COMPASS KNOWLEDGE HOLDINGS INC
10SB12G/A, 2000-05-12
BUSINESS SERVICES, NEC
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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-SB

                                AMENDMENT NO. 2

                   GENERAL FORM FOR REGISTRATION OF SECURITIES
                  OF SMALL BUSINESS ISSUERS UNDER SECTION 12(b)
                     OR 12(g) OF THE SECURITIES ACT OF 1934

                        COMPASS KNOWLEDGE HOLDINGS, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                    NEVADA                            87-0471549
        (STATE OR OTHER JURISDICTION OF             (IRS EMPLOYER
        INCORPORATION OR ORGANIZATION)          IDENTIFICATION NUMBER)

                           2710 REW CIRCLE, SUITE 100
                              OCOEE, FLORIDA 34761
           (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES INCLUDING ZIP CODE)

                                 (407) 656-3906
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

                                 (407) 656-7585
              (REGISTRANT'S FACSIMILE NUMBER, INCLUDING AREA CODE)

                            WWW.COMPASSKNOWLEDGE.COM
                         (REGISTRANT'S WEBSITE ADDRESS)

                     SECURITIES TO BE REGISTERED PURSUANT TO
                           SECTION 12(b) OF THE ACT:

                                               NAME OF EACH EXCHANGE
  TITLE OF EACH CLASS                              ON WHICH EACH
  TO BE SO REGISTERED                        CLASS IS TO BE REGISTERED
  -------------------                        -------------------------
          NONE                                          NONE

                     SECURITIES TO BE REGISTERED PURSUANT TO
                           SECTION 12(g) OF THE ACT:
                     ----------------------------------------

                     COMMON STOCK, PAR VALUE $.001 PER SHARE
                     ----------------------------------------
                                (TITLE OF CLASS)



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                                TABLE OF CONTENTS

<TABLE>
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<S>        <C>                                                                                         <C>
PART I

Item 1    Description of Business......................................................................   2

Item 2    Management's Discussion and Analysis of Results of Operations and Financial Condition........  27

Item 3    Description of Property......................................................................  34

Item 4    Security Ownership of Certain Beneficial Owners and Management...............................  34

Item 5    Directors and Executive Officers and Control Persons.........................................  36

Item 6    Executive Compensation.......................................................................  37

Item 7    Certain Relationships and Related Transactions...............................................  39

Item 8    Description of Securities....................................................................  40

PART II

Item 1    Market Price of and Dividends on the Registrant's Common Equity and
          Other Shareholder Matters....................................................................  42

Item 2    Legal Proceedings............................................................................  43

Item 3    Changes in and Disagreements with Accountants................................................  43

Item 4    Recent Sales of Unregistered Securities......................................................  43

Item 5    Indemnification of Directors and officers....................................................  45

Part F/S Financial Statements..........................................................................  45

PART III
Items 1 and 2 Index and Description to Exhibits........................................................  46

</TABLE>



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         FORWARD LOOKING STATEMENTS. THE DISCUSSION CONTAINED HEREIN REGARDING
WE AND ITS BUSINESS AND OPERATIONS MAY INCLUDE "FORWARD LOOKING STATEMENTS."
SUCH STATEMENTS CONSIST OF ANY STATEMENT OTHER THAN A RECITATION OF HISTORICAL
FACT AND CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS
"MAY," "EXPECT," "ANTICIPATE," "ESTIMATE" OR "CONTINUE" OR THE NEGATIVE THEREOF,
OTHER VARIATIONS THEREOF, OR COMPARABLE TERMINOLOGY. ALL FORWARD-LOOKING
STATEMENTS ARE NECESSARILY SPECULATIVE, AND THERE ARE CERTAIN RISKS AND
UNCERTAINTIES THAT COULD CAUSE ACTUAL EVENTS OR RESULTS TO DIFFER MATERIALLY
FROM THOSE REFERRED TO IN SUCH FORWARD-LOOKING STATEMENTS. EXCEPT FOR HISTORICAL
INFORMATION, MATTERS DISCUSSED IN THIS REPORT REGARDING FINANCIAL RESULTS AND
DEMAND FOR PRODUCTS AND SERVICES ARE FORWARD-LOOKING STATEMENTS THAT INVOLVE
RISKS AND UNCERTAINTIES, INCLUDING THOSE RELATED TO THE FURTHER DEVELOPMENT OF
OUR PRODUCTS AND SERVICES AND MARKET ACCEPTANCE OF SUCH PRODUCTS AND SERVICES.

         AS USED IN THIS FORM 10, THE TERMS "WE", "US", "OUR" AND "COMPASS
KNOWLEDGE HOLDINGS, INC." MEAN COMPASS KNOWLEDGE HOLDINGS, INC. AND ITS
SUBSIDIARIES, AND THE TERM "COMMON STOCK" MEANS COMPASS KNOWLEDGE HOLDINGS, INC.
COMMON STOCK, $0.001 PAR VALUE. UNLESS OTHERWISE STATED, REFERENCE TO A "YEAR"
IN THIS FORM 10 MEANS OUR FISCAL YEAR, WHICH ENDS ON DECEMBER 31.

         THERE ARE A NUMBER OF RISKS ASSOCIATED WITH OUR INDUSTRY. FOR
INFORMATION CONCERNING THESE RISKS SEE "RISKS RELATED TO INDUSTRY" BEGINNING ON
PAGE 16 OF THIS FORM 10-SB/A.

PART I

ITEM 1.  DESCRIPTION OF BUSINESS

HISTORICAL BACKGROUND

         Our business began with Professional Educational Seminars, Inc., a
Florida corporation which purchased the operating division and intellectual
property of Paul M. Deutsch Press, Inc. in November 1993. Professional
Educational Seminars was formed for the purpose of developing, owning and
operating seminars, developing and providing certificate programs and developing
and publishing materials in life care planning for catastrophic injuries and
impairments. In November 1993, Rogers W. Kirven, Jr., our Chief Executive
Officer, and several other individuals acquired all the issued and outstanding
stock of Professional Educational Seminars, and in 1994 the name of Professional
Educational Seminars, Inc. was changed to Rehabilitation Training Institute,
Inc., one of our wholly-owned subsidiaries.

         In March of 1996, Rehabilitation Training Institute with the University
of Florida Health Services, Inc., a Florida corporation and an affiliate of the
University of Florida, formed Intelicus, LC, a Florida limited liability company
organized for the purpose of developing, marketing and operating degree and
certificate programs for healthcare professionals. Rehabilitation Training



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Institute was ultimately issued 64.5% of the ownership interest in Intelicus and
University of Florida Health Services was issued the remaining 35.5% ownership
interest. Intelicus was managed by four managing members, two appointed by
Rehabilitation Training Institute and two appointed by University of Florida
Health Services.

         On February 9, 1999, Compass Knowledge Group, Inc. was incorporated
under the laws of the State of Florida for the purpose of establishing a company
to acquire companies and develop and operate businesses involved in the distance
learning business. We had no operating history. Upon formation, our shareholders
were issued 9,188,257 shares of our common stock, $.001 par value.

         Effective October 31, 1999, Compass Knowledge Group, Inc. consummated a
tax-free stock exchange with the shareholders of Rehabilitation Training
Institute whereby Rehabilitation Training Institute shareholders exchanged, on a
one-for-one basis, all of their common stock in Rehabilitation Training
Institute for common stock in Compass Knowledge Group, Inc. No new shares of
common stock were issued to the shareholders of Compass Knowledge Group, Inc. as
part of the exchange. Upon consummation of the stock exchange, we owned 100% of
Rehabilitation Training Institute and Rehabilitation Training Institute owned
64.5% of Intelicus. The University of Florida Health Services owned the
remaining 35.5% of Intelicus. The exchange has been accounted for as a business
combination among control groups, similar to a pooling of interests.

         In October 1999, we also agreed to purchase the 35.5% equity interest
in Intelicus, LC which was then owned by The University of Florida Foundation,
Inc. as a result of a gift from the University of Florida Health Services, Inc.
In exchange for the 35.5% interest, we agreed to issue to The University of
Florida Foundation 465,000 shares of our common stock and to contribute $300,000
to The University of Florida Foundation for the purpose of establishing an
endowment fund for health professionals. As a condition to the closing, The
University of Florida, College of Pharmacy agreed to extend for a period of five
(5) years the term of its professional service agreements with us for an
additional 35,000 shares of our common stock. This transaction was valued at
$2.00 per share, which was the fair market value of our stock at that time.
These transactions were closed on December 1, 1999. Other than that of an
arms-length business arrangement and the ownership of 5.27% of our common stock,
there is no affiliation between us and The University of Florida.

         The purchase of The University of Florida Foundation's interest in
Intelicus was structured as an equity exchange whereby The University of Florida
Foundation received 465,000 shares of our common stock (approximately 3.2% of
our issued and outstanding common stock) in exchange for its 35.5% ownership
interest in Intelicus, thereby making Intelicus our wholly owned subsidiary. The
University of Florida Foundation is entitled to a one-time piggy-back
registration right and a nominee of The University of Florida Foundation, Inc.
shall be appointed to our board of directors for so long as The University of
Florida Foundation owns at least 1% of our issued and outstanding stock, as
calculated on a fully diluted basis.

         On November 15, 1999, we were recapitalized in a tax-free acquisition
of Winthrop Industries, Inc. In accordance with the acquisition agreement, our
common stockholders received one share of Winthrop Industries' common stock for
each share of common stock owned by them and our preferred shareholders received
a like kind and number with identical preferences of Series A Preferred Stock in
Winthrop Industries in exchange for our Series A Preferred Stock. Winthrop
Industries also adopted our Stock Option Plan, thereby allowing our option
holders to exercise their options to acquire common shares of Winthrop
Industries in accordance with the adopted Stock Option Plan. No new shares of
common stock were issued to the shareholders of Winthrop as part of the
exchange. For accounting purposes, the acquisition has been treated as a
recapitalization of Compass Knowledge Group, Inc. with Compass Knowledge Group
as the acquirer.

         As an additional negotiated condition of the Winthrop Industries
acquisition, the management of Winthrop Industries completed an offering on
November 15, 1999 of 2,000,000 shares of its common stock, at an offering price
$2.00 per share. The offering was made pursuant to an exemption from
registration under the Securities Act of 1933, provided by Regulation D, Rule
506, of said Act, raising proceeds of $3,936,025, net of offering costs of
$63,975. Neither Compass Knowledge Group nor any of its officers, directors or
shareholders assisted or participated in this offering.

         At the time we closed the transaction with Winthrop Industries,
Winthrop had no operations. The principal reasons for this transaction were to
obtain cash in the amount of $3,936,025 (which Winthrop had as a result of the
private placement of 2,000,000 shares of its common stock) and to become a
publicly traded company, listed on the OTC-BB.

         As part of the acquisition of Winthrop Industries, its officers and
directors resigned and were replaced by our officers and directors. The name of
Winthrop Industries was changed to Compass Knowledge Holdings, Inc. Prior to the
acquisition of Winthrop Industries, our management had no relationship with
Winthrop Industries or its shareholders. At the time of the Exchange, none of
the shareholders of Winthrop or their officers or directors owned any stock in
Compass and none of the Compass shareholders or their officers or directors
owned any stock in Winthrop. The net proceeds from it's offering was the only
material asset of Winthrop at the time of the closing of the exchange. Upon the
consummation of the Winthrop Industries acquisition, Mr. Kirven, our Chief
Executive Officer, owned approximately 30% of our issued and outstanding voting
common stock and Mr. Devin, our President, owned approximately 21%.

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         On December 24, 1999, two of our principal shareholders and officers,
Rogers W. Kirven, Jr. and Daniel J. Devine, collectively gifted 350,000 shares
of our common stock owned by them to The University of Florida Foundation for
the purpose of providing an endowment for health professionals.


         Beginning with the purchase of Professional Education Seminars, Inc. in
November 1993 and continuing through the present, Mr. Kirven, our Chief
Executive Officer, and Mr. Devin, our President, who collectively own
approximately 51% of our issued and outstanding voting common stock and held
proxies for the other shareholders of the Company prior to the Winthrop
Industries acquisition, have controlled and directed our operations.


OUR BUSINESS

INTRODUCTION

         We are an educational company that delivers our education programs to
working professionals primarily in the healthcare market utilizing the Internet,
expert video presentation and other traditional mediums by:

         o     Delivering curricula and content over the Internet and through
               other traditional mediums,
         o     Providing interaction between and among the students and their
               professors via the Internet through e-mail, lectures and chat
               rooms, and
         o     Providing course content on video and hard copy materials to
               students.

         We presently operate our business through our wholly owned subsidiaries
which sell and deliver our programs. Our programs contain the content and
curriculum of The University of Florida, which is presently our only content
provider. We are highly dependent on The University of Florida. An interruption
or loss of our relationship with The University of Florida would, at this stage
of our development, have a material adverse effect on our business and financial
results. We anticipate selling and delivering our own programs with content and
curriculum provided by other content providers in the near future.


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         We currently deliver our education programs utilizing the Internet and
through expert video presentations and other traditional mediums utilizing two
models. One model we use for delivering degree programs and the other we use for
delivering certificate programs. We use these models to deliver advanced
professional degrees and certificates, all but one of which are conferred by The
University of Florida.


DEGREE PROGRAMS

         o  Doctor of Pharmacy

         o  Doctor of Audiology

CERTIFICATE PROGRAMS

         o  Life Care Planning


         o  Herbal Products & Counseling

         o  Principles and Application in Indoor Air Quality


         We presently offer and sell our education programs using the Internet
and other traditional mediums to targeted niche markets nationally. Our
marketing and delivery of programs are designed to build and enhance our brand
image and that of The University of Florida and our future university content
providers. Through our delivery system, individual students are able to access
brand name content, anytime, and at a reasonable cost. We utilize our experience
and skills to:


         o  identify under-served market niches,

         o  obtain and develop branded content,

         o  design effective distributed learning programs,

         o  sell programs to a target marketplace, and


         o  promote and manage distance learning educational programs.



         Personal contact and the direct exchange of information and discussion
between our students and professors is important to supplement context and
determine competency with respect to our Doctor of Pharmacy, Doctor of
Audiology and Life Care Planning programs. It is not important with respect to
our Herbal Products & Counseling and Principles and Application in Indoor Air
Quality programs which have been enhanced by other components in our system
such as the Internet and video communication tools.

         For our Doctor of Pharmacy and Doctor of Audiology programs where
personal contact is important, we establish regional meeting sites in select
geographical areas where at least one instructor is provided for at least five
but no more than 55 students who are within two to three hours driving distance
from the meeting site. If there are less than five students in any given
geographical area then in order to enroll in the program the student will be
required to travel to the nearest regional meeting site. If there are more than
55 students in any such area, we break the region into as many multiple areas
as are necessary to satisfy our enrollment/instructor criteria.

         In the last semester of our Doctor of Pharmacy program there were 23
regional meeting sites located in 14 different states with a total enrollment
of approximately 420 students.

         In the last semester of our Doctor of Audiology program there were 15
regional meeting sites located in 11 different states with a total enrollment
of approximately 345 students.

         For our Life Care Planning program where personal contract is not as
important and where student enrollment has been historically less than our
doctorial programs and where the students typically live in diverse,
unconcentrated locations, we provide for rotating multiple meeting sites to
minimize the distance which the students are required to travel.

         In the last semester of our Life Care Planning program, our instructors
traveled to 12 different meeting sites in 24 states providing instruction to
50 students. We believe that our rotating multiple meeting site strategy helps
to minimize any adverse impact that we might otherwise experience in our
enrollment and operations.


LAWS AND REGULATIONS

         The laws and regulations concerning delivery of educational programs
and products in a distributed or distance learning environment vary from state
to state. Some states have yet to pass any laws or regulations specific to the
delivery of education via electronic media while other states have not fully
developed such laws and regulations. Some states have passed laws that prohibit
degree-granting institutions from operating physical sites without proper
authorization.

         Presently, the University of Florida is authorized to provide degrees
in only Florida, Texas and Arkansas and has an application pending in North
Carolina. With respect to students in all other states in which we provide our
programs, we believe, after conferring with our legal advisors, that approval or
authorization is not presently required. Accordingly, we have yet to experience
any geographical limitations in our business. If, however, such states or others
in which we intend to do business require authorization, our business, financial
status and expansion plans could be adversely effected.

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OUR MARKET

         Presently, our programs provide educational degrees and certificates to
the healthcare education market. One hundred percent of our programs and 100% of
our revenues are derived from this marketplace. Currently, approximately 71% of
our net revenues is derived from our degree programs and approximately 28% is
derived from our certificate programs. We believe, based upon recent trends in
the education healthcare industry and technology advancements, that this market
will continue to increase. Our opinion is also based on the following factors:

         o  generally healthcare professionals are required by their profession
            to take continuing education courses;

         o  healthcare professionals have a history of taking education
            courses; and

         o  healthcare professionals have ready access to personal computers
            and the Internet.

         Our research also leads us to believe that, as with the healthcare
industry in general, growth in the education healthcare marketplace will also be
driven by pressures to reduce cost from managed care organizations, government
agencies, regulators, large corporations, small businesses, and consumers. These
cost pressures have generally resulted in lower incomes, downsizing, and greater
workloads for all healthcare workers, which we believe will require the learning
of new skills. Besides maintaining proficiency, many healthcare professionals
also obtain additional education so that they can increase their income through
specialization. We believe that these factors are the primary drivers for the
increased interest in distance learning programs.

         We are also currently exploring new business opportunities outside the
healthcare marketplace that include degree and certificate programs in law,
criminology, and succession planning.




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A COMPETITIVE ENVIRONMENT

         While we have experienced little competition in the heathcare segment
of the education market to date, no assurance can be given that larger, better
capitalized companies will not enter this market. Likewise, if we expand our
business, as we presently intend to do, into other areas of the education
marketplace, we will be faced with significant competition. In our market there
are a number, of large, highly capitalized public companies that focus on the
higher education market such as eCollege.com, Apollo Group, Inc., DeVry, The
Lightspan Partnership, Convene.com and ITT Educational Services. Other companies
focus on the corporate training market (e.g., the CBT Group, The Learning Tree)
and a smaller number are recognized as specialty providers including Sylvan
Learning and NCS Computer.


         We believe that our delivery models, our niche marketing strategy, and
our focus on customer acquisition and marketing, differentiates us from the
competition. Furthermore, the market is highly fragmented with no single
competitor accounting for a dominant market share.




