ARGOSY EDUCATION GROUP INC, S-1, 1998-09-11

ARGOSY EDUCATION GROUP INC
S-1, 1998-09-11

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 11, 1998

REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
ARGOSY EDUCATION GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
ILLINOIS 36-2855674 610000
(STATE OR OTHER (I.R.S. EMPLOYER (PRIMARY STANDARD
JURISDICTION OF IDENTIFICATION NO.) INDUSTRIAL
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
TWO FIRST NATIONAL PLAZA
20 SOUTH CLARK STREET, 3RD FLOOR
CHICAGO, ILLINOIS 60603
TELEPHONE: (312) 899-9900
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
MICHAEL C. MARKOVITZ
CHAIRMAN
TWO FIRST NATIONAL PLAZA
20 SOUTH CLARK STREET, 3RD FLOOR
CHICAGO, ILLINOIS 60603
TELEPHONE: (312) 899-9900
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
MARK B. TRESNOWSKI LAWRENCE D. LEVIN
GERALD T. NOWAK MARK D. WOOD
KIRKLAND & ELLIS KATTEN MUCHIN & ZAVIS
200 EAST RANDOLPH DRIVE 525 WEST MONROE STREET, SUITE 1600
CHICAGO, ILLINOIS 60601 CHICAGO, ILLINOIS 60661
TELEPHONE: (312) 861-2000 TELEPHONE: (312) 902-5200
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
MAXIMUM
TITLE OF EACH CLASS OF SECURITIES TO BE AGGREGATE AMOUNT OF
REGISTERED OFFERING PRICE(1) REGISTRATION FEE
- ------------------------------------------------------------------------------
<S> <C> <C>
Class A Common Stock, par value $0.01
per share............................. $34,500,000 $10,178
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</TABLE>
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o).
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED SEPTEMBER 11, 1998

PROSPECTUS

ARGOSY EDUCATION GROUP, INC.

CLASS A COMMON STOCK
--------
All of the shares of Class A Common Stock, par value $.01 per share ("Class A
Common Stock"), of Argosy Education Group, Inc. (the "Company") offered hereby
(the "Offering") are being offered by the Company.
Prior to the Offering there has been no public market for the Class A Common
Stock. It is currently estimated that the initial public offering price will be
between $ and $ per share. See "Underwriting" for information
relating to the factors to be considered in determining the initial public
offering price. Application will be made for inclusion of the Class A Common
Stock on the Nasdaq National Market under the symbol "ARGY."
Upon completion of the Offering, the Company will have shares of
Class A Common Stock and shares of Class B Common Stock, par value $.01
per share ("Class B Common Stock"), outstanding. The Company's Class A Common
Stock and Class B Common Stock (collectively, the "Common Stock") are
substantially identical except with respect to voting power and conversion
rights. The Class A Common Stock is entitled to one vote per share, and the
Class B Common Stock is entitled to ten votes per share. Immediately after the
Offering, Michael C. Markovitz, the Company's founder and Chairman, will own
100% of the Class B Common Stock (representing approximately % of the
aggregate voting power of the Common Stock, assuming no exercise of the
Underwriters' over-allotment option). Each share of Class B Common Stock
converts automatically into one share of Class A Common Stock upon sale or
other transfer to a party other than a Permitted Transferee (as defined
herein). See "Description of Capital Stock."

SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE CLASS A COMMON STOCK
OFFERED HEREBY.
--------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CON-
TRARY IS A CRIMINAL OFFENSE.
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- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS (1) COMPANY (2)
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share......................... $ $ $
Total (3)......................... $ $ $
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</TABLE>
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(1) For information regarding indemnification of the Underwriters, see
"Underwriting."
(2) Before deducting expenses of the Offering, estimated at $ , payable
by the Company.
(3) The Company's sole shareholder has granted the Underwriters a 30-day option
to purchase up to an aggregate of additional shares of Class A
Common Stock on the same terms and conditions as the securities offered
hereby solely to cover over-allotments, if any. See "Underwriting." If such
option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Selling Shareholder will be
$ , $ and $ , respectively. Proceeds to Company will not be
affected by exercise of the over-allotment option.
--------
The shares of Class A Common Stock are being offered by the several
Underwriters named herein, subject to prior sale, when, as and if accepted by
them and subject to certain conditions. It is expected that certificates for
the shares of Class A Common Stock offered hereby will be available for
delivery on or about , 1998 at the offices of Salomon Smith Barney Inc.,
333 West 34th Street, New York, New York 10001.
--------
SALOMON SMITH BARNEY ABN AMRO INCORPORATED
, 1998
<PAGE>

[Inside front cover art]

Pictures of the Company's facilities and students together with the following
text:

ARGOSY
EDUCATION
GROUP

Argosy Education Group is a leading provider of for-profit postgraduate
education with a primary focus on doctoral level programs. The Company's
mission is to provide academically-oriented, practitioner-focused education in
fields with numerous employment opportunities and strong student demand.

AMERICAN SCHOOLS OF
PROFESSIONAL PSYCHOLOGY

ASPP grants postgraduate level degrees in a variety of specialties within the
field of clinical psychology. The Company offers a doctorate in clinical
psychology, master's of arts degrees in clinical psychology and professional
counseling and a master's of science degree in health services administration.

UNIVERSITY OF SARASOTA

U of S grants postgraduate and bachelor's level degrees in education, business
and behavioral science. Certain of the programs consist of an innovative
combination of distance learning and personal interaction, allowing students
to complete a significant percentage of the preparatory work for each course
at home in advance of an intensive in-person instructional period, typically
scheduled during breaks in the academic year.

MEDICAL INSTITUTE OF MINNESOTA

MIM offers associate degrees in a variety of allied health care fields. MIM
offers programs leading to certification as a veterinary technician,
diagnostic medical sonographer, histotechnician, medical assistant, medical
laboratory technician or radiologic technologist.

PRIMETECH INSTITUTE

PrimeTech offers diploma programs in network engineering, internet
engineering, software programming and paralegal studies.

VENTURA GROUP

Ventura publishes materials and holds workshops in select cities across the
United States to prepare individuals to take various national and state
administered oral and written health care licensure examinations in the fields
of psychology, social work, counseling, marriage and family therapy, and
marriage, family and child counseling.

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE CLASS A COMMON
STOCK, INCLUDING BY OVER-ALLOTMENT, ENTERING STABILIZING BIDS, EFFECTING
SYNDICATE COVERING TRANSACTIONS AND IMPOSING PENALTY BIDS. FOR A DESCRIPTION
OF THESE ACTIVITIES, SEE "UNDERWRITING."

2
<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements,
including the notes thereto, appearing elsewhere in this Prospectus.
Prospective investors should consider carefully, among other things, the
information set forth under "Risk Factors" in this Prospectus. Unless otherwise
noted or where the context otherwise requires, all information herein (i) gives
effect to the conversion of all currently outstanding shares of common stock
into shares of Class B Common Stock, the authorization of the Class A Common
Stock and a -for-one stock split to be effected immediately prior to such
conversion (collectively, the "Stock Conversion") and (ii) does not give effect
to the exercise of the Underwriters'over-allotment option. As used in this
Prospectus, unless the context indicates otherwise, the term "Company" refers
to Argosy Education Group, Inc. and its subsidiaries, including all of their
schools and campuses; the term "school" means a campus or group of campuses
known by a single name (such as the American Schools of Professional Psychology
or the University of Sarasota); the term "campus" means a single location of
any school (such as the Rolling Meadows campus of the Illinois School of
Professional Psychology); and the term "institution" means a main campus and
its additional locations, as such are defined under regulations of the United
States Department of Education ("DOE"). References to fiscal years refer to the
Company's fiscal years ended September 30, 1993 and 1994, eleven months ended
August 31, 1995 and fiscal years ended August 31, 1996, 1997 and 1998. Data
with respect to the Company set forth herein (other than historical financial
data, as well as other data included in the selected Summary Consolidated
Financial and Other Data and Selected Historical Consolidated Financial and
Other Data) give effect to the Company's acquisition of PrimeTech Institute,
which will be completed concurrent with the Offering.

THE COMPANY

The Company is a leading provider of for-profit postgraduate education with a
primary focus on doctoral level programs. The Company's mission is to provide
academically-oriented, practitioner-focused education in fields with numerous
employment opportunities and strong student demand. The Company's schools offer
programs in clinical psychology, education, business, allied health professions
and information technology and are approved and accredited to offer doctoral,
master's, bachelor's and associate degrees as well as to award diplomas. At May
31, 1998, approximately 62% of the Company's students were enrolled in doctoral
programs. In 1997, the Company graduated approximately 335 clinical psychology
doctoral students out of approximately 4,000 clinical psychology doctoral
degrees conferred nationwide. The Company operates 12 campuses in seven states
and the Province of Ontario, Canada, with a total of approximately 4,600
students, representing 47 states and 30 foreign countries, enrolled as of May
31, 1998. The Company's net revenue has grown from $8.1 million in fiscal 1993
to $20.5 million in fiscal 1997, representing a compound annual growth rate of
approximately 26%.

The Company was founded in 1975, when the Company's Chairman, Michael C.
Markovitz, Ph.D., recognized a demand for a non-research oriented professional
school that would educate and prepare students for careers as clinical
psychology practitioners. To address this demand, the Company started the
Illinois School of Professional Psychology in Chicago, Illinois in 1976 and, in
its first year of operations, received several thousand applications for
admission to a class of 70 students for the doctorate in clinical psychology
("PsyD") degree. The continuing demand for high quality, practitioner-focused
psychology postgraduate education led the Company to expand the renamed
American Schools of Professional Psychology ("ASPP") to seven campuses located
across the United States. In response to a broader demand for quality career
education, the Company has expanded beyond the psychology curriculum with the
acquisitions of: (i) the University of Sarasota ("U of S"), a degree-granting
institution focusing primarily on postgraduate business and education (March
1992); (ii) the Medical Institute of Minnesota ("MIM"), a degree-granting
institution focusing on a variety of allied health professions (February 1998);
and (iii) PrimeTech Institute ("PrimeTech"), an institution granting diplomas
in computer programming and other aspects of information technology and in
paralegal studies (to be completed

3
<PAGE>

concurrent with the Offering). In addition, the Company became the largest
provider of postgraduate psychology license examination preparation courses and
materials in the United States by its acquisition of the Ventura test
preparation business ("Ventura") in August 1997. Through Ventura, the Company
also provides professional licensure examination materials and workshops for
social work; marriage, family and child counseling; marriage and family
therapy; and counseling certification examinations nationwide.

The Company operates the following schools:

. American Schools of Professional Psychology grants doctoral and master's
degrees in clinical psychology and related disciplines at seven campuses
located in Illinois (2), Minnesota, Georgia, Virginia, Hawaii and
Arizona, and is preparing to operate campuses in Florida and California
pending regulatory approval. ASPP is accredited by the North Central
Association of Colleges and Schools ("NCA"), and three of its campuses
are accredited by the American Psychological Association ("APA"). ASPP's
net tuition revenue has grown from $7.1 million for fiscal 1993 to $15.8
million for fiscal 1997, representing a compound annual growth rate of
approximately 22%.

. University of Sarasota grants doctoral, master's and bachelor's degrees
at two campuses located in Sarasota and Tampa, Florida, and is preparing
to operate a campus in Southern California pending regulatory approval. U
of S is accredited by the Southern Association of Colleges and Schools
("SACS"). U of S's net tuition revenue has grown from $1.1 million for
fiscal 1993 to $4.2 million for fiscal 1997, representing a compound
annual growth rate of approximately 39%.

. Medical Institute of Minnesota grants associate degrees at one campus in
Minneapolis, Minnesota. MIM is institutionally accredited by the
Accrediting Bureau of Health Education Schools ("ABHES"), and
additionally holds individual programmatic accreditation appropriate to
each degree program offered. MIM's net tuition revenue was $1.5 million
for the four-month period from February 3, 1998 (the date of acquisition)
to May 31, 1998.

. PrimeTech Institute awards diplomas at two campuses in Ontario, Canada,
and is preparing to operate a campus in Scarborough, Ontario pending
regulatory approval. PrimeTech's net tuition revenue was $1.5 million for
the nine month period from September 1, 1997 to May 31, 1998. Dr.
Markovitz initially acquired a one-third interest in PrimeTech in
November 1995 and, together with the other owners, will be selling his
interest to the Company in connection with the Offering.

In addition, Ventura publishes materials and holds workshops in select cities
across the United States to prepare individuals to take various national and
state administered oral and written health care licensure examinations in
psychology and other mental health disciplines. Ventura's net revenue was $2.8
million for the nine month period from August 26, 1997 (the date of
acquisition) to May 31, 1998.

BUSINESS STRATEGY

The Company's mission is to provide academically-oriented, practitioner-
focused education in fields with numerous employment opportunities and strong
student demand. The key elements of the Company's business strategy are as
follows:

4
<PAGE>

The Company's academic programs are designed to prepare students to work in
their chosen professions immediately upon graduation. This practitioner-focused
approach provides the additional benefits of attracting highly motivated
students and increasing student retention and graduate employment.

Emphasizing School Management Autonomy and Accountability. The Company
operates with a decentralized management structure in which local campus
management is empowered to make most of the day-to-day operating decisions at
each campus and is primarily responsible for the profitability and growth of
that campus. At the same time, the Company provides each of its schools with
certain services that it believes can be performed most efficiently and cost-
effectively by a centralized office. Such services include marketing,
accounting, information systems, financial aid processing and administration of
regulatory compliance. The Company believes this combination of decentralized
management and certain centralized services significantly increases its
operational efficiency.

GROWTH STRATEGY

The Company's objective is to achieve growth in revenue and profits while
consistently maintaining the integrity and quality of its academic programs.
The key elements of the Company's growth strategy are as follows:

Expanding Program Offerings. The Company continually engages in the
development of new and the expansion of existing curricular offerings at the
doctoral, master's, bachelor's, associate and diploma levels. Of the 17 degree-
granting programs currently offered by the Company, five have been introduced
since 1995. For example, in 1995 the Company introduced its doctorate in
business administration ("DBA") program to provide students with advanced level
business training and in 1997 the Company initiated its master's of science in
health services administration ("MSHSA") program to provide students with
training and problem solving skills from the areas of both business and social
sciences. Once new programs have proven successful at one school, the Company
seeks to expand them to its other schools which offer related programs.

Emphasizing Student Recruitment and Retention. The Company believes that it
can increase total enrollment at its campuses through the implementation of an
integrated marketing program that utilizes direct response and direct sales to
college and high school counselors. The Company is in the process of hiring a
marketing professional at each of its campuses to focus both the marketing
campaign and overall recruitment effort of each campus within its targeted
market. The Company also believes it can increase its profitability through
improvements in student retention rates, as the cost of efforts to keep current
students in school are less than the expense of attracting new students.

5
<PAGE>

Acquisitions. The Company intends to capitalize on the fragmentation in both
the for-profit and not-for-profit segments of the postgraduate education
industry by acquiring and consolidating attractive schools and educational
programs. The Company has acquired six of its 12 campuses, three of which were
for-profit and three of which were not-for-profit, and the Ventura test
preparation business. The Company believes there are significant opportunities
to acquire schools which can serve as platforms for program and campus
expansion. Prime acquisition candidates are those that have the potential to be
quickly developed into profitable, accredited, degree-granting schools offering
programs consistent with the Company's mission.

THE OFFERING

<TABLE>
<S> <C>
Class A Common Stock offered by
the Company...................... shares
Common Stock to be outstanding
after the Offering:
Class A Common Stock............ shares (1)
Class B Common Stock............ shares
Total......................... shares
Use of Proceeds by the Company.... Repayment of certain indebtedness of the
Company, including notes payable to the
Company's sole shareholder, and for general
corporate purposes. See "Use of Proceeds."
Proposed Nasdaq National Market
symbol........................... "ARGY"
</TABLE>
- --------
(1) Excludes an aggregate of shares which, prior to the consummation of
the Offering, will be reserved for issuance under the Company's 1998 Stock
Plan and Employee Stock Purchase Plan (each as defined below and
collectively, the "Stock Plans"). See "Management--Stock Plans."

6
<PAGE>

SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA

The following table sets forth certain consolidated financial and other
operating data for the Company. This information should be read in conjunction
with the consolidated financial statements and notes thereto appearing
elsewhere in this Prospectus. See "Unaudited Pro Forma Condensed Consolidated
Financial Data" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

<TABLE>
<CAPTION>
ELEVEN YEAR ENDED NINE MONTHS
MONTHS AUGUST 31, PRO ENDED MAY 31, PRO
ENDED ---------------- FORMA ---------------- FORMA
AS AS
AUGUST 31, ADJUSTED ADJUSTED
1995 (1) 1996 1997 1997 (2) 1997 1998 1998 (3)
---------- ------- ------- -------- ------- ------- --------
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net revenue............. $14,041 $17,840 $20,460 $16,565 $22,742
Operating expenses:
Cost of education...... 7,251 9,370 10,661 7,815 10,692
Selling expenses....... 325 263 516 318 690
General and
administrative
expenses.............. 3,763 5,174 5,432 3,952 6,291
Related party expense
(4)................... 1,244 1,710 993 898 1,807
------- ------- ------- --- ------- ------- ---
Total operating
expenses............ 12,583 16,517 17,602 12,983 19,480
------- ------- ------- --- ------- -------
Income from operations.. 1,458 1,323 2,858 3,582 3,262
Interest income
(expense), net......... 122 249 390 294 (127)
Other income (expense),
net.................... -- 21 (48) (10) (12)
------- ------- ------- --- ------- -------
Income before provision
for income taxes (5)... 1,580 1,593 3,200 3,866 3,123
Provision for income
taxes (5).............. 30 30 37 70 53
------- ------- ------- --- ------- ------- ---
Net income.............. $ 1,550 $ 1,563 $ 3,163 $ 3,796 $ 3,070
======= ======= ======= === ======= ======= ===
Income before provision
for income taxes as
reported (5)........... $ 1,580 $ 1,593 $ 3,200 $ 3,866 $ 3,123
Pro forma provision for
income taxes (5)....... 632 637 1,280 1,546 1,249
------- ------- ------- --- ------- ------- ---
Pro forma net income
(5).................... $ 948 $ 956 $ 1,920 $ 2,320 $ 1,874
======= ======= ======= === ======= ======= ===
Basic and diluted
earnings per share
(5)(6)(7):
Historical............. $ 930 $ 938 $ 1,899 $ 2,279 $ 1,843
Pro forma.............. $ 569 $ 574 $ 1,152 $ 1,393 $ 1,125
Weighted average common
shares outstanding--
basic and diluted
(6)(7)................. 1,666 1,666 1,666 1,666 1,666
OTHER DATA:
EBITDA (8).............. $ 1,748 $ 1,722 $ 3,296 $ 3,906 $ 3,921
EBITDA margin (8)....... 12.4% 9.7% 16.1% 23.6% 17.2%
Student population (9).. 2,644 2,858 3,253 3,188 3,963
Number of campuses (10). 7 8 8 8 10
</TABLE>

<TABLE>
<CAPTION>
AS OF MAY 31, 1998
----------------------------
PRO FORMA
PRO FORMA AS ADJUSTED
ACTUAL (11) (11)(12)
------ --------- -----------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents
and short-term
investments............ $7,356 $7,499
Working capital......... 340 (6,495)
Total assets............ 20,748 23,050
Long-term debt
(excluding current
maturities)............ 5,331 5,760
Shareholders' equity
(deficit).............. 6,237 (220)
</TABLE>

7
<PAGE>

- --------
(1) Prior to fiscal 1995, the Company's fiscal year end was September 30.
During fiscal 1995, the Company changed its year end to August 31. Fiscal
1995 represents the Company's results of operations for the eleven months
ended August 31, 1995. All fiscal years subsequent to 1995 represent the
twelve months ended August 31 of the year indicated.
(2) Gives effect to (i) the acquisitions of Ventura, MIM, PrimeTech and MCM
University Plaza, Inc., a company whose sole shareholder is Dr. Markovitz
and which owns the real estate leased by U of S ("MCM Plaza"), and (ii)
the Offering and the application of the net proceeds therefrom as
described under "Use of Proceeds," as if such transactions had occurred on
September 1, 1996. See "Unaudited Pro Forma Condensed Consolidated
Financial Data."
(3) Gives effect to (i) the acquisitions of Ventura, MIM and PrimeTech and
(ii) the Offering and the application of the net proceeds therefrom as
described under "Use of Proceeds," as if such transactions had occurred on
September 1, 1997. See "Unaudited Pro Forma Condensed Consolidated
Financial Data."
(4) Represents amounts paid to MCM Management Corporation ("Management
Corp."), an affiliate of Michael C. Markovitz, for services rendered by
Dr. Markovitz during the period presented. The Company will not incur such
expenses in future periods; however, Dr. Markovitz will receive
compensation from the Company as Chairman, including an initial annual
base salary of $200,000.
(5) Prior to the Offering, the Company was an S corporation and not subject to
federal (and certain state) corporate income taxes. The statement of
operations data reflects a pro forma provision for income taxes as if the
Company were subject to federal and state corporate income taxes for all
periods. The pro forma provision for income taxes represents a combined
effective federal and state tax rate of 40%. See "The Company" and Notes 5
and 12 to the Company's consolidated financial statements.
(6) Weighted average common shares outstanding used in computing historical
and pro forma basic and diluted earnings per share consists of only actual
common shares outstanding, as the Company has no common stock equivalents.
(7) Pro forma as adjusted weighted average common shares outstanding for the
year ended August 31, 1997 and nine months ended May 31, 1998 reflects the
issuance in the Offering of and shares, respectively,
attributable to distributions paid in excess of earnings and the repayment
of indebtedness as described in "Use of Proceeds," as if the Offering had
occurred at the beginning of each period presented.
(8) "EBITDA" equals income from operations plus depreciation and amortization.
EBITDA margin is EBITDA as a percentage of net revenue. EBITDA and EBITDA
margin do not represent, and should not be considered as an alternative
to, net income or cash flow from operations as determined by generally
accepted accounting principles, and the Company's calculation thereof may
not be comparable to that reported by other companies.
(9) Reflects actual student population as of the end of the period indicated,
not including participants in Ventura test preparation programs.
(10) Reflects the total number of campuses operated by the Company as of the
end of the period indicated.
(11) Gives effect to (i) the acquisitions of PrimeTech and MCM Plaza, (ii) the
conversion of the Company from an S corporation to a C corporation and
(iii) the payment of the Distribution (as defined), which would have been
approximately $6.3 million, as if such transactions had occurred on May
31, 1998.
(12) As adjusted for the Offering and the application of the net proceeds
therefrom as described under "Use of Proceeds," as if such transactions
had occurred on May 31, 1998.

8
<PAGE>

RISK FACTORS

In addition to the other information contained in this Prospectus, the
following risk factors should be considered carefully in evaluating the
Company and its business before purchasing any shares of Class A Common Stock
offered hereby. This Prospectus contains certain forward-looking statements
that are based on the beliefs of, as well as assumptions made by and
information currently available to, the Company's management. The words
"believe," "anticipate," "intend," "estimate," "expect" and similar
expressions are intended to identify such forward-looking statements, but are
not the exclusive means of identifying such statements. Such statements
reflect the current views of the Company or its management and are subject to
certain risks, uncertainties and assumptions, including, but not limited to,
those set forth in the following risk factors. Should one or more of these
risks or uncertainties materialize, or should underlying assumptions prove
incorrect, the Company's actual results, performance or achievements in 1998
and beyond could differ materially from those expressed in, or implied by,
such forward-looking statements. The Company undertakes no obligation to
release publicly any revisions to any such forward-looking statements that may
reflect events or circumstances after the date of this Prospectus.

SUBSTANTIAL DEPENDENCE ON STUDENT FINANCIAL AID; POTENTIAL ADVERSE EFFECTS OF
REGULATION

Students attending the Company's schools finance their education through a
combination of individual resources (including earnings from full or part-time
employment), government-sponsored financial aid and other sources, including
family contributions and scholarships provided by the Company. The Company
estimates that over 51% of the students at its U.S. schools receive some
government-sponsored (federal or state) financial aid. For the 1996-97 award
year (July 1, 1996 to June 30, 1997), approximately 42% of the Company's net
U.S. tuition revenue (on a cash basis) was derived from some form of such
government-sponsored financial aid received by the students enrolled in its
schools. In addition, a substantial majority of the students attending
PrimeTech receive Canadian government-sponsored financial aid. A reduction in
U.S. or Canadian government funding levels could lead to lower enrollments at
the Company's schools and require the Company to seek alternative sources of
financial aid for its students. If student enrollments are lowered or such
alternative sources cannot be arranged, the Company's business, results of
operations and financial condition would be materially and adversely affected.

Potential Adverse Effects of Failure to Comply with U.S. Financial Aid
Requirements

The Company and its U.S. schools are subject to extensive regulation by
federal and state governmental agencies and accrediting bodies. In particular,
the Higher Education Act of 1965, as amended (the "HEA"), and the regulations
promulgated thereunder by the DOE subject the Company's U.S. schools to
significant regulatory scrutiny on the basis of numerous standards that
schools must satisfy in order to participate in the various federal student
financial assistance programs under Title IV of the HEA (the "Title IV
Programs"). Among other things, the standards under the HEA and its
implementing regulations with which the Company's U.S. institutions must
comply: (i) require each institution to maintain a rate of default by its
students on federally guaranteed or funded student loans that is below a
specified rate, (ii) limit the proportion of an institution's net revenues
that may be derived from the Title IV Programs, (iii) establish certain
financial responsibility and administrative capability standards, (iv) provide
that an institution or its parent corporation which engage in certain types of
transactions that would result in a change in ownership and control of that
institution or corporation must reestablish the institution's eligibility for
Title IV Program funds, (v) prohibit the payment of certain incentives to
personnel engaged in student recruiting and admissions activities related to
educational programs eligible for Title IV Program funds and (vi) require
certain short-term educational programs to achieve stringent completion and
placement outcomes in order to be eligible for Title IV Program funds. Under
the HEA and its implementing regulations, certain of these standards must be
complied with on an institutional basis. For purposes of these standards, the
regulations define an institution as a main campus and its additional
locations, if any. Under this definition, each of the Company's U.S. campuses
is a separate institution.

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The Company is required to engage an independent auditor to conduct a
compliance review of each U.S. institution's Title IV Program operations and
to submit the results of such audits to the DOE on an annual basis. The
Company has complied with its obligations in this regard on a timely basis.
Based upon the most recent annual compliance audits of the Company's U.S.
institutions and upon other reviews and audits by independent and governmental
entities relating to compliance with the requirements established by the HEA
and the regulations thereunder, the Company's institutions have been found to
be in substantial compliance with the requirements for participating in the
Title IV Programs, and the Company believes that its institutions continue to
be in substantial compliance with those requirements.

Under the rule limiting the amount of net revenues that may be derived from
the Title IV Programs, commonly referred to as the "85/15 Rule," an
institution would be disqualified from participation in those programs if more
than 85% of its net revenues (on a cash basis) in any fiscal year was derived
from the Title IV Programs. The Company has calculated that, since this
requirement took effect in 1995, none of the Company's U.S. institutions
derived more than 75% of its net revenue (on a cash basis) from the Title IV
Programs for any fiscal year, and that for fiscal 1997 the range for the
Company's U.S. institutions was from approximately 41% to approximately 52%.

The HEA also mandates specific regulatory responsibilities for each of the
following components of the higher education regulatory triad: (i) the federal
government through the DOE; (ii) the non-governmental accrediting agencies
recognized by the DOE; and (iii) state postsecondary education regulatory
bodies. As in the case of the HEA and its implementing regulations, the
regulations, standards and policies of the accrediting agencies and state
education regulatory bodies frequently change, and changes in, or new
interpretations of, applicable laws, regulations, standards or policies could
have a material adverse effect on the schools' accreditation, authorization to
operate in various states, permissible activities, receipt of funds under the
Title IV Programs or costs of doing business. The Company's failure to
maintain or renew any required regulatory approvals, accreditations or
authorizations would have a material adverse effect on the Company's business,
results of operations and financial condition. See "Financial Aid and
Regulation--Federal Oversight of the Title IV Programs--Increased Regulatory
Scrutiny."

In the event of a failure of the Company to comply with applicable Title IV
Program requirements, the affected institution could be required to repay
improperly disbursed Title IV Program funds and could be assessed an
administrative fine of up to $25,000 per violation of Title IV Program
requirements. In addition, the DOE could transfer that institution from the
"advance" system of payment of Title IV Program funds, under which an
institution requests and receives funding from the DOE in advance based on
anticipated needs, to the "reimbursement" or cash monitoring system of
payment, under which an institution must disburse funds to students and
document their eligibility for Title IV Program funds before receiving funds
from the DOE or from Federal Family Education Loan ("FFEL") program lenders.
Violations of Title IV Program requirements could also subject an institution
or the Company to sanctions under the False Claims Act as well as other civil
and criminal penalties. The failure by any of the Company's institutions to
comply with applicable federal, state or accrediting agency requirements could
result in the limitation, suspension or termination of that institution's
ability to participate in the Title IV Programs or the loss of state licensure
or accreditation. Any such event could have a material adverse effect on the
Company's business, results of operations or financial condition. There are no
proceedings for any such purposes pending against any of the Company's
institutions, and the Company has no reason to believe that any such
proceeding is contemplated. See "Financial Aid and Regulation--Federal
Oversight of the Title IV Programs."

Risk That Legislative Action Will Reduce Financial Aid Funding or Increase
Regulatory Burden

The Title IV Programs are subject to significant political and budgetary
pressures. The process of reauthorizing the HEA by the U.S. Congress, which
takes place approximately every five years, has begun and is expected to be
completed in late 1998. It is not possible to predict the outcome of the
reauthorization process. Although there is no present indication that the
Congress will decline to reauthorize the Title IV Programs, there

10
<PAGE>

can be no assurance that government funding for the Title IV Programs will
continue to be available or maintained at current levels. A reduction in
government funding levels could lead to lower enrollments at the Company's
schools and require the Company to seek alternative sources of financial aid
for students enrolled in its schools. Given the significant percentage of the
Company's net revenue that is indirectly derived from the Title IV Programs,
the loss of or a significant reduction in Title IV Program funds available to
students at the Company's schools would have a material adverse effect on the
Company's business, results of operations and financial condition.

In addition, there can be no assurance that current requirements for student
and institutional participation in the Title IV Programs will not change or
that one or more of the present Title IV Programs will not be replaced by
other programs with materially different student or institutional eligibility
requirements. Numerous changes to the HEA have been proposed by the DOE and
other parties. Thus, the reauthorization process could result in revisions to
the HEA that increase the compliance burden on the Company's institutions. If
the Company cannot comply with the provisions of the HEA, as revised during
the reauthorization process, or if the cost of such compliance is excessive,
the Company's business, results of operations and financial condition would be
materially adversely affected. The DOE has also circulated proposals that
would affect guaranty agencies and lenders and could impact the access of the
Company's institutions and their students to FFEL program loans. See
"Financial Aid and Regulation--Nature of Federal Support for Postsecondary
Education in the U.S." There can be no assurance that any legislation will not
include statutory language that is different from, or in addition to, that
which is currently being proposed by the DOE or that in the future there will
not be enacted other different legislation amending the HEA or otherwise
impacting institutions, guaranty agencies or lenders.

POTENTIAL LOSS OF STUDENT FINANCIAL AID IN THE EVENT OF FAILURE TO MEET
FINANCIAL RESPONSIBILITY STANDARDS

The HEA and its implementing regulations establish specific standards of
financial responsibility that must be satisfied in order to qualify for
participation in the Title IV Programs. Under standards effective prior to
July 1, 1998, and which may continue to be applied to demonstrate financial
responsibility for an institution's fiscal year beginning on or after July 1,
1997 and on or before June 30, 1998, an institution must: (i) have an acid
test ratio (defined as the ratio of cash, cash equivalents and current
accounts receivable to current liabilities) of at least 1:1 at the end of each
fiscal year, (ii) have a positive tangible net worth at the end of each fiscal
year and (iii) not have a cumulative net operating loss during its two most
recent fiscal years that results in a decline of more than 10% of the
institution's tangible net worth at the beginning of that two-year period. In
order to make this determination, the DOE requires an institution to submit
annual audited financial statements prepared on an accrual basis. As of May
31, 1998, the Company was in full compliance with current HEA financial
responsibility standards.

In November 1997, the DOE issued new regulations, which took effect July 1,
1998 and revised the DOE's standards of financial responsibility. These new
standards replace the numeric tests described above with three different
ratios: an equity ratio, a primary reserve ratio and a net income ratio, which
are weighted and added together to produce a composite score for the
institution. Institutions such as the Company may demonstrate financial
responsibility by meeting the new standards or the old standards for fiscal
years that began on or after July 1, 1997 but on or before June 30, 1998. The
Company applied these new regulations to the Company's audited financial
statements as of May 31, 1998 and has determined that it satisfied the new
standards as of that date. See "Financial Aid and Regulation--Federal
Oversight of the Title IV Programs."

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<PAGE>

system of payment for its Title IV Program funds. The DOE has interpreted this
surety condition to require the posting of an irrevocable letter of credit in
favor of the DOE. Under a separate standard of financial responsibility, if an
institution has made late Title IV Program refunds to students in its prior
two years, the institution is required to post a letter of credit in favor of
the DOE in an amount equal to 25% of total Title IV Program refunds paid by
the institution in its prior fiscal year. None of the Company's institutions
has made late Title IV Program refunds requiring it to post a letter of credit
in favor of the DOE.

POTENTIAL LOSS OF STUDENT FINANCIAL AID IN THE EVENT OF HIGH STUDENT LOAN
DEFAULT RATES

The Company is substantially dependent on continued participation by its
institutions in the student loan programs included in the Title IV Programs.
For the 1996-97 award year (July 1, 1996 to June 30, 1997), federally
guaranteed or funded student loans represented approximately 42% of the
Company's net U.S. tuition revenue (on a cash basis). Under the HEA, an
institution could lose its eligibility to participate in some or all of the
Title IV Programs if the rate of defaults of its students on their FFEL loans
(referred to as the "cohort default rate") exceeds specified rates for
specified periods of time. An institution's annual cohort default rate on FFEL
loans, including a "weighted average" cohort default rate for institutions
that participate in this loan program, is calculated as the rate at which
borrowers scheduled to begin repayment on such loans in one year default on
those loans by the end of the following year. If an institution's cohort
default rate is 25% or greater in any one of the three most recent federal
fiscal years, the DOE may determine that the institution lacks administrative
capability and may place that institution on "provisional certification"
status for up to four years. Provisional certification does not limit an
institution's access to Title IV Program funds, but does subject that
institution to closer review by the DOE and possible summary adverse action if
that institution commits violations of Title IV Program requirements. If an
institution has cohort default rates of 25% or greater for three consecutive
federal fiscal years, that institution will no longer be eligible to
participate in the FFEL programs for the remainder of the federal fiscal year
in which the determination of ineligibility is made and for the two subsequent
federal fiscal years. An institution whose cohort default rate for any federal
fiscal year exceeds 40% may have its eligibility to participate in all of the
Title IV Programs limited, suspended or terminated. In addition, if an
institution's cohort default rate for loans under the Federal Perkins Loan
("Perkins") program exceeds 15% for any federal award year, the DOE may
determine that the institution lacks administrative capability and place the
institution on provisional certification status for up to three years. None of
the Company's institutions has published FFEL or Perkins cohort default rates
of 15% or greater for any of the past three federal fiscal years. In 1995, the
range of FFEL cohort default rates of the Company's institutions was from 2.2%
to 10.9%. The range of preliminary FFEL cohort default rates of the Company's
institutions for fiscal 1996 was from zero to 7.4%. See "Financial Aid and
Regulation--Federal Oversight of the Title IV Programs--Cohort Default Rates."

