ELEMENT K CORP, S-1/A, 2000-08-15

ELEMENT K CORP
S-1/A, 2000-08-15
BUSINESS SERVICES, NEC

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 15, 2000

REGISTRATION STATEMENT NO. 333-36574
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 3

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

ELEMENT K CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C> <C>
DELAWARE 7372 16-1580060
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>

500 CANAL VIEW BOULEVARD
ROCHESTER, NEW YORK 14623
(716) 240-7500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------

LANCE E. D'AMICO
VICE PRESIDENT, SECRETARY AND
GENERAL COUNSEL
ELEMENT K CORPORATION
500 CANAL VIEW BOULEVARD
ROCHESTER, NEW YORK 14623
(716) 240-7500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES TO:

<TABLE>
<S> <C>
STACY J. KANTER STEPHEN L. BURNS
HOWARD L. ELLIN CRAVATH, SWAINE & MOORE
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 825 EIGHTH AVENUE
FOUR TIMES SQUARE NEW YORK, NEW YORK 10019
NEW YORK, NEW YORK 10036-6522 TEL: (212) 474-1000
TEL: (212) 735-3000
</TABLE>

------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, check the following box: [X]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
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CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
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PROPOSED MAXIMUM AGGREGATE AMOUNT OF
TITLE OF SECURITIES BEING REGISTERED OFFERING PRICE(1)(2) REGISTRATION FEE
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Class A common stock, $.01 par value(3).................. $75,900,000 $20,038
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</TABLE>

(1) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(o) of the Securities Act.

(2) Includes shares that may be issued upon exercise of the underwriters'
over-allotment option.

(3) The securities covered by the market making prospectus contained in this
registration statement are being registered under the Securities Act of 1933
on this registration statement. Registration fees with respect to this
registration statement have previously been paid in accordance with Rule
457(a).
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2

EXPLANATORY NOTE

This Amendment No. 3 to Registration Statement No. 333-36574 contains (1) a
form of prospectus relating to the initial public offering of Class A common
stock of Element K Corporation and (2) the form of the alternate pages required
to create the prospectus that may be used by any broker-dealer subsidiary of
Wasserstein Perella Group, Inc. in connection with offers and sales in market
making transactions of the previously issued shares of Class A common stock. The
alternate pages appear after the initial public offering prospectus and replace
the prospectus cover page, the table of contents page and the sections titled
"Use of Proceeds," "Dividend Policy," "Legal Matters," "Experts" and "Where You
Can Find More Information" of the initial public offering prospectus. In
addition, the "Underwriting" and "Notice to Canadian Residents" sections will be
removed from the market making prospectus and replaced by the "Plan of
Distribution" section.

<PAGE> 3

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS
NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO
BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.

SUBJECT TO COMPLETION, DATED AUGUST 15, 2000

5,500,000 Shares

[elementk LOGO]

Class A Common Stock

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

Prior to this offering, there has been no public market for our Class A
common stock. The initial public offering price of the Class A common stock is
expected to be between $10.00 and $12.00 per share. We have applied to list our
Class A common stock on The Nasdaq Stock Market's National Market under the
symbol "LMNK."

The underwriters have an option to purchase a maximum of 825,000 additional
shares of our Class A common stock to cover over-allotments of shares.

INVESTING IN OUR CLASS A COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" ON
PAGE 10.

<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND ELEMENT K
PUBLIC COMMISSIONS CORPORATION
-------- ------------- -----------
<S> <C> <C> <C>
Per Share............................................ $ $ $
Total................................................ $ $ $
</TABLE>

Delivery of the shares of our Class A common stock will be made on or about
, 2000.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

CREDIT SUISSE FIRST BOSTON
CHASE H&Q
THOMAS WEISEL PARTNERS LLC

The date of this prospectus is , 2000.
<PAGE> 4

[INSIDE FRONT COVER]

[ARTWORK]
<PAGE> 5

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TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUMMARY.................... 1
RISK FACTORS.......................... 10
SPECIAL NOTE REGARDING FORWARD-
LOOKING STATEMENTS AND INDUSTRY
DATA................................ 19
USE OF PROCEEDS....................... 20
DIVIDEND POLICY....................... 20
DILUTION.............................. 21
CORPORATE HISTORY AND ORGANIZATION.... 22
CAPITALIZATION........................ 26
UNAUDITED PRO FORMA FINANCIAL
STATEMENTS.......................... 27
SELECTED HISTORICAL FINANCIAL DATA.... 40
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS....................... 42
BUSINESS.............................. 51
</TABLE>

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
MANAGEMENT............................ 64
RELATED PARTY TRANSACTIONS............ 71
PRINCIPAL STOCKHOLDERS................ 74
DESCRIPTION OF CAPITAL STOCK AND
MEMBERSHIP UNITS.................... 77
SHARES ELIGIBLE FOR FUTURE SALE....... 83
IMPORTANT UNITED STATES FEDERAL TAX
CONSEQUENCES TO NON-U.S. HOLDERS OF
OUR CLASS A COMMON STOCK............ 85
UNDERWRITING.......................... 87
NOTICE TO CANADIAN RESIDENTS.......... 90
LEGAL MATTERS......................... 91
EXPERTS............................... 91
WHERE YOU CAN FIND MORE INFORMATION... 91
INDEX TO FINANCIAL STATEMENTS......... F-1
</TABLE>

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

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT, AS THIS DOCUMENT MAY BE AMENDED OR SUPPLEMENTED
AFTER THAT DATE IN THE EVENT OF ANY SUBSEQUENT MATERIAL CHANGES DURING THE
PROSPECTUS DELIVERY PERIOD SPECIFIED BELOW. FOR ADDITIONAL INFORMATION ABOUT
ELEMENT K REQUIRED TO BE FILED UNDER THE SECURITIES AND EXCHANGE ACT OF 1934,
YOU SHOULD VISIT THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
www.sec.gov.

DEALER PROSPECTUS DELIVERY OBLIGATION

UNTIL , 2000 (25 DAYS AFTER THE COMMENCEMENT OF THE
OFFERING), ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR
NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE DEALER'S OBLIGATION TO DELIVER A PROSPECTUS WHEN
ACTING AS AN UNDERWRITER AND WITH RESPECT TO UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
i
<PAGE> 6

PROSPECTUS SUMMARY

This is only a summary and does not contain all of the information that may
be important to you. You should read the entire prospectus, including the risk
factors and our financial statements, before deciding to invest in our Class A
common stock.

OUR COMPANY

We are a leading provider of Web-based learning, or e-learning, designed to
address the strategic objectives of businesses and government organizations by
helping them build knowledge, expand competencies and improve productivity. Our
e-learning course and reference libraries can be conveniently accessed through
standard Web browsers. We enhance our e-learning environment through the use of
multimedia content, simulations, searchable databases, message boards, e-mail
and chat rooms. Our solution includes a learning management system that allows
our customers to track and evaluate participation and performance. We believe
that our e-learning offerings enable our customers to improve productivity and
generate greater returns on their e-learning investments than those that are
typically achieved through traditional classroom or other forms of
technology-based training.

We believe that our early entry into the e-learning market in 1997 has
enabled us to become a leader in revenues, customers and the number of courses
offered. We market and deliver approximately 550 high-quality online courses,
which comprise more than 4,400 hours of training, covering a broad array of
information technology, or IT, topics as well as a growing library of business
and professional courses. We are translating several of these courses into
foreign languages and currently have more than 125 translated versions
representing approximately 650 hours of training. We market our e-learning
offerings through multiple direct sales channels and through indirect sales
channels that include domestic and international resale and licensing
arrangements. Our current customers include American Express, BP, IBM, Intel,
Prudential, the State of Texas, Toyota and the U.S. Navy. Our corporate and
government customers generally purchase annual subscriptions that give
individual employees unlimited access to one or more of our libraries of online
courses. As of June 30, 2000, we had approximately 240,000 active subscriptions
that were sold directly by us to businesses and government organizations. Our
resale and licensing arrangements include our strategic relationships with
ExecuTrain, Gateway, Macromedia, Micron and ZDNet.

In 1999, our revenues totaled $10.5 million, a 114% increase over 1998
revenues. Net cash used in operating activities for 1999 was $4.5 million and
our net loss for 1999 was $8.2 million. On a pro forma basis, our 1999 revenues
were $17.0 million, net cash used in operating activities was $1.3 million and
our net loss was $33.7 million. On a pro forma basis, our revenues for the six
months ended June 30, 2000 were $15.3 million, net cash used in operating
activities was $13.9 million and our net loss was $33.9 million.

According to TRAINING Magazine, domestic corporations with more than 100
employees budgeted $62.5 billion for training in 1999, including $15 billion
budgeted for outside training services. Although corporate learning has
historically consisted primarily of classroom-based training programs, we
believe that this traditional methodology has a number of limitations, including
travel and opportunity costs, inability to update content in a timely manner,
difficulty in tailoring courses to a student's needs, facility and instructor
costs and poor tracking and assessment capabilities. In response to these
limitations, many businesses and government organizations are seeking more
effective learning solutions, and an increasing number are adopting e-learning
to meet their training needs. A study published in January 2000 by International
Data Corporation, or IDC, estimated that the U.S. market for e-learning was
about $1.1 billion in 1999 and projected that this market would grow to $11.4
billion in 2003, representing a compound annual growth rate of 79%. The largest
segment of the U.S. e-learning market currently is IT training, which the IDC
study estimated to be $870 million in 1999 and projected to grow to $5.3 billion
in 2003. We believe e-learning providers that offer a fully-hosted, integrated
solution -- comprising an extensive array of high-quality content, an enhanced
learning experience and a robust learning management system -- are uniquely
positioned to take advantage of this growing market opportunity.

1
<PAGE> 7

We provide a complete e-learning solution. Our solution features anytime,
anywhere accessibility and extensive libraries of high-quality course and
reference materials. Our enhanced learning experience offers several online
learning modalities, including instructor-led courses, self-paced tutorials and
reference sources. Our solution also includes a robust learning management
system that allows our customers to easily deploy our service throughout their
organizations and to track its use and effectiveness. Because we provide a
fully-hosted solution, our customers avoid the expense of designing, building
and maintaining infrastructure and content themselves.

We intend to build on our expertise in e-learning to take advantage of the
growing market opportunity and become the leading provider of high-quality
e-learning solutions for businesses and government organizations. We are
pursuing a strategy consisting of the following key elements:

- creating diverse revenue streams by selling subscriptions to our
elementk.com Web site, developing co-branded sites for resellers and
licensing our content and e-learning courses;

- expanding our sales and distribution channels by substantially increasing
the size of our enterprise sales team and telesales force and by further
developing our relationships with resellers;

- broadening our course libraries to include approximately 550 IT and 125
business and professional courses by December 2000;

- enhancing our learning management system by upgrading our learner
assessment capabilities and by introducing authoring tools that will
enable our customers to create their own proprietary content; and

- continually improving our users' learning experience by providing greater
functionality and a more engaging experience.

CORPORATE HISTORY AND ORGANIZATION

Since the introduction of our e-learning offerings in 1997, our business
operated within the ZD Education division of Ziff-Davis Inc. In February 2000,
Ziff-Davis sold the businesses comprising its ZD Education division for $172
million to an investment group composed of U.S. Equity Partners, L.P. and U.S.
Equity Partners (Offshore) L.P., two private equity funds managed by an
affiliate of Wasserstein Perella Group, Inc., or "Wasserstein Perella," which we
refer to collectively as "USEP," and several other U.S. and offshore
co-investors. The other co-investors include TMCT Ventures, funds managed by
Highfields Capital Management, BancAmerica Capital Investors, BancBoston
Capital, officers of Wasserstein Perella and several executive officers of
Element K.

The e-learning business of ZD Education was acquired for $57 million by
Element K Holdings LLC, which we refer to as "Element K," a limited liability
company formed for the purpose of completing the acquisition. Wasserstein
Perella also formed Element K Corporation, which is the company whose shares of
Class A common stock you will be purchasing if you decide to invest in the
initial public offering. Element K Corporation's sole asset is its controlling
interest in Element K. Wasserstein Perella currently controls Element K
Corporation through its ownership of 100% of Element K Corporation's Class B
common stock, which it acquired at the time it initially capitalized the
company. By virtue of its ownership of our Class B common stock, Wasserstein
Perella will control a majority of the voting power in Element K Corporation so
long as USEP and/or the other co-investors own a majority of the membership
units in Element K. To the extent that USEP and/or the other co-investors
convert their membership units in Element K into shares of Element K Corporation
Class A common stock, the number of votes to which the Class B common stock will
be entitled will decrease proportionately. See "Description of Capital Stock and
Membership Units."

In July and August 2000, Element K Corporation issued an aggregate of
1,096,491 shares of Series A preferred stock to some of the existing investors
in Element K, and received a total of approximately $10 million, or $9.12 per
share, in these transactions. The price per share was arrived at through arms-
length negotiations with a group of our non-employee investors who are not
affiliated with Wasserstein

2
<PAGE> 8

Perella. Element K Corporation used the proceeds from these transactions to
purchase membership units in Element K.

The ownership interests of USEP and the co-investors in Element K are
currently represented directly by membership units in Element K and indirectly
by their preferred stock in Element K Corporation. Immediately prior to the
completion of the initial public offering, the offshore co-investors' ownership
interests in Element K and all shares of Element K Corporation Series A
preferred stock will be converted into shares of Element K Corporation's Class A
common stock on a one-for-one basis. Each share of Class A common stock of
Element K Corporation is economically equivalent to a membership unit in Element
K, including those owned by USEP and the co-investors, except for differences
arising from the different tax treatment of a limited liability company member
compared to a corporate stockholder. For further details, see "Description of
Capital Stock and Membership Units."

The following chart summarizes our corporate structure immediately
following the completion of the initial public offering:

[CORPORATE STRUCTURE FLOWCHART]

In connection with our acquisition of the e-learning business of ZD
Education, USEP and the co-investors also formed Element K Press LLC, which we
refer to as "Press," to acquire the IT courseware and journal publishing and IT
training center businesses of ZD Education from Ziff-Davis for $90 million. At
the time of the acquisition, Press and Element K jointly formed Element K
Content LLC, which we refer to as "Content," to purchase the content development
operations of ZD Education from Ziff-Davis for $25 million. Immediately upon
completion of the initial public offering, Element K will purchase for $25
million the remaining interests in Content it does not already own from Press,
which interests Press initially purchased for $20.3 million.

For more information regarding our corporate history and organization, see
"Corporate History and Organization."

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

3
<PAGE> 9

We have recently adopted the corporate identity and brand name "Element K,"
which is the subject of a pending federal trademark application, and we have
obtained the Internet domain names "elementk.com," "elementk.net,"
"elementk.org," "lmnk.com," "lmnk.net," "lmnk.org" and"training.com." This
prospectus contains other product names, trade names, trademarks and service
marks, all of which are the property of their respective owners.
------------------------

We were incorporated in Delaware on January 18, 2000. Our principal
executive offices are located at 500 Canal View Boulevard, Rochester, New York
14623 and our telephone number is (716) 240-7500. Our Web site is located at
www.elementk.com. The information on our Web site is not part of this
prospectus.

4
<PAGE> 10

THE OFFERING

Class A common stock offered:....... 5,500,000 shares

Common stock to be outstanding after
the offering:
Class A common stock(1)........... 10,817,500 shares

Class B common stock.............. One share, which is convertible at any
time into 250 shares of Class A common
stock.

Membership units in Element K to be
outstanding after the offering,
excluding units held by Element K
Corporation(2):................... 16,667,821 units. The membership units
are exchangeable at any time for one
share of our Class A common stock and
are economically equivalent to shares
of Class A common stock, except for
differences arising from the different
tax treatment of a limited liability
company member compared to a corporate
stockholder.

Total Class A common stock
equivalents to be
outstanding after the
offering(3):...................... 27,485,571

Estimated net proceeds from the
offering............................ $53,265,000

Use of proceeds:

by Element K Corporation ......... To acquire 5,500,000 membership units
in Element K, representing an
approximate 20.0% additional equity
interest in Element K, or 6,325,000
membership units representing an
approximate 22.3% equity interest if
the underwriters exercise their
over-allotment option in full. After
giving effect to the purchase of
additional membership units with the
proceeds of the initial public
offering, Element K Corporation will
have an approximate 39.4% equity
interest in Element K, or 41.1% if the
underwriters exercise their
over-allotment option in full.

by Element K...................... To purchase the equity interests in
Content not already owned by us, expand
our online course library, complete our
acquisition of ExecuTrain's content
library, increase our sales and
marketing efforts, build brand
awareness, improve technical
capabilities, complete our investment
in Isopia Interactive Networks, or
"Isopia," with whom we are developing a
new learning management system that we
will license as a component of our
e-learning platform, and fund other
general corporate activities, including
working capital and possible future
acquisitions.

Voting rights....................... Holders of Class A common stock are
entitled to one vote per share. The
holder of Class B common stock is
entitled to a number of votes per share
equal to 250 plus the number of
membership units held by all members of
Element K other than Element K
Corporation.

Proposed Nasdaq National Market
symbol.............................. LMNK

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<PAGE> 11

---------------
(1) Excludes 1,107,500 shares of Class A common stock subject to options
outstanding as of June 30, 2000 under the 2000 Stock Option Plan, including
1,057,550 shares of Class A common stock subject to outstanding options
granted at $4.00 per share and 49,950 shares of Class A common stock subject
to outstanding options granted at the initial public offering price of the
Class A common stock.

(2) Excludes 1,050,000 underfunded membership units outstanding as of June 30,
2000 and held by some of our executive officers, which are subject to
vesting requirements and are exchangeable for shares of Class A common stock
on a one-for-one basis after payment of $4.00 per unit with respect to
850,000 underfunded membership units and after payment of an amount equal to
the initial public offering price per unit with respect to 200,000
underfunded membership units. For additional information, see
"Management -- Underfunded Membership Units in Element K."

(3) Assumes conversion into Class A common stock of the sole share of Class B
common stock and all outstanding membership units in Element K, excluding
membership units held by Element K Corporation and excluding 2,157,500
shares of Class A common stock subject to options outstanding as of June 30,
2000 or issuable upon exchange of underfunded membership units.

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<PAGE> 12

SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION

The table below sets forth the summary historical financial data for our
predecessor business, which we refer to as Element K Corporation Predecessor
Business, for the periods indicated, Element K for the period from February 10,
2000 (the date Element K acquired the Element K Corporation Predecessor Business
from Ziff-Davis) through June 30, 2000 and as of June 30, 2000, the pro forma
financial data for Element K Corporation for the year ended December 31, 1999
and for the six months ended June 30, 2000 and the pro forma as adjusted
financial data as of June 30, 2000. For a description of the pro forma
adjustments, see "Unaudited Pro Forma Financial Statements."

The historical statement of operations data for the years ended December
31, 1997, 1998 and 1999 have been derived from financial statements audited by
Arthur Andersen LLP, and are based on the accounting records of Ziff-Davis,
which, in the opinion of management, include all adjustments necessary for the
presentation of the results of operations for such periods. The Element K
Corporation Predecessor Business historical statement of operations data for the
six months ended June 30, 1999 is unaudited and is based on the accounting
records of Ziff-Davis, which, in the opinion of management, include all
adjustments necessary for the presentation of the results of operations for this
period. During the periods prior to February 10, 2000, we operated as part of a
division of Ziff-Davis, and therefore the data presented is provided on a
carve-out basis, which assumes this division operated as an independent
reporting entity for the periods presented. The financial information included
here may not necessarily reflect our results of operations and financial
position in the future or what our results of operations and financial position
would have been had we been a separate, stand-alone company during the periods
and on the dates presented.

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<TABLE>
<CAPTION>
ELEMENT K
CORPORATION
ELEMENT K CORPORATION PREDECESSOR BUSINESS ELEMENT K ELEMENT K PRO FORMA
------------------------------------------ ------------------- CORPORATION FOR THE SIX
FOR THE SIX FOR THE PERIOD FROM PRO FORMA MONTHS
YEAR ENDED DECEMBER 31, MONTHS ENDED FEBRUARY 10, 2000 YEAR ENDED ENDED
-------------------------- JUNE 30, THROUGH JUNE 30, DECEMBER 31, JUNE 30,
1997 1998 1999 1999 2000 1999 2000
------ ------- ------- ------------- ------------------- ------------ -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues:
Subscription revenues......... $ 225 $ 1,737 $ 4,946 $ 1,794 $ 4,946 $ 4,946 $ 6,021
Royalty revenues.............. 2,874 2,999 4,955 2,075 4,255 11,414 8,260
Other revenues................ -- 194 640 314 918 640 1,026
------ ------- ------- -------- -------- ----------- -----------
Total net revenues.............. 3,099 4,930 10,541 4,183 10,119 17,000 15,307
Cost of net revenues............ 230 1,336 3,894 1,865 3,358 3,894 3,408
------ ------- ------- -------- -------- ----------- -----------
Gross profit.................... 2,869 3,594 6,647 2,318 6,761 13,106 11,899
Operating expenses:
Research and development...... 1,354 3,527 7,199 2,694 7,810 8,232 13,490
Selling and marketing......... 898 2,199 4,018 1,637 9,404 3,332 10,363
General and administrative.... 637 1,843 3,283 1,642 2,523 6,602 4,369
Depreciation and
amortization................ 108 107 362 101 9,531 28,673 17,594
------ ------- ------- -------- -------- ----------- -----------
Total operating expenses........ 2,997 7,676 14,862 6,074 29,268 46,838 45,816
------ ------- ------- -------- -------- ----------- -----------
Loss from operations.......... (128) (4,082) (8,215) (3,756) (22,507) (33,732) (33,917)
Equity in loss of affiliate..... -- -- -- -- (6,139) -- --
Provision for income taxes...... -- -- -- -- -- -- --
------ ------- ------- -------- -------- ----------- -----------
Net loss...................... $ (128) $(4,082) $(8,215) $ (3,756) $(28,646) $ (33,732) $ (33,917)
====== ======= ======= ======== ======== =========== ===========
Basic net loss per share(a)... -- -- -- -- -- $ (1.23) $ (1.23)
Shares used in determining net
loss per share(a)........... -- -- -- -- -- 27,485,571 27,485,571
CASH FLOW DATA:
EBITDA(b)....................... $ (20) $(3,975) $(7,853) $ (3,655) $(12,976) $ (5,059) $ (16,323)
Net cash from (used in)
operating activities.......... 579 (3,128) (4,451) (3,229) (11,597) (1,320) (13,930)
Net cash used in investing
activities.................... (541) (97) (1,796) (620) (67,833) (28,097) (117,499)
Net cash from (used in)
financing activities.......... (38) 3,225 6,247 3,849 82,972 90,302 173,538
</TABLE>

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

(a) Basic net loss per share was determined by dividing net loss by 27,485,571
Class A common stock equivalents outstanding after giving effect to the
initial public offering, including 16,667,821 membership units in Element K
held by members other than Element K Corporation.

(b) EBITDA, or earnings before interest, taxes, depreciation and amortization,
is calculated above by adding loss from operations and depreciation and
amortization. EBITDA does not represent net income or cash flows from
operations, as these terms are defined under generally accepted accounting
principles, and should not be considered as an alternative to net income as
an indicator of the company's operating performance or as a measure of
liquidity. Although EBITDA is not a measure recognized under generally
accepted accounting principles, we have included information concerning
EBITDA because we believe this information is used by some investors as one
measure of an issuer's operations and because it is used by management as a
measure of our business' performance.

8
<PAGE> 14

<TABLE>
<CAPTION>
ELEMENT K
CORPORATION
PRO FORMA
ELEMENT K AS
AS OF ADJUSTED
JUNE 30, AS OF
2000 JUNE 30,
ACTUAL 2000
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 3,542 $ 42,109
Working capital............................................. (5,191) 29,811
Goodwill and identifiable intangibles(a).................... 53,878 72,506
Total assets................................................ 76,027 137,679
Total liabilities........................................... 21,701 24,783
Minority interest........................................... -- 43,702
Members' equity............................................. 54,326 --
Stockholders' equity........................................ -- 69,194
</TABLE>

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

(a) Goodwill and identifiable intangibles are expected to be amortized over a
period of one to ten years.

9
<PAGE> 15

RISK FACTORS

You should carefully consider the risks described below and the other
information in this prospectus before deciding to invest in our Class A common
stock. We believe that the risks and uncertainties described below are the
principal material risks facing us as of the date of this prospectus. Our
business, financial condition or results of operations could be materially
adversely affected by any of the following risks. The trading price of our Class
A common stock could decline because of any of the following risks, and you
might lose all or part of your investment.

RISKS RELATING TO OUR BUSINESS AND FINANCIAL PERFORMANCE

WE RECENTLY BEGAN OPERATING AS A STAND-ALONE COMPANY, WHICH WILL REQUIRE US TO
INCUR ADDITIONAL COSTS.

Until February 2000, we operated as part of a division of Ziff-Davis and we
derived benefits from our relationship with Ziff-Davis, including the financing
of our activities and the ability to use the Ziff-Davis brand. Following our
separation from Ziff-Davis, we have been and will continue to be required to
supplement our financial, administrative and other resources to provide services
necessary to operate as an independent public company, which has caused and will
cause us to incur additional costs. As a result, the historical financial
information we have included in this prospectus may not reflect what our results
of operations, financial position and cash flows would have been had we been a
separate, stand-alone company during the periods and on the dates presented or
what our results of operations, financial position and cash flows will be in the
future.

WE EXPECT FUTURE LOSSES AND MAY NOT ACHIEVE OR MAINTAIN PROFITABILITY.

We expect that our business will incur significant losses for the
foreseeable future. We expect to continue to incur losses as we expand our
operations and fund our growth. We plan to increase our operating expenses in
order to market, sell and support our e-learning offerings, enhance our
technological capabilities and hire additional staff. We plan to invest heavily
to develop additional courses and enhance the functionality of our products,
which will also increase our operating expenses. As a result, we will need to
significantly increase our revenues to achieve profitability. If we do not
generate sufficient revenues or become profitable within a time frame expected
by investors, the market price of our Class A common stock will likely decline.
Even if we do achieve profitability, we may not be able to sustain or increase
profitability in the future.