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         We believe that the level of competition will continue to increase as
current competitors increase the sophistication of their offerings and as new
participants enter the market. Many of our current and potential competitors
have longer operating histories, larger customer bases, greater brand
recognition and significantly greater financial, marketing and other resources
than we do and may enter into strategic or commercial relationships with larger,
more established and well-financed companies and institutions. Certain
competitors may be able to secure alliances with customers and affiliates on
more favorable terms, devote greater resources to marketing and promotional
campaigns and devote substantially more resources to systems development than we
can. In addition, new technologies and the expansion of existing technologies
may increase the competitive pressures we face. Increased competition may result
in reduced operating margins, as well as loss of market share and brand
recognition. We may not be able to compete successfully against current and
future competitors, and the competitive pressures we face could have a material
adverse effect on our business and financial results.

         There is a potential threat that a large, highly capitalized company
will initiate a strategy to enter the distributed learning healthcare segment
which could directly and adversely effect our business and financial results.

STRATEGIC ALLIANCES, OUR FIRST CONTENT PARTNER - THE UNIVERSITY OF FLORIDA


         An important part of our strategy is to enhance our business by
establishing long term strategic alliances with universities, colleges and other
knowledge content providers. These alliances are based upon a model whereby we
bear the risk of marketplace development and obtain content from our knowledge
partner, thereby making our central operations the delivery of specialized
content in the context of our delivery system.





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         The University of Florida was our first and at this time is our only
content provider. The University of Florida provides us with the curriculum and
content for our degree and certificate programs. While The University of Florida
owns the content and curriculum that make up the core of our existing programs,
we otherwise own all rights, title and interest in the derivative works and our
systems.

         We perform the following activities with respect to our programs:

         o  Student Registration Preprocessing

         o  Student Support

         o  Assistance in Curriculum Development

         o  Administration of Multimedia

         o  Administration of Hardcopy

         o  Daily Management of  Student Database

         o  Daily Financial Management

         o  Daily Personnel Management

         o  Quality Control

         o  Facilities Management

         o  Approval and Maintenance of Program Content

         o  Creation of Video Content as well as editing and enhancement.

         o  Marketing of Programs

         o  Development of Market Strategies

         o  Execution of Market Strategy

         o  Development of Promotional Literature

         o  Development of Collateral Materials

         o  Development and Management of Mailing Lists

         o  Management of Telephone Database

         We currently have 27 contracts with The University of Florida for two
ongoing degree and five ongoing certificate programs. Our degree programs have
five year terms and we receive between 38% and 50% of total student fees
received with respect to these programs depending on the level of service we
provide. Our certificate programs have terms tied to the economic life of the
program which we estimate to be approximately 10 years. We pay The University of
Florida three to 15 percent of total student fees collected with respect to
certificate programs.

STRATEGIC ALLIANCES - FUTURE PARTNERS

         We are actively engaged in discussions with several potential strategic
partners with either curriculum, content and/or technology specialties. These
content providers offer opportunities for us to rapidly move forward with the
introduction of new programs since they have the core knowledge that may be
placed into our web-based delivery system.

         The technology partners are educational technology suppliers and would
enhance our ability to stay on the leading edge of rapidly developing content
delivery technology. Additionally, these potential partners have a number of
customers that would be attractive partners.

         No assurance can be given that we will be able to develop a
relationship with these potential partners or if developed, the nature of any
such relationship.

CURRENT PROGRAMS

         We utilize an educational marketing system to optimize our brand and
quality recognition. This system is specifically focused on working professional
students who want a educational experience but cannot or do not want to "return
to campus." By utilizing the relationship with The University of Florida and
other content providers, many new programs are expected to be developed in the
near term in specialty areas where demand for training has already been clearly
identified by the professional community. As an example, our Doctor of Pharmacy
program has led to additional opportunities in herbal medications and diabetes.
Our management team is also actively engaged in identifying additional sources
of programs and content providers.


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Presently, the programs that are developed and are currently being offered in
the marketplace include:

1.       THE WORKING PROFESSIONAL DOCTOR OF PHARMACY PROGRAM

         There is a significant opportunity to advance the careers of many
pharmacists that want to upgrade their professional credentials to a Doctor of
Pharmacy. The University of Florida College of Pharmacy is among the top ten
pharmacy schools in the nation for the past four years as ranked by U.S. NEWS
AND WORLD REPORT'S annual ranking of the best colleges and universities in the
country.

         Our Working Professional Doctor of Pharmacy Program has more than 420
students enrolled in the Spring, 2000 semester. Tuition currently ranges from
$18,000 to $22,500 for the three-year degree program, depending on whether the
student is a resident or nonresident of Florida or is a student enrolled under a
corporate plan.

2.       THE WORKING PROFESSIONAL DOCTOR OF AUDIOLOGY PROGRAM

         This degree program is designed for the working professional
audiologist to upgrade their degree to the Doctorate of Audiology (Au.D.). The
Working Professional Au.D. Degree is designed to provide working audiologists
with the complex and diverse skills necessary to meet the challenges of the
healthcare marketplace. There are approximately 345 students enrolled in the 18
month program, each paying $12,555 in tuition.

3.       LIFE CARE PLANNING CERTIFICATE PROGRAM

         The Life Care Planning Certificate Program is targeted toward
rehabilitation, medical, and vocational professionals desiring to add billable
skills to their professional capabilities. Life Care Plans are documents that
are used generally as evidence in litigation. The plan reviews the cause and
result of the catastrophic injury and then defines the plan of care format for
the catastrophically injured individual. Medical and financial aspects are
planned for the full life expectancy of the injured individual. This certificate
program is composed of six training sessions and two distance learning modules
offering up to 120 post-graduate hours in professional training focused on Life
Care Planning for Catastrophic Case Management including vocational issues that
are vital to Life Care Planning. We currently train in excess of 300 students
per year. The total tuition cost for this program is $3,595. In addition to the
Certificate Program, (9) additional advanced courses are offered for a cost of
$795 per course.



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4.       PRINCIPLES AND APPLICATIONS IN INDOOR AIR QUALITY

         With a high awareness of "sick building" syndrome, combined with
government regulation, the demand for Indoor Air Quality education for both
healthcare and management professionals is very significant. This program is
100% Internet based. There are currently 15 students enrolled in this program.
The tuition for this program is $500 per student.





5.       HERBAL PRODUCTS AND COUNSELING

         This certificate program will educate the Pharmacist regarding the
science of herbal formulas. Additionally, the Pharmacist will be taught how to
consult to their customers regarding the facts, fiction, and use of herbal
products. It is anticipated that this program will be expanded in order to be
given to other healthcare professionals. We have in conjunction with The
University of Florida, entered into an agreement with the IVAX Corporation to
provide a herbal certificate program to their customers at a discounted price of
$250 per student. The tuition for this program is $595.00 per student.

PROGRAMS NOT PRESENTLY BEING ENROLLED

         Programs that are developed but for which we are NOT presently
enrolling students (although we expect to do so later this year or early next
year) include:

1.       HEALTH CARE FINANCE

         This certificate program assists physicians in preparing for the future
of healthcare delivery and management. This program covers some of the
principles and techniques taught in an MBA program, but is tailored to the
physician's perspective and time constraints. The tuition for this four-module
program, when offered, is expected to be $1,695.

2.       FUNCTIONAL CAPACITY EVALUATION

         The Functional Capacity Evaluation Certificate Program gives
physicians, chiropractors, occupational therapists, physical therapists and
other professionals the ability to define the extent of an individual's injuries
using scientifically based protocols. The program is composed of four modules
which are delivered over a four month period using our distance learning and
classroom delivery systems. The tuition for this program is currently $1,795.

PROGRAMS PRESENTLY UNDER DEVELOPMENT

1.       SUCCESSION PLANNING CERTIFICATION

         Succession Planning is a growing area of specialty that assists
business owners in developing a financial planning strategy that will satisfy
their estate planning and business continuity objectives. The aging demographics
of today's business owners and the creation of thousands of new businesses have
created a demand for succession planning professionals. The tuition for this
certificate program is $4,645. It is anticipated that the first class for this
program will begin in the second quarter of 2000.






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<PAGE>   13



2.       DIABETES MANAGEMENT CERTIFICATE

         As an extension to the current pharmacy degree program, many
opportunities exist to utilize the existing curriculum and package into both
certificate programs and continuing education modules. A certificate program in
diabetes management is currently under development. This offers an opportunity
to meet the Medicare ruling that allows pharmacists to bill Medicare for
diabetes consultation. The tuition is scheduled to be $995 per student with
enrollees expected in the second quarter of 2000.

3.       MASTERS OF BUSINESS ADMINISTRATION - NON-PROFIT ORGANIZATIONAL
         MANAGEMENT

         This 18 month program gives the leaders of non-profit organizations and
churches instruction for developing and managing their organization . The
program utilizes evaluation methodologies to determine each individual student's
competency regarding a specific area of knowledge. Each course is designed as an
independent module focused on one area of the organization's structure. There is
significant value in this format because the student gains a thorough competency
in a particular area and then can immediately apply the new skills to their
work. We are schedule to launch this program in the third quarter of 2000.


4.       PSYCHOPHARMACOLOGY FOR PSYCHOLOGISTS

         The professional evolution of psychology has presented an opportunity
for psychologists to enhance their knowledge base with additional education,
training and credentialing that would permit the prescription of medications for
emotional and behavioral disorders when appropriate legislative barriers are
addressed. This two year program has a tuition cost that ranges from $8,700 to
$9,570. The College of West Virginia will provide the curriculum for this
program. We are currently enrolling students for the third quarter of 2000.


PROGRAM DEVELOPMENT STRATEGY

         We have increased our program development team from one individual
since our inception through November 1999 to eleven people presently. Four
members of our development team hold Doctorates and three individuals hold
Masters degrees which enables them to work more effectively with the academic
personnel of our content partners. Additionally, we updated our software and
development tools to include a 106 step management process to effectively
monitor and manage each individual program as it is developed. With these
additional resources, we anticipate that the typical program development will be
three to six months in length. We believe that with our current development team
we will be able to develop 15 programs simultaneously.

         Our Program Development strategy is organized around a four-step
process that includes:

1.       COURSE/PROGRAM IDENTIFICATION

         A program or course is developed from an analysis of the marketplace.
We only develop and deliver a specific program after we have completed several
market tests and received the level of marketplace interest that we believe is
necessary to develop, sell and operate a program profitably.

         We scan the marketplace to find educational opportunities that are
quickly transferable to our delivery models. The criteria that are



                                       12
<PAGE>   14


required for initial consideration of a potential program include:

>>       Identified opportunity in the working professional marketplace;

>>       Designed for the working professional;

>>       Suitable to the technology and marketing approach of our
         delivery system and our learning model; and

>>       Offers financial and specific career benefits to the student which are
         consistent with our slogan "Knowledge That Earns".


2.       CURRICULUM DESIGN

         Once a new product is identified, the curriculum must be designed to
operate within our delivery system. Most existing degree or certificate programs
that are identified are not scalable or able to be easily integrated into a
distributed learning format without completely restructuring the curriculum.
Therefore, our first step is to locate the best "Knowledge Experts" and begin
the design. Where it is needed, an "Academic Curriculum Committee" will provide
oversight and recommendations regarding the curriculum's academic goals and
structure. An "Academic Accreditation Partner" may also be involved,
particularly where degree accreditation is needed.

         Once the educational objectives have been determined, the "Knowledge
Expert" will become a part of our instructional design team whose members
include an instructional designer, media/art producer, and a technology
specialist. The task of the instructional design team is to create the highest
quality, dynamic, and interactive learning environment possible. The team uses
technology and Internet communication tools in combination with proven
curriculum design methods. We believe that this instructional design system
produces the highest outcomes as measured in student knowledge, application of
that knowledge and successful graduation.

3.       THE OBJECT LEARNING MODEL

Our object learning model has been developed to be delivered to students
utilizing, as a component of, our web-based delivery system. Our learning model
is based upon the following characteristics:

>>       Curriculum

         Programs are developed to provide for specific educational outcomes. We
         believe that by integrating academic theory with professional practice
         that the marketability of our students in the work place is increased
         thereby creating the opportunity for higher pay and better positions.

         We are in a constant process of updating and improving our programs and
         the curriculum. In conjunction with this process we have implemented a
         quality assessment program which allows our students and professors to
         assess and rate our programs and curriculum based on a number of
         factors which includes:

         o  Effectiveness of our programs

         o  Ease of participation and access

         o  Quality of content

         o  Depth of content

         o  Program efficiency and length

         o  Outcome satisfaction

         Based upon the level of rating, we make the necessary and appropriate
         modifications and adjustments in an effort to achieve the intended and
         desired results.

>>       Faculty

         A key characteristic of all of our programs is to supply our students
         with mentor professors with the appropriate academic credentials and
         demonstrated professional experience in the area of instruction. We
         also require the professors to have the requisite professional
         experience. We maintain a quality assessment program which serves to
         develop continuous curriculum and professor improvement which, we
         believe, helps students attain their objectives. Our quality assessment
         program allows our students to assess and rate the quality of the
         professors. If a professor is given a less than "better than average"
         rating by our students, we immediately remedy the problem or replace
         him or her.



                                       13
<PAGE>   15

>>       Competency-based Evaluation

         In assessing a student's progress, we utilize competency-based
         evaluations throughout our programs. This allows students to focus
         their attention on their areas of weakness.

>>       Interactive Learning

         Courses are designed for maximum faculty and student interaction. Group
         activity coupled with interactive electronic applications allows the
         students access to our professors and fellow students.

>>       Case Method of Learning

         Our programs utilize the case method learning approach. This
         methodology provides students with real-life case studies that they can
         apply to the workplace.

>>       Academic Degrees and Certificates

         The programs are developed to award academic degrees and certificates
         from partner educational institutions, upon successful completion of
         all courses. In addition, certificates of completion are awarded for
         successful completion of each individual course.

4.       OUR DELIVERY SYSTEM

         The working professional has a select set of educational requirements.
We attempt to meet these needs for accessibility, time and cost effectiveness,
and immediate applicability to work through our delivery system. This system
allows the student to utilize the program within the time and access demands of
the working professional. This system is designed to let students in any
geographic location take the program. Some programs require the student to
travel to a centralized location at least once per course to interact with their
mentor/professor and other students. The key components of the model include:

>>       Internet casework prescribed by mentor/professor.

         The Internet is used as a component of our system by giving the
         student the ability to:

         o  Communicate with their mentor/professor and fellow students
            via e-mail and web chat

         o  Research online resources

         o  Review syllabus and course information

         o  Complete online tests

         o  Submit homework

>>       Video workbook completed at home.

         The majority of the lecture material is videotaped and distributed to
         the students to be viewed at their own schedule. Expert presenters are
         brought to a video production facility for filming prior to the
         beginning of the course. This format allows the students to view the
         material at a time convenient for them and allows them to review it
         multiple times if required.

>>       Clinical class work on a select basis to determine competence.


         The students are generally required to demonstrate certain competencies
         in order to successfully complete our programs. These competencies are
         related to the applicable course and in the case of our Doctor of
         Pharmacy, Doctor of Audiology and Life Care Planning programs are
         developed in regional meeting sites.

         For our Doctor of Pharmacy and Doctor of Audiology programs, we
         establish regional meeting sites in select geographical areas where at
         least one instructor is provided for at least five but no more than 55
         students who are within two to three hours driving distance from the
         meeting site. If there are less than five students in any given
         geographical area then in order to take the program the student will
         be required to travel to the nearest regional meeting site. If there
         are more than 55 students in any such area, we break the region into
         as many multiple areas as are necessary to satisfy our
         enrollment/instructor criteria.

         For our Life Care Planning program where student enrollment has been
         historically less than our doctorial programs and where the students
         typically live in diverse, unconcentrated locations, we provide for
         rotating multiple meeting sites to minimize the distance which the
         students are required to travel.


>>       Group interaction allowing for specific study of content topics and
         case presentations.

         Group interaction is utilized to give the student the opportunity to
         discuss and express their understanding of the applicable material.
         Group interaction can take place in person at a regional location or it
         can take place via the telephone or web chat. We feel that the group
         interaction component reinforces the learning experience and
         effectiveness of the curriculum.

MARKETPLACE DEVELOPMENT

         1. The Company Market Model

         We believe marketplace development is one of the most critical
components of a successful program. We begin the marketplace development by
conducting an extensive evaluation of all market



                                       14

<PAGE>   16


niches using a model which utilizes various criteria and methods for determining
the viability of a given market. Our model consists of a series of low cost
direct response market tests to prove or disprove market acceptance of a
specific program. The model also schedules and scores the effectiveness of each
specific marketing test. This model has proven to be effective in pre-testing
programs in a low cost manner, allowing management to determine how successful a
possible program will be before investing in a complete program development.

         2. Comprehensive Marketing Management

         We use a media mix of direct response marketing, advertising, public
relations, internet marketing, telephone call center technology and database
management to acquire students. Every marketing event is tracked, allowing for
effective evaluation of each marketing program. The admissions call center, in
combination with our marketing software program, provides immediate feed back on
various aspects of the marketing program. The data is also used to further
refine the targeted marketing program using our call center and direct marketing
services.

         We also utilize proprietary software that allows for consistent
tracking of all student and task contact. Not only does this improve current
student communication, it also allows us to continue a relationship with the
student. The database tracks which new programs and which new products would be
of interest to students.

         Quality improvement is implemented by surveys of participants in each
program. Instructor knowledge, instructor effectiveness and curriculum
application is rated. Once analyzed, action programs are implemented to upgrade
and enhance our products and services.



                                       15
<PAGE>   17


RISKS RELATING TO OUR INDUSTRY

         DISTANCE LEARNING MAY NOT BE BROADLY ACCEPTED BY ACADEMICS AND
EDUCATORS.

         Through our relationships with educational institutions and educators
we understand that some academics and educators are opposed to distributed and
distance learning in principle. They also have expressed concerns regarding the
perceived loss of control over the education process that can result from the
outsourcing of campuses and courses. Some of these critics, particularly college
and university professors, have the capacity to influence the market for our
services, and their opposition could have a material adverse impact on our
business and financial results. Further, the growth and development of the
market for distributed learning has resulted in some concerns from the academic
community about the protection of intellectual property associated with course
content, which may impose additional burdens on companies offering online
learning. We are unaware of any legal action resulting from course content being
delivered over the Internet. The adoption of any additional laws or regulations
may impair the growth of online learning, which could have a material adverse
effect on our business and financial results.