POTENTIAL ADVERSE CONSEQUENCES IN THE EVENT OF A FAILURE TO MAINTAIN
ACCREDITATIONS

The Company believes that the accreditation of its institutions is a
significant factor in its students' decisions to attend, and in its faculty
members' decisions to teach at, the Company's schools. Any failure to maintain
accreditation could have a material adverse effect on the Company's ability to
attract and retain qualified students and faculty. In addition, in order to
participate in the Title IV Programs, an institution must be accredited by an
accrediting agency recognized by the DOE. Accreditation is a non-governmental
process through which an institution submits to qualitative review by an
organization of peer institutions, based on the standards of the accrediting
agency and the stated aims and purposes of the institution. Certain states
also require institutions to maintain accreditation as a condition of
continued authorization to grant degrees. In addition, certain states require
various health professionals, including clinical psychologists, to have
graduated from a school with professional accreditation in order to qualify
for a license to practice in such state. Each of the Company's U.S.
institutions is accredited by an accrediting agency recognized by the DOE and
certain of the campuses maintain programmatic accreditation from the
applicable professional organization, such as the American Psychological
Association. The HEA requires accrediting agencies recognized by the DOE to
review and monitor many aspects of an institution's operations and to take
appropriate action when the institution fails to comply with the accrediting
agency's standards. Any failure of the Company's institutions to maintain
their accreditations would

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<PAGE>

have a material adverse effect on the Company's business, results of
operations and financial condition. See "Financial Aid and Regulation--
Accreditation."

POTENTIAL ADVERSE CONSEQUENCES IN THE EVENT OF A FAILURE TO MAINTAIN STATE
LICENSES OR AUTHORIZATIONS

In order to operate and award degrees and diplomas, and to participate in
the Title IV Programs, a campus must be licensed or authorized to offer its
programs of instruction by the relevant agencies of the state in which such
campus is located. Each state has its own standards and requirements for
licensure or authorization, which vary substantially among the states.
Typically, state laws require that a campus demonstrate that it has the
personnel, resources and facilities appropriate to its instructional programs.
Each of the Company's U.S. campuses is licensed or authorized by the relevant
agencies of the state in which such campus is located. Additionally, if any of
the Company's campuses were to lose its state license or authorization, such
campus would not only lose its eligibility to participate in the Title IV
Programs, but would be required to discontinue operations. The loss by any of
the Company's institutions of their state licenses or authorizations would
have a material adverse effect on the Company's business, results of
operations and financial condition. See "Financial Aid and Regulation--State
Authorization."

POTENTIAL ADVERSE REGULATORY CONSEQUENCES IN THE EVENT OF A CHANGE OF
OWNERSHIP OR CONTROL

When an institution undergoes a "change of ownership" that results in a
"change of control," as defined in the HEA and applicable regulations, that
institution becomes ineligible to participate in the Title IV Programs and may
receive and disburse only certain previously committed Title IV Program funds
to its students until it has applied for and received recertification from the
DOE. This standard applies both to the Company and to any institution acquired
by the Company. Approval of an application for recertification must be based
upon a determination by the DOE that the institution under its new ownership
is in compliance with the requirements of institutional eligibility. The time
required to act on such an application can vary substantially and may take
several months. If an institution is recertified following a change of
ownership, it will be on a provisional basis. Provisional certification does
not limit an institution's access to Title IV Program funds, but does subject
that institution to closer review by the DOE and possible summary adverse
action if that institution commits violations of Title IV Program
requirements.

Under the HEA and its implementing regulations, a "change of ownership"
resulting in a "change in control" would occur upon the transfer of a
controlling interest in the voting stock of an institution or such
institution's parent corporation. With respect to a publicly-traded
corporation, which the Company will be following consummation of the Offering,
a change of ownership resulting in a change in control occurs when there is an
event that would obligate that corporation to file a Current Report on Form 8-
K with the Securities and Exchange Commission (the "Commission") disclosing a
change of control. A change of ownership and control also could require an
institution to reaffirm its state authorization and accreditation. The
requirements of states and accrediting agencies with jurisdiction over the
Company's schools vary widely in this regard. See "Financial Aid and
Regulation--Federal Oversight of the Title IV Programs--Restrictions on
Acquiring or Opening Additional Schools and Adding Educational Programs."

The Company believes that the Offering will not constitute a change of
ownership resulting in a change in control under the HEA or DOE regulations.
However, if the Offering were determined to constitute a change of ownership
resulting in a change in control under state and/or accrediting agency
standards, the Company would be required to reestablish the state
authorization and accreditation of each of the affected U.S. campuses. Based
upon its review of applicable state and accrediting agency standards, the
Company does not believe that the Offering will constitute a change of
ownership resulting in a change of control for state authorization or
accreditation purposes.

Once the Company is deemed to be publicly traded, the potential adverse
implications of a change of ownership resulting in a change in control could
influence future decisions by the Company and its shareholders regarding the
sale, purchase, transfer, issuance or redemption of the Company's capital
stock. Under certain

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<PAGE>

circumstances, a sale or transfer by Michael C. Markovitz of a substantial
amount of Class B Common Stock (which would convert upon such sale or transfer
to Class A Common Stock) could constitute a change in ownership resulting in a
change of control. See "--Voting Control by Principal Shareholder."

DEPENDENCE ON CANADIAN FINANCIAL AID; POTENTIAL ADVERSE EFFECTS OF CANADIAN
REGULATION

A substantial majority of the students attending PrimeTech receive student
financial assistance from Canadian federal and/or provincial financial aid
programs. Specifically, Canadian students are eligible to receive loans under
the Canada Student Loan ("CSL") program. Students who are residents of the
province of Ontario receive financial assistance under both the CSL program
and the Ontario Student Assistance Plan ("OSAP").

To enable its students to receive such financial aid, a Canadian institution
must meet certain eligibility standards to administer these programs and must
comply with extensive statutes, rules, regulations and requirements. In
particular, to maintain its right to administer Ontario student financial
assistance programs, an institution, such as PrimeTech, must, among other
things, be registered and in good standing under the Private Vocational
Schools Act ("PVSA") and must be approved by the Ontario Ministry of Education
and Training as an eligible institution. Additionally, the Company may not
operate a private vocational school in the province of Ontario unless such
school is registered under the PVSA. Any failure of PrimeTech or the Company
to meet the eligibility standards or comply with the applicable statutes,
rules, regulations and requirements could have a material adverse effect on
the Company's business, results of operations or financial condition.

The legislative, regulatory and other requirements relating to student
financial assistance programs in Ontario are subject to change by applicable
governments due to political and budgetary pressures, and any such change may
affect the eligibility for student financial assistance of the students
attending PrimeTech which, in turn, could materially adversely affect the
Company's business, results of operations or financial condition. See
"Financial Aid and Regulation--Canadian Regulation."

SEASONALITY IN RESULTS OF OPERATIONS

The Company has experienced seasonality in its results of operations
primarily due to the pattern of student enrollments at most of the Company's
schools. Historically, the Company's lowest quarterly net revenue and income
have been in the fourth fiscal quarter (June through August), due to lower
student enrollment during the summer months at most of the Company's schools,
while the Company's expenses remain relatively constant over the course of a
year. The Company expects that this seasonal trend will continue. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Seasonality."

RISKS ASSOCIATED WITH EXPANSION AND ACQUISITION PLANS; RISKS RELATING TO THE
INTEGRATION OF ACQUISITIONS

As part of its business strategy, the Company intends to continue to expand
its operations through the expansion of existing programs, the establishment
of new schools and programs and the acquisition of existing institutions. The
organic development of new schools, locations and programs poses unique
challenges and requires the Company to make investments in management, capital
expenditures, marketing expenses and other resources different, and in some
cases greater, than those required with respect to the operation of acquired
schools. To open a new school, the Company is required to obtain appropriate
state or provincial approvals and accrediting agency authorizations. In
addition, to be eligible for Title IV Program funding, such schools need
federal authorization and approvals. In the case of entirely separate, free
standing U.S. institutions, a minimum of two years' operating history is
required for them to be eligible for Title IV Program funding.

Acquisitions involve a number of special risks and challenges, including the
diversion of management's attention, integration of the operations and
personnel of acquired companies, adverse short-term effects on reported
operating results and the possible loss of key employees. Continued growth
through acquisitions may also subject the Company to unanticipated business or
regulatory uncertainties or liabilities. In addition, when the Company
acquires an existing school, a significant portion of the purchase price for
such school typically

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<PAGE>

will be allocated to goodwill and other intangibles (e.g., intellectual
property and non-competition agreements). The Company amortizes goodwill over
periods of 15 to 40 years and other intangible assets over periods of two to
ten years. In addition, the Company's acquisition of a school would constitute
a change in ownership resulting in a change of control with respect to such
school for purposes of eligibility to participate in the Title IV Programs and
for state licensing and accreditation purposes. See "--Potential Adverse
Effects of Regulation; Impairment of Federal Funding--Regulatory Consequences
in the Event of a Change of Ownership or Control." Generally, the Company
intends to acquire schools subject to the condition that they be recertified
promptly for such eligibility by the DOE. The failure of the Company to manage
its expansion and acquisition program effectively could have a material
adverse effect on the Company's business, results of operations or financial
condition.

There can be no assurance that suitable expansion or acquisition
opportunities will be identified or can be acquired on acceptable terms or
that any new or acquired institutions can be operated profitably or
successfully integrated into the Company's operations. Growth through
expansion or acquisition also could involve other risks, including the
diversion of management's attention from normal operating activities, the
inability to find appropriate personnel to manage the Company's expanding
operations and the possibility that new or acquired schools will be subject to
unanticipated business or regulatory uncertainties or liabilities.

COMPETITION

The postsecondary education market in the United States is highly fragmented
and competitive, with no private or public institution enjoying a significant
market share. The Company competes for students with postgraduate, four-year
and two-year degree granting institutions, which include non-profit public and
private colleges, universities and proprietary institutions. An attractive
employment market also reduces the number of students seeking postgraduate
degrees, thereby increasing competition for potential postgraduate students.
Management believes that competition among educational institutions is based
on the quality of educational programs, location, perceived reputation of the
institution, cost of the programs and employment opportunities for graduates.
Certain public and private colleges and universities may offer programs
similar to those of the Company at a lower tuition cost due in part to
governmental subsidies, government and foundation grants, tax deductible
contributions or other financial resources not available to proprietary
institutions. Other proprietary institutions also offer programs that compete
with those of the Company. Moreover, there is an increase in competition in
the specific educational markets served by the Company. For example, excluding
PsyD programs offered by the Company, in the 1992 academic year there were 29
PsyD programs existing in the United States, while in the 1997 academic year
there were 36 PsyD programs in the United States. Certain of the Company's
competitors in both the public and private sector have greater financial and
other resources than the Company. There can be no assurance that competitive
factors will not have a material adverse effect on the Company's business,
results of operations or financial condition. See "Business--Competition."

DEPENDENCE ON CERTAIN INDUSTRIES

The Company's schools offer programs in clinical psychology, education,
business, allied health professions and information technology, and the demand
for the Company's educational programs is correlated to employment
opportunities in these particular markets. For example, the Company believes
that managed care and other health care cost containment initiatives can lead
to reduced compensation for health care providers such as clinical
psychologists and reduced demand for psychologists with advanced degrees such
as those offered by the Company, thereby having an adverse impact on the
demand for certain of the programs offered by the Company. These and other
adverse economic and market conditions in the industries that employ graduates
of the Company's schools could have a material adverse effect on the business,
financial condition or results of operations of the Company. See "Business--
Graduate Employment."

RELIANCE ON KEY PERSONNEL

The operation of the Company requires managerial, operational and academic
expertise. In particular, the Company is dependent upon the management and
leadership skills of a number of its senior executives, including

15
<PAGE>

its Chairman, Michael C. Markovitz, its President, Harold J. O'Donnell, and
its Chief Financial Officer, Charles T. Gradowski, as well as on the skills of
the deans of its various institutions and its faculty members. The nature of
the skills required to manage the Company and teach in its schools affords the
Company's key employees substantial opportunities for alternative employment,
and there can be no assurance that the Company will continue to be successful
in attracting and retaining such personnel. Substantially all of the Company's
employees are employed "at will." The Company does not maintain "key man" life
insurance policies on any of its key employees. The failure of the Company to
attract and retain key personnel could have a material adverse effect on the
Company's business, results of operations or financial condition. See
"Management."

YEAR 2000 PROBLEM; NEW COMPANY COMPUTER SYSTEM

The "Year 2000 Problem" is the potential for computer processing errors
resulting from the use of computer programs that have been written using two
digits, rather than four, to denote a year (e.g., using the digits "98" to
denote 1998). Computer programs using this nomenclature can misidentify
references to dates after 1999 as meaning dates early in the twentieth century
(e.g., "1902" rather than "2002"). The Year 2000 Problem is commonly
considered to be prevalent in computer programs written as recently as the
mid-1990s, and can cause such programs to generate erroneous information, to
otherwise malfunction or to cease operations altogether.

The Company is in the process of installing a new management information
system in its corporate headquarters. In addition, the Company's schools each
have stand-alone computer systems and networks for internal use and for
communication with its students and with corporate headquarters. There can be
no assurance that the installation of the Company's new system will proceed
smoothly or that additional management time or expense will not be required to
successfully complete such installation. Although the Company expects that its
new computer system will be free of the Year 2000 Problem and, based upon its
review of its other internal computer systems, all such systems will be free
of the Year 2000 Problem, there can be no assurance that this new computer
system will not be affected by the Year 2000 Problem, that the Company's
existing systems will not be affected by the Year 2000 Problem, or that a
failure of any other parties, such as the government agencies on which the
Company depends for student financial assistance or the financial institutions
involved in the processing of student loans, to address the Year 2000 Problem
will not have a material adverse effect on the Company's business, results of
operations or financial condition. In particular, there can be no assurance
that malfunctions relating to the Year 2000 Problem will not result in the
misreporting of financial information by the Company. The Company is currently
making inquiries of certain of its vendors regarding the Year 2000 Problem,
and has not detected any issues relating to the Year 2000 Problem. However,
the Company has not made a formal assessment of the computer programs used by
government agencies or other third parties with which the company interacts,
or an assessment of its own vulnerability to the failure of such programs to
be free of the Year 2000 Problem. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Year 2000 Problem."

VOTING CONTROL BY PRINCIPAL SHAREHOLDER

The Company's founder and Chairman, Michael C. Markovitz, beneficially owns
all of the outstanding shares of Class B Common Stock. Each share of Class B
Common Stock has ten votes as compared to one vote for each share of Class A
Common Stock. Following consummation of the Offering, Dr. Markovitz will
control % ( % if the Underwriters' over-allotment option is exercised in
full) of the voting power of the Common Stock. As a result of such stock
ownership, Dr. Markovitz will be able to control the outcome of all matters
submitted to a vote of the holders of Common Stock, including the election of
Directors, amendments to the Company's Articles of Incorporation (the
"Articles") and By-laws and approval of significant corporate transactions.
See "Description of Capital Stock." Such voting power could also have the
effect of delaying, deterring or preventing a change in control of the Company
that might be otherwise beneficial to shareholders. See "Security Ownership of
Certain Beneficial Owners and Management."

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<PAGE>

ANTI-TAKEOVER EFFECTS OF CERTAIN CHARTER, BY-LAW AND STATUTORY PROVISIONS

Certain provisions of the Company's Articles and By-laws may inhibit changes
in control of the Company not approved by the Company's Board of Directors
(the "Board"). These provisions include (i) disparate voting rights per share
between the Class A Common Stock and the Class B Common Stock, (ii) a
prohibition on shareholder action through written consents, (iii) a
requirement that special meetings of shareholders be called only by the Board,
(iv) advance notice requirements for shareholder proposals and nominations,
(v) limitations on the ability of shareholders to amend, alter or repeal the
By-laws and (vi) the authority of the Board to issue without shareholder
approval preferred stock with such terms as the Board may determine. In
addition, under certain conditions, Section 11.75 of the Illinois Business
Corporation Act of 1983, as amended (the "Illinois Act"), would prohibit the
Company from engaging in a "business combination" with an "interested
shareholder" (in general, a shareholder owning 15% or more of the Company's
outstanding voting shares) for a period of three years. See "Description of
Capital Stock."

RESTRICTIONS UNDER THE CREDIT AGREEMENT

The Company intends to enter into a credit agreement (the "Credit
Agreement") with The Northern Trust Company providing for borrowings of up to
approximately $30 million. Following consummation of the Offering, the Company
does not expect to have any borrowings outstanding under the Credit Agreement.
It is anticipated that the Credit Agreement will restrict the Company and its
subsidiaries' ability to take certain actions, including incurring additional
indebtedness or substantially altering the Company's current method of
conducting business. A breach of any covenants contained in the Credit
Agreement could result in an event of default thereunder and allow the lenders
to accelerate the maturity of the indebtedness outstanding under the Credit
Agreement. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources."

BROAD DISCRETION AS TO USE OF PROCEEDS

The Company intends to use the net proceeds of the Offering to repay certain
indebtedness and, as determined by management in its sole discretion, for
working capital and general corporate purposes, including new program
development and the possible acquisition of additional businesses that are
complementary to the current or future business of the Company. Aside from the
repayment of indebtedness, the Company has not determined the specific
allocation of the net proceeds among the various uses described above and,
accordingly, investors in the Offering will rely upon the judgment of the
Company's management with respect to the use of proceeds. See "Use of
Proceeds."

ABSENCE OF DIVIDENDS

The Company currently intends to retain its earnings to finance future
growth and therefore does not anticipate paying any cash dividends on the
Common Stock in the foreseeable future. In addition, DOE financial
responsibility standards could in certain circumstances directly restrict the
ability of the Company to pay dividends or indirectly do so by restricting the
ability of the Company to obtain dividends or other funds from its
subsidiaries. See "--Potential Loss of Student Financial Aid Due to Failure to
Meet Financial Responsibility Standards," "--Restrictions under Credit
Agreement" and "Dividend Policy."

ABSENCE OF PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE; IMMEDIATE AND
SUBSTANTIAL DILUTION

Prior to the Offering, there has been no public market for the Class A
Common Stock and there can be no assurance that an active trading market will
develop or be sustained after the Offering. The initial public offering price
for the Class A Common Stock will be determined by negotiations between the
Company and the Underwriters, based upon several factors, and may not be
indicative of the price that will prevail in the public market. There can be
no assurance that the market price of the Class A Common Stock will not
decline from the initial public offering price.

17
<PAGE>

After consummation of the Offering, the market price of the Class A Common
Stock will be subject to fluctuations in response to a variety of factors,
including quarterly variations in the Company's operating results,
announcements of acquisitions by the Company or its competitors, new
regulations or interpretations of regulations applicable to the Company's
schools, changes in accounting treatments or principles and changes in
earnings estimates by securities analysts, as well as general political,
economic and market conditions. The market price for the Class A Common Stock
may also be affected by the Company's ability to meet or exceed analysts' or
"street" expectations, and any failure to meet such expectations, even if
minor, could have a material adverse effect on the market price of the Class A
Common Stock. In addition, the stock market has from time to time experienced
significant price and volume fluctuations that have particularly affected the
market prices of equity securities of certain companies and that have often
been unrelated to the operating performance of such companies. In the past,
following periods of volatility in the market price of a company's securities,
securities class action litigation has often been instituted against such a
company. Any such litigation initiated against the Company could result in
substantial costs and a diversion of management's attention and resources,
which could have a material adverse effect on the Company's business, results
of operations or financial condition. See "Underwriting."

The initial public offering price of the Class A Common Stock offered hereby
is substantially higher than the net book value of the currently outstanding
Common Stock. Therefore, purchasers of the Class A Common Stock offered hereby
will experience immediate and substantial dilution of $ per share in the
net tangible book value of the Class A Common Stock. See "Dilution."

SHARES ELIGIBLE FOR FUTURE SALE

Upon consummation of the Offering, the Company will have shares of
Common Stock outstanding. The shares of Class A Common Stock sold in
the Offering will be freely tradeable without restriction or further
registration under the Securities Act of 1933, as amended (the "Securities
Act"), unless held by an "affiliate" of the Company, as that term is defined
in the Securities Act. The Company, and certain persons holding Common Stock
or options to purchase Common Stock, at the time of the Offering, have agreed
not to sell, offer to sell, grant any option for the sale of or otherwise
dispose of any shares of Common Stock or securities convertible into or
exchangeable or exercisable for Common Stock, without the prior written
consent of Salomon Smith Barney Inc. on behalf of the Underwriters, for a
period of 180 days after the date of this Prospectus. Upon the expiration of
these lock-up arrangements with Salomon Smith Barney Inc., all of the
shares of Common Stock issued and outstanding as of the date of this
Prospectus will be eligible for immediate sale in the public market subject in
certain cases to compliance with certain volume and other limitations under
Rule 144 of the Securities Act ("Rule 144"). No prediction can be made as to
the effect, if any, that sales of shares of Common Stock or the availability
of shares of Common Stock for sale will have on the market price of the Class
A Common Stock from time to time. The sale of a substantial number of shares
held by existing shareholders, whether pursuant to subsequent public offerings
or otherwise, or the perception that such sales could occur, could adversely
affect the market price of the Class A Common Stock and could materially
impair the Company's future ability to raise capital through an offering of
equity securities. See "Shares Eligible For Future Sale" and "Underwriting."

18
<PAGE>

THE COMPANY

The Company currently owns and operates ASPP directly, and owns and operates
U of S, MIM and Ventura through its wholly owned subsidiaries. Dr. Markovitz
currently owns a one-third interest in PrimeTech Canada, Inc. and, together
with the other owners, will be selling his interests to the Company in
connection with the Offering. Historically, Dr. Markovitz separately owned and
operated certain businesses that are now owned by the Company.

The following chart illustrates the current structure of the Company after
giving effect to the acquisition of PrimeTech:

CHART

Prior to the Offering, the Company will effect the Stock Conversion,
consisting of the conversion of all currently outstanding shares of common
stock into shares of Class B Common Stock, the authorization of the Class A
Common Stock and a -for-one stock split to be effected immediately prior to
such conversion.

The Company has elected to be treated as an S corporation for federal income
tax purposes. Similar elections were made in states providing for conforming
laws. As a result, the Company currently pays no federal income tax and
virtually no state income tax, and the earnings of the Company are subject to
taxation directly at the shareholder level. Effective with the Offering, the
Company's S corporation status will be terminated, and the Company will become
subject to corporate income taxation as a C corporation.

The Company intends to pay to Dr. Markovitz a distribution equal to all of
the Company's undistributed earnings and the net deferred income tax asset
which the Company has as of the consummation of the Offering (the
"Distribution"). It is not possible at this time to determine the exact amount
of the Distribution because it will be based upon the Company's net income for
fiscal 1998 and the portion of fiscal 1999 net income which precedes the
consummation of the Offering. The Company currently estimates that its
undistributed earnings and the net deferred income tax asset as of the
consummation of the Offering will be approximately $7.0 million. The
Distribution will be paid in the form of a note issued by the Company to Dr.
Markovitz (the "Distribution Loan"), which will be payable immediately after
consummation of the Offering.

The principal executive offices of the Company are located at Two First
National Plaza, 20 South Clark Street, Third Floor, Chicago, Illinois 60603
and its telephone number is (312) 899-9900.

19
<PAGE>

USE OF PROCEEDS

The net proceeds to the Company from the sale of shares of Class A Common
Stock offered hereby are estimated to be $ , assuming an initial public
offering price of $ per share and after deducting estimated underwriting
discounts and commissions and expenses of the Offering. The Company will not
receive any proceeds from the exercise of the over-allotment option granted to
the Underwriters by the Company's sole shareholder. See "Underwriting."

The Company intends to use approximately $4.9 million of the net proceeds of
the Offering to repay notes payable to the Company's lenders (the "Bank
Notes"), which were issued in connection with the acquisitions of Ventura and
MIM and for general corporate purposes. The Bank Notes bear interest at an
average blended rate of 8.0% per annum, become due at various times through
2004 and may be prepaid at anytime without premium or penalty.

The Company also intends to use approximately $7.0 million of the net
proceeds of the Offering to pay the Distribution Loan and $0.7 million to
repay indebtedness to Dr. Markovitz incurred in connection with the Company's
purchase of the stock of MCM Plaza, a company wholly owned by Dr. Markovitz
(the "Real Estate Loan," and, together with the Distribution Loan, the
"Shareholder Loans"). The Shareholder Loans bear interest at 8.0% per annum,
are payable upon demand and may be prepaid at anytime without premium or
penalty. See "Management--Compensation Committee Interlocks and Insider
Participation."

The Company intends to use the remainder of the net proceeds of the Offering
for working capital and general corporate purposes, including new program
development at existing campuses, the addition of new campuses and the
possible acquisition of additional businesses that are complementary to the
current or future business of the Company. The Company has not determined the
specific allocation of the remainder of the net proceeds among the various
uses described above and, accordingly, investors in the Offering will rely
upon the judgment of the Company's management with respect to the use of such
proceeds.

DIVIDEND POLICY

The Company intends to retain future earnings to finance its growth and
development and therefore does not anticipate paying any cash dividends in the
foreseeable future, other than the Distribution. See "The Company." Payment of
future dividends, if any, will be at the discretion of the Company's Board of
Directors after taking into account various factors, including the Company's
financial condition, operating results, current and anticipated cash needs and
plans for expansion. In addition, DOE financial responsibility standards could
in certain circumstances directly restrict the ability of the Company to pay
dividends or indirectly do so by restricting the ability of the Company to
obtain dividends or other funds from its subsidiaries. See "Risk Factors--
Potential Loss of Student Financial Aid Due to Failure to Meet Financial
Responsibility Standards." For certain information regarding distributions
made by the Company in fiscal 1995, 1996, 1997 and 1998, see "Management--
Compensation Committee Interlocks and Insider Participation." See also
"Management's Discussions and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."

20
<PAGE>

CAPITALIZATION

The following table sets forth the cash, cash equivalents and short-term
investments and the consolidated capitalization of the Company (i) at May 31,
1998, (ii) pro forma for (a) the purchase of MCM Plaza, (b) the conversion of
the Company from an S corporation to a C corporation and (c) the payment of
the estimated Distribution and (iii) as adjusted to give effect to the sale by
the Company of shares of Class A Common Stock offered hereby
(assuming an initial public offering price of $ per share) and the
application of the estimated net proceeds as described under "Use of
Proceeds." This table should be read in conjunction with the Company's
consolidated financial statements and notes thereto appearing elsewhere in
this Prospectus.

<TABLE>
<CAPTION>
AS OF MAY 31, 1998
------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------- --------- -----------
<S> <C> <C> <C>
Cash, cash equivalents and short-term
investments.................................... $ 7,356 $7,356 $
======= ====== ======
Long-term debt, less current maturities......... $ 5,331 $5,331 $
Shareholders' equity (deficit):
Preferred stock, $.01 par value, 5,000,000
shares authorized, no shares issued and
outstanding on an as adjusted basis..........
Class A Common Stock, $.01 par value,
30,000,000 shares authorized, shares
issued and outstanding (1)...................
Class B Common Stock, $.01 par value,
10,000,000 shares authorized, shares
issued and outstanding.......................
Common stock, no par value, 1,000,000 shares
authorized, 1,666 shares issued and
outstanding on an actual basis, no shares
authorized, issued or outstanding on an as
adjusted basis............................... 505 505
Additional paid-in capital (2)................ -- --
Unrealized loss on investments................ (5) (5)
Purchase price in excess of predecessor entity
carryover basis (3).......................... -- (720)
Retained earnings (2)......................... 5,737 --
------- ------ ------
Total shareholders' equity (deficit).......... 6,237 (220)
------- ------ ------
Total capitalization........................ $11,568 $5,111 $
======= ====== ======
</TABLE>
- --------
(1) Excludes an aggregate of shares which, prior to the consummation of
the Offering, will be reserved for issuance under the Company's Stock
Plans. See "Management--Stock Plans."
(2) Additional paid-in capital and retained earnings have been adjusted to
reflect the capitalization of retained earnings to additional paid-in
capital upon conversion of the Company to a C corporation. The amount
capitalized is net of the adjustments necessary to (i) record deferred
income taxes upon conversion of the Company to a C corporation and (ii)
reflect payment of the Distribution, which would have been approximately
$6.3 million as of May 31, 1998.
(3) Reflects the purchase price of MCM Plaza's stock in excess of the
historical book value of the underlying net assets.

21
<PAGE>

DILUTION

The net tangible book value of the Company as of May 31, 1998 was
approximately $(0.3) million, or $(205) per share of Common Stock. Net
tangible book value per share represents the amount of the Company's total
tangible assets less its total liabilities, divided by the number of shares of
Common Stock outstanding. After giving effect to (i) the receipt of $
million of estimated net proceeds from the sale by the Company of shares of
Class A Common Stock in the Offering (assuming an initial public offering
price of $ per share), (ii) the use of such net proceeds to repay
indebtedness as described under "Use of Proceeds," (iii) the purchase price of
MCM Plaza's stock in excess of the historical book value of the underlying net
assets, (iv) the payment of the Distribution and (v) the recording of deferred
income taxes upon conversion of the Company from an S corporation to a C
corporation, the pro forma net tangible book value of the Company at May 31,
1998 would have been approximately $ , or $ per share of Common
Stock. This represents an immediate dilution in net tangible book value of
$ per share to new investors purchasing shares in the Offering. The
following table illustrates this dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share....................... $
Net tangible book value per share at May 31, 1998...................
Decrease per share attributable to the purchase price
of MCM Plaza's stock in excess of the historical
book value of the underlying net assets, the payment
of the Distribution and the recording of
deferred income taxes..............................................
---
Increase per share attributable to the Offering (1).................
----
Pro forma as adjusted net tangible book value per share
after the Offering.................................................
====
Dilution of net tangible book value per share to purchasers
of shares in the Offering.......................................... $
</TABLE>
- --------
(1) After deduction of underwriting discounts and commissions and estimated
expenses of the Offering.

The following table summarizes, on a pro forma basis as of May 31, 1998, the
number of shares of Common Stock purchased from the Company, the total
consideration paid and the average price per share paid by the existing
shareholder and by new investors purchasing shares in the Offering:

<TABLE>
<CAPTION>
SHARES TOTAL
PURCHASED CONSIDERATION
-------------- ---------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------ ------- -------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders............ 1,666 $504,666 $302.92
Investor purchasing shares in the
Offering........................
----- --- -------- --- -------
Total........................ 100% $ 100% $
===== === ======== === =======
</TABLE>

22
<PAGE>

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA

The unaudited pro forma condensed consolidated statements of operations of
the Company (i) give effect to (a) the acquisitions of Ventura, MIM, PrimeTech
and MCM Plaza, and (b) the conversion of the Company from an S corporation to
a C corporation and (ii) are adjusted to give effect to the Offering and the
application of the estimated net proceeds therefrom as set forth under "Use of
Proceeds," as if such transactions had occurred at the beginning of each
period presented.

The unaudited pro forma condensed consolidated statement of operations for
the year ended August 31, 1997 includes the audited statements of operations
of the Company and the unaudited historical statement of operations of (i)
Ventura, MIM and Prime Tech for the year then ended and (ii) the unaudited
statement of revenue and certain operating expenses for MCM Plaza for the
eight months ended April 30, 1997. The unaudited pro forma condensed
consolidated statement of operations for the nine months ended May 31, 1998
includes the audited statements of operations of the Company for the nine
months ended May 31, 1998, and the unaudited statements of operations of (i)
MIM for the five months and three days ended February 3, 1998 and (ii) Prime
Tech for the nine months ended May 31, 1998. The historical results of
operations of MIM and Ventura have been included in the Company's financial
statements subsequent to the dates of their acquisition. The historical
results of operation of MCM Plaza have been included in the Company's
financial statements subsequent to April 30, 1997, the date Dr. Markovitz
purchased the property, because the Company's acquisition of MCM Plaza on
August 31, 1998 was between two parties controlled by Dr. Markovitz, and is
therefore accounted for in a manner similar to a pooling of interests. This
results in the restatement of all periods from the date Dr. Markovitz
purchased MCM Plaza. For the purpose of preparing the unaudited pro forma
condensed consolidated statements of operations only, the historical
statements of operations for PrimeTech described above were translated from
Canadian dollars (PrimeTech's functional currency) to U.S. dollars at the
approximate average exchange rate for the respective periods.

The unaudited pro forma condensed consolidated balance sheet as of May 31,
1998 (i) gives effect to (a) the acquisition of PrimeTech, (b) the Company's
acquisition of MCM Plaza's stock at a purchase price in excess of the
historical book value of the underlying net assets, (c) the conversion of the
Company from an S corporation to a C corporation and (d) the payment of the
Distribution and (ii) is adjusted to give effect to the Offering and the
application of the estimated net proceeds therefrom as set forth under "Use of
Proceeds," as if such transactions had occurred on May 31, 1998.

The unaudited pro forma financial data are a presentation of historical
results with accounting and other adjustments. The unaudited pro forma
financial data do not reflect the effects of any of the anticipated changes to
be made by the Company in its operations from the historical operations, are
presented for informational purposes only and should not be construed to be
indicating (i) the results of operations or the financial position of the
Company that actually would have occurred had such transactions been
consummated as of the dates indicated or (ii) the results of operations or the
financial position of the Company in the future.

The unaudited pro forma financial data reflect the acquisitions of MIM,
Ventura and PrimeTech using the purchase method of accounting. The acquired
assets and liabilities of MIM, Ventura and PrimeTech are stated at values
representing a preliminary allocation of the purchase price based upon
estimated fair market values at the dates of acquisition. The final purchase
accounting allocations will be determined based upon final appraised values
and are not expected to differ significantly from the estimates used herein.
MCM Plaza's assets and liabilities are included in the Company's balance sheet
at their historical book values in a manner similar to a pooling of interests.

The following unaudited pro forma financial data and accompanying notes are
qualified in their entirety by reference to, and should be read in conjunction
with, "Management's Discussion and Analysis of Financial Condition and Results
of Operations," the consolidated financial statements and notes thereto of the
Company and the other historical financial information included elsewhere in
this Prospectus.