OUR QUARTERLY OPERATING RESULTS ARE DIFFICULT TO PREDICT AND SUBJECT TO
FLUCTUATIONS THAT COULD ADVERSELY AFFECT OUR STOCK PRICE.

As a result of our limited operating history, our future revenues and
operating results are difficult to predict. Our quarterly results of operations
may fluctuate significantly in the future due to shortfalls in our recognized
revenues in accordance with generally accepted accounting principles or in the
invoice amount of our sales, known as "booked revenues." We therefore believe
that quarter-to-quarter comparisons of our operating results may not be a good
indication of our future performance, and that you should not rely on them to
predict our future performance or the future performance of our stock price. In
the event of a revenue or booked revenue shortfall or unanticipated expenses in
some future quarter or quarters, our operating results may be below the
expectations of investors. If this were to occur, the price of our Class A
common stock could decline significantly.

Due to the factors discussed in this risk factors section and elsewhere in
this prospectus and because we are engaged in a relatively new and emerging
business, revenue and operating results for the foreseeable future are difficult
to forecast. We are incurring significant development and other expenses with
the expectation that certain levels of revenue will be generated by these
activities. We will likely be unable to, or may elect not to, reduce spending
quickly enough to offset any unexpected revenue shortfall. Any significant
shortfall in revenue in relation to our expectations would have a material
adverse effect on our financial position and would likely adversely affect the
price of our Class A common stock.

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<PAGE> 16

WE ARE GROWING RAPIDLY, AND IF WE FAIL TO MANAGE OUR GROWTH EFFECTIVELY WE MAY
BE UNABLE TO SUPPORT OUR CUSTOMER BASE OR TAKE ADVANTAGE OF NEW MARKET
OPPORTUNITIES.

Our recent rapid growth has placed, and future anticipated growth is likely
to continue to place, a considerable burden on our managerial, operational,
customer service staff and office resources. We have grown from 123 employees on
December 31, 1998 to 418 employees on June 30, 2000. Several members of our
senior management team have joined us within the last several months, including
our chief executive officer. We must continue to expand our sales and marketing,
content and technology development and administrative departments as we offer
new products and services to meet the demands of a rapidly growing customer
base. We must also maintain and strengthen the breadth and depth of current
strategic relationships while rapidly developing new relationships. Our ability
to train and integrate new personnel and improve our financial and managerial
controls, reporting systems and procedures may not be sufficient to support our
growth and customer needs, and our management may not be able to effectively
identify, manage and develop existing and emerging market opportunities and
relationships.

IF WE LOSE SENIOR MANAGERS OR OTHER KEY PERSONNEL, IT COULD IMPAIR OUR ABILITY
TO COMPETE EFFECTIVELY.

We depend on the continued services and performance of our senior
management and other key personnel, including technical and sales personnel. We
do not have employment agreements with most of our senior management team. The
current premium paid to managers and professionals with Internet experience may
create incentives for them to leave our company, which could impair our ability
to compete effectively.

IF WE FAIL TO ATTRACT SKILLED EMPLOYEES, OUR ABILITY TO GROW MAY BE LIMITED.

The shortage of skilled employees may create recruitment difficulties for
our company. The growth of our business and revenue depends in large part upon
our ability to attract sufficient numbers of highly skilled employees,
particularly experienced sales, marketing, technical and product development
personnel, all of which are currently in short supply. While we have been
successful to date in hiring a sufficient number of skilled employees, our
ability to recruit may be impaired because our business is based in the
Rochester, New York area, which has a smaller labor market than the headquarters
of some of our competitors.

ANY ACQUISITIONS OF OR INVESTMENTS IN BUSINESSES, TECHNOLOGIES, PRODUCTS OR
SERVICES THAT WE UNDERTAKE COULD BE DIFFICULT TO INTEGRATE, DISRUPT OUR BUSINESS
AND DILUTE STOCKHOLDER VALUE.

We intend to acquire or make investments in complementary businesses,
technologies, services or products if appropriate opportunities arise. We could
have difficulty integrating these acquisitions or investments with our business.
These difficulties could disrupt our ongoing business, distract our management
and employees, increase our expenses and adversely affect our results of
operations. Furthermore, we may issue equity securities to pay for any future
acquisitions or investments, which may be dilutive to our existing stockholders.

IF WE FAIL TO KEEP PACE WITH RAPID TECHNOLOGICAL CHANGES IN THE E-LEARNING
MARKET, OUR REVENUE GROWTH AND RESULTS OF OPERATIONS MAY BE ADVERSELY AFFECTED.

The e-learning market is characterized by rapidly changing technologies,
short development cycles and evolving standards. If we fail to anticipate or
respond adequately to technological developments or we are unable to make
necessary investments in technology, we could lose customers or fail to gain new
customers. We must respond rapidly to developments related to Internet
technology, hardware platforms, operating systems and applicable programming
languages. We may have to expand or adapt our technological components to
respond to the following:

- an increasing number of customers;

- insufficient bandwidth;

- changes in our customers' requirements;

- the need for enhanced network response times;

- technological advances; or

- government regulation.

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<PAGE> 17

IF WE ARE UNSUCCESSFUL IN PROMOTING BRAND AWARENESS, OUR REVENUE GROWTH COULD
SUFFER.

Our efforts in developing awareness of our new brand name, Element K, may
not be successful. The development of the Element K brand name is critical to
achieving market penetration and revenue growth. The e-learning market is new
and evolving and our long-term success is dependent on our ability to be
perceived as a leading provider of online educational services. From our
inception in 1997 until April 2000, we were known as ZD Education and marketed
our services under the brand names ZDU and LearnItOnline. We have only recently
introduced our Element K corporate identity and brand name. The change in brand
name may result in brand confusion that could impair our sales growth. If we
fail to successfully promote and maintain our brand, we may not achieve
sufficient market acceptance to generate the revenue levels we need to become
profitable.

IF OUR REVENUES FROM CONTRACTS WITH LARGE ENTERPRISES DO NOT GROW SIGNIFICANTLY,
WE MAY BE UNABLE TO REACH AND MAINTAIN PROFITABILITY.

If we are to achieve revenue targets that will allow us to reach and
maintain profitability, it may be necessary to increase our revenues from
contracts with large enterprises. To date, the majority of our e-learning
revenue from direct corporate sales has come from contracts with mid-sized
organizations or work groups within large organizations. Although we have
recently formed an enterprise sales team and hired additional salespeople for
this group, we may not succeed in developing large enterprise accounts.

TERMINATION OF OUR RELATIONSHIP WITH GATEWAY, MICRON OR ZDNET WOULD ADVERSELY
AFFECT OUR FINANCIAL PERFORMANCE.

We have relationships with Gateway and Micron that provide these entities
with the right to resell or license our online offerings. Our relationship with
Gateway generated approximately 3% of our revenue and 15% of our booked revenue
in 1999, and approximately 27% of our pro forma revenue and 29% of our pro forma
booked revenue for the six months ended June 30, 2000. We expect that Gateway
will continue to account for a significant percentage of our revenue and booked
revenue. Our relationship with Micron generated approximately 8% of our revenue
and 9% of our booked revenue in 1999, and approximately 4% of our pro forma
revenue and 3% of our pro forma booked revenue for the six months ended June 30,
2000. We also have a license agreement with ZDNet under which it sells some of
our online courses. ZDNet accounted for 16% of our revenue and 11% of our booked
revenue in 1999, and approximately 8% of our pro forma revenue and 6% of our pro
forma booked revenue for the six months ended June 30, 2000. We expect that
revenues from Micron and ZDNet will account for a smaller percentage of our
revenue and booked revenue in the future because our revenue from other sources
is growing at a higher rate. Our arrangements with these strategic resellers are
not subject to long-term contractual commitments. Our revenues and operating
results would be adversely affected if any of these companies were to withdraw
all or a substantial portion of its business.

REDUCED ROYALTIES FROM PRESS COULD HARM OUR FINANCIAL PERFORMANCE.

Our revenues and profits would be adversely affected if royalty revenues
from Press were to decline. Press publishes printed IT courseware for use in
classroom training and IT journals based on our content pursuant to a ten-year
licensing agreement. Press's revenues may be adversely affected by the current
shift in the corporate learning market to Web-based training products. Royalties
from Press represented approximately 39% of our pro forma revenue and 31% of our
pro forma booked revenue for 1999 and approximately 22% of our pro forma revenue
and 15% of our pro forma booked revenue for the six months ended June 30, 2000.
We expect that royalties from Press will account for a smaller percentage of our
revenue and booked revenue in the future because our revenue from other sources
is growing at a higher rate.

SOME THIRD-PARTY CONTENT DEVELOPERS MAY STOP WORKING WITH US OR MAY COMPETE WITH
US, WHICH COULD INCREASE OUR DEVELOPMENT COSTS OR DELAY NEW COURSE
INTRODUCTIONS.

Although we have developed the majority of our course content internally, a
number of our courses are based on content that we license from outside sources.
We do not have exclusive arrangements or long-term contracts with most of our
third-party content developers, and some of these developers may stop working
with us or may compete with us. If one or more of these content developers were
to stop

12
<PAGE> 18

working with us, we would have to rely on internally generated content or
contracted content developers to develop additional courses. For relatively
standard content, such as content related to popular software applications, it
may be relatively easy to develop new or obtain replacement content from other
sources. For highly specialized course content for which few sources of
expertise are available, we may not be able to obtain reliable alternative
sources on reasonable terms in a timely manner, or at all. If we need to find
new sources for content, our course development costs could increase and we
might be forced to delay the introduction of new courses.

WE MAY NEED ADDITIONAL CAPITAL IN THE FUTURE AND IT MAY NOT BE AVAILABLE ON
ACCEPTABLE TERMS, OR AT ALL.

Based on our current business plan, we anticipate that our available cash
resources, combined with the net proceeds from the initial public offering, will
be sufficient for us to meet our anticipated working capital and capital
expenditure requirements for at least the next 24 months. Nevertheless, we may
need to raise additional capital to take advantage of unanticipated
opportunities, respond to competitive pressures or acquire complementary
products, businesses or technologies. We may also expand our content and
technology development through acquisitions or investments in other companies,
which would increase our future funding requirements. If adequate funds are not
available when required, or are not available on acceptable terms, our financial
condition, operating results and business may be materially and adversely
affected.

FUTURE AMORTIZATION OF OUR GOODWILL AND IDENTIFIABLE INTANGIBLES WILL HAVE A
NEGATIVE EFFECT ON OUR NET INCOME, AND ANY FUTURE IMPAIRMENT OF OUR LONG-LIVED
ASSETS, INCLUDING INTANGIBLES, WOULD HAVE A NEGATIVE EFFECT ON OUR NET INCOME.

As a result of the acquisition of Element K Corporation Predecessor
Business by Element K on February 10, 2000, we recorded goodwill and
identifiable intangibles of $62.4 million on our balance sheet, which we expect
to amortize from one to three years. After completion of the initial public
offering, as a result of our acquisition of the remaining membership interests
in Content that we do not own, we will record additional goodwill and
intangibles of approximately $20.8 million, which we expect to amortize over a
period of three to ten years. Amortization of goodwill and identifiable
intangibles will significantly reduce our net income during this year and
subsequent years. Since acquisitions are expected to continue to be a focus of
our growth strategy, we expect that goodwill and intangible amortization
expenses will have a negative impact on our net income in the future. Our policy
for the recognition and measurement of any impairment of long-lived assets,
including intangible assets, is to assess the current and anticipated future
undiscounted cash flows associated with any impaired assets. If any assets
become impaired in the future, the charges would have a negative impact on our
net income.

RISKS RELATING TO OUR INDUSTRY AND THE INTERNET

THE GROWTH OF OUR BUSINESS WOULD BE CONSTRAINED IF e-LEARNING IS NOT WIDELY
ACCEPTED.

If the e-learning market fails to develop or develops more slowly than we
expect, we may not achieve our revenue and earnings targets and the value of our
Class A common stock will likely decline. The e-learning market's early stage of
development makes it difficult for us to predict customer demand accurately.
Many of our potential customers have allocated only a limited portion of their
education budgets to e-learning. Even if companies implement e-learning
programs, they may still choose to design, develop or manage all or a part of
their programs internally. The failure of companies to utilize third parties
like us to provide e-learning would adversely affect the growth of our business.

THE e-LEARNING MARKET IS HIGHLY COMPETITIVE AND WE MAY NOT HAVE ADEQUATE
RESOURCES TO COMPETE EFFECTIVELY, WHICH COULD RESULT IN REDUCED REVENUES AND
OPERATING MARGINS.

The e-learning market is highly competitive and we may not have adequate
resources to compete effectively. Increased competition or our inability to
compete successfully against current and future competitors could result in
reduced revenues and operating margins. We compete primarily with third-party
suppliers of instructor-led training, internal training departments and other
suppliers of computer-based training and e-learning solutions. Our competitors
vary in size and in the scope and breadth of the courses and services they
offer. Several of our competitors have longer operating histories and
significantly

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<PAGE> 19

greater financial, technical and marketing resources than we do. A number of
these competitors also have broader and more established distribution channels
to deliver competing products or services directly to customers. In addition,
larger companies may choose to enter the e-learning market, including through
the acquisition of one or more of our competitors. We anticipate that the lack
of significant entry barriers to the e-learning market and the availability of
licensable content will allow additional competitors to enter the market. As
competition intensifies, the e-learning market may undergo significant price
competition.

The e-learning market is characterized by frequent new product and service
introductions, which could render our products obsolete. Competitive product
introductions and evolving customer requirements will require us to continue to
make substantial investments in product development. If we cannot develop and
market future products, enhancements or services in a timely and cost-effective
manner or if our products, enhancements or services do not achieve market
acceptance, our competitive position may be impaired.

ANY PROLONGED FAILURE IN OUR COMPUTER NETWORK WOULD DIRECTLY IMPACT OUR ABILITY
TO DELIVER e-LEARNING SERVICES AND WOULD LIKELY LEAD TO CUSTOMER DISSATISFACTION
AND A LOSS OF REVENUES.

We periodically experience unscheduled system downtime, during which our
Web site is inaccessible to users. If we experience extended downtime, our
subscribers and resellers could lose confidence in our services. The continuing
and uninterrupted performance of our internal computer network and Internet
servers is critical to our success. Any system failure that causes interruptions
or delays in our ability to make our courses accessible to customers could
reduce customer satisfaction and, if sustained or repeated, could reduce the
attractiveness of our courses and services and result in significant revenue
losses. We are particularly vulnerable to network failures during periods of
rapid growth when our roster of courses and participants can outpace our network
capacity. Our business requires that we support multiple participants
concurrently and deliver fast response times with minimal network delays. We are
continuing to add system capacity, but we may not be able to provide adequate
network capacity, especially during periods of rapid growth. Any failure to meet
these capacity requirements could lead to additional expenditures, lost business
opportunities and damage to our reputation and competitive position.

ANY FAILURE OF OR CAPACITY CONSTRAINTS IN THE SYSTEMS OF THIRD PARTIES ON WHICH
WE RELY COULD ADVERSELY AFFECT OUR BUSINESS.

Most of our communications and computer hardware operations are located at
the facilities of Applied Theory Communications, a secure co-location facility
operator in Syracuse, New York. Unexpected events such as natural disasters,
power losses and vandalism could damage our systems. Telecommunications
failures, computer viruses, electronic break-ins, earthquakes, fires, floods,
other natural disasters or other similar disruptive problems could adversely
affect the operation of our systems. Despite precautions we have taken,
unanticipated problems affecting our systems in the future could cause
interruptions or delays in the delivery of our e-learning services. The failure
of our telecommunications provider or Applied Theory to provide sufficient and
timely data communications capacity and network infrastructure could cause
service interruptions or slower response times, and reduce customer demand for
our services. Our insurance policies may not adequately compensate us for any
losses that may occur due to any damages or interruptions in our systems.
Accordingly, we could be required to make significant capital expenditures in
the event of damage.

IF WE ARE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS AND
OUR INTERNET DOMAIN NAMES, OUR ABILITY TO COMPETE EFFECTIVELY AND THE GROWTH OF
OUR REVENUES MAY BE IMPAIRED.

Unauthorized parties may attempt to duplicate or copy our courses or our
delivery technology or obtain and use information that we regard as proprietary.
The protection of our proprietary rights is critical to our success and our
failure to do so would affect our ability to compete and have a negative impact
on our revenues. We rely on a combination of copyright, trademarks, service
marks and trade secret laws to protect our proprietary rights. Despite our
efforts to protect these rights, we may be unsuccessful in preventing others
from developing competitive products using related technology. 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

14
<PAGE> 20

States. As a consequence, effective trademark, service mark, copyright and trade
secret protection may not be available in every country in which our courses and
services are made available.

We have recently adopted the brand name "Element K," which is the subject
of a pending federal trademark application, and we have obtained the Internet
domain names "elementk.com," "elementk.net" and "elementk.org." In addition, we
have purchased a number of trademarks, service marks and Internet domain names
from Ziff-Davis. It is possible, however, that third parties could acquire
trademarks or domain names that are substantially similar or conceptually
similar to our trademarks or domain names. This could decrease the value of our
trademarks or domain names and could hurt our business. The regulation of domain
names in the United States and in foreign countries is subject to change. The
relationship between regulations governing domain names and laws protecting
trademarks and similar proprietary rights is unclear. As a result, we may not
acquire or maintain exclusive rights to our domain names in the United States or
in other countries in which we conduct business.

THIRD PARTIES MAY CLAIM THAT WE HAVE BREACHED THEIR INTELLECTUAL PROPERTY
RIGHTS, WHICH MAY REQUIRE US TO INCUR SUBSTANTIAL COSTS AND DIRECT MANAGEMENT'S
ATTENTION AND RESOURCES TO DEFEND THESE CLAIMS.

It is possible that our trademarks or domain names may infringe upon or
otherwise violate the rights of third parties. It is also possible that the
content of some of our courses, including content provided by other parties, may
subject us to the intellectual property claims of third parties. Although we
generally seek indemnification from our content providers in order to protect us
from these types of claims, we may not be fully protected from extensive damage
claims or claims for injunctive relief. In addition, our content providers may
assert that some of the courses we develop or license may improperly use their
proprietary content. Our involvement in any litigation to resolve intellectual
property ownership matters may require us to incur substantial costs and divert
management's attention and resources. In addition, a failure to prevail in any
litigation of this kind could adversely affect our business and financial
condition.

GOVERNMENT REGULATIONS AND LEGAL UNCERTAINTIES RELATING TO THE INTERNET IN
GENERAL AND TO OUR INDUSTRY IN PARTICULAR COULD CONSTRAIN OUR GROWTH AND
INCREASE OUR EXPENSES.

New or amended laws or regulations may decrease the popularity or slow the
expansion of the Internet and constrain our revenue growth and increase our
expenses. The applicability to the Internet of existing laws is uncertain with
regard to many issues, including sales tax, intellectual property ownership and
infringement, copyright, trademark, trade secret, export of encryption
technology and personal privacy. There are an increasing number of laws and
regulations pertaining to liability for information received from or transmitted
over the Internet, online content regulation, user privacy, taxation and quality
of products and services. It is possible that more laws and regulations may be
adopted with respect to the Internet, such as laws or regulations relating to
user privacy, taxation, e-mail, pricing, Internet access, content, copyrights,
distribution and characteristics and quality of products and services. In
addition, various state statutes govern private post-secondary educational
institutions. It is uncertain whether states will attempt to apply these
statutes to regulate the offering of courses over the Internet.

LITIGATION AND NEW LAWS OR REGULATIONS REGARDING THE PROTECTION OF PERSONAL
INFORMATION ON THE INTERNET COULD REQUIRE US TO INCUR SIGNIFICANT EXPENSES.

We may be subject to liability if private information provided to us by our
users is misused. In addition, if third parties penetrate our network security
or otherwise misappropriate our users' personal information or credit card
information, we could be subject to liability. We could also be subject to
liability for claims for unauthorized purchases with credit card information,
impersonation or other similar fraud claims, or other misuses of personal
information, such as for unauthorized marketing purposes. These claims could
result in costly and time-consuming litigation. Congress is considering adopting
stricter privacy laws regarding the collection and use of personal information
obtained from individuals when accessing Web sites. If government authorities
choose to regulate or investigate our privacy practices, it may result in
additional expenses.

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<PAGE> 21

RISKS RELATING TO THE INITIAL PUBLIC OFFERING

FUTURE SALES OF SHARES AFTER THE INITIAL PUBLIC OFFERING COULD CAUSE OUR STOCK
PRICE TO DECLINE.

Future sales of shares by existing stockholders or holders of membership
units in Element K who exchange membership units for shares of our Class A
common stock could negatively affect our stock price. Upon completion of the
initial public offering we will have outstanding 10,817,500 shares of Class A
common stock, assuming no exercise of the underwriters' over-allotment option.
Of these shares, only the 5,500,000 shares of Class A common stock sold in the
initial public offering (6,325,000 shares if the underwriters exercise their
over-allotment option in full) will be freely tradeable, without restriction, in
the public market. After the lock-up agreements pertaining to the initial public
offering expire 180 days from the initial public offering date, we may be
required to register up to 21,985,571 additional shares of Class A common stock,
including Class A common stock issuable upon the exchange of membership units in
Element K or upon the conversion of the one share of Class B common stock in
Element K Corporation, under the registration rights provisions of Element K's
limited liability company agreement. While the underwriters may release these
shares from the lock-up at any time, the underwriters have advised us that this
will be done, if at all, only on a case-by-case basis. The underwriters have
advised us that they currently do not have any intention to consent to a waiver
of the lock-up agreements. These additional shares of Class A common stock will
also become freely tradeable once the holding period and other requirements
contained in Rule 144 of the Securities Act have been satisfied. For a more
detailed discussion of when shares not sold in the initial public offering will
become freely tradable, see "Shares Eligible for Future Sale" and "Related Party
Transactions -- Registration Rights."

PROVISIONS OF OUR ORGANIZATIONAL DOCUMENTS AND DELAWARE LAW MAY HAVE
ANTI-TAKEOVER EFFECTS THAT COULD PREVENT A CHANGE IN OUR CONTROL AND MAY HAVE A
NEGATIVE EFFECT ON OUR STOCK PRICE.

Provisions of our organizational documents and Delaware law could make it
more difficult for a third party to acquire us, even if doing so would be
beneficial to our stockholders. These provisions could have the effect of
depriving stockholders of an opportunity to sell their shares at a premium over
prevailing market prices by discouraging third parties from seeking to obtain
control of our company in a tender offer or similar transaction. These
provisions include:

- a classified board of directors, in which our board is divided into three
classes with three-year terms with only one class elected at each annual
meeting of stockholders, which means that a holder of a majority of the
voting power of our capital stock will need two annual meetings of
stockholders to gain control of the board;

- a provision that permits only the board of directors, the chairman or the
chief executive officer to call special meetings of stockholders; and

- a provision that requires advance notice to the company of items of
business to be brought before stockholders' meetings.

In addition, amending any of the above provisions requires the approval of
holders representing 80% of the voting power of our outstanding capital stock.

AS A NEW INVESTOR, YOU WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION IN NET
TANGIBLE BOOK VALUE PER SHARE OF YOUR CLASS A COMMON STOCK.

The initial public offering price of our Class A common stock is
substantially higher than the net tangible book value per share of the
outstanding Class A common stock and common stock equivalents immediately after
the initial public offering. Therefore, based on an assumed initial public
offering price of $11.00 per share, the midpoint of the range on the cover page
of this prospectus, if you purchase our Class A common stock in the initial
public offering, you will incur immediate and substantial dilution in pro forma
net tangible book value of $9.53 per share. For more information on the
calculation of the amount of this dilution, see "Dilution."

OUR STOCK PRICE COULD BE VOLATILE AND COULD DECLINE FOLLOWING THE INITIAL PUBLIC
OFFERING.

The stock market has experienced significant price and volume fluctuations,
and the market prices of technology companies, particularly Internet-related
companies like ours, have been highly volatile.
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<PAGE> 22

Investors may not be able to resell their shares of Class A common stock at or
above the initial public offering price. In addition, our results of operations
during future periods following the completion of the initial public offering
may fail to meet the expectations of investors. In such event, the market price
of our Class A common stock could fall. Our stock price may also fluctuate as a
result of factors that are beyond our control or unrelated to our operating
results.

RISKS RELATING TO OUR CORPORATE STRUCTURE

WASSERSTEIN PERELLA WILL EFFECTIVELY CONTROL OUR COMPANY AND MAY EXERCISE ITS
CONTROL IN A MANNER THAT IS INCONSISTENT WITH THE INTERESTS OF INVESTORS IN OUR
CLASS A COMMON STOCK.

Upon completion of the initial public offering, Wasserstein Perella will be
the sole owner of our Class B common stock, which, so long as Wasserstein
Perella and the initial co-investors own a majority of the membership units in
Element K, gives Wasserstein Perella the ability to elect a majority of our
board of directors and to control the management of Element K Corporation.
Wasserstein Perella may exercise its control over our company and Element K in a
manner that is inconsistent with the interests of holders of our Class A common
stock. As long as Wasserstein Perella owns a majority of the outstanding voting
power of our common stock, it will generally be able to determine the outcome of
all actions by Element K Corporation and Element K, including:

- the composition of our board of directors and, through it, the direction
and policies of our company, including the appointment and removal of
officers;

- mergers or other business combinations involving our company, including
mergers into holding companies controlled by Wasserstein Perella;

- acquisitions or dispositions of assets including the sale of all or
substantially all of Element K to a third party;

- future issuances of common stock or other securities;

- incurrences of debt;

- amendments, waivers and modifications to our agreements, including the
Element K LLC Agreement and agreements with Wasserstein Perella; and

- the payment of dividends on our common stock.

WE HAVE POTENTIAL CONFLICTS OF INTEREST WITH PRESS THAT MAY ADVERSELY AFFECT US.