         THE MARKET FOR DISTANCE LEARNING IN HIGHER EDUCATION IS IN AN EARLY
STAGE AND MAY NOT CONTINUE TO DEVELOP.

         The market for distance learning is new and emerging. Although online
learning has been available for several years, it currently represents only a
small portion of the overall higher education market. Accordingly, our success
depends upon colleges, universities, associations and companies adopting online
learning. To date, we have entered into contracts with only one university, The
University of Florida. The use of online learning may not become widespread and
our services may not achieve commercial success. In addition, colleges and
universities that have already invested substantial resources in other
nontraditional methods of instruction may be reluctant to adopt new methods that
compete with their existing offerings. Any failure of online learning to gain
continuing market acceptance would have a material adverse effect on our
business and financial results.

         WE OPERATE IN A HIGHLY COMPETITIVE MARKET AND WE MAY NOT HAVE ADEQUATE
RESOURCES TO COMPETE SUCCESSFULLY.

         The distance learning market is quickly evolving and is subject to
rapid technological change. Although the market is highly fragmented with no
single competitor accounting for a dominant market share, competition is
intense. Our competitors vary in size and in the scope and breadth of the
products and services they offer. Competition is most intense from colleges' and
universities' internal information technology departments. Some colleges and
universities construct online learning systems utilizing in-house personnel and


                                       16
<PAGE>   18



creating their own software or purchasing software components from a vendor. We
also face significant competition from a variety of companies including:

>>       other companies which seek to offer a complete solution including
         software and services;
>>       software companies with specific products for the college and
         university market;
>>       systems integrators; and
>>       hardware vendors.

         Other competitors in this market include a wide range of education and
training providers. These companies use video, cable, correspondence, CD-ROM,
computer-based training, and online training.

         We believe that the level of competition will continue to increase as
current competitors increase the sophistication of their offerings and as new
participants enter the market. Many of our current and potential competitors
have longer operating histories, larger customer bases, greater brand
recognition and significantly greater financial, marketing and other resources
than we do and may enter into strategic or commercial relationships with larger,
more established and well-financed companies. Certain competitors may be able to
secure alliances with customers and affiliates on more favorable terms, devote
greater resources to marketing and promotional campaigns and devote
substantially more resources to systems development than we can. In addition,
new technologies and the expansion of existing technologies may increase the
competitive pressures we face. Increased competition may result in reduced
operating margins, as well as loss of market share and brand recognition. We may
not be able to compete successfully against current and future competitors, and
competitive pressures we face could have a material adverse effect on our
business and financial results.

         OUR MARKET IS CHARACTERIZED BY RAPID TECHNOLOGICAL CHANGE, AND OUR
SERVICES MAY BECOME OBSOLETE OR UNMARKETABLE.

         The market for our products and services is characterized by rapid
technological change, changes in customer demands and evolving industry
standards. The introduction of services embodying new technologies and the
emergence of new industry standards can render existing services obsolete and
unmarketable. To succeed, we must address the increasingly sophisticated needs
of higher education by improving our software and services to keep pace with
technological developments, emerging industry standards and customer
requirements. We may not be able to do so successfully.

         GOVERNMENT REGULATIONS, INCLUDING THOSE RELATING TO THE INTERNET IN
GENERAL AND TO OUR INDUSTRY IN PARTICULAR, COULD ADVERSELY AFFECT OUR BUSINESS.

         Our operating results could be impaired if we become subject to
burdensome government regulation and legal uncertainties. We may be subject to
government laws and regulations, such as the Family Educational Rights and
Privacy Act and Alberta's Freedom of Information and Protection of Privacy
Regulation. Our violation of these statutes, or of any other law or regulation,
could have a material adverse effect on our business and financial results. In


                                       17
<PAGE>   19



addition, it is possible that a number of laws and regulations may be adopted
with respect to the Internet, relating to:

>>   user privacy;
>>   pricing;
>>   content;
>>   copyrights;
>>   distribution; and
>>   characteristics and quality of products and services.

         The adoption of any additional laws or regulations may decrease the
popularity or expansion of the Internet. A decline in the growth of the Internet
could decrease demand for our products and services and increase our cost of
doing business. Moreover, the applicability of existing laws to the Internet is
uncertain with regard to many issues including property ownership, intellectual
property, export of encryption technology, sales tax, libel and personal
privacy. Our business and financial results could be seriously harmed by any new
legislation or regulation of these types. There are an increasing number of laws
and regulations pertaining to the Internet. These laws and regulations relate to
liability for information received from or transmitted over the Internet, online
content regulation, user privacy, taxation and quality of products and services.
Moreover, the applicability to the Internet of existing laws governing
intellectual property ownership and infringement, copyright, trademark, trade
secret, obscenity, libel, employment, personal privacy and other issues is
uncertain and developing. We cannot predict the impact, if any, that future
regulation or regulatory changes may have on our business.

         COLLEGE AND UNIVERSITY ACCREDITATION STANDARDS COULD ADVERSELY AFFECT
OUR BUSINESS.

         Many colleges and universities are accredited by regional accreditation
organizations whose approval may be required for the college or university to
offer courses over the Internet. Any delay in, or failure to receive, such
approval could limit or prevent a college or university from using our system,
which would adversely affect our business and financial results.

         Educational institutions are required to have authorization to operate
as degree-granting institutions in each state where they operate physical sites
which provide educational programs. Certain states also take the position that
any education institution providing online degrees to students residing in their
state is required to satisfy certain state standards. Some states accept
accreditation as evidence of meeting minimum state standards for authorization.
Other states require separate evaluations for authorization. Depending on the
state, the addition of a degree program not offered previously or the addition
of a new location must be included in the institution's accreditation and be
approved by the appropriate state authorization agency. The University of
Florida is presently authorized to operate in only three states in which it
provides degrees through our web-utilized delivery system. If The University of
Florida and our other future content partners are required to obtain
authorization to provide distance learning degrees and certificate programs in
such other states, it could have a material adverse effect on our business,
financial status and our ability to expand our business.




                                       18
<PAGE>   20



         OUR SUCCESS DEPENDS ON MAINTENANCE AND CONTINUED DEVELOPMENT OF THE
INTERNET'S INFRASTRUCTURE.

         Our success depends, in large part, upon the maintenance of the
Internet's infrastructure with the necessary speed, data capacity and security,
and timely development of enabling products such as high speed modems, for
providing reliable Web access and services as well as improved content. We
currently depend on a Web server located in a commercial data center, commonly
known as Web "server farms," to provide us a network backbone connection.
Increases in the number of users, frequency of use or bandwidth requirements may
strain the Internet's infrastructure and degrade the performance and reliability
of the Web. Furthermore, the Web has experienced a variety of outages and delays
as a result of damage to portions of its infrastructure, and any future outages
or delays could adversely affect our business. In addition, delays in the
development or adoption of new standards and protocols that are designed to
handle increased levels of activity, could reduce the viability of the Web. The
infrastructure or complementary products or services necessary to maintain and
enhance the Web as a commercial medium may never be developed. If the necessary
infrastructure, standards or protocols or complementary products, services, or
facilities are not developed, or if the Web does not continue to develop as a
viable commercial medium, our business and financial results would be materially
and adversely affected.

         IF USE OF THE INTERNET DOES NOT CONTINUE TO GROW, OUR BUSINESS COULD BE
HARMED.

         Our success is highly dependent on the continued growth in the general
use of the Internet. There can be no guarantee that the general use of the
Internet will continue to grow. Several factors, including concerns related to
security, cost and ease of use and access could limit future growth in Internet
use, which could materially and adversely impact our business and financial
results.

         OUR PROSPECTS ARE DIFFICULT TO EVALUATE BECAUSE WE HAVE ONLY BEEN
OPERATING OUR BUSINESS SINCE 1993.

         We began offering our products and services in 1993. We have only
received $5.75 million financing and operate with 23 employees, servicing one
university. As a result of our limited financial and personnel resources and
limited operations, we have a limited operating history from which investors may
evaluate our business and prospects. Further, our revenue growth to date may not
be indicative of our future operating results.

         WE INTEND TO INVEST HEAVILY IN ACQUISITIONS, PRODUCTS AND SERVICES.

         We intend to invest heavily to acquire companies, develop our products
and services and establish our development, sales and marketing capabilities. We
believe that our success depends, among other things, on our ability to obtain
additional financing, develop new relationships with colleges, universities,
associations and businesses and to maintain existing customer relationships.



                                       19
<PAGE>   21




Accordingly, we intend to incur significant expenses for development and sales
and marketing. As such, our earnings may not increase and we could experience
net operating losses and negative cash flow. To the extent our sales and
marketing efforts do not significantly increase our revenues, our business and
financial results will be materially and adversely affected.

         OUR OPERATING RESULTS ARE LIKELY TO FLUCTUATE SIGNIFICANTLY AND MAY BE
BELOW THE EXPECTATIONS OF ANALYSTS AND INVESTORS.

         Because of our limited operating history and the emerging nature of the
online learning market, we may be unable to accurately forecast our revenues.
The sales cycle for our products and services varies widely and it is difficult
for us to predict the timing of particular sales, the rate at which online
campuses, courses and/or course supplements will be implemented or the number of
students and participants who will enroll in our distributed learning courses.
The cancellation or delay of even a small number of our anticipated
implementations could cause our revenues to fall short of projections. Since
most of our costs are fixed and are based on anticipated revenue levels, small
variations in the timing of revenue recognition could cause significant
variations in operating results from quarter to quarter.

         The following factors may affect our quarterly, as well as our annual,
operating results:

>>       our ability to attract and retain colleges, universities, associations
         and companies;

>>       our ability to successfully implement our distributed learning
         programs;

>>       the amount and timing of operating costs and capital expenditures
         relating to expansion of our business;

>>       our introduction of new or enhanced services and products, and similar
         introductions by our competitors;

>>       our ability to upgrade and develop our systems and infrastructure;

>>       our ability to attract, motivate and retain personnel; and

>>       technical difficulties in delivering our services.

         As a result, we believe that our prior sales and operating results may
not necessarily be meaningful, and that such comparisons may not be accurate
indicators of future performance. Just because our business grew substantially
during the last two years, we can give no assurance that these percentages will
reflect the ongoing pattern of our business.





                                       20
<PAGE>   22



         OUR SALES CYCLE IS LENGTHY AND CAN VARY WIDELY.

         The sales cycle between initial customer contact and signing of a
contract varies widely, reflecting differences in our customers' decision-making
processes and budget cycles. As a result, we may not be able to forecast the
timing and amount of specific sales and resulting revenue. Our customers
typically conduct extensive and lengthy evaluations before committing to our
system. Delays in the sales cycle can result from, among other things, changes
in budgets, the need for approval from both the customer's administration and
faculty, and the need to educate a customer as to the potential applications of
and cost savings associated with our services. We generally have little or no
control over these factors, which may cause a potential customer to favor a
competitor's products and services, or to delay or forego purchases altogether.
The delay in or failure to complete planned transactions could have a material
adverse effect on our business and financial results and could cause our
financial results to vary significantly from period to period.

         MANAGING OUR GROWTH EFFECTIVELY MAY BE DIFFICULT.

         We are currently experiencing a period of significant expansion, which
may be difficult to manage. Our growth has placed, and any further growth is
likely to continue to place, a significant strain on our managerial,
operational, financial and other resources. We have grown from 8 employees as of
December 31, 1998 to 21 employees as of December 31, 1999. This growth will
require us to implement additional management information systems, to further
develop our operating, administrative, financial and accounting systems and
controls and to maintain close coordination among our technology development,
accounting, finance, marketing, sales, and customer service and support
departments. If we cannot effectively manage our expanding operations, we may
not be able to continue to grow, or may grow at a slower pace. Our failure to
successfully manage growth and to develop financial controls and accounting and
reporting systems or to add and retain personnel that adequately support our
growth would have a material adverse effect on our business and financial
results.




                                       21
<PAGE>   23




         WE MUST EXPAND OUR CUSTOMER SERVICE AND SUPPORT DEPARTMENT AND IT MAY
BE DIFFICULT FOR US TO DO SO.

         As we increase the number of colleges, universities, associations and
companies we serve, we will require greater numbers of development personnel and
account service representatives to ensure rapid and successful implementation of
our technology and programs. For these positions, we face great competition in
hiring them. We may not be able to increase the size of our customer service and
support department on a timely basis, or at all, and we may not be able to
provide the high level of support required by our customers, especially during
the initial implementation and development of our programs. Our failure to
continue to provide a high level of customer support would have a material
adverse effect on our business and financial results.

         OUR NETWORK INFRASTRUCTURE AND COMPUTER SYSTEMS MAY FAIL.

         The continuing and uninterrupted performance of our network
infrastructure and computer systems is critical to our success. Any system
failure that causes interruptions in our ability to provide service to our
customers or their students could reduce customer satisfaction and, if sustained
or repeated, would reduce the attractiveness of our technology and services to
providers or their students. An increase in the number of students online
through our servers could strain the capacity of our software or hardware, which
could lead to slower response times or system failures. During the current
semester, student and faculty connections to websites hosted by us are
approximately 130,000. Based on our present usage patterns, we believe that our
current servers can support significantly more student and faculty users. To the
extent we do not successfully address any capacity constraints, such constraints
would have a material adverse effect on our business and financial results.

         Our operations are dependent upon our ability to protect our computer
systems against damage from fire, power loss, telecommunications failures,
vandalism and other malicious acts, and similar unexpected adverse events. In
addition, the failure of our telecommunications provider or our network backbone
provider, which provides us with our Internet connection, to provide the data
communications capacity and network infrastructure in the time frame we require
could cause service interruptions or slower response times. Despite precautions
we have taken, unanticipated problems affecting our systems have from time to
time in the past caused, and in the future could cause, interruptions or delays
in the delivery of our products and services. In the past we have experienced
slower response times, and on occasion some of our customers' websites have been
unavailable for several hours, as the result of general Internet failure and/or
service problems from our previous, third-party web-server provider. Any damage
or failure that interrupts or delays our operations could have a material
adverse effect on our business and financial results.

         OUR NETWORK MAY BE VULNERABLE TO SECURITY RISKS.

         Our success depends on our ability to provide network security
protection and the confidence of our customers in that ability. Our system is
designed to prevent unauthorized access from the Internet; nevertheless, in the
future we may not be able to prevent unauthorized disruptions of our network
operations, whether caused unintentionally or by computer "hackers." Due to the



                                       22
<PAGE>   24




sensitive nature of the information contained on the websites hosted by us, such
as students' grades, our websites may be targeted by hackers. As such,
disruptions may result in liability to us and harm to our customers, and our
failure to prevent such disruptions would have a material adverse effect on our
business and financial results.

         WE DEPEND ON OUR KEY PERSONNEL.

         We depend on our key personnel and may have difficulty attracting and
retaining skilled employees. If we are unable to retain key personnel or attract
new personnel, it could have a material adverse effect on our business. The loss
of the services of any of our key personnel or our inability to successfully
attract and retain qualified personnel in the future would have a material
adverse effect on our business. Our future success depends on the continued
service of Rogers W. Kirven, Jr., our Chief Executive Officer, Daniel J. Devine,
our President and Chief Operating Officer and Stephen Wells, our Chief
Information and Marketing Officer. We maintain a life insurance policy on Mr.
Kirven with a face value of $1,000,000. The loss of the services of Messrs.
Kirven, Devine or Wells would have a material adverse effect on our business and
financial results.

         WE MUST PROTECT OUR INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS.

         Our success depends, in part, on our ability to protect our proprietary
rights and technology, such as our trade and product names, and the software
included in our products. We presently do not own nor have we applied for any
copyrights, service marks or trademarks, but rely on trade secrets and employee
and third-party nondisclosure agreements to protect our proprietary rights.
Unauthorized parties may attempt to duplicate or copy aspects of our services,
products, systems or software or to obtain and use information that we regard as
proprietary. Policing unauthorized use of our services, products, systems or
software underlying our services is difficult, and while we are unable to
determine the extent to which piracy exists, piracy in general will likely be a
persistent problem. In addition, the laws of many countries do not protect our
proprietary rights to as great an extent as do the laws of the United States. As
a consequence, effective trademark, service mark, copyright, and trade secret
protection may not be available in every country in which our products and
services are made available online. Our proprietary rights and technology may
not be adequate, and our competitors could independently develop similar rights
and technology. Our failure to meaningfully protect our intellectual property
could have a material adverse effect on our business and financial results.

         We may from time to time encounter disputes over rights and obligations
concerning intellectual property. Although we believe that our intellectual
property rights are sufficient to allow us to market our existing services
without incurring liability to third parties, and we are not aware of any
disputes with third parties relating to competing intellectual property rights,
we might not prevail in such disputes. Failure to prevail in one or more such
disputes could impair our right to market our services, which, in turn, could
have a material adverse effect on our business and financial results.






                                       23
<PAGE>   25

EMPLOYEES

         On December 31, 1999, we employed approximately 21 people comprised of
3 product development personnel, 10 marketing personnel, 4 technology
individuals, and 4 individuals in general administration. We will hire
additional employees on an as needed basis. We believe that our relationship
with our employees is good. None of our employees are members of collective
bargaining units or labor union contract nor have we been subjected to any
strikes or employment disruptions.

MAJOR SUPPLIERS

         Except for curriculum obtained from The University of Florida, which is
currently substantially all of our educational content, we obtain our products
and supplies from many different individuals and entities and are not dependent
on any major suppliers.

DEPENDENCE ON KEY CUSTOMERS

         Presently, we have only one knowledge partner, The University of
Florida. We are highly dependent on this partner but anticipate providing, in
the near future, our products and services to other colleges, universities,
associations and companies at large. An interruption or loss of our relationship
with The University of Florida would have a material adverse effect on our
business and financial results.

PATENTS, TRADEMARKS, LICENSES

         We do not depend upon any patents to conduct our business; nor do we
hold any such patents. We do not own any registered trade names, trademarks or
service marks.

         We have 27 professional service agreements (or license arrangements)
with the University of Florida with respect to use of The University of
Florida's name and content in both course development and marketing. If we were
to breach these agreements, it would have a material adverse effect on our
business and financial results.