23
<PAGE>

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 1997

<TABLE>
<CAPTION>
HISTORICAL
---------------------------------------------
PRIME- MCM PRO FORMA PRO OFFERING PRO FORMA
ARGOSY VENTURA(1) MIM TECH(2) PLAZA(3) ADJUSTMENTS FORMA ADJUSTMENTS AS ADJUSTED
------- ---------- ------ ------- -------- ----------- ------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net revenue............. $20,460 $4,126 $4,553 $1,153 $255 $ (127)(5) $30,420 $ $
Operating expenses:
Cost of education...... 10,661 2,146 2,431 501 -- -- 15,739
Selling expenses....... 516 184 615 190 -- -- 1,505
General and
administrative
expenses.............. 5,432 1,812 1,431 469 76 309(5)(6)(7) 9,529
Related party expense.. 993 -- -- -- -- (993)(8) --
------- ------ ------ ------ ---- ------- ------- ------- --------
Total operating
expenses.............. 17,602 4,142 4,477 1,160 76 (684) 26,773
------- ------ ------ ------ ---- ------- ------- ------- --------
Income (loss) from
operations............. 2,858 (16) 76 (7) 179 557 3,647
Interest income......... 497 17 11 -- -- -- 525
Interest expense........ (107) (40) (15) (9) -- (662)(9) (833) (11)
Other (expense) income,
net.................... (48) 1 (5) -- -- -- (52)
------- ------ ------ ------ ---- ------- ------- ------- --------
Income(loss) before
provision for income
taxes.................. 3,200 (38) 67 (16) 179 (105) 3,287
Provision for income
taxes.................. 37 -- -- -- -- 1,278 (10) 1,315 (10)
------- ------ ------ ------ ---- ------- ------- ------- --------
Net income (loss)....... $ 3,163 $ (38) $ 67 $ (16) $179 $(1,383) $ 1,972 $ $
======= ====== ====== ====== ==== ======= ======= ======= ========
Basic and diluted
earnings per share..... $ 1,184 $
======= ========
Weighted average common
shares outstanding--
basic and diluted...... 1,666 (12)
======= ======= ========
</TABLE>

See notes to unaudited pro forma condensed consolidated financial data.

24
<PAGE>

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED MAY 31, 1998

<TABLE>
<CAPTION>
HISTORICAL
------------------------------- PRO FORMA PRO OFFERING PRO FORMA
ARGOSY MIM (4) PRIMETECH (2) ADJUSTMENTS FORMA ADJUSTMENTS AS ADJUSTED
------- ------- ------------- ----------- ------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net revenue............. $22,742 $2,005 $1,481 $ -- $26,228 $ $
Operating expenses:
Cost of education...... 10,692 1,161 771 -- 12,624
Selling expenses....... 690 215 299 -- 1,204
General and
administrative
expenses.............. 6,291 401 387 237 (6)(7) 7,316
Related party expense.. 1,807 -- -- (1,807)(8) --
------- ------ ------ ------ ------- ------ ------
Total operating
expenses............ 19,480 1,777 1,457 (1,570) 21,144
------- ------ ------ ------ ------- ------ ------
Income from operations.. 3,262 228 24 1,570 5,084
Interest income......... 296 1 2 -- 299
Interest expense........ (423) (3) (15) (99)(9) (540) (11)
Other expense, net...... (12) (9) -- -- (21)
------- ------ ------ ------ ------- ------ ------
Income before provision
for income taxes....... 3,123 217 11 1,471 4,822
Provision for income
taxes.................. 53 -- -- 1,876 (10) 1,929 (10)
------- ------ ------ ------ ------- ------ ------
Net income.............. $ 3,070 $ 217 $ 11 $ (405) $ 2,893 $ $
======= ====== ====== ====== ======= ====== ======
Basic and diluted
earnings per share..... $ 1,736 $ $
======= ====== ======
Weighted average common
shares outstanding--
basic and diluted...... 1,666 (12)
======= ====== ======
</TABLE>

See notes to unaudited pro forma condensed consolidated statements of
operations.

25
<PAGE>

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MAY 31, 1998

<TABLE>
<CAPTION>
HISTORICAL
--------------------- PRO FORMA OFFERING PRO FORMA
ARGOSY PRIMETECH (2) ADJUSTMENTS PRO FORMA ADJUSTMENTS AS ADJUSTED
------- ------------- ----------- --------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents............. $ 6,229 $ 84 $ -- $ 6,313 $ (11) $
Short-term investments................ 1,127 59 -- 1,186
Deferred income taxes................. -- -- 269 (13) 269
Other current assets.................. 1,704 1,083 -- 2,787
------- ------ ------- ------- ------- -------
Total current assets................ 9,060 1,226 269 10,555
Property and equipment, net............ 3,790 624 (83) 4,331
Other assets:
Long-term investments................. 816 -- -- 816
Intangibles........................... 6,578 -- -- 6,578
Other non-current assets.............. 504 18 -- 522
Deferred income taxes................. -- -- 248 (13) 248
------- ------ ------- ------- ------- -------
Total assets........................ $20,748 $1,868 $ 434 $23,050 $ $
======= ====== ======= ======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
(DEFICIT):
Current liabilities:
Current maturities of long-term debt.. $ 3,364 $ -- $ 314 $ 3,678 $ (11) $
Accounts payable and accrued expenses. 2,177 58 -- 2,235
Deferred revenue...................... 3,179 984 -- 4,163
Shareholder loans..................... -- -- 6,974 (14)(15) 6,974
------- ------ ------- ------- ------- -------
Total current liabilities........... 8,720 1,042 7,288 17,050
Long-term debt, less current
maturities............................ 5,331 429 -- 5,760 (11)
Other long-term liabilities............ 460 -- -- 460
Shareholders' equity (deficit)......... 6,237 397 (6,854)(13)(14)(15) (220)
------- ------ ------- ------- ------- -------
Total liabilities and shareholders'
equity (deficit)................... $20,748 $1,868 $ 434 $23,050 $ $
======= ====== ======= ======= ======= =======
</TABLE>

See notes to unaudited pro forma condensed consolidated financial data.

26
<PAGE>

NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA

The following notes identify the pro forma adjustments made to the
historical amounts in the unaudited pro forma condensed consolidated financial
data:
(1) Represents Ventura's results of operations through August 26, 1997, the
date of its acquisition by the Company. Results for periods subsequent to
August 26, 1997 are included in the Company's results of operations for
such periods.
(2) The acquisition of PrimeTech is contingent upon consummation of the
Offering and accordingly its balance sheet data and results of operations
are not included in the historical balance sheet and statements of
operations of the Company for the periods presented. The results of
operations of PrimeTech will be included with those of the Company for all
periods subsequent to the date of acquisition.
(3) Represents MCM Plaza's revenues and certain expenses (excluding
depreciation and interest) through April 30, 1997, the date of MCM Plaza's
acquisition by Dr. Markovitz. Result for periods subsequent to April 30,
1997 are included in the Company's results of operations for such periods.
(4) Represents MIM's results of operations through February 3, 1998, the date
of its acquisition by the Company. Results for periods subsequent to
February 3, 1998 are included in the Company's results of operations for
such periods.
(5) Represents amounts paid by U of S to MCM Plaza under a lease agreement for
the rental of U of S school facility prior to April 30, 1997. On August
31, 1998, MCM Plaza sold its stock to U of S for its appraised value of
approximately $3.3 million, less assumed liabilities of approximately $2.6
million. As a result, U of S will not incur rent expense with respect to
such property in future periods. See "Management--Compensation Committee
Interlocks and Insider Participation."
(6) The preliminary appraised values of the acquired fixed assets of Ventura,
MIM and PrimeTech have been assigned to the respective assets acquired.
Depreciation of fixed assets, based on appraised values and estimated
useful lives (which range from three to 40 years) in excess of the
historical amounts (which were only recorded from the date of the
acquisitions to the end of each period), is recorded as an adjustment.
Depreciation of the MCM Plaza real estate for the eight months ended April
30, 1997 has been included in the pro forma adjustment. Additionally,
intangible assets recorded in conjunction with the acquisitions of
Ventura, MIM and PrimeTech include goodwill of approximately $5.6 million,
intellectual property of $0.6 million and covenants not-to-compete of
approximately $0.1 million. Goodwill is amortized on a straight-line basis
over its estimated useful life of 40 years. Intellectual property is being
amortized over its estimated useful life of 2-4 years. Covenants not-to-
compete are amortized over their estimated useful lives of 5 to 10 years.
Amortization expense of these intangible assets, based upon their new
values and estimated useful lives in excess of the historical amounts
(which were only recorded from the date of the acquisitions to the end of
each period), is recorded as an adjustment.
(7) The proportionate amount of Dr. Markovitz's initial annual base salary as
Chairman of the Company of $200,000 has been included as a pro forma
adjustment.
(8) Management fees charged to the Company by Management Corp., a company
wholly owned by Dr. Markovitz, related to non-recurring business
activities have been eliminated. The Company will not incur such expenses
in future periods. See "Management--Compensation Committee Interlocks and
Insider Participation."
(9) Reflects additional interest expense associated with approximately $9.0
million of debt incurred to finance the acquisitions of Ventura, MIM,
PrimeTech and MCM Plaza. Interest on bank borrowings is imputed assuming
an 8.0% borrowing rate for the twelve months ended August 31, 1997 and the
nine months ended May 31, 1998.
(10) Prior to consummation of the Offering, the Company was an S corporation
and was not subject to federal (and certain state) corporate income
taxes. A combined effective federal and state income tax rate of 40% has
been assumed in calculating the pro forma provision for income taxes.
(11) Reflects issuance of shares of Class A Common Stock and the
application of the net proceeds from the Offering, estimated to be $
million, net of expenses and fees, as described under "Use of

27
<PAGE>

Proceeds." At May 31, 1998, the outstanding debt to be repaid in
connection with the Offering totaled $4.9 million, resulting in excess
cash from the Offering of $ million. Interest expense associated with
indebtedness repaid with the proceeds from the Offering has been
eliminated.
(12) The adjustment includes the increase in the weighted average shares
outstanding related to proceeds from (i) the issuance of and
shares of Class A Common Stock for the year ended August 31, 1997
and nine months ended May 31, 1998, respectively, to be sold by the
Company in the Offering in order to repay indebtedness as described under
"Use of Proceeds," and (ii) shares of Class A Common Stock
assumed to be sold in the Offering to fund the amount of shareholder
distributions in excess of earnings for the nine months ended May 31,
1998.
(13) Reflects the recording of deferred income taxes upon the Company's
conversion from an S corporation to a C corporation.
(14) On August 31, 1998, U of S purchased MCM Plaza for a purchase price equal
to its appraised value of approximately $3.3 million, less liabilities
assumed of approximately $2.6 million. The purchase price exceeded the
historical book value of the underlying net assets, resulting in a
reduction in shareholders' equity of $0.7 million.
(15) Gives effect to the payment of the Distribution, which would have been
approximately $6.3 million as of May 31, 1998.

28
<PAGE>

SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA

The following selected historical consolidated financial and other data are
qualified by reference to, and should be read in conjunction with, the
Company's consolidated financial statements and the related notes thereto
appearing elsewhere in this Prospectus and "Management's Discussion and
Analysis of Financial Condition and Results of Operations." The selected
statement of operations data set forth below for the Company for the eleven
months ended August 31, 1995, the fiscal years ended August 31, 1996 and 1997
and the nine months ended May 31, 1998 and the balance sheet data as of August
31, 1996 and 1997 and May 31, 1998 are derived from the audited consolidated
financial statements of the Company included elsewhere in this Prospectus. The
selected statement of operations data for the Company set forth below for the
fiscal years ended September 30, 1993 and 1994 and the balance sheet data as
of September 30, 1993 and 1994 are derived from the unaudited consolidated
financial statements of the Company not included in this Prospectus. The
selected balance sheet data as of August 31, 1995 are derived from the audited
consolidated financial statements not included in this Prospectus. The
selected statement of operations data for the Company set forth below for the
nine months ended May 31, 1997 are derived from the unaudited consolidated
financial statements of the Company included elsewhere in this Prospectus. The
unaudited statements of the Company include all adjustments, consisting only
of normal recurring adjustments, necessary for a fair presentation of the
Company's financial condition and results of operations for those periods and,
in the opinion of management have been prepared on the same basis as the
audited financial statements.

<TABLE>
<CAPTION>
ELEVEN
YEAR ENDED MONTHS YEAR ENDED NINE MONTHS
SEPTEMBER 30, ENDED AUGUST 31, ENDED MAY 31,
--------------- AUGUST 31, ---------------- ----------------
1993 1994 1995 (1) 1996 1997 1997 1998
------ ------- ---------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net revenue............. $8,051 $11,061 $14,041 $17,840 $20,460 $16,565 $22,742
Operating expenses:
Cost of education...... 4,032 5,496 7,251 9,370 10,661 7,815 10,692
Selling expenses....... 184 317 325 263 516 318 690
General and
administrative
expenses.............. 2,327 3,079 3,763 5,174 5,432 3,952 6,291
Related party expense
(2)................... 1,206 624 1,244 1,710 993 898 1,807
------ ------- ------- ------- ------- ------- -------
Total operating
expenses............ 7,749 9,516 12,583 16,517 17,602 12,983 19,480
------ ------- ------- ------- ------- ------- -------
Income from operations.. 302 1,545 1,458 1,323 2,858 3,582 3,262
Interest income......... 48 12 123 304 497 340 296
Interest expense........ (55) (40) (1) (55) (107) (46) (423)
Other income (expense),
net.................... 6 21 -- 21 (48) (10) (12)
------ ------- ------- ------- ------- ------- -------
Income before provision
for income taxes as
reported (3)........... 301 1,538 1,580 1,593 3,200 3,866 3,123
Provision for income
taxes (3).............. 2 40 30 30 37 70 53
------ ------- ------- ------- ------- ------- -------
Net income.............. $ 299 $ 1,498 $ 1,550 $ 1,563 $ 3,163 $ 3,796 $ 3,070
====== ======= ======= ======= ======= ======= =======
Income before provision
for income taxes as
reported (3)........... $ 301 $ 1,538 $ 1,580 $ 1,593 $ 3,200 $ 3,866 $ 3,123
Pro forma provision for
income taxes (3)....... 120 615 632 637 1,280 1,546 1,249
------ ------- ------- ------- ------- ------- -------
Pro forma net income.... $ 181 $ 923 $ 948 $ 956 $ 1,920 $ 2,320 $ 1,874
====== ======= ======= ======= ======= ======= =======
OTHER DATA:
EBITDA (4).............. $ 459 $ 1,741 $ 1,748 $ 1,722 $ 3,296 $ 3,906 $ 3,921
EBITDA margin (4)....... 5.7% 15.7% 12.4% 9.7% 16.1% 23.6% 17.2%
Capital expenditures,
net.................... $ 157 $ 224 $ 195 $ 404 $ 341 $ 125 $ 362
Student population (5).. 1,285 2,304 2,644 2,858 3,253 3,188 3,963
Number of campuses (6).. 4 7 7 8 8 8 10
</TABLE>

29
<PAGE>

<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30, AS OF AUGUST 31, AS OF
-------------- ------------------------ MAY 31,
1993 1994 1995 (1) 1996 1997 1998
------ ------- -------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and
short-term investments.... $2,660 $ 2,533 $ 3,596 $ 5,384 $ 6,728 $ 7,356
Working capital............ 632 523 1,848 3,316 3,907 340
Total assets............... 4,239 4,637 6,452 8,336 17,580 20,748
Long-term debt (excluding
current maturities)....... 1,408 62 292 243 6,354 5,331
Shareholder's equity....... 282 2,280 3,830 5,236 7,448 6,237
</TABLE>
- --------
(1) Prior to fiscal 1995, the Company's fiscal year end was September 30.
During fiscal 1995, the Company changed its year end to August 31. Fiscal
1995 represents the Company's results of operations for the eleven months
ended August 31, 1995. All fiscal years subsequent to 1995 represent the
twelve months ended August 31 of the year indicated.
(2) Represents amounts paid to Management Corp., an affiliate of Dr.
Markovitz, for services rendered by Dr. Markovitz during the period
presented. The Company will not incur such expenses in future periods;
however, Dr. Markovitz will receive compensation from the Company as
Chairman, including an initial annual base salary of $200,000.
(3) Prior to the Offering, the Company was an S corporation and not subject to
federal (and certain state) corporate income taxes. The statement of
operations data reflects a pro forma provision for income taxes as if the
Company were subject to federal and state corporate income taxes for all
periods. The pro forma provision for income taxes represents a combined
effective federal and state tax rate of 40%. See "The Company" and Notes 5
and 12 to the Company's consolidated financial statements.
(4) "EBITDA" equals income from operations plus depreciation and amortization.
EBITDA margin is EBITDA as a percentage of net revenue. EBITDA and EBITDA
margin do not represent, and should not be considered as an alternative
to, net income or cash flow from operations as determined by generally
accepted accounting principles, and the Company's calculation thereof may
not be comparable to that reported by other companies.
(5) Reflects actual student population as of the end of the period indicated,
not including participants in Ventura test preparation programs.
(6) Reflects the total number of campuses operated by the Company as of the
end of the period indicated.

30
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the
Selected Historical Consolidated Financial and Other Data and the Company's
consolidated financial statements and notes thereto appearing elsewhere in
this Prospectus.

BACKGROUND AND OVERVIEW

The Company is a leading provider of for-profit postgraduate education with
a primary focus on doctoral level programs. As of May 31, 1998, the Company's
schools had approximately 4,600 students enrolled representing 47 states and
30 foreign countries. The Company's schools offer programs in clinical
psychology, education, business, allied health professions and information
technology and are approved and accredited to offer doctoral, master's,
bachelor's and associate degrees as well as to award diplomas. Approximately
62% of the Company's students are enrolled in doctoral programs. The Company
operates 12 campuses in seven states and the Province of Ontario, Canada.
Additionally, the Company is preparing to operate four new campuses pending
regulatory approval.

The Company's principal sources of revenue are tuition, workshop fees and
sales of related study materials. Students attending the Company's schools
finance their education through a combination of individual resources
(including earnings from full or part-time employment), government-sponsored
financial aid and other sources, including family contributions and
scholarships provided by the Company. During fiscal 1997, approximately 43% of
the Company's net cash receipts were derived indirectly from the Title IV
Programs.

In fiscal 1997, the Company derived approximately 98% of its net revenue
from tuition. Tuition payments are made at the beginning of each term; the
start date for each term varies by school and program. Payment of each term's
tuition may be made by cash or financial aid. If a student withdraws from
school prior to the completion of the term, the Company refunds a portion of
the tuition already paid, based upon the number of classes the student has
attended. For students receiving financial aid, the timing of the refunds for
withdrawal is based on federal, state and accrediting agency standards. The
scholarships that the Company grants to certain students are recorded as a
reduction of tuition revenue. Tuition revenue is recognized ratably over the
term of each program, while fees for the three to four day workshops held by
Ventura are recognized on the first day of the workshop. Revenue from sales of
related study materials is recognized on the date of shipment.

The Company's schools charge tuition at varying amounts, depending not only
on the particular school, but also upon the type of program and the specific
curriculum. Each of the Company's schools typically implements one or more
tuition increases annually. The size of these increases differ from year to
year and among campuses and programs. Tuition for the Company's schools as of
September 1, 1998 represents an approximate increase of 5% over the same date
in 1997.

The Company also generates revenue from textbook sales and property rental.
In fiscal 1997, approximately 2% of the Company's net revenue was derived from
these sources.

The Company categorizes its expenses as cost of education, selling and
general and administrative. Cost of education expenses generally consists of
expenses directly attributable to the educational activity at the schools.
These include salaries and benefits of faculty and student support personnel,
the cost of educational supplies and facilities (including rents on school
leases), and all other school occupancy costs. Selling expenses include direct
and indirect marketing and advertising expenses.

General and administrative expenses include salaries and benefits of
personnel in accounting, human resources, corporate and school administration
functions and all corporate office expenses. Also included in general and
administrative expenses are depreciation expense associated with computer
laboratories, equipment, furniture and fixtures, and amortization expense
associated with intangible assets consisting primarily of goodwill,
intellectual property and non-competition agreements with previous owners of
the schools or campuses.

31
<PAGE>

Related party expense represents amounts paid to Management Corp., a company
wholly owned by Dr. Markovitz, for services rendered by Dr. Markovitz. The
Company will not incur such expenses in future periods; however, Dr. Markovitz
will receive compensation from the Company as Chairman, including an initial
annual base salary of $200,000.

RECENT ACQUISITIONS

On August 26, 1997, the Company acquired Ventura for an aggregate purchase
price of $4.2 million and, on February 3, 1998, the Company acquired MIM for
an aggregate purchase price of $2.4 million. Both acquisitions were accounted
for as purchases.

In April 1998, the Company entered into an agreement, pursuant to which the
Company will acquire 100% of the outstanding stock of PrimeTech. Dr. Markovitz
initially acquired a one-third interest in PrimeTech in November 1995 and,
together with the other owners, will be selling his interest to the Company in
connection with the Offering. The purchase agreement obligates the Company to
pay the former owners (including Dr. Markovitz) a total of C$500,000 upon
closing and to issue shares of Common Stock, the fair value of which is equal
to 102% of PrimeTech's net income, as defined in such agreement, in each of
the next three fiscal years. The total purchase price is currently estimated
to be approximately C$5.1 million. The acquisition, which will be accounted
for as a purchase, has been approved by the Board of Directors of each company
and is subject to the successful completion of the Offering.

On August 31, 1998, U of S acquired the stock of MCM Plaza. The purchase is
accounted for in a manner similar to a pooling of interests, resulting in the
Company including the results of operations of MCM Plaza for all periods
subsequent to April 30, 1997, the date Dr. Markovitz acquired MCM Plaza. The
purchase price of approximately $3.3 million, based upon an appraisal,
exceeded the historical book value of the underlying net assets by
approximately $0.7 million, resulting in a reduction in the Company's retained
earnings by such amount. See "Management--Compensation Committee Interlocks
and Insider Participation."

RESULTS OF OPERATIONS

The following table summarizes the Company's operating results as a
percentage of net revenues for the period indicated:

<TABLE>
<CAPTION>
ELEVEN
MONTHS YEAR ENDED NINE MONTHS
ENDED AUGUST 31, ENDED MAY 31,
AUGUST 31, ------------ --------------
1995 1996 1997 1997 1998
---------- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue........................... 100.0% 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Cost of education................... 51.6 52.5 52.1 47.2 47.0
Selling expenses.................... 2.3 1.5 2.5 1.9 3.0
General and administrative expenses. 26.8 29.0 26.5 23.9 27.7
Related party expense............... 8.9 9.6 4.9 5.4 8.0
----- ----- ----- ------ ------
Total operating expenses.......... 89.6 92.6 86.0 78.4 85.7
----- ----- ----- ------ ------
Income from operations................ 10.4 7.4 14.0 21.6 14.3
Interest/other income (expense), net.. 0.9 1.5 1.7 1.7 (0.6)
----- ----- ----- ------ ------
Income before provision for income
taxes................................ 11.3 8.9 15.7 23.3 13.7
Provision for income taxes............ 0.2 0.2 0.2 0.4 0.2
----- ----- ----- ------ ------
Net income............................ 11.1% 8.7% 15.5% 22.9% 13.5%
===== ===== ===== ====== ======
</TABLE>

32
<PAGE>

Nine Months Ended May 31, 1998 Compared to Nine Months Ended May 31, 1997

Net Revenue. Net revenue increased 37.3% from $16.6 million for the nine
months ended May 31, 1997 to $22.8 million for the nine months ended May 31,
1998, primarily due to additional net revenue of $4.3 million from the
acquisitions of Ventura and MIM. For schools owned by the Company during
fiscal 1997, the average number of students attending the schools increased
55.1%, and the average tuition increased 5.2%.

Cost of Education. Cost of education increased 36.8% from $7.8 million for
the nine months ended May 31, 1997 to $10.7 million for the nine months ended
May 31, 1998, due to additional teaching costs to meet the growth in the
number of students attending the schools and the development of new programs.
Cost of education as a percentage of net revenue decreased slightly from 47.2%
in 1997 to 47.0% in 1998 due to the acquisition of Ventura, whose programs
have lower cost of education than the Company's other programs. This benefit
was partially offset by the acquisition of MIM, which has higher costs of
education as a percentage of net revenue.

Selling Expenses. Selling expenses increased 117.0% from $0.3 million for
the nine months ended May 31, 1997 to $0.7 million for the nine months ended
May 31, 1998 and, as a percentage of net revenue, increased from 1.9% to 3.0%,
primarily due to the acquisitions of Ventura and MIM, which require the use of
more costly advertising media than ASPP and U of S. These acquisitions
accounted for approximately 66.7% of the increase. In addition, the Company
marketed new programs and increased promotion for certain campuses in fiscal
1998.

General and Administrative Expenses. General and administrative expenses
increased 59.2% from $4.0 million for the nine months ended May 31, 1997 to
$6.3 million for the nine months ended May 31, 1998 and, as a percentage of
net revenue, increased from 23.9% to 27.7%, primarily due to additional costs
associated with Ventura and MIM, which accounted for approximately 51.4% of
the increase. The Company also hired personnel at its corporate office to
expand the depth of its management.

Related Party Expense. Related party expense increased 101.2% from $0.9
million for the nine months ended May 31, 1997 to $1.8 million for the nine
months ended May 31, 1998 and, as a percentage of net revenue, increased from
5.4% to 8.0%. The related party expense amount has been discretionary and has
been determined by the sole shareholder of the Company. The Company will not
incur such expense in future periods; however, Dr. Markovitz will receive
compensation from the Company as Chairman, including an initial annual base
salary of $200,000.

Interest/Other Income (Expense), Net. Interest/other income (expense), net
decreased 148.9% from $0.3 million for the nine months ended May 31, 1997 to
$(0.1) million for the nine months ended May 31, 1998 and, as a percentage of
net revenue, decreased from 1.7% to (0.6)%. Interest income was $0.3 million
for the nine months ended May 31, 1997. Interest expense of $0.4 million as a
result of additional borrowings to finance the acquisitions of Ventura and MIM
exceeded interest income earned on the Company's investments during the nine
months ended May 31, 1998.

Provision for Income Taxes. The provision for income taxes was immaterial
for both the nine months ended May 31, 1997 and 1998.

Net Income. Net income decreased 19.1% from $3.8 million for the nine months
ended May 31, 1997 to $3.1 million for the nine months ended May 31, 1998, due
to the increase in related party expense.

Year Ended August 31, 1997 Compared to Year Ended August 31, 1996

Net Revenue. Net revenue increased 14.7% from $17.8 million in fiscal 1996
to $20.5 million in fiscal 1997, primarily due to a 13.8% increase in the
average number of students attending the schools and an average tuition
increase of 5.1% effected in 1997. The increase in student population is
attributed to the development of new programs at certain campuses and the
addition of the Company's Arizona campus.

Cost of Education. Cost of education increased 13.8% from $9.4 million in
fiscal 1996 to $10.7 million in fiscal 1997, due to additional teaching costs
to meet the growth in the number of students attending the schools

33
<PAGE>

and the development of new academic programs. As a percentage of net revenue,
cost of education remained relatively constant.

Selling Expenses. Selling expenses increased 96.2% from $0.3 million in
fiscal 1996 to $0.5 million in fiscal 1997 and, as a percentage of net revenue,
increased from 1.5% to 2.5%, primarily due to the Company's increased focus on
marketing new academic programs and promoting certain campuses.

General and Administrative Expenses. General and administrative expenses
increased 5.0% from $5.2 million in fiscal 1996 to $5.4 million in fiscal 1997;
however, as a percentage of net revenue, general and administrative expenses
decreased from 29.0% in fiscal 1996 to 26.5% in fiscal 1997. The decrease can
be attributed primarily to the Company's 1996 investments in new office space,
corporate office personnel and a new computer system.

Related Party Expense. Related party expense decreased 41.9% from $1.7
million in fiscal 1996 to $1.0 million in fiscal 1997 and, as a percentage of
net revenue, decreased from 9.6% to 4.9%. The related party expense amount has
been discretionary and has been determined solely by the shareholder of the
Company.

Interest/Other Income (Expense), Net. Interest/other income (expense), net
remained constant from fiscal 1996 to fiscal 1997. Although more interest
income was generated in fiscal 1997 from the increase in cash flow from
operations, it was offset by additional interest expense associated with the
Company's purchase of MCM Plaza.

Provision for Income Taxes. The provision for income taxes was immaterial in
both fiscal 1996 and fiscal 1997.

Net Income. Net income increased 102.4% from $1.6 million in fiscal 1996 to
$3.2 million in fiscal 1997 due to the growth of existing schools and the
factors discussed above, including the decrease in related party expense.

Year Ended August 31, 1996 Compared to Eleven Months Ended August 31, 1995

Net Revenue. Net revenue increased 27.1% from $14.0 million for the eleven
months ended August 31, 1995 to $17.8 million in fiscal 1996, primarily due to
a 9.1% increase in the average number of students attending the schools and an
average tuition increase of 5.1% effective in fiscal 1996, as well as the
purchases of the Hawaii and Rolling Meadows, Illinois campuses and the opening
of the Virginia campus.

Cost of Education. Cost of education increased 29.2% from $7.3 million for
the eleven months ended August 31, 1995 to $9.4 million in fiscal 1996 and, as
a percentage of net revenue, increased from 51.6% to 52.5%, primarily due to
additional teaching costs to meet the growth in the number of students
attending the schools and the development of new campuses and programs.

Selling Expenses. Selling expenses remained constant at $0.3 million for the
eleven months ended August 31, 1995 and in fiscal 1996; however, as a
percentage of net revenue, selling expenses decreased from 2.3% to 1.5% as the
Company's spending on new marketing activities remained constant.

General and Administrative Expenses. General and administrative expenses
increased 37.5% from $3.8 million for the eleven months ended August 31, 1995
to $5.2 million in fiscal 1996 and, as a percentage of net revenue, increased
from 26.8% to 29.0%. The increase can be attributed primarily to the Company's
1996 investments in new office space, corporate office personnel and a new
computer system.

Related Party Expense. Related party expense increased 37.5% from $1.2
million for the eleven months ended August 31, 1995 to $1.7 million in fiscal
1996 and, as a percentage of net revenue, increased from 8.9% to 9.6%. The
related party expense amount has been discretionary and has been determined
solely by the shareholder of the Company.

Interest/Other Income (Expense), Net. Interest/other income (expense), net
increased 121.3% from $0.1 million for the eleven months ended August 31, 1995
to $0.3 million in fiscal 1996 and, as a percentage of net

34
<PAGE>

revenue, increased from 0.9% to 1.5%. Interest income increased 147.2% from
$0.1 million for the eleven months ended August 31, 1995 to $0.3 million in
fiscal 1996, due to the increase in cash flow from operations during fiscal
1996.

Provision for Income Taxes. Provision for income taxes was immaterial for
the eleven months ended August 31, 1995 and in fiscal 1996.

Net Income. Net income remained constant at $1.6 million for the eleven
months ended August 31, 1995 and fiscal 1996 as a result of growth of existing
schools and the factors discussed above being largely offset by an increase in
related party expense.

SEASONALITY; VARIATIONS IN QUARTERLY RESULTS OF OPERATIONS

The Company has experienced seasonality in its results of operations
primarily due to the pattern of student enrollments at most of the Company's
schools. Historically, the Company's lowest quarterly net revenue and income
have been in the fourth fiscal quarter (June through August) due to lower
student enrollment during the summer months at most of the Company's schools,
while the Company's expenses remain relatively constant over the course of a
year. The Company expects that this seasonal trend will continue.

The following table sets forth unaudited quarterly financial data for each
of the seven fiscal quarters in the year ended August 31, 1997 and the nine
months ended May 31, 1998 and such data expressed as a percentage of the
Company's totals with respect to such information for the applicable quarters.
The Company believes that this information includes all adjustments
(consisting solely of normal recurring adjustments) necessary for a fair
presentation of such quarterly information when read in conjunction with the
consolidated financial statements included elsewhere herein. The operating
results for any quarter are not necessarily indicative of the results for any
future period.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
AUGUST 31, 1997 MAY 31, 1998
------------------------------- -------------------------
1ST 3RD 4TH 1ST 3RD
QTR 2ND QTR QTR QTR QTR 2ND QTR QTR
------ ------- ------ ------ ------ ------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenue............. $5,466 $4,850 $6,198 $3,946 $7,247 $6,724 $8,771
Percentage of fiscal
year total............. 26.7% 23.7% 30.3% 19.3%
Income from operations.. $1,624 $ 579 $1,379 $ (724) $1,741 $ 585 $ 936
Percentage of fiscal
year total............. 56.7% 20.3% 48.3% (25.3)%
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

Since its formation, the Company has financed its operating activities
primarily through cash generated from operations. Acquisitions have been
financed primarily through debt instruments. Net cash provided by operating
activities increased to $3.9 million in fiscal 1997 from $2.7 million in
fiscal 1996 and $1.6 million in fiscal 1995, due primarily to increases in net
income. Net cash provided by operating activities was $6.0 million in the
first nine months of fiscal 1997 and $4.2 million in the first nine months of
fiscal 1998.

Capital expenditures were $0.2 million, $0.4 million, $0.3 million and $0.4
million in fiscal 1995, 1996, 1997 and the nine months ended May 31, 1998,
respectively. Capital expenditures are expected to increase in the future as
student population increases and the Company continues to upgrade and expand
current facilities and equipment. The Company plans to invest approximately
$0.5 million in upgrading its computer systems during fiscal 1999. The Company
has no other commitment for material capital expenditures.

The Company intends to enter into the Credit Agreement with The Northern
Trust Company providing for borrowings of up to approximately $30 million at
an interest rate of 2% above LIBOR. Following consummation of the Offering,
the Company does not expect to have any borrowings outstanding under the
Credit Agreement. It is anticipated that the Credit Agreement will restrict
the Company and its subsidiaries' ability to take certain actions, including
incurring additional indebtedness or substantially altering the Company's
current method of conducting business.

35
<PAGE>

The Company's cash flow from operations on a long-term basis is dependent on
the receipt of funds from the Title IV Programs. For fiscal 1997, the
Company's U.S. institutions derived approximately 41% to approximately 52% of
their respective net revenue (on a cash basis) from the Title IV Programs. The
HEA and its implementing regulations establish specific standards of financial
responsibility that must be satisfied in order to qualify for participation in
the Title IV Programs.

The DOE requires that Title IV Program funds collected by an institution for
unbilled tuition be kept in separate cash or cash equivalent accounts until
the students are billed for the portion of their program related to these
Title IV Program funds. In addition, all funds transferred to the Company
through electronic funds transfer programs are held in a separate cash account
until certain conditions are satisfied. As of May 31, 1998, the Company held
an immaterial amount of funds in these separate accounts. The restrictions on
any cash held in these accounts have not significantly affected the Company's
ability to fund daily operations.