Although we do not intend to compete with Press in the businesses of
publishing printed courseware and providing classroom training, it is possible
that in the future the interests of our business and those of Press could come
into conflict. From 1997 to February 2000, our business, along with the
businesses of Press and Content, operated as three separate businesses within
the ZD Education division of Ziff-Davis. In February 2000, entities formed by
U.S. Equity Partners, L.P. and U.S. Equity Partners (Offshore), L.P. purchased
the assets and liabilities of this division from Ziff-Davis and reorganized the
businesses as Element K, Press and Content. As a result of that reorganization,
there are potential conflicts of interest between Press and us arising out of
our past and ongoing relationship, including:

- potential competitive business opportunities;

- the allocation of management's time between Element K and Press;

- allocation of management compensation and employee benefits for senior
managers employed by both Element K and Press;

- the nature and pricing of services rendered by Element K to Press or by
Press to Element K; and

- shared marketing functions and shared services agreements between Element
K and Press.

Our management and the controlling equity holders of Element K and Press
could resolve these conflicts in a manner adverse to our company. Several
members of our senior management serve as senior managers of Press. In
particular, Bruce Barnes serves as chief executive officer, Terence Nulty serves
as president, Howard Cohen serves as executive vice president and chief
financial officer and Lance D'Amico serves as vice president, secretary and
general counsel of each of Element K Corporation, Element K and

17
<PAGE> 23

Press. In addition, seven of our directors -- Bruce Barnes, Terence Nulty, Bruce
Wasserstein, Robert Fogelson, Ellis Jones, Anup Bagaria and Thomas
Unterman -- are also directors of Press. For more information regarding our
relationship with Press, see "Related Party Transactions -- Intercompany
Agreements."

IF PRESS DEFAULTS ON ITS OBLIGATIONS UNDER ITS BANK CREDIT AGREEMENT, IT COULD
RESULT IN A CHANGE OF CONTROL IN OUR COMPANY.

While neither Element K Corporation nor Element K currently has any
outstanding debt, Press is a party to a bank credit facility. In the event of a
default, the lenders have the right to foreclose on some of the membership
interests in Element K and the Class A common stock of Element K Corporation
owned by USEP and the co-investors and then liquidate those equity interests.
This could lead to a change of control in our company. Your investment in the
shares of our Class A common stock could be adversely affected by these events.

WE ARE A HOLDING COMPANY WHOSE SOLE ASSET IS OUR EQUITY INTEREST IN ELEMENT K,
WHICH MAY BE LIMITED IN ITS ABILITY TO MAKE FUNDS AVAILABLE FOR THE PAYMENT OF
OUR OBLIGATIONS.

We are a holding company whose sole asset after the completion of the
initial public offering will be an approximate 39.4% equity interest in Element
K, or 41.1% if the underwriters exercise their over-allotment option in full,
which we will control as sole manager. We have no independent means of
generating revenues and we depend on cash from Element K to satisfy our
obligations. Except for tax distributions, Element K is not obligated to make
funds available to Element K Corporation for payment of any obligations in the
form of loans, distributions or otherwise. In the event that the members' tax
liabilities exceed the cash available to Element K, distributions will be made
first to Element K Corporation, with any remaining cash distributed to the other
members on a pro rata basis. In addition, Element K's ability to make any loans,
distributions or other payments to us will depend on Element K's earnings,
business and tax considerations and legal restrictions.

18
<PAGE> 24

SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS AND INDUSTRY DATA

This prospectus contains forward-looking statements that relate to future
events or our future financial performance. In some cases, you can identify
forward-looking statements by terminology such as "may," "will," "should,"
"expect," "plan," "anticipate," "believe," "estimate," "forecast," "predict,"
"intend," "potential" or "continue" or the negative of such terms or other
comparable terminology. In addition, these forward-looking statements include,
but are not limited to, statements regarding the following:

- our ability to compete effectively in the e-learning market;

- the level of acceptance of e-learning;

- our ability to manage the growth of our business;

- our ability to respond effectively to potential changes in the method of
delivery of e-learning;

- our ability to keep up with new applications and enhancements to existing
applications;

- our plans to develop new products; and

- our business strategies and plans.

These statements are only predictions.

Although we believe that the expectations reflected in the forward-looking
statements in this prospectus are reasonable, we cannot guarantee future
results, levels of activity, performance or achievements. The risks set forth in
the risk factors section and elsewhere in this prospectus could cause our future
operating results to differ materially from those contemplated by our
forward-looking statements. In addition, factors that we are not currently aware
of could harm our future operating results.

19
<PAGE> 25

USE OF PROCEEDS

We estimate that we will receive net proceeds from the sale of 5,500,000
shares of Class A common stock in the offering of $53.3 million, assuming an
initial public offering price of $11.00 per share, the mid-point of the range
set forth on the cover page of this prospectus, and after deducting estimated
underwriting discounts and commissions and estimated offering expenses. If the
underwriters exercise their over-allotment option in full, we estimate that our
net proceeds will be approximately $61.7 million.

In order to effectuate the post-offering structure described below under
"Corporate History and Organization," Element K Corporation will use all net
proceeds of the offering to acquire newly issued membership units in Element K
representing an approximate 20.0% equity interest in Element K, or 22.3% if the
underwriters' over-allotment option is exercised in full. The price of the
membership units we plan to acquire will equal the net proceeds per share of the
Class A common stock offered in this prospectus. After completion of the initial
public offering, Element K Corporation will have an approximate 39.4% equity
interest in Element K, or 41.1% if the underwriters exercise their overallotment
option in full.

Element K will use $25 million of the net proceeds to purchase the equity
interests in Content that it does not already own from Press, $6 million to
complete our $10 million aggregate investment in debt securities convertible
into an approximately 20% equity interest in Isopia and approximately $6 million
to complete our $7 million acquisition of ExecuTrain's content library in
conjunction with our recent strategic relationship with ExecuTrain.

The remaining proceeds will be used to:

- expand our course libraries;

- increase our sales and marketing efforts;

- build our brand awareness;

- improve our technical capabilities; and

- fund other general corporate activities, including working capital and
possible future acquisitions.

Element K intends to invest the net proceeds in appropriate investments
until the proceeds are used for the purposes described above.

DIVIDEND POLICY

Neither Element K Corporation nor Element K has declared or paid any cash
dividends or distributions since their inception or has any obligation to pay
any specific cash dividends or distributions in the future, except Element K is
required to pay distributions to its members to the extent necessary to enable
those members to pay taxes incurred with respect to taxable income of Element K.
In the event that the members' tax liabilities exceed the cash available to
Element K, distributions will be made first to Element K Corporation, with any
remaining cash distributed to the other members on a pro rata basis. We
currently intend to cause Element K to retain future earnings, if any, less any
tax distributions, to finance the expansion of our business.

20
<PAGE> 26

DILUTION

The following table illustrates, as of June 30, 2000, the dilution in pro
forma net tangible book value, which represents total tangible assets less total
liabilities, on a per share basis, after giving effect to:

- the issuance by Element K of 75,172 additional membership units to the
initial investors for $300,688 during the period from July 1, 2000
through July 13, 2000;

- the issuance in July and August 2000 by Element K Corporation of
approximately $10 million of Series A preferred stock that will
automatically convert on a one-for-one basis into 1,096,491 shares of
Element K Corporation's Class A common stock on the initial public
offering date;

- the assumed exchange of all outstanding membership units, excluding
underfunded membership units and membership units held by Element K
Corporation, in Element K for, and the conversion of the outstanding
share of Class B common stock into, 20,889,080 shares of Class A common
stock as of the initial public offering date; and

- the issuance of 5,500,000 shares of Class A common stock in the initial
public offering, assuming an initial public offering price of $11.00 per
share, before deducting underwriting discounts and commissions and
estimated offering expenses.

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $11.00
Pro forma net tangible book value per share as of June 30,
2000................................................... $0.49
Increase in pro forma net tangible book value per share
attributable to new investors purchasing shares of
Class A common stock in the initial public offering.... 0.98
-----
Pro forma as adjusted net tangible book value per share of
Class A common stock after the initial public offering.... 1.47
------
Dilution per share to new investors assuming the exchange of
outstanding membership units in Element K, excluding
underfunded membership units, into shares of Class A
common stock.............................................. $(9.53)
======
</TABLE>

The following table summarizes the relative investment in Element K by the
existing investors in Element K and by new investors in the initial public
offering, the total consideration received by Element K and the average price
per Element K membership unit or share of Element K Corporation Class A common
stock. The following table assumes no exercise of the underwriters'
over-allotment option.

<TABLE>
<CAPTION>
UNITS/SHARES PURCHASED TOTAL CONSIDERATION AVERAGE PRICE
----------------------- ---------------------- PER
NUMBER PERCENT PAID PERCENT UNIT/SHARE
----------- -------- ----------- ------- --------------
<S> <C> <C> <C> <C> <C>
Existing investors................ 21,985,571 80.0% $93,556,318 60.7% $ 4.26
New investors..................... 5,500,000 20.0 60,500,000 39.3 11.00
---------- ----- ----------- ----- ------
Total........................ 27,485,571 100.0% 154,056,318 100.0%
========== ===== =========== =====
</TABLE>

The discussion and table presented above assume no exercise of any
outstanding stock options and no conversion of any underfunded membership units.
At June 30, 2000, there were options outstanding to purchase 1,057,550 shares of
Class A common stock at $4.00 per share and 850,000 underfunded membership units
in Element K, each exchangeable for one share of Class A common stock upon
payment of $4.00 per share. Although none of the options or underfunded
membership units begin to vest until February 2001, assuming all these options
were exercised and the underfunded units were exchanged immediately following
the initial public offering, tangible book value would be increased by proceeds
of $7.6 million.

21
<PAGE> 27

CORPORATE HISTORY AND ORGANIZATION

From 1997 to February 2000, our business operated within a division of
Ziff-Davis Inc., a media company focused on computing and Internet-related
technologies. This division, known as ZD Education, operated three lines of
business:

- the e-learning business currently conducted by Element K;

- the content development and acquisition business currently conducted by
Content; and

- the IT courseware and journal publishing and IT training center
businesses currently conducted by Press.

HISTORICAL STRUCTURE

[CORPORATE STRUCTURE FLOW CHART]

Acquisition and Reorganization

In February 2000, entities formed by USEP, as well as several U.S. and
offshore co-investors, purchased the assets and liabilities of ZD Education from
Ziff-Davis and reorganized the business. The U.S. and offshore co-investors
consist of Ares Leveraged Investment Fund, L.P., Ares Leveraged Investment Fund
II, L.P., BancAmerica Capital Investors II, L.P.**, BancBoston Capital, Inc.**,
Education Employee Partners LLC*, Education (Parallel) Employee Partners LLC*,
Gulf Diversified Holdings I Corp.*, Highfields Capital I LP, Highfields Capital
II LP, HZDI, Inc., New York Life Capital Partners, L.P., TMCT Ventures, L.P.,
USEP Portfolio Employees LLC*, William Rosenthal, officers and employees of
Wasserstein Perella and several executive officers of Element K. In the
reorganization:

- Element K acquired the e-learning business of ZD Education;

- Content acquired the content development and acquisition business of ZD
Education, as well as administrative services functions such as human
resources, accounting and MIS that are today shared by Element K and
Press; and

- Press acquired the IT courseware and journal publishing and IT training
center businesses of ZD Education.

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

* Affiliated with Wasserstein Perella.

** An investor in USEP.

22
<PAGE> 28

In connection with the reorganization, Wasserstein Perella, as general
partner of the USEP entities, also purchased 100% of Element K Corporation's
Class B common stock. As a result, Wasserstein Perella controls Element K as a
result of USEP's ownership interest in Element K and, so long as USEP and the
initial co-investors own a majority of the membership units in Element K,
Wasserstein Perella will control Element K Corporation through its ownership of
Element K Corporation's Class B common stock.

Post-Acquisition Structure

The following chart shows our corporate structure, together with that of
Press, immediately after the acquisition and reorganization:

POST-ACQUISITION STRUCTURE

[CORPORATE STRUCTURE GRAPH]

At the time of acquisition, Element K contributed approximately $6.2 million in
cash for a 95% common equity interest in Content. Press contributed $20 million
in cash for a preferred equity interest and approximately $325,000 in cash for a
5% common equity interest in Content. Upon completion of the initial public
offering, Element K will purchase from Press the equity interests in Content it
does not already own for $25 million.

23
<PAGE> 29

Post-Offering Structure

Each share of Class A common stock in Element K Corporation is economically
equivalent to a membership unit in Element K, except for differences arising
from the different tax treatment of a limited liability company member compared
to a corporate stockholder. While Element K Corporation has priority rights with
respect to tax-related distributions in the event of a shortfall in available
funds at Element K, any other distributions by Element K will be made pro rata
in accordance with the percentage equity interest of its members. Accordingly,
Element K Corporation would receive approximately 39.4% of any distributions by
Element K (41.1% if the underwriters exercise their overallotment option in
full). After the initial public offering, Element K will be owned directly by
USEP and the founding U.S. co-investors through their ownership of membership
units in Element K and indirectly by the stockholders in Element K Corporation.
Immediately after the completion of the initial public offering, Element K will
acquire all of the interests in Content that it does not already own. The
following chart shows our corporate structure, together with that of Press,
after the initial public offering and related transactions and the percentage
economic interests held directly by each entity:

POST-OFFERING STRUCTURE
[CORPORATE STRUCTURE GRAPH]
[ICON] Represents the Issuer, Element K Corporation,
and entities under its control.

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

* In July and August 2000, Element K Corporation issued an aggregate of
1,096,491 shares of Series A preferred stock to some of the existing investors
in Element K. The percentage ownership for each of the entities in Element K
Corporation assumes exercise of the option.

(a) As of July 13, 2000, the offshore co-investors collectively held an
aggregate 12.5% interest in Element K through single-purpose holding
corporations. Immediately prior to the completion of the initial public
offering, these single purpose holding corporations will be merged into Element
K Corporation, with the stockholders of each single purpose holding corporation
receiving a number of shares of Element K Corporation's Class A common stock
equal to the number of membership units of Element K held by such single purpose
holding corporations.

(b) Consists of 3.0% held by U.S. Equity Partners, L.P. and 15.6% held by U.S.
Equity Partners (Offshore), L.P.

24
<PAGE> 30

In connection with the initial public offering, Element K Corporation will
issue 5,500,000 shares of Class A common stock to the public and will then
immediately contribute the net proceeds received from the initial public
offering to Element K in exchange for additional membership units representing
an approximate 20.0% equity interest in Element K, or 22.3% if the underwriters
exercise their over-allotment option in full. After the offering, Element K
Corporation will be a holding company whose sole asset will be its approximate
39.4% equity interest in Element K, or 41.1% if the underwriters exercise their
over-allotment option in full. Element K Corporation will act as the sole
manager of Element K and will thereby control Element K.

Following the initial public offering, the holders of Element K
Corporation's Class A common stock will own over 99.99% of Element K
Corporation's outstanding capital stock. Nevertheless, since Wasserstein Perella
and the founding U.S. co-investors will directly own 60.6% of the membership
units in Element K, representing all the membership units in Element K not owned
by Element K Corporation, and Wasserstein Perella will own 100% of the shares of
Element K Corporation's Class B common stock (which will represent approximately
60.6% of the voting rights in Element K Corporation), Wasserstein Perella will
control Element K Corporation and Element K. Wasserstein Perella also controls
U.S. Equity Partners, L.P., which will own approximately 3.0% of Element K
Corporation's Class A common stock, and U.S. Equity Partners (Offshore), L.P.,
which will own approximately 15.6% of Element K Corporation's Class A common
stock. As a result, following the initial public offering and for so long as
USEP and the initial co-investors own all their existing membership units in
Element K, Wasserstein Perella will control an aggregate of 68.0% of the voting
power of Element K Corporation.

For tax purposes, net profits and net losses of Element K will generally be
allocated pro rata in accordance with the percentage equity interests of its
members. Accordingly, Element K Corporation generally will be allocated
approximately 39.4% of Element K's net profits and net losses, or 41.1% if the
underwriters exercise their over-allotment option in full.

25
<PAGE> 31

CAPITALIZATION

The following table sets forth, as of June 30, 2000, cash and cash
equivalents, the actual capitalization of Element K and the pro forma as
adjusted capitalization of Element K Corporation. The pro forma as adjusted
capitalization of Element K Corporation reflects:

- the formation of Element K Corporation;

- the receipt by Element K of $300,688 in proceeds from the issuance,
between July 1, 2000 and July 13, 2000, of 75,172 additional membership
units to its initial investors;

- the receipt July and August 2000 by Element K Corporation of
approximately $10 million in proceeds from the issuance of Series A
preferred stock to several of the existing investors in Element K and the
automatic conversion of these shares into Class A common stock on a
one-for-one basis on the initial public offering date;

- the receipt of net proceeds by Element K Corporation from the sale of
5,500,000 shares of Class A common stock in the initial public offering
at an assumed initial public offering price of $11.00 per share, after
deducting the underwriting discounts and commissions and estimated
offering expenses;

- the issuance by Element K Corporation of 4,221,009 shares of Class A
common stock as a result of the merger into Element K Corporation of
single-purpose corporations formed by the offshore co-investors in
Element K, which hold an aggregate of 4,221,009 membership units in
Element K;

- the acquisition of Element K membership units by Element K Corporation
with the net proceeds of the initial public offering; and

- the acquisition by Element K of all the equity interests in Content that
it does not already own for $25 million.

<TABLE>
<CAPTION>
AS OF JUNE 30, 2000
------------------------
(IN THOUSANDS)
ELEMENT K
CORPORATION
PRO FORMA
ELEMENT K AS ADJUSTED
--------- -----------
<S> <C> <C>
Cash and cash equivalents................................... $ 3,542 $ 42,109
======= ========
Long-term debt.............................................. -- --
Minority interest........................................... -- 43,702
Members' equity............................................. 54,326 --
Stockholders' equity:
Class A common stock, $.01 par value; 150,000,000 shares
authorized; none issued and outstanding on an actual
basis; 10,817,500 issued and outstanding on a pro forma
as adjusted basis (assuming (1) the issuance of
1,096,491 shares of Class A common stock upon the
conversion of Series A preferred stock; (2) the
issuance of 5,500,000 shares of Class A common stock in
the initial public offering; and (3) the issuance of
4,221,009 shares of Class A common stock to certain
offshore co-investors immediately prior to completion
of the initial public offering)........................ -- 108
Class B common stock, $.01 par value; 1000 shares
authorized; one issued and outstanding on an actual
basis; one issued and outstanding on a pro forma as
adjusted basis......................................... * *
Preferred stock, $.01 par value; 50,000,000 shares
authorized; none issued and outstanding................ -- --
Paid-in capital........................................... -- 69,086
------- --------
Total equity........................................... 54,326 112,896
------- --------
Total capitalization................................... $54,326 $112,896
======= ========
</TABLE>

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

* Element K Corporation has one share of Class B common stock issued and
outstanding that is not captured due to rounding.

26
<PAGE> 32

UNAUDITED PRO FORMA FINANCIAL STATEMENTS

The following unaudited pro forma financial statements are based on the
historical financial statements of Element K Corporation Predecessor Business,
Element K, Element K Content LLC Predecessor Business and Content. These
historical financial statements have been adjusted to illustrate the pro forma
effects of the following transactions:

(1) the acquisition by Element K of Element K Corporation Predecessor
Business, and the entering into of new commercial agreements directly
attributable to the acquisition, which agreements provide for the
payment and receipt of commissions to and from Press for the reciprocal
sale of products and for the payment of content royalty fees to Content
by Element K and Press;

(2) the formation of Element K Corporation and the acquisition for $1,000
of 250 membership units in Element K, representing a 0.001% membership
interest in Element K;

(3) the issuance by Element K of 75,172 membership units to all the initial
investors for $300,688 during the period from July 1, 2000 through July
13, 2000;

(4) the issuance in July and August 2000 by Element K Corporation of
approximately $10 million of Series A preferred stock to be
automatically converted into 1,096,491 shares of Element K Corporation
Class A common stock on a one-for-one basis upon completion of the
initial public offering;

(5) the issuance by Element K Corporation of 5,500,000 shares of Class A
common stock in the initial public offering at an assumed initial
public offering price of $11.00 per share;

(6) the acquisition by Element K Corporation of 5,500,000 additional
membership units in Element K with the net proceeds of the initial
public offering, which after the offering will result in a 39.4%
ownership interest in Element K and consolidated accounting treatment
of Element K;

(7) the issuance by Element K Corporation of 4,221,009 shares of Class A
common stock as a result of the merger into Element K Corporation of
single-purpose corporations formed by the offshore co-investors in
Element K, which hold an aggregate of 4,221,009 membership units in
Element K; and

(8) the acquisition by Element K of all Content membership units not
already owned by Element K, resulting in a change of Element K's
accounting for Content from an equity method investment to a wholly
owned consolidated subsidiary, which will result in elimination of
intercompany transactions from the financial statements.

The unaudited pro forma statement of operations for the year ended December
31, 1999 and the six months ended June 30, 2000 give effect to all of the
above-described transactions as if they had occurred as of January 1, 1999. The
unaudited pro forma balance sheet gives effect to all of the above-described
transactions as if they had occurred on June 30, 2000. All the pro forma
adjustments are described in more detail in the accompanying notes and are based
upon available information and assumptions that management believes are
reasonable.

During the periods covered by the financial statements of Element K
Corporation Predecessor Business and Element K Content LLC Predecessor Business,
the activities of each of Element K Corporation Predecessor Business and Element
K Content LLC Predecessor Business were conducted as part of Ziff-Davis' overall
operations, and separate financial statements were not prepared. We have
prepared these financial statements on a "carve out" basis, which assumes these
businesses operated as independent reporting companies for the periods presented
herein. These financial statements were prepared from the historical accounting
records of Ziff-Davis and include various allocations for costs and expenses.
Therefore, the statement of operations for these businesses may not be
indicative of the results of operations that would have resulted if these
businesses had historically operated on a stand-alone basis. All of the
allocations and estimates reflected in the financial statements of these
businesses are based on assumptions that we believe are reasonable under the
circumstances.

The pro forma financial statements do not purport to represent what Element
K Corporation's results of operations or financial condition would actually have
been had the above-described transactions in fact occurred on such dates or to
project Element K Corporation's results of operations or financial condition for
any future date or period. The pro forma financial statements should be read in
conjunction with the consolidated financial statements and related notes
included elsewhere in this prospectus and "Management's Discussion and Analysis
of Financial Condition and Results of Operations."

27
<PAGE> 33

ELEMENT K CORPORATION

UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS)

<TABLE>
<CAPTION>
Acquisition by Element K
of Remaining Content
Membership Units
-----------------------------------
ELEMENT K ADJUSTED ELEMENT K
CORPORATION ELEMENT K CONTENT CORPORATION
PREDECESSOR ACQUISITION ELEMENT K LLC PREDECESSOR CONSOLIDATION PRO FORMA
BUSINESS ADJUSTMENTS PRO FORMA BUSINESS (e) ADJUSTMENTS AS ADJUSTED
----------- ----------- --------- ----------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net revenues:
Subscription revenues.... $ 4,946 $ -- $ 4,946 $ -- $ -- $ 4,946
Royalty revenues......... 4,955 -- 4,955 9,572 (3,113)(f) 11,414
Other revenues........... 640 -- 640 -- -- 640
------- -------- -------- ------- ------- --------
TOTAL NET REVENUES......... 10,541 -- 10,541 9,572 (3,113) 17,000
------- -------- -------- ------- ------- --------
Cost of net revenues:
Cost of subscription
revenues............... 3,752 -- 3,752 -- -- 3,752
Cost of royalty
revenues............... 117 -- 117 -- -- 117
Cost of other revenues... 25 -- 25 -- -- 25
------- -------- -------- ------- ------- --------
TOTAL COST OF NET
REVENUES................. 3,894 -- 3,894 -- -- 3,894
------- -------- -------- ------- ------- --------
Gross profit............... 6,647 -- 6,647 9,572 (3,113) 13,106
------- -------- -------- ------- ------- --------
Operating expenses:
Research and
development............ 7,199 -- 7,199 4,145 (3,113)(g) 8,231
Selling and marketing.... 4,018 (686)(a) 3,332 -- -- 3,332
General and
administrative......... 3,283 215(b) 3,498 3,104 -- 6,602
Depreciation and
amortization........... 362 21,162(c) 21,524 7,149 -- 28,673
------- -------- -------- ------- ------- --------
14,862 20,691 35,553 14,398 (3,113) 46,838
------- -------- -------- ------- ------- --------
Loss from operations..... (8,215) (20,691) (28,906) (4,826) -- (33,732)
Equity in loss of
affiliate................ -- (4,585)(d) (4,585) -- 4,585(h) --
------- -------- -------- ------- ------- --------
NET LOSS................. $(8,215) $(25,276) $(33,491) $(4,826) $ 4,585 $(33,732)
======= ======== ======== ======= ======= ========
</TABLE>

See Notes to Unaudited Pro Forma Statement of Operations for Year Ended
December 31, 1999

28
<PAGE> 34

NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS)

<TABLE>
<S> <C>
(a) SELLING AND MARKETING:
Represents a 30% agency commission received for the
reimbursement of Element K's estimated selling costs
incurred in connection with the sale of Press's
products............................................. $(1,171)
Represents a 30% agency commission paid to Press for
the reimbursement of their estimated selling costs
incurred in connection with the sale of Element K's
products............................................. 485
-------
$ (686)
=======
(b) GENERAL AND ADMINISTRATIVE EXPENSES:
Represents the elimination of management fees charged
to Element K Corporation Predecessor Business by its
former parent........................................ $ (505)
Represents the cost of replacement services previously
provided by former parent............................ 220
Represents the management fee to be charged to Element
K by Wasserstein Perella............................. 500
-------
$ 215
=======
(c) DEPRECIATION AND AMORTIZATION:
Represents amortization of goodwill and other
intangibles arising from the acquisition of Element K
Corporation Predecessor Business..................... $21,162
=======
(d) EQUITY IN LOSS OF AFFILIATE:
Recognition of 95% (representing Element K's then
ownership interest in Content) of Content's adjusted
loss of $4,826 (See Note (e) below).................. $(4,585)
=======
(e) The Adjusted Element K Content LLC Predecessor Business
operating results are derived from the historical
statement of operations of Element K Content LLC
Predecessor Business for the year ended December 31,
1999, adjusted to reflect the following:
</TABLE>

- reclassification of Content's operating expenses, which were previously
aggregated, into separate categories;

- effect of the acquisition of Element K Content LLC Predecessor Business
by Content from Ziff-Davis; and

- impact of a new license agreement between Content and Press entered into
on February 10, 2000.