         We currently use component software from the following vendors:

         Microsoft Corporation
         Eshare Technology



                                       24
<PAGE>   26




         The Microsoft Corporation provides the NT Operating System for our file
servers which we intend to upgrade within the next several weeks to NT Small
Business Server 4.5. Eshare Technology provides our chat server software. We
utilize a hosting company for our web hosting needs.

         We regard substantial elements of our services as proprietary and may
seek to protect them by relying on trademark, service mark, trade dress,
copyright and trade secret laws and restrictions on disclosure and transferring
title. While we have not yet filed any trade name, service mark or trademark
applications, we anticipate pursuing the registration of some of our names and
marks in the United States and possibly worldwide. Effective trademark,
copyright and trade secret protection may not be available in every country in
which our products and services are distributed or made available through the
Internet. There can be no assurance that the steps we anticipate taking will to
protect our proprietary rights and will be adequate or that third parties will
not infringe or misappropriate our copyrights, trademarks, service marks, trade
dress and similar proprietary rights.

GOVERNMENT REGULATION.

INDUSTRY REGULATION

         We believe we are not currently subject to any governmental approvals
in order to sell our services or products. There are, however, regulations
applicable to businesses in general, and Internet businesses in particular with
respect to access to or commerce on the Internet.

         Our operating results could be impaired if we become subject to
burdensome government regulation and legal uncertainties. We may become subject
to government laws and regulations, such as the Family Educational Rights and





                                       25
<PAGE>   27


Privacy Act and Alberta's Freedom of Information and Protection of Privacy
Regulation. A violation of these statutes, or of any other law or regulation,
could have a material adverse effect on our business and financial results. In
addition, it is possible that a number of laws and regulations may be adopted
with respect to the Internet, relating to user privacy, pricing, content,
copyrights, distribution and characteristics and quality of products and
services.

         Educational institutions are required to have authorization to operate
as degree-granting institutions in each state where they operate physical sites
which provide educational programs. Certain states also take the position that
any education institution providing online degrees to students residing in their
state is required to satisfy certain state standards. Some states accept
accreditation as evidence of meeting minimum state standards for authorization.
Other states require separate evaluations for authorization. Depending on the
state, the addition of a degree program not offered previously or the addition
of a new location must be included in the institution's accreditation and be
approved by the appropriate state authorization agency. The University of
Florida is presently authorized to operate in only three states in which it
provides degrees through our web-utilized delivery system. If The University of
Florida and our other knowledge partners are required to obtain authorization to
provide distance learning degrees and certificate programs in such other states,
it could have a material adverse effect on our business, financial status and
our ability to expand our business.

         The adoption of any additional laws or regulations may decrease the
popularity or expansion of the Internet. A decline in the growth of the Internet
could decrease demand for our products and services and increase our cost of
doing business. Moreover, the applicability of existing laws to the Internet is
uncertain with regard to many issues including property ownership, intellectual
property, export of encryption technology, sales tax, libel and personal
privacy. Our business and financial results could be seriously harmed by any new
legislation or regulation of these types. There are an increasing number of laws
and regulations pertaining to the Internet. These laws and regulations relate to
liability for information received from or transmitted over the Internet, online
content regulation, user privacy, taxation and quality of products and services.
Moreover, the applicability to the Internet of existing laws governing
intellectual property ownership and infringement, copyright, trademark, trade
secret, obscenity, libel, employment, personal privacy and other issues is
uncertain and developing. We cannot predict the impact, if any, that future
regulation or regulatory changes may have on our business.

SECURITIES REGULATION

         Our common stock, par value $.001 per share, was eligible in July 1998
for trading on the NASDAQ Over-The-Counter Bulletin Board Service under the
symbol "WTHP" which was changed to "CKNO" effective with our acquisition of
Winthrop Industries, Inc.

         Pursuant to NASD Eligibility Rule 6530 issued on January 4, 1999,
issuers who do not make current filings pursuant to Sections 13 and 15(d) of the
Securities Act of 1934 are ineligible for listing on the NASDAQ Over-the-Counter
Bulletin Board. Pursuant to the Rule, issuers who are not current with such
filings are subject to de-listing pursuant to a phase-in schedule depending on



                                       26
<PAGE>   28



each issuer's trading symbol as reported on January 4, 1999. Therefore, pursuant
to the phase-in schedule, we will be subject to de-listing in May 2000 if we do
not become current with our filings.

         We have not made filings pursuant to Sections 13 or 15(d) of the
Securities Act of 1934. We have filed this Registration Statement on Form 10-SB
in order to become a "reporting" company and therefore comply with Rule 6530.

RESEARCH AND DEVELOPMENT

         For the years ended December 31, 1999 and December 31, 1998, we
expended approximately $167,063 and $76,100, respectively, in research and
development activities related to developing our web site and educational
programs. These costs are recognized as expense over the life of the contract,
based on the expected revenue stream from course offerings during the contract
period.

COSTS AND EFFECTS OF COMPLIANCE WITH ENVIRONMENTAL LAWS

         To the best of our knowledge, we are in compliance with all applicable
federal, state, and local environmental laws and regulations. We are unaware of
any federal, state or local environment laws or regulations which have a
material effect on our operations and business. We have incurred minimal costs
associated with environmental compliance.

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.

         FORWARD LOOKING STATEMENTS. THE DISCUSSION CONTAINED HEREIN REGARDING
OUR BUSINESS AND OPERATIONS MAY INCLUDE "FORWARD LOOKING STATEMENTS." SUCH
STATEMENTS CONSIST OF ANY STATEMENT OTHER THAN A RECITATION OF HISTORICAL FACT
AND CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS "MAY,"
"EXPECT," "ANTICIPATE," "ESTIMATE" OR "CONTINUE" OR THE NEGATIVE THEREOF, OTHER
VARIATIONS THEREOF, OR COMPARABLE TERMINOLOGY. ALL FORWARD-LOOKING STATEMENTS
ARE NECESSARILY SPECULATIVE, AND THERE ARE CERTAIN RISKS AND UNCERTAINTIES THAT
COULD CAUSE ACTUAL EVENTS OR RESULTS TO DIFFER MATERIALLY FROM THOSE REFERRED TO
IN SUCH FORWARD-LOOKING STATEMENTS. EXCEPT FOR HISTORICAL INFORMATION, MATTERS
DISCUSSED IN THIS REPORT REGARDING FINANCIAL RESULTS AND DEMAND FOR PRODUCTS AND
SERVICES ARE FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES,
INCLUDING THOSE RELATED TO THE FURTHER DEVELOPMENT OF OUR PRODUCTS AND SERVICES
AND MARKET ACCEPTANCE OF SUCH PRODUCTS AND SERVICES.

OVERVIEW

         Our business began with Professional Educational Seminars, Inc., a
Florida corporation which purchased the operating division and intellectual
property of Paul M. Deutsch Press, Inc. in November 1993. Professional
Educational Seminars was formed for the purpose of developing, owning and
operating seminars, developing and providing certificate programs and developing
and publishing materials in life care planning for catastrophic injuries and
impairments. In November 1993, Rogers W. Kirven, Jr., our Chief Executive
Officer, and several other individuals acquired all the issued and outstanding
stock of Professional Educational Seminars, and in 1994 the name of Professional
Educational Seminars, Inc. was changed to Rehabilitation Training Institute,
Inc., one of our wholly-owned subsidiaries.

         In March of 1996, Rehabilitation Training Institute with the University
of Florida Health Services, Inc., a Florida corporation and an affiliate of the
University of Florida, formed Intelicus, LC, a Florida limited liability company
organized for the purpose of developing, marketing and operating degree and
certificate programs for healthcare professionals. Rehabilitation Training
Institute was ultimately issued 64.5% of the ownership interest in Intelicus and
University of Florida Health Services was issued the remaining 35.5% ownership
interest. Intelicus was managed by four managing members, two appointed by
Rehabilitation Training Institute and two appointed by The University of Florida
Health Services.


         On February 9, 1999, Compass Knowledge Group, Inc. was incorporated
under the laws of the State of Florida for the purpose of establishing a company
to acquire companies and develop and operate businesses involved in the
distributed learning business. We had no operating history. Upon formation, our
shareholders were issued 9,188,257 shares of our common stock, $.001 par value.


         Effective October 31, 1999, Compass Knowledge Group, Inc. consummated a
tax-free stock exchange with the shareholders of Rehabilitation Training
Institute whereby Rehabilitation Training Institute shareholders exchanged, on a
one-for-one basis, all of their common stock in Rehabilitation Training
Institute for common stock in Compass Knowledge Group, Inc. No new shares of
common stock were issued to the shareholders of Compass Knowledge Group, Inc. as
part of the exchange. Upon consummation of the stock exchange, we owned 100% of
Rehabilitation Training Institute and Rehabilitation Training Institute owned
64.5% of Intelicus. The University of Florida Health Services owned the
remaining 35.5% of Intelicus. The exchange has been accounted for as a business
combination among control groups, similar to a pooling of interests.

         In October 1999, we also agreed to purchase the 35.5% equity interest
in Intelicus, LC which was then owned by The University of Florida Foundation,
Inc. as a result of a gift from the University of Florida Health Services, Inc.
In exchange for the 35.5% interest, we agreed to issue to The University of
Florida Foundation 465,000 shares of our common stock and to contribute $300,000
to The University of Florida Foundation for the purpose of establishing an
endowment fund for health professionals. As a condition to the closing, The
University of Florida, College of Pharmacy agreed to extend for a period of five
(5) years the term of its professional service agreements with us for an
additional 35,000 shares of our common stock. This transaction was valued at
$2.00 per share, which was the fair market value of our stock at that time.
These transactions were closed on December 1, 1999. Other than that of an
arms-length business arrangement, there is no affiliation between us and The
University of Florida.

         On November 15, 1999, we were recapitalized in a tax-free acquisition
of Winthrop Industries, Inc. In accordance with the acquisition agreement, our
common stockholders received one share of Winthrop Industries' common stock for
each share of common stock owned by them and our preferred shareholders received
a like kind and number with identical preferences of Series A Preferred Stock in
Winthrop Industries in exchange for our Series A Preferred Stock. Winthrop
Industries also adopted our Stock Option Plan, thereby allowing our option
holders to exercise their options to acquire common shares of Winthrop
Industries in accordance with the adopted Stock Option Plan. No new shares of
common stock were issued to the shareholders of Winthrop as part of the
exchange. For accounting purposes, the acquisition has been treated as a
recapitalization of Compass Knowledge Group, Inc. with Compass Knowledge Group
as the acquirer.




                                       27
<PAGE>   29


         Beginning in March of 1996, we significantly increased our selling and
marketing efforts, and began developing programs with The University of Florida.
Similarly, we invested, and continue to invest, our resources in an effort to
broaden our service capabilities by expanding our infrastructure and personnel.
In the fall of 1996 we added, together with The University of Florida, our
Doctor of Pharmacy program and in the fall of 1998 we launched our Doctorate of
Audiology program and our second certificate program, Functional Capacity
Evaluation. In 1999, Applications in Indoor Air Quality and Health Care Finance
was added to our program list. In 2000, we have added Herbal Products and
Counseling and Psychopharmacology for Psychologists programs together with three
additional programs to our education portfolio.

         We became profitable in 1998 with profits in 1999 increasing by
approximately 410%. We currently intend to continue to increase our capital and
operating expenses to support anticipated growth, to fund increased sales and
marketing, to enhance existing technology and to make acquisitions.

REVENUE

         To date we have entered into 27 multi-year contracts with The
University of Florida to produce and sell our programs. Each contract is based
on our standard form, customized for each college within The University of
Florida which we do business with and specifies the services we will provide.
These contracts specify the courses to be provided, responsibilities of each
party with respect to implementation and the stated percentage of student fees
which each party will receive. Our contracts do not require The University of
Florida to guarantee any minimum number of student enrollments or to commit to
developing any content beyond the initial curriculum covered by the contract.
Our contracts typically have a minimum term of five years or longer.




                                       28
<PAGE>   30



         We anticipate entering into contracts with other universities,
colleges and associations for their content and curriculum. From our inception
through December 31, 1999, our revenue has been generated from our percentage of
the student fees derived from the sale of our programs. We expect that this
revenue stream will continue to grow, but that we will also derive fees from
providing additional services and selling ancillary products.

         Although we have and continue to experience revenue growth, there is no
assurance that this growth will continue at its current pace, or at all, or that
continued revenue growth will be indicative of future operating results and
profitability.


         We presently offer two types of educational programs: degree programs
and professional certificate programs. These programs range in length from two
months to three years. For degree programs, in which The University of Florida
is responsible for course curricula and for conferring a degree, we receive a
stated percentage of student fees. We currently record as revenues only the
portion of the student fees paid to us by The University of Florida. For
professional certificate programs, in which we are responsible the majority of
the program risks, developing course curricula and for awarding participant
certificates, we record, as gross revenue, all student fees.


         We based our revenue recognition policy on recent guidance by the
Securities and Exchange Commission (SEC) and current proposal stage literature
promulgated by the Emerging Issues Task Force (EITF), in EITF Issue No. 99-19,
"Reporting Revenue Gross versus Net", regarding the recognition of gross versus
net revenues for internet based entities. While we employ a web-utilized
delivery system in our operations, of which internet applications is only one
component, we believe that our current revenue recognition policy complies with
the SEC's and EITF's guidance. Should the SEC revise its guidance or the final
consensus reached by the EITF in Issue No. 99-19 differ from our current policy,
we will revise our revenue recognition treatment accordingly. However, the
decision to reflect gross or net revenues will not have any impact on our net
income.

         For both degree and professional certificate programs, student fees
must be paid prior to the student's attendance. We defer this revenue and
recognize it as income over the period of instruction. If a student withdraws
from a course or program prior to the start date, the student fees may be
refunded or applied to a later seminar.

SEASONALITY

         Due to the seasonality inherent in the academic calendar which
typically consists of three academic terms, as well as our customers' plans for
distance learning programs and course development, we experience fluctuations in
our quarterly results. We typically collect student fees for our semester based
degree programs in the first, second and fourth quarters. Our operating expenses
are relatively fixed in nature and seasonal fluctuations in revenue will result
in seasonal fluctuation in our operating results. As a result, quarter-to-
quarter financial results are not directly comparable.




                                       29
<PAGE>   31



STUDENT FEES

Total student fee revenue for courses offered by us for 1999 and 1998 were as
follows:


<TABLE>
<CAPTION>

                                                                               1999              1998
                                                                             ---------        -----------
                                                                             (audited)        (unaudited)
<S>                                                                        <C>               <C>
          Gross student fee revenues from degree programs                  $  4,164,506      $  1,597,670
          Less:  portion retained by University Partners                      2,286,939           912,868
                                                                           ------------       -----------
             Net student fee revenue from degree programs                     1,877,567           684,802
          Gross student fee revenue from certificate programs                   750,295           491,743
          Other revenue                                                          31,444            33,954
                                                                           ------------       -----------
          Total student fee revenue                                        $  2,659,306       $ 1,210,499
                                                                           ============       ===========
</TABLE>




 COST OF REVENUE

         Our cost of revenue consists primarily of facility costs, equipment
rentals, video production and duplications, web site development costs and
technical personnel costs. To continue to execute our business plan, we intend
to expand our operations, including our marketing, technical, operational and
customer support resources.

         Historically, we have not paid any sales commissions. Beginning in the
year 2000, sales commissions will be paid to our program development personnel
as student fees are earned to more closely match the revenue recognized. We have
also hired personnel and made investments in our infrastructure to support
future growth. Since the majority of our costs are variable no assurance can be
given that revenues will continue to exceed our cost of revenue in the future.

SELLING AND PROMOTION

         The principal components of our selling and promotion expenses are
advertising, promotion and travel. Other significant components include
marketing collateral expenses and consulting fees. As revenue increases, we
expect total selling and marketing expenses to increase but to decrease as a
percentage of revenue.

GENERAL AND ADMINISTRATIVE

         The principal component of our general and administrative expenses is
employee compensation and benefits. Other components include facilities,
depreciation, communications, professional and consulting fees. As operations
increase, we expect total general and administrative expenses to increase but to
decrease as a percentage of revenues.



                                       30
<PAGE>   32



RESULTS OF OPERATIONS

         Set forth below is certain of our selected combined financial and
operating information for the two years ended December 31, 1999 and 1998. The
selected combined financial information is derived from our consolidated
financial statements for such periods. The information set forth below should be
read in conjunction with Management's Discussion and Analysis of Financial
Conditions and Results of Operations and our Combined Financial Statements and
Notes thereto.

         The financial results for the years ended December 31, 1999 include our
recapitalization on November 15, 1999. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations" for additional information on
this topic.


<TABLE>
<CAPTION>

                                                               YEAR ENDED DECEMBER 31
                                                            -----------------------------
                                                                1999             1998
                                                            ------------     ------------
<S>                                                         <C>              <C>
Total Student Revenue                                       $  2,659,306     $  1,210,499
Gross Profit                                                $  2,043,205     $    868,445
Net Income Before Minority Interest                         $    344,546     $     55,766

Net Income After Minority Interest                          $    155,432     $     30,312
Pro forma earnings per share, basic and diluted             $      0.011     $      0.002
Pro Forma Weighted Average Shares Outstanding
Basic                                                         12,544,520       12,250,000
Diluted                                                       13,079,779       12,250,000
</TABLE>




<TABLE>
<CAPTION>
                                                             AT DECEMBER 31, 1999
                                                         ---------------------------------
<S>                                                                 <C>
Working Capital                                                     $ 4,480,963
Total Current Assets                                                $ 5,441,105
Total Property and Equipment                                        $    85,752
Total Current Liabilities                                           $   960,142
Stockholders' equity                                                $ 5,865,382
</TABLE>


         TWELVE MONTHS ENDED DECEMBER 31, 1999 COMPARED TO TWELVE MONTHS ENDED
DECEMBER 31, 1998.

         Net student fee revenues increased by $1,448,807 to $2,659,306 for the
twelve months ended December 31, 1999 from $1,210,499 for the twelve months
ended December 31, 1998, representing an increase of approximately 120%. These
results are primarily attributed to the full year's impact of Doctor of
Audiology program which provided net student fee revenues of $1,083,793 in 1999
compared to $92,070 in 1998.