The Company intends to use approximately $4.9 million of the net proceeds
from the Offering to repay the Bank Notes, which were issued in connection
with the acquisition of Ventura, MIM, and for general corporate purposes, and
to use approximately $7.7 million to repay the Shareholder Loans. The Company
intends to use the remainder of the net proceeds for working capital and
general corporate purposes, including new academic program development at
existing campuses, the addition of new campuses and the possible acquisition
of additional businesses that are complementary to the current or future
business of the Company. The Company has not determined the specific
allocation of the remainder of the net proceeds among the various uses
described above and, accordingly, investors in the Offering will rely upon the
judgment of the Company's management with respect to the use of such proceeds.
See "Use of Proceeds."

Upon consummation of the Offering, the only indebtedness outstanding will be
indebtedness in the aggregate amount of $2.3 million secured by the real
estate that is owned by MCM Plaza and leased by U of S, which bears interest
at a rate of 9.0% and matures in 2007 and 2008, and certain indebtedness of
the Company to the sellers in the acquisitions of MIM and Ventura, which
aggregates $1.5 million, bears interest at rates of 6.25% and 8.0% and matures
in 2001 and 2002.

YEAR 2000 PROBLEM

The Company is in the process of installing a new management information
system in its corporate headquarters. In addition, the Company's schools each
have stand-alone computer systems and networks for internal use and for
communication with its students and with corporate headquarters. There can be
no assurance that the installation of the Company's new system will proceed
smoothly or that additional management time or expense will not be required to
successfully complete such installation. Although the Company expects that its
new computer system will be free of the Year 2000 Problem and, based upon its
review of its other internal computer systems, expects such other systems will
be free of the Year 2000 Problem, there can be no assurance that this new
computer system will not be affected by the Year 2000 Problem, that the
Company's existing systems will not be affected by the Year 2000 Problem, or
that a failure of any other parties, such as the government agencies on which
the Company depends for student financial assistance or the financial
institutions involved in the processing of student loans, to address the Year
2000 Problem will not have a material adverse effect on the Company's
business, results of operations or financial condition. In particular, there
can be no assurance that malfunctions relating to the Year 2000 Problem will
not result in the misreporting of financial information by the Company. The
Company is currently making inquiries of certain of its vendors regarding the

36
<PAGE>

Year 2000 Problem, and has not detected any issues relating to the Year 2000
Problem. However, the Company has not made a formal assessment of the computer
programs used by government agencies or other third parties with which the
company interacts, or an assessment of its own vulnerability to the failure of
such programs to be free of the Year 2000 Problem. See "Risk Factors--Year
2000 Problem; New Company Computer System."

INFLATION

The Company has historically implemented tuition increases each year at or
above the rate of inflation. Average tuition increases at the Company's
schools for fiscal 1997, 1996 and 1995 were 5.1%, 5.0% and 5.2%, respectively.

RECENT ACCOUNTING PRONOUNCEMENTS

Recent pronouncements of the Financial Accounting Standards Board ("FASB"),
which are not required to be adopted at this date, include Statement of
Financial Accounting Standards ("SFAS") No. 131, "Disclosure about Segments of
an Enterprise and Related Information," and SFAS No. 130, "Reporting
Comprehensive Income." Statement of Position 98-5, "Reporting on the Costs of
Start-Up Activities," requires that all nongovernmental entities expense the
costs of start-up activities as these costs are incurred. SFAS No. 128,
"Earnings Per Share," is effective for both interim and fiscal years ending
after December 15, 1997. SFAS No. 131 requires that a public business
enterprise report financial and descriptive information about its reporting
segments on the same basis that it uses internally for evaluating segment
performance and deciding how to allocate resources to segments. SFAS No. 130
establishes standards for reporting and display of comprehensive income and
its components in a full set of general-purpose financial statements. SFAS No.
128 specifies guidelines as to the method of computation of, as well as
presentation and disclosure requirements for, earnings per share. SFAS No. 128
and Statement of Position 98-5 did not have any effect on the Company's
Consolidated Financial Statements upon adoption. SFAS Nos. 130 and 131 are
effective for fiscal years beginning after December 15, 1997 and earlier
application is not permitted. The adoption of SFAS No. 130 is not expected to
have a material effect on the Company's consolidated financial statements. The
impact of adopting SFAS No. 131 has not been determined by the Company.

37
<PAGE>

BUSINESS

GENERAL

The Company is a leading provider of for-profit postgraduate education with
a primary focus on doctoral level programs. The Company's mission is to
provide academically-oriented, practitioner-focused education in fields with
numerous employment opportunities and strong student demand. The Company's
schools offer programs in clinical psychology, education, business, allied
health professions and information technology and are approved and accredited
to offer doctoral, master's, bachelor's and associate degrees as well as to
award diplomas. At May 31, 1998, approximately 62% of the Company's students
were enrolled in doctoral programs. In 1997, the Company graduated
approximately 335 clinical psychology doctoral students out of approximately
4,000 clinical psychology doctoral degrees conferred nationwide. The Company
operates 12 campuses in seven states and the Province of Ontario, Canada, with
a total of approximately 4,600 students representing 47 states and 30 foreign
countries, enrolled as of May 31, 1998. The Company's net revenue has grown
from $8.1 million in fiscal 1993 to $20.5 million in fiscal 1997, representing
a compound annual growth rate of approximately 26%.

The Company was founded in 1975, when the Company's Chairman, Michael C.
Markovitz, Ph.D., recognized a demand for a non-research oriented professional
school that would educate and prepare students for careers as clinical
psychology practitioners. To address this demand, the Company started the
Illinois School of Professional Psychology in Chicago, Illinois in 1976 and,
in its first year of operations, received several thousand applications for
admission to a class of 70 students for the PsyD degree. The continuing demand
for high quality, practitioner-focused psychology postgraduate education led
the Company to expand the renamed ASPP to seven campuses located across the
United States. In response to a broader demand for quality career education,
the Company has expanded beyond the psychology curriculum with the
acquisitions of: (i) the University of Sarasota, a degree-granting institution
focusing primarily on postgraduate business and education (March 1992); (ii)
the Medical Institute of Minnesota, a degree-granting institution focusing on
a variety of allied health professions (February 1998); and (iii) PrimeTech
Institute, an institution granting diplomas in computer programming and other
aspects of information technology and in paralegal studies (to be completed
concurrent with the Offering). Dr. Markovitz initially acquired a one-third
interest in PrimeTech in November 1995 and, together with the owners, will be
selling his interest to the Company in connection with the Offering. In
addition, the Company became the largest provider of postgraduate psychology
license examination preparation courses and materials in the United States by
its acquisition of Ventura in August 1997. Through Ventura, the Company also
provides professional licensure examination materials and workshops for social
work; marriage, family and child counseling; marriage and family therapy; and
counseling certification examinations nationwide.

The Company operates the following schools:

. American Schools of Professional Psychology grants doctoral and master's
degrees in clinical psychology and related disciplines at seven campuses
located in Illinois (2), Minnesota, Georgia, Virginia, Hawaii and
Arizona, and is preparing to operate campuses in Florida and California
pending regulatory approval. ASPP is accredited by NCA, and three of its
campuses are accredited by the APA. ASPP's net tuition revenue has grown
from $7.1 million for fiscal 1993 to $15.8 million for fiscal 1997,
representing a compound annual growth rate of approximately 22%.

. University of Sarasota grants doctoral, master's and bachelor's degrees
at two campuses located in Sarasota and Tampa, Florida, and is preparing
to operate a campus in Southern California. U of S is accredited by SACS.
U of S's net tuition revenue has grown from $1.1 million for fiscal 1993
to $4.2 million for fiscal 1997, representing a compound annual growth
rate of approximately 39%.

. Medical Institute of Minnesota grants associate degrees at one campus in
Minneapolis, Minnesota. MIM is institutionally accredited by ABHES, and
additionally holds individual programmatic accreditation appropriate to
each degree program offered. MIM's net tuition revenue was $1.5 million
for the four month period from February 3, 1998 (the date of acquisition)
to May 31, 1998.

38
<PAGE>

. PrimeTech Institute awards diplomas at two campuses in Ontario, Canada,
and is preparing to operate a campus in Scarborough, Ontario pending
regulatory approval. PrimeTech's net tuition revenue was $1.5 million for
the nine month period from September 1, 1997 to May 31, 1998. Dr.
Markovitz initially acquired a one-third interest in PrimeTech in November
1995 and, together with the other owners, will be selling his interest to
the Company in connection with the Offering.

In addition, Ventura publishes materials and holds workshops in select
cities across the United States to prepare individuals to take various
national and state administered oral and written health care licensure
examinations in psychology and other mental health disciplines. Ventura's net
tuition revenue was $2.8 million for the nine month period from August 26,
1997 (the date of acquisition) to May 31, 1998.

The following table sets forth certain additional information regarding the
Company's schools and their various campuses:

<TABLE>
<CAPTION>
YEAR
SCHOOL AND CAMPUS LOCATIONS OPENED DATE ACQUIRED ACCREDITATION
- ------------------------------------------------ ------ -------------- -------------
<S> <C> <C> <C> <C>
AMERICAN SCHOOLS OF PROFESSIONAL PSYCHOLOGY NCA
Illinois School of
Professional
Psychology/Chicago....... Chicago, IL 1976 -- APA
Illinois School of
Professional
Psychology/Meadows....... Rolling Meadows, IL 1979 March 1994
Minnesota School of
Professional Psychology.. Minneapolis, MN 1987 -- APA
Georgia School of
Professional Psychology.. Atlanta, GA 1990 -- APA
American School of
Professional
Psychology/Virginia...... Arlington, VA 1994 --
American School of
Professional
Psychology/Hawaii........ Honolulu, HI 1979 March 1994
Arizona School of
Professional Psychology.. Phoenix, AZ 1997 --
Florida School of
Professional
Psychology(1)............ Tampa, FL 1995 September 1998
American School of
Professional
Psychology/Rosebridge(2). Corte Madera, CA
UNIVERSITY OF SARASOTA SACS
University of
Sarasota/Honore.......... Sarasota, FL 1969 March 1992
University of
Sarasota/Tampa........... Tampa, FL 1995 --
University of
Sarasota/California(2)... Southern CA
MEDICAL INSTITUTE OF
MINNESOTA................ Minneapolis, MN 1961 February 1998 ABHES
PRIMETECH INSTITUTE(3)
PrimeTech Institute/North
York..................... North York, Ontario 1989 April 1998
PrimeTech Institute/City
Campus................... Toronto, Ontario 1995 April 1998
PrimeTech
Institute/Scarborough(2). Scarborough, Ontario
</TABLE>
- --------
(1) From September 1995 until Fall 1998, the Florida School of Professional
Psychology ("FSPP") was operated as a part of the University of
Sarasota/Tampa campus. Pending receipt of a license from the State of
Florida, FSPP is continuing to operate under the U of S's Florida license.
(2) These campuses will be established if and when all required regulatory
approvals have been obtained. The Company has applications pending for all
such approvals.
(3) In April 1998, the Company entered into an agreement, pursuant to which
the Company will acquire 100% of the outstanding stock of PrimeTech. Dr.
Markovitz initially acquired a one-third interest in PrimeTech in November
1995 and, together with the other owners, will sell his interest to the
Company in connection with the Offering.

39
<PAGE>

INDUSTRY OVERVIEW

According to the DOE's National Center for Education Statistics (the
"NCES"), education is the second largest sector of the U.S. economy,
accounting for approximately 8% of gross domestic product in 1997, or over
$600 billion. The Company's schools are part of the postsecondary education
market, which accounts for approximately one-third of the total sector. Of the
approximately 6,000 postsecondary schools that are eligible to participate in
the Title IV Programs, approximately 500 are proprietary degree-granting
institutions such as the Company's schools.

The NCES estimates that by the year 2001 the number of students enrolled in
higher education institutions will increase by more than 1.5 million, to over
16 million students. The Company believes that a significant portion of this
growth in the postsecondary education market will result from an increase in
the number of new high school graduates, an increase in the number of college
graduates attending postgraduate institutions and the increased enrollment by
working adults in postsecondary and postgraduate institutions. According to
the NCES, the number of new high school graduates per year is expected to
increase by approximately 24%, from 2.5 million graduates in 1994 to 3.1
million graduates in 2004. Over the same period, the number of college
graduates attending postgraduate institutions is expected to increase by
approximately 100,000 students. The NCES estimates that, over the next several
years, initial enrollments in postsecondary education institutions by working
adults will increase more rapidly than initial enrollments of recent high
school graduates.

The postsecondary education industry generally is expected to benefit from
the public's increased recognition of the value of a postsecondary education.
According to the NCES, the percentage of recent high school graduates who
continued their education after graduation increased from approximately 53% in
1983 to approximately 65% in 1996. The percentage of college graduates
continuing to postgraduate institutions remained relatively constant, at 11%,
over the same period. The Company believes that students pursue higher
education for a variety of reasons, including the increased prestige
associated with academic credentials, career change and development,
intellectual curiosity and the income premium associated with higher
education. According to Census Bureau data, in 1995 the income premiums over
comparable workers with high school diplomas for associate, bachelor's,
master's and doctoral degree holders were 25%, 55%, 91% and 127%,
respectively.

BUSINESS STRATEGY

Focusing on Advanced Degrees. The Company is a leading for-profit provider
of postgraduate education in the United States. Approximately 62% of the
Company's students are enrolled in doctoral programs, with an additional 18%
pursuing master's degrees and 20% pursuing bachelor's or associate degrees or
diplomas. Management believes that the Company's emphasis on advanced degree
programs provides greater predictability of tuition revenue and reduces
recruitment cost per enrolled student. Consistent with this philosophy, the
Company plans to expand some of its associate degree programs, such as those
offered by MIM, to bachelor's degree programs. By offering more advanced
degree programs, the Company can also take advantage of the tendency of many
graduates of master's, bachelor's and associate degree programs to continue
their education at the same institution if appropriate advanced degree
programs are offered.

Focusing on Curricula with Practical Professional Applications. The Company
was founded to respond to a demand for postgraduate education which focuses on
practical professional applications instead of research. The Company's
academic programs are designed to prepare students to work in their chosen
professions immediately upon graduation. Psychology graduate students, for
example, gain significant practical professional experience through a required
internship program. Similarly, MIM requires all of its students to participate
in a field-based internship. The Company's programs for professional educators
also focus on practical benefits by offering the academic credentials and
skills in discrete sub-specialties required for promotion and increased
compensation. This practitioner-focused approach provides the additional
benefits of attracting highly motivated

40
<PAGE>

students and increasing student retention and graduate employment. The
Company's professional test preparation business provides it with another
means of participating in the practical education needed for graduates in many
fields to become practitioners.

Refining and Adapting Educational Programs. Each of the Company's schools
strives to meet the changing needs of its students and changes in the
employment markets by regularly refining and adapting its existing educational
programs. To do so, the Company has implemented its Program for Institutional
Effectiveness Review. PIER is designed to provide periodic feedback from
senior management, faculty and students with a view toward consistently
improving the quality of each school's academic programs. Through PIER, the
Company solicits the views of each of these participants in the educational
process on quality improvement issues such as curriculum innovations which can
meet existing or expected employment and student demands and class scheduling
and other program administrative improvements which can improve the students'
educational experience.

Emphasizing School Management Autonomy and Accountability. The Company
operates with a decentralized management structure in which local campus
management is empowered to make most of the day-to-day operating decisions at
each campus and is primarily responsible for the profitability and growth of
that campus. Appropriate performance-based incentive compensation arrangements
have been implemented by the Company to reinforce the accountability of local
campus management under this structure. At the same time, the Company provides
each of its schools with certain services that it believes can be performed
most efficiently and cost-effectively by a centralized office. Such services
include marketing, accounting, information systems, financial aid processing
and administration of regulatory compliance. The Company believes this
combination of decentralized management and certain centralized services
significantly increases its operational efficiency.

GROWTH STRATEGY

Expanding Program Offerings. The Company continually engages in the
development of new and the expansion of existing curricular offerings at the
doctoral, master's, bachelor's, associate and diploma levels. Of the 17
degree-granting programs currently offered by the Company, five have been
introduced since 1995. For example, in 1995 the Company introduced its DBA
program to provide students with advanced level business training and in 1997
the Company initiated its MSHSA program to provide students with training and
problem solving skills from the areas of both business and social sciences.
The Company believes that there are significant opportunities to develop
additional new programs, such as its proposed program in sports psychology at
ASPP, its proposed program in dental hygienics at MIM, and its new program in
pastoral counseling at U of S. Once new programs have proven successful at one
school, the Company seeks to expand them to its other schools which offer
related programs. For example, ASPP currently offers a master's of arts ("MA")
degree in counseling at four campuses and is in the process of making this
program available at the remaining ASPP campuses.

Adding New Campuses. The Company seeks to expand its presence into new
geographic locations. Six of the Company's 12 campuses were developed by the
Company, either as new campuses or as additional locations of existing
campuses. The Company continually evaluates new locations for developing
additional campuses and believes that significant opportunities exist for
doing so. For example, of the 21 metropolitan areas in the United States with
a population in excess of two million persons, nine do not have a graduate
school of professional psychology that awards the PsyD degree. The Company
also believes there is demand in Southern California for the type of programs
offered by U of S and has received approval from SACS to open a branch campus
of U of S in Southern California. The Company intends to proceed with the
development of this branch campus as soon as it receives approval from the
State of California. The Company has also recently been granted a license to
open a new PrimeTech campus in Scarborough, Ontario.

41
<PAGE>

Emphasizing Student Recruitment and Retention. The Company believes that it
can increase total enrollment at its campuses through the implementation of an
integrated marketing program that utilizes direct response and direct sales to
college and high school counselors. The Company is in the process of hiring a
marketing professional at each of its campuses to focus both the marketing
campaign and overall recruitment effort of each campus within its targeted
market. The Company also believes it can increase its profitability through
improvements in student retention rates, as the cost of efforts to keep
current students in school are less than the expense of attracting new
students.

Expanding into Related Educational Services. The Company believes that
significant opportunities exist in providing educational services that are
related to its current program offerings. Through Ventura, the Company has
become a leading provider of test preparation programs for psychology
licensure examinations. These programs bring the Company in contact with a
significant number of current and future psychology practitioners, which the
Company believes can offer an opportunity to market additional educational
programs in the future. For example, the Company believes that non-degree
continuing education programs will increasingly be mandated by state licensing
authorities; this represents an opportunity for the Company to provide
services not only for the graduates of its schools, but also for the broader
universe of licensed health care providers to which it gains access through
its Ventura test preparation programs.

Acquisitions. The Company intends to capitalize on the fragmentation in both
the for-profit and not-for-profit segments of the postgraduate education
industry by acquiring and consolidating attractive schools and educational
programs. The Company has acquired six of its 12 campuses, three of which were
for-profit and three of which were not-for-profit, and the Ventura test
preparation business. The Company believes there are significant opportunities
to acquire schools which can serve as platforms for program and campus
expansion. Prime acquisition candidates are those that have the potential to
be quickly developed into profitable, accredited degree-granting schools
offering programs consistent with the Company's mission.

PROGRAMS OF STUDY

ASPP. ASPP grants postgraduate level degrees in a variety of specialties
within the field of clinical psychology. The Company offers a doctorate in
clinical psychology, master's of arts degrees in clinical psychology and
professional counseling and a master's of science degree in health services
administration. ASPP also offers a postdoctoral program in clinical
psychopharmacology. Approximately 70% of ASPP's students are enrolled in the
PsyD program in various specialties and, of the students enrolled in the
clinical MA program, historically more than 50% continue in the PsyD program.

The Company was among the first academic programs in the United States to
offer the practitioner-focused PsyD degree, as compared to the research-
oriented PhD degree. The PsyD is a four year program consisting of one year of
classroom training, two years divided between classroom training and fieldwork
practicum and a fourth year consisting of a paid internship. The program
focuses on practical issues in clinical psychology as compared to abstract
research topics. For example, fourth year students prepare a case study as
their final project, rather than a doctoral dissertation. Clinical MA students
complete a two year program, all of which can be carried over into the PsyD
program.

In connection with its emphasis on a practitioner-focused education, ASPP
offers a variety of minors to be pursued in connection with the PsyD program.
For example, the Chicago campus offers minors in the areas of Family
Psychology, Ethnic Racial Psychology, Psychoanalytic Psychology, Sexual Abuse
Psychology, Health Psychology and Psychology and Religion. The Minnesota
campus also offers the Health Psychology and Psychology and Religion
subspecialties, as well as a minor in Child and Family Psychology, and the
Hawaii campus offers a minor in Substance Abuse.

The master's of arts program in professional counseling is a two year
program combining classroom training and fieldwork. Typically offered in the
evening and on weekends, this program aims to provide the skills and training
needed by individuals to practice as licensed professional counselors in a
wide variety of governmental, community and private settings.

42
<PAGE>

The MSHSA degree is designed to provide students with training and problem
solving skills from the areas of both business and social sciences. Students
learn about business principles and their application to health care as well
as clinical training methods and behavior theories applicable to the health
care field. The program focuses on innovative solutions to health care
delivery problems by drawing on both business and interpersonal behavior
theory.

ASPP's academic programs are highly respected in the field. Since its
inception in 1976, ASPP has graduated over 2,400 students. While its focus is
on practice rather than research, its graduates also include PsyDs who now
serve as tenured faculty members at Harvard University and Northwestern
University.

U of S. U of S grants postgraduate and bachelor's level degrees in
education, business and behavioral science. In education, U of S offers a
doctorate in education ("EdD"), a master's of arts in education ("MEd") and an
educational specialist degree ("EdS"), each with various majors or
concentrations such as curriculum and instruction, human services
administration, counseling psychology and educational leadership. In business,
U of S offers a doctorate in business administration, a master's of business
administration ("MBA") and a bachelor's of science in business administration
("BSBA"), each with various majors or concentrations such as information
systems, international business, management and marketing. In behavioral
science, U of S offers a master's of arts in counseling.

The EdD and MEd programs are offered to professional educators from across
the U.S. The programs consist of an innovative combination of distance
learning and personal interaction, allowing students to complete a significant
percentage of the preparatory work for each course at home in advance of an
intensive in-person instructional period, typically scheduled during breaks in
the academic year. The Company believes that an important aspect of the
learning experience is the student's interaction with faculty and other
students. The EdD is a three year program and the MEd is a two year program.

The DBA, MBA and BSBA degrees are offered both part-time and full-time and
consist of classes in disciplines such as statistics, economics, accounting
and finance. The BSBA is a two year degree program; the MBA a two year
program; and the DBA a three year program, of which the MBA can count for two
years.

MIM. MIM offers associate degrees ("AA") in a variety of allied health care
fields. MIM offers programs leading to certification as a veterinary
technician, diagnostic medical sonographer, histotechnician, medical
assistant, medical laboratory technician or radiologic technologist.
Currently, approximately 60% of the students are enrolled in the veterinary
technician program. The programs typically consist of 12-15 months of full-
time classroom training and two to six months of internship.

PrimeTech. PrimeTech offers diploma programs in network engineering,
internet engineering, software programming and paralegal studies. The programs
typically consist of 18 months of full-time course work, which can be taken on
a part-time basis and which is completed on-site.

Ventura. Ventura publishes materials and holds workshops in select cities
across the United States to prepare individuals to take various national and
state administered oral and written health care licensure examinations in the
fields of psychology, social work, counseling, marriage and family therapy,
and marriage, family and child counseling. The programs typically last three
to four days and are conducted at various locations throughout the United
States.

STUDENT BODY

Recruitment

The Company seeks to attract students with both the motivation and ability
to complete the programs offered by its schools. To generate interest, the
Company engages in a broad range of activities to inform potential students
and their parents about its schools and programs of study.

The general reputation of the Company's schools and referrals from current
students, alumni and employers are the largest sources of new students. The
Company believes that over 60% of ASPP's students for the 1997

43
<PAGE>

fiscal year were recruited through referrals from current and former students
as well as employees and others who have worked with ASPP's graduates. The
Company also employs marketing tools such as its web site and creates
publications and other promotional materials for the Company's schools,
participates in school fairs and uses other traditional recruitment techniques
common to undergraduate and postgraduate institutions. The goal of the
Company's recruitment efforts is to increase awareness of the Company's
schools among potential applicants in a cost-effective and dignified manner.

ASPP and U of S operate in a different marketing environment than MIM and
PrimeTech. ASPP and U of S seek to appeal to academically-oriented students,
students who might otherwise elect to attend a state-sponsored or private
university and who expect to see recruitment efforts and materials consistent
with such universities, such as course catalogs and participation in student
fairs. MIM and PrimeTech seek to appeal to students who are strictly seeking
career-enhancing education, students who may not have college or university
experience and who typically respond to more traditional commercial marketing
efforts. Ventura markets its programs directly to graduates of postgraduate
psychology schools that have registered to take postgraduate licensure exams.

The following table sets forth certain statistics regarding the student body
at each of the Company's schools for the 1997/1998 academic year:

<TABLE>
<CAPTION>
NUMBER OF AVERAGE
SCHOOL STUDENTS AGE % POSTGRADUATE
- ----------------------------------------------- --------- ------- --------------
<S> <C> <C> <C>
American Schools of Professional Psychology.... 1,876 33 100%
University of Sarasota......................... 1,217 41 98%
Medical Institute of Minnesota................. 582 27 0%
PrimeTech Institute............................ 574 30 0%
</TABLE>

Admission

The Company's admissions objective is to achieve controlled student
enrollment growth while consistently maintaining the integrity and quality of
its academic programs. At each of the Company's schools, student admissions
are overseen by a committee, comprised principally of members of the faculty,
that reviews each application and makes admissions decisions. Differing
programs within the Company operate with differing degrees of selectivity.
Some of the Company's programs, particularly its postgraduate psychology
programs, receive many more applications for admission than can be
accommodated. Admissions criteria for such programs include a combination of
prior academic record, performance on an admissions essay and work experience.
The Company believes that other of its programs are beneficial to anyone who
chooses to take them. Such programs tend to be less selective; however, the
Company does screen students both for their commitment to completing a
particular program of study and their aptitude for the academic subject matter
of their chosen program. Upon passing the various screens of the admissions
process, successful applicants are notified of acceptance into the program of
their choice. All of the Company's schools use a rolling admissions format.

Retention

The Company recognizes that the ability to retain students until graduation
is an important indicator of the success of its schools and of its students.
As with other postsecondary institutions, students at the Company's schools
may fail to finish their programs for a variety of personal, financial or
academic reasons. While ASPP doctoral students have seven years to complete
their studies, students generally complete the program in approximately five
and one-half years. Over 62% of the members of ASPP's 1992 entering doctoral
class graduated in 1997, and historically approximately 70% of ASPP's students
ultimately complete their degree. U of S, MIM and PrimeTech have historically
had similar completion rates, although MIM and PrimeTech have substantially
shorter programs. The Company believes MIM's and PrimeTech's completion rates
are higher than those of many other associate degree and diploma programs. To
reduce the risk of student withdrawals, the Company counsels students early in
the application process to gauge their commitment to completing their chosen
course of study.

As with students at other postsecondary educational institutions, the
Company's students who fail to complete their programs do so for a variety of
personal, financial or academic reasons. As a result, student

44
<PAGE>

retention is considered an entire school's responsibility, from admissions to
faculty and administration to career counseling services. To minimize student
withdrawals, faculty and staff members at each of the Company's campuses
strive to establish personal relationships with students. Each campus devotes
staff resources to advising students regarding academic and financial matters,
part-time employment and other matters that may affect their success. However,
while there may be many contributors, each campus has one administrative
employee specifically responsible for monitoring and coordinating the student
retention efforts. In addition, the Company's senior management regularly
tracks retention rates at each campus and provides feedback and support to
local campus administrators.

TUITION AND FEES

The Company's schools invoice students for tuition and other institutional
charges by the term of instruction. Each school's refund policies meet the
requirements of the DOE and such school's state and accrediting agencies.
Generally, if a student ceases attendance during the first 60% of his or her
first term, the applicable school will refund institutional charges based on
the number of weeks remaining in that term. After a student has attended 60%
of that term, the school will retain 100% of the institutional charges. After
a student's first term, the school refunds institutional charges based on the
number of weeks attended in the term in which the student withdraws.
Generally, after six weeks of a term, the school will retain 100% of the
institutional charges for that academic period.

The following table sets forth the average total tuition to complete a
degree at each of the Company's schools, based on tuition rates for the
1997/1998 academic year:

<TABLE>
<CAPTION>
AVERAGE TOTAL LENGTH OF
SCHOOL TUITION PROGRAM
- ------------------------------------------------------- ------------- ---------
<S> <C> <C>
AMERICAN SCHOOLS OF PROFESSIONAL PSYCHOLOGY
PsyD................................................. $ 51,500 4 years
MA (Clinical)........................................ 24,000 2 years
MA (Counseling)...................................... 17,500 2 years
MSHSA................................................ 22,500 2 years
UNIVERSITY OF SARASOTA
DBA, EdD............................................. $ 21,500 3 years
MEd.................................................. 15,585 2 years
EdS.................................................. 10,500 2 years
MBA.................................................. 9,500 2 years
MA................................................... 15,585 2 years
BSBA................................................. 14,000 2 years
MEDICAL INSTITUTE OF MINNESOTA
Veterinary Technician, Radiologic Technologist,
Medical Lab Technician, Diagnostic Medical
Sonographer......................................... $ 18,500 18 months
Histotechnician, Medical Assistant................... 16,000 18 months
PRIMETECH INSTITUTE
Software Programming Engineer........................ C$ 14,500 18 months
Software Programmer.................................. 11,500 13 months
PC/LAN............................................... 7,000 12 months
Internet Service/Support Engineer.................... 6,000 12 months
Legal Secretary...................................... 6,000 12 months
LAN Professional, Paralegal.......................... 5,500 12 months
Microcomputer Business Application Administration.... 4,500 12 months
Desktop Publishing Specialist........................ 4,000 12 months
Accounting Assistant................................. 3,500 12 months
</TABLE>

45
<PAGE>

GRADUATE EMPLOYMENT

The Company believes that employment of its graduates in occupations related
to their fields of study is critical to the ability of its schools to continue
to recruit students successfully. Based on information received from
graduating students and employers, the Company believes that students
graduating from the Company's schools enjoy considerable professional success.
ASPP's graduating class of 1997, for example, reported a 95% employment rate
within six months after graduation. U of S's education students are primarily
working professional educators, and thus by definition, have a significant
graduate employment rate. The success of their educational experience is
measured by continued and accelerated success in their field. MIM and
PrimeTech each provide academic programs specifically tailored to a student's
career goals. MIM's and PrimeTech's graduating classes of 1997 reported
employment rates in their relevant fields of study within six months of
graduation of 85% and 91%, respectively.

FACULTY

The Company seeks to attract and retain faculty with outstanding credentials
in their respective fields for each of its schools. Each of the Company's
schools attempts to employ faculty members who are dedicated to the teaching
profession and to provide such faculty members with a stimulating and
professional academic environment and competitive compensation packages. The
Company emphasizes a core staff of full-time faculty members to maintain
continuity and consistency across its academic programs, augmented by part-
time adjunct faculty with significant industry experience. The Company's
schools each employ dedicated faculty with significant experience and
credentials in their respective fields to provide the personal interaction
that is critical to the academic experience. The Company also encourages its
full-time faculty members to engage in meaningful outside professional
activities to retain current practical experience. The Company has implemented
its PIER program providing periodic feedback to faculty from senior
management, faculty peers and students with a view toward consistently
improving the quality of each school's academic programs.

The following table sets forth certain information regarding the faculty at
each of the Company's schools as of June 30, 1998:

<TABLE>
<CAPTION>
FULL-TIME ADJUNCT
SCHOOL FACULTY FACULTY(1) HIGHEST DEGREE OF FULL-TIME FACULTY
- ------------------------ --------- ---------- ------------------------------------------
<S> <C> <C> <C>
American Schools of
Professional
Psychology............. 81 166 100% Doctoral (PhD or PsyD)
University of Sarasota.. 29 11 95% Doctoral, 5% Master's
Medical Institute of 23 26 9% Doctoral, 13% Master's, 43% Bachelor's,
Minnesota.............. 9% Associate, 26% Certificate
PrimeTech Institute..... 15 2 12% Doctoral, 38% Master's, 50% Bachelor's
</TABLE>
- --------
(1) Represents faculty members teaching at least one class during the
1997/1998 academic year.

GOVERNANCE OF THE COMPANY'S SCHOOLS

Each ASPP campus is managed locally by a Dean who reports to the President
of the Company (Harold J. O'Donnell). U of S is headed by a Provost (Ned
Wilson) who reports to the Board of U of S, with a consultative relationship
with the President of the Company. Both PrimeTech and MIM are headed by Unit
Presidents (George Schwartz and Philip Miller, respectively) each of whom
reports to his respective Board, as well as maintains a consultative
relationship with the President of the Company. Scott Abels, President of
Ventura, reports to the President of the Company.

ASPP, U of S, MIM and PrimeTech each has an independent Board of Directors,
separate from the Company's Board but elected by the Company as sole
shareholder. These local Boards independently make and approve policies and
budgets.

COMPETITION

46
<PAGE>

postgraduate, four-year and two-year degree-granting institutions, which
include non-profit public and private colleges, universities and proprietary
institutions. An attractive employment market also reduces the number of
students seeking postgraduate degrees, thereby increasing competition for
potential postgraduate students. Management believes that competition among
educational institutions is based on the quality of educational programs,
location, perceived reputation of the institution, cost of the programs and
employment opportunities for graduates. Certain public and private colleges
and universities may offer programs similar to those of the Company at a lower
tuition cost due in part to governmental subsidies, government and foundation
grants, tax deductible contributions or other financial resources not
available to proprietary institutions. Other proprietary institutions also
offer programs that compete with those of the Company. Moreover, there is an
increase in competition in the specific educational markets served by the
Company. For example, excluding PsyD programs offered by the Company, in the
1992 academic year there were 29 PsyD programs existing in the United States,
while in the 1998 academic year there were 36 PsyD programs in the United
States. Certain of the Company's competitors in both the public and private
sector have greater financial and other resources than the Company.

EMPLOYEES

As of June 30, 1998, the Company employed 308 persons. Of this number, 23
were employed in the Company's corporate headquarters, 152 were full-time or
permanent part-time faculty members and 133 were working as administrative or
support staff deployed at the various Company locations. None of the Company's
employees are unionized. The Company believes its relations with its employees
are generally good.

FACILITIES

The following table sets forth certain information as of June 30, 1998 with
respect to the principal properties leased by the Company and its
subsidiaries. All of the Company's facilities are leased except the University
of Sarasota's Honore campus, which is owned by the Company. See "Management--
Compensation Committee Interlocks and Insider Participation."