29
<PAGE> 35

NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR YEAR ENDED DECEMBER 31, 1999 -- (CONTINUED)
(IN THOUSANDS)

<TABLE>
<CAPTION>
HISTORICAL
STATEMENT OF ADJUSTED
OPERATIONS OF ELEMENT K
ELEMENT K CONTENT
CONTENT LLC RECLASSIFICATION LLC
PREDECESSOR OF OPERATING ACQUISITION PREDECESSOR
BUSINESS EXPENSES ADJUSTMENTS BUSINESS
--------------- ---------------- ------------ -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues:
Subscription revenues................ $ -- $ -- $ -- $ --
Royalty revenues..................... 8,081 -- 1,491(i) 9,572
Other revenues....................... -- -- --
------ ------- ------- -------
TOTAL NET REVENUES..................... 8,081 -- 1,491 9,572
------ ------- ------- -------
Cost of net revenues:
Cost of subscription revenues........ -- -- -- --
Cost of royalty revenues............. -- -- -- --
Cost of other revenues............... -- -- -- --
------ ------- ------- -------
TOTAL COST OF NET REVENUES............. -- -- -- --
------ ------- ------- -------
Gross profit........................... 8,081 -- 1,491 9,572
------ ------- ------- -------
Operating expenses:
Research and development............. -- 4,145 -- 4,145
Selling and marketing................ -- -- -- --
General and administrative........... -- 3,104 -- 3,104
Depreciation and amortization........ -- 832 6,317(ii) 7,149
Unallocated operating expenses....... 8,081 (8,081) -- --
------ ------- ------- -------
8,081 -- 6,317 14,398
------ ------- ------- -------
Operating income..................... -- -- (4,826) (4,826)
Equity in loss of affiliate............ -- -- -- --
------ ------- ------- -------
NET LOSS............................. $ -- $ -- $(4,826) $(4,826)
====== ======= ======= =======
</TABLE>

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

<TABLE>
<S> <C> <C>
(i) ROYALTY REVENUES:
Represents the elimination of Content's historical revenues
from cost reimbursement by Press. Under the new license
agreement between Content and Press, these payments will be
paid in the form of a royalty............................... $(4,969)

Represents the royalty paid to Content from Press under the
new license agreement....................................... 6,460
-------
$ 1,491
=======
(ii) DEPRECIATION AND AMORTIZATION:
Represents the amortization expense for goodwill and other
intangibles related to the acquisition of Element K Content
LLC Predecessor Business by Content......................... $ 6,317
=======
</TABLE>

<TABLE>
<S> <C> <C>
(f) ROYALTY REVENUES:
Represents the elimination of intercompany sales by Content
to Element K included in the historical statement of
operations of Element K Content LLC Predecessor Business for
the year ended December 31, 1999............................ $(3,113)
=======
(g) RESEARCH AND DEVELOPMENT:
Represents the elimination of content development costs that
were allocated to Element K by Content...................... $(3,113)
=======
(h) EQUITY IN LOSS OF AFFILIATE:
Represents the elimination of the equity in loss of
affiliate as a result of the acquisition of the remaining
Content membership units.................................... $ 4,585
=======
</TABLE>

30
<PAGE> 36

ELEMENT K CORPORATION

UNAUDITED PRO FORMA STATEMENT OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 2000

(IN THOUSANDS)

<TABLE>
<CAPTION>
ACQUISITION BY ELEMENT K OF
REMAINING
CONTENT MEMBERSHIP UNITS
ELEMENT K -----------------------------
CORPORATION ADJUSTED
PREDECESSOR ELEMENT K ELEMENT K
BUSINESS FOR THE CONTENT
FOR THE PERIOD PERIOD LLC
1/1/00- 2/10/00- ACQUISITION ELEMENT K PREDECESSOR CONSOLIDATION
2/9/00 6/30/00 ADJUSTMENTS PRO FORMA BUSINESS(H) ADJUSTMENTS
-------------- --------- ----------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net revenues:
Subscription revenues............ $ 1,075 $ 4,946 $ -- $ 6,021 $ -- $ --
Royalty revenues................. 717 4,255 -- 4,972 5,165 (1,877)(i)
Other revenues................... 108 918 -- 1,026 -- --
------- -------- ------- -------- ------- -------
Total net revenues................. 1,900 10,119 -- 12,019 5,165 (1,877)
------- -------- ------- -------- ------- -------
Cost of net revenues:
Cost of subscription revenues.... 495 2,464 182(a) 3,141 461 (925)(j)
Cost of royalty revenues......... 40 607 63(b) 710 104 (355)(k)
Cost of other revenues........... 48 287 5(c) 340 50 (118)(l)
------- -------- ------- -------- ------- -------
Total cost of net revenues......... 583 3,358 250 4,191 615 (1,398)
------- -------- ------- -------- ------- -------
Gross profit....................... 1,317 6,761 (250) 7,828 4,550 (479)
------- -------- ------- -------- ------- -------
Operating expenses:
Research and development......... 1,322 7,809 -- 9,131 4,705 (346)(m)
Selling and marketing............ 618 9,404 341(d) 10,363 -- --
General and administrative....... 537 2,523 (41)(e) 3,019 1,483 (133)(n)
Depreciation and amortization.... 69 9,531 2,095(f) 11,695 5,899 --
------- -------- ------- -------- ------- -------
Total operating expenses......... 2,546 29,267 2,395 34,208 12,087 (479)
------- -------- ------- -------- ------- -------
Loss from operations............. (1,229) (22,506) (2,645) (26,380) (7,537) --

Equity in loss of affiliate........ -- (6,140) (1,020)(g) (7,160) -- 7,160(o)
------- -------- ------- -------- ------- -------
Net loss........................... $(1,229) $(28,646) $(3,665) $(33,540) $(7,537) $ 7,160
======= ======== ======= ======== ======= =======

ELEMENT K
CORPORATION
PRO FORMA
AS ADJUSTED
-----------
<S> <C>
Net revenues:
Subscription revenues............ $ 6,021
Royalty revenues................. 8,260
Other revenues................... 1,026
--------
Total net revenues................. 15,307
--------
Cost of net revenues:
Cost of subscription revenues.... 2,677
Cost of royalty revenues......... 459
Cost of other revenues........... 272
--------
Total cost of net revenues......... 3,408
--------
Gross profit....................... 11,899
--------
Operating expenses:
Research and development......... 13,490
Selling and marketing............ 10,363
General and administrative....... 4,369
Depreciation and amortization.... 17,594
--------
Total operating expenses......... 45,816
--------
Loss from operations............. (33,917)
Equity in loss of affiliate........ --
--------
Net loss........................... $(33,917)
========
</TABLE>

See Notes to Unaudited Pro Forma Statement of Operations

for the Six Months Ended June 30, 2000

31
<PAGE> 37

NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2000

(IN THOUSANDS)

<TABLE>
<S> <C> <C>
(a) COST OF SUBSCRIPTION REVENUES:
Represents the elimination of third party content royalty
costs, attributable to subscription revenues, which were
paid by Element K Corporation Predecessor Business........ $ (113)
Represents an additional 25% content royalty paid by Element
K Corporation to Content in connection with sale of
Element K's products...................................... 295
--------
$ 182
========
(b) COST OF ROYALTY REVENUES:
Represents the elimination of third party content royalty
costs, attributable to royalty revenues, which were paid
by Element K Corporation Predecessor Business............. $ (36)
Represents an additional 25% content royalty paid by Element
K Corporation to Content in connection with sale of
Element K's products...................................... 99
--------
$ 63
========
(c) COST OF OTHER REVENUES:
Represents the elimination of third party content royalty
costs, attributable to other revenues, which were paid by
Element K Corporation Predecessor Business................ $ (3)
Represents an additional 25% content royalty paid by Element
K Corporation to Content in connection with the sale of
Element K's products...................................... 8
--------
$ 5
========
(d) SELLING AND MARKETING:
Represents a 30% agency commission received for the
reimbursement of Element K's estimated selling costs
incurred in connection with the sale of Press's
products.................................................. $ (218)
Represents a 30% agency commission paid to Press for the
reimbursement of their estimated selling costs incurred in
connection with the sale of Element K's products.......... 28
Represents the elimination of historical selling expenses
during the period January 1, 2000 through February 9,
2000...................................................... (49)
Represents the allocation of historical selling expenses
during the period January 1, 2000 through February 9,
2000...................................................... 580
--------
$ 341
========

(e) GENERAL AND ADMINISTRATIVE EXPENSES:
Represents the elimination of management fees charged to
Element K Corporation Predecessor Business by its former
parent.................................................... $ (65)
Represents the cost of replacement services................. 24
--------
$ (41)
========
(f) DEPRECIATION AND AMORTIZATION:
Represents the elimination of goodwill amortization arising
from the acquisition of Element K Corporation Predecessor
Business for the period February 10, 2000 through June 30,
2000...................................................... $ (8,486)
Represents the amortization of goodwill arising from the
acquisition of Element K Corporation Predecessor Business
as if the acquisition had occurred on January 1, 1999
through June 30, 2000..................................... $ 10,581
--------
$ 2,095
========
</TABLE>

32
<PAGE> 38
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2000 -- (CONTINUED)

(IN THOUSANDS)

<TABLE>
<S> <C> <C>
(g) EQUITY IN LOSS OF AFFILIATE:
Represents the elimination of 95% (representing Element K's then ownership interest in Content)
of Content's loss of $(6,463) for the period February 10, 2000 through June 30, 2000........... $ 6,140
Recognition of 95% of Content's pro forma loss of $(7,537) for the period January 1, 2000 through
June 30, 2000 (See Note (h) below)............................................................. $ (7,160)
----------
$ (1,020)
==========
</TABLE>

(h) The Adjusted Element K Content LLC Predecessor Business operating results
are derived from the historical statement of operations of Element K
Content LLC Predecessor Business for the period from January 1, 2000,
through February 9, 2000 and Content for the period from February 10, 2000
through June 30, 2000, in each case adjusted to reflect the following:

- reclassification of Content's operating expenses, which were previously
aggregated, into separate categories;
- the effect of the acquisition of Element K Content LLC Predecessor
Business by Content from Ziff-Davis; and
- the impact of a new license agreement between Content and Press entered
into on February 10, 2000.

<TABLE>
<CAPTION>
ELEMENT K
CONTENT LLC ADJUSTED
PREDECESSOR ELEMENT K
BUSINESS CONTENT RECLASSIFICATION CONTENT LLC
FOR THE PERIOD FOR THE PERIOD OF OPERATING ACQUISITION PREDECESSOR
1/1/00-2/9/00 2/10/00-6/30/00 EXPENSES ADJUSTMENTS BUSINESS
-------------- --------------- ---------------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net revenues:
Subscription revenues.................. $ -- $ -- $ -- $ -- $ --
Royalty revenues....................... 1,286 3,926 -- (47)(i) 5,165
Other revenues......................... -- -- -- -- --
------ ------- ------- ------- -------
Total net revenues..................... 1,286 3,926 -- (47) 5,165
Cost of net revenues:
Cost of subscription revenues.......... -- -- 461 -- 461
Cost of royalty revenues............... -- -- 104 -- 104
Cost of other revenues................. -- -- 50 -- 50
------ ------- ------- ------- -------
Total cost of net revenues............. -- -- 615 -- 615
------ ------- ------- ------- -------
Gross profit.............................. 1,286 3,926 (615) (47) 4,550
Operating expenses:
Research and development............... -- -- 4,705 -- 4,705
Selling and marketing.................. -- -- -- -- --
General and administrative............. -- -- 1,483 -- 1,483
Depreciation and amortization.......... 170 4,702 -- 1,027(ii) 5,899
Unallocated operating expenses......... 1,116 5,687 (6,803) -- --
------ ------- ------- ------- -------
Total operating expenses............... 1,286 10,389 (615) 1,027 12,087
Loss from operations...................... -- (6,463) -- (1,074) (7,537)
Equity in loss of affiliate -- -- -- -- --
------ ------- ------- ------- -------
Net Loss.................................. $ -- $(6,463) $ -- $(1,074) $(7,537)
====== ======= ======= ======= =======
</TABLE>

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

<TABLE>
<S> <C> <C>
(i) ROYALTY REVENUES:
Represents the elimination of Content's historical revenues
from cost reimbursement by Press for the period January 1,
2000 through February 9, 2000. Under the new license
agreement between Content and Press, these payments will be
paid in the form of a royalty.............................. $ (808)
Represents the pro forma royalty paid to Content from Press
under the new license agreement............................ 761
--------
$ (47)
========
(ii) DEPRECIATION AND AMORTIZATION:
Represents the elimination of goodwill amortization arising
from the acquisition of Element K Content LLC Predecessor
Business for the period February 10, 2000 through June 30,
2000....................................................... $ (2,131)
Represents the amortization expense for goodwill related to
the acquisition of Element K Content LLC Predecessor
Business by Content as if the acquisition had occurred on
January 1, 1999............................................ $ 3,158
--------
$ 1,027
========
</TABLE>

33
<PAGE> 39
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2000 -- (CONTINUED)

(IN THOUSANDS)

<TABLE>
<S> <C> <C>
(i) ROYALTY REVENUES:
Represents the elimination of cost reimbursement for content
development and support service costs in the historical
statement of operations of Element K Content LLC
Predecessor Business for the period January 1, 2000
through February 9, 2000.................................. $ (479)
Represents the elimination of intercompany sales by Content
to Element K included in the historical statement of
operations for Content for the period February 10, 2000
through June 30, 2000..................................... (1,398)
--------
$ (1,877)
========
(j) COST OF SUBSCRIPTION REVENUES:
Represents the elimination of content expense, attributable
to subscription revenues, which was paid by Element K to
Content and included in the historical statement of
operations for Element K for the period February 10, 2000
through June 30, 2000..................................... $ (925)
========
(k) COST OF ROYALTY REVENUES:
Represents the elimination of content expense, attributable
to royalty revenues, which was paid by Element K to
Content and included in the historical statement of
operations for Element K for the period February 10, 2000
through June 30, 2000..................................... $ (355)
========
(l) COST OF OTHER REVENUES:
Represents the elimination of content royalty expense,
attributable to other revenues, which was paid by Element
K to Content and included in the historical statement of
operations for Element K for the period February 10, 2000
through June 30, 2000..................................... $ (118)
========
(m) RESEARCH AND DEVELOPMENT:
Represents the elimination of content development expense
included in the historical statement of operations for
Element K for the period January 1, 2000 through February
9, 2000................................................... $ (346)
========
(n) GENERAL AND ADMINISTRATIVE:
Represents the elimination of general and administrative
expense included in the historical statement of operations
for Element K for the period January 1, 2000 through
February 9, 2000.......................................... $ (133)
========
(o) EQUITY IN LOSS OF AFFILIATE:
Represents the elimination of the equity in loss of
affiliate as a result of the acquisition of the remaining
Content membership units.................................. $ 7,160
========
</TABLE>

34
<PAGE> 40

ELEMENT K CORPORATION

UNAUDITED PRO FORMA BALANCE SHEET

AS OF JUNE 30, 2000

(IN THOUSANDS)

<TABLE>
<CAPTION>
OFFERING AND RELATED ADJUSTMENTS
--------------------------------------------
ADDITIONAL ACQUISITION OF
EQUITY ACQUISITION OF REMAINING
CONTRIBUTIONS ELEMENT K CONTENT
ELEMENT K BY INITIAL MEMBERSHIP MEMBERSHIP
ELEMENT K CORPORATION INVESTORS OFFERING UNITS UNITS(N)
----------- ----------- ------------- -------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents... $ 3,542 $ --(a) $10,301(d) $53,265(g) $ 1(i) $(25,000)
Accounts receivable, net.... 7,787 -- -- -- -- --
Due from affiliate.......... -- -- -- -- -- --
Prepaid expenses & other
current assets............ 4,701 -- -- -- -- (483)
------- -------- ------- ------- -------- --------
TOTAL CURRENT ASSETS........ 16,030 -- 10,301 53,265 1 (25,483)

Property and equipment,
net....................... 2,754 -- -- -- -- 4,979
Goodwill and identifiable
intangibles............... 53,878 -- -- -- -- 18,628
Note receivable............. 2,000 -- -- -- -- --
Deposits and other assets... 1,326 -- -- -- -- --
Investment in affiliate..... 40 1(b) -- -- (1)(j) (40)
------- -------- ------- ------- -------- --------
TOTAL ASSETS................ $76,028 $ 1 $10,301 $53,265 $ -- $ (1,916)
======= ======== ======= ======= ======== ========
Accounts payable............ $ 1,776 $ -- $ -- $ -- $ -- $ 1,182
Due to affiliates........... 2,750 -- -- -- -- 399
Accrued expenses and other
liabilities............... 3,263 -- -- -- -- 1,501
Deferred revenue, net....... 13,432 -- -- -- -- --
------- -------- ------- ------- -------- --------
TOTAL CURRENT LIABILITIES... 21,221 -- -- -- -- 3,082

Deferred revenue, net of
current portion........... 480 -- -- -- -- --
Minority interest........... -- -- -- -- 43,702(k) --
Members' preferred equity... -- -- -- -- -- --
Members' equity (deficit)... 54,327 -- 301(e) -- (54,628)(l) --
Stockholders' equity........ -- 1(c) 10,000(f) 53,265(h) 10,926(m) (4,998)
------- -------- ------- ------- -------- --------
TOTAL LIABILITIES AND
EQUITY.................... $76,028 $ 1 $10,301 $53,265 $ -- $ (1,916)
======= ======== ======= ======= ======== ========

ELEMENT K
CORPORATION
PRO FORMA
AS ADJUSTED
-----------
<S> <C>
Cash and cash equivalents... $ 42,109
Accounts receivable, net.... 7,787
Due from affiliate.......... --
Prepaid expenses & other
current assets............ 4,218
--------
TOTAL CURRENT ASSETS........ 54,114
Property and equipment,
net....................... 7,733
Goodwill and identifiable
intangibles............... 72,506
Note receivable............. 2,000
Deposits and other assets... 1,326
Investment in affiliate..... --
--------
TOTAL ASSETS................ $137,679
========
Accounts payable............ $ 2,958
Due to affiliates........... 3,149
Accrued expenses and other
liabilities............... 4,764
Deferred revenue, net....... 13,432
--------
TOTAL CURRENT LIABILITIES... 24,303
Deferred revenue, net of
current portion........... 480
Minority interest........... 43,702
Members' preferred equity... --
Members' equity (deficit)... --
Stockholders' equity........ 69,194
--------
TOTAL LIABILITIES AND
EQUITY.................... $137,679
========
</TABLE>

See Notes to Unaudited Pro Forma Balance Sheet

As of June 30, 2000

35
<PAGE> 41

NOTES TO UNAUDITED PRO FORMA BALANCE SHEET

AS OF JUNE 30, 2000

(IN THOUSANDS)

<TABLE>
<S> <C> <C>
(a) CASH AND CASH EQUIVALENTS:
Represents the initial funding of Element K Corporation .... $ 1
Represents cash paid by Element K Corporation to acquire the
initial 250 membership units in Element K, representing a
0.001% membership interest in Element K................... (1)
--------
$ --
========
(b) INVESTMENT IN AFFILIATE:
Represents the purchase by Element K Corporation of 250
membership units in Element K............................. $ 1
========
(c) STOCKHOLDERS' EQUITY:
Represents the initial share of Class B common stock sold in
the formation of Element K Corporation ................... $ 1
========
(d) CASH AND CASH EQUIVALENTS:
Represents proceeds from the sale of Element K membership
units to the initial investors in proportion to their
February 10, 2000 initial investment...................... $ 301
Represents proceeds from the private placement of Element K
Corporation Series A preferred stock with some of the
initial investors......................................... 10,000
--------
$ 10,301
========
(e) MEMBERS' EQUITY:
Represents the increase in members' equity resulting from
the sale of Element K membership units to the initial
investors in proportion to their February 10, 2000 initial
investment................................................ $ 301
========
(f) STOCKHOLDERS' EQUITY:
Represents the increase in stockholders' equity resulting
from the private sale to some of the initial investors of
Element K Corporation Series A preferred stock, which will
automatically convert into Element K Corporation Class A
common stock on the initial public offering date.......... $ 10,000
========
(g) CASH AND CASH EQUIVALENTS:
Represents the proceeds from the initial public offering,
net of underwriting discounts, commissions and offering
expenses.................................................. $ 53,265
========
(h) STOCKHOLDERS' EQUITY:
Represents the increase in stockholders' equity resulting
from the issuance of Class A common stock in the initial
public offering........................................... $ 53,265
========
(i) CASH AND CASH EQUIVALENTS:
Represents the cash contributed by Element K Corporation to
Element K reflected as a result of consolidation.......... $ 1
Represents the cash paid to acquire 5,500,000 membership
units in Element K........................................ (53,265)
Represents the cash received by Element K from Element K
Corporation............................................... 53,265
--------
Represents the total cash reclassed to Element K
Corporation............................................... $ 1
========
</TABLE>

36
<PAGE> 42
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET

AS OF JUNE 30, 2000 -- (CONTINUED)

(IN THOUSANDS)

<TABLE>
<S> <C> <C>
(j) INVESTMENT IN AFFILIATE:
Represents the reversal of Element K Corporation's
investment in Element K to reflect consolidated accounting
treatment................................................. $ (1)
========
(k) MINORITY INTEREST:
Represents reclassification of Element K's members' equity
to minority interest because, upon completion of the
initial public offering, Element K Corporation will become
the sole manager of Element K and will unilaterally
control Element K under the Element K limited liability
company agreement......................................... $ 43,702
========
(l) MEMBERS' EQUITY:
Element K Corporation has reclassified the entire amount of
Element K equity that it does not own to minority interest
based upon the guidance provided in EITF Issue No. 96-16
"Investor's Accounting for an Investee when the Investor
owns a majority of voting stock but the minority
shareholder or shareholders have certain approval or veto
rights." As provided for in the Element K limited
liability company agreement and in connection with Element
K Corporation's acquisition of 250 membership units in
Element K, Element K Corporation has rights and privileges
whereby it can unilaterally control Element K. These
rights allow Element K Corporation to:
(a) make decisions related to Element K's business strategy
and policy;
(b) direct all corporate actions;
(c) unilaterally manage the affairs of Element K without
consent from members constituting the majority;
(d) have absolute control over the executive management of
Element K.
Element K Corporation believes that these rights and
privileges permit unilateral control over Element K. The
other holders of membership units have no material
approval or veto rights. Accordingly, it has consolidated
Element K and reclassified the members' equity owned by
third parties to minority interest.
Represents reclassification of Element K's members' equity
to minority interest because, upon completion of the
initial public offering, Element K Corporation will become
the sole manager of Element K and will control 100% of the
voting interest in Element K under the Element K limited
liability company agreement............................... $(43,702)
Represents reclassification of certain of Element K's
members' equity to stockholders' equity of Element K
Corporation as a result of the merger into Element K
Corporation of single purpose corporations, which hold an
aggregate of 4,221,009 membership units in Element K...... (10,926)
--------
$(54,628)
========

(m) STOCKHOLDERS' EQUITY:
Represents reclassification of certain of Element K's
members' equity to stockholders' equity of Element K
Corporation as a result of the merger into Element K
Corporation of single purpose corporations, which hold an
aggregate of 4,201,579 membership units in Element K...... $ 10,926
========
</TABLE>

37
<PAGE> 43
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET

AS OF JUNE 30, 2000 -- (CONTINUED)

(IN THOUSANDS)

(n) The table below represents the acquisition of all Content membership units
not already owned by Element K.

<TABLE>
<CAPTION>
ACQUISITION OF
REMAINING
CONTENT
MEMBERSHIP
CONTENT UNITS TOTAL
------- -------------- -----
<S> <C> <C> <C>
Cash and cash equivalents............... $ -- $(25,000)(i) $(25,000)
Accounts receivable, net................ -- -- --
Due from affiliate...................... -- -- --
Prepaid expenses & other current
assets................................ 2,065 (2,548)(ii) (483)
------- -------- --------
Total Current Assets.................... 2,065 (27,548) (25,483)
Property and equipment, net............. 4,979 -- 4,979
Goodwill................................ 18,628 -- 18,628
Investment in affiliate................. -- (40)(iii) (40)
------- -------- --------
Total Assets.......................... $25,672 $(27,588) $ (1,916)
======= ======== ========
Accounts payable........................ $ 1,182 -- $ 1,182
Due to affiliate........................ 399 -- 399
Accrued expenses and other
liabilities........................... 1,501 -- 1,501
Deferred revenue, net................... 2,548 (2,548)(iv) --
------- -------- --------
Total Liabilities....................... 5,630 (2,548) 3,082
Minority Interest....................... -- -- --
Members' preferred equity............... 20,000 (20,000)(v) --
Members' common equity (deficit)........ 42 (42)(vi) --
Stockholders' equity.................... -- (4,998)(vii) (4,998)
------- -------- --------
Total Liabilities and Equity.......... $25,672 $(27,588) $ (1,916)
======= ======== ========
</TABLE>

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

<TABLE>
<S> <C> <C>
(i) CASH AND CASH EQUIVALENTS:
Represents cash paid by Element K for acquisition of all
remaining membership units in Content not previously owned
by Element K.............................................. $(25,000)
========
(ii) PREPAID EXPENSES & OTHER CURRENT ASSETS:
Represents the elimination of prepaid royalty fees and
support services costs due to Content from Element K...... $ (2,548)
========
(iii) INVESTMENT IN AFFILIATE:
Represents the reversal of Element K's investment in Content
as a result of the acquisition of the remaining Content
membership units.......................................... $ (40)
Represents the investment in Content for all remaining
membership units not previously owned..................... 25,000
Represents the elimination of investment in Content to
reflect consolidated accounting treatment................. (25,000)
--------
$ (40)
========
(iv) DEFERRED REVENUE:
Represents the elimination of deferred content royalty fees
and support services costs due to Content from Element
K......................................................... $ (2,548)
========
</TABLE>

38
<PAGE> 44
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET

AS OF JUNE 30, 2000 -- (CONTINUED)

(IN THOUSANDS)

<TABLE>
<S> <C> <C>
(v) MEMBERS' PREFERRED EQUITY:
Represents the elimination of members' preferred equity as a
result of the acquisition by Element K of the remaining
Content membership units.................................. $(20,000)
========
(vi) MEMBERS' COMMON EQUITY:
Represents the elimination of members' common equity as a
result of the acquisition by Element K of the remaining
Content membership units.................................. $ (42)
========
(vii) STOCKHOLDERS' EQUITY:
Represents the reduction of stockholders' equity for excess
of purchase price paid by Element K for remaining interest
in Content over historical cost basis..................... $ (4,998)
========
</TABLE>

39
<PAGE> 45

SELECTED HISTORICAL FINANCIAL DATA

The table below sets forth the selected historical financial data for
Element K Corporation Predecessor Business and Element K as of the dates and for
the periods indicated. The Element K Corporation Predecessor Business historical
statement of operations data for the years ended December 31, 1997, 1998 and
1999 and the historical balance sheet data as of December 31, 1997, 1998 and
1999 have been derived from financial statements audited by Arthur Andersen LLP,
and are based on the accounting records of Ziff-Davis, which, in the opinion of
management, include all adjustments necessary for the presentation of the
financial position at such dates and the results of operations for such periods.
The Element K Corporation Predecessor Business historical statement of
operations data for the six months ended June 30, 1999 and the historical
balance sheet data as of June 30, 1999 are unaudited and are based on the
accounting records of Ziff-Davis, which, in the opinion of management, include
all adjustments necessary for the presentation of the financial position at this
date and the results of operations for this period. During the periods presented
for the Element K Corporation Predecessor Business, we operated as part of a
separate division of Ziff-Davis, and therefore the data presented is provided on
a carve-out basis, which assumes this division operated as an independent
reporting entity for the periods presented.