         Gross profit increased by $1,174,760 to $2,043,205 for the twelve
months ended December 31,1999 from $868,445 for the twelve months ended December
31, 1998, representing an increase of approximately 135%. This increase is the
result of the successful development of new degree and certificate programs. Our
gross profit percentage increased from approximately 72% in 1998 to
approximately 77% in 1999, substantially due to increased efficiencies of scale
with respect to instruction costs and services.



                                       31
<PAGE>   33




         Operating expenses increased by $878,063 to $1,703,918 for the twelve
months ended December 31, 1999 from $825,855 for the twelve months ended
December 31, 1998, representing an increase of approximately 106%. The increase
is primarily due to an increase in personnel from 8 in 1998 to 21 in 1999 which
resulted in compensation and other employee related expenses increasing by
$254,743 in 1999. Also contributing was the incremental spending of $183,171
with respect to selling and promotional expenses incurred for new programs, and
an increase in management and consulting fees of approximately $209,300.

         As a result of the above changes, net income increased by $125,120 to
$155,432 for the twelve months ended December 31,1999 from $30,312 for the
twelve months ended December 31, 1998.

INCOME TAXES

         Income taxes will consist of federal, state and local taxes, when
applicable. We expect continued profits for the foreseeable future that will
generate significant tax expense. We experienced a taxable loss in 1999 which
resulted in a net operating loss carryforward. We elected not to recognize any
current year benefit from this taxable loss.

       We use the liability method of accounting for income taxes, as set forth
in Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes." Under the liability method, deferred taxes are determined based
on the difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect, in the years in which the
differences are expected to reverse.

LIQUIDITY AND CAPITAL RESOURCES

         Our cash and cash equivalents increased from $103,058 at December 31,
1998 to $4,781,033 at December 31, 1999. This net change occurred primarily
because we raised $5,603,051 in net proceeds from the sale of equity securities
and had net cash generated from operations of $432,688 during 1999.

         Our investment in property and equipment for the twelve months ended
December 31, 1999 was $78,777 as compared to $9,000 for the twelve months ended
December 31, 1998. Installation of network infrastructure equipment and
equipment for new employees. We intend to continue to make investments in these
types of equipment and property, although we have no material commitments to do
so.

         We expect the cash generated from operations and our current cash, cash
equivalents and short term investments to meet our working capital and capital
expenditure requirements for at least the next 12 months unless additional cash
is needed for acquisitions. Beyond the next 12 months, we will need to obtain
additional debt and/or equity financing to fund our operations and anticipated
growth. Although there can be no guarantee, we believe such funds will be
available to us.



                                       32
<PAGE>   34

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Market risk represents the risk of loss that may impact our financial
position, operating results or cash flows due to adverse changes in financial
market prices and rates. We are, or may become, exposed to market risk in the
areas of changes in United States interest rates and changes in foreign currency
exchange rates as measured against the United States Dollar. These exposures are
directly related to our normal operating and funding activities. Historically
and as of December 31, 1999, we have not used derivative instruments or engaged
in hedging activities.

INTEREST RATE RISK

         We manage interest rate risk by investing excess funds in cash
equivalents and short-term investments bearing variable interest rates, which
are tied to various market indices. As a result, we do not believe that
near-term changes in interest rates will result in a material effect on our
future earnings, fair values or cash flows.




                                       33
<PAGE>   35


RECENT ACCOUNTING PRONOUNCEMENTS

         In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"). We are required to adopt
SFAS No. 133 in the year ended December 31, 2001. SFAS No. 133 establishes
methods of accounting for derivative financial instruments and hedging
activities related to those instruments as well as other hedging activities. To
date, we have not entered into any derivative financial instruments or hedging
activities.

ITEM 3.  DESCRIPTION OF PROPERTY

         The majority of our business activities are conducted out of our
corporate offices located at 2710 Rew Circle, Suites 100 and 200, Ocoee, Florida
34761. This facility houses our technical and administrative offices. This space
consist of approximately 4,400 square feet of office and production space. The
lease terms expire on September 30, 2002. The average monthly rent is
approximately $6,208, or $74,500 per annum.

     We believe that our leased property is in good condition and is well
maintained. Due to our rapid growth, we anticipate leasing additional technical
and administrative office space in the near future. We believe that such space
can be secured on commercially reasonable terms and without undue operational
disruption. We do not have any policies regarding investments in real estate,
securities or other forms of property.

ITEM 4.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         Our authorized capital stock consists of 50,000,000 shares of common
stock, $.001 par value per share, of which there are 14,750,000 shares of common
stock issued and outstanding as of December 31, 1999, and 5,000,000 shares of
"blank check" preferred stock, of there are 2,000 shares of Series A Convertible
Preferred with a stated value of $1,750,000 outstanding as of December 31, 1999.

         Contemporaneous with our formation, our board of directors adopted a
Stock Option Plan, pursuant to which it authorized and granted to the Compass
Knowledge Group Management Trust, options to purchase up to 1,500,000 shares of
our common stock. One million three hundred seventy one thousand six hundred
(1,371,600) of these options were granted by the Trustees of the Trust on
February 9, 1999 to various employees, officers, directors and consultants at an
exercise price per option share of $.75. The remainder of the options were
granted by the Trustees during the year to various employees, officers,
directors and consultants at exercise prices of $.75, $2.00 and $4.00, the fair
market value of our common stock at the time of the grant.



                                       34
<PAGE>   36



         In December 1999, our board of directors adopted a Year 2000 Stock
Option Plan which authorizes 1,000,000 additional shares of common stock
available for grants to our officers, directors, employees and consultants. The
exercise price shall be at least equal to the fair market value of the
underlying common stock on the grant date and no option may be exercised beyond
ten (10) years from the grant date. To date, none of these options have been
granted.

         The following table sets forth, as of December 31, 1999, the beneficial
ownership of our common stock (i) by the only persons who are known by us to own
beneficially more than 5% of our common stock; (ii) by each of our directors;
and (iii) by all directors and officers as a group. Percentage ownership assumes
all vested options are fully exercised.


<TABLE>
<CAPTION>
                                                                    OPTIONS FOR
          NAME AND ADDRESS OF               SHARES OF COMMON          COMMON                           PERCENTAGE
           BENEFICIAL OWNER                   STOCK OWNED         STOCK OWNED (4)    TOTAL SHARES      OWNED (5)
           ----------------                   ------------      - --------------- -  -------------     ---------

<S>                                                 <C>                   <C>            <C>                 <C>
Rogers W. Kirven, Jr. (1)(4)(6)                     4,606,289             381,118        4,987,407           30.15%
2710 Rew Circle, Suite 100
Ocoee, FL  34761

Daniel J. Devine (1)(4)(6)                          3,335,587             275,982        3,611,569           21.83%
2710 Rew Circle, Suite 100
Ocoee, FL  34761

Dr. Paul Lerman (2)(5)(6)                                 -0-               5,000            5,000                *
Farleigh Dickenson University
1000 River Road
H325A
Teaneck, NJ 07666

Dr. Robert G. Frank (2)(5)(6)                             -0-               5,000            5,000                *
College of Health Professions
University of Florida
P.O. Box 100185
Gainesville, FL  32610

Bruce Rosetto (2)(5)(6)                                72,756               5,000           82,756                *
U.S. Plastic Lumber Corp.
2300 Glades Rd, Ste. 440 West
Boca Raton, FL  33431

Pioneer Ventures Ltd. Partnership (3)(6)              875,000                 -0-          875,000            5.14%
651 Day Hill Road
Windsor, CT  06095-0040

University of Florida Foundation, Inc.(6)(7)          850,000                 -0-          850,000            5.27%
University of Florida
P.O. Box 100185
Gainesville, FL  32610

All 5%  shareholders,  officers and Directors       9,744,632             672,100       10,416,732           62.96%
as a group


</TABLE>



                                       35
<PAGE>   37

- ------------------------------
 *       Indicates less than one percent.

(1)      Individuals who are both officers and directors.
(2)      Individuals who are directors only. Effective March 15, 2000,
         Mr. Rosetto resigned from our Board of Directors for personal reasons
         unassociated with us or our business.
(3)      Pioneer Ventures owns 2,000 shares of our convertible Series A
         Preferred Stock which may be converted by Pioneer at anytime into
         875,000 shares of our common stock. This Preferred Stock may be voted
         as common stock by Pioneer's General Partner, Pioneer Ventures Corp.,
         on the basis of 875,000 shares of common stock (which is the number
         of common shares on a past-conversion basis).
(4)      Reflects options granted under our option plan which may be exercised
         within the next 60 days at an exercise price of $.75.
(5)      Reflects options granted under our option plan which may be exercised
         within the next 60 days at an exercise price of $4.00.
(6)      Based on 16,541,050 issued and outstanding shares including all options
         and other convertible instruments that may be either exercised or
         converted into common stock within the next 60 days.
(7)      The University of Florida Foundation stock is voted by its Board of
         Trustees.

ITEM 5.  DIRECTORS, EXECUTIVE OFFICERS, AND CONTROL PERSONS

EXECUTIVE OFFICERS AND DIRECTORS

         The following table sets forth our directors and executive officers.
Directors are elected for a period of one year and thereafter serve until the
next annual meeting at which their successors are duly elected by our
stockholders. Our officers are employed under four year employment contracts and
other employees serve at the will of the Board of Directors.
<TABLE>
<CAPTION>

                 NAME                           AGE                                 POSITION
                 ----                           ---                                 --------
<S>                                             <C>         <C>
Rogers W. Kirven, Jr.                           46          Chairman,  Director,  Chief Executive Officer,  Secretary
                                                            and Treasurer

Daniel J. Devine                                38          Director and President

Dr. Paul Lerman                                 59          Director

Dr. Robert G. Frank                             47          Director


</TABLE>


OFFICERS AND EMPLOYEE DIRECTORS

         ROGERS W. KIRVEN, JR., Co-founder of Compass Knowledge Group, Inc.,
Chairman of the Board and Chief Executive Officer, Secretary and Treasurer. Mr.
Kirven has served as one of our directors and chief executive officer since our
inception. Since 1991, Mr. Kirven served as Managing Partner of the Kirven
Group, Inc., located in Ocoee, Florida, a private investment firm that
specializes in investments in healthcare and education. Mr. Kirven has a
Bachelor of Arts degree from Clemson University and is a graduate of the
Executive Program for Small Companies', Stanford University.

         DANIEL J. DEVINE, Co-founder of Compass Knowledge Group, Inc., Director
and President. Mr. Devine is responsible for the overall management of our
business, including all operations and research and development of new programs.
He has served as our Chief Operating Officer and its predecessor companies since
1995. From 1993 to 1995, he was a partner with The Kirven Group, Inc. Prior to
joining the Kirven Group, Mr. Devine was manager of business development for the



                                       36
<PAGE>   38



Global Messaging Group of the Harris Corporation, located in Melbourne, Florida,
which focused on the commercial electronic messaging marketplace. Mr. Devine has
a Bachelor of Science degree in Electrical Engineering from the University of
Florida and completed the Stanford University Executive Program for Growing
Companies in the Spring, 1999.

NON-EMPLOYEE DIRECTORS

         DR. PAUL LERMAN. Dr. Lerman was appointed to the Company's board in
November 1999 by Pioneer Ventures in accordance with its Investment Agreement
with us. Since April 1990, Dr. Lerman has served as Dean and Professor of the
College of Business Administration for Fairleigh Dickinson University. Dr.
Lerman also provides consulting services to a number of major corporations
including, the BASF Corporation and the AT&T Corporation. Dr. Lerman received
his Ph.D. in Operations Research from New York University, a Master's degree in
Mechanical Engineering from New York University, a Bachelor of Arts degree in
Mathematics and Economics and a B.M.E. in Mechanical Engineering from the New
York University.

         DR. ROBERT G. FRANK. Dr. Frank was appointed to the Company's board in
November 1999 by the University of Florida Foundation is accordance with its
Stock Purchase Agreement with the Company.  Dr. Frank is also a director and a
managing member of Intelicus, LC, our operating subsidiary. Dr. Frank has
dedicated his entire career to education and research in the areas of Clinical
and Health Psychology. Dr. Frank has also served since February of 1995 and
continues to serve as the Dean of the College of Health Professions at the
University of Florida and Vice President for Rehabilitation and Behavioral
Health at Shands Healthcare, both located in Gainesville, Florida. Prior to that
time, Dr. Frank served as the Director of Clinical Health Psychology and
Neuropsychology at the University of Missouri School of Medicine. Dr. Frank
received his Ph.D. from the University of New Mexico in Clinical Psychology.

ITEM 6.  EXECUTIVE COMPENSATION

         We have entered into an employment agreement with Rogers W. Kirven,
Jr., to serve as our Chief Executive Officer, in November 1999 for an initial
term of four years. The principal terms of Mr. Kirven's employment agreement are
as follows:

      o  an annual salary of $175,000, which may be increased from time to time
         at the discretion of our board of directors;


                                       37
<PAGE>   39


      o  stock options which may be issued from time to time at the discretion
         of our board of directors;

      o  a provision for term life insurance;

      o  discretionary bonuses; and

      o  standard benefits.

         We entered into an employment agreement with Daniel J. Devine, to serve
as our President, in November 1999 for an initial term of four years. The
principal terms of Mr. Devine's employment agreement are as follows:

      o  an annual salary of $140,000, which may be increased from time to time
         at the discretion of our board of directors;

      o  stock options which may be issued from time to time at the discretion
         of our board of directors;

      o  provisions for a term life insurance;

      o  discretionary bonuses; and

      o  standard benefits.

SUMMARY COMPENSATION TABLE

     The following table sets forth compensation paid to each of the individuals
who served as our Chief Executive Officer and President for the fiscal year
ended December 31, 1999. There were no other officers during 1999.

                         SUMMARY OF COMPENSATION TABLE.
                               ANNUAL COMPENSATION

<TABLE>
<CAPTION>
                                                                                                          Long-term Compensation
                                                                                       Common Stock     --------------------------
     Name & Principal                                                  Other Annual       Under           LTIP        All Other
        Position                    Year     Salary($)     Bonus($)    Compensation    Options/SARs     Payout($)    Compensation
- ---------------------------         -----    ----------   ---------    ------------    ------------     ---------    ------------
<S>                                <C>        <C>           <C>           <C>          <C>               <C>           <C>
Rogers W. Kirven, Jr., CEO (1)      1999      $ 80,167      $36,000        $-0-          381,118           $-0-          -0-
Daniel J. Devine(2)                 1999      $106,633      $59,256        $-0-          275,982           $-0-          -0-
</TABLE>

- -------------------
(1)      Rogers W. Kirven, Jr. has served as our Director and the Chief
         Executive Officer since our organization on February 9, 1999.
(2)      Daniel J. Devine has served as a Director and President since our
         organization on February 9, 1999.
(3)      Options were granted on February 9, 1999, and may be exercised at any
         time at $.75 per share until February 9, 2004. No options were
         exercised during fiscal 1999.

OPTIONS/SAR GRANTS IN LAST FISCAL YEAR

                      Option/SAR Grants in Last Fiscal Year
                               [Individual Grants]
<TABLE>
<CAPTION>

                        Number of Securities      Percent of Total
                            Underlying          Options/sars Granted
                           Options/SARs            to Employees in        Exercise or Base      Expiration
Name                        Granted(#)               Fiscal Year            Price ($/Sh)           Date
- ----                    -------------------     ---------------------     ----------------      ------------
<S>                     <C>                             <C>                     <C>             <C>
Rogers W. Kirven,       381,118                         25%                     .75             February 9, 2004
Jr., CEO/Director

Daniel J. Devine,       275,982                         18%                     .75             February 9, 2004
President/Director


</TABLE>



         Contemporaneous with our formation, our board of directors adopted a
Stock Option Plan, pursuant to which it authorized and granted to the Compass
Knowledge Group Management Trust, options to purchase up to 1,500,000 shares of
our common stock. All of these options were granted by the Trustees of the Trust
to



                                       38
<PAGE>   40


various employees, officers, directors and consultants at an exercise prices per
option share of $.75, $2.00 and $4.00 which were equal to the fair market value
of our common stock at the time of the grants. Awards under the Stock Option
Plan consist of stock options (both non-qualified options and options intended
to qualify as "Incentive Stock Options" under Section 422 of the Internal
Revenue Code of 1986, as amended), as described in the Plan.

         In December 1999, our board of directors adopted a Year 2000 Stock
Option Plan which authorizes 1,000,000 additional shares of common stock
available for grants to our officers, directors, employees and consultants. The
exercise price shall be at least equal to the fair market value of the
underlying common stock on the grant date and no option may be exercised beyond
ten (10) years from the grant date. To date, none of these options have been
granted.

         Except as set forth in the tables above, there has been no non-cash
compensation awarded in the form of stock options granted to our officers or
directors under our stock option plans or otherwise.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END
OPTION/SAR VALUES

         We have no options, exercises or values to report for its last fiscal
year.

LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR

         We have no long term incentive plans during 1999 and therefore has no
awards to report for its last fiscal year.

COMPENSATION OF DIRECTORS

         Our directors who are also officers receive no additional compensation
for their service as directors. Each of our outside directors were granted 5,000
options on December 1, 1999. These options have an exercise price of $4.00 and
expire on February 9, 2004, unless otherwise extended. None of our non-directors
have been paid cash compensation to date. Cash and non-cash fees are expected to
be paid our non-employee directors for service in the future. All directors are
entitled to reimbursement for reasonable expenses incurred in the performance of
their duties as members of our Board of Directors.

ITEM 7.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         In December 1999, we issued 465,000 shares of our common stock at a
fair value of $930,000, plus acquisition costs of $16,500, and contributed
$300,000 to The University of Florida Foundation, Inc., an affiliated party, in
exchange for its 35.5% minority interest in Intelicus. Goodwill of $981,555 was
recorded as a result of this acquisition. In addition, we issued 35,000 shares
at a fair value of $70,000 to the University of Florida Foundation as
consideration for The University of Florida to extend the term for the pharmacy
agreements to five years.

         Net student fee revenue from the University of Florida was $1,877,567
and $684,802 for the years ended December 31, 1999 and 1998, respectively.
Accounts receivable from this partner totaled $484,961, as of December 31, 1999.

         During 1999, we issued 30,000 stock options to a minority stockholder
for the retirement of a $45,040 note payable.


         Also during 1999, we forgave loans of $204,648 from Mr. Kirven, our
Chief Executive Officer, and Mr. Devine, our President and to others. These
amounts were reclassed to additional paid-in capital.