<TABLE>
<CAPTION>
CAMPUS SQUARE FOOTAGE
- ----------------------------------------------------------------- --------------
<S> <C>
AMERICAN SCHOOLS OF PROFESSIONAL PSYCHOLOGY
Illinois School of Professional Psychology/Chicago............... 37,831
Illinois School of Professional Psychology/Meadows............... 10,469
Minnesota School of Professional Psychology...................... 9,457
Georgia School of Professional Psychology........................ 9,725
American School of Professional Psychology/Virginia.............. 7,976
American School of Professional Psychology/Hawaii................ 6,596
Arizona School of Professional Psychology........................ 8,673
Florida School of Professional Psychology........................ 5,410
American School of Professional Psychology/Rosebridge............ 4,184
UNIVERSITY OF SARASOTA
University of Sarasota/Honore Campus............................. 18,940
University of Sarasota/Tampa Campus.............................. 5,410
MEDICAL INSTITUTE OF MINNESOTA................................... 62,300
PRIMETECH INSTITUTE
PrimeTech Institute/North York................................... 9,199
PrimeTech Institute/City Campus.................................. 8,681
VENTURA.......................................................... 15,540
</TABLE>

47
<PAGE>

LEGAL PROCEEDINGS

The Company, Dr. Markovitz and certain other companies in which Dr.
Markovitz has an interest have been named as defendants in Charlena Griffith,
et al. v. University Hospital, L.L.C. et al., a class action lawsuit filed in
November 1997 and currently pending in the United States District Court for
the Northern District of Illinois, Eastern Division. This lawsuit arose in
connection with the closing of a for-profit psychiatric hospital located in
Chicago, which was established in 1989 by Dr. Markovitz and operated under the
name University Hospital ("University Hospital"). University Hospital was
substantially dependant on Medicare reimbursement for its revenues. In May
1997, after continued Medicare reimbursement to University Hospital was
effectively terminated, University Hospital ceased operations and made an
assignment for the benefit of its creditors, which is ongoing. The Company
owned a 95% equity interest in University Hospital at the time of the
assignment for the benefit of its creditors.

The plaintiffs in the lawsuit, former employees of University Hospital,
allege that (i) the hospital was closed without proper notice to employees in
violation of the Worker Adjustment and Retraining Notification Act; (ii) in
violation of the Employee Retirement Income Security Act of 1974, employee
contributions to the hospital's profit sharing plan made prior to the hospital
closing were not delivered to the plan; (iii) in violation of the Illinois
Wage Payment and Collection Act, the hospital failed to pay the final
compensation due its employees prior to the hospital closing and (iv) the
defendants converted for their own use and benefit the amount of the
plaintiffs' last paycheck, accrued vacation, profit sharing contributions and
credit union contributions. The Company and Dr. Markovitz have been named as
defendants in this lawsuit based upon an allegation that they are alter egos
of University Hospital.

The Company, Dr. Markovitz and the other defendants in this lawsuit deny all
claims asserted and are vigorously defending themselves. The cost of defense
has not been borne by the Company, and the Company does not expect the
ultimate outcome of this matter to have a material adverse effect on its
results of operations or financial condition.

The Company is not party to any other legal proceedings that it believes
would, individually or in the aggregate, have a material adverse effect on its
results of operations or financial condition.

48
<PAGE>

FINANCIAL AID AND REGULATION

ACCREDITATION

Accreditation is a non-governmental process through which an institution
submits itself to qualitative review by an organization of peer institutions.
The three types of accrediting agencies are (i) national accrediting agencies,
which accredit institutions on the basis of the overall nature of the
institutions without regard to their locations, (ii) regional accrediting
agencies, which accredit institutions located within their geographic areas
and (iii) programmatic accrediting agencies, which accredit specific
educational programs offered by an institution. Accrediting agencies primarily
examine the academic quality of the instructional programs of an institution,
and a grant of accreditation is generally viewed as certification that an
institution's programs meet generally accepted academic standards. Accrediting
agencies also review the administrative and financial operations of the
institutions they accredit to ensure that each institution has the resources
to perform its educational mission.

Pursuant to provisions of the HEA, the DOE relies on accrediting agencies to
determine whether institutions' educational programs qualify them to
participate in the Title IV Programs. The HEA specifies certain standards that
all recognized accrediting agencies must adopt in connection with their review
of postsecondary institutions. Accrediting agencies that meet the DOE
standards are recognized as reliable arbiters of educational quality. The HEA
requires each recognized accrediting agency to submit to a periodic review of
its procedures and practices by the DOE as a condition of its continued
recognition.

All of the Company's U.S. campuses are accredited by an accrediting agency
recognized by the DOE. ASPP is accredited by NCA to offer both doctoral and
master's degrees at its campuses in Illinois, Minnesota, Georgia, Virginia,
Hawaii and Arizona. ASPP's Chicago, Minneapolis and Atlanta campuses are also
accredited by the APA. U of S is accredited by SACS to award doctoral,
master's and bachelor's degrees in business, doctoral and master's degrees in
education and doctoral and master's degrees in psychology. MIM is approved by
the State of Minnesota to award associate degrees in a variety of allied
health fields, is institutionally accredited by ABHES, a nationally recognized
accreditor of allied health care institutions, and additionally holds
individual programmatic accreditation appropriate to each degree program
offered. PrimeTech is approved as a private vocational school in the Province
of Ontario, Canada, to award diplomas upon successful completion of the
following main programs: (1) Network Engineering; (2) Internet Engineering;
(3) Software Programming; and (4) Paralegal Studies.

The HEA requires accrediting agencies recognized by the DOE to review many
aspects of an institution's operations to ensure that the education or
training offered by the institution is of sufficient quality to achieve, for
the duration of the accreditation period, the stated objective for which the
education or training is offered. Under the HEA, a recognized accrediting
agency must perform regular inspections and reviews of institutions of higher
education, including unannounced site visits to institutions that provide
career-oriented education and training. An accrediting agency may place an
institution on probation or similar warning status or direct the institution
to show cause why its accreditation should not be revoked if the accrediting
agency believes an institution may be out of compliance with accrediting
standards. It may also place an institution on "reporting" status in order to
monitor one or more specified areas of the institution's performance. An
institution placed on reporting status is required to report periodically to
its accrediting agency on that institution's performance in the specified
areas. While on reporting status, an institution may be required to seek the
permission of its accrediting agency to open and commence instruction at new
locations. None of the Company's schools are on probation, show cause or
reporting status.

STUDENT FINANCIAL ASSISTANCE

49
<PAGE>

tuition revenue (on a cash basis) was derived from some form of such
government-sponsored financial aid received by the students enrolled in its
schools. In addition, a substantial majority of the students attending
PrimeTech receive Canadian government-sponsored financial aid.

To provide students access to financial assistance available through the
Title IV Programs, an institution, including its additional locations, must be
(i) authorized to offer its programs of instruction by the relevant agencies
of the state in which it and its additional campuses, if any, are located,
(ii) accredited by an accrediting agency recognized by the DOE and (iii)
certified as eligible by the DOE. In addition, the institution must ensure
that Title IV Program funds are properly accounted for and disbursed to
eligible students.

Under the HEA and its implementing regulations, each of the Company's
campuses that participates in the Title IV Programs must comply with certain
standards on an institutional basis, as more specifically identified below.
For purposes of these standards, the regulations define an institution as a
main campus and its additional locations, if any. Under this definition, each
of the Company's U.S. campuses is a separate institution.

NATURE OF FEDERAL SUPPORT FOR POSTSECONDARY EDUCATION IN THE UNITED STATES

While many states support public colleges and universities primarily through
direct state subsidies, the federal government provides a substantial part of
its support for postsecondary education in the form of grants and loans to
students who can use this support at any institution that has been certified
as eligible by the DOE. The Title IV Programs have provided aid to students
for more than 30 years, and, since the mid-1960's, the scope and size of such
programs have steadily increased. Since 1972, Congress has expanded the scope
of the HEA to provide for the needs of the changing national student
population by, among other things, (i) providing that students at proprietary
institutions, such as the Company's institutions, are eligible for assistance
under the Title IV Programs, (ii) establishing a program for loans to parents
of eligible students, (iii) opening the Title IV Programs to part-time
students, and (iv) increasing maximum loan limits and in some cases
eliminating the requirement that students demonstrate financial need to obtain
federally guaranteed student loans. Most recently, the Federal Direct Loan
program was enacted, enabling students to obtain loans from the federal
government rather than from commercial lenders. The process of reauthorizing
the HEA by the U.S. Congress, which takes place approximately every five
years, has begun and is expected to be completed in late 1998. Numerous
changes to the HEA have been proposed by the DOE and other parties.

Students at the Company's institutions receive grants, loans and work
opportunities to fund their education under several of the Title IV Programs,
of which the two largest are the FFEL program and the Federal Pell Grant
("Pell") program. Some of the Company's institutions participate in the
Perkins program and the Federal Work-Study ("FWS") program. In addition, the
Company's institutions are eligible to participate in the Federal Supplemental
Educational Opportunity Grant ("FSEOG") program.

Most aid under the Title IV Programs is awarded on the basis of financial
need, generally defined under the HEA as the difference between the cost of
attending an educational program and the amount a student can reasonably
contribute to that cost. All recipients of Title IV Program funds must
maintain a satisfactory grade point average and progress in a timely manner
toward completion of their program of study.

Pell. Pell grants are the primary component of the Title IV Programs under
which the DOE makes grants to students who demonstrate financial need. Every
eligible student is entitled to receive a Pell grant; there is no
institutional allocation or limit.

FSEOG. FSEOG awards are designed to supplement Pell grants for the neediest
students. FSEOG grants generally range in amount from $100 to $4,000 per year;
however, the availability of FSEOG awards is limited by the amount of funds
allocated to an institution under a formula that takes into account the size
of the institution, its costs and the income levels of its students. The
Company is required to make a 25% matching contribution for all FSEOG program
funds disbursed. Resources for this institutional contribution may include
institutional grants, scholarships and other eligible funds (i.e., funds from
foundations and other charitable organizations) and, in certain states,
portions of state scholarships and grants. At this time, none of the Company's
institutions participates in FSEOG.

50
<PAGE>

FFEL. The FFEL program consists of two types of loans, Stafford loans, which
are made available to students, and PLUS loans, which are made available to
parents of students classified as dependents. Under the Stafford loan program,
a student may borrow up to $2,625 for the first academic year, $3,500 for the
second academic year and, in some educational programs, $5,500 for each of the
third and fourth academic years. Graduate and professional students may borrow
up to $8,500 per academic year. Students with financial need qualify for
interest subsidies while in school and during grace periods. Students who are
classified as independent can increase their borrowing limits and receive
additional unsubsidized Stafford loans. Such students can obtain an additional
$4,000 for each of the first and second academic years and, depending upon the
educational program, an additional $5,000 for each of the third and fourth
academic years. Graduate and professional students may borrow up to an
additional $10,000 per academic year. The obligation to begin repaying
Stafford loans does not commence until six months after a student ceases
enrollment as at least a half-time student. Amounts received by students in
the Company's institutions under the Stafford program in the 1996-97 award
year equaled approximately 42% of the Company's net U.S. tuition revenue (on a
cash basis). PLUS loans may be obtained by the parents of a dependent student
in an amount not to exceed the difference between the total cost of that
student's education (including allowable expenses) and other aid to which that
student is entitled. At this time, none of the Company's institutions
participates in the PLUS program.

The Company's schools and their students use a wide variety of lenders and
guaranty agencies and have not experienced difficulties in identifying lenders
and guaranty agencies willing to make federal student loans. The HEA requires
the establishment of lenders of last resort in every state to ensure that
students at any institution that cannot identify such lenders will have access
to the FFEL program loans.

Perkins. Eligible undergraduate students may borrow up to $3,000 under the
Perkins loan program during each academic year, with an aggregate maximum of
$15,000, at a 5% interest rate and with repayment delayed until nine months
after the borrower ceases to be enrolled on at least a half-time basis.
Perkins loans are made available to those students who demonstrate the
greatest financial need. Perkins loans are made from a revolving account, 75%
of which was initially capitalized by the DOE. Subsequent federal capital
contributions, with an institutional match in the same proportion, may be
received if an institution meets certain requirements. Each institution
collects payments on Perkins loans from its former students and loans those
funds to currently enrolled students. Collection and disbursement of Perkins
loans is the responsibility of each participating institution. During the
1996-97 award year, the Company collected approximately $36,100 from its
former students in repayment of Perkins loans. In the 1996-97 award year, the
Company's required matching contribution was approximately $5,700. The Perkins
loans disbursed to students in the Company's institutions in the 1996-97 award
year represented less than 1% of the Company's net U.S. tuition revenue.

FWS. Under the FWS program, federal funds are made available to pay up to
75% of the cost of part-time employment of eligible students, based on their
financial need, to perform work for the institution or for off-campus public
or non-profit organizations. During the 1996-97 award year, the Company's
institutions and other organizations provided matching contributions totaling
approximately $27,000. At least 5% of an institution's FWS allocation must be
used to fund student employment in community service positions. FWS earnings
are not used for tuition and fees. However, in the 1996-97 award year, the
federal share of FWS earnings represented less than 1% of the Company's net
U.S. tuition revenue.

FEDERAL OVERSIGHT OF THE TITLE IV PROGRAMS

The substantial amount of federal funds disbursed through the Title IV
Programs coupled with the large numbers of students and institutions
participating in those programs have led to instances of fraud, waste and
abuse. As a result, the United States Congress has required the DOE to
increase its level of regulatory oversight of institutions to ensure that
public funds are properly used. Each institution which participates in the
Title IV Programs must annually submit to the DOE an audit by an independent
accounting firm of that institution's compliance with Title IV Program
requirements, as well as audited financial statements. The DOE also conducts
compliance reviews, which include on-site evaluations of several hundred
institutions each year, and directs student loan guaranty agencies to conduct
additional reviews relating to the FFEL programs. In addition, the

51
<PAGE>

Office of the Inspector General of the DOE conducts audits and investigations
of institutions in certain circumstances. Under the HEA, accrediting agencies
and state licensing agencies also have responsibilities for overseeing
institutions' compliance with Title IV Program requirements. As a result, each
participating institution, including each of the Company's institutions, is
subject to frequent and detailed oversight and must comply with a complex
framework of laws and regulations or risk being required to repay funds or
becoming ineligible to participate in the Title IV Programs. In addition,
because the DOE periodically revises its regulations (e.g., in November 1997,
the DOE published new regulations with respect to financial responsibility
standards to take effect July 1, 1998) and changes its interpretation of
existing laws and regulations, there can be no assurance that the DOE will
agree with the Company's understanding of each Title IV Program requirement.
See "--Financial Responsibility Standards."

Largely as a result of this increased oversight, the DOE has reported that
more than 800 institutions have either ceased to be eligible for or have
voluntarily relinquished their participation in some or all of the Title IV
Programs since October 1, 1992. This has reduced competition among
institutions with respect to certain markets and educational programs.

Cohort Default Rates. A significant component of the Congressional
initiative aimed at reducing fraud, waste and abuse was the imposition of
limitations on participation in the Title IV Programs by institutions whose
former students defaulted on the repayment of federally guaranteed or funded
student loans at an "excessive" rate. Since the DOE began to impose sanctions
on institutions with cohort default rates above certain levels, the DOE has
reported that more than 600 institutions have lost their eligibility to
participate in some or all of the Title IV Programs. However, many
institutions, including all of the Company's institutions, have responded by
implementing aggressive student loan default management programs aimed at
reducing the likelihood of students failing to repay their loans in a timely
manner. An institution's cohort default rates under the FFEL programs are
calculated on an annual basis as the rate at which student borrowers scheduled
to begin repayment on their loans in one federal fiscal year default on those
loans by the end of the next federal fiscal year. Any institution whose cohort
default rate equals or exceeds 25% for any one of the three most recent
federal fiscal years may be found by the DOE to lack administrative capability
and, on that basis, placed on provisional certification status for up to three
years. Provisional certification status does not limit an institution's access
to Title IV Program funds but does subject that institution to closer review
by the DOE and possible summary adverse action if that institution commits
violations of Title IV Program requirements. Any institution whose cohort
default rates equal or exceed 25% for three consecutive years will no longer
be eligible to participate in the FFEL programs for the remainder of the
federal fiscal year in which the DOE determines that such institution has lost
its eligibility and for the two subsequent federal fiscal years. In addition,
an institution whose cohort default rate for any federal fiscal year exceeds
40% may have its eligibility to participate in all of the Title IV Programs
limited, suspended or terminated. Since the calculation of cohort default
rates involves the collection of data from many non-governmental agencies
(i.e., lenders, private guarantors or services), as well as the DOE, the HEA
provides a formal process for the review and appeal of the accuracy of cohort
default rates before the DOE takes any action against an institution based on
such rates. In addition to the foregoing, if an institution's cohort default
rate for loans under the Perkins program exceeds 15% for any federal award
year (i.e., July 1 through June 30), that institution may be placed on
provisional certification status for up to three years.

None of the Company's institutions has had a published FFEL or Perkins
cohort default rate of 15% or greater for any of the past three federal fiscal
years. The Company's overall average cohort default rates for fiscal 1993,
1994 and 1995 were 0.4%, 2.9% and 7.9%, respectively. The average cohort
default rates for proprietary institutions nationally for federal fiscal years
1993, 1994 and 1995 were 23.9%, 21.1% and 19.9%, respectively. The Company's
preliminary overall average cohort default rate for fiscal 1996 was 4.6%.

Increased Regulatory Scrutiny. The HEA provides for a three-part initiative,
referred to as the Program Integrity Triad, intended to increase regulatory
scrutiny of postsecondary education institutions. One part of the Program
Integrity Triad expands the role of accrediting agencies in the oversight of
institutions participating in the Title IV Programs. As a result, the
accrediting agencies which review and accredit the Company's campuses have
increased the breadth of such reviews and have expanded their examinations in
such areas as financial

52
<PAGE>

responsibility and timeliness of student refunds. The Program Integrity Triad
provisions also require each accrediting agency recognized by the DOE to
undergo comprehensive periodic reviews by the DOE to ascertain whether such
accrediting agency is adhering to required standards. Each accrediting agency
that reviews any of the Company's campuses has been reviewed by the DOE under
these provisions and has been approved for recognition by the DOE.

A second part of the Program Integrity Triad tightens the standards to be
applied by the DOE in evaluating the financial responsibility and
administrative capability of institutions participating in the Title IV
Programs. In addition, the Program Integrity Triad mandates that the DOE
periodically review the eligibility and certification to participate in the
Title IV Programs of every such eligible institution. By law, all institutions
were required to undergo such a recertification review by the DOE by 1997 and
are required to undergo such a recertification review every four years
thereafter. Under these standards, each of the Company's institutions will be
evaluated by the DOE more frequently than in the past. A denial of
recertification would preclude an institution from continuing to participate
in the Title IV Programs.

A third part of the Program Integrity Triad required each state to establish
a State Postsecondary Review Entity ("SPRE") to review certain institutions
within that state to determine their eligibility to continue participating in
the Title IV Programs. However, no SPREs are actively functioning. The United
States Congress has declined to provide funding for the SPRE, and proposed
legislation is pending in the Congress to repeal the SPRE program.
Nevertheless, state requirements are important to an institution's eligibility
to participate in the Title IV Programs since an institution and its programs
must be licensed or otherwise authorized to operate in the state in which it
offers education or training in order to be certified as eligible. See "State
Authorization."

Financial Responsibility Standards. All institutions participating in the
Title IV Programs must satisfy a series of specific standards of financial
responsibility. Institutions are evaluated for compliance with those
requirements in several circumstances, including as part of the DOE's
quadrennial recertification process and also annually as each institution
submits its audited financial statements to the DOE. Under standards in effect
prior to July 1, 1998, one standard requires each institution to demonstrate
an acid test ratio (defined as the ratio of cash, cash equivalents and current
accounts receivable to current liabilities) of at least 1:1 at the end of each
fiscal year. Another standard requires that each institution have a positive
tangible net worth at the end of each fiscal year. A third standard prohibits
any institution from having a cumulative net operating loss during its two
most recent fiscal years that results in a decline of more than 10% of that
institution's tangible net worth as measured at the beginning of that two-year
period. The DOE may measure an institution's financial responsibility on the
basis of the financial statements of the institution itself or the financial
statements of the institution's parent company, and may also consider the
financial condition of any other entity related to the institution.

In November 1997, the DOE issued new regulations, which took effect July 1,
1998 and revised the DOE's standards of financial responsibility. These new
standards replace the numeric tests described above with three different
ratios: an equity ratio, a primary reserve ratio and a net income ratio, which
are weighted and added together to produce a composite score for the
institution. Institutions such as the Company have the choice of meeting the
new standards or the old standards for fiscal years that began on or after
July 1, 1997, but before June 30, 1998. The Company has applied these new
regulations to the Company's audited financial statements as of May 31, 1998
and has determined that it satisfied the new standards as of that date.

An institution that is determined by the DOE not to meet any one of the
standards of financial responsibility is nonetheless entitled to participate
in the Title IV Programs if it can demonstrate to the DOE that it is
financially responsible on an alternative basis. An institution may do so by
posting surety either in an amount equal to 50% (or greater, as the DOE may
require) of total Title IV Program funds received by students enrolled at such
institution during the prior year or in an amount equal to 10% (or greater, as
the DOE may require) of such prior year's funds if the institution also agrees
to provisional certification and to transfer to the reimbursement or cash
monitoring system of payment for its Title IV Program funds. The DOE has
interpreted this surety condition to require the posting of an irrevocable
letter of credit in favor of the DOE. Alternatively, an institution may
demonstrate, with the support of a statement from a certified public
accountant and other information specified

53
<PAGE>

in the regulations, that it was previously in compliance with the numeric
standards and that its continued operation is not jeopardized by its financial
condition. Under a separate standard of financial responsibility, if an
institution has made late Title IV Program refunds to students in its prior
two years, the institution is required to post a letter of credit in favor of
the DOE in an amount equal to 25% of total Title IV Program refunds paid by
the institution in its prior fiscal year.

Restrictions on Acquiring or Opening Additional Schools and Adding
Educational Programs. An institution which undergoes a change of ownership
resulting in a change in control must be reviewed and recertified for
participation in the Title IV Programs under its new ownership. Pending
recertification, the DOE suspends Title IV Program funding to that
institution's students, except for certain Title IV Program funds that were
committed under the prior owner. If an institution is recertified following a
change of ownership, it will be on a provisional basis. During the time an
institution is provisionally certified, it may be subject to closer review by
the DOE and to summary adverse action for violations of Title IV Program
requirements, but provisional certification does not otherwise limit an
institution's access to Title IV Program funds.

In addition, the HEA generally requires that proprietary institutions be
fully operational for two years before applying to participate in the Title IV
Programs. However, under the HEA and applicable regulations, an institution
that is certified to participate in the Title IV Programs may establish an
additional location and apply to participate in the Title IV Programs at that
location without reference to the two-year requirement, if such additional
location satisfies all other applicable eligibility requirements. The
Company's expansion plans are based, in large part, on its ability to acquire
schools that can be recertified and to open additional locations as part of
its existing institutions.

Generally, if an institution eligible to participate in the Title IV
Programs adds an educational program after it has been designated as an
eligible institution, the institution must apply to the DOE to have the
additional program designated as eligible. However, an institution is not
obligated to obtain DOE approval of an additional program that leads to a
professional, graduate, bachelor's or associate degree or which prepares
students for gainful employment in the same or related recognized occupation
as an educational program that has previously been designated as an eligible
program at that institution and meets certain minimum length requirements.
Furthermore, short-term educational programs, which generally consist of those
programs that provide at least 300 but less than 600 clock hours of
instruction, are eligible only for FFEL funding and only if they have been
offered for a year and the institution can demonstrate, based on an
attestation by its independent auditor, that 70% of all students who enroll in
such programs complete them within a prescribed time and 70% of those students
who graduate from such programs obtain employment in the recognized occupation
for which they were trained within a prescribed time. In the event that an
institution erroneously determines that an educational program is eligible for
purposes of the Title IV Programs without the DOE's express approval, the
institution would likely be liable for repayment of Title IV Program funds
provided to students in that educational program. The Company does not believe
that the DOE's regulations will create significant obstacles to its plans to
add new programs.

Certain of the state authorizing agencies and accrediting agencies with
jurisdiction over the Company's campuses also have requirements that may, in
certain instances, limit the ability of the Company to open a new campus,
acquire an existing campus, establish an additional location of an existing
institution or begin offering a new educational program. The Company does not
believe that such standards will have a material adverse effect on the Company
or its expansion plans.

The "85/15 Rule." Under a provision of the HEA commonly referred to as the
"85/15 Rule," a proprietary institution, such as each of the Company's U.S.
institutions, would cease being eligible to participate in the Title IV
Programs if, on a cash accounting basis, more than 85% of its net revenues for
the prior fiscal year was derived from the Title IV Programs. Any institution
that violates the 85/15 Rule immediately becomes ineligible to participate in
the Title IV Programs and is unable to apply to regain its eligibility until
the following fiscal year. The Company has calculated that, since this
requirement took effect in 1995, none of the Company's U.S. institutions
derived more than 75% of its net revenue (on a cash basis) from the Title IV
Programs for any award

54
<PAGE>

year, and that for fiscal 1997 the range for the Company's U.S. institutions
was from approximately 41% to approximately 52%. For 1997, the independent
auditors of the Company or the institution, if applicable, examined
management's assertion that each of the Company's U.S. institutions complied
with these requirements and opined that such assertion was fairly stated in
all material respects. The Company regularly monitors compliance with this
requirement in order to minimize the risk that any of its U.S. institutions
would derive more than 85% of its revenue from the Title IV Programs for any
fiscal year. If an institution appears likely to approach the 85% threshold,
the Company would evaluate the appropriateness of making changes in student
funding and financing to ensure compliance with the 85/15 Rule.

Restrictions on Payment of Bonuses, Commissions or Other Incentives. The HEA
prohibits an institution from providing any commission, bonus or other
incentive payment based directly or indirectly on success in securing
enrollments or financial aid to any person or entity engaged in any student
recruitment, admission or financial aid awarding activity for programs
eligible for Title IV Program funds. The Company believes that its current
compensation plans are in compliance with HEA standards.

STATE AUTHORIZATION

Each of the Company's campuses is authorized to offer educational programs
and grant degrees or diplomas by the state in which such campus is located.
The level of regulatory oversight varies substantially from state to state. In
some states, the campuses are subject to licensure by the state education
agency and also by a separate higher education agency. State laws establish
standards for instruction, qualifications of faculty, location and nature of
facilities, financial policies and responsibility and other operational
matters. State laws and regulations may limit the ability of the Company to
obtain authorization to operate in certain states, to award degrees or
diplomas or offer new degree programs. Certain states prescribe standards of
financial responsibility that are different from those prescribed by the DOE.
The Company believes that each of its campuses is in substantial compliance
with state authorizing and licensure laws.

CANADIAN REGULATION

The Ontario Ministry of Education and Training ("OMET") provides financial
assistance to eligible students through OSAP, which includes two main
components, the CSL program and the Ontario Student Loans Program ("OSLP")
program. To maintain its right to administer OSAP, an institution, such as the
PrimeTech campuses in Toronto, must, among other things, be registered and in
good standing under the PVSA and abide by the rules, regulations and
administrative manuals of the CSL, OSLP and other OSAP-related programs. In
order to attain initial eligibility, an institution must establish, among
other things, that it has been in good standing under the PVSA for at least 12
months, that it has offered an eligible program for at least 12 months and
that it has graduated at least one class in an eligible program that satisfies
specific requirements with respect to class size and graduation rate. During
the first two years of initial eligibility, the institution must have its
administration of OSAP independently audited, and full eligibility will not be
granted unless these audits establish that the institution has properly
administered OSAP. The institution can only administer CSL funds, and cannot
administer OSLP funds, until it has gained full eligibility. Once an
institution has gained OSAP eligibility, the institution must advise OMET
before it takes any material action that may result in its failure or
inability to meet any rules, regulations or requirements related to OSAP. Both
of the Company's Canadian campuses are fully eligible to administer CSL and
OSLP Funds.

In order for an OSAP-eligible institution to establish a new branch of an
existing eligible institution, it must obtain an OSAP-designation from OMET,
either as a separate institution if the branch administers OSAP without the
involvement of the main campus, or as part of the same institution, if OSAP is
administered through the main campus of the institution. The Company does not
believe that OSAP's requirements will create significant obstacles to its
plans to acquire additional institutions or open new branches in Ontario.

Institutions participating in OSAP, such as the PrimeTech campuses in
Toronto, cannot submit applications for loans to students enrolled in
educational programs that have not been designated as OSAP-eligible by OMET.

55
<PAGE>

To be eligible, among other things, a program must be registered with the
Private Vocational Schools unit, must be of a certain minimum length and must
lead to a diploma or certificate. Each of the PrimeTech educational programs
has been designated OSAP eligible by OMET and the Company does not anticipate
that these program approval requirements will create significant problems with
respect to its plans to add new educational programs.

An institution cannot automatically acquire OSAP-designation through
acquisition of other OSAP-eligible institutions. When there is a change of
ownership, including a change in controlling interest, in a non-incorporated
OSAP-eligible institution, OMET will require evidence of the institution's
continued capacity to properly administer the program before extending OSAP
designation to the new owner. The Company does not believe that the Offering
will be considered a change of ownership for purposes of OSAP. Given that OMET
periodically revises its regulations and other requirements and changes its
interpretations of existing laws and regulations, there can be no assurance
that OMET will agree with the Company's understanding of each OMET
requirement.

PrimeTech is required to audit its OSAP administration annually and OMET is
authorized to conduct its own audits of the administration of the OSAP
programs by any OSAP-eligible institution. The Company has complied with these
requirements on a timely basis. Based on its most recent annual compliance
audits, PrimeTech has been found to be in substantial compliance with the
requirements of OSAP, and the Company believes that it continues to be in
substantial compliance with these requirements. OMET has the authority to take
any measures it deems necessary to protect the integrity of the administration
of OSAP. If OMET deems a failure to comply to be minor, OMET will advise the
institution of the deficiency and provide the institution with the opportunity
to remedy the asserted deficiency. If OMET deems the failure to comply to be
serious in nature, OMET has the authority to: (i) condition the institution's
continued OSAP designation upon the institution's meeting specific
requirements during a specific time frame; (ii) refuse to extend the
institution's OSAP eligibility to the OSLP program; (iii) suspend the
institution's OSAP designation or (iv) revoke the institution's OSAP
designation. In addition, when OMET determines that any non-compliance in an
institution's OSAP administration is serious, OMET has the authority to
contract with an independent auditor, at the expense of the institution, to
conduct a full audit in order to quantify the deficiencies and to require
repayment of all loan amounts. In addition, OMET may impose a penalty up to
the amount of the damages assessed in the independent audit.

As noted above, PrimeTech is subject to the PVSA. The Company may not
operate a private vocational school in the province of Ontario unless such
school is registered under the PVSA. Upon payment of the prescribed fee and
satisfaction of the conditions prescribed by the regulations under the PVSA
and by the Private Vocational Schools Unit of the OMET, an applicant or
registrant such as PrimeTech is entitled to registration or renewal of
registration to conduct or operate a private vocational school unless: (1) it
cannot reasonably be expected to be financially responsible in the conduct of
the private vocational school; (2) the past conduct of the officers or
directors provides reasonable grounds for belief that the operations of the
campus will not be carried on in accordance with relevant law and with
integrity and honesty; (3) it can reasonably be expected that the course or
courses of study or the method of training offered by the private vocational
school will not provide the skill and knowledge requisite for employment in
the vocation or vocations for which the applicant or registrant is offering
instruction; or (4) the applicant is carrying on activities that are, or will
be, if the applicant is registered, in contravention of the PVSA or the
regulations under the PVSA. An applicant for registration to conduct or
operate a private vocational school is required to submit with the application
a bond in an amount determined in accordance with the regulations under the
PVSA. PrimeTech is currently registered under the PVSA at both of its
buildings, and the Company does not believe that there will be any impediment
to renewal of such registrations on an annual basis.

The PVSA provides that a "registration" is not transferable. However, the
Private Vocational Schools Unit of OMET takes the position that a purchase of
shares of a private vocational school does not invalidate the school's
registration under the PVSA. The Company does not believe that the Offering
will invalidate the registration of PrimeTech.

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<PAGE>

If a corporation is convicted of violating the PVSA or the regulations under
the PVSA, the maximum penalty that may be imposed on the corporation is
$25,000.

The legislative, regulatory and other requirements relating to student
financial assistance programs in Ontario are subject to change by applicable
governments due to political and budgetary pressures and any such change may
affect the eligibility for student financial assistance of the students
attending PrimeTech which, in turn, could materially adversely affect the
Company's business, results of operations and financial condition.

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<PAGE>

MANAGEMENT

EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES

Set forth below is the name, age as of August 31, 1998, and a brief account
of the business experience of the Company's executive officers and directors
and certain key employees:

<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------------------- --- -------------------------------------
<S> <C> <C>
Michael C. Markovitz.................. 48 Chairman of the Board of Directors
Harold J. O'Donnell................... 68 President
Charles T. Gradowski.................. 49 Chief Financial Officer
Theodore J. Herst..................... 74 Director
Karen M. Knab......................... 50 Director
Michael W. Mercer..................... 47 Director
Kalman K. Shiner...................... 56 Director
Leslie M. Simmons..................... 69 Director
John E. Sites......................... 60 Director
Scott Ables........................... 37 General Manager, Ventura
Philip Miller......................... 49 Unit President, MIM
George Schwartz....................... 49 Unit President, PrimeTech
Ned Wilson............................ 54 Provost, U of S
Lisa Doyle............................ 31 Controller
Cynthia Hartwell...................... 43 Vice President, Operations
Jean Norris........................... 33 Vice President, Enrollment Management
Jamie Wyse............................ 44 Vice President, Business Development
</TABLE>

DIRECTORS AND EXECUTIVE OFFICERS

Michael C. Markovitz, Ph.D., has served as Chairman of the Board of the
Company since its inception. In 1976, Dr. Markovitz co-founded the Illinois
School of Professional Psychology and, during the developmental years of the
school, also served as President. After purchasing the interests of the co-
founders of the Illinois School of Professional Psychology, Dr. Markovitz
oversaw the growth of the original single campus school into the multi-campus
American Schools of Professional Psychology. From 1978 to 1986, Dr. Markovitz
was a lecturer in Management at Northwestern University and is the author of
the "BBP Guide to Human Resource Management" (1982), a textbook regarding
personnel management. Dr. Markovitz received his doctoral degree in psychology
from the University of Chicago and has been an active member of the American
Psychological Association and the National Council of Schools of Professional
Psychology.

Harold J. O'Donnell, Ph.D., has served as the President of the Company since
1992. From 1976 to 1991, Dr. O'Donnell served in a series of management
positions with Apollo Group, Inc., including Director of the Southern
California Program of Institute for Professional Development (1976 to 1979),
Executive Vice President of Institute for Professional Development (1979 to
1982), Executive Vice President of University of Phoenix (1979 to 1987) and
Provost of University of Phoenix (1987 to 1992). From 1974-1976, Dr. O'Donnell
served as Deputy Manpower Director for the Long Beach Commission on Economic
Opportunity. Dr. O'Donnell has served as an adviser to colleges and
universities in California, Indiana, Illinois and Florida involving
developmental and regional accreditation issues with accrediting bodies such
as NCA, SACS and the Western Association of Schools and Colleges. Dr.
O'Donnell received his doctoral degree in educational administration from the
University of Notre Dame and his master's degree from Catholic University of
America. He continued his postdoctoral training in programs at Stanford
University, the University of California at Los Angeles and the University of
San Francisco.

