value of $862,500.  In addition,  the agreement
has elements for an additional 42,500,000 shares of unregistered common stock to
be issued based upon certain performance goals attained by the Company using the
assets  purchased.  Trainseek,  Inc.  was an  on-line  distributor  of  training
resources operating under the "trainseek.com" web-site. The purchase is expected
to close by the end of the second  quarter  2001,  subject to the  completion of
satisfactory due diligence.

On April 9, 2001, the Company  entered into a Payoff and  Termination  Agreement
with BNA, whereby the purchase  consideration payable owed by the Company to BNA
(SEE NOTE 5) was reduced from  $1,123,000 to $125,000.  As of December 31, 2000,
the purchase price for this  acquisition was adjusted to reflect this agreement,
and the allocation of costs assigned to acquired  publishing  rights and masters
was  reduced.  The purchase  consideration  payable has been  classified  in the
financial  statements  based  on  the  new  terms  defined  in  the  Payoff  and
Termination Agreement.

                                      F-19
<PAGE>


                          LearnCom, Inc. and Subsidiary
             Notes to Consolidated Financial Statements (continued)


13.  SUBSEQUENT EVENTS (CONTINUED)

On April 30, 2001, the Company  entered into a loan and security  agreement with
American National Bank, whereby the maturity dates of the note payable ($857,500
outstanding  at December  31, 2000) and the  $500,000  revolving  line of credit
($450,000  outstanding  at December 31,  2000) were  extended to April 28, 2002.
Based  on the  new  agreement,  substantially  all of the  assets  of  LearnCom,
including BNA Communications,  Inc. and VideoLearning Systems, Inc., are pledged
to secure the borrowings owed to American  National Bank. In addition,  the line
of credit is subject to a borrowing base formula of eligible receivables and the
new agreement  provides,  among other things,  for the maintenance of collateral
and places limits on dividends,  capital  expenditures  and other  transactions.
Certain  shareholders  of the Company have  guaranteed  the amounts  outstanding
under American National Bank financing  arrangements (SEE NOTE 7). The financial
statements  and related  footnotes  reflect the new terms and provisions of this
loan and security agreement (SEE NOTE 6 AND NOTE 7).

                                      F-20