                                       39
<PAGE>   41


         On November 15, 1999, one of our wholly owned subsidiaries,
Rehabilitation Training Institute, Inc., paid notes aggregating $800,000 due our
officers, Rogers W. Kirven, Jr., our Chief Executive Officer, and Daniel J.
Devine, our President. These notes originated from a redemption of 34,483 shares
of their common stock in Rehabilitation Training Institute, our wholly-owned
subsidiary, on January 1, 1999. The notes were payable upon demand and were
repaid from the cash proceeds we received from the sale of our common stock in
connection with our recapitalization on November 15, 1999.

         From January 1, 1999 through October 31, 1999, and for the year ended
December 31, 1998, Intelicus, our operating subsidiary, paid management fees in
the amounts of $382,628 and $228,280, respectively, to The Kirven Group, Inc.,
an entity controlled by our Chief Executive Officer, Rogers W. Kirven, Jr. In
turn, The Kirven Group, Inc. employed Rogers W. Kirven, Dan Devine, our
President, and Steve Wells our chief marketing and information employee.
Pursuant to such agreement, The Kirven Group, Inc., through these individuals
and other subcontractors, acted as executive advisors to Intelicus and were
responsible for the day-to-day operation and management of our business as well
as program analysis, acquisitions, due diligence, accounting, financial and
other administrative services. There is no ongoing arrangement for these
services as this relationship was terminated effective November 5, 1999.

         We entered into a commercial lease agreement with our Chief Executive
Officer, Rogers W. Kirven, Jr., on January 1, 2000 for approximately 2,450
square feet of office space located at 2710 Rew Circle, Suite 100, Ocoee,
Florida. The lease base rent is $2,588 per month which is computed at a base
rental rate of $12.676 per square per annum. In addition to the base rent, we
are responsible for the payment of all sales tax and other charges and
impositions imposed upon the premises as well as $620 per month as additional
rent for our share of common area maintenance and operating expenses. The lease
expires on September 30, 2002.

         Except as described above, we currently have no transactions nor are
there any proposed with our officers, directors, 5% or greater shareholders, and
affiliates. Conflicts of interest could arise in the negotiation of the terms of
any transaction between us and our shareholders, officers, directors or
affiliates. We have no plans or arrangements, including the hiring of an
independent third party, for the resolution of disputes between us and such
persons, if they arise. Our business and financial condition could be adversely
affected should such individuals choose to place their own interests before
ours. No assurance can be given that conflicts of interest will not cause us to
lose potential opportunities, profits, or management attention. Our Board of
Directors has adopted a policy regarding transactions between us and any of our
officers, directors, or affiliates, including loan transactions, requiring that
all such transactions be approved by a majority of the independent and
disinterested members of our Board of Directors and that all such transactions
be for a bona fide business purpose and be entered into on terms at least as
favorable to us as could be obtained from unaffiliated independent third
parties. All ongoing relationships with any of our officers, directors or
affiliates are in compliance with our policy.

ITEM 8.  DESCRIPTION OF SECURITIES

         While the following statements provide a description of all of the
material facts related to the matters discussed in this section they do not
purport to be complete and are qualified in their entirety by reference to the
detailed provisions of our Certificate of Incorporation, as amended, Bylaws, and
Stock Option Plan, copies of which are filed as exhibits to this documents.



                                       40
<PAGE>   42



COMMON STOCK.

         We currently are authorized to issue 50,000,000 shares of $.001 par
value common stock, of which, as of December 31, 1999, approximately 14,750,000
shares were issued and outstanding.

         The holders of our common stock are entitled to equal dividends and
distributions per share with respect to our common stock when, as and if
declared by our Board of Directors from funds legally available therefore. No
holder of any shares of common stock has a pre-emptive right to subscribe for
any of our securities, nor are any common shares subject to redemption or
convertible into any other of our securities. Upon our liquidation, dissolution
or winding up, and after payment of creditors and preferred stockholders, if
any, our assets will be divided pro-rata on a share-for-share basis among the
holders of the shares of our common stock. All shares of our common stock now
outstanding are fully paid, validly issued and non-assessable. Each share of our
common stock is entitled to one vote with respect to the election of any
director or any other matter upon which our stockholders are required or
permitted to vote. Holders of our common stock do not have cumulative voting
rights, so the holders of more than 50% of the combined shares voting for the
election of directors may elect all of the directors if they choose to do so,
and, in that event, the holders of the remaining shares will not be able to
elect any members to the Board of Directors.

PREFERRED STOCK.

         We are authorized to issue up to 5,000,000 shares of $.001 par value
"blank check" Preferred Stock, 5,000 of which have been designated as Series A
Convertible Preferred Stock and 2,000 of which are outstanding as of December
31, 1999. Our Board of Directors has the power, without further action by the
holders of our common stock, to designate the relative rights and preferences of
the preferred stock, and to issue the preferred stock in one or more series as
designated by our Board of Directors. The designation of rights and preferences
could include preferences as to liquidation, redemption and conversion rights,
voting rights, dividends or other preferences, any of which may be dilutive of
the interest of the holders of our common stock or our preferred stock of any
other series. The issuance of preferred stock may have the effect of delaying or
preventing a change in control of our management and ownership without further
shareholder action and may adversely affect the rights and powers, including
voting rights, of the holders of common stock. In certain circumstances, the
issuance of preferred stock could depress the market price of our common stock.
Our Board of Directors will effect a designation of each series of preferred
stock by filing with the Nevada Secretary of State a Certificate of Designation
defining the rights and preferences of each such series. Documents so filed are
matters of public record and may be examined in accordance with procedures of
the Delaware Secretary of State, or copies thereof may be obtained from us.

         The Series A Convertible Preferred Stock may be convertible at any time
by the holder at his option to our common stock at $2.00 per share. The Series A
Convertible Preferred Stock is subject to an annual cash and/or preferred stock
cumulative dividend of 8%. The Series A Convertible Preferred Stock also has
senior liquidation preferences, voting rights equal to common stock and other
rights and preferences common to such securities, including the right to
designate one of our directors. The Series A Convertible Preferred Stock is also
entitled to a one-time demand and unlimited piggy-back registration rights
including any common stock issued upon conversion thereof.


                                       41
<PAGE>   43



TRANSFER  AGENT.

         The transfer agent for our common stock is Interwest Transfer Co., 1981
East 4800 South, Salt Lake City, UT 84117.

                                     PART II

ITEM 1.  MARKET PRICE AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND OTHER
          SHAREHOLDER MATTERS.

         Our common stock, par value $.001 per share, was eligible in July 1998
for trading on the NASDAQ Over-The-Counter Bulletin Board Service under the
symbol "WTHP" which was changed to "CKNO" effective with our recapitalization on
November 15, 1999.

         Pursuant to NASD Eligibility Rule 6530 issued on January 4, 1999,
issuers who do not make current filings pursuant to Sections 13 and 15(d) of the
Securities Act of 1934 are ineligible for listing on the NASDAQ Over-the-Counter
Bulletin Board. Pursuant to the Rule, issuers who are not current with such
filings are subject to de-listing pursuant to a phase-in schedule depending on
each issuer's trading symbol as reported on January 4, 1999. As previously
discussed, our trading symbol was "WTHP". Therefore, pursuant to the phase-in
schedule, we will be subject to de-listing in May, 2000 if we do not become
current with our filings.

         We have not made filings pursuant to Sections 13 or 15(d) of the
Securities Act of 1934. We have filed this Registration Statement on Form 10-SB
in order to become a "reporting" company and therefore comply with the Rule
6530.

         Until November 15, 1999 there was no established trading market for our
common stock. Set forth below for each month beginning in November 1999 are the
high and low bid information with respect to our common stock. Because we engage
in over-the-counter market quotations, these quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commissions and may not represent
actual transactions.


                                                  PER SHARE OF
                                                  COMMON STOCK
                                       ------------------------------

PERIOD:                                 HIGH                  LOW
- -------                                 ----                  ---
November 1999                           $4.23                 $3.75
December 1999                           $8.00                 $3.90
January 2000                            $7.40                 $5.50
February 2000                           $7.00                 $5.875
March 2000                              $6.25                 $3.75


                                       42
<PAGE>   44



         As of December 31, 1999, 14,750,000 shares of our common stock were
outstanding and, as far as we can determine, were held by in excess of 130
registered shareholders. As of December 31, 1999, there were 2,375,000 shares of
common stock issuable upon exercise of outstanding options or warrants to
purchase, or securities convertible into, common stock.

         We have not paid any cash dividends since our inception and do not
anticipate paying cash dividends in the foreseeable future.

ITEM 2.  LEGAL PROCEEDINGS.

         We are not a party to any legal action and are not aware of any
threatened litigation.

ITEM 3.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.

         There were no changes or disagreements with our accountants.

         The reports of Arthur Andersen LLP on our financial statements as of
December 31, 1999 do not contain an adverse opinion or a disclaimer of opinion,
or was qualified or modified as to uncertainty, audit scope or accounting
principles.

ITEM 4.  RECENT SALES OF UNREGISTERED SECURITIES.

         On February 9, 1999, Compass Knowledge Group, Inc. was incorporated
under the laws of the State of Florida Upon formation, some of our shareholders
which included our Chief Executive Officer, Rogers W. Kirven, Jr., and our
President Daniel J. Devine were issued 9,188,257 shares of our common stock,
$.001 par value. The shareholders paid $.001 per share for their stock. This
offering was not underwritten. The issuance of these securities were done in
reliance upon an exemption from registration under Section 4(2) of the
Securities Act.

         In March of 1996, Rehabilitation Training Institute with the University
of Florida Health Services, Inc., a Florida corporation and an affiliate of the
University of Florida, formed Intelicus, LC, a Florida limited liability company
organized for the purpose of developing, marketing and operating degree and
certificate programs for health care professionals. Rehabilitation Training
Institute was ultimately issued 64.5% of the ownership interest in Intelicus and
University of Florida Health Services was issued the remaining 35.5% ownership
interest. This offering was not underwritten. The University of Florida Health
Services contributed certain intangible assets valued at $213,350 and $200,000
in cash in four semiannual installments commencing March 15, 1996 for its
ownership interest in Intelicus. The Rehabilitation Training Institute
contributed certain intangible assets valued at $750,000 for its ownership
interest in Intelicus. This offering was not underwritten and the issuance of
these securities were done in reliance upon an exemption from registration under
Section 4(2) of the Securities Act.

         Effective October 31, 1999, Compass Knowledge Group, Inc. consummated a
tax-free stock exchange with the shareholders of Rehabilitation Training
Institute whereby Rehabilitation Training Institute shareholders exchanged, on a
one-for-one basis (61,743 aggregate shares), all of their common stock in
Rehabilitation Training Institute for common stock in Compass Knowledge Group,
Inc. No new shares of common stock were issued to the shareholders of Compass
Knowledge Group, Inc. as part of the exchange. Upon consummation of the stock
exchange, we owned 100% of Rehabilitation Training Institute and Rehabilitation
Training Institute owned 64.5% of Intelicus. The University of Florida Health
Services owned the remaining 35.5% of Intelicus. The exchange has been accounted
for as a business combination among control groups, similar to a pooling of
interests. This offering was not underwritten and the issuance of these
securities were done in reliance upon an exemption from registration under
Section 4(2) of the Securities Act.



                                       43


<PAGE>   45

         On November 5, 1999, we issued 2,000 shares of our Series A Convertible
Preferred Stock to Pioneer Ventures Limited Partnership for $875 per share to
raise $1,750,000. The Series A Convertible Preferred Stock may be convertible by
the holder at his option to common stock at $2.00 per share at any time. The
Series A Convertible Preferred Stock is subject to an annual cash and/or
preferred stock cumulative dividend of 8%. The Series A Convertible Preferred
Stock also has senior liquidation preferences, voting rights equal to our common
stock and other rights and preferences common to such securities, including the
right to designate one director. The Series A Convertible Preferred Stock is
also entitled to a one-time demand and unlimited piggy-back registration rights
including any of our common stock issued upon conversion thereof. The offering
was not underwritten. This sale was exempt from registration in reliance upon
Rule 506 under Regulation D promulgated under the Securities Act of 1933. We
filed a Form D notice of sale with the Securities and Exchange Commission within
15 days after the first sale.

         On November 15, 1999, we were recapitalized in a tax-free acquisition
of Winthrop Industries, Inc. In connection with this transaction, our common
stockholders received one share of Winthrop Industries' common stock for each
share of common stock owned by them (9,750,000 aggregate shares) and our
preferred shareholders received a like kind and number with identical
preferences of Series A Preferred Stock in Winthrop Industries (2,000 aggregate
preferred shares) in exchange for our Series A Preferred Stock. Winthrop
Industries also adopted our Stock Option Plan, thereby allowing our option
holders to exercise their options to acquire common shares of Winthrop
Industries in accordance with the adopted Stock Option Plan. No new shares of
common stock were issued to the shareholders of Winthrop as part of the
exchange. As of the closing, our shareholders owned 80% of Winthrop, as
calculated on a fully diluted basis which we valued, based on market, at $2.00
per share. For accounting purposes, the acquisition has been treated as a
recapitalization of Compass Knowledge Group, Inc. with Compass Knowledge Group
as the acquirer. This offering was not underwritten. The issuance of these
securities was exempt from registration in reliance upon Rule 506 under
Regulation D promulgated under the Securities Act of 1933. Winthrop filed Form D
notice of sale with the Securities and Exchange Commission within 15 days of
November 15, 1999.

         As a condition to the closing of the Winthrop Industries transaction,
Winthrop on November 15, 1999 issued 2,000,000 shares of its common stock, $.001
par value, to a number of various investors for $2 per share to raise $3,936,025
net of offering costs of $63,675. The offering was not underwritten. This sale
was exempt from registration in reliance upon Rule 506 under Regulation D
promulgated under the Securities Act of 1933. Winthrop filed a Form D notice of
sale with the Securities and Exchange Commission within 15 days after the first
sale.

         Effective December 1, 1999, we issued 500,000 shares of our common
stock, $.001 par value, to The University of Florida Foundation, Inc. in
consideration of its 35.5% in Intelicus, L.C., a operating subsidiary and an
extension of the term of contracts with the College of Pharmacy, University of
Florida. These shares were valued at $2.00, which was the market value of our
stock on the date the parties reached an agreement. The shares were issued in
reliance upon an exempt from registration under Section 4(2) of the Securities
Act.

         Except for the transaction with Compass Knowledge Group, the
Rehabilitation Training Institute and The University of Florida Foundation,
Inc., none of these transactions were with an affiliated party.


                                       44


<PAGE>   46



ITEM 5.  INDEMNIFICATION OF DIRECTORS AND OFFICERS.

         The General Corporation Law of Nevada limits the liability of officers
and directors for breach of fiduciary duty except in certain specified
circumstances, and also empowers us to indemnify officers, directors, employees
and others from liability in certain circumstances such as where the person
successfully defended himself on the merits or acted in good faith in a manner
reasonably believed to be in the best interests of the corporation.

         Our articles of incorporation, with certain exceptions, eliminate any
personal liability of our directors or officers or our shareholders for monetary
damages for the breach of such person's fiduciary duty, and, therefore, our
officers or directors cannot be held liable for damages to us or our
shareholders for gross negligence or lack of due care in carrying out his (or
her) fiduciary duties as a Director except in certain specified instances. We
may also adopt by-laws which provide for indemnification to the full extent
permitted under law which includes all liability, damages and costs or expenses
arising from or in connection with service for, employment by, or other
affiliation with us to the maximum extent and under all circumstances permitted
by law.

         Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our directors, officers, and controlling persons
pursuant to the foregoing provisions or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.

         We are currently in the process of obtaining a Directors and Officers
Liability Insurance policy with coverage limits of approximately $5,000,000.

PART  F/S

FINANCIAL STATEMENTS. The Financial Statements required by this Item are
included at the end of this report beginning on Page F-1 as follows:

Index to Financial Statements                                            F-1

Report of Independent Certified Public Accountants Arthur Andersen LLP   F-2

Compass Knowledge Holdings, Inc. And Subsidiaries:

Consolidated Balance Sheet -- December 31, 1999                          F-3

Consolidated Statements of Operations
 For The Years Ended December 31, 1999 (Audited) And 1998 (Unaudited)    F-4

Consolidated Statements of Changes In Stockholders' Equity
 For The Years Ended December 31, 1999 (Audited) And 1998 (Unaudited)    F-5

Consolidated Statements of Cash Flows
 For The Years Ended December 31, 1999 (Audited) And 1998 (Unaudited)    F-6

Notes To Consolidated Financial Statements
 December 31, 1999 (Audited) And 1998 (Unaudited)                        F-7




                                       45
<PAGE>   47


PART III

ITEMS 1 AND 2.  INDEX AND DESCRIPTION TO EXHIBITS.

Exhibit 3         3.1   Articles of Incorporation*

                  3.2   Certificate of Amendment*

                  3.3   Plan and Articles of Merger*

                  3.4   Certificate of Designation*

                  3.5   Bylaws*

Exhibit 4 Instruments defining rights of security holders.

                  4.1   Certain rights of security holders are set forth in the
                        Articles of Incorporation, as amended, and our Bylaws
                        as set forth in Exhibits 3.1, 3.2, 3.3 and 3.4*

                  4.2   Investment Agreement by and between Pioneer Ventures
                        Associates Limited Partnership and Compass Knowledge
                        Group, Inc. dated November 5, 1999.*

                  4.3   Voting and Shareholder's Agreement by and between
                        Pioneer Ventures Associates Limited Partnership and
                        Rogers W. Kirven, Jr. and Daniel Devine dated November
                        5, 1999.*

                  4.4   Compass Knowledge Holdings, Inc. Year 1999 Stock Option
                        Plan.*

                  4.5   Compass Knowledge Group, Inc. Stock Option Agreement*

                  4.6   Compass Knowledge Holdings, Inc. Year 2000 Stock Option
                        Plan.*

Exhibit 10        Material Contracts

                  10.1  Amended and Restated Stock Exchange Agreement dated
                        effective October 31, 1999 by and among Compass
                        Knowledge Group, Inc., Rehabilitation Training
                        Institute, David Colburn, Michael Borcheck, Daniel J.
                        Devine and Rogers W. Kirven, Jr.*

                  10.2  Agreement and Plan of Merger dated November 15, 1999
                        among Winthrop Industries, Inc., Media Capital
                        Subsidiary, Inc. and Compass Knowledge Group, Inc.*

                  10.3  Amended and Restated Employment Agreement dated November
                        1, 1999 between Rogers W. Kirven, Jr. and Compass
                        Knowledge Holdings, Inc.*

                  10.4  Amended and Restated Employment Agreement dated November
                        1, 1999 between Daniel J. Devine and Compass Knowledge
                        Holdings, Inc.*

                  10.5  Stock Purchase Agreement by and between Compass
                        Knowledge Holdings, Inc. and The University of Florida
                        Foundation, Inc. effective December 1, 1999*

                  10.6  Registration Rights Agreement for The University of
                        Florida Foundation, Inc.*

                  10.7  Standard Professional Services Agreement*

Exhibit 27        Financial Data Schedule*

* Previously Filed


                                       46

<PAGE>   48



                                   SIGNATURES

         In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.