Charles T. Gradowski, C.P.A., has served as Chief Financial Officer of the
Company since 1995. Mr. Gradowski served as Controller at Clipper Exxpress, a
freight forwarder, from 1988 to 1995. Mr. Gradowski received his bachelor's
degree and a master's in business administration from the University of
Illinois.

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<PAGE>

Theodore J. Herst has been a Director of the Company since its inception.
Mr. Herst is a co-founder of the Illinois School of Professional Psychology
and past Chairman of the Board of the Illinois School of Professional
Psychology. Since 1988, Mr. Herst has been retired from the practice of law.

Karen M. Knab has been a Director of the Company since 1986. Ms. Knab has
been a member of the Board of Directors of U of S since 1995. Since January
1996, Ms. Knab has been the Executive Officer of the law firm of Sutherland,
Asbill and Brennan. From 1993 to 1996, she was the Managing Partner of the
Washington, D.C. office of The Peers Group, a consulting firm.

Michael W. Mercer, Ph.D., has been a Director of the Company since 1986. Dr.
Mercer is currently in private practice as a psychologist and is the author of
several books on psychology. He is the past President of the Illinois
Psychological Association.

Kalman M. Shiner, C.P.A., has been a Director of the Company since June
1998. Mr. Shiner is currently the Managing Director of the accounting firm of
Ostra, Reisin, Berk & Abrams, Ltd.

Leslie M. Simmons has been a Director of the Company since 1981. Mr. Simmons
has been a member of the Board of Directors of U of S since 1995. Mr. Simmons
is Chairman of the Board of Directors of Apollo South Corporation.

John M. Sites has been a Director of the Company since 1994. Mr. Sites has
been Vice President for Program Development for American InterContinental
University since 1997. Mr. Sites served as President of the American
InterContinental University in Dubai (United Arab Emirates) (1996 to 1997),
Senior Vice President of American InterContinental University in London (1994
to 1996) and Associate Executive Director of the Commission on Colleges, SACS
(1989 to 1993). Mr. Sites served for over twenty years at Brenau College as a
Faculty Member, Department Chair, Academic Dean and Executive Vice President.

OTHER KEY EMPLOYEES

Scott Ables has been the General Manager of Ventura since 1997, where he
oversees the administration, marketing and sales efforts. Mr. Ables has been
affiliated with the Association for Advanced Training in the Behavioral
Sciences since 1991, serving in a number of managerial positions, and has
overseen the development of curricular materials for test preparation in a
variety of professional fields. From 1987 to 1991, Mr. Ables was an executive
of Contractors Career Centers, Inc., where he taught seminars addressing
business and legal issues to professionals. He is a former Director of the
California Contractors Association. Mr. Ables received his bachelor's degree
in political science from California State University.

Philip Miller has served as President of Medical Institutes of America, Inc.
since its founding in 1998. Mr. Miller had been Executive Vice President of
MIM from 1988 to 1992 and President of MIM since 1992. From 1970 to 1985, Mr.
Miller was with the U.S. Department of Education, the Minnesota Department of
Education and the Minnesota Higher Education Board. Mr. Miller received his
J.D. degree from the William Mitchell College of Law.

George Schwartz, C.A., has served as President of PrimeTech Institute since
1995. From 1988 to 1995, Mr. Schwartz was a Chartered Accountant and Partner
with Cole and Partner. Mr. Schwartz is a graduate of the University of
Toronto.

Ned Wilson, Ph.D., has served as the Provost and CEO of the University of
Sarasota since 1994. From 1992 to 1994, Dr. Wilson served as Dean of the
School of Business of the University of Sarasota. From 1990 to 1992, Dr.
Wilson was a faculty member at the University of Sarasota and a software
design consultant for GTE and Arthur Andersen. Dr. Wilson had previously
served as a faculty member in schools of business as well as an educational
consultant in Connecticut. Dr. Wilson received his doctoral degree from Ohio
State University.

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<PAGE>

Lisa Doyle, C.P.A., has served as the Controller of the Company since 1995.
From 1989 to 1995, Ms. Doyle served as Audit Manager for Goettsche, Tranen,
Winter and Russo. Ms. Doyle is a graduate of the University of Illinois.

Cynthia Hartwell has served as Vice President of Operations for the Company
since 1997. From 1995 to 1997, Ms. Hartwell served as Director of Operations
for the Sacramento Campus, University of Phoenix. From 1991 to 1995, she was
an employee of the Apollo Group/University of Phoenix, and served as Director
of Learning Resources for the University of Phoenix. Ms. Hartwell has also
served in management and research positions at several companies, with a focus
on programs involving educational development. Ms. Hartwell holds a master's
degree from the University of Missouri.

Jean Norris has served as Vice President for Enrollment Management for the
Company since January 1998. Ms. Norris had previously served as the Dean of
Admissions at Robert Morris College from 1996 to 1998, and a variety of other
administrative positions at Robert Morris from 1989 to 1996. Ms. Norris has a
bachelor's degree in management from National-Louis University and a master's
degree in communications from Governors State University.

Jamie Wyse has served as Vice President of Business Development for the
Company since 1996. From 1994 to 1996, Mr. Wyse served as Director of
Marketing and Sales for Regal Hotels International and, from 1990 to 1994,
served as Director of Marketing and Sales for Regent International Hotels.
During 1988 to 1990, he worked on developing a group of retail gourmet
specialty shops with Neuchatel, Inc. From 1985 to 1988, Mr. Wyse served as
Director of Strategic Planning and New Business Development with World Book,
Inc. At World Book, Mr. Wyse completed twelve acquisitions in the educational
publishing area. Mr. Wyse holds a master's in business administration in
marketing/finance from the University of Chicago's Graduate School of Business
and a bachelor's of science in communication management from the University of
Tennessee.

COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors currently has three standing committees--a
Compensation Committee, an Audit Committee and an Investment Committee. A
majority of the members of each of these committees are independent directors.

The Compensation Committee recommends action to the Board regarding the
salaries and incentive compensation of elected officers of the Company and
administers the Company's bonus plans and Stock Plans. It is anticipated that
a majority of the Compensation Committee members will be persons who are "Non-
Employee Directors" as defined under Rule 16b-3 of the Exchange Act and
"outside directors" (as defined in Section 162(m) of the Internal Revenue Code
of 1986, as amended (the "Code")). The Compensation Committee is currently
comprised of Michael C. Markovitz (Chairman), Karen M. Knab, and Leslie M.
Simmons.

The Audit Committee makes recommendations to the Board regarding the
selection, retention and termination of the Company's independent auditors and
reviews the annual financial statements of the Company and the Company's
internal controls. The Audit Committee is currently comprised of Michael C.
Markovitz (Chairman), Theodore J. Herst, and Kalman M. Shiner.

The Investment Committee makes recommendations to the Board regarding the
acquisition of additional schools. The Investment Committee is currently
comprised of Michael C. Markovitz (Chairman), Michael W. Mercer and Kalman M.
Shiner.

COMPENSATION OF DIRECTORS

Historically, the Company's directors have received $700 for attending each
Board meeting. After the consummation of the Offering, the Company's directors
will also be compensated in the form of stock option

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<PAGE>

grants, initially to be annual grants of options to purchase shares of
Class A Common Stock at the fair market value thereof on the date of grant.
Additionally, directors of U of S, MIM and PrimeTech will be compensated in
the form of annual grants of options to purchase shares of Class A
Common Stock at the fair market value thereof on the date of grant. All
directors are reimbursed for all travel-related expenses incurred in
connection with their activities as directors.

EXECUTIVE COMPENSATION

The following table sets forth in summary form information concerning the
compensation awarded to Michael C. Markovitz, Harold J. O'Donnell and Charles
T. Gradowski (collectively, the "Named Executive Officers") for all services
rendered in all capacities to the Company and its subsidiaries for the fiscal
year ended August 31, 1998. No other executive officer of the Company earned
more than $100,000 in total compensation for fiscal 1998.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------------
OTHER ANNUAL
NAME AND PRINCIPAL POSITION SALARY(1) BONUS COMPENSATION
- --------------------------- --------- ------- ------------
<S> <C> <C> <C>
Michael C. Markovitz.......................... $ -- $ -- $5,286,443(2)
Chairman
Harold J. O'Donnell........................... 114,700 58,341 10,781(3)
President
Charles T. Gradowski.......................... 86,883 15,000 6,264(3)
Chief Financial Officer
</TABLE>
- --------
(1) Includes amounts earned in fiscal 1998, but deferred at each Named
Executive Officer's election pursuant to the Company's 401(k) Plan.
(2) Dr. Markovitz received distributions of $4,293,443 from the Company in
1997 as its sole shareholder and Management Corp., an affiliate of Dr.
Markovitz, received payments of $993,000 in 1997 in respect of services
performed by Dr. Markovitz for the Company. The Company will not incur
such expenses in future periods; however, Dr. Markovitz will receive
compensation from the Company as Chairman, including an initial annual
base salary of $200,000.
(3) Represents contributions made by the Company under its 401(k) Plan.

STOCK PLANS

Pre-Existing Stock Option Grants, Exercises and Holdings

No persons held any options to purchase Common Stock or stock appreciation
rights as of the end of fiscal 1997.

1998 Stock Incentive Plan

Prior to the consummation of the Offering, the Board and stockholder of the
Company will approve the Company's 1998 Stock Incentive Plan (the "1998 Stock
Plan"). The 1998 Stock Plan will be administered by the Compensation
Committee. Certain employees, directors, officers, advisors and consultants of
the Company will be eligible to participate in the 1998 Stock Plan
("Participants"). The Compensation Committee will be authorized under the 1998
Stock Plan to select the Participants and determine the terms and conditions
of the awards under the 1998 Stock Plan. The 1998 Stock Plan provides for the
issuance of the following types of incentive awards: stock options, stock
appreciation rights, restricted stock, performance grants and other types of
awards that the Compensation Committee deems consistent with the purposes of
the 1998 Stock Plan. An

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<PAGE>

aggregate of shares of Class A Common Stock of the Company will be
reserved for issuance under the 1998 Stock Plan, subject to certain adjustments
reflecting changes in the Company's capitalization.

Options granted under the 1998 Stock Plan may be either incentive stock
options ("ISOs") or such other forms of non-qualified stock options ("NQOs") as
the Compensation Committee may determine. ISOs are intended to qualify as
"incentive stock options" within the meaning of Section 422 of the Code. The
exercise price of (i) an ISO granted to an individual who owns shares
possessing more than 10% of the total combined voting power of all classes of
stock of the Company (a "10% Owner") will be at least 110% of the fair market
value of a share of Common Stock on the date of grant and (ii) an ISO granted
to an individual other than a 10% Owner and an NQO will be at least 100% of the
fair market value of a share of Class A Common Stock on the date of grant.

Options granted under the 1998 Stock Plan may be subject to time vesting and
certain other restrictions at the sole discretion of the Compensation
Committee. Subject to certain exceptions, the right to exercise an option
generally will terminate at the earlier of (i) the first date on which the
initial grantee of such option is not employed by the Company for any reason
other than termination without cause, death or permanent disability or (ii) the
expiration date of the option. If the holder of an option dies or suffers a
permanent disability while still employed by the Company, the right to exercise
all unexpired installments of such option shall be accelerated and shall vest
as of the latest of the date of such death, the date of such permanent
disability and the date of the discovery of such permanent disability, and such
option shall be exercisable, subject to certain exceptions, for 180 days after
such date. If the holder of an option is terminated without cause, to the
extent the option has vested, such option will be exercisable for 30 days after
such date.

All outstanding awards under the 1998 Stock Plan will terminate immediately
prior to consummation of a liquidation or dissolution of the Company, unless
otherwise provided by the Board. In the event of the sale of all or
substantially all of the assets of the Company or the merger of the Company
with another corporation, all restrictions on any outstanding awards will
terminate and Participants will be entitled to the full benefit of their awards
immediately prior to the closing date of such sale or merger, unless otherwise
provided by the Board.

The Board generally will have the power and authority to amend the 1998 Stock
Plan at any time without approval of the Company's stockholders, subject to
applicable federal securities and tax laws limitations (including regulations
of the Nasdaq National Market).

Stock Purchase Plan

The Company's Employee Stock Discount Purchase Plan (the "Stock Purchase
Plan") will be approved by the Board and stockholder prior to the consummation
of the Offering. The Stock Purchase Plan is intended to give employees a
convenient means of purchasing shares of Class A Common Stock through payroll
deductions. The Stock Purchase Plan is intended to provide an incentive to
participate by permitting purchases at a discounted price. The Company believes
that ownership of stock by employees will foster greater employee interest in
the success, growth and development of the Company.

Subject to certain restrictions, each employee of the Company who is a U.S.
resident or a U.S. citizen temporarily on location at a facility outside of the
United States will be eligible to participate in the Stock Purchase Plan if he
or she has been employed by the Company for more than one year. Participation
will be discretionary for eligible employees. The Company will reserve
shares of Class A Common Stock for issuance in connection with the Stock
Purchase Plan. Elections to participate and purchases of stock will be made on
a quarterly basis. Each participating employee contributes to the Stock
Purchase Plan by choosing a payroll deduction in any specified amount, with a
specified minimum deduction per payroll period. A participating employee may
increase or decrease the amount of such employee's payroll deduction, including
a change to a zero deduction, as of the beginning of any month. Elected
contributions will be credited to participants' accounts at the end of each
calendar quarter.

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<PAGE>

Each participating employee's contributions will be used to purchase shares
for the employee's share account as promptly as practicable after each calendar
quarter. The cost per share will be 90% of the lower of the closing price of
the Class A Common Stock on the Nasdaq National Market on the first or the last
day of the calendar quarter. The number of shares purchased on each employee's
behalf and deposited in his/her share account will be based on the amount
accumulated in such participant's cash account and the purchase price for
shares with respect to any calendar quarter. Shares purchased under the Stock
Purchase Plan will carry full rights to receive dividends declared from time to
time. A participating employee will have full ownership of all shares in such
employee's share account and may withdraw them for sale or otherwise by written
request to the Compensation Committee following the close of each calendar
quarter. Subject to applicable federal securities and tax laws, the Board will
have the right to amend or to terminate the Stock Purchase Plan. Amendments to
the Stock Purchase Plan will not affect a participating employee's right to the
benefit of the contributions made by such employee prior to the date of any
such amendment. In the event the Stock Purchase Plan is terminated, the
Compensation Committee will be required to distribute all shares held in each
participating employee's share account plus an amount of cash equal to the
balance in each participating employee's cash account.

401(K) PLAN

The Company has a tax-qualified employee savings and retirement plan (the
"401(k) Plan") covering all of the Company's full-time employees. Pursuant to
the 401(k) Plan, employees may elect to reduce their current compensation up to
the statutorily prescribed annual limit ($9,500 in 1997) and have the amount of
such reduction contributed to the 401(k) Plan. The 401(k) Plan provides for
contributions to the 401(k) Plan by the Company on behalf of all participants.
The Company contributes an amount equal to 6% of an eligible employee's annual
earnings on a discretionary basis. The 401(k) Plan is intended to qualify under
Section 401 of the Code so that contributions by employees or by the Company to
the 401(k) Plan, and income earned on plan contributions, are not taxable to
employees until withdrawn, and so that contributions by the Company will be
deductible by the Company when made. The trustees under the 401(k) Plan, at the
direction of each participant, invest such participant's assets in the 401(k)
Plan in selected investment options.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

In fiscal 1997, the compensation of the Company's executives was determined
by a majority of the Company's Board, consisting of Dr. Markovitz, Karen M.
Knab, Michael W. Mercer, Kalman M. Shiner, Leslie M. Simmons and John E. Sites.

The Company has historically paid certain management fees from time to time
to Management Corp., a company wholly owned by Michael C. Markovitz, the
Company's Chairman, for services rendered. Such amounts totaled $1.0 million
during fiscal 1997 and $1.8 million during the nine months ended May 31, 1998.

During fiscal 1997, the Company from time to time advanced amounts to Dr.
Markovitz, the Chairman of the Company. During fiscal 1997, the Company
advanced Dr. Markovitz $0.5 million in exchange for an unsecured note bearing
interest at 5.9% per annum. As of May 31, 1998, Dr. Markovitz had repaid the
note and interest totaling approximately $0.5 million.

On August 31, 1998, U of S acquired the stock of MCM Plaza, a company wholly
owned by Dr. Markovitz. The purchase price of approximately $3.3 million, based
upon an independent third-party appraisal, exceeded the historical book value
of the underlying net assets by $0.7 million. MCM Plaza acquired the property
on which U of S is located in April 1997 for a purchase price of approximately
$2.2 million.

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<PAGE>

with the Offering. The purchase agreement obligates the Company to pay the
former owners (including Dr. Markovitz) a total of C$500,000 upon closing and
to issue shares of Common Stock the fair value of which is equal to 102% of
PrimeTech's net income, as defined, in each of the next three fiscal years.
The total purchase price is estimated to be C$5.1 million, of which Dr.
Markovitz is expected to receive one-third. The acquisition, which will be
accounted for as a purchase, has been approved by the Board of Directors of
each company and is subject to the successful completion of the Offering.

The Company made distributions to its shareholder of $0.2 million, $0.9
million and $4.3 million in fiscal 1996, fiscal 1997 and the first nine months
of fiscal 1998, respectively. In addition, as described in "The Company," the
Company intends to pay to Dr. Markovitz the Distribution. It is not possible
at this time to determine the exact amount of the Distribution because it will
be based upon the Company's income for fiscal 1998 and the portion of fiscal
1999 income which precedes the consummation of the Offering. The Company
currently estimates that its undistributed earnings and the net deferred
income tax asset as of the consummation of the Offering will be approximately
$7.0 million. The Distribution will be paid in the form of the Distribution
Loan, which will be payable immediately after consummation of the Offering.

One of the Company's schools has historically leased 18,940 square feet of a
building owned by MCM Plaza, a company wholly owned by Dr. Markovitz, for
lease payments aggregating $189,400 per year. During fiscal 1998, Dr.
Markovitz sold the stock of MCM Plaza to the Company for an aggregate
consideration equal to its appraised value of approximately $3.3 million, less
liabilities assumed of approximately $2.6 million to which the property was
subject.

Dr. Markovitz indirectly owned and operated Illinois Alternatives, Inc.
("Illinois Alternatives One"), a company formed by him in 1994 to provide
social work case management on behalf of the Illinois Department of Children
and Family Services for children in need of psychological treatment. From July
1, 1997 through December 31, 1997, the Company provided accounting services to
Illinois Alternatives One in exchange for payments to the Company of $12,000
per month, for a total of $72,000 for this period. Effective December 31,
1997, the business of Illinois Alternatives One was transferred to another
company which assumed the name "Illinois Alternatives, Inc." ("Illinois
Alternatives Two"), 30% of the stock of which is owned by Dr. Markovitz. Since
January 1, 1998, the Company has continued to provide accounting services to
Illinois Alternatives Two for $12,000 per month and the Company expects this
arrangement to continue.

In 1989, Dr. Markovitz established a small for-profit psychiatric hospital
located in Chicago and operated under the name University Hospital. University
Hospital was substantially dependant on Medicare reimbursement for its
revenues. In May 1997, after continued Medicare reimbursement to this hospital
was effectively terminated, University Hospital ceased operations and made an
assignment for the benefit of its creditors, which is ongoing.

During fiscal years 1996 and 1997, the Company made loans to University
Hospital in the amounts of $600,000 and $1,251,000, and bearing interest at
rates of 5.8% and 5.9%, respectively. The largest amount outstanding under
such loans at any time since January 1, 1997 was $1,093,000 as of August 31,
1997. Of these amounts, $766,000 has been repaid. The remaining balance of
$1,093,000 has not been repaid and the Company does not expect it to be
repaid. The Company has recorded such loans as shareholder distributions to
Dr. Markovitz in its financial statements.

A class action lawsuit has been filed on behalf of former employees of
University Hospital against Dr. Markovitz, the Company, University Hospital
and certain other companies in which Dr. Markovitz has an interest. See
"Business--Legal Proceedings."

The Company intends that any future transactions between the Company and its
officers, directors and affiliates will be on terms no less favorable to the
Company than can be obtained on an arm's length basis from unaffiliated third
parties and that any transactions with such persons will be approved by a
majority of the Company's outside directors or will be consistent with
policies approved by such outside directors.

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<PAGE>

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The table below sets forth certain information regarding the equity
ownership of the Company as of August 31, 1998 by (i) each person or entity
known to the Company who beneficially owns five percent or more of a class of
Common Stock of the Company, (ii) each Director and Named Executive Officer of
the Company and (iii) all Directors and executive officers of the Company as a
group. Unless otherwise stated, each of the persons named in the table has
sole voting and investment power with respect to the securities beneficially
owned by him or her as set forth opposite his or her name. Beneficial
ownership of the Common Stock listed in the table has been determined in
accordance with the applicable rules and regulations promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").

<TABLE>
<CAPTION>
PRIOR TO THE OFFERING AFTER THE OFFERING
------------------------------ NUMBER OF ------------------------------
DIRECTORS, NAMED NUMBER OF NUMBER OF PERCENT OF CLASS A NUMBER OF NUMBER OF PERCENT OF
EXECUTIVE OFFICERS CLASS A CLASS B VOTING SHARES CLASS A CLASS B VOTING
AND 5% SHAREHOLDERS SHARES SHARES POWER OFFERED SHARES SHARES POWER
------------------- --------- --------- ---------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Michael C. Markovitz....
Harold J. O'Donnell.....
Charles T. Gradowski....
Theodore J. Herst.......
Karen M. Knab...........
Michael W. Mercer.......
Kalman M. Shiner........
Leslie M. Simmons.......
John E. Sites...........
All Directors and
Officers as a group (9
persons)...............
</TABLE>
- --------
* Less than one percent.

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<PAGE>

DESCRIPTION OF CAPITAL STOCK

GENERAL MATTERS

The following discussion describes the Company's capital stock, Articles and
By-laws as will be in effect upon consummation of the Offering. The following
summary of certain provisions of the Company's capital stock describes all
material provisions of, but does not purport to be complete and is subject to,
and qualified in its entirety by, the Articles and the By-laws of the Company
that are included as exhibits to the Registration Statement of which this
Prospectus forms a part and by the provisions of applicable law.

Prior to the Offering, the Company had one class of common stock
outstanding. Contingent upon consummation of the Offering, the Company's
existing common stock will be converted into Class B Common Stock, and the
Class A Common Stock will become authorized. At the time of the Offering, the
total amount of authorized capital stock of the Company will consist of
30,000,000 shares of Class A Common Stock, par value $0.01 per share,
10,000,000 shares of Class B Common Stock, par value $0.01 per share and
5,000,000 shares of Preferred Stock, par value $1.00 per share (the "Preferred
Stock"). Upon completion of the Offering, shares of Class A Common
Stock, shares of Class B Common Stock and no shares of Preferred Stock
will be issued and outstanding. Additionally, shares of Class A Common
Stock will be reserved for issuance under the Stock Plans and shares
of Class A Common Stock will be reserved for issuance upon conversion of the
Class B Common Stock.

The Articles and By-laws contain certain provisions that are intended to
enhance the likelihood of continuity and stability in the composition of the
Board and that may have the effect of delaying, deferring or preventing a
future takeover or change in control of the Company unless such takeover or
change in control is approved by the Board.

CLASS A COMMON STOCK

The shares of Class A Common Stock being offered by the Company will be,
upon payment therefor, validly issued, fully paid and nonassessable. Subject
to the prior rights of the holders of any Preferred Stock, the holders of
outstanding shares of Class A Common Stock will be entitled to receive
dividends out of assets legally available therefor at such time and in such
amounts as the Board may from time to time determine. See "Dividend Policy."
The shares of Class A Common Stock will not be convertible and the holders
thereof will have no preemptive or subscription rights to purchase any
securities of the Company. Upon liquidation, dissolution or winding up of the
Company, the holders of Class A Common Stock, along with holders of Class B
Common Stock, will be entitled to receive pro rata the assets of the Company
which are legally available for distribution, after payment of all debts and
other liabilities and subject to the prior rights of any holders of Preferred
Stock then outstanding. Each outstanding share of Class A Common Stock will be
entitled to one vote on all matters submitted to a vote of shareholders.
Except as otherwise required by law or the Articles, the Class A Common Stock
and Class B Common Stock will vote together on all matters submitted to a vote
of the shareholders, including the election of Directors.

Application will be made for inclusion of the Class A Common Stock on the
Nasdaq National Market under the symbol "ARGY."

CLASS B COMMON STOCK

The issued and outstanding shares of Class B Common Stock generally will
have identical rights to those of the Class A Common Stock except with respect
to voting power and conversion rights. Each share of Class B Common Stock will
be entitled to ten votes on all matters submitted to a vote of shareholders,
as compared to one vote for each share of Class A Common Stock. Class B Common
Stock will be convertible at the option of the holder, and mandatorily
convertible upon any transfer thereof (except to Permitted Transferees) and at
any time that the Permitted Transferees, in the aggregate, do not beneficially
own at least 10% of the total outstanding shares of Common Stock, into Class A
Common Stock on a share-for-share basis. "Permitted Transferee" is

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<PAGE>

defined in the Articles of Incorporation to include Dr. Markovitz, certain
members of his family and certain family trusts and corporations. The Class B
Common Stock will not be registered under the Securities Act and will not be
listed for trading on any national securities exchange or on the Nasdaq
National Market.

PREFERRED STOCK

The Board may, without further action by the Company's shareholders, from
time to time, direct the issuance of shares of Preferred Stock in series and
may, at the time of issuance, determine the rights, preferences and
limitations of each series. Holders of shares of Preferred Stock may be
entitled to receive a preference payment in the event of any liquidation,
dissolution or winding-up of the Company before any payment is made to the
holders of shares of Common Stock. Satisfaction of any dividend preferences of
outstanding shares of Preferred Stock would reduce the amount of funds
available for the payment of dividends on shares of Common Stock. Under
certain circumstances, the issuance of shares of Preferred Stock may render
more difficult or tend to discourage a merger, tender offer or proxy contest,
the assumption of control by a holder of a large block of the Company's
securities or the removal of incumbent management. Upon the affirmative vote
of a majority of the total number of Directors then in office, the Board,
without shareholder approval, may issue shares of Preferred Stock with voting
and conversion rights which could adversely affect the holders of shares of
Common Stock. Upon consummation of the Offering, there will be no shares of
Preferred Stock outstanding, and the Company has no present intention to issue
any shares of Preferred Stock.

CERTAIN PROVISIONS OF THE AMENDED AND ARTICLES OF INCORPORATION AND BY-LAWS

The Articles provide that, at any time after the date on which Dr. Markovitz
and his Permitted Transferees cease to own at least 51% of the voting power of
the outstanding Common Stock, shareholder action can be taken only at an
annual or special meeting of shareholders and cannot be taken by written
consent in lieu of a meeting. The Articles and the By-laws provide that,
except as otherwise required by law, special meetings of the shareholders can
only be called by the Chairman of the Board or the President of the Company,
or pursuant to a resolution adopted by a majority of the Board. Shareholders
are not permitted to call a special meeting or to require the Board to call a
special meeting.

The By-laws establish an advance notice procedure for shareholder proposals
to be brought before an annual meeting of shareholders of the Company,
including proposed nominations of persons for election to the Board.

Shareholders at an annual meeting may only consider proposals or nominations
specified in the notice of meeting or brought before the meeting by or at the
direction of the Board or by a shareholder who was a shareholder of record on
the record date for the meeting, who is entitled to vote at the meeting and
who has given to the Company's Secretary timely written notice, in proper
form, of the shareholder's intention to bring that business before the
meeting. Although the By-laws do not give the Board the power to approve or
disapprove shareholder nominations of candidates or proposals regarding other
business to be conducted at a special or annual meeting, the By-laws may have
the effect of precluding the conduct of certain business at a meeting if the
proper procedures are not followed or may discourage or defer a potential
acquiror from conducting a solicitation of proxies to elect its own slate of
Directors or otherwise attempting to obtain control of the Company.

The Articles and By-laws provide that the affirmative vote of holders of at
least 66 2/3% of the total votes eligible to be cast in the election of
Directors will be required to amend, alter, change or repeal certain of their
provisions. This requirement of a super-majority vote to approve amendments to
the Articles and By-laws could enable a minority of the Company's shareholders
to exercise veto power over any such amendments. In addition, the Class B
Common Stock has ten votes, as compared to one vote for each share of Class A
Common Stock, on all matters to come before the shareholders, including the
election of Directors. By virtue of such stock ownership, the holders of the
Class B Common Stock will be able to control the vote on all matters submitted
to a vote of the holders of Common Stock, including the election of Directors,
amendments to the Articles and By-laws and approval of significant corporate
transactions. Such concentration of ownership could also have the effect of
delaying, deterring or preventing a change in control of the Company that
might otherwise be beneficial to shareholders. See "Risk Factors--Control by
Existing Shareholders."

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<PAGE>

CERTAIN PROVISIONS OF ILLINOIS LAW

Section 11.75 of the Illinois Act prevents an "interested shareholder"
(defined in Section 11.75, generally, as a person owning 15% or more of a
corporation's outstanding voting shares) from engaging in a "business
combination" with a publicly-held Illinois corporation for three years
following the date upon which such person became an interested shareholder
unless: (i) before such person became an interested shareholder, the board of
directors of the corporation approved the transaction in which the interested
shareholder became an interested shareholder or approved the business
combination; (ii) upon consummation of the transaction that resulted in the
shareholder becoming an interested shareholder, the interested shareholder
owned at least 85% of the voting shares of the corporation outstanding at the
same time the transaction commenced (excluding shares held by directors who
are also officers of the corporation and by employee shares plans that do not
provide employee participants with the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or
exchange offer); or (iii) on or subsequent to the date upon which such person
became an interested shareholder, the business combination is approved by the
board of directors of the corporation and authorized at a special meeting of
shareholders (not by written consent) by the affirmative vote of the holders
of at least 66 2/3% of the outstanding voting shares of the corporation not
owned by the interested shareholder. A "business combination" includes
mergers, asset sales and other transactions resulting in financial benefit to
a shareholder. Section 11.75 could prohibit or delay mergers or other takeover
or change in control attempts with respect to the Company and, accordingly,
may discourage attempts to acquire the Company.

LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS

The Articles limit the liability of Directors to the fullest extent
permitted by the Illinois Act. In addition, the By-laws provide that the
Company shall indemnify Directors and officers of the Company to the fullest
extent permitted by such law. The Company anticipates entering into
indemnification agreements with its current Directors and executive officers
shortly following the completion of the Offering.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Class A Common Stock will be
American Stock Transfer & Trust Company.

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<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Upon the consummation of the Offering, the Company will have outstanding
shares of Common Stock (assuming no exercise of the Underwriters'
over-allotment option). All of the shares of Class A Common Stock sold in the
Offering will be freely tradeable under the Securities Act, unless purchased
by "affiliates" of the Company as that term is defined under the Securities
Act. Upon the expiration of lock-up arrangements between the Company, certain
shareholders and the Underwriters, which will occur 180 days after the date of
this Prospectus (the "Effective Date"), all of the shares of Common
Stock issued and outstanding as of the date of this Prospectus (the
"Restricted Shares") will become immediately eligible for sale, subject to
compliance with Rule 144 of the Securities Act as described below (other than
the holding period required by Rule 144 which has already been satisfied).

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned Restricted Shares for
at least one year will be entitled to sell in any three-month period a number
of shares that does not exceed the greater of: (i) 1% of the number of shares
of Common Stock then outstanding (approximately shares immediately
after the Offering) or (ii) the average weekly trading volume of the Class A
Common Stock on the Nasdaq National Market during the four calendar weeks
immediately preceding the date on which the notice of sale is filed with the
Securities and Exchange Commission. Sales pursuant to Rule 144 are subject to
certain requirements relating to manner of sale, notice and availability of
current public information about the Company. A person (or persons whose
shares are aggregated) who is not deemed to have been an affiliate of the
Company at any time during the 90 days immediately preceding the sale and who
has beneficially owned Restricted Shares for at least two years is entitled to
sell such shares pursuant to Rule 144(k) without regard to the limitations and
requirements described above.

The Company's officers, directors and sole shareholder have agreed with the
Underwriters that until 180 days after the Effective Date they shall not,
directly or indirectly, sell, offer to sell, solicit any offer to buy,
contract to sell, grant any option to purchase or otherwise transfer or
dispose of any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock, or in any manner transfer all or
a portion of the economic consequences associated with the ownership of the
Common Stock, or cause a registration statement covering any shares of Common
Stock to be filed, without the prior written consent of Salomon Smith Barney
Inc. subject to certain limited exceptions. The Company has also agreed not to
directly or indirectly, offer, sell, contract to sell, grant any option to
purchase or otherwise dispose of any Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock or, in any
manner, transfer all or a portion of the economic consequences associated with
the ownership of the Common Stock or cause a registration statement covering
any shares of Common Stock to be filed, for a period of 180 days after the
Effective Date, without the prior written consent of Salomon Smith Barney Inc.
subject to certain limited exceptions, including grants of options pursuant
to, and issuance of shares of Common Stock upon exercise of options under, the
1998 Stock Plan. The lock-up agreements may be released at any time as to all
or any portion of the shares subject to such agreements at the sole discretion
of Salomon Smith Barney Inc.

The Company intends to file a registration statement covering the sale of
shares of Class A Common Stock reserved for issuance under the 1998
Stock Plan. See "Management--Stock Option Plan." Such registration statement
is expected to be filed as soon as practicable after the date of this
Prospectus and will automatically become effective upon the filing.
Accordingly, shares registered under such registration statement will be
available for sale in the public market unless such shares are subject to
vesting restrictions and subject to limitations on resale by "affiliates"
pursuant to Rule 144.

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<PAGE>

UNDERWRITING

Upon the terms and subject to the conditions stated in the Underwriting
Agreement dated the date hereof, each Underwriter named below has severally
agreed to purchase, and the Company has agreed to sell to such Underwriter,
the number of shares of Common Stock set forth opposite the name of such
Underwriter.

<TABLE>
<CAPTION>
NUMBER OF
NAME OF UNDERWRITER SHARES
------------------- ----------
<S> <C>
Salomon Smith Barney Inc.......................................
ABN AMRO Incorporated..........................................
----------
Total......................................................
==========
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares are subject to
approval of certain legal matters by counsel and to certain other conditions.
The Underwriters are obligated to take and pay for all shares of Common Stock
offered hereby (other than those covered by the over-allotment option
described below) if any such shares are taken.