The Element K historical statement of operations data for the period from
February 10, 2000 through June 30, 2000 and the historical balance sheet data as
of June 30, 2000 are unaudited and, in the opinion of management, include all
adjustments necessary for the presentation of the results of operations for such
period and the financial position at such date. The financial information
included here may not necessarily reflect our results of operations and
financial position in the future or what our results of operations and financial
position would have been had we been a separate, stand-alone company during the
periods and on the dates presented. You should read the following data in
conjunction with the financial statements, the pro forma financial statements
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this prospectus.

40
<PAGE> 46

<TABLE>
<CAPTION>
ELEMENT K CORPORATION PREDECESSOR BUSINESS ELEMENT K
------------------------------------------- ----------------------
FOR THE SIX FOR THE PERIOD FROM
YEAR ENDED DECEMBER 31, MONTHS ENDED FEBRUARY 10, 2000
--------------------------- JUNE 30, 1999 THROUGH JUNE 30, 2000
1997 1998 1999 (UNAUDITED) (UNAUDITED)
------- ------- ------- ------------- ----------------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues:
Subscription revenues................... $ 225 $ 1,737 $ 4,946 $ 1,794 $ 4,946
Royalty revenues........................ 2,874 2,999 4,955 2,075 4,255
Other revenues.......................... -- 194 640 314 918
------- ------- ------- ------- --------
Total net revenues........................ 3,099 4,930 10,541 4,183 10,119
Cost of net revenues...................... 230 1,336 3,894 1,865 3,358
------- ------- ------- ------- --------
Gross profit.............................. 2,869 3,594 6,647 2,318 6,761
------- ------- ------- ------- --------
Operating expenses:
Research and development................ 1,354 3,527 7,199 2,694 7,810
Selling and marketing................... 898 2,199 4,018 1,637 9,404
General and administrative.............. 637 1,843 3,283 1,642 2,523
Depreciation and amortization........... 108 107 362 101 9,531
------- ------- ------- ------- --------
Total operating expenses.................. 2,997 7,676 14,862 6,074 29,268
------- ------- ------- ------- --------
Loss from operations.................... (128) (4,082) (8,215) (3,756) (22,507)
Equity in loss of affiliate............. -- -- -- -- (6,140)
Provision for income taxes................ -- -- -- -- --
------- ------- ------- ------- --------
Net loss................................ $ (128) $(4,082) $(8,215) $(3,756) $(28,647)
======= ======= ======= ======= ========
Basic and diluted net loss per share.... -- -- -- -- --
Shares used in determining net loss per
share................................. -- -- -- -- --
CASH FLOW DATA:
EBITDA(a)................................. $ (20) $(3,975) $(7,853) $(3,655) $(12,976)
Net cash from (used in) operating
activities:............................. 579 (3,128) (4,451) (3,229) (11,597)
Net cash used in investing activities:.... (541) (97) (1,796) (620) (67,833)
Net cash from (used in) financing
activities:............................. (38) 3,225 6,247 3,849 82,972
BALANCE SHEET DATA (AS OF PERIOD END):
Cash and cash equivalents................. $ -- $ -- $ -- N/A $ 3,542
Working capital........................... (599) (1,446) (4,328) N/A (5,191)
Total assets.............................. 1,602 2,630 7,147 N/A 76,027
Total liabilities......................... 1,769 3,654 10,138 N/A 21,701
Division deficit.......................... (167) (1,024) (2,991) N/A --
Members' equity........................... -- -- -- N/A 54,326
</TABLE>

---------------
(a) EBITDA, or earnings before interest, taxes, depreciation and amortization,
is calculated above by adding loss from operations and depreciation and
amortization. EBITDA does not represent net income or cash flows from
operations, as these terms are defined under generally accepted accounting
principles, and should not be considered as an alternative to net income as
an indicator of the company's operating performance or as a measure of
liquidity. Although EBITDA is not a measure recognized under generally
accepted accounting principles, we have included information concerning
EBITDA because we believe this information is used by some investors as one
measure of an issuer's operations and because it is used by management as a
measure of our business' performance.

41
<PAGE> 47

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

You should read the following discussion and analysis together with
"Selected Historical Financial Data," "Unaudited Pro Forma Financial Statements"
and the financial statements included elsewhere in this prospectus. This
discussion contains forward-looking statements that involve risks and
uncertainties. The statements are based on current expectations and actual
results could differ materially from those discussed here. See "Risk Factors" on
page 9 of this prospectus and "Special Note Regarding Forward-Looking Statements
and Industry Data."

OVERVIEW

Element K Corporation is a holding company that has no significant
operating assets other than its investment in Element K. Following the initial
public offering, Element K Corporation will be the sole manager of Element K.

We are a leading provider of Web-based learning, or e-learning, designed to
address the strategic objectives of businesses and government organizations by
helping them build knowledge, expand competencies and improve productivity.
Through standard Web browsers, our customers can conveniently and
cost-effectively access our course and reference libraries from anywhere and at
any time. We believe that our e-learning offerings enable our customers to
improve productivity and generate greater returns on their e-learning
investments than those that are typically achieved through traditional classroom
or technology-based training.

Since our business began operations in 1997, we operated as part of ZD
Education, a division of Ziff-Davis Inc. In February 2000, entities formed by
U.S. Equity Partners, L.P. and U.S. Equity Partners (Offshore), L.P. purchased
the assets and liabilities of ZD Education from Ziff-Davis Inc. We have
presented our financial statements on a "carve out" basis, which assumes this
business operated as an independent reporting company for the periods presented,
and have included the historical operations of the e-learning business. The
financial statements included here have been prepared from Ziff-Davis'
historical accounting records. All of the allocations and estimates in the
financial statements are based on assumptions management believes are reasonable
under the circumstances. Nevertheless, these allocations and estimates are not
necessarily indicative of the costs and expenses that would have resulted if our
business had operated as a separate entity during the periods presented.

Since our business began operations in 1997, it has experienced significant
operating and net losses. These losses primarily relate to the expansion of our
operations. We intend to continue to invest heavily in content development,
promoting our brand and technology and infrastructure enhancements. As a result,
we expect to continue to incur significant losses for the foreseeable future.
Moreover, the rate at which these losses will be incurred may increase from
current levels.

Management evaluates financial performance based on several factors,
including its primary financial measure known as "EBITDA" which is defined as
earnings before interest, taxes, depreciation and amortization. Consistent with
management's focus on cash flow generation, EBITDA measures operating
performance before charges for depreciation and noncash amortization of
intangible assets such as goodwill, which typically would be recognized in
acquisitions accounted for as purchases. As such, the following discussion of
the results of operations of the company includes, among other factors, an
analysis of changes in EBITDA. Nevertheless, EBITDA should be considered in
addition to, not as a substitute for, operating income or loss, net income and
other measures of financial performance reported in accordance with generally
accepted accounting principles.

In view of the rapidly changing nature of our business and our limited
operating history as a stand-alone company, we believe that period-to-period
comparisons of our operating results are not necessarily meaningful and should
not be relied upon as an indication of future performance. In addition, the
financial information included in this prospectus may not necessarily be
indicative of our financial position, results of operations and cash flows had
we operated as a separate stand-alone company during the periods presented.

42
<PAGE> 48

REVENUES

Subscription Revenues

We derive revenues from annual subscriptions to our e-learning offerings.
Annual subscriptions provide users with unlimited access to defined online
course libraries aimed at computer end-users, IT professionals and business
professionals. Pricing varies based upon the type and the number of course
titles licensed by a customer, the number of users within the customer's
organization and the length of the agreement. Payment for subscriptions is
generally received within 45 days following the date of invoice. Revenue derived
from online subscription bookings is deferred and recognized over the term of
the subscription, which is typically 12 months, creating a current deferred
revenue liability.

To date, a significant portion of our subscription revenues have been
derived from desktop application courses. In the past six months, we have
enhanced our course offerings targeted towards IT professionals, including
programming and Web development, networking and operating systems, as well as
multimedia courses. As a result of these efforts, we believe that the revenue
derived from our IT professional courses will increase significantly.

Royalty Revenues

We license our content to third parties that then resell our content in a
variety of modalities and to corporations that use our content within their
internal networks in conjunction with third-party learning management systems.
We also license access to our XML content database for customers who wish to
download modules for use in their own printed and other media. Pricing varies
based upon the type and the number of course titles licensed by a customer, the
frequency of use or the number of users accessing the content, the length of the
agreement and the amount of royalties remitted at the beginning of the
agreement. Royalty payments are generally received within 30 days following the
month or quarter end during which the royalties have been earned. Royalty
revenue is recognized over the life of a contract or on a usage basis, as
applicable.

To date, a significant portion of royalty revenue has been derived from our
relationship with ZDNet under which we license our Web-based courses for resale
to members of ZDNet's SmartPlanet Web site. We have a contractual relationship
with SmartPlanet that provides for minimum quarterly payments of $600,000
through December 31, 2000. Pro forma royalties under our ten-year license
agreement with Press, which sells printed IT courseware and IT journals based on
our content, accounted for approximately $6.8 million, or 39% of our pro forma
revenue and 31% of our pro forma booked revenue in 1999. On a pro forma basis
for the six months ended June 30, 2000, royalties from Press accounted for
approximately $3.3 million, or 22% of our pro forma revenue, and 15% of our pro
forma booked revenue. We expect that this percentage will continue to decline in
the future because of the higher growth rate of our revenue from other sources.

Other Revenues

Other revenues consist of CD-ROM products and online sales of printed
courseware sold in conjunction with online instructor-led, or eILT, courses.
Revenue from these sales is recognized upon shipment.

EXPENSES

Cost of Net Revenues

Cost of net revenues consists primarily of Web delivery, customer support
and royalty expenses. Web delivery and customer support expenses include
personnel costs, maintenance and facility costs required to operate our Web site
and costs to provide interactive support to participants in our courses.

Royalty expenses include amounts that were charged to our business by
Element K Content LLC Predecessor Business for content development and
production. Royalties have been expensed as the underlying revenue is booked.

43
<PAGE> 49

Research and Development

Research and development expenses consist primarily of personnel costs
related to our technology and content development efforts. We believe that
continued investment in research and development is essential to our future
success, and as a result we expect these expenses to increase substantially in
future periods.

Customer-sponsored research activities relating to the development of new
products, services or techniques or the improvement of existing products,
services or techniques have been immaterial during the past three full fiscal
years.

Selling and Marketing

Selling and marketing expenses consist primarily of advertising and other
promotional expenses, personnel costs, commissions and travel and entertainment
expenses. We expect selling and marketing expenses will continue to increase as
we continue to expand our selling and marketing efforts and increase our
promotional activities to build our brand.

General and Administrative

General and administrative expenses consist primarily of salaries, payroll
taxes, incentive compensation and related employee benefits, and costs for
general corporate functions, including information technology support, finance,
accounting and facilities. We expect general and administrative expenses to
increase substantially in the future as we expand our staff and incur additional
costs to support the expected growth of our business. We expect to incur
expenses associated with being a public company, including increased legal and
accounting fees. We will share our legal and accounting resources with Press and
will charge Press for these services on a pro-rata basis.

Following the initial public offering, we plan to invest significantly to
develop new courses to complement and expand our existing course library. We
also plan to significantly increase marketing expenses to further develop our
distribution channels and to build brand awareness. As a result of these planned
increases in expenses, we expect to incur significant losses for the foreseeable
future.
------------------------

The following discussion and analysis compares the historical results of
operations for Element K for the period February 10, 2000 through June 30, 2000
against the historical results of operations for Element K Corporation
Predecessor Business for the six months ended June 30, 1999.

As a result of the acquisition of Element K Corporation Predecessor
Business by Element K on February 10, 2000, the historical periods presented are
not comparable. In order to present a more meaningful comparison for the six
months ended June 30, 2000, we have also included a discussion of Element K
Corporation's pro forma results of operations during the same period.

Six Months Ended June 30, 1999 and Period from February 10, 2000 through June
30, 2000

NET REVENUES

Net revenues increased to $10.1 million for the period from February 10,
2000 through June 30, 2000 from $4.2 million for the six months ended June 30,
1999. For the period from February 10, 2000 through June 30, 2000, subscriptions
accounted for 49% of revenue, royalties accounted for 42% of revenue and the
aggregate of CD-ROM and online sales of printed courseware accounted for 9% of
revenue. In 1999, subscriptions accounted for 43% of revenue, royalties
accounted for 50% of revenue and CD-ROM delivered content accounted for 7% of
revenue.

Subscription Revenues. Subscription revenues increased to $4.9 million for
the period from February 10, 2000 through June 30, 2000 from $1.8 million for
the six months ended June 30, 1999. The increase was attributable to the
expansion of our online offerings, driven by the growth in the number of sales
representatives and an increase in sales productivity. On a pro forma basis for
the six months ended June 30, 2000, subscription revenues were approximately
$6.0 million.

44
<PAGE> 50

Royalty Revenues. Royalty revenues increased to $4.3 million for the
period from February 10, 2000 through June 30, 2000 from $2.1 million for the
six months ended June 30, 1999. The increase in royalty revenue was attributable
to the sale of online course content to our former affiliate, SmartPlanet, as
well as other strategic partners. On a pro forma basis for the six months ended
June 30, 2000, royalty revenues were approximately $8.3 million. Pro forma
revenue includes approximately $3.3 million received by Content from Press for
content licensing under the new commercial relationship referred to in "Cost of
Net Revenues" below.

Other Revenues. Other revenues increased to $0.9 million for the period
from February 10, 2000 through June 30, 2000 from $0.3 million for the six
months ended June 30, 1999. This increase was attributable to sales of printed
courseware to online subscribers in connection with their enrollment in our eILT
courses and revenue derived from customization services. There were no
comparable courseware or customization services revenue streams during 1999. On
a pro forma basis for the six months ended June 30, 2000, other revenue was
approximately $1.0 million.

EXPENSES

Cost of Net Revenues. Cost of net revenues increased to $3.4 million for
the period from February 10, 2000 through June 30, 2000 from $1.9 million for
the six months ended June 30, 1999. This increase is attributable to a new
commercial relationship for the use of content as a result of the acquisition of
Element K Content LLC Predecessor Business by Element K Content LLC on February
10, 2000. On February 10, 2000, Element K LLC began remitting a royalty to
Element K Content LLC for the use of its content calculated as 25% of booked
revenue. Prior to February 10, 2000, Element K Predecessor Business reimbursed
Element K Content LLC Predecessor Business for content development costs
actually incurred on its behalf. These reimbursement costs were classified as
research and development expenses. On a pro forma basis for the six months ended
June 30, 2000, cost of net revenues was approximately $3.4 million.

Research and Development. Content-related research and development
expenses decreased to $0.3 million for the period from February 10, 2000 through
June 30, 2000 from $1.1 million for the six months ended June 30, 1999. This
decrease is attributable to the new commercial relationship for the use of
content referred to in "Cost of Net Revenues" above. On a pro forma basis for
the six months ended June 30, 2000, content related research and development
expenses were $5.0 million.

Technology-related research and development expenses increased to $7.5
million for the period from February 10, 2000 through June 30, 2000 from $1.6
million for the six months ended June 30, 1999. This increase was principally
attributable to personnel and contract labor related costs to enhance our site
functionality and architecture. Full-time equivalent technology related
headcount increased from 35 as of June 30, 1999 to 77 as of June 30, 2000. On a
pro forma basis for the six months ended June 30, 2000, technology related
research and development expenses were $8.5 million.

Selling and Marketing. Selling and marketing expenses increased to $9.4
million for the period from February 10, 2000 through June 30, 2000 from $1.6
million for the six months ended June 30, 1999. This increase was attributable
to an increase in marketing expenses associated with the launch of the new
brand, Element K, as well as the expansion of our direct sales force, which
resulted in overall revenue gains noted above. Total marketing expenses for the
period from February 10, 2000 through June 30, 2000 were $6.1 million compared
to $0.2 million during the six months ended June 30, 1999. Full-time equivalent
direct sales and marketing personnel increased from 21 as of June 30, 1999 to 92
as of June 30, 2000. On a pro forma basis for the six months ended June 30,
2000, selling and marketing expenses were approximately $10.4 million.

General and Administrative. General and administrative expenses increased
to $2.5 million for the period from February 10, 2000 through June 30, 2000 from
$1.6 million for the six months ended June 30, 1999. This increase is
attributable to additional accounting, legal and administrative personnel
expenses and expenses in connection with the initial public offering. On a pro
forma basis for the six months ended June 30, 2000, general and administrative
expenses were approximately $4.4 million.

45
<PAGE> 51

Earnings Before Interest, Taxes, Depreciation and Amortization
(EBITDA). EBITDA loss increased to $13.0 million for the period from February
10, 2000 through June 30, 2000 from a loss of $3.7 million for the six months
ended June 30, 1999. On a pro forma basis for the six months ended June 30,
2000, EBITDA loss was approximately $16.3 million.

Years Ended December 31, 1998 and 1999

NET REVENUES

Net revenues increased to $10.5 million in 1999 from $4.9 million in 1998.
In 1999, subscriptions accounted for 47% of revenue, royalties accounted for 47%
of revenue and the aggregate of CD-ROM and online sales of printed courseware
accounted for 6% of revenue. In 1998, subscriptions accounted for 35% of
revenue, royalties accounted for 61% of revenue and CD-ROM delivered content
accounted for 4% of revenue.

Subscription Revenues. Subscription revenues increased to $4.9 million in
1999 from $1.7 million in 1998. The increase was attributable to expansion of
our online offerings, growth in our number of sales representatives and an
increase in sales productivity.

Royalty Revenues. Royalty revenues increased to $5.0 million in 1999 from
$3.0 million in 1998. The increase in royalty revenue was attributable to
increased demand for our online course content from our former affiliate,
SmartPlanet, as well as increased sales of our intranet deployed product.

Other Revenues. Other revenues increased to $0.6 million in 1999 from $0.2
million in 1998. Approximately $0.2 million of the revenue increase was driven
by the growth in our number of sales representatives and an increase in sales
productivity for CD-ROM based products. The remaining increase was attributable
to approximately $0.2 million of online sales of printed courseware to online
subscribers in conjunction with their enrollment in our eILT courses. We did not
earn revenue from the sale of printed courseware to online subscribers in 1998.

EXPENSES

Cost of Net Revenues. Cost of net revenues increased to $3.9 million in
1999 from $1.3 million in 1998. This increase was attributable to an increase in
personnel costs associated with the expansion of site operations of
approximately $1.7 million and to costs for the expansion of our content
libraries of approximately $1.0 million. Site operations include costs such as
instructors for eILT courses, technical and customer support personnel and Web
hosting fees. Costs associated with our content library consist of royalties
paid to third-party content providers.

Research and Development. Content-related research and development
expenses increased to $2.4 million in 1999 from $1.2 million in 1998. This
increase was principally attributable to personnel and contract labor related
costs to expand our online content libraries for self-study tutorials and eILT
courses. Full-time equivalent content related headcount increased from 18 as of
December 31, 1998 to 31 as of December 31, 1999.

Technology-related research and development expenses increased to $4.8
million in 1999 from $2.3 million in 1998. This increase was principally
attributable to personnel and contract labor related costs to enhance our site's
functionality and architecture. Full-time equivalent technology related
headcount increased from 26 as of December 31, 1998 to 66 as of December 31,
1999.

Selling and Marketing. Selling and marketing expenses increased to $4.0
million in 1999 from $2.2 million in 1998. This increase was principally
attributable to the expansion of our direct sales force, which resulted in
overall revenue gains noted above. Full-time equivalent direct sales headcount
increased from 15 as of December 31, 1998 to 24 as of December 31, 1999.

General and Administrative. General and administrative expenses increased
to $3.3 million in 1999 from $1.8 million in fiscal 1998. This increase was
attributable to growth in the number of full-time equivalent employee headcount
during 1999 and the resulting allocation of these costs based upon average
headcount.

46
<PAGE> 52

Years ended December 31, 1997 and 1998

NET REVENUES

Net revenues increased to $4.9 million in 1998 from $3.1 million in 1997.
In 1998, subscriptions accounted for 35% of revenue, royalties accounted for 61%
of revenue and CD-ROM based training products accounted for 4% of revenue. In
1997, subscriptions accounted for 7% of revenue and royalties accounted for 93%
of revenue. We did not earn revenue from the sale of CD-ROM based products
during 1997.

Subscription Revenues. Subscription revenues increased to $1.7 million in
1998 from $0.2 million in 1997, which was attributable to expansion of our
online offerings, growth in our number of sales representatives and an increase
in sales productivity.

Royalty Revenues. Royalty revenues increased to $3.0 million in 1998 from
$2.9 million in 1997. The increase in royalty revenue was principally
attributable to increased demand for our content from foreign licensees.

Other Revenues. Other revenues were $0.2 million in 1998, the year in
which we initiated sales of CD-ROM products through our direct sales channel.

EXPENSES

Cost of Net Revenues. Cost of net revenues increased to $1.3 million in
1998 from $0.2 million in fiscal 1997. This increase was primarily attributable
to an increase in personnel costs associated with expansion of the site
operations.

Research and Development. Content-related research and development
expenses increased to $1.2 million in 1998 from $0.6 million in 1997. This
increase was principally attributable to personnel and contract labor related
costs to expand our online content libraries for self-study tutorials and eILT
courses. Full-time equivalent content related headcount increased from 12 as of
December 31, 1997 to 18 as of December 31, 1998.

Technology-related research and development expenses increased to $2.3
million in 1998 from $0.8 million in 1997. This increase was principally
attributable to personnel and contract labor related costs to enhance our site's
functionality and architecture. Full-time equivalent technology related
headcount increased from four as of December 31, 1997 to 26 as of December 31,
1998.

Selling and Marketing. Selling and marketing expenses increased to $2.2
million in 1998 from $0.9 million in 1997. This increase was principally
attributable to the expansion of our direct sales force corresponding to the
revenue gains noted above. Full-time equivalent direct sales headcount increased
from seven as of December 31, 1997 to 15 as of December 31, 1998.

General and Administrative. General and administrative expenses increased
to $1.8 million in 1998 from $0.6 million in fiscal 1997. This increase was
attributable to growth in the number of full-time equivalent employee headcount
during 1998 and the resulting allocation of these costs based upon average
headcount.

QUARTERLY RESULTS OF OPERATIONS

The following table sets forth the unaudited quarterly results of
operations of Element K Corporation Predecessor Business for the eight most
recent quarters ended December 31, 1999, and the pro forma results of operations
for Element K Corporation for the quarters ended March 31 and June 30, 2000. You
should read the following table in conjunction with the financial statements and
pro forma financial statements included elsewhere in this prospectus. The
historical financial information includes all adjustments, consisting only of
normal recurring adjustments, that we consider necessary for a fair

47
<PAGE> 53

presentation of our operating results for the quarters presented. You should not
draw any conclusions about our future results from the quarterly results of
operations shown below.