                                           COMPASS KNOWLEDGE HOLDINGS, INC.


Date:    April 17, 2000                By: /s/ ROGERS W. KIRVEN, JR.
      --------------------             ---------------------------------------
                                           Chief Executive Officer and Director

Directors

/s/ DANIEL J. DEVINE
- ---------------------------------


/s/ DR. PAUL LERMAN
- ---------------------------------


/s/ DR. ROBERT FRANK
- ---------------------------------






                                       47
<PAGE>   49







COMPASS KNOWLEDGE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999,
TOGETHER WITH REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS

<PAGE>   50


                                    PART F/S
                        COMPASS KNOWLEDGE HOLDINGS, INC.

                                    CONTENTS

Index to Financial Statements                                                F-1

Report of Independent Certified Public Accountants Arthur Andersen LLP       F-2

Compass Knowledge Holdings, Inc. And Subsidiaries:

Consolidated Balance Sheet -- December 31, 1999                              F-3

Consolidated Statements of Operations
For The Years Ended December 31, 1999 (Audited) And 1998 (Unaudited)         F-4

Consolidated Statements of Changes In Stockholders' Equity
For The Years Ended December 31, 1999 (Audited) And 1998 (Unaudited)         F-5

Consolidated Statements of Cash Flows
For The Years Ended December 31, 1999 (Audited) And 1998 (Unaudited)         F-6

Notes To Consolidated Financial Statements
December 31, 1999 (Audited) And 1998 (Unaudited)                             F-7













                                      F-1
<PAGE>   51


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



To the Board of Directors and Shareholders of
Compass Knowledge Holdings, Inc.:

We have audited the accompanying consolidated balance sheet of Compass Knowledge
Holdings, Inc. and subsidiaries (a Nevada corporation) as of December 31, 1999,
and the related consolidated statements of operations, changes in stockholders'
equity and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

We conducted our audit 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 audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Compass Knowledge Holdings,
Inc. and subsidiaries as of December 31, 1999, and the results of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.


                              Arthur Andersen LLP





Orlando, Florida,
     February 4, 2000







                                      F-2
<PAGE>   52

                COMPASS KNOWLEDGE HOLDINGS, INC. AND SUBSIDIARIES


                 CONSOLIDATED BALANCE SHEET -- DECEMBER 31, 1999

<TABLE>
<CAPTION>


                                     ASSETS
<S>                                                                              <C>
CURRENT ASSETS:
     Cash and cash equivalents                                                   $ 4,781,033
     Accounts receivable, net of allowance for doubtful accounts of $10,887          484,961
     Due from related parties                                                        120,162
     Prepaid expenses                                                                 48,299
     Other assets                                                                      6,650
                                                                                 -----------
                      Total current assets                                         5,441,105

PROPERTY AND EQUIPMENT, net                                                           85,752

GOODWILL, NET                                                                        977,769

OTHER ASSETS, NET                                                                    320,898
                                                                                 -----------
                      Total assets                                               $ 6,825,524
                                                                                 ===========

                               LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES:
     Accounts payable and accrued expenses                                       $   179,149
     Deferred student fees                                                           449,263
     Accrued preferred stock dividends                                                17,500
     Amounts due to related parties                                                  314,230
                                                                                 -----------
                      Total liabilities                                              960,142
                                                                                 -----------

COMMITMENTS AND CONTINGENCIES (Note 6)

STOCKHOLDERS' EQUITY:
     Preferred stock, 5,000,000 shares authorized, 2,000 shares issued
         and outstanding                                                           1,667,026
     Common stock, $0.001 par value; 50,000,000 shares authorized,
         14,750,000 shares issued and outstanding                                     14,750
     Additional paid-in capital                                                    4,283,509
     Unearned compensation                                                           (20,150)
     Retained deficit                                                                (79,753)
                                                                                 -----------
                      Total stockholders' equity                                   5,865,382
                                                                                 -----------
                      Total liabilities and stockholders' equity                 $ 6,825,524
                                                                                 ===========

</TABLE>


 The accompanying notes are an integral part of this consolidated balance sheet.





                                      F-3
<PAGE>   53
                COMPASS KNOWLEDGE HOLDINGS, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

      FOR THE YEARS ENDED DECEMBER 31, 1999 (AUDITED) AND 1998 (UNAUDITED)


<TABLE>
<CAPTION>

                                                                      1999              1998
                                                                   (audited)         (unaudited)
                                                                 ------------       ------------
<S>                                                              <C>                <C>
TOTAL STUDENT FEE REVENUE
    Net student fee revenue from degree programs                 $  1,877,567       $    684,802
    Gross student fee revenue from certificate programs               750,295            491,743
    Other revenue                                                      31,444             33,954
                                                                 ------------       ------------
      Total student fee revenue                                     2,659,306          1,210,499

INSTRUCTION COSTS AND SERVICES                                        616,101            342,054
                                                                 ------------       ------------
                      Gross profit                                  2,043,205            868,445
                                                                 ------------       ------------

OPERATING EXPENSES:
     Selling and promotional                                          431,431            248,260
     General and administrative                                     1,272,487            577,595
                                                                 ------------       ------------
                      Total operating expenses                      1,703,918            825,855
                                                                 ------------       ------------

INCOME FROM OPERATIONS                                                339,287             42,590
                                                                 ------------       ------------

OTHER INCOME (EXPENSE):
     Interest income                                                   20,461             16,798
     Interest expense                                                 (14,803)            (2,662)
     Other                                                               (399)              (960)
                                                                 ------------       ------------
                      Total other income                                5,259             13,176
                                                                 ------------       ------------

INCOME BEFORE MINORITY INTEREST IN NET INCOME OF SUBSIDIARY           344,546             55,766

MINORITY INTEREST IN NET INCOME OF SUBSIDIARY                         189,114             25,454
                                                                 ------------       ------------

NET INCOME                                                            155,432             30,312
LESS:  PREFERRED STOCK DIVIDENDS                                      (17,500)                --
                                                                 ------------       ------------
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS                      $    137,932       $     30,312
                                                                 ============       ============

PRO FORMA EARNINGS PER SHARE:  (Note 8)
     Basic                                                       $      0.011       $      0.002
                                                                 ============       ============
     Diluted                                                     $      0.011       $      0.002
                                                                 ============       ============

PRO FORMA WEIGHTED AVERAGE SHARES OUTSTANDING:  (Note 8)
     Basic                                                         12,544,520         12,250,000
                                                                 ============       ============
     Diluted                                                       13,079,779         12,250,000
                                                                 ============       ============

</TABLE>


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







                                      F-4
<PAGE>   54



                COMPASS KNOWLEDGE HOLDINGS, INC. AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

      FOR THE YEARS ENDED DECEMBER 31, 1999 (AUDITED) AND 1998 (UNAUDITED)

<TABLE>
<CAPTION>


                                                                                                                        Total
                                       Preferred Stock       Common Stock       Additional                           Stockholders'
                                     -----------------     -----------------      Paid-In    Unearned    Retained      (Deficit)
                                     Shares   Amount       Shares     Amount      Capital  Compensation   Defic         Equity
                                     ------   ------       ------     ------    ---------- ------------  --------    -------------
<S>                                  <C>    <C>            <C>      <C>        <C>          <C>         <C>          <C>
BALANCE, December 31, 1997
   (Unaudited)                          --  $       --     100,000  $ 145,000  $   85,756   $     --    $(566,830)   $  (336,074)

     Net income (Unaudited)             --          --          --         --          --         --       30,312         30,312
                                     -----  ----------  ----------  ---------  ----------   --------     --------     ----------

BALANCE, December 31, 1998
   (Unaudited)                          --          --     100,000    145,000      85,756         --     (536,518)      (305,762)

     Conversion to $0.001
       par value                        --          --          --   (144,900)    144,900         --           --             --
     Stock redemption and
       retirement                       --          --     (38,257)       (38)   (887,512)        --           --       (887,550)
     Distribution to members
        of subsidiary                   --          --          --         --          --         --      (58,525)       (58,525)
     Issuance of stock options
        for retirement of note
        payable to stockholder          --          --          --         --      45,040         --           --         45,040
     Forgiveness of notes payable
        to stockholders                 --          --          --         --     204,648         --           --        204,648
     Issuances of common stock          --          --  14,688,257     14,688   5,018,435         --           --      5,033,123
     Issuance of preferred stock     2,000   1,667,026          --         --          --         --           --      1,667,026
     Issuance of stock options
        to non-employees                --          --          --         --      49,600    (49,600)          --             --
     Impact of change in taxable
        status                          --          --          --         --    (377,358)        --      377,358             --
     Preferred stock dividend           --          --          --         --          --         --      (17,500)       (17,500)
     Amortization of unearned
        compensation                    --          --          --         --          --     29,450           --         29,450
     Net income                         --          --          --         --          --         --      155,432        155,432
                                     -----  ----------  ----------  ---------  ----------   --------     --------     ----------
BALANCE, December 31, 1999           2,000  $1,667,026  14,750,000  $  14,750  $4,283,509   $(20,150)    $(79,753)    $5,865,382
                                     =====  ==========  ==========  =========  ==========   ========     ========     ==========
</TABLE>


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




                                      F-5
<PAGE>   55



                COMPASS KNOWLEDGE HOLDINGS, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

      FOR THE YEARS ENDED DECEMBER 31, 1999 (AUDITED) AND 1998 (UNAUDITED)


<TABLE>
<CAPTION>

                                                                               1999              1998
                                                                             (audited)        (unaudited)
                                                                            -----------       -----------
<S>                                                                         <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income                                                             $   155,432       $    30,312
     Adjustments to reconcile net income to net cash
         provided by (used in) operating activities-
              Depreciation and amortization                                      18,747             7,616
              Other                                                                 399               960
              Amortization of unearned compensation                              29,450                --
              Minority interest in net income of subsidiary                     189,114            25,454
              Decrease (increase) in operating assets and liabilities-
                  Accounts receivable                                            45,836          (506,507)
                  Due from related parties                                       (4,332)            5,817
                  Prepaid expenses                                              (48,299)               --
                  Other current assets                                            7,324           (13,974)
                  Other long term assets                                       (158,365)               --
                  Accounts payable and accrued expenses                         147,448             7,715
                  Deferred student fees                                        (148,250)           203,467
                  Due to related parties                                        198,184           (38,632)
                                                                            -----------       -----------
                      Net cash provided by (used in)
                           operating activities                                 432,688          (277,772)
                                                                            -----------       -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchase of property and equipment                                         (78,777)           (9,000)
     Proceeds from sale of property and equipment                                 1,000                --
     Acquisition of minority interest                                          (316,500)               --
                                                                            -----------       -----------
                      Net cash used in investing activities                    (394,277)           (9,000)
                                                                            -----------       -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Proceeds from issuance of common stock                                   3,936,025                --
     Proceeds from issuance of preferred stock                                1,667,026                --
     Payment of notes payable to stockholders                                  (830,000)               --
     Payment of note payable                                                    (25,000)               --
     Cash paid related to merger with Winthrop Industries, Inc.                 (18,732)               --
     Distributions paid to minority stockholder                                 (31,230)               --
     Distributions paid to members of subsidiaries                              (58,525)               --
                                                                            -----------       -----------
                      Net cash provided by financing activities               4,639,564                --
                                                                            -----------       -----------

NET INCREASE (DECREASE) IN CASH AND
     CASH EQUIVALENTS                                                         4,677,975          (286,772)

CASH AND CASH EQUIVALENTS, beginning of year                                    103,058           389,830
                                                                            -----------       -----------

CASH AND CASH EQUIVALENTS, end of year                                      $ 4,781,033       $   103,058
                                                                            ===========       ===========
</TABLE>


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






                                      F-6
<PAGE>   56
                COMPASS KNOWLEDGE HOLDINGS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                DECEMBER 31, 1999 (AUDITED) AND 1998 (UNAUDITED)


1. ORGANIZATION, REORGANIZATION AND NATURE OF BUSINESS:

         Compass Knowledge Holdings, Inc. (CKHI) began its business as
Professional Educational Seminars, Inc., a Florida corporation which purchased
the operating division and intellectual property of Paul M. Deutsch Press, Inc.
in November 1993. Professional Educational Seminars was formed for the purpose
of developing, owning and operating seminars, developing and providing
certificate programs and developing and publishing materials in life care
planning for catastrophic injuries and impairments. In November 1993, Rogers W.
Kirven, Jr., Chief Executive Officer of CKHI, and several other individuals
acquired all the issued and outstanding stock of Professional Educational
Seminars, and in 1994 the name of Professional Educational Seminars, Inc. was
changed to Rehabilitation Training Institute, Inc., one of CKHI's wholly-owned
subsidiaries.

         CKHI is an educational company that delivers education programs to
working professionals primarily in the healthcare market utilizing the Internet,
expert video presentation and other traditional mediums by:

         o     Delivering curricula and content over the Internet and through
               other traditional mediums,
         o     Providing interaction between and among the students and their
               professors via the Internet through e-mail, lectures and chat
               rooms, and
         o     Providing course content on video and hard copy materials to
               students.

         CKHI presently operates its business through its wholly owned
subsidiaries which sell and deliver its programs.

         In March of 1996, Rehabilitation Training Institute with The University
of Florida Health Services, Inc., a Florida corporation and an affiliate of the
University of Florida, formed Intelicus, LC, a Florida limited liability company
organized for the purpose of developing, marketing and operating degree and
certificate programs for healthcare professionals. Rehabilitation Training
Institute was ultimately issued 64.5% of the ownership interest in Intelicus and
University of Florida Health Services was issued the remaining 35.5% ownership
interest. Intelicus was managed by four managing members, two appointed by
Rehabilitation Training Institute and two appointed by The University of Florida
Health Services.


         On February 9, 1999, Compass Knowledge Group, Inc. (CKGI) was
incorporated under the laws of the State of Florida for the purpose of
establishing a company to acquire companies and develop and operate businesses
involved in the distance learning business. (CKGI) had no operating history.
Upon formation, the shareholders of CKGI were issued 9,188,257 shares of our
common stock, $.001 par value. At the formation of CKGI, proxy relationships
were in place that resulted in CKGI and RTI having a common control group.


         Effective October 31, 1999, CKGI consummated a tax-free stock exchange
with the shareholders of Rehabilitation Training Institute whereby
Rehabilitation Training Institute shareholders exchanged, on a one-for-one basis
(61,743 aggregate shares), all of their common stock in Rehabilitation Training
Institute for common stock in CKGI. No new shares of common stock were issued to
the shareholders of CKGI as part of the exchange. Upon consummation of the stock
exchange, CKGI owned 100% of Rehabilitation Training Institute and
Rehabilitation Training Institute owned 64.5% of Intelicus. The University of
Florida Health Services owned the remaining 35.5% of Intelicus. The exchange has
been accounted for as a business combination among control groups, similar to a
pooling of interests. At the time of the exchange, CKGI did not have any
operations. Accordingly, the financial information of CKGI (and thus, as noted
below, the Company) prior to the exchange represents the consolidated financial
information of RTI. In conjunction with this transaction, RTI elected to change
its tax status - see Note 5.

         In October 1999, CKGI also agreed to purchase the 35.5% equity interest
in Intelicus, LC which was then owned by The University of Florida Foundation,
Inc. as a result of a gift from the University of Florida Health Services, Inc.
In exchange for the 35.5% interest, CKGI agreed to issue to The University of
Florida Foundation 465,000 shares of its common stock and to contribute $300,000
to The University of Florida Foundation for the purpose of establishing an
endowment fund for health professionals. As a condition to the closing, The
University of Florida, College of Pharmacy agreed to extend for a period of five
(5) years the term of its professional service agreements with CKGI for an
additional 35,000 shares of CKGI's common stock. This transaction was valued at
$2.00 per share, which was the fair market value of CKGI's stock at that time.
These transactions were closed on December 1, 1999.

         On November 15, 1999, CKGI was recapitalized in a tax-free acquisition
of Winthrop Industries, Inc. (WII). In accordance with the acquisition
agreement, CKGI common stockholders received one share of WII's common stock for
each share of common stock owned by them (9,750,000 aggregate shares) and CKGI's
preferred shareholders received a like kind and number with identical
preferences of Series A Preferred Stock in WII (2,000 aggregate shares) in
exchange for CKGI's Series A Preferred Stock. WII also adopted CKGI's Stock
Option Plan, thereby allowing CKGI option holders to exercise their options to
acquire common shares of WII in accordance with the adopted Stock Option Plan.
No new shares of common stock were issued to the shareholders of WII as part of
the exchange. Prior to the acquisition of CKGI, WII was a nonoperating public
shell company but, as noted below, WII had completed an offering of its common
stock. For accounting purposes, the acquisition has been treated as a
recapitalization of CKGI with CKGI as the acquirer. This accounting is identical
to that resulting from a reverse acquisition, except that no goodwill or other
intangible asset has been recorded. The historical financial statements prior to
November 15, 1999, are those of CKGI, which was formed on February 9, 1999.

         Also on November 15, 1999, the Board of Directors of the Company (the
Board) approved, and stockholders owning a majority of the Company's outstanding
common stock consented to: (i) the authorization of 5,000,000 shares of
preferred stock to be issued with such rights and preferences as determined by
the Board, (ii) a reverse stock split of the issued and outstanding shares of
the Company's common stock on a 3.33 to 1 basis, so that stockholders of the
Company prior to the CKGI acquisition received one share of the Company's $.001
par value common stock for every 3.33 shares of common stock held by them, and
(iii) to reflect a name change to Compass Knowledge Holdings, Inc. The
accompanying consolidated financial statements reflect the impact of the 3.33 to
1 stock split for all periods presented. As an additional negotiated condition
of the WII, the management of WII completed an offering on November 15, 1999 of
2,000,000 shares of its common stock, at an offering price $2.00 per share. The
offering was made pursuant to an exemption from registration under the
Securities Act of 1933, provided by Regulation D, Rule 506, of said Act, raising
proceeds of $3,936,025, net of offering costs of $63,975. Neither CKGI nor any
of its officers, directors or shareholders assisted or participated in this
offering.