The Underwriters, for whom Salomon Smith Barney Inc. and ABN AMRO
Incorporated are acting as the Representatives, propose to offer part of the
shares directly to the public at the public offering price set forth on the
cover page of this Prospectus and part of the shares to certain dealers at a
price that represents a concession not in excess of $ per share under the
public offering price. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of $ per share to certain other
dealers. After the initial offering of the shares to the public, the public
offering price and such concessions may be changed by the Representatives. The
Representatives have advised the Company that the Underwriters do not intend
to confirm sales of any shares to any accounts over which they exercise
discretionary authority.

The Company's sole shareholder has granted to the Underwriters an option,
exercisable for thirty days from the date of this Prospectus, to purchase up
to additional shares of Common Stock at the price to public set forth
on the cover page of this Prospectus minus the underwriting discounts and
commissions. The Underwriters may exercise such option solely for the purpose
of covering over-allotments, if any, in connection with the Offering of the
shares offered hereby. To the extent such option is exercised, each
Underwriter will be obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional shares as the number of
shares set forth opposite each Underwriter's name in the preceding table bears
to the total number of shares listed in such table.

The Company, its officers and directors and its sole shareholder, who will
hold an aggregate of shares of Common Stock after this Offering, have
agreed that, for a period of 180 days following the date of this Prospectus,
they will not, without the prior written consent of Salomon Smith Barney Inc.,
sell, offer to sell, solicit any offer to buy, contract to sell, grant any
option to purchase (other than under the Stock Option Plan), or otherwise
transfer or dispose of any shares of Common Stock, or any securities
convertible into, or exercisable or exchangeable for, Common Stock, except
that the Company may grant options under the Stock Option Plan and may issue
shares of Common Stock pursuant to the exercise of options granted under the
Stock Option Plan.

Prior to the Offering, there has not been any public market for the Common
Stock of the Company. Consequently, the initial public offering price for the
shares of Common Stock included in the Offering will be determined by
negotiations between the Company and the Representatives. Among the factors to
be considered in determining such price are the history of and prospects for
the Company's business and the industry in which it competes, an assessment of
the Company's management and the present state of the Company's development,
the past and present net revenues and earnings of the Company, the prospects
for growth of the Company's net revenues and earnings, the current state of
the economy in the United States and the current level of economic

70
<PAGE>

activity in the industry in which the Company competes and in related or
comparable industries, and currently prevailing conditions in the securities
markets, including current market valuations of publicly traded companies that
are comparable to the Company.

Up to an aggregate of shares of Common Stock, or approximately %
of the shares offered hereby, have been reserved for sale at the public
offering price to certain employees of the Company and other persons
designated by the Company. The maximum investment of any such person may be
limited by the Company in its sole discretion. The number of shares of Common
Stock available for sale to the general public will be reduced to the extent
such persons purchase such reserved shares. Any reserved shares not so
purchased will be offered by the Underwriters to the general public on the
same basis as the other shares offered hereby. This program will be
administered by Salomon Smith Barney Inc.

The Underwriters may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation
M under the Exchange Act. Over-allotment involves syndicate sales in excess of
the offering size, which creates a syndicate short position. Stabilizing
transactions permit bids for any purchases of the Class A Common Stock so long
as the stabilizing bids do not exceed a specified maximum. Syndicate covering
transactions involve purchases of the Class A Common Stock in the open market
in order to cover syndicate short positions. Syndicate short positions may
also be covered by exercise of the Underwriters' over-allotment option
described above in lieu of or in addition to open market purchases. Penalty
bids permit the Underwriters to reclaim a selling concession from a syndicate
member when the shares of Class A Common Stock originally sold by such
syndicate member are purchased in a stabilizing transaction or syndicate
covering transaction to cover syndicate short positions. Such stabilizing
transactions, syndicate covering transactions and penalty bids may cause the
price of the Class A Common Stock to be higher than it would otherwise be in
the absence of such transactions. These transactions may be effected on the
Nasdaq National Market or otherwise and, if commenced, may be discontinued at
any time.

The Company and the Underwriters have agreed to indemnify each other against
certain liabilities, including liabilities arising under the Securities Act.

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<PAGE>

LEGAL MATTERS

The validity of the Class A Common Stock being offered hereby and certain
other legal matters relating to the Offering will be passed upon for the
Company by Kirkland & Ellis (a partnership which includes professional
corporations), Chicago, Illinois. Katten Muchin & Zavis (a partnership which
includes professional corporations), Chicago, Illinois, is acting as counsel
for the Underwriters.

EXPERTS

The consolidated financial statements of the Company and its subsidiaries as
of August 31, 1996 and 1997 and May 31, 1998 and for the eleven months August
31, 1995, the fiscal years ended August 31, 1996 and 1997 and the nine months
ended May 31, 1998, included in this Prospectus and elsewhere in the
Registration Statement, have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
giving said report.

AVAILABLE INFORMATION

The Company has filed a Registration Statement on Form S-1 with respect to
the Class A Common Stock being offered hereby with the Securities and Exchange
Commission (the "Commission") under the Securities Act. This Prospectus, which
constitutes a part of the Registration Statement, does not contain all the
information set forth in the Registration Statement, certain items of which
are omitted in accordance with the rules and regulations of the Commission.
Statements contained in this Prospectus concerning the provisions of documents
filed with the Registration Statement as exhibits are necessarily summaries of
such documents, and each such statement is qualified in its entirety by
reference to the copy of the applicable document filed as an exhibit to the
Registration Statement. The Registration Statement may be inspected and copied
at the public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549; at its
Chicago Regional Office, Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511; and at its New York Regional Office, Seven World
Trade Center, 13th Floor, New York, New York 10048. Copies of such material
can be obtained from the public reference section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates or accessed
electronically by means of the Commission's home page on the Internet at
http://www.sec.gov. For further information pertaining to the Company and the
Class A Common Stock being offered hereby, reference is made to the
Registration Statement, including the exhibits thereto and the financial
statements, notes and schedules filed as a part thereof.

72
<PAGE>

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARGOSY EDUCATION GROUP, INC.
Report of Independent Public Accountants................................ F-2
Consolidated Balance Sheets as of August 31, 1996 and 1997 and May 31,
1998................................................................... F-3
Consolidated Statements of Operations for the eleven months ended August
31, 1995, the years ended August 31, 1996 and 1997 and the nine months
ended May 31, 1998..................................................... F-4
Consolidated Statements of Shareholder's Equity for the eleven months
ended August 31, 1995, the years ended August 31, 1996 and 1997 and the
nine months ended May 31, 1998......................................... F-5
Consolidated Statements of Cash Flows for the eleven months ended August
31, 1995, the years ended August 31, 1996 and 1997 and the nine months
ended May 31, 1998..................................................... F-6
Notes to Consolidated Financial Statements.............................. F-7
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholder of
Argosy Education Group, Inc.:

We have audited the accompanying consolidated balance sheets of ARGOSY
EDUCATION GROUP, INC. (an Illinois corporation) as of August 31, 1996 and 1997
and May 31, 1998, and the related consolidated statements of operations,
shareholder's equity and cash flows for the eleven months ended August 31,
1995, the years ended August 31, 1996 and 1997 and the nine months ended May
31, 1998. 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 generally accepted auditing
standards. 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 Argosy
Education Group, Inc. as of August 31, 1996 and 1997 and May 31, 1998, and the
results of their operations and their cash flows for the eleven months ended
August 31, 1995, the years ended August 31, 1996 and 1997 and the nine months
ended May 31, 1998, in conformity with generally accepted accounting
principles.

Arthur Andersen LLP
Chicago, Illinois
August 31, 1998

F-2
<PAGE>

ARGOSY EDUCATION GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
AUGUST 31, MAY 31,
-------------- --------------------
PRO FORMA
1998
ASSETS 1996 1997 1998 (NOTE 12)
------ ------ ------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents.................... $4,231 $ 4,209 $ 6,229 $ 6,229
Short-term investments....................... 1,153 2,519 1,127 1,127
Receivables--
Students, net of allowance for doubtful
accounts of $30, $30 and $113 at August
31, 1996 and 1997, and May 31, 1998,
respectively.............................. 202 221 914 914
Other...................................... 89 126 225 225
Shareholder note receivable.................. -- 505 -- --
Inventories.................................. 161 108 112 112
Prepaid expenses............................. 61 117 165 165
Due from related entities.................... -- -- 288 288
Deferred income taxes........................ -- -- -- 269
------ ------- ------- -------
Total current assets..................... 5,897 7,805 9,060 9,329
------ ------- ------- -------
Property and equipment, net of accumulated
depreciation and amortization................. 801 3,188 3,790 3,790
Other assets:
Non-current investments...................... 849 1,451 816 816
Deposits..................................... 251 405 504 504
Deferred income taxes........................ -- -- -- 248
Intangibles, net............................. 538 4,731 6,578 6,578
------ ------- ------- -------
Total other assets....................... 1,638 6,587 7,898 8,146
------ ------- ------- -------
Total assets............................. $8,336 $17,580 $20,748 $21,265
====== ======= ======= =======
<CAPTION>
LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)
----------------------------------------------
<S> <C> <C> <C> <C>
Current Liabilities:
Current maturities of long-term debt......... $ 249 $ 264 $ 3,364 $ 3,364
Accounts payable............................. 309 590 709 709
Accrued payroll and related expenses......... 487 557 998 998
Accrued expenses............................. 235 266 470 470
Deferred revenue............................. 1,301 1,716 3,179 3,179
Shareholder distribution..................... -- -- -- 6,974
------ ------- ------- -------
Total current liabilities................ 2,581 3,393 8,720 15,694
------ ------- ------- -------
Long-term debt, less current maturities........ 243 6,354 5,331 5,331
------ ------- ------- -------
Deferred rent.................................. 276 385 460 460
------ ------- ------- -------
Commitments and contingencies
Shareholder's equity (deficit):
Common stock--1,000,000 shares authorized, no
par value, 1,666 shares issued and
outstanding................................. 504 505 505 505
Unrealized loss on investments............... -- (17) (5) (5)
Purchase price in excess of predecessor carry
over basis.................................. -- -- -- (720)
Retained earnings............................ 4,732 6,960 5,737 --
------ ------- ------- -------
Total shareholder's equity (deficit)..... 5,236 7,448 6,237 (220)
------ ------- ------- -------
Total liabilities and shareholder's
equity (deficit)........................ $8,336 $17,580 $20,748 $21,265
====== ======= ======= =======
</TABLE>

The accompanying notes are an integral part of these consolidated balance
sheets.

F-3
<PAGE>

ARGOSY EDUCATION GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
ELEVEN
MONTHS
ENDED YEARS ENDED NINE MONTHS
AUG. AUGUST 31, ENDED MAY 31,
31, ---------------- -------------------
1995 1996 1997 1997 1998
------- ------- ------- ----------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenue.................... $14,041 $17,840 $20,460 $16,565 $22,742
------- ------- ------- ------- -------
Operating expenses:
Cost of education............ 7,251 9,370 10,661 7,815 10,692
Selling expenses............. 325 263 516 318 690
General and administrative
expenses.................... 3,763 5,174 5,432 3,952 6,291
Related party expense........ 1,244 1,710 993 898 1,807
------- ------- ------- ------- -------
Total operating expenses... 12,583 16,517 17,602 12,983 19,480
------- ------- ------- ------- -------
Income from operations..... 1,458 1,323 2,858 3,582 3,262
------- ------- ------- ------- -------
Other income (expense):
Interest income.............. 123 304 497 340 296
Interest expense............. (1) (55) (107) (46) (423)
Other income (expense)....... -- 21 (48) (10) (12)
------- ------- ------- ------- -------
Total other income
(expense), net............ 122 270 342 284 (139)
------- ------- ------- ------- -------
Income before provision for
income taxes.............. 1,580 1,593 3,200 3,866 3,123
Provision for income taxes..... 30 30 37 70 53
------- ------- ------- ------- -------
Net income..................... $ 1,550 $ 1,563 $ 3,163 $ 3,796 $ 3,070
======= ======= ======= ======= =======
Earnings per share:
Basic and diluted............ $ 930 $ 938 $ 1,899 $ 2,279 $ 1,843
======= ======= ======= ======= =======
Weighted average shares
outstanding--basic and
diluted..................... 1,666 1,666 1,666 1,666 1,666
======= ======= ======= ======= =======
Pro forma data (unaudited):
Income before provision for
income taxes, as reported... $ 1,580 $ 1,593 $ 3,200 $ 3,866 $ 3,123
Pro forma provision for
income taxes................ 632 637 1,280 1,546 1,249
------- ------- ------- ------- -------
Pro forma net income......... $ 948 $ 956 $ 1,920 $ 2,320 $ 1,874
======= ======= ======= ======= =======
Pro forma earnings per
share--basic and diluted.... $ 569 $ 574 $ 1,152 $ 1,393 $ 1,125
======= ======= ======= ======= =======
Pro forma weighted average
shares outstanding-- basic
and diluted................. 1,666 1,666 1,666 1,666 1,666
======= ======= ======= ======= =======
</TABLE>

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

F-4
<PAGE>

ARGOSY EDUCATION GROUP, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
COMMON STOCK--
NO PAR VALUE,
1,000,000 SHARES
AUTHORIZED
------------------ UNREALIZED TOTAL
SHARES RETAINED GAIN (LOSS) SHAREHOLDER'S
OUTSTANDING AMOUNT EARNINGS ON INVESTMENTS EQUITY
----------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, September 30,
1994................... 1,666 $503 $ 1,777 $-- $ 2,280
Net income............ -- -- 1,550 -- 1,550
----- ---- ------- ---- -------
BALANCE, August 31,
1995................... 1,666 503 3,327 -- 3,830
Net income............ -- -- 1,563 -- 1,563
Shareholder
distributions........ -- -- (158) -- (158)
Shareholder
contribution......... -- 1 -- -- 1
----- ---- ------- ---- -------
BALANCE, August 31,
1996................... 1,666 504 4,732 -- 5,236
Net income............ -- -- 3,163 -- 3,163
Unrealized loss on
investments.......... -- -- -- (17) (17)
Shareholder
distributions........ -- -- (935) -- (935)
Shareholder
contribution......... -- 1 -- -- 1
----- ---- ------- ---- -------
BALANCE, August 31,
1997................... 1,666 505 6,960 (17) 7,448
Net income............ -- -- 3,070 -- 3,070
Unrealized gain on
investments.......... -- -- -- 12 12
Shareholder
distributions........ -- -- (4,293) -- (4,293)
----- ---- ------- ---- -------
BALANCE, May 31, 1998... 1,666 $505 $ 5,737 $ (5) $ 6,237
===== ==== ======= ==== =======
</TABLE>

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

F-5
<PAGE>

ARGOSY EDUCATION GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
YEARS ENDED NINE MONTHS ENDED
ELEVEN MONTHS AUGUST 31, MAY 31,
ENDED --------------- -------------------
AUG. 31, 1995 1996 1997 1997 1998
------------- ------ ------- ----------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income.............. $ 1,550 $1,563 $ 3,163 $ 3,796 $ 3,070
Adjustments to reconcile
net income to net cash
provided by operating
activities--
Depreciation and
amortization......... 290 399 438 324 659
Changes in operating
assets and
liabilities, net of
acquired businesses--
Receivables, net.... (128) (45) (38) (264) (474)
Inventories......... (66) (27) 53 68 48
Prepaid expenses.... 22 (14) (56) 25 (34)
Deposits............ 83 378 (154) (159) (94)
Accounts payable.... (3) (35) 251 263 (219)
Accrued payroll and
related expenses... 215 113 70 286 468
Accrued expenses.... 170 67 (26) 2 (32)
Deferred revenue.... (613) 179 102 1,546 708
Deferred rent....... 118 158 105 85 76
------- ------ ------- ------- -------
Net cash provided
by operating
activities....... 1,638 2,736 3,908 5,972 4,176
------- ------ ------- ------- -------
Cash flows from investing
activities:
Purchase of property and
equipment, net......... (195) (404) (341) (125) (362)
(Purchase) sale of
investments, net....... (1,936) 12 (1,985) (1,955) 2,039
Business acquisitions,
net of cash acquired... (400) -- (6,292) (2,212) (1,683)
Shareholder note
receivable............. -- -- (505) -- 505
------- ------ ------- ------- -------
Net cash (used in)
provided by
investing
activities....... (2,531) (392) (9,123) (4,292) 499
------- ------ ------- ------- -------
Cash flows from financing
activities:
Proceeds from issuance
of long-term debt...... 415 194 6,296 2,270 2,994
Payments of long-term
debt................... (44) (160) (169) (211) (1,068)
Borrowings from
affiliated entities,
net.................... -- -- -- -- (288)
Shareholder
distributions.......... -- (158) (935) (935) (4,293)
Shareholder
contributions.......... -- 1 1 -- --
------- ------ ------- ------- -------
Net cash provided by
(used in) financing
activities......... 371 (124) 5,193 1,124 (2,655)
------- ------ ------- ------- -------
Net (decrease) increase in
cash and cash
equivalents.............. (522) 2,220 (22) 2,804 2,020
Cash and cash equivalents,
beginning of year........ 2,533 2,011 4,231 4,231 4,209
------- ------ ------- ------- -------
Cash and cash equivalents,
end of year.............. $ 2,011 $4,231 $ 4,209 $ 7,035 $ 6,229
======= ====== ======= ======= =======
Supplemental disclosures
of cash flow information:
Cash paid for--
Interest.............. $ 9 $ 48 $ 107 $ 47 $ 389
Taxes................. 29 30 17 13 41
======= ====== ======= ======= =======
Supplemental disclosure of
non-cash investing and
financing activities:
Acquisitions of various
schools and
businesses--
Fair value of assets
acquired............. $ 400 $ -- $ 6,677 $ 2,241 $ 3,111
Net cash used in
acquisitions......... (400) -- (6,292) (2,212) (1,683)
------- ------ ------- ------- -------
Liabilities assumed
or incurred........ $ -- $ -- $ 385 $ 29 $ 1,428
======= ====== ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.

F-6
<PAGE>

ARGOSY EDUCATION GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(INFORMATION FOR THE NINE MONTHS ENDED MAY 31, 1997 IS UNAUDITED)

1. DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION

The consolidated financial statements of Argosy Education Group, Inc.
(formerly known as American Schools of Professional Psychology, Inc. ("ASPP"))
("AEG" or the "Company") include the accounts of the Company and its wholly
owned subsidiaries, University of Sarasota, Inc. ("U of S"), Argosy
International, Inc. ("Ventura") and the Medical Institutes of America, Inc.
("MIA"). Prior to being subsidiaries of the Company, the companies were
separate entities owned by the same shareholder. Through various transactions,
these companies were contributed by the shareholder to the Company. The
Company continues to conduct business under its historical name, ASPP.

The Company provides programs in clinical psychology, education, business
and allied health professions and courses and materials for post-graduate
psychology license examinations in the United States. The Company operates
through four business units and is approved and accredited to offer doctoral,
master's, bachelor's and associate degrees as well as to award diplomas
through ten campuses in seven states.

ASPP was established in 1975 and is accredited by the National Association
of Colleges and Schools to offer both doctoral degrees (PsyD--Doctor of
Psychology) and master's degrees (MA, Clinical Psychology; MA, Counseling
Psychology; MHSA, Master of Health Service Administration) at campuses located
in Illinois (Illinois School of Professional Psychology/Chicago; Chicago, IL
and Illinois School of Professional Psychology/Meadows; Rolling Meadows, IL);
Minnesota (Minnesota School of Professional Psychology; Minneapolis, MN);
Georgia (Georgia School of Professional Psychology; Atlanta, GA); Virginia
(American School of Professional Psychology/Virginia; Arlington, VA); Hawaii
(American School of Professional Psychology/Hawaii; Honolulu, HI); and Arizona
(Arizona School of Professional Psychology; Phoenix, AZ). The three senior
campuses (Illinois School of Professional Psychology/Chicago, Minnesota School
of Professional Psychology and Georgia School of Professional Psychology) are
also accredited by the American Psychological Association.

U of S was established in 1969 and is accredited by the Southern Association
of Colleges and Schools ("SACS") to award bachelor's degrees in business
(BSBA, Bachelor of Science in Business Administration), master's degrees in
business (MBA), doctoral degrees in business (DBA), both master's and doctoral
degrees in education (MEd and EdD) and master's and doctoral degrees in
psychology (MA, Clinical Psychology and PsyD). U of S operates two campuses:
University of Sarasota/Honore, Sarasota, FL; and University of Sarasota/Tampa,
Tampa, FL.

Ventura has two wholly-owned subsidiaries, Academic Review, Inc. ("AR") and
Association for Advanced Training in the Behavioral Sciences, Inc. ("AATBS").
Both AR and AATBS publish materials and hold workshops in select cities across
the United States to prepare individuals to take various national and state
administered oral and written health care licensure examinations in the fields
of psychology; social work; counseling; marriage and family therapy; and
marriage, family and child counseling.

MIA has one wholly-owned subsidiary, the Medical Institute of Minnesota,
Inc. ("MIM"), which is approved by the State of Minnesota to award associate
degrees in a variety of allied health care fields. MIM is institutionally
accredited by the Accrediting Bureau of Health Education Schools ("ABHES"), a
nationally recognized accreditor of allied health care institutions, and
additionally holds individual programmatic accreditation appropriate to each
degree offered.

The contribution by the shareholder of businesses under common control and,
as described in Note 3, the Company's purchase of MCM University Plaza, Inc.'s
stock from its shareholder have been accounted for in a manner similar to a
pooling of interests. The results of operations of all acquired businesses
have been consolidated for all periods subsequent to the date of acquisition.
The consolidated financial statements include

F-7
<PAGE>

ARGOSY EDUCATION GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

the accounts of the Company and its wholly owned subsidiaries. All significant
intercompany transactions and balances have been eliminated in the
consolidation.

The financial statements and related notes thereto for the nine months ended
May 31, 1997 are unaudited and have been prepared on the same basis as the
audited financial statements included herein. In the opinion of management,
such unaudited financial statements include all adjustments (consisting of
normal recurring adjustments) necessary to present fairly the information set
forth herein. Operating results for the nine months ended May 31, 1998 are not
necessarily indicative of results that may be expected for the fiscal year
ended August 31, 1998.

2. SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies of the Company are as follows:

Concentration of Credit Risk

The Company extends unsecured credit for tuition to a significant portion of
the students who are in attendance at its schools. A substantial portion of
credit extended to students is repaid through the students' participation in
various federally funded financial aid programs under Title IV of the Higher
Education Act of 1965, as amended (the "Title IV Programs").

The following table presents the amount and percentage of the Company's cash
receipts collected from the Title IV Programs for the eleven months ended
August 31, 1995, the years ended August 31, 1996 and 1997, and the nine months
ended May 31, 1997 and 1998 (dollars in thousands):

<TABLE>
<CAPTION>
FOR THE
ELEVEN
MONTHS FOR THE YEARS FOR THE NINE
ENDED ENDED MONTHS ENDED
AUG. AUGUST 31, MAY 31,
31, ---------------- -------------------
1995 1996 1997 1997 1998
------- ------- ------- ----------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Total Title IV funding...... $10,793 $ 9,131 $ 9,035 $ 9,281 $11,207
Total cash receipts......... $14,466 $18,883 $20,982 $18,166 $20,321
Total Title IV funding as a
percentage of total cash
receipts................... 75% 48% 43% 51% 55%
======= ======= ======= ======= =======
</TABLE>

The Company generally completes and approves the financial aid packet of
each student who qualifies for financial aid prior to the student beginning
class in an effort to enhance the collectibility of its unsecured credit.
Transfers of funds from the financial aid programs to the Company are made in
accordance with the United States Department of Education ("DOE")
requirements. Changes in DOE funding of federal student financial aid programs
could impact the Company's ability to attract students.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash in banks, highly liquid money
market accounts and commercial paper with maturities of less than three
months.

Restricted Cash

Cash received from the U.S. Government under various student aid grant and
loan programs is considered to be restricted. Restricted cash is held in
separate bank accounts and does not become available for general use by the
Company until the financial aid is credited to the accounts of students and
the cash is transferred to an operating account. Restricted cash is not
included in the accounts of the Company and was immaterial at August 31, 1996
and 1997, and at May 31, 1998.

F-8
<PAGE>

ARGOSY EDUCATION GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Investments

The Company invests excess cash in investments consisting primarily of
corporate bonds (maturing from 5 to 21 months) and U.S. Government treasury
notes (maturing from 9 to 17 months). The investments are considered available
for sale, stated at their fair market value and classified based upon their
maturity dates.

At August 31, 1996 and 1997, and May 31, 1998, investments consisted of the
following (dollars in thousands):
<TABLE>
<CAPTION>
AUGUST 31,
------------- MAY 31,
1996 1997 1998
------ ------ -------
<S> <C> <C> <C>
Fair value--
Corporate bonds................................... $1,153 $2,272 $1,159
U.S. Government treasury notes.................... 849 1,698 784
------ ------ ------
Total investments at fair value................. 2,002 3,970 1,943
Valuation allowance................................. -- 17 5
------ ------ ------
Total investments at cost....................... $2,002 $3,987 $1,948
====== ====== ======
</TABLE>

Advertising and Marketing Costs

Advertising and marketing costs are expensed as incurred and are included in
selling expenses in the accompanying statements of operations.

Inventories

Inventories, consisting principally of program materials, books and
supplies, are stated at the lower of cost, determined on a first-in, first-out
basis, or market.

Property and Equipment

Property and equipment are stated at cost. Depreciation and amortization are
recognized utilizing both accelerated and straight-line methods. Leasehold
improvements are amortized over their estimated useful lives or lease terms,
whichever is shorter. Maintenance, repairs and minor renewals and betterments
are expensed; major improvements are capitalized. The estimated useful lives
and cost basis of property and equipment at August 31, 1996 and 1997, and May
31, 1998, are as follows (dollars in thousands):

<TABLE>
<CAPTION>
AUGUST 31,
------------- MAY 31,
1996 1997 1998 LIFE
------ ------ ------- ----------
<S> <C> <C> <C> <C>
Land.................................... $ 6 $ 517 $ 517
Building................................ -- 1,905 2,066 40 years
Office equipment........................ 710 864 877 3-10 years
Furniture and fixtures.................. 271 272 335 3-7 years
Leasehold improvements.................. 196 151 430 7-10 years
Computer equipment...................... 220 365 586 3-5 years
Instructional equipment and materials... 425 434 614 3-7 years
------ ------ ------
1,828 4,508 5,425
Less--Accumulated depreciation and
amortization........................... 1,027 1,320 1,635
------ ------ ------
$ 801 $3,188 $3,790
====== ====== ======
</TABLE>

F-9
<PAGE>

ARGOSY EDUCATION GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Intangible Assets

Intangible assets include goodwill, intellectual property, covenants not-to-
compete and contract costs related to business acquisitions and the buyout of
a former shareholder. Intangible assets are being amortized on a straight-line
basis over their estimated useful lives. At August 31, 1996 and 1997, and May
31, 1998, the cost basis and useful lives of intangible assets consist of the
following (dollars in thousands):

<TABLE>
<CAPTION>
AUGUST 31,
------------- MAY 31,
1996 1997 1998 LIFE
------ ------ ------- -----------
<S> <C> <C> <C> <C>
Goodwill................................ $ 997 $4,614 $6,575 15-40 years
Intellectual property................... -- 390 600 2-4 years
Covenants not-to-compete................ -- 252 252 5-10 years
Contract costs.......................... 100 -- -- 5 years
------ ------ ------
1,097 5,256 7,427
Less--Accumulated amortization.......... 559 525 849
------ ------ ------
$ 538 $4,731 $6,578
====== ====== ======
</TABLE>

On an ongoing basis, the Company reviews intangible assets and other long-
lived assets for impairment whenever events or circumstances indicate that
carrying amounts may not be recoverable. To date, no such events or changes in
circumstances have occurred. If such events or changes in circumstances occur,
the Company will recognize an impairment loss if the undiscounted future cash
flows expected to be generated by the asset (or acquired business) are less
than the carrying value of the related asset. The impairment loss would adjust
the asset to its fair value.

Revenue Recognition

Revenue consists primarily of tuition revenue from courses taught at the
schools and workshop fees and sales of related materials. Revenue from courses
taught is recognized on a straight-line basis over the length of the
applicable course. Revenue from the workshops is recognized on the date of the
workshop. If a student withdraws, future revenue is reduced by the amount of
refund due to the student. Refunds are calculated in accordance with federal,
state and accrediting agency standards. Revenues from rental of the Company's
owned facility is recognized on a straight-line basis over the life of the
leases. Textbook sales are recorded upon shipment. Revenue from rent and
textbook sales represent less than 4% of the Company's net revenue for the
nine months ended May 31, 1998. Revenue is stated net of scholarships and
grants given to the students, which totaled approximately $567,000 for the
nine months ended May 31, 1998. Deferred revenue represents the portion of
payments received but not earned and is reflected as a current liability in
the accompanying balance sheets as such amount is expected to be earned within
the next year.

Management's Use of Estimates

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

Financial Instruments

The carrying value of current assets and liabilities reasonably approximate
their fair value due to their short maturity periods. The carrying value of
the Company's debt obligations reasonably approximate their fair value as the
stated interest rate approximates current market interest rates of debt with
similar terms.

F-10
<PAGE>

ARGOSY EDUCATION GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

New Accounting Pronouncements

Earnings Per Share

In February 1998, the Financial Accounting Standards Board issued Financial
Accounting Standard No. 128, "Earnings Per Share" ("SFAS No. 128"), which is
effective for reporting periods ending after December 15, 1997. SFAS No. 128
changed the methodology of calculating earnings per share and renamed the two
calculations basic earnings per share and diluted earnings per share. The
calculations differ by eliminating any common stock equivalents (such as stock
options, warrants and convertible preferred stock) from the basic earnings per
share and changes certain calculations when computing diluted earnings per
share. The weighted average number of common shares outstanding used in
determining basic earnings per common share calculation includes all common
stock outstanding during each period presented. The Company does not have any
common stock equivalents or convertible securities and therefore the same
number of shares outstanding is used when determining basic and diluted
earnings per share. The Company has adopted SFAS No. 128 and has retroactively
restated all periods presented.

Comprehensive Income

In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income" ("SFAS No. 130"), which establishes standards
for reporting of comprehensive income. This pronouncement requires that all
items recognized under accounting standards as components of comprehensive
income, as defined in the pronouncement, be reported in a financial statement
that is displayed with the same prominence as other financial statements.
Comprehensive income includes all changes in equity during a period except
those resulting from investments by owners and distributions to owners. The
financial statement presentation required under SFAS No. 130 is effective for
all fiscal years beginning after December 15, 1997. As of May 31, 1998, the
Company had not adopted this pronouncement; however, the impact is not
expected to be material.

Segment Reporting

In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosure about Segments of an Enterprise and Related Information" ("SFAS
No. 131"), which amends the requirements for a public enterprise to report
financial and descriptive information about its reportable operating segments.
Operating segments, as defined in the pronouncement, are components of an
enterprise about which separate financial information is available that is
evaluated regularly by the Company in deciding how to allocate resources and
in assessing performance. The financial information is required to be reported
on the basis that it is used internally for evaluating segment performance and
deciding how to allocate resources to segments. The disclosure required by
SFAS No. 131 is effective for all fiscal years beginning after December 15,
1997. As of May 31, 1998, the impact of this pronouncement had not been
determined by the Company.

Start-Up Costs

In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") 98-5, "Reporting on the Costs of Start-Up
Activities." This SOP provides guidance on the financial reporting of start-up
costs and organization costs. It requires that all nongovernmental entities
expense the costs of start-up activities as these costs are incurred. The
Company currently expenses all start-up and organizational costs as incurred
and is therefore not impacted by this SOP.

F-11
<PAGE>

ARGOSY EDUCATION GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

3. BUSINESS ACQUISITIONS

Real Estate Operation

On August 31, 1998, the Company purchased 100% of the stock of MCM
University Plaza, Inc. from the Company's shareholder at its appraised value
of approximately $3.3 million less assumed obligations of approximately $2.6
million, from the Company's shareholder. MCM University Plaza, Inc. owns real
estate leased by U of S, which was originally acquired by the Company's
shareholder on April 30, 1997 for approximately $2.2 million with funds
obtained from a mortgage (Note 4). The assets, liabilities and operations of
the real estate are included in the Company's financial statements subsequent
to April 30, 1997, the date the Company's shareholder purchased the real
estate, in a manner similar to a pooling of interests because the August 1998
transaction was between two parties controlled by the Company's shareholder.
The purchase price of MCM University Plaza, Inc.'s stock in excess of the
historical book value of the underlying net assets acquired, totaling
approximately $720,000, will be reflected as a reduction of shareholder's
equity on August 31, 1998.

Ventura

On August 26, 1997, Ventura acquired 100% of the outstanding shares of
capital stock of AATBS. This acquisition was accounted for as a purchase and,
accordingly, the acquired assets and assumed liabilities have been recorded at
their estimated fair market values at the date of the acquisition. The
estimated fair market values of certain assets are based upon preliminary
appraisal reports. The purchase price of approximately $1,756,000 exceeded the
fair market value of net assets acquired, resulting in goodwill of
approximately $1,562,000. In connection with the purchase, the former owner of
the acquired business entered into a 10 year covenant not-to-compete agreement
with the Company for a total price of $50,000. The acquisition was financed
through the issuance of a $1,606,000 promissory note payable to the former
owner and other debt financing.

On August 26, 1997, AR acquired certain assets and assumed certain
liabilities of Academic Review, Inc., a California corporation. This
acquisition was accounted for as a purchase and, accordingly, the purchased
assets and assumed liabilities have been recorded as their estimated fair
market values at the date of acquisition. The estimated fair market values of
certain assets are based upon preliminary appraisal reports. The purchase
price of approximately $2,324,000 exceeded the estimated fair market value of
net assets acquired, resulting in goodwill of approximately $2,045,000. In
connection with the purchase, the former owner of the acquired business
entered into a 10 year covenant not-to-compete agreement with the Company for
a total price of $50,000. The acquisition was financed with bank debt.

MIA

On February 3, 1998, MIA purchased 100% of the capital stock of MIM for a
purchase price of approximately $2,368,000. The acquisition was accounted for
as a purchase and, accordingly, the acquired assets and assumed liabilities
have been recorded at their estimated fair value at the date of the
acquisition. The purchase price exceeded the fair market value of net assets
acquired resulting in goodwill of approximately $1,962,000. The purchase price
was financed with approximately $2,068,000 in short-term borrowings and cash
from operations.

F-12
<PAGE>

ARGOSY EDUCATION GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The following unaudited pro forma results of operations data (in thousands,
except per share data) for the year ended August 31, 1997, and the nine months
ended May 31, 1998, assumes that the business acquisitions described above
occurred on September 1, 1996. The pro forma results below are based on
historical results of operations including adjustments for interest,
depreciation, amortization and income taxes (using a 40% effective rate) and
do not necessarily reflect actual results that would have occurred. The pro
forma results for the nine months ended May 31, 1998, are not necessarily
indicative of results that may be expected for the fiscal year ending August
31, 1998.