ELEMENT K CORPORATION PREDECESSOR BUSINESS
-------------------------------------------
THREE MONTHS ENDED
-------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1998 1998 1998 1998
--------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Net revenues:
Subscription revenues....... $ 182 $ 269 $ 425 $ 861
Royalty revenues............ 703 754 745 797
Other revenues.............. 7 2 66 119
------- ------- ------- -------
Total net revenues............ 892 1,025 1,236 1,777
------- ------- ------- -------
Cost of net revenues.......... 60 235 472 569
------- ------- ------- -------
Gross profit.................. 832 790 764 1,208
------- ------- ------- -------
Operating expenses:
Research and development.... 758 771 827 1,171
Selling and marketing....... 478 491 509 721
General and
administrative............ 769 347 363 364
Depreciation and
amortization.............. 25 27 29 26
------- ------- ------- -------
2,030 1,636 1,728 2,282
------- ------- ------- -------
Loss from operations........ (1,198) (846) (964) (1,074)
------- ------- ------- -------
Provision for income taxes.... -- -- -- --
------- ------- ------- -------
Net loss.................... $(1,198) $ (846) $ (964) $(1,074)
======= ======= ======= =======
EBITDA(a)................... $(1,173) $ (819) $ (935) $(1,048)
======= ======= ======= =======

<CAPTION>
ELEMENT K
CORPORATION
PRO FORMA
ELEMENT K CORPORATION PREDECESSOR BUSINESS --------------------
------------------------------------------- THREE THREE
THREE MONTHS ENDED MONTHS MONTHS
------------------------------------------- ENDED ENDED
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30,
1999 1999 1999 1999 2000 2000
--------- -------- --------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Net revenues:
Subscription revenues....... $ 768 $ 1,026 $ 1,225 $ 1,927 $ 2,564 $ 3,457
Royalty revenues............ 836 1,239 1,448 1,432 4,049 4,211
Other revenues.............. 113 201 127 199 317 709
------- ------- ------- ------- -------- --------
Total net revenues............ 1,717 2,466 2,800 3,558 6,930 8,377
------- ------- ------- ------- -------- --------
Cost of net revenues.......... 750 1,111 1,002 1,031 1,451 1,957
------- ------- ------- ------- -------- --------
Gross profit.................. 967 1,355 1,798 2,527 5,479 6,420
------- ------- ------- ------- -------- --------
Operating expenses:
Research and development.... 1,310 1,394 1,787 2,708 5,379 8,111
Selling and marketing....... 820 813 1,113 1,272 2,436 7,927
General and
administrative............ 816 825 805 837 1,777 2,592
Depreciation and
amortization.............. 53 48 91 170 7,423 10,171
------- ------- ------- ------- -------- --------
2,999 3,080 3,796 4,987 17,015 28,801
------- ------- ------- ------- -------- --------
Loss from operations........ (2,032) (1,725) (1,998) (2,460) (11,536) (22,381)
------- ------- ------- ------- -------- --------
Provision for income taxes.... -- -- -- -- -- --
------- ------- ------- ------- -------- --------
Net loss.................... $(2,032) $(1,725) $(1,998) $(2,460) $(11,536) $(22,381)
======= ======= ======= ======= ======== ========
EBITDA(a)................... $(1,979) $(1,677) $(1,907) $(2,290) $ (4,113) $(12,210)
======= ======= ======= ======= ======== ========
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

Historically, capital investments and operating losses of our business were
financed through internally generated cash flow from the profitable businesses
of ZD Education and capital contributions from Ziff-Davis.

As of June 30, 2000, we had approximately $3.5 million in cash and cash
equivalents. From April 1, 2000 to June 30, 2000, the founding equity investors
in Element K made additional cash equity contributions aggregating $14.3
million. Of this amount, $2.0 million was used to fund our initial investment in
convertible debt securities of Isopia, $0.7 million was used for initial funding
of our development agreement with Isopia, $0.5 million was used for an initial
payment in connection with our acquisition of ExecuTrain's content library and
the remaining $11.1 million is expected to be used for general working capital
requirements.

Cash used in operating activities was approximately $11.6 million for the
period from February 10, 2000 through June 30, 2000 compared to approximately
$3.2 million for the six months ended June 30, 1999. The increase was primarily
attributable to an increase in costs to expand our course libraries, enhance our
site functionality and expand our sales and marketing efforts.

Cash used in investing activities was approximately $67.8 million for the
period from February 10, 2000 through June 30, 2000 compared to approximately
$0.6 million for the six months ended June 30, 1999. The increase was primarily
attributable to the acquisition of Element K LLC Predecessor Business and the
acquisition of equity interests in Element K Content LLC Predecessor Business by
Element K.

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Cash from financing activities was approximately $83.0 million for the
period from February 10, 2000 through June 30, 2000 compared to approximately
$3.8 million for the six months ended June 30, 1999. The increase was primarily
attributable to the initial capitalization of Element K.

Cash used in operating activities was $4.5 million for the year ended
December 31, 1999, compared to $3.1 million for the year ended December 31,
1998. The increase from 1998 to 1999 was primarily attributable to an increase
in costs to expand our course libraries and enhance our site functionality.

Cash used in investing activities was $1.8 million for the year ended
December 31, 1999 compared to $0.1 million for the year ended December 31, 1998.
The increase from 1998 to 1999 was attributable to the purchase of property and
equipment.

Cash from financing activities was $6.2 million for the year ended December
31, 1999, compared to $3.2 million for the year ended December 31, 1998. The
increase from 1998 to 1999 was due to an increase in contributions from
Ziff-Davis, to fund operating and investing activities of our business.

Our cash requirements depend on numerous factors, including:

- market acceptance of our e-learning solution;

- development of new courses;

- sales force expansion;

- marketing and brand promotions;

- functionality enhancement of our online offerings;

- investments in technology; and

- possible future acquisitions.

In July and August 2000, we issued an aggregate of 1,096,491 shares of
Series A preferred stock to some of the existing investors in Element K, and
received a total of approximately $10 million, or $9.12 per share, in these
transactions. The price per share was arrived at through arms-length
negotiations with a group of our non-employee investors who are not affiliated
with Wasserstein Perella. All shares of Series A preferred stock will convert
automatically into shares of Class A common stock on a one-for-one basis on the
initial public offering date.

We have committed an additional $6.0 million to complete our $10 million
investment in debt securities convertible into an approximately 20% equity
interest in Isopia over the next several months and have committed to complete
such investment within 30 days of our initial public offering. We have agreed to
pay Isopia additional fees of up to $2.3 million for software development
services. We have committed to make an additional payment of approximately $6
million to complete our $7 million acquisition of ExecuTrain's content within 30
days of our initial public offering.

Our principal long-term cash commitments consist of office leases and a
minimum guaranteed royalty agreement. We expect our capital expenditures will
increase significantly as we make technological improvements to our system and
technical infrastructure. Additionally, we expect to make continuing investments
in developing new courses, expanding our sales and marketing program and
aggressively building our brand.

Based on our current business plan, we anticipate that our available cash
resources, combined with the net proceeds from the initial public offering, will
be sufficient for us to meet our anticipated working capital and capital
expenditure requirements for at least the next 24 months. Nevertheless, we may
need to raise additional capital to take advantage of unanticipated
opportunities, respond to competitive pressures or acquire complementary
products, businesses or technologies. We may also expand our content and
technology development through acquisitions or investments in other companies,
which would increase our future funding requirements. Our ability to meet
current and anticipated operating requirements will depend upon our ability to
obtain adequate funds on acceptable terms and our future performance, which, in
turn, will be subject to general economic and competitive conditions and to
financial, business and other factors, many of which are beyond our control.

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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our cash and cash equivalents are held with financial institutions,
government and government agencies and corporations, thereby reducing credit
risk concentrations. We do not hold or issue derivative financial instruments.

More than 90% of our revenues recognized to date have been denominated in
U.S. dollars and are from the United States. We do not expect foreign currency
denominated transactions to account for a material portion of our revenues for
the foreseeable future.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, "Accounting for the Cost of Computer Software
Developed or Obtained for Internal Use." SOP 98-1 is effective for financial
statements for years beginning after December 15, 1998. SOP 98-1 provides
guidance on accounting for computer software developed or obtained for internal
use including the requirement to capitalize specified costs and amortization of
such costs. We do not expect the adoption of this standard to have a material
effect on our capitalization policy.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments and for hedging activities and is effective
for all quarters of years beginning after June 15, 1999. As we do not currently
engage or plan to engage in derivative or hedging activities there is no impact
on our results of operations, financial position or cash flows as a result of
the adoption of this standard.

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BUSINESS

OVERVIEW

We believe that our early entry into the e-learning market in 1997 has
enabled us to become a leader in revenues, customers and the number of courses
offered. We market and deliver approximately 550 high-quality online courses
which comprise more than 4,400 hours of training, covering a broad array of
information technology, or IT, topics, as well as a growing library of business
and professional courses. We are translating several of these courses into
foreign languages and currently have more than 125 translated versions
representing approximately 650 hours of training. We market our e-learning
offerings through multiple direct sales channels and through indirect sales
channels that include domestic and international resale and licensing
arrangements. Our current customers include American Express, BP, IBM, Intel,
Prudential, the State of Texas, Toyota and the U.S. Navy. Our corporate and
government customers generally purchase annual subscriptions that give
individual employees unlimited access to one or more of our libraries of online
courses. As of June 30, 2000, we had approximately 240,000 active subscriptions
that were sold directly by us to businesses and government organizations. Our
resale and licensing arrangements include our strategic relationships with
ExecuTrain, Gateway, Macromedia, Micron and ZDNet.

MARKET OPPORTUNITY

In order to remain competitive in today's rapidly changing global economy,
organizations need to invest in their most important asset, their employees.
Organizations recognize that employees who continually develop and refine their
skill sets are able to increase their productivity. According to TRAINING
Magazine, domestic corporations with more than 100 employees budgeted $62.5
billion for training in 1999, including $15 billion budgeted for outside
training services. Although corporate learning has historically consisted
primarily of classroom-based training programs, we believe this traditional
methodology has a number of limitations, including:

- scheduling conflicts and absences from work, which result in significant
opportunity and travel costs;

- logistical challenges in delivering up-to-date content in a timely and
consistent manner to large and geographically dispersed groups;

- difficulties in tailoring courses to address the needs and preferences of
each student;

- the significant costs of live instructors and classroom facilities; and

- the inability to track the learning process and monitor its
effectiveness.

In response to these limitations, many businesses, government organizations
and professionals are seeking more effective, cost-efficient learning solutions.
We believe that the advantages of e-learning are compelling and are causing
e-learning solutions to be increasingly adopted by employers and by businesses

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that desire to offer professional learning as a value-added service to
customers. A study published in January 2000 by International Data Corporation,
or IDC, estimated that the U.S. market for e-learning was approximately $1.1
billion in 1999 and projected that this market would grow to $11.4 billion in
2003, representing a compound annual growth rate of 79%. The largest segment of
the U.S. e-learning market is currently IT training, which the IDC study
estimated to be $870 million in 1999 and projected to grow to $5.3 billion in
2003. We believe e-learning providers that offer a turnkey integrated solution
will be uniquely positioned to take advantage of this growing market
opportunity.

THE ELEMENT K SOLUTION

Element K provides a complete e-learning solution that integrates three key
elements. First, we deliver an enhanced learning experience by creating an
environment that combines the advantages of e-learning with the expert guidance
and peer interaction of traditional training. Second, we offer extensive
libraries of high-quality content focused on IT professionals, computer
end-users and business professionals. Third, we provide a robust learning
management system that allows managers to easily deploy the service throughout
their organizations and to monitor its use and effectiveness. In addition, we
provide a completely hosted solution, which enables our customers to avoid the
expense of designing, building and maintaining infrastructure themselves. The
following chart illustrates the ways in which Element K addresses each of these
components to provide our customers with a complete e-learning solution.

OUR FULLY-HOSTED SOLUTION

[FULLY-HOSTED SOLUTION GRAPH]

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Enhanced Learning Experience

Multiple Learning Modalities. The most critical component of learning is
the individual learner, whose limited time and particular requirements represent
the greatest barriers to knowledge building. Recognizing that people learn in
different ways, we offer a choice of several learning modalities.

- Our online instructor-led courses, which we refer to as eILT courses, are
unique among e-learning providers. Our eILT courses are offered during
fixed periods and are run by instructors who post assignments on
dedicated message boards, lead online discussions according to a set
schedule and provide feedback and mentoring.

- Our self-paced tutorials incorporate a high level of student interaction
and were developed specifically for Web delivery. These courses allow
students to log on at any time and work independently, controlling the
pace of their learning.

- Our online computer professional libraries allow subscribers to learn by
accessing extensive searchable online reference materials, including a
library of more than 500 IT-related reference books, provided through our
relationship with Books24x7.com.

Anytime, Anywhere Accessibility. Because learners may access our courses
and reference materials at any time through standard Web browsers and
technologies, our solution enables users to tailor e-learning to their schedule.
Our e-learning solution is accessible seven days a week, 24 hours a day while
users are at work, at home or traveling.

Engaging and Interactive Learning Environment. We offer an engaging and
interactive learning environment with multimedia content, simulations, reference
materials and searchable databases. Our courses enable users to begin at a level
that is suitable to their needs, integrate it with on-the-job practice and focus
on relevant topics. Our campus-like environment allows students to interact with
peers and experts through message boards, e-mail and chat rooms.

Extensive Content Libraries

We currently offer approximately 550 high-quality Web-enabled courses,
which deliver more than 4,400 hours of instruction. We offer several IT
libraries that cover a broad array of topics, including office productivity
software, Web development, design and media, programming languages, networking,
Internet/intranet technologies and database design and management. Building on
our online instructional design capabilities, we have introduced approximately
75 courses in business skills training and compliance training, based on content
licensed from third parties, including Harvard Business School Publishing.

Robust Learning Management System

Our learning management system offers a wide range of features to support
our customers' objectives. We support e-learning deployment with multiple
easy-to-use enrollment and student set up options. We enable large organizations
to set up multiple training administrators. Our customers are able to track and
report activity for individual students and student groups, including skills
assessment and course completions. We also allow training administrators to
customize the site with their own corporate messages and logos.

Fully-Hosted Turnkey Solution

We fully host our integrated e-learning solution. Our customers do not need
to install or manage any software and avoid the need to make significant
investments in technology infrastructure, such as servers, data bases, technical
staff or technical support. We can continually upgrade functionality, add
courses and update our content without inconveniencing our customers and at
minimal implementation cost to us.

STRATEGY

Our objective is to build on our expertise in e-learning to take advantage
of the growing market opportunity in e-learning and to become the leading
provider of high-quality e-learning solutions for a broad range of
organizations. We intend to pursue the following five-part strategy to achieve
this objective.

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Build Diverse Revenue Streams

We plan to create diverse revenue streams from our integrated e-learning
solutions and the individual components of these solutions. We will continue to
sell subscriptions to our elementk.com Web site and develop co-branded sites for
strategic resellers such as PC manufacturers and distributors, software
companies, training centers and consulting firms. We will also continue to
license our courses and libraries to resellers that offer e-learning, as well as
to customers for use with third-party learning management systems.

Expand Sales and Distribution Channels

We are expanding our internal sales and marketing capabilities to target a
wide range of businesses and government organizations. We are investing heavily
in both our enterprise sales team to reach large organizations in the U.S. and
major international markets and our telesales force to reach smaller corporate
accounts. We intend to grow our relationships with resellers that enable us to
reach diverse markets on a cost-effective basis. We will seek to deepen our
existing strategic relationships with resellers such as ExecuTrain, Gateway,
Macromedia, Micron and ZDNet, which resell our e-learning subscriptions and
content to mass markets as a co-branded offering. We seek to develop additional
relationships with consulting firms, PC manufacturers and distributors, software
companies and training centers. We also intend to accelerate our penetration of
international markets through strategic alliances and licensing arrangements.

Continually Broaden Content Libraries

We will continue to expand our course and reference content libraries in
subject areas with a large potential market. We plan to broaden our IT library
to approximately 550 courses and to expand our business and professional
offerings to more than 125 courses by December 2000. We expect to have more than
125 translated versions of our courses by December 2000. We will undertake a
major initiative in business and professional e-learning by continuing our focus
on general business subjects, such as sales and leadership training and
workplace safety. We also intend to expand into large professional fields that
adhere to industry-wide certification standards or require continuing education,
such as finance, law, accounting and project management. We believe that these
expanded libraries will give us the opportunity to capture a greater proportion
of the learning budgets of existing and new customers.

Enhance Our Learning Management System

Our learning management system will serve as the platform and provide the
structure and services for organizations to create their own e-learning
environment. We plan to upgrade our professional development support
capabilities, including the ability to build personalized learning paths based
on improved competency-based assessments. We will provide additional tools, such
as course registration and resources management, that will allow customers to
effectively manage their hybrid offline/online learning environment. We will
continue to enhance our capability to offer customization, including allowing
organizations to customize the "look and feel" and individuals to personalize
their learning paths and course catalog. We will also continue to integrate new
features and enhancements such as synchronous (live) training, instant messaging
and online course authoring.

We have entered into a development and licensing agreement with Isopia
under which we will work jointly to develop a customized version of their
learning management software for our e-learning service. We believe that the
architecture of Isopia's learning management software will enable scalability of
our e-learning service to a base of millions of users and will facilitate
customization of our e-learning service for corporate customers and resellers.
In addition, we have committed to invest an aggregate of $10 million in Isopia
in exchange for debt securities convertible into an approximately 20% equity
interest in Isopia.

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Continually Improve User's Learning Experience

We will continue to improve our e-learning offerings by providing users
with greater functionality and a more engaging experience. Our strategy includes
introducing new learning modes such as one-to-one mentoring and real-time online
classes, developing more sophisticated search and knowledge retrieval
capabilities, and rolling out a customer relationship management system that
assists users in finding immediate answers to their questions. As we enhance our
offerings, we plan to adopt a multi-tier pricing model for each library that
offers customers varying levels of user experience, functionality and personal
service. We expect that our new premium offerings will generate higher revenues
and gross profit per subscriber than our traditional subscriptions.

PRODUCTS AND SERVICES

Courses

We currently offer approximately 550 high-quality e-learning courses, which
deliver more than 4,400 hours of training. We are in the process of translating
several of these courses into foreign languages, and currently have more than
125 translated versions representing more than 700 hours of training. The topics
covered range from office productivity software, such as Microsoft Excel and
Word, to computer professional development, such as Java programming and Linux
operating systems. Our libraries for computer professionals cover a broad array
of topics, such as Web development, programming languages, networking,
Internet/intranet technologies and database design and management. A number of
our courses have received approvals from educational institutions and
certification organizations for continuing education or professional
certification. We also offer courses that track key IT certifications from
Microsoft, Novell and CompTIA. We have an aggressive development schedule for
the remainder of 2000 that includes adding approximately 200 additional IT
courses providing more than 1,000 hours of training, and several additional IT
certifications from Cisco and Oracle. All of our courses include real-time
customer service and support.

Since December 1999, we have introduced approximately 75 courses in
business skills and compliance training. Our current business skills courses
include performance assessment, management, finance essentials and negotiation
techniques. Our business courses are based on content licensed from Harvard
Business School Publishing and Quicknowledge. Current compliance training
courses cover issues such as workplace safety and sexual harassment prevention.

Learning Modalities

eILT. Our online instructor-led, or eILT, courses are offered during fixed
time periods and are run by instructors who are subject matter experts. The
instructors post assignments on dedicated message boards, lead online
discussions according to a set schedule and provide feedback and mentoring. Our
eILT courses are generally designed around content contained in printed
courseware that we obtain from Press and resell through our Web site to eILT
students. Students in eILT courses learn from one another via threaded message
boards on which they may also post questions for the instructor. Our instructor
guidelines require instructors to respond to student queries within 24 hours.
The eILT courses are also supported by teaching assistants who facilitate
student discussions and respond to questions. Each eILT course can typically
accommodate 250 to 500 students per instructor.

Self-paced Tutorials. Self-paced tutorials allow students to log on at any
time and work independently, controlling the pace of their learning by repeating
a lesson, topic or activity as often as necessary. Our self-paced tutorials
incorporate a high level of student interaction and were developed specifically
for Web delivery. Because we incur minimal incremental costs for each additional
student, a subscriber to one of our libraries has access to all of the
self-study courses within the library.

Reference Library. Professionals frequently face specific questions that
cannot be answered efficiently by taking a course. Our service allows
subscribers to browse or search a database containing thousands of up-to-date
"how to" articles covering a broad range of specific topics. Subscribers to our
computer professional libraries also receive access to extensive searchable
online library reference materials, including more than 500 IT-related reference
books, provided through our relationship with Books24x7.com.
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Learning Management System

To support our customers e-learning deployment, we provide a comprehensive
and fully-hosted and integrated learning management system. The learning
management system provides customers with (1) a customizable fully-hosted
learning environment, (2) student management features, including set up,
assessment, learning plans, tracking and reporting, (3) course management
features, including course registrations, and (4) integrated 24 X 7 customer
support.

SALES AND MARKETING

We market our services through direct sales channels and through
relationships with domestic and international resellers. As of June 30, 2000, we
had 92 employees engaged in sales and marketing activities.

Direct Sales Channels

We have established several direct sales channels aimed at reaching various
potential customer bases in a cost-efficient manner including:

- an enterprise sales team focused on reaching large companies and
government organizations;

- a field sales force covering mid-size businesses and individual units of
large enterprises;

- a telesales force that supports the field sales force and markets to
smaller corporate accounts; and

- direct mail marketing to reach small businesses and IT professionals.

In order to increase sales to large companies, we have expanded our
enterprise sales team, which is composed of experienced salespeople located in
various markets across the U.S. The enterprise sales team concentrates on
corporate and government accounts that could generate more than $100,000 in
annual revenue. We plan to continue to expand our enterprise sales force by
hiring experienced professionals with existing relationships in large companies.
Based on Press' success in using telesales to sell e-learning solutions to small
and mid-size training centers, we have increased the size of our telesales team
in order to cover smaller corporate and government accounts. We are also
offering e-learning solutions to small businesses and IT professionals through
direct mail marketing, building on Press' success in marketing IT journals.

Our sales team fills requests from customers for printed courseware
materials, enabling our customers to purchase e-learning and printed courseware
from a single source. We take these orders on behalf of Press and receive a 30%
agency commission from Press as reimbursement of estimated sales costs.

Indirect Sales Channels

Our indirect sales channels, which include reseller and licensee
relationships, are a key component of our growth strategy because they permit us
to reach potential customers with limited incremental marketing expense. We have
established agreements with a number of companies who resell our e-learning
solutions or content to their customers through their distribution channels.
Under these agreements, we generally do not bear any of the resellers' marketing
and selling expenses. Our resellers generally are in the position to offer
e-learning to their customer base as a complement to their own offerings, which
lowers their selling expenses.

Two of our most significant reseller relationships are with personal
computer manufacturers Gateway and Micron. Recently, we entered into an
additional strategic reseller agreement with ExecuTrain, one of the world's
largest classroom training organizations. We have established and are developing
strategic relationships with software companies, such as Macromedia, to provide
co-branded e-learning services to their customers and user base. We have
established and are developing reseller arrangements with Internet portals and
e-commerce sites focused on the IT and learning markets, such as ZDNet,
Headlight.com and KaplanCollege.com. We are also developing strategic
relationships with consulting and outsourcing companies that provide or could
provide learning as a value-added service to their customers. We believe that
our ability to create co-branded or customized versions of our Web site for our
reseller partners, together with our broad libraries of courses, enhances our
attractiveness as a strategic partner.

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Our principal strategic relationships include:

- a reseller and licensee relationship with ExecuTrain, which will (1) sell
subscriptions for ExecuTrain University, a customized, co-branded
e-learning service that is developed and entirely hosted by us; (2)
license a customized e-learning service designed to supplement classroom
learning events; and (3) license our IT training content;

- a reseller and licensee relationship with Gateway, which sells
subscriptions for LearnAtGateway, a similar customized co-branded version
of our e-learning Web site and also sells CD-ROMs containing our
e-learning courses;

- a reseller relationship with Macromedia, under which we have created a
customized Macromedia University e-learning service, which Macromedia
will market to its customers and user base;

- a reseller relationship with Micron, which sells subscriptions for
MicronU, a similarly customized co-branded e-learning service; and

- a licensing agreement with ZDNet, whereby we provide its SmartPlanet
e-learning site with a license to our e-learning content.

We will also continue to build on Press' historical relationships with
training center companies and plan to enter into co-branded arrangements with
other major training center chains. Our training center customers supplement
their live instructor course offerings with our online course offerings,
allowing us to sell to corporate and individual customers that we might not
otherwise reach in a cost-effective manner.

To date, substantially all of our revenues have been generated within the
United States. Currently, we reach international markets in the United Kingdom,
the Netherlands, Italy, France and Australia primarily through licensees and in
Canada through a direct sales force of three sales people. In addition, we
recently entered into agreements to license our e-learning software and content
in Southern Africa and a number of countries in the Middle East.

Most of these reseller relationships are in the early stages of development
and many of these relationships are terminable at will or upon short notice. To
date many of these relationships have been on a nonexclusive basis.

Marketing

A key element of our strategy is to generate awareness of the Element K
brand name. We have historically marketed our products and services under the
brand names ZDU and LearnItOnline. We have relaunched these services under the
Element K brand name. We intend to build brand awareness primarily through print
advertising in business and training publications and targeted online marketing.
We will also market our e-learning services through our recently-introduced
"training.com" site, which is resold by training centers and educational
institutions, and through customized sites developed for strategic resellers,
such as ExecuTrain, Gateway, Macromedia and Micron. All of the e-learning sites
we host are co-branded as "powered by Element K."

CASE STUDIES

The case studies below describe several e-learning objectives of our
existing customers and resellers and the benefits derived from our solutions.

GATEWAY -- one of the nation's largest personal computer manufacturers.

Business Objective: Introduce e-learning as a key value added service
to Gateway's PC customers.

Element K Solution: In September 1999, we introduced a library of
self-paced e-learning tutorials which combined our
standard office productivity offerings with newly
created tutorials covering software packages that
were bundled

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with Gateway's computers. These tutorials were
offered within our environment, and subscriptions
were initially sold through Gateway's Country Store
channel. In February 2000, we introduced the
Gateway Learning Library, a CD-ROM package
containing the courses and learning environment
included in the initial e-learning solution. In
March 2000, we launched LearnAtGateway.com, a
co-branded Web site that includes a series of eILT
classes and a suite of tutorials for office
productivity topics. Both LearnAtGateway.com and
the Gateway Learning Library are distributed
through Gateway's Country Store, telesales and
small business channels.

This arrangement has allowed Gateway to introduce a
key value-added service, thereby deepening its
relationship with customers and enhancing its
brand. We believe that our relationship with
Gateway illustrates the power of using a strategic
relationship as a channel into new markets.

EXECUTRAIN -- a leading classroom-based information technology training
company, with over 250 franchise locations in 40 countries.

Business Objective: Enable classroom-based training company to deliver
branded e-learning solutions to its broadly
distributed customer base and to outsource its
content development function.