                                      F-7
<PAGE>   57

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and
its subsidiaries. All significant intercompany amounts and transactions have
been eliminated.

Use of Estimates

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

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of
three months or less at time of purchase to be cash and cash equivalents.

Fair Value of Financial Instruments

The carrying values of cash and cash equivalents, accounts receivable, due from
related parties, accounts payable and accrued expenses, due to related parties,
and note payable to related party, approximate fair value due to the short-term
maturities of these financial instruments.

Property and Equipment

Property and equipment are stated at cost. Depreciation is computed based on the
estimated useful lives of the assets, three years for computer equipment and
seven years for office furniture, using the straight-line method for financial
reporting purposes. Ongoing maintenance and repairs are expensed when incurred.
Depreciation expense was $14,689 and $7,616 for the years ended December 31,
1999 and 1998.

Goodwill

Goodwill represents the excess of the cost over the net assets of the acquired
companies and is being amortized on a straight-line basis over 15 years.
Goodwill of $977,769 at December 31, 1999, net of accumulated amortization of
$3,786, is included on the accompanying consolidated balance sheet. Amortization
expense for the year ended December 31, 1999 was $3,786.





                                      F-8
<PAGE>   58

Other Assets

The Company enters into long-term contracts with certain universities (the
University Partners), for the development and delivery of the degree programs.
Costs incurred by the Company in entering into these contracts are deferred and
amortized over the life of the contract, generally three to five years. Other
assets at December 31, 1999 include $69,728, net of accumulated amortization of
$272, all of which was recorded in the year ended December 31, 1999.

Under the long-term contracts with its University Partners, the Company is
responsible for developing and delivering a degree program for the duration of
the contract period. Direct external and internal costs incurred in the design
and development of course content and the master copy of course materials are
capitalized as content development costs. These costs are recognized as expense
over the life of the contract, based on the expected revenue stream from course
offerings during the contract period. Other assets at December 31, 1999 include
$167,063 of capitalized content development costs.

The Company expenses the production costs of advertising the first time the
advertising takes place, except for direct-response advertising, which is
capitalized and amortized over its expected period of future benefits.
Direct-response advertising consists primarily of marketing materials mailed to
potential students, which include direct response cards. The capitalized costs
of the advertising are amortized over the period student fee revenues for the
associated program will be recognized. At December 31, 1999, $84,107 of
advertising was included in other assets.

Long-Lived Assets

The Company reviews its long-lived assets for impairment whenever circumstances
indicate that the carrying amount of an asset may not be recoverable. There has
been no impairment reflected in the accompanying consolidated financial
statements.

Revenue Recognition

The Company offers two types of educational programs: degree programs and
professional certificate programs. For degree programs, in which the Company's
University Partners are responsible for course curricula and for conferring a
degree, the Company receives a stated percentage of student fees. The Company
currently records as revenues only the portion of the student fees paid to the
Company by the University Partners.

The Company has based its revenue recognition policy on recent guidance by the
Securities and Exchange Commission (SEC) and current proposal stage literature
promulgated by the Emerging Issues Task Force (EITF), in EITF Issue No. 99-19,
"Reporting Revenue Gross versus Net", regarding the recognition of gross versus
net revenues for internet based entities. While the Company employs a
web-based delivery system in its operations, of which internet applications is
only one component, management believes that its current revenue recognition







                                      F-9
<PAGE>   59

policy complies with the SEC's and EITF's guidance. Should the SEC revise its
guidance or the final consensus reached by the EITF in Issue No. 99-19 differ
from the Company's current policy, management will revise its revenue
recognition treatment accordingly. However, the decision to reflect gross or net
revenues will not have any impact on the Company's net income.


For professional certificate programs, in which the Company is responsible for
course curricula and for awarding the certificate, the Company records as
gross revenue all student fees.


For both degree and professional certificate programs, student fees must be paid
prior to the student's attendance of the seminar. The Company defers this
revenue and recognizes it as income over the period of instruction. If a student
withdraws from a course or program prior to the start date, the student fees may
be refunded or applied to a later seminar.

Total student fee revenue for courses offered by the Company for 1999 and 1998
were as follows:


<TABLE>
<CAPTION>

                                                                               1999              1998
                                                                             (audited)        (unaudited)
                                                                             ----------        ----------
<S>                                                                          <C>               <C>

          Gross student fee revenues from degree programs                    $4,164,506        $1,597,670
          Less: portion retained by University Partners                       2,286,939           912,868
                                                                             ----------        ----------
              Net student fee revenue from degree programs                    1,877,567           684,802
          Gross student fee revenue from certificate programs                   750,295           491,743
          Other revenue                                                          31,444            33,954
                                                                             ----------        ----------
              Total student fee revenue                                      $2,659,306        $1,210,499
                                                                             ==========        ==========

</TABLE>


Research and Development Costs

Research and development costs related to present and future educational
programs are expensed as incurred. Research and development costs were
approximately $160,500 and $76,100 for the years ended December 31, 1999 and
1998.

Stock-Based Compensation

The Company accounts for employee and non-employee director stock options in
accordance with Accounting Principles Board Opinion No. 25 "Accounting for Stock
Issued to Employees," (APB 25). Under APB 25, the Company recognizes
compensation expense related to employee and non-employee director stock options
for the excess, if any, of the fair value of the Company's stock at the date of
grant over the option exercise price. The amount is charged to operations over
the vesting period. See Note 9 for the pro forma disclosures required by
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123).

The Company accounts for non-employee stock options based on the fair value
method in accordance with SFAS 123. Under SFAS 123, the Company recognizes
compensation expense






                                      F-10
<PAGE>   60

related to non-employee stock options based on the fair value of the options at
the date of the grant, as determined by the Black-Scholes pricing model. This
amount is charged to operations over the vesting period.

Income Taxes

The Company uses the liability method of accounting for income taxes, as set
forth in Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting
for Income Taxes." Under the liability method, deferred taxes are determined
based on the difference between the financial statement and tax bases of assets
and liabilities using enacted tax rates in effect, in the years in which the
differences are expected to reverse.

Earnings Per Common Share

Basic earnings per common share are calculated after deducting dividends on
preferred shares from the net earnings and are based on the weighted average
number of shares outstanding during the period. Diluted earnings per common
shares reflect adjustments to the weighted average number of shares outstanding
for the assumed exercise of employee stock options, less the number of treasury
shares assumed to be purchased from the proceeds, including applicable unearned
compensation expense and income tax benefits, and the assumed conversion of
preferred stock.

Newly Issued Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" (SFAS 133). SFAS
133 requires companies to recognize all derivative contracts as either assets or
liabilities in the balance sheet and to measure them at fair value. If certain
conditions are met, a derivative may be specifically designed as a hedge, the
objective of which is to match the timing of gain or loss recognition on the
hedging derivative with the recognition of (i) the changes in the fair value of
the hedged asset or liability that are attributable to the hedged risk or (ii)
the earnings effect of the hedged forecasted transaction. For a derivative not
designated as a hedging instrument, the gain or loss is recognized in income in
the period of change. SFAS 133, as amended by SFAS 137, is effective for all
fiscal quarters of fiscal years beginning after June 15, 2000. Historically, the
Company has not entered into derivative contracts to hedge existing risks or for
speculative purposes. Accordingly, the Company does not expect adoption of the
new standard on July 1, 2000, to affect the consolidated financial statements.







                                      F-11
<PAGE>   61
3. RELATED-PARTY TRANSACTIONS:

During December, 1999, the Company issued 465,000 shares of common stock at a
fair value of $930,000, plus acquisition costs of $16,500, to a University
Partner in exchange for its 35.5% minority interest in Intelicus. In connection
with this acquisition, the Company also committed to contribute $300,000 to the
University Partner for the purpose of establishing an endowment fund for health
professionals (the "Contribution"). Goodwill of $981,555 was recorded as a
result of this acquisition. In addition, the Company issued 35,000 shares at a
fair value of $70,000 as consideration for the University Partner to extend a
contract agreement for a degree program.

Net student fee revenue from one University Partner was $1,877,567 and $684,802
for the years ended December 31, 1999 and 1998, respectively. Accounts
receivable from the University Partner totaled $484,961, as of December 31,
1999.

Management Fees

The Company paid approximately $382,600 and $228,300 in management fees to an
entity controlled by the Company's Chief Executive Officer (CEO) and principal
stockholder, for the years ended December 31, 1999 and 1998, respectively.

Amounts Due to Related Parties

Amounts due to related parties include a $12,510 note payable to a stockholder
and $300,000 due to the University Partner in connection with the Contribution.
Both of these amounts were paid in full subsequent to December 31, 1999.

4. PROPERTY AND EQUIPMENT:

Property and equipment consists of the following at December 31, 1999:

                                                                  Amount
                                                                 --------
             Computer equipment                                  $ 92,121
             Office furniture                                      21,611
                                                                 --------
                                                                  113,732
             Less- Accumulated depreciation                       (27,980)
                                                                 --------
                                                                 $ 85,752
                                                                 ========

5. INCOME TAXES:

The difference between the provision for income taxes at the statutory rate of
34% and the effective tax rate is due to the recording of a valuation allowance
and non-taxable income.





                                      F-12
<PAGE>   62
Deferred income taxes at December 31, 1999, consisted of the following:



                                                                       Total
                                                                     Deferred
                                                                    Tax Assets
                                                                   (Liabilities)
                                                                  -------------

       Accrued liabilities                                            $     94
       Net operating loss carry forward (NOL)                            3,664
       Depreciation                                                       (288)
                                                                      --------
                    Total deferred tax assets                         $  3,470
                                                                      --------
                    Valuation allowance                                 (3,470)
                                                                      --------
                                                                      $     --
                                                                      ========


At December 31, 1999, the Company had a NOL carryforward of $3,664 available to
offset future taxable income, which expires in 2019. Realization of the deferred
tax assets is dependent on generating sufficient future taxable income. At
December 31, 1999, the Company had a net deferred tax asset, which was fully
offset by a valuation allowance.

Through October 31, 1999, RTI was taxed under the provisions of Subchapter S of
the Internal Revenue Code. As of November 1, 1999, RTI terminated its Subchapter
S election; accordingly, the undistributed deficit of $377,358 has been included
as a reduction to additional paid-in capital.

6. COMMITMENTS AND CONTINGENCIES:

Leases

The Company leases office space and equipment under leases that expire on
various dates through September 10, 2003. As of December 31, 1999, future net
minimum lease payments that









                                      F-13
<PAGE>   63
have initial or remaining noncancellable lease terms in excess of one year are
as follows:

            Year Ending
            December 31,                                         Amount
            ------------                                       ---------
                2000                                           $  77,437
                2001                                              76,740
                2002                                              58,112
                2003                                               1,114
                                                                --------
                                                                $213,403
                                                                ========

Total rent expense for the years ended December 31, 1999 and 1998 was $44,404
and $37,128, respectively. Included in these amounts is rent expense of $35,866
for the years ended December 31, 1999 and 1998, paid to an entity
controlled by the Company's CEO and principal stockholder.

7. CONVERTIBLE PREFERRED STOCK:

On November 5, 1999, the Company issued 2,000 shares of preferred stock for
proceeds of $1,667,026, net of offering expenses of $82,974. The preferred stock
may be convertible by the holder, at its option, to common stock of the Company
at $2.00 per share at any time (see Note 8). The preferred stock is subject to
an annual cash and/or preferred stock cumulative dividend of 8%. The preferred
stock has senior liquidation preferences, voting rights equal to common stock
and other rights and preferences common to such securities, including the right
to designate one director of the Company. The preferred stock is also entitled
to a one-time demand and unlimited piggy-back registration rights including any
common stock issued upon conversion thereof.

8. EARNINGS PER SHARE:

The computation of basic earnings per share was based on the weighted average
number of shares of common stock outstanding. The computation of diluted
earnings per share was based on the weighted average number of shares of common
stock and common stock equivalents outstanding. In accordance with SFAS No. 128,
"Earnings per Share", the following tables







                                      F-14
<PAGE>   64

reconcile net income and weighted average shares outstanding to the amounts used
to calculate basic and diluted earnings per share for the years ended December
31, 1999 and 1998:

<TABLE>
<CAPTION>

                                                                                1999             1998
                                                                              (audited)        (unaudited)
                                                                             -----------       -----------

  <S>                                                                        <C>               <C>
   Net income available to common stockholders                               $   137,932       $    30,312
                                                                             -----------       -----------

   Pro forma weighted average shares outstanding                              12,544,520        12,250,000
   Effect of stock option plan                                                   535,259                --
                                                                             -----------       -----------
   Pro forma diluted weighted average shares outstanding                      13,079,779        12,250,000
                                                                             ===========       ===========

   Pro forma basic earnings per share                                        $     0.011       $     0.002
                                                                             ===========       ===========
   Pro forma diluted earnings per share                                      $     0.011       $     0.002
                                                                             ===========       ===========

</TABLE>

As of December 31, 1999, there were 2,000 shares of preferred stock, convertible
into 875,000 common shares. These shares were not included in the computation of
diluted earnings per share because the effect of the assumed conversion had an
antidilutive effect.

For purposes of presenting earnings per share, common stock issued to effectuate
the transaction with WII and in the exchange between CKGI and RTI are assumed to
have been outstanding for all periods presented. Accordingly, these earnings per
share presentations have been labeled as pro forma earnings per share.

9. STOCK OPTIONS AND WARRANTS:

Contemporaneous with the formation of CKGI in February 1999, the Board adopted a
Stock Option Plan (the Plan), pursuant to which it authorized and granted to the
Compass Knowledge Group Management Trust (the Trust), options to purchase up to
1,500,000 shares of the Company's common stock. In turn, throughout the year
ended December 31, 1999, the Trust issued options as follows:

<TABLE>
<CAPTION>

                                                                     Weighted-Average
              Exercise             Weighted Average Initial        Remaining Contractual
               Price                   Contractual Life          Life at December 31, 1999               Shares
              --------             ------------------------      -------------------------              ---------
               <S>                             <C>                           <C>                       <C>
               $0.75                           5.0                            3.8                       1,374,500
               $2.00                           4.3                            2.8                          60,500
               $4.00                           4.2                            3.3                          65,000
                                      --------------------             ----------------              --------------
               Total                           4.9                            3.7                       1,500,000
                                      ====================             ================              ==============

</TABLE>

The weighted-average exercise price for all stock options granted is $0.94. As
of December 31, 1999, 1,500,000 stock options remained outstanding and 902,100
were exercisable. The exercisable options have a weighted-average exercise price
of $0.89.




                                      F-15
<PAGE>   65

Unless extended by the Company's Board, all options under the Plan expire on
February 9, 2004. Awards under the Plan consist of stock options (both
non-qualified options and options that qualify as "Incentive Stock Options"
under Section 422 of the Internal Revenue Code of 1986, as amended), as
described in the Plan.

On December 15, 1999, the Board of the Company adopted a Year 2000 Stock Option
Plan, which authorized 1,000,000 shares of common stock available for grants to
the Company's officers, directors, employees and consultants. The exercise price
shall be at least equal to the fair market value of the underlying common stock
on the grant date and no option may be exercised beyond 10 years from the grant
date. None of these options were granted during the year ended December 31,
1999.

Pursuant to the requirements of SFAS No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123), the following disclosures are presented to reflect the
Company's pro forma net income for the years ended December 31, 1999 and 1998,
as if the fair value method of accounting prescribed by SFAS 123 had been used
for options granted to employees and non-employee directors. In preparing these
disclosures, the Company has determined the value using the Black Scholes model
based on the following assumptions: expected lives of 5 years, volatility of 0
percent for options granted prior to November 15, 1999, 92 percent for options
granted after November 15, 1999, a risk-free rate of 4.75 percent, and no
expected dividends.

Using these assumptions, the weighted-average fair value per share of the stock
option grants during the year ended December 31, 1999 was approximately $0.29.
Had compensation expense been determined consistent with SFAS 123, utilizing the
assumptions above with amortization of compensation cost over the vesting
period, the Company's net income (loss) for the year ended December 31, 1999
would have been impacted as follows:

<TABLE>
<CAPTION>

                                                                   As reported             Pro forma
                                                                   -----------             ---------
<S>                                                                  <C>                   <C>
Net income (loss)                                                    $155,432              $(113,636)
Pro forma basic earnings (loss) per share                            $  0.011              $  (0.010)
Pro forma diluted earnings (loss) per share                          $  0.011              $  (0.010)
                                                                     ========              =========

</TABLE>

For the year ended December 31, 1999, compensation expense related to stock
options issued to non-employees of $29,450 was recognized in the accompanying
consolidated statement of operations. The remaining unamortized unearned
compensation was $20,150 at December 31, 1999.






                                      F-16
<PAGE>   66



10. SUPPLEMENTAL CASH FLOW DISCLOSURES:

The Company paid interest of approximately $10,800 and $2,700 for the years
ended December 31, 1999 and 1998, respectively.

The issuance of 465,000 common shares and the additional 35,000 shares for the
purchase of the minority interest and the five-year contract extension (see Note
3), respectively, were non-cash transactions.

During 1999, the Company issued 30,000 stock options to a stockholder for the
retirement of a $45,040 note payable.

Also during 1999, the Company forgave loans of $204,648 from various
stockholders. These amounts were reclassed to additional paid-in capital. In
addition, the Company received capital contributions from a stockholder in the
form of other assets as follows:

       Cash received                                                   $  8,768
       Due from related party - a non-cash capital transaction          115,830
                                                                       --------
              Gross assets acquired                                     124,598
       Less:  cash paid for transaction costs                           (27,500)
                                                                       --------
              Net assets acquired                                      $ 97,098
                                                                       ========

On February 9, 1999, 9,188,257 common shares of CKGI were issued to the
stockholders in conjunction with the formation of CKGI, in exchange for
non-monetary consideration.

In accordance with the terms of the Company's cumulative preferred stock,
dividends of $17,500 were accrued at December 31, 1999.











                                      F-17


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