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
AUGUST 31, MAY 31,
1997 1998
---------- -----------
<S> <C> <C>
Net revenue........................................ $29,267 $24,747
Net income......................................... $ 1,223 $ 1,246
======= =======
Earnings per share--basic and diluted.............. $ 734 $ 748
======= =======
</TABLE>

In April 1998, the Company entered into an agreement pursuant to which the
Company will acquire 100% of the outstanding stock of Primetech Corporation,
Inc. and 1184267 Ontario, Inc. (collectively, "Prime Tech"), Canadian schools
which award non-degree certificates in network engineering and software
programming, upon consummation of the Company's contemplated initial public
offering of its common stock (the "IPO" or the "Offering"). The shareholder of
the Company currently owns a one-third interest in Prime Tech. The agreement
obligates the Company to pay the former owners a total of $500,000 (Canadian
Dollars) upon closing and to issue shares of the Company's common stock, the
fair value of which is equal to 102% of Prime Tech's net income, as defined in
such agreement, in each of the next three fiscal years. The acquisition will
be accounted for as a purchase, has been approved by the Board of Directors of
each company and is subject to the successful completion of the IPO (Note 12).

F-13
<PAGE>

ARGOSY EDUCATION GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

4. DEBT

Debt of the Company at August 31, 1996 and 1997, and May 31, 1998, consists
of the following:

<TABLE>
<CAPTION>
AUGUST 31,
----------- MAY 31,
1996 1997 1998
---- ------ -------
(IN THOUSANDS)
<S> <C> <C> <C>
Borrowings under line of credit agreements............. $ 78 $ 56 $ 449
Bank note payable, bearing interest at prime (8.5% at
May 31, 1998), requiring monthly interest payments of
$14,500 and a final principal payment on November 27,
1998, secured by the assets of ASPP................... -- -- 2,023
Bank note payable, bearing interest at the one year
U.S. treasury note rate plus 2% (7.512% at May 31,
1998), requiring monthly principal payments of $27,976
through September 1, 2004, secured by the assets of
AR.................................................... -- 2,350 2,126
Promissory note with the former owner of AATBS, bearing
interest at 6.25%, requiring an initial payment of
$400,000 on January 1, 1998, quarterly principal and
interest payments of $75,000 through October 1, 2002
and a final payment of $375,000 on January 1, 2002,
secured by the assets of AATBS........................ -- 1,605 1,187
Mortgage debt, bearing interest at 9%, requiring
monthly principal and interest payments of $18,378
through March 31, 2007 and a final payment of
$1,830,368 on April 30, 2007, secured by related real
estate................................................ -- 2,182 2,162
Promissory note with the former owner of MIM, bearing
interest at 8%, requiring monthly principal and
interest payments of $9,426 through May 31, 2001,
unsecured............................................. -- -- 300
Bank note payable, bearing interest at the one year
U.S. treasury rate plus 2% (7.512% at May 31, 1998),
requiring monthly principal payments of $1,786 through
September 1, 2004, secured by the assets of AATBS and
Ventura............................................... -- 150 136
Bank note payable, bearing interest at the prime rate
plus 1% (9.5% at May 31, 1998), requiring monthly
payments of interest only, principal due on February
12, 1999, unsecured................................... 80 80 80
Bank note payable, bearing interest at 9%, requiring
monthly principal and interest payments of $1,462
through May 18, 2008, secured by real estate.......... -- -- 115
Bank note payable, bearing interest at prime (8.5% at
May 31, 1998), requiring monthly principal payments of
$8,333 through July 31, 1999, secured by certain
assets of ASPP........................................ 292 192 117
Other.................................................. 42 3 --
---- ------ ------
492 6,618 8,695
Less--Current maturities............................... 249 264 3,364
---- ------ ------
$243 $6,354 $5,331
==== ====== ======
</TABLE>

The Company has three line-of-credit agreements with various banks which
provide for aggregate maximum borrowings of $850,000, expiring at various
times beginning on September 15, 1998. Amounts outstanding under these
agreements bear interest at rates ranging from prime to prime plus 2% (8.5% to
10.5% at May 31, 1998) and are secured by the assets of MIM, AATBS, Ventura
and ASPP. As of May 31, 1998, outstanding borrowings under these agreements
totaled approximately $449,000.

F-14
<PAGE>

ARGOSY EDUCATION GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The Company is required to maintain certain financial ratios under its
various credit agreements. As of May 31, 1998, the Company was in compliance
with all of its covenants.

At May 31, 1998, future annual principal payments of long-term debt are as
follows (in thousands):

<TABLE>
<S> <C>
May 31--
1999............................ $3,364
2000............................ 753
2001............................ 763
2002............................ 862
2003............................ 407
2004 and thereafter............. 2,546
------
$8,695
======
</TABLE>

5. INCOME TAXES

All of the consolidated entities have elected to include their income and
expenses with those of their shareholder for federal income tax purposes (an
"S Corporation election"). Accordingly, the statements of operations for the
eleven months ended August 31, 1995, the fiscal years ended August 31, 1996
and 1997, and the nine months ended May 31, 1997 and 1998, do not include a
provision for federal income taxes. The S Corporation election will terminate
immediately prior to the consummation of the proposed IPO (Note 12). The
Company has recorded a provision for state income taxes.

Upon effective termination of the S Corporation election, the Company will
record a deferred income tax asset and a related tax benefit. If the effective
date of the Offering had been May 31, 1998, a deferred income tax asset and
income tax benefit of approximately $517,000 would have been recorded.
Deferred income taxes are recorded under the asset and liability method of
accounting for income taxes, which requires the recognition of deferred income
taxes based upon the tax consequences of "temporary differences" by applying
enacted statutory tax rates applicable to future years to differences between
the financial statements carrying amounts and the tax basis of existing assets
and liabilities. As of May 31, 1998, deferred income taxes would have
consisted of the following (dollars in thousands):

<TABLE>
<S> <C>
Deferred income tax assets:
Payroll and related............................................... $210
Deferred rent..................................................... 184
Allowance for doubtful accounts................................... 45
Other............................................................. 14
----
Total deferred income tax assets................................ 453
----
Deferred income tax liability--
Depreciation and amortization..................................... 64
----
Net deferred income tax asset................................... $517
====
</TABLE>

The Company intends to enter into a tax indemnification agreement with its
shareholder prior to the IPO which will provide, among other things, that the
Company will indemnify its current shareholder against additional income taxes
resulting from adjustments made (as a result of a final determination made by
a competent tax authority) to the taxable income reported by the Company as an
S Corporation for periods prior to the Offering, but only to the extent those
adjustments provide a tax benefit to the Company.

F-15
<PAGE>

ARGOSY EDUCATION GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

6. LEASES

Facilities and Equipment Leases

The Company maintains operating leases for its educational and office
facilities and for certain office and computer equipment. The facility leases
generally require the Company to pay for pro rata increases in property taxes,
maintenance and certain operating expenses. Rent expense under operating
leases, recognized on a straight-line basis over the term of the lease
(excluding property taxes, maintenance and operation costs), totaled $841,281,
$1,118,777, $1,087,204, $724,714 and $1,004,773 for the eleven months ended
August 31, 1995, fiscal years ended August 31, 1996 and 1997, and the nine
months ended May 31, 1997 and 1998, respectively.

Real Estate Rental Income

The Company leases certain space of its building owned by MCM University
Plaza, Inc. in Sarasota, Florida, to outside parties under noncancellable
operating leases.

At May 31, 1998, the approximate future minimum rental income and
commitments under operating leases that have initial or remaining
noncancellable lease terms in excess of one year are as follows (dollars in
thousands):

<TABLE>
<CAPTION>
REAL ESTATE
AND
LEASE SUBLEASE
COMMITMENTS INCOME TOTAL
----------- ----------- -------
<S> <C> <C> <C>
As of August 31,
Remainder of 1998....................... $ 441 $(113) $ 328
1999.................................... 1,694 (382) 1,312
2000.................................... 1,425 (310) 1,115
2001.................................... 1,387 (147) 1,240
2002.................................... 1,398 (37) 1,361
2003.................................... 1,362 (1) 1,361
2004 and thereafter..................... 3,297 -- 3,297
------- ----- -------
$11,004 $(990) $10,014
======= ===== =======
</TABLE>

7. COMMITMENTS AND CONTINGENCIES

Letters of Credit

The Company has outstanding irrevocable letters of credit totaling
approximately $412,000 as of May 31, 1998, which were issued in connection
with leases for office facilities.

Litigation

The Company, the shareholder of the Company and certain other companies in
which the shareholder of the company has an interest have been named as
defendants in a class action lawsuit filed in November 1997. The lawsuit arose
in connection with the closing of a for-profit psychiatric hospital (the
"Hospital"), which was established in 1989 by the shareholder of the Company.
The Hospital was substantially dependent on Medicare reimbursement for its
revenues. In May 1997, after continued Medicare reimbursement to the Hospital
was effectively terminated, the Hospital ceased operations and made an
assignment for the benefit of its creditors, which is ongoing. The Company
owned a 95% equity interest in the Hospital at the time of the assignment for
the benefit of its creditors.

F-16
<PAGE>

ARGOSY EDUCATION GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The plaintiffs in the lawsuit, former employees of the Hospital, allege that
(i) the Hospital was closed without proper notice to employees in violation of
the Worker Adjustment and Retraining Notification Act; (ii) in violation of
the Employee Retirement Income Security Act of 1974, employee contributions to
the Hospital's profit sharing plan made prior to the Hospital closing were not
delivered to the plan; (iii) in violation of the Illinois Wage Payment and
Collection Act, the Hospital failed to pay the final compensation due its
employees prior to the Hospital closing and (iv) the defendants converted for
their own use and benefit the amount of the plaintiffs' last paycheck, accrued
vacation, profit sharing contributions and credit union contributions. The
Company, the shareholder of the Company and the other defendants in the
lawsuit deny all claims asserted and are vigorously defending themselves.

From time to time, the Company is also subject to occasional lawsuits,
investigations and claims arising out of the normal conduct of business.
Management does not believe the outcome of any pending claims will have a
material adverse impact on the Company's financial position or results of
operations.

8. REGULATORY

The Company and its U.S. schools are subject to extensive regulation by
federal and state governmental agencies and accrediting bodies. In particular,
the Higher Education Act of 1965, as amended (the "HEA") and the regulations
promulgated thereunder by the DOE subject the Company's U.S. schools to
significant regulatory scrutiny on the basis of numerous standards that
schools must satisfy in order to participate in the various federal student
financial assistance programs under the Title IV Programs. Under the HEA and
its implementing regulations, certain financial responsibility and other
regulatory standards must be complied with in order to qualify to participate
in the Title IV Programs. Under such standards, each institution must, among
other things: (a) have an acid test ratio (defined as the ratio of cash, cash
equivalents, and current accounts receivable to current liabilities) of at
least 1:1 at the end of each fiscal year; (b) have a positive tangible net
worth at the end of each fiscal year; (c) not have a cumulative net operating
loss during its two most recent fiscal years that results in a decline of more
than 10% of the institution's tangible net worth at the beginning of that two-
year period; (d) collect 85% or less of its revenues from Title IV Program
funds in any fiscal year; and (e) not have cohort default rates on federally
funded or federally guaranteed student loans of 25% or greater for three
consecutive federal fiscal years. Any regulatory violation could be the basis
for the initiation of a suspension, limitation or termination proceeding
against the Company or any of its U.S. institutions. To minimize risks
associated with noncompliance with DOE requirements, the Company conducts
periodic financial and compliance reviews.

In November 1997, the DOE published new regulations regarding financial
responsibility to take effect July 1, 1998. The regulations provide a
transition year alternative which will permit institutions to have their
financial responsibility for the 1998 fiscal year measured on the basis of
either the new regulations or the current regulations, whichever are more
favorable. Under the new regulations, the DOE will calculate three financial
ratios for an institution, each of which will be scored separately and which
will then be consolidated to determine the institution's financial
responsibility. If an institution's composite score falls below this threshold
level or is between the minimum for unconditional approval and the threshold
for more than three consecutive years, the institution will be required to
post a letter of credit in favor of the DOE. The Company does not believe that
these new regulations will have a material effect on the Company's compliance
with the DOE's financial responsibility standards.

The process of reauthorizing the HEA by the U.S. Congress, which takes place
every five years, has begun and is expected to be completed by 1998. It is not
possible to predict the outcome of the reauthorization process. Although there
is no present indication that the Congress will decline to reauthorize the
Title IV Programs, there can be no assurance that government funding for the
Title IV Programs will continue to be available or maintained at current
levels, nor can there be assurance that current requirements for student and
institutional

F-17
<PAGE>

ARGOSY EDUCATION GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

participation in the Title IV Programs will be unchanged. Thus, the
reauthorization process could result in revisions to the HEA that increase the
compliance burden on the Company's institutions. A reduction in funding levels
for federal student financial assistance programs could impact the Company's
ability to attract students.

In order to operate and award degrees, diplomas and certificates and to
participate in the Title IV Programs, a campus must be licensed or authorized
to offer its programs of instruction by the relevant agency of the state in
which such campus is located. Each of the Company's campuses is licensed or
authorized by the relevant agency of the state in which such campus is located.
In addition, in order to participate in the Title IV Programs, an institution
must be accredited by an accrediting agency recognized by the DOE. Each of the
Company's schools is accredited by an accrediting agency recognized by the DOE.

With each acquisition of an institution that is eligible to participate in
the Title IV Programs, that institution undergoes a change of ownership that
results in a change of control, as defined in the HEA and applicable
regulations. In such event, that institution becomes ineligible to participate
in the Title IV Programs and may receive and disburse only previously committed
Title IV Program funds to its students until it has applied for and received
the DOE recertification under the Company's ownership. A change of ownership,
as defined, occurred in connection with the purchase of MIM and the
contribution of U of S to the Company (as defined in Note 1). As of May 31,
1998, the Company received DOE approval for the change of ownership for both
entities.

9. RELATED-PARTY TRANSACTIONS

During fiscal 1997, the Company advanced funds to its shareholder totaling
$500,000. The unsecured note bears interest at 5.9% at August 31, 1997 and is
due on June 26, 1999. The amount of principal and interest outstanding totaled
$527,791 and was repaid on May 31, 1998.

A company owned by the shareholder of the Company provides management
services for the Company and its schools. For the eleven months ended August
31, 1995, the years ended August 31, 1996 and 1997, and the nine months ended
May 31, 1997 and 1998, the Company incurred and paid expenses totaling
$1,243,911, $1,709,900, $993,441, $897,941 and $1,807,139, respectively,
related to such services. Upon consummation of the IPO, such services will no
longer be provided by the affiliated company.

As of May 31, 1998, the Company had loaned approximately $180,000 to Prime
Tech, an entity one-third owned by the shareholder of the Company. The note is
unsecured and bears interest at 8.0%. Upon completion of the Offering, the
Company will purchase 100% of Prime Tech. See Notes 3 and 12.

The Company pays certain administrative and other expenses on behalf of an
entity partially owned by the shareholder of the Company. The total amount owed
to the Company from this entity for such advances was approximately $108,000 at
May 31, 1998. The affiliated entity paid a management fee to the Company of
approximately $138,000 during the nine months ended May 31, 1998 related to
such services.

10. PROFIT-SHARING PLAN

The Company maintains a 401(k) profit-sharing plan that covers full-time
employees. Employees can contribute up to 15%. Contributions to the plan are
made at the discretion of the Board of Directors as well as by employees in
lieu of current salary. Contributions by the Company totaled $181,753,
$332,689, $389,632, $306,051 and $330,119 for the eleven months ended August
31, 1995, the years ended August 31, 1996 and 1997, and for the nine months
ended May 31, 1997 and 1998, respectively.

F-18
<PAGE>

ARGOSY EDUCATION GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

11. VALUATION AND QUALIFYING ACCOUNTS

The following summarizes the activity of the allowance for doubtful accounts
(dollars in thousands):

<TABLE>
<CAPTION>
BALANCE AT NET CHARGES INCREASE DUE BALANCE AT
BEGINNING TO OPERATING TO END OF
OF PERIOD EXPENSES ACQUISITIONS PERIOD
---------- ------------ ------------ ----------
<S> <C> <C> <C> <C>
Student receivable
allowance activity for
the eleven months ended
August 31, 1995........ $ 5 $-- $-- $ 5
Student receivable
allowance activity for
the year ended August
31, 1996............... 5 25 -- 30
Student receivable
allowance activity for
the year ended August
31, 1997............... 30 -- -- 30
Student receivable
allowance activity for
the nine months ended
May 31, 1998........... $30 $ 60 $ 23 $113
</TABLE>

12. SUBSEQUENT EVENTS AND PRO FORMA DATA (UNAUDITED)

On September 10, 1998, the Company filed a registration statement on Form S-
1 under the Securities Act of 1933 to sell shares of its common stock in the
IPO. The Company intends to use the net proceeds from the Offering to repay
certain outstanding debt which totaled $4.9 million at May 31, 1998 and to pay
a distribution to its shareholder.

In connection with the Offering, the Company will convert to a C Corporation
resulting in the recording of $517,000 in deferred income tax assets, as
discussed in Note 5. Prior to the consummation of the Offering, the Company
intends to declare a distribution (the "Distribution") equal to the Company's
undistributed earnings and the net deferred income tax asset as of the
consummation of the Offering. The Company also intends to enter into a tax
indemnification agreement with its shareholder prior to the consummation of
the Offering. As of May 31, 1998, the Distribution would have equaled
approximately $6.3 million. Retained earnings of the Company, after recording
the Distribution and deferred income taxes, will be reclassified to additional
paid-in-capital in connection with the termination of the Company's S
Corporation election.

The unaudited pro forma balance sheet gives effect to (i) the recording of
the deferred income taxes, (ii) the recording of the Distribution and (iii)
the purchase of MCM University Plaza, Inc.'s stock by the Company as described
in Note 3. No other contemplated transactions in connection with the Offering
are included in the unaudited pro forma balance sheet information.

The pro forma net income and net income per share includes a provision for
federal and state income taxes as if the Company had been a C Corporation. The
pro forma provision for income taxes assumes a combined federal and state
effective income tax rate of 40%.

Supplemental pro forma earnings per share for the year ended August 31, 1997
and for the nine months ended May 31, 1997 and 1998 of $ , $ and $ ,
respectively, is computed based upon (i) pro forma income adjusted for the
reduction in interest expense (net of tax benefit) resulting from the
application of net proceeds of the contemplated offering to reduce
indebtedness of the Company and (ii) the pro forma weighted average number of
shares of common stock outstanding adjusted to reflect the assumed sale by the
Company of approximately , and shares of common stock
in the Offering for the year ended August 31, 1997 and for the nine months
ended May 31, 1997 and 1998, respectively, resulting in net proceeds
sufficient to pay indebtedness and shareholder distributions in excess of net
income for the nine months ended May 31, 1998.

See Note 3 for a description of business acquisitions occurring after May
31, 1998.

F-19
<PAGE>

[INSIDE BACK COVER ART]

[MAP SHOWING THE COMPANY'S LOCATIONS TOGETHER WITH THE FOLLOWING TEXT:]

ARGOSY EDUCATION GROUP

UNIVERSITY OF MEDICAL INSTITUTE AMERICAN SCHOOLS OF PROFESSIONAL
SARASOTA OF MINNESOTA PSYCHOLOGY

WWW.ASPP.EDU

5250 17th Street 3465 Waialae Ave
Sarasota, FL 34235 5503 Green Valley 2301 W Dunlap Ave Suite 300
800-331-5995 Drive Suite 211 Honolulu, HI 96816
Bloomington, MN Phoenix, AZ 85021 808-735-0109
55437

WWW.SARASOTA.EDU

602-216-2600

410 Ware Blvd Suite 1701 Gold Road,
300 612-844-0064 50 El Camino Drive Suite 101
Tampa, FL 33619 WWW.MIM.TEC.MN.US Corte Madera, CA Rolling Meadows, IL
800-850-6488 94925 60008

415-927-2477

847-290-7400

PRIMETECH INSTITUTE

VENTURA GROUP 5001 Yonge Street, 410 Ware Blvd 3103 East 80th
Suite 302 Suite 300 Street

5126 Ralston Street Willowdale, Ontario Tampa, FL 33619 Suite 290
M2N 6P6 813-246-4419 Minneapolis, MN
55425

Ventura, CA 93003
800-472-1931 416-225-1862 990 Hammond Drive
612-921-9500

www.aarbs.com www.primetechinstitute.com

Atlanta, GA 30328
94 Cumberland 888-671-4777 1400 Wilson Blvd.
Street Suite 700 Suite 110
Toronto, Ontario Arlington, VA 22209
M5RIA3 703-243-5300

416-929-0121 20 S. Clark Street
Suite 300
Chicago, IL. 60603
312-201-0200
<PAGE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY, OR BY ANY OF THE UNDERWRITERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE
CLASS A COMMON STOCK IN ANY JURISDICTION OR TO ANY PERSON TO WHOM IT IS UNLAW-
FUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PRO-
SPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF.

--------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 9
The Company............................................................... 19
Use of Proceeds........................................................... 20
Dividend Policy........................................................... 20
Capitalization............................................................ 21
Dilution.................................................................. 22
Unaudited Pro Forma Condensed Consolidated Financial Data................. 23
Selected Historical Consolidated Financial and Other Data................. 29
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................. 31
Business.................................................................. 38
Financial Aid and Regulation.............................................. 49
Management................................................................ 58
Security Ownership of Certain Beneficial Owners and Management............ 65
Description of Capital Stock.............................................. 66
Shares Eligible for Future Sale........................................... 69
Underwriting.............................................................. 70
Legal Matters............................................................. 72
Experts................................................................... 72
Available Information..................................................... 72
Index to Financial Statements............................................. F-1
</TABLE>

--------------------------

UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEAL-
ERS EFFECTING TRANSACTIONS IN THE CLASS A COMMON STOCK, WHETHER OR NOT PARTICI-
PATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DE-
LIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOT-
MENTS OR SUBSCRIPTIONS.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

ARGOSY EDUCATION
GROUP, INC.

CLASS A COMMON STOCK

-----------------

PROSPECTUS
, 1998

-----------------

SALOMON SMITH BARNEY

ABN AMRO INCORPORATED

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

PART II--INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following is a statement of estimated expenses of the issuance and
distribution of the securities being registered other than underwriting
compensation:

<TABLE>
<S> <C>
SEC registration fee............................................. $10,178
NASD filing fee.................................................. 3,950
Nasdaq National Market fees...................................... *
Blue sky fees and expenses (including attorneys' fees and
expenses)....................................................... *
Printing and engraving expenses.................................. *
Transfer agent's fees and expenses............................... *
Accounting fees and expenses..................................... *
Legal fees and expenses.......................................... *
Miscellaneous expenses........................................... *
-------
Total........................................................ $ *
=======
</TABLE>
- --------
*To be provided by amendment.

All amounts are estimated except for the SEC registration fee and the NASD
filing fee.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Company is incorporated under the laws of the State of Illinois. Section
8.75 of the Illinois Business Corporation Act provides generally and in
pertinent part that an Illinois corporation may indemnify its directors and
officers against expenses (in the case of actions by or in the right of the
corporation) or against expenses, judgments, fines and settlements (in all
other cases) actually and reasonably incurred by them in connection with any
action, suit or proceeding if, in connection with the matters in issue, they
acted in good faith and in a manner they reasonably believed to be in, or not
opposed to, the best interests of the corporation and, in connection with any
criminal suit or proceeding, if in connection with the matters in issue, they
had no reasonable cause to believe their conduct was unlawful. Section 8.75
further permits an Illinois corporation to grant to its directors and officers
additional rights of indemnification through bylaw provisions, agreements,
votes of shareholders or interested directors or otherwise, to purchase
indemnity insurance on behalf of such indemnifiable persons and to advance to
such indemnifiable persons expenses incurred in defending a suit or proceeding
upon receipt of certain undertakings.

The Company's Articles of Incorporation will provide for the indemnification
of directors and officers of the Company to the fullest extent permitted by
Section 8.75.

In that regard, the Articles of Incorporation will provide that the Company
shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation) by reason of the fact that he is or was
a director or officer of such corporation, or is or was serving at the request
of such corporation as a director, officer or member of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit
or proceeding if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of such corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. Indemnification in connection with an action
or suit by or in the right of such corporation to procure a judgment in its
favor will be limited to payment or settlement of such an action or suit
except that no such indemnification may be made in respect of any claim, issue
or matter as to which such person shall have

II-1
<PAGE>

been adjudged to be liable for negligence or misconduct in the performance of
his duty to the indemnifying corporation unless and only to the extent that
the court in which such action or suit was brought shall determine that,
despite the adjudication of liability but in consideration of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper. In addition,
all of the Company's directors and officers are expected to be covered by
insurance policies maintained by the Company against certain liabilities for
actions taken in their capacities as such, including liabilities under the
Securities Act.

Section 8 of the Underwriting Agreement also provides for indemnification by
the Underwriters of the Company's officers and directors for certain
liabilities under the Securities Act.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

None.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1** Form of Underwriting Agreement
3.1** Articles of Incorporation of the Company
3.2** By-laws of the Company
4.1** Form of Specimen Stock Certificate
5.1** Opinion of Kirkland & Ellis
10.1** Argosy Education Group, Inc. 1998 Stock Incentive Plan
10.2** Argosy Education Group, Inc. Employees Stock Discount Purchase Plan
Form of Tax Indemnification Agreement between the Company and Dr.
10.3** Markovitz
Term Note of Academic Review, Inc., dated August 27, 1997, in favor of
10.4** Northern Trust Company
10.5** Real Estate Mortgage and Security Agreement, dated April 30, 1997,
among MCM University Plaza, Inc. and Northern Trust Bank of Florida,
N.A.
Lease Agreement, dated July 21, 1995, between Park Central Corp. and U
10.6** of S
10.7** Standard Tenancy Agreement, dated December 10, 1992, between Lakeside
Commons Partners and the Company, as amended by Lease Amendment, dated
March 17, 1994, between Lakeside Commons Partners and the Company
10.8** Tenant Lease, dated June 21, 1995, between CKSS Associates and the
Company
10.9** Lease Agreement, dated January 20, 1997, between Reed Union School
District and California Graduate School of Psychology.
10.10** Lease, dated September 8, 1994, between American National Bank and
Trust Company of Chicago and The Company, as amended by Amendment to
Lease, dated November 28, 1997, between American National Bank and
Trust Company of Chicago and the Company
10.11** Lease Agreement, dated July 3, 1996, between Continental Offices Ltd.
and the Company, as amended by First Amendment, to Lease Agreement,
dated July 3, 1996, between Continental Offices Ltd. and the Company
10.12** Office Lease, dated May 28, 1997, between Presson Advisory, L.L.C. and
the Company
10.13** Lease, dated May 3, 1997, between Control Data Corporation and the
Company, and amended by Letter Agreement, dated December 8, 1994
</TABLE>

II-2
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.14** Lease, dated August 1, 1997, between Oneida Realty Company and the
Company
10.15** Lease Agreement, dated May 3, 1994, between Arlington Park Realty
Corporation and the Company
10.16** Standard Industrial/Commercial Multi-Tenant Lease--Modified Net, dated
November 3, 1995, between the Gordon Family Trust and AATBS, and
addenda and amendments thereto
10.17** Lease, dated October 11, 1991, between MEPC American Properties
Incorporated and Medical Institute of Minnesota, Inc. and amendments
thereto.
10.18** Indenture of Sublease, dated June 9, 1997, between Royal Bank of
Canada and PrimeTech Corporation
10.19** Lease, dated March 14, 1997, between Cumberland-Bellair Investment,
Inc. and 1184266 Ontario Inc.
10.20** Stock Purchase Agreement, dated April 15, 1998, among PrimeTech Canada
Inc., George Schwartz, P.M.T. Holdings Inc. and Michael Markovitz
10.21** Stock Purchase Agreement, dated February 3, 1998, between Medical
Institutes of America, Inc. and Phillip Miller
10.22** Agreement to Purchase and Redeem Stock, dated August 26, 1997, among
Ventura, Steven H. Santini and Association for Advanced Training in
the Behavioral Sciences
10.23** Agreement to Purchase Assets, dated August 26, 1997, among Academic
Review, Inc., an Illinois corporation, Academic Review, Inc., a
California corporation and Steven H. Santini
10.24** Purchase and Sale Agreement, dated August 31, 1998, between University
of Sarasota, Inc. and Michael C. Markovitz
10.25** Software License and Service Agreement, dated March 31, 1998, between
SCT Software & Resource Management Corporation and the Company
10.26** Purchase of Services Agreement, dated January 1, 1998, between
Illinois Alternatives, Inc. and the Company
10.27** Form of Distribution Loan note.
21.1** Subsidiaries of the Company
23.1** Consent of Kirkland & Ellis (included in Exhibit 5.1)
23.2* Consent of Arthur Andersen LLP
27.1* Financial Data Schedule
</TABLE>
- --------
*Filed herewith.
**To be filed by amendment.

ITEM 17. UNDERTAKINGS.

The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being

II-3
<PAGE>

registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

II-4
<PAGE>

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF CHICAGO, STATE OF
ILLINOIS ON SEPTEMBER 11, 1998.

Argosy Education Group, Inc.

/s/ Michael C. Markovitz
By: _________________________________
Name: Michael C. Markovitz
Title: Chairman

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW CONSTITUTES AND APPOINTS MICHAEL C. MARKOVITZ, HAROLD J. O'DONNELL AND
CHARLES T. GRADOWSKI AND EACH OF THEM, HIS OR HER TRUE AND LAWFUL ATTORNEYS-
IN-FACT AND AGENTS, WITH FULL POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR
HIM OR HER AND IN HIS OR HER NAME, PLACE AND STEAD, IN ANY AND ALL CAPACITIES
(INCLUDING HIS OR HER CAPACITY AS A DIRECTOR AND/OR OFFICER OF ARGOSY
EDUCATION GROUP, INC.), TO SIGN ANY OR ALL AMENDMENTS (INCLUDING POST-
EFFECTIVE AMENDMENTS) TO THIS REGISTRATION STATEMENT AND ANY SUBSEQUENT
REGISTRATION STATEMENT FILED PURSUANT TO RULE 462(B) UNDER THE SECURITIES ACT
OF 1933 (AND ANY AMENDMENTS THERETO), AND TO FILE THE SAME, WITH ALL EXHIBITS
THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH, WITH THE SECURITIES AND
EXCHANGE COMMISSION, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND AGENTS, AND EACH
OF THEM, FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT AND
THING REQUISITE AND NECESSARY TO BE DONE IN AND ABOUT THE PREMISES, AS FULLY
TO ALL INTENTS AND PURPOSES AS HE OR SHE MIGHT OR COULD DO IN PERSON, HEREBY
RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEYS-IN-FACT AND AGENTS OR ANY OF
THEM, OR THEIR OR HIS OR HER SUBSTITUTE OR SUBSTITUTES, MAY LAWFULLY DO OR
CAUSE TO BE DONE BY VIRTUE HEREOF.

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT AND POWER OF ATTORNEY HAVE BEEN SIGNED ON SEPTEMBER 11,
1998, BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH RESPECT TO
ARGOSY EDUCATION GROUP, INC.:

<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------

<S> <C>
/s/ Michael C. Markovitz Chairman and Director
___________________________________________ (principal executive officer)
Michael C. Markovitz

/s/ Charles T. Gradowski Chief Financial Officer
___________________________________________ (principal financial and accounting
Charles T. Gradowski officer)

/s/ Theodore J. Herst Director
___________________________________________
Theodore J. Herst

/s/ Michael W. Mercer Director
___________________________________________
Michael W. Mercer

/s/ Karen M. Knab Director
___________________________________________
Karen M. Knab

/s/ Kalman M. Shiner Director
___________________________________________
Kalman M. Shiner

/s/ Leslie M. Simmons Director
___________________________________________
Leslie M. Simmons

/s/ John E. Sites Director
___________________________________________
John E. Sites

</TABLE>

II-5

<PAGE>

EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our report
and to all references to our Firm included in or made a part of this
registration statement.

Arthur Andersen LLP
Chicago, Illinois
September 10, 1998

<PAGE>

<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> AUG-31-1997 AUG-31-1998
<PERIOD-START> SEP-01-1996 SEP-01-1997
<PERIOD-END> MAY-31-1997 MAY-31-1998
<CASH> 0 6,229
<SECURITIES> 0 1,127
<RECEIVABLES> 0 1,027
<ALLOWANCES> 0 113
<INVENTORY> 0 112
<CURRENT-ASSETS> 0 9,060
<PP&E> 0 5,425
<DEPRECIATION> 0 1,635
<TOTAL-ASSETS> 0 20,748
<CURRENT-LIABILITIES> 0 8,720
<BONDS> 0 5,331
0 0
0 0
<COMMON> 0 505
<OTHER-SE> 0 5,732
<TOTAL-LIABILITY-AND-EQUITY> 0 20,748
<SALES> 0 0
<TOTAL-REVENUES> 16,565 22,742
<CGS> 0 0
<TOTAL-COSTS> 12,983 19,480
<OTHER-EXPENSES> 10 12
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 46 423
<INCOME-PRETAX> 3,866 3,123
<INCOME-TAX> 70 53
<INCOME-CONTINUING> 3,796 3,070
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 3,796 3,070
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0

</TABLE>

<PAGE>

<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
the Company's Consolidated Financial Statements and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> AUG-31-1996 AUG-31-1997
<PERIOD-START> SEP-01-1995 SEP-01-1996
<PERIOD-END> AUG-31-1996 AUG-31-1997
<CASH> 4,231 4,209
<SECURITIES> 1,153 2,519
<RECEIVABLES> 232 756
<ALLOWANCES> 30 30
<INVENTORY> 161 108
<CURRENT-ASSETS> 5,897 7,805
<PP&E> 1,828 4,508
<DEPRECIATION> 1,027 1,320
<TOTAL-ASSETS> 8,336 17,580
<CURRENT-LIABILITIES> 2,581 3,393
<BONDS> 243 6,354
0 0
0 0
<COMMON> 504 505
<OTHER-SE> 4,732 6,943
<TOTAL-LIABILITY-AND-EQUITY> 8,336 17,580
<SALES> 0 0
<TOTAL-REVENUES> 17,840 20,460
<CGS> 0 0
<TOTAL-COSTS> 16,517 17,602
<OTHER-EXPENSES> (21) 48
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 55 107
<INCOME-PRETAX> 1,593 3,200
<INCOME-TAX> 30 37
<INCOME-CONTINUING> 1,563 3,163
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,563 3,163
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0

</TABLE>

<PAGE>

<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
the Company's Consolidated Financial Statements and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 11-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> AUG-31-1995
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 14,041
<CGS> 0
<TOTAL-COSTS> 12,583
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 50
<INTEREST-EXPENSE> 1
<INCOME-PRETAX> 1,580
<INCOME-TAX> 30
<INCOME-CONTINUING> 1,550
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,550
<EPS-PRIMARY> 0
<EPS-DILUTED> 0

</TABLE>