Element K Solution: In June 2000, we were selected to design a
co-branded e-learning environment for ExecuTrain
franchisees. This site, completely hosted by
Element K, will contain a customized ExecuTrain
look and feel and contain our full catalog of
self-paced tutorials and eILT courses. ExecuTrain's
world-wide sales force will sell annual e-learning
subscriptions into its corporate customer base. In
addition, we will develop a series of online
learning events to be used as companions to
selected ExecuTrain courses. These online learning
events will allow students to utilize the Internet
to prepare for, supplement or extend their in-class
learning experiences. We will also acquire and
convert to XML format ExecuTrain's existing library
of IT training content. This content will be
combined with our own content library in an
electronic database from which ExecuTrain's
franchisees will download substantially all of the
course modules used in their classrooms.

Through this arrangement, Element K will enable
ExecuTrain and its franchisees to deliver
e-learning to customers, diversifying their product
offerings without the expense and delay required to
develop an online solution internally. ExecuTrain
will also simplify its operations by outsourcing
its content development and hosting to Element K,
while franchisees will benefit from enhanced
customization and flexibility by accessing through
our XML database courseware content, which in the
past could only be ordered and shipped in printed
format.

MACROMEDIA -- a leading developer of software solutions for enterprises and
professional Web developers.

Business Objective: Increase expertise and loyalty of customer base by
featuring e-learning on a highly-trafficked
corporate Web site.

Element K Solution: In August 2000, we launched Macromedia University,
a co-branded e-learning Web site featuring three
libraries of online courses relating to Macromedia
and other software products. The Macromedia Basic
library includes introductory courses in most
Macromedia products,

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while the Macromedia Complete library contains
advanced and special topics courses on Macromedia
products. The site's Macromedia Web Professional
library also includes our reference tools and over
100 additional courses. Macromedia University is
promoted on Macromedia's highly-trafficked
corporate Web site and is completely hosted by
Element K.

By utilizing Element K's e-learning solutions,
Macromedia can offer its user base online
educational experiences that will further user
expertise, thereby increasing customer loyalty.
E-learning is also a means of attracting
sophisticated IT professionals to Macromedia's
site, enhancing its brand and creating incremental
revenue opportunities. By relying on Element K for
the development and hosting of the site, Macromedia
is able to achieve these benefits with minimal
distraction from its core business activities.

TOYOTA MOTOR SALES, U.S.A. -- the U.S. subsidiary of Toyota, a leading
worldwide automobile manufacturer.

Business Objective: Provide a consistent and centralized IT training
program to its U.S. employee base.

Element K Solution: In March 1999, Toyota chose our e-learning solution
to provide approximately half of its U.S. employees
with IT and business skills courses. Employees can
log on to our Web site at anytime and from anywhere
to complete knowledge-building courses, access
information from our online reference library or
communicate with a community of peers and subject
matter experts. Managers can register employees,
track usage and assess performance levels.
Administrative information can be uploaded and used
in conjunction with standard enterprise management
software. Because it is hosted by us, implementing
our solution required no incremental systems
investment by Toyota, requires no maintenance by
Toyota and uses no bandwidth on Toyota's intranet.
In September 1999, Toyota entered into a three-year
contract with us and expanded the program to cover
all of its U.S. employees. We also provide CD-ROM
based solutions and custom courseware and training
services to Toyota under this arrangement.

BP -- one of the world's largest petroleum and petrochemicals groups, with
over $100 billion of revenue in 1999.

Business Objective: Utilize the internet to establish an efficient,
multi-national learning platform.

Element K Solution: In late 1999, BP's e-business task force invited
Element K to launch a pilot program involving 2,500
Houston-based employees. The purpose of this
program was to demonstrate the efficiencies
achievable by implementing Element K's e-learning
solutions across a large employee base. Following
the program, BP purchased 2,500 subscriptions to
our desktop applications and computer professional
libraries. Shortly thereafter, an international
committee of BP executives approved an additional
contract to deploy Element K's e-learning solutions
across a universe of 40,000 employees in multiple
locations in the UK and the United States.

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BP has thus been able to rapidly establish a
scalable, turnkey e-learning platform, including
tutorials, eILT courses, reference, community and
learning management functionality, accessible by
substantial numbers of employees and managers
simultaneously anytime, anywhere. Element K also
provides BP with access to our electronic content
database for other internal training programs, as
well as a series of reference guides and a limited
suite of customized online tutorials. By deploying
Element K's e-learning solutions, BP is utilizing
the Internet to achieve meaningful efficiencies in
its professional learning activities.

CUSTOMERS

We currently sell our products and services directly to more than 1,600
companies, government organizations and training centers throughout North
America. The following is a list of some of our direct customers, each of which
was among our 30 largest business and government customers in terms of booked
revenue during the year ended December 31, 1999.

<TABLE>
<S> <C>
- American Express - Parke-Davis
- CompUSA - Prudential
- Duke Energy - State of Ohio
- IBM Global Services - State of Texas
- Intel - Toyota
- Kinkos - U.S. Navy
</TABLE>

We also sell our e-learning offering through resale and licensing
agreements, including strategic relationships with ExecuTrain, Gateway,
Macromedia, Micron and ZDNet, with access to mass markets. ZDNet accounted for
16% of revenue and 11% of booked revenue in 1999, and approximately 8% of pro
forma revenue and 6% of pro forma booked revenue for the six months ended June
30, 2000. Our reseller relationship with Gateway generated approximately 3% of
our revenue and 15% of our booked revenue in 1999, and approximately 27% of our
pro forma revenue and 29% of our pro forma booked revenue for the six months
ended June 30, 2000. Our reseller relationship with Micron generated
approximately 8% of revenue and 9% of booked revenue in 1999, and approximately
4% of our pro forma revenue and 3% of our pro forma booked revenue for the six
months ended June 30, 2000. In addition, royalties under our ten-year agreement
with Press would have accounted for approximately 39% of our pro forma revenue
and 31% of our pro forma booked revenue in 1999 and approximately 22% of our pro
forma revenue and 15% of our pro forma booked revenue for the six months ended
June 30, 2000. No other business relationship accounted for more than 5% of our
revenue or booked revenue in 1999 or for the six months ended June 30, 2000.

COURSE AND REFERENCE LIBRARY DEVELOPMENT

We have developed the majority of our e-learning courses based on content
created internally and by independent contractors. As of June 30, 2000, we
employed a content development staff of 83 employees, consisting of writers,
technical editors, educational design specialists and acquisition editors, as
well as 88 multimedia design specialists and five eILT curriculum development
managers. Key competencies of this group include:

- expertise in instructional design with an emphasis on consistency across
multiple learning modalities;

- subject matter expertise for key IT topics;

- content acquisition expertise, including management of an external
network of subject matter experts;

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- expertise in efficient course development; and

- multimedia design expertise.

All elements of our e-learning courses employ a graphical user interface
that emphasizes simplicity and clarity to help ensure that participants can take
our courses with minimal assistance. Our graphical user interface incorporates
features that allow users to interact easily and intuitively with our programs
and makes rich use of color, illustrations and photographs. We then incorporate
our course navigation features and our learner assessment features.

Our instructional design model draws heavily from adult learning theory and
emphasizes motivation, topic relevance, self-management, problem solving,
mastery learning, role-playing, reinforcement and feedback. Our courses are
designed to allow users to work at their own pace, learn by observing others and
assess their mastery of the selected skills through testing. We also maintain an
ongoing research, evaluation and update program to maintain the quality and
relevance of our courses and to ensure the utilization of state-of-the-art tools
to enhance our offerings.

Although we have created the majority of our content internally, we also
develop a number of courses in cooperation with outside sources that provide the
underlying content. Our principal relationships with outside content providers
include:

- arrangements with Harvard Business School Publishing and Quicknowledge
that enable us to offer self-study Web-based lessons in business skills
and compliance training, including courses in performance, assessment,
management, finance essentials and negotiation techniques, and

- an exclusive licensing agreement with Books24x7.com that allows our
subscribers to easily search and quickly retrieve in-depth information
contained in hundreds of technical reference books from leading
publishers including Macmillan Computer Publishing, McGraw-Hill, MIT
Press and Wiley Computer Publishing.

We may rely more heavily on third-party content as we expand our online
courses beyond IT.

TECHNOLOGY AND INFRASTRUCTURE

Our e-learning solution is delivered primarily on the Internet through Web
servers. We also deliver our self-paced tutorials on corporate intranets and
over local-area and wide-area networks.

Our products incorporate Web technologies from IBM, Microsoft, Oracle and
Sun. Our e-commerce engine is based on IBM's WebSphere technology running on a
Sun Solaris platform. We utilize Silknet for our customer resource management
system.

Our content objects are built using standard Web technologies, including
HTML, XML and JavaScript, as well as Shockwave and Flash technologies from
Macromedia to provide quickly accessible learning objects that include text,
audio, graphics, simulations and interactivity. Our use of standard Web
technologies and file compression allows us to deliver high quality e-learning
to all users, including to those with 28.8 Kbps modem connections and through
congested corporate networks.

Our system is designed to provide reliable service both internally and
externally to our customers. Our infrastructure includes redundant servers and
components, back-up power supplies and access to multiple Internet connections.
Most of our communications and computer hardware operations are located at the
facilities of Applied Theory Communications, a secure co-location facility
operator, in Syracuse, New York. We have our site and databases backed-up on a
regular schedule. We attempt to maintain a safe and secure data storage and
e-mail environment through standard networking, security measures and continual
anti-virus scanning that involves automatic updates for protection against new
viruses. We also maintain firewall technology to protect against security
breaches and hackers.

We operate an Oracle enterprise resource planning system that provides an
integrated financial and order fulfillment infrastructure. As a result, we have
real time access to our operating and financial trends. We believe that the
current system configuration provides us with the system capacity to execute our
business plan for the foreseeable future.

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COMPETITION

The e-learning market is evolving quickly and is subject to rapid
technological change, shifts in customer demands and evolving learning
methodologies. The market is highly fragmented, with no single competitor
accounting for dominant market share, and competition is intense. We are a
leading provider of Web-based learning. Other leading providers in the
technology-based training market segment include DigitalThink, NETg, a
subsidiary of Harcourt, Inc., and SmartForce. In addition to competing with
other suppliers of technology-based learning solutions, various content
aggregator sites and free resource providers, we also compete with third-party
suppliers of instructor-led training and with internal corporate training
departments. Some of our current and potential competitors have greater name
recognition and greater financial, technical, sales, marketing, support and
other resources than we do.

We believe opportunities exist to build market share through product
leadership, brand development, aggressive selling and marketing and, possibly,
consolidation. The principal competitive factors in our market are the ability
to provide an effective e-learning solution to meet the needs of enterprises and
individual users, quality of customer service and pricing commensurate with
value delivered.

Although our extensive online course catalog, high-quality content,
existing sales organization and significant development experience provide us
with important competitive advantages as the learning market shifts to the
Internet, there can be no assurance that we can maintain or improve our
competitive position. We anticipate that the lack of significant entry barriers
to the e-learning market will allow new competitors to enter the market,
increasing the level of competition.

INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS

We regard our copyrights, service marks, trademarks, trade secrets,
software, domain names, proprietary technology and similar intellectual property
as critical to our success. To protect our proprietary rights, we rely generally
on copyright, trademark and trade secret laws, licenses with customers,
independent contractors and other third parties and confidentiality agreements.

We have recently adopted the brand name "Element K," which is the subject
of a pending federal trademark application, and we have obtained the Internet
domain names "elementk.com," "elementk.net," "elementk.org," "lmnk.com" and
"training.com." We have a license to use our historical trademark "ZDU" and the
domain names "zdu.com" and "zduniversity.com" that extends until February 2003.
We intend to make a significant investment to build our new Element K brand and
corporate identity.

It is possible that third parties could acquire trademarks or domain names
that are substantially similar or conceptually similar to our trademarks or
domain names. This could decrease the value of our trademarks or domain names
and could hurt our business. It is also possible that our trademarks or domain
names could infringe upon or otherwise violate the rights of third parties. The
regulation of domain names in the United States and in foreign countries is
subject to change. The relationship between regulations governing domain names
and laws protecting trademarks and similar proprietary rights is unclear.

It may also be possible for third parties to copy or otherwise obtain and
use our course materials or technology without our permission or to develop
similar courseware or technology independently. Additionally, our agreements
with employees, consultants and others participating in product and service
development may be breached. We may not have adequate remedies for any breach
and our trade secrets may become known or independently developed by
competitors.

Content and Press have entered into a license agreement under which Press
pays a monthly royalty fee for an exclusive right to use the content created by
Content in developing, marketing and providing printed training materials and
live instructor-led classroom training. If the content is not subject to a third
party royalty, Content receives 25%, 15% and 10% of revenues derived from sales
of computer professional material, desktop applications material and journal
content, respectively. If licensed content is subject to a third party royalty,
Press pays Content the third party royalty due plus 5% of the revenue derived
from sales of the materials. Content may not terminate this agreement for ten
years.

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We have made investments in research and development activities, and all
course materials and technology developed by us as a result are the sole
property of Element K. Our research and development expenses totaled $1.4
million in 1997, $3.5 million in 1998 and $7.2 million in 1999.

EMPLOYEES

As of June 30, 2000, we had 418 employees. Of these employees, there were
83 in content development, 88 in multimedia development, 92 in sales and
marketing, 38 in research and development, 39 in Web delivery and customer
support and 78 in support services. We believe that our relationship with our
employees is satisfactory. None of our employees are members of organized labor
groups or are covered by collective bargaining agreements.

FACILITIES

We currently sublease from Press over 29,000 square feet of space in
Rochester, New York, which we utilize for our corporate headquarters. By the end
of 2000, Press may also sublease to us approximately 30,000 square feet of
additional space at the same Rochester facility. We also currently sublease
approximately 32,000 square feet of space in Rochester for our multimedia design
group. We also sublease a 4,000 square foot West Coast sales office in Redmond,
Washington from Press. For more information on our subleases with Press, see
"Related Party Transactions -- Subleases." We believe that our facilities are
adequate to meet our current needs.

LEGAL PROCEEDINGS

We are not a party to any material legal proceedings.

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MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND KEY MANAGEMENT PERSONNEL

The names of our directors, executive officers and other key management
personnel, their respective ages, as of June 30, 2000, and positions are as
follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Bruce Barnes......................... 38 Chief Executive Officer and Director
Terence Nulty........................ 44 President and Director
Howard Cohen......................... 32 Executive Vice President and Chief Financial Officer
Paul Krause.......................... 31 Executive Vice President, Development and Operations
Lance D'Amico........................ 31 Vice President, Secretary and General Counsel
William Byron Concevitch............. 42 Senior Vice President, Sales
Daniel Cleveland..................... 36 Senior Vice President, Strategic Relationships
Christopher Harte.................... 40 Vice President, Web Development
Paul Ameden.......................... 34 Vice President, Professional Services
Lynette Sharp........................ 37 Vice President, Corporate Telesales
Lesley Darling....................... 32 Chief Learning Officer
William Jacques...................... 39 Controller
Bruce Wasserstein.................... 51 Chairman of the Board of Directors
Anup Bagaria......................... 28 Director
Robert Fogelson...................... 31 Director
Ellis Jones.......................... 46 Director
Thomas Unterman...................... 55 Director
</TABLE>

Executive Officers

Bruce Barnes has been our Chief Executive Officer since March 2000 and a
director since February 2000. He has also been Chief Executive Officer of Press
since March 2000 and a director of Press since February 2000. From February 1997
until March 2000, he was a managing director of Wasserstein Perella and a senior
member of its merchant banking group since September 1998. He was Executive Vice
President of Ziff Brothers Investments, L.L.C., a private investment company,
from January 1995 to June 1996. Prior to that, Dr. Barnes worked at Ziff
Communications Company, the holding company for a predecessor of Ziff-Davis, as
Senior Vice President and Chief Financial Officer from September 1993 to
December 1994 and as Vice President and Special Assistant to the Chairman from
November 1992 to September 1993. He received a Ph.D. in economics from the
University of Pennsylvania.

Terence Nulty has been our President and a director since February 2000. He
has also been President and a director of Press since February 2000. He was
President of ZD Education from April 1999 to February 2000. Mr. Nulty joined ZD
Education in 1996 as General Manager of the ZD Education Training Center. In
1998, Mr. Nulty was promoted to Vice President and General Manager of the
Courseware Publishing Division. In January 1999, he assumed the role of Vice
President, Sales & Marketing for ZD Education. Prior to joining ZD Education,
Mr. Nulty spent 15 years with Eastman Kodak in a variety of sales, marketing and
staff positions, both domestic and international. His last position at Kodak was
Regional Manager for business technology products. Prior to Kodak, Mr. Nulty
held the position of marketing representative for IBM Corporation.

Howard Cohen has been our Executive Vice President and Chief Financial
Officer since February 2000. He has also been Executive Vice President and Chief
Financial Officer of Press since February 2000. He was Vice President, Finance
from the time he joined ZD Education in October 1998 to February 2000. Prior to
joining ZD Education, Mr. Cohen held the position of Chief Financial Officer of
PBC, Inc., a major operator of commercial bakeries on the East Coast.
Previously, Mr. Cohen held various accounting and finance positions at Ernst &
Young LLP since 1990. His last position with Ernst & Young

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was Manager in the Financial Advisory Services Group where he provided various
financial consulting services to middle market companies.

Paul Krause has been our Executive Vice President, Development and
Operations since February 2000. He was Vice President of Publishing and
Operations of ZD Education from July 1999 to February 2000. Mr. Krause joined ZD
Education in 1996 as Director of Operations and Business Management. In 1998,
Mr. Krause was promoted to Business Manager for the courseware publishing
division and later that year Mr. Krause assumed responsibility for interactive
product development. In January 1999, Mr. Krause was promoted to Vice President,
and transferred to the Financial Services Group where he headed the Financial
Planning function. Prior to joining ZD Education, Mr. Krause held various
financial, information systems and operational positions for General Railway
Signal.

Lance D'Amico has been our Vice President, Secretary and General Counsel
since March 2000. He has also been Vice President, Secretary and General Counsel
of Press since March 2000. From 1994 until March 2000, Mr. D'Amico was an
attorney at Cravath, Swaine & Moore in New York City where he focused on mergers
and acquisitions and corporate finance transactions.

William Byron Concevitch has been our Senior Vice President, Sales since
June 2000. From 1993 to June 2000, Mr. Concevitch held numerous positions with
ExecuTrain, including Vice President of Sales and Chief Learning Officer. At
ExecuTrain, Mr. Concevitch was responsible for developing and implementing
ExecuTrain's web-delivered training strategies and designing the ExecuTrain
Virtual Classroom. Prior to joining ExecuTrain, Mr. Concevitch was affiliated
with the Dale Carnegie Training organization. Mr. Concevitch is the creator of
Mindset Marketing: A Proven System To Sell to High-Level Decision Makers, and
the author of the soon to be published book "Increasing the Odds: Sales Is Not A
Numbers Game."

Daniel Cleveland has been Senior Vice President, Strategic Relationships
since July 2000. Prior to that, Mr. Cleveland was Vice President, Strategic
Relationships since December 1998. Mr. Cleveland joined ZD Education in 1992 and
has held the positions of West Region Sales Manager, Director of Business
Development and Director and General Manager of Internet Technology Sales. Prior
to 1992, Mr. Cleveland held the position of Account Consultant with Aetna
Capital Management.

Christopher Harte has been our Vice President, Web Development since
February 2000. From April 1999 until February 2000 he was the Practice Manager
and Principal Consultant for the Custom Software Solutions practice at Questra
Corporation and from November 1998 to April 1999 he was the Resource Manager of
Questra's Northeast IT Division. From 1997 to November 1998, he worked at Danka
Business Systems PLC and was responsible for infrastructure and client support.
Prior to that he worked at Eastman Kodak Company for approximately fourteen
years in various management and implementation positions in software development
and business re-engineering.

Paul Ameden has held the position of Vice President, Professional Services
since April 2000. From February 1996 to April 2000, Mr. Ameden was director of
Professional Services for Questra Corporation's Customer Relationship Management
Practice and was responsible for developing service delivery capability for
package based software implementation. From 1988 to February 1996, Mr. Ameden
held numerous positions at Eastman Kodak Corporation.

Lynette Sharp has been our Vice President, Corporate Telesales since
February 2000. Previously, Ms. Sharp was General Manager for Campus Global Net
from August 1999 through January 2000. Prior to that, Ms. Sharp was Director of
Agent Sales & Distributor Management for Matrix Telecom from 1997 to July 1999.
Prior to that, at Citizens Communications she held the positions of Vice
President, Indirect Sales and Vice President, Directory & Consumer Services from
1995 to 1997. Prior to that, she spent ten years with ACC Corporation in various
sales leadership positions of increasing responsibility. Her last position at
ACC Corporation was Director, Carrier Services.

Lesley Darling has been our Chief Learning Officer since March 2000. For
the past eight years Ms. Darling has held various positions of increasing
responsibility at ZD Education, including Senior Systems Instructor, Training
Manager, Director of Instructional Development and Director of On-line
Education. Ms. Darling has researched, developed and presented seminars
worldwide on instructional quality and methodology.
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William Jacques has been our Controller since March 2000. Previously, Mr.
Jacques held the positions of Director of Internal Audit of Ziff-Davis from May
1998 and Financial Director - Europe of Ziff-Davis' Marketing Intelligence
Division from September 1992 until May 1998. Prior to that, Mr. Jacques held
various internal and external auditing positions including Internal Auditor with
Norton Company, a division of Saint-Goabin and Senior Auditor at Ernst &
Whinney.

Directors

Bruce Wasserstein is Chairman and Chief Executive Officer of Wasserstein
Perella Group, Inc. He has been Chairman of the Board of Directors of Element K
Corporation since February 2000. He is currently the Chairman of the Board of
Directors of Press, law.com, American Lawyer Media and American Lawyer Media
Holdings, and is also a director of other private companies. Before establishing
Wasserstein Perella in 1988, Mr. Wasserstein was Co-Head of Investment Banking
at The First Boston Corporation and a Managing Director and Member of its
Management Committee.

Anup Bagaria is a Managing Director of Wasserstein Perella and a member of
the firm's Merchant Banking Group. He has been a director of Element K
Corporation since March 2000. Mr. Bagaria also currently serves on the Board of
Directors of Press, American Lawyer Media, American Lawyer Media Holdings and
law.com. Mr. Bagaria joined Wasserstein Perella in 1993.

Robert Fogelson is a Vice President of Wasserstein Perella and is a member
of Wasserstein Perella's Merchant Banking Group. He has been a director of
Element K Corporation since February 2000. He is also a director of Press. Mr.
Fogelson joined Wasserstein Perella in September 1998. From 1993 to 1998, Mr.
Fogelson was an attorney at Cravath, Swaine & Moore in New York City where he
focused on mergers and acquisitions and corporate finance transactions.

Ellis Jones is a Managing Director of Wasserstein Perella and President of
Wasserstein Perella Asset Management, which includes the firm's merchant banking
and venture capital groups. He has been a director of Element K Corporation
since February 2000. He is also a director of Press. Prior to joining
Wasserstein Perella in February 1995, Mr. Jones was Managing Director, corporate
finance, and head of the Los Angeles office at Salomon Brothers from 1988 to
1994. Before that period, he was a vice president in investment banking at The
First Boston Corporation.

Thomas Unterman has been Managing Partner of the Rustic Canyon Group, which
is the General partner of TMCT Ventures, L.P., since September 1999. He has been
a director of Element K Corporation since February 2000. He is also a director
of The Tribune Company, Ticketmaster-CitySearch Online Inc. and Hollywood, Inc.
He served as Executive Vice President and Chief Executive Officer of The Times
Mirror Company from January 1998 to December 1999 and as Senior Vice President
and Chief Financial Officer from August 1995 to January 1998. From January 1995
to August 1995, Mr. Unterman was a Senior Vice President and General Counsel
and, from September 1992 to February 1995, was Vice President and General
Counsel of The Times Mirror Company.

Shared Officers with Press

As noted above, Messrs. Barnes, Nulty, Cohen and D'Amico are officers of
Press as well as our company. Press reimburses us for a proportionate share of
the total compensation expense of these officers based on the approximate
percentage of their time devoted to Press.

Board of Directors

Our certificate of incorporation provides for a classified board of
directors consisting of three classes of directors, each serving staggered
three-year terms. As a result, a portion of our board of directors will be
elected each year. For further information on our classified board, see
"Description of Capital Stock and Membership Units -- Anti-takeover effects of
provisions of Delaware Law and Element K Corporation's certificate of
incorporation and bylaws."

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As a result of its ownership of 100% of our Class B common stock,
Wasserstein Perella controls a majority of the voting power in our company, and
therefore controls the election of our board of directors.

Section 145 of the Delaware General Corporation Law allows us to indemnify
officers, directors and any corporate agents under certain circumstances for
liabilities, including reimbursement for expenses incurred arising under the
Securities Act. Our amended and restated certificate of incorporation and our
amended and restated by-laws provide for indemnification of our directors,
officers, employees and other agents to the extent and under the circumstances
permitted by the Delaware General Corporation Law. We will enter into agreements
with our directors and executive officers that will require us, among other
things, to indemnify them to the fullest extent permitted by Delaware law
against certain liabilities that may arise because of their status or service as
directors and executive officers. We will also purchase directors and officers
liability insurance, which will provide coverage against liabilities, including
liabilities under the Securities Act.

Compensation of Directors

No director currently receives cash compensation for services rendered as a
director. Directors will be reimbursed for their reasonable out-of-pocket
expenses incurred in attending meetings of the board of directors. Non-employee
directors will be eligible for participation in Element K's 2000 Non-Employee
Director Stock Option Plan.

Committees of the Board of Directors

Prior to or shortly after the completion of the initial public offering, we
will establish an audit committee of the board of directors which will consist
solely of three or more independent directors. In addition, we will adopt an
audit committee charter. The audit committee will review, act on and report to
the board of directors with respect to various auditing and accounting matters,
including the selection of our auditors, the scope of the annual audits, the
fees to be paid to the auditors, the performance of our independent auditors and
our accounting practices.

We will also establish a compensation committee of the board of directors
which will consist of at least two independent directors. The compensation
committee will determine the salaries and incentive compensation of our officers
and provide recommendations for the salaries and incentive compensation of our
other employees and consultants. The compensation committee will also administer
the 2000 Stock Option Plan and the 2000 Non-Employee Director Stock Option Plan.

Compensation Committee Interlocks and Insider Participation

During the year ended December 31, 1999, we had no compensation committee
interlocks. Decisions regarding compensation for 1999 were made by Ziff-Davis.
Following the completion of the initial public offering, compensation decisions
will be made by our compensation committee.

EXECUTIVE COMPENSATION

During 1999, Messrs. Nulty, Cohen and Krause were employees of Ziff-Davis
and were compensated by Ziff-Davis. Messrs. Barnes and D'Amico were hired in
2000. As a result, none of our named executive officers have reportable
compensation from us for 1999.

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EMPLOYMENT ARRANGEMENTS WITH EXECUTIVE OFFICERS

Severance Arrangements

We have entered into severance agreements with Messrs. Nulty, Cohen and
Krause providing that if their employment is terminated without cause or if they
leave with good reason they will receive one year's base salary. Under the terms
of the Element K limited liability company agreement, in the event of a
termination without cause, Messrs. Barnes, Nulty, Cohen and Krause would be
entitled to 12 months of accelerated vesting with respect to their underfunded
membership units in Element K, or in the event of a termination without cause in
connection with or following a change of control, accelerated vesting of all
their respective unvested underfunded membership units in Element K. For further
details, see "-- Underfunded Membership Units in Element K".

Employee Agreements

Under an employment agreement dated March 21, 2000, Lance D'Amico became
Vice President, Secretary and General Counsel of Element K Corporation, Element
K and Press. The employment agreement provides that Mr. D'Amico's combined
annual base salary will be $175,000 and he will be eligible for a $25,000
performance bonus based on the financial results of the companies. Mr. D'Amico
also received an interest-free loan to cover his expenses in relocating to
Rochester, New York. This loan will be forgiven 25% on each anniversary of the
date he commenced employment.

Under the 2000 Stock Option Plan, Mr. D'Amico was granted 35,000 options to
acquire shares of our Class A common stock for $4.00 per share. Mr. D'Amico was
also granted 28,000 options to acquire shares of the common stock of Press for
$4.00 per share. Mr. D'Amico's options have a 10-year exercise period and vest
25% upon the first anniversary of the date of grant and 6.25% upon the end of
each calendar quarter thereafter. In the event Mr. D'Amico's employment is
terminated without cause or he leaves for good reason he will receive one year's
base salary and his relocation loan will be forgiven. In addition, if Mr.
D'Amico's employment is terminated without cause or he leaves for good reason in
connection with or following a change in control, all his unvested options will
immediately vest and remain exercisable for the remainder of their term.

STOCK OWNERSHIP OF OUR DIRECTORS AND EXECUTIVE OFFICERS

Our directors and executive officers purchased and currently own 486,463
membership units in Element K convertible into 486,463 shares of our Class A
common stock. Holders of membership units in Element K will generally be
allocated profits and losses pro rata as owners of interests in Element K. In
addition, some or all of our executive officers and directors may purchase
shares of our Class A common stock in the initial public offering from the
shares reserved for our employees, directors, affiliates and other individuals
whom we feel have contributed to the success of our company. At the time of
completion of the initial public offering, no director or executive officer will
own or have Element K membership units convertible into, or options to purchase
in excess of 2% of our Class A common stock, other than shares with respect to
which beneficial ownership has been disclaimed. For more information, see
"-- 2000 Stock Option Plan" and "-- Underfunded Membership Units in Element K."

2000 STOCK OPTION PLAN

Element K adopted the 2000 Stock Option Plan on February 10, 2000. The
purpose of the plan is to provide additional incentive to our officers, key
employees, non-employee directors and consultants and those of our subsidiaries
and affiliates whose substantial contributions are essential to the continued
growth and success of our business. Nonqualified stock options may be granted
under the plan to our officers, key employees, non-employee directors and
consultants or to those of our subsidiaries or affiliates. Employees of Press
have been granted options under the plan.

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The plan, which is administered by the compensation committee of our board
of directors, provides for the grant of nonqualified stock options. We have
reserved up to 10% of the number of shares of our outstanding Class A common
stock for issuance under the plan.

The option exercise price of a stock option granted under the plan is
determined by the compensation committee at the time the option is granted.
Stock options are exercisable at the times and upon the conditions that the
compensation committee may determine. Options granted under the 2000 Stock
Option Plan generally vest 25% upon the first anniversary of the date of grant
and 6.25% upon the end of each calendar quarter thereafter. The compensation
committee may accelerate the exercisability of any stock option or portion
thereof at any time, including following a change in control. Generally, the
exercise period will be determined by the compensation committee, but the
exercise period may not exceed ten years from the date of grant. The option
exercise price must be paid in full at the time of exercise, and is payable in
cash, or, at the discretion of the compensation committee and upon such terms as
they may approve, by transferring shares to us or by a cashless exercise
procedure. If a stock option granted under the plan expires or is terminated for
any reason, the shares of Class A common stock underlying the stock option will
again be available for purposes of the plan.

Subject to the approval of the compensation committee, a participant may
transfer any of the stock options granted to the participant under the plan to
members of his or her immediate family or household, including his or her
children, grandchildren and spouse or to trusts for the benefit of the family
members or to partnerships in which such family members are the only partners,
provided that no transfer is made for consideration and the transferee agrees in
writing to be bound by all provisions of the plan.

If a participant's employment or service terminates for any reason, the
participant may generally only exercise his or her stock options that are
exercisable at the time of termination for 60 days after the termination date. A
stock option may not be exercised after it expires.

Our board of directors may modify or terminate the plan at any time, but
the rights and obligations under any stock option granted before any amendment
of the plan may not be materially impaired by any amendment, except with the
consent of the participants.

2000 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN

Element K adopted the 2000 Non-Employee Director Stock Option Plan on
, 2000. The Non-Employee Director Plan authorizes the grant of
options to purchase up to 150,000 shares of Class A common stock to non-employee
directors of Element K Corporation, other than those affiliated with Wasserstein
Perella and the co-investor group. No options have been granted to date under
the Non-Employee Director Plan.

UNDERFUNDED MEMBERSHIP UNITS IN ELEMENT K

Messrs. Barnes, Nulty, Cohen and Krause have each been granted underfunded
membership units in Element K. Underfunded membership units are designed to be
economically similar to stock options. The holders of the underfunded membership
units will generally be allocated profits and losses pro rata as owners of
profit interests in Element K. Each underfunded membership unit may be exchanged
for one share of our Class A common stock upon payment of the underfunded
portion of the units. The underfunded membership units vest according to the
following schedule: 25% upon the first anniversary of the date of grant and
6.25% upon the end of each calendar quarter thereafter. The vesting of each of
these executives' underfunded membership units depends upon the executive's
continued employment with us. In the event that the holder is terminated without
cause, the holder will be entitled to 12 months of accelerated vesting with
respect to the holders' underfunded membership units. In the event the holder is
terminated without cause in connection with or following a change of control,
all of the holder's unvested underfunded membership units will immediately vest.
The holders of the underfunded membership units are subject to a one-year
noncompetition obligation with us following termination of employment and a
one-year prohibition on soliciting our employees or customers.

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<PAGE> 75

In connection with some significant corporate transactions, the underfunded
membership units will be cancelled and the holders of these units will be
granted options to purchase shares of our Class A common stock with a fair
market value substantially equivalent to the fair market value of the cancelled
underfunded membership units prior to their cancellation. If USEP exercises its
right to require the conversion of all underfunded membership units either into
shares of our Class A common stock on a one-for-one basis or into shares of
common stock of a holding company of Element K Corporation, the underfunded
membership units will be converted into restricted shares of stock of the
relevant company upon payment of the underfunded portion of the units.

We may grant additional underfunded membership units to executive officers
in the future.

GRANT OF STOCK OPTIONS AND UNDERFUNDED MEMBERSHIP UNITS

As of June 30, 2000, the following grants of stock options and underfunded
membership units had been made:

<TABLE>
<CAPTION>
NUMBER NUMBER OF
OF SHARES UNDERFUNDED
UNDERLYING MEMBERSHIP
NAME AND PRINCIPAL POSITION OPTIONS UNITS
--------------------------- ---------- -----------
<S> <C> <C>
Bruce Barnes................................................ -- 500,000
Chief Executive Officer
Terence Nulty............................................... -- 250,000
President
Paul Krause................................................. -- 150,000
Executive Vice President, Development and Operations
Howard Cohen................................................ -- 150,000
Executive Vice President and Chief Financial Officer
Lance D'Amico............................................... 35,000 --
Vice President, Secretary and General Counsel
Executive Group............................................. 35,000 1,050,000
Non-Executive Director Group................................ 0 0
Non-Executive Officer Employee Group........................ 937,700 --
Employees of Press.......................................... 134,800 0
</TABLE>

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RELATED PARTY TRANSACTIONS

In this section we summarize the material provisions of agreements entered
into by Element K, Press, Content and our founding equity investors and other
related parties. The agreements described below were not negotiated with
independent third parties and therefore were not the result of arm's-length
negotiations. We cannot assure you that the agreements and transactions
described below were obtained on terms as favorable to us as could have been
obtained from independent third parties. We have included the agreements
summarized below as exhibits to the registration statement of which this
prospectus is a part, and we urge you to read these agreements in their entirety
because the agreements, and not these summaries, contain the full
responsibilities of the parties to the agreements.

OUR RELATIONSHIP WITH WASSERSTEIN PERELLA

Wasserstein Perella is an international investment banking firm that owns
100% of our Class B common stock and is the general partner of both USEP
entities. Prior to the initial public offering, Wasserstein Perella controlled
Element K through USEP's ownership interest in Element K and controlled Element
K Corporation through its ownership of Element K Corporation's Class B common
stock. After the initial public offering, Wasserstein Perella will control
Element K through its control of Element K Corporation, which is the sole
manager of Element K. Bruce Wasserstein, Ellis Jones, Anup Bagaria and Robert
Fogelson, four of our directors, are employed by Wasserstein Perella. Bruce
Barnes, our CEO and a director, was employed by Wasserstein Perella until March
2000.

Financial Advisory Services Agreement

Element K entered into a financial advisory services agreement with
Wasserstein Perella for so long as funds controlled by Wasserstein Perella or
any of its affiliates control, directly or indirectly, at least 10% of the
outstanding equity interests of Element K. This agreement may be terminated by
Wasserstein Perella at any time upon thirty days written notice. In return for
assisting management to develop and implement operating, marketing and financial
performance strategies, Wasserstein Perella receives an annual fee of $500,000
per year, plus expenses, payable quarterly. We have agreed to indemnify
Wasserstein Perella under the terms of the agreement.

Engagement Letter

Element K entered into an engagement letter with Wasserstein Perella in
which Wasserstein Perella agreed to provide consulting and advisory services in
connection with the transactions related to Element K's acquisition of our
business from Ziff-Davis. Wasserstein Perella received a fee of $586,684 from
Element K and $250,000 from Content and was reimbursed for its out-of-pocket
costs and expenses in connection with these services. We have agreed to
indemnify Wasserstein Perella under the terms of the agreement.

ELEMENT K CONTENT ACQUISITION

Content was established to create, develop and acquire content for and
license content to Element K and Press. Element K contributed $6.2 million in
cash for a 95% common equity interest in Content at the time of its formation.
At the same time, Press contributed $20 million in cash for preferred equity
interests and $325,000 in cash for a 5% common equity interest in Content. In
connection with the initial public offering, Element K is acquiring all of the
Content membership interests that it does not already own from Press for $25
million. In determining the value of Content for the purposes of these
transactions, Wasserstein Perella and Element K Corporation, in consultation
with Credit Suisse First Boston Corporation, employed recognized valuation
techniques, including discounted cash flow analysis, while also taking into
account the growth of the e-learning industry.

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<PAGE> 77

INTERCOMPANY AGREEMENTS

Subscription Agreement

Element K Corporation and Wasserstein Perella entered into a subscription
agreement in which Wasserstein Perella purchased one share of Class B common
stock for $1,000. Element K Corporation used the proceeds from this subscription
to acquire 250 membership units in Element K. On all matters submitted to a vote
of the stockholders of Element K Corporation, Wasserstein Perella, as the holder
of the Class B common stock, may vote, in person or by proxy, the aggregate
number of votes equal to 250 plus the number of membership units held by all
members of Element K other than Element K Corporation, which immediately after
completion of the initial public offering represents 60.6% of the voting power.

Content License Agreement

Trademark License Agreement

Element K has granted Press a royalty-free license to use Element K's
trademarks to conduct, promote and market Press' business, subject to quality
control and other related provisions. The agreement has a ten-year term and
subsequently is renewable annually for one-year terms. This agreement allows
Press to include the Element K logo and trademark on its various print products,
which reach a wide audience of corporate learning decision makers and
professionals.

Reseller Agreement

Press and Element K have entered into a reseller agreement in which each
appointed the other an independent, nonexclusive authorized reseller for its
products. For purposes of the agreement, Element K's products include
subscriptions to its online courses and its CD-ROM and intranet-based learning
products, and Press's sole product is IT print courseware. The agreement
provides that Press will sell its printed courseware to Element K at a price
equal to the most favorable price available to an unaffiliated third party, plus
shipping. Press has agreed to fulfill and ship all orders for Element K,
including orders from students in our eILT courses. The agreement also provides
for commissions equal to 30% of gross revenue generated by Press's telesales of
Element K's online course offerings and by Element K's direct sales team's sales
of Press's print courseware. The agreement has a ten-year term and subsequently
is renewable annually for one-year terms.

Shared Services Agreement

Element K and Press have entered into a shared services agreement with
Content which provides that Content will provide accounting, financial
reporting, human resources, facilities and information systems services to both
companies. Element K and Press have no obligation to continue to use any of the
services and may discontinue any of the services subject to customary notice
provisions. Depending upon the service provided, Element K and Press will pay
Content fees equal to its pro rata share of the total cost of the applicable
service based on employee headcount or its proportionate share of aggregate
revenue. The agreement has a ten-year term and subsequently is renewable
annually for one-year terms.

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<PAGE> 78

Press Credit Facility

Press has a revolving credit facility which has been secured by a pledge by
USEP and the other founding equity investors of a substantial portion of their
equity interests in Element K. If a default occurs under this credit facility,
the lenders have the right to foreclose on those membership interests of USEP
and the other founding equity investors and then liquidate those equity
interests, but, the lenders will have no security interest in or right to
foreclose on any of our assets or any of the Class A common stock issued in the
initial public offering. Press has engaged an affiliate of Credit Suisse First
Boston Corporation to arrange the refinancing of the Press Credit Facility.

Subleases

Press has entered into subleases with Element K for space in buildings
located at the Canal View Office Park, Rochester, New York. The subleases expire
on January 30, 2008. Element K has two renewal options of five years each under
the respective subleases. In addition to base rent, Element K is required to pay
its proportionate share of utility services, repair and maintenance services and
real estate taxes to Press. We believe that our existing facilities are adequate
to meet our current needs and that suitable additional or substitute space will
be available on commercially reasonable terms when needed. Press has entered
into an agreement under which our primary landlord will build a new facility to
house Press' training center, and Press will sublease to us the space its
training center currently occupies. We also sublease a 4,000 square foot sales
office in Redmond, Washington from Press.

OTHER TRANSACTIONS

Registration Rights

We have granted registration rights in connection with the membership
interests in Element K purchased by our founding equity investors. These
registration rights provide, subject to various limitations, that at the request
of USEP or of a majority of our other founding equity investors, we will use our
reasonable efforts to effect the registration under applicable federal and state
securities laws of any Class A common stock of Element K Corporation held by
them or issuable to them in exchange for membership units in Element K. After
the initial public offering, our founding equity investors will have the right,
subject to certain limitations, to include the Class A common stock of Element K
Corporation issuable in exchange for their membership units in Element K in
registrations of securities that we initiate on our own behalf or on behalf of
other stockholders. All holders with registration rights have agreed not to
exercise their registration rights until 180 days following the initial public
offering date without the consent of Credit Suisse First Boston Corporation.

Series A Preferred Stock

In July and August 2000, we issued and sold an aggregate of 1,096,491
shares of Series A preferred stock to some of the existing investors in Element
K, and received a total of approximately $10 million, or $9.12 per share, in
these transactions. The price per share was arrived at through arms-length
negotiations with a group of our non-employee investors who are not affiliated
with Wasserstein Perella. All shares of Series A preferred stock will
automatically convert into shares of Class A common stock on a one-for-one basis
on the initial public offering date.

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<PAGE> 79

PRINCIPAL STOCKHOLDERS

The following table sets forth information regarding beneficial ownership
by the following persons of our Class A common stock as of June 30, 2000, after
giving effect to the issuance of 1,096,491 shares of Class A common stock upon
conversion of the Series A preferred stock on the initial public offering date:

- the expected beneficial owners of at least 5% of our Class A common stock
upon completion of the initial public offering;

- each of our directors and named executive officers; and

- our directors and executive officers as a group.

<TABLE>
<CAPTION>
% OF SHARES % OF VOTING POWER IN ELEMENT K
NUMBER OF SHARES BENEFICIALLY CORPORATION AFTER OFFERING
BENEFICIALLY OWNED(1) OWNED(1) -------------------------------------
---------------------- ------------------- ASSUMING ASSUMING
BEFORE AFTER BEFORE AFTER NO CONVERSION OF FULL CONVERSION OF
STOCKHOLDER OFFERING OFFERING OFFERING OFFERING MEMBERSHIP UNITS MEMBERSHIP UNITS
----------- ---------- --------- -------- -------- ---------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Wasserstein Perella Group,
Inc.(2).................. 10,044,154 9,491,789 45.7% 34.5% 68.0%(3) 34.5%(3)
U.S. Equity Partners,
L.P.(4).................. 6,219,602 6,219,602 28.3 22.6 1.2 22.6
U.S. Equity Partners
(Offshore), L.P.(5)...... 1,692,711 1,692,711 7.7 6.2 6.2 6.2
TMCT Ventures, L.P.(6)..... 4,823,542 4,823,542 21.9 17.5 1.1 17.5
Highfields Capital
Ltd.(7).................. 2,200,473 2,200,473 10.0 8.0 8.0 8.0
BancAmerica Capital
Investors II, L.P.(8).... 1,492,889 1,492,889 6.8 5.4 * 5.4
Bruce Barnes(9)............ 425,766 425,766 1.9 1.5 0 1.5
Terence Nulty(10).......... 19,519 19,519 * * 0 *
Paul Krause(10)............ 19,519 19,519 * * 0 *
Howard Cohen(10)........... 15,615 15,615 * * 0 *
Lance D'Amico(10).......... 6,044 6,044 * * 0 *
Bruce
Wasserstein(11)(12)...... 70,725 70,725 * * 0 0
Anup Bagaria............... 0 0 0 0 0 0
Robert Fogelson(11)........ 14,145 14,145 * * 0 0
Ellis Jones(11)............ 99,015 99,015 * * 0 0
Thomas Unterman(13)........ 4,823,542 4,823,542 21.9 17.5 1.1 17.5
Directors and executive
officers as a group (10
persons)(14)............. 5,310,005 5,310,005 24.2% 19.3% 1.1% 19.3%
</TABLE>

---------------
* Represents less than 1%.

(1) Unless otherwise indicated below, the persons and entities named in the
table have sole voting and sole investment power with respect to all shares
beneficially owned by them, limited by community property laws where
applicable. Shares of Class A common stock underlying outstanding
membership units in Element K that are currently exchangeable into Class A
common stock or exchangeable within 60 days of the date of the initial
public offering are deemed to be outstanding and to be beneficially owned
by the person holding such membership units for the purpose of computing
the percentage ownership. There are no shares of Class A common stock
underlying options that are currently exercisable or exercisable within 60
days of the date of the initial public offering. There are no underfunded
membership units exchangeable into Class A common stock within 60 days of
the date of the initial public offering.

(2) Includes shares beneficially owned by U.S. Equity Partners, L.P. and shares
beneficially owned by U.S. Equity Partners (Offshore), L.P. Wasserstein
Perella Group, Inc. is a private company that indirectly owns 100% of WP
Management Partners, L.L.C., which owns the one share of Class B common
stock and is the sole general partner of U.S. Equity Partners, L.P. and
U.S. Equity Partners (Offshore), L.P., and may be deemed to beneficially
own shares held by USEP Portfolio Employees LLC. Wasserstein Perella Group,
Inc. also indirectly owns 100% of WP Plan Management Partners,

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<PAGE> 80

Inc., which is the sole managing member of Education Employee Partners LLC
and Education (Parallel) Employee Partners LLC. As a result, Wasserstein
Perella Group, Inc. may be deemed to be the indirect beneficial owner of
the membership units of Element K held by these entities and the one share
of Class B common stock held by WP Management Partners, L.L.C. The address
of Wasserstein Perella Group, Inc. is 31 West 52nd Street, New York, New
York 10022.

(3) Because the share of Class B common stock beneficially owned by Wasserstein
Perella Group, Inc. is entitled to a number of votes equal to 250 plus the
number of membership units held by all of the members of Element K other
than Element K Corporation, the number of votes ascribed to the share of
Class B common stock will decline as membership units not owned by Element
K Corporation are exchanged into shares of Class A common stock.

(4) The address of U.S. Equity Partners, L.P. is c/o Wasserstein Perella, 320
Park Avenue, New York, New York 10022. Without giving effect to the
exchange of any Element K membership units into shares of Class A common
stock, immediately after the initial public offering, U.S. Equity Partners,
L.P. will own 326,553 shares of Class A common stock, or 3.0% of the total
number of shares outstanding, and 5,893,049 Element K membership units, or
21.4% of the total number of outstanding membership units.

(5) The address of U.S. Equity Partners (Offshore), L.P. is c/o Wasserstein
Perella, 320 Park Avenue, New York, New York 10022. Without giving effect
to the exchange of any Element K membership units into shares of Class A
common stock, immediately after the initial public offering, U.S. Equity
Partners (Offshore), L.P. will own 1,692,711 shares of Class A common
stock, or 15.6% of the total number of shares outstanding, and no Element K
membership units, or 0% of the total number of outstanding membership
units.

(6) TMCT Ventures, L.P. is a limited partnership, of which Rustic Canyon
Partners LLC is the general partner. Mr. Thomas Unterman is the managing
member of Rustic Canyon Partners LLC. The address of TMCT Ventures, L.P. is
2425 Olympic Boulevard, Suite 6050 West, Santa Monica, California 90404.

(7) Highfields Capital Ltd. is an investment fund organized under the laws of
the Cayman Islands. Highfields Capital I LP will own 16,166 shares of Class
A common stock and 246,497 Element K membership units, and Highfields
Capital II LP will own 33,868 shares of Class A common stock and 517,710
Element K membership units, and are both managed by Highfields Capital
Management LP, which is also the manager of Highfields Capital Ltd. Each of
these entities' address is c/o Highfields Capital Management LP, 200
Clarendon Street, Boston, Massachusetts 02116.

(8) The general partner for BancAmerica Capital Investors II, L.P. is
BancAmerica Capital Management II, L.P., whose general partner is BACM II
G.P., L.L.C. The limited partnership interest of BancAmerica Capital
Investors II, L.P., is 100% owned by BA Equity Investors Inc., which is
100% owned by Bank of America Corporation, a public company. The address of
BankAmerica Capital Investors II, L.P. is c/o Bank of America, 231 South
LaSalle Street, Chicago, Illinois 60697.

(9) Consists of membership units in Element K held by Aufklarung LLC, Bruce
Barnes 2000 Annuity Trust and Lorelei Investments LLC.

(10) Consists of membership units in Element K.

(11) Represents the effective economic interest of this person in membership
units of Element K held by Education (Parallel) Employee Partners LLC, as a
result of such person's interest in this entity. None of Messrs.
Wasserstein, Fogelson or Jones has voting or investment power over any of
the membership units held by Education (Parallel) Employee Partners LLC.
Upon exchange of these membership units into shares of Class A common
stock, Messrs. Wasserstein, Fogelson and Jones will continue to have no
voting or investment power over these shares. Each of Messrs. Wasserstein,

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<PAGE> 81

Fogelson and Jones disclaims beneficial ownership of these Element K
membership units and the shares of Class A common stock issuable upon their
exchange.

(12) Mr. Wasserstein is a founder, the Chairman and Chief Executive Officer and
a significant shareholder of Wasserstein Perella Group, Inc., which
indirectly controls and has a significant economic interest in each of U.S.
Equity Partners, L.P. and U.S. Equity Partners (Offshore), L.P. Mr.
Wasserstein disclaims beneficial ownership of any of the interests in
Element K or Element K Corporation beneficially owned by Wasserstein
Perella Group, Inc., U.S. Equity Partners, L.P. or U.S. Equity Partners
(Offshore), L.P.

(13) Includes 4,526,422 membership units in Element K and 297,120 shares of
Element K Corporation Class A common stock held of record by TMCT Ventures,
L.P. Mr. Unterman is the managing member of Rustic Canyon Partners LLC,
which is the general partner of TMCT Ventures, L.P., and accordingly may be
deemed to beneficially own all or a portion of the shares held by TMCT
Ventures, L.P. Mr. Unterman disclaims beneficial ownership of these units
and shares.

(14) Includes 5,012,885 shares of Class A common stock issuable upon the
exchange of outstanding membership units in Element K that are currently
exchangeable into Class A common stock or exchangeable within 60 days of
the date of the initial public offering and 297,120 shares of Element K
Corporation Class A common stock, including 4,823,542 shares beneficially
owned by Mr. Unterman as to which he disclaims beneficial ownership, as
explained in footnote 13 above. Does not include the 70,725, 14,145 and
99,015 shares as to which Messrs. Wasserstein, Fogelson and Jones have
disclaimed beneficial ownership, as explained in footnote 11 above.

The underwriters have reserved for sale, at the initial public offering
price, up to [ ] shares of Class A common stock for employees,
directors and business associates and related persons of Element K Corporation
and its affiliates who have expressed an interest in purchasing shares of Class
A common stock in the initial public offering. Some of the officers and
directors set forth above may acquire additional shares of Class A common stock
in the initial public offering through this program or otherwise.

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<PAGE> 82

DESCRIPTION OF CAPITAL STOCK AND MEMBERSHIP UNITS

The following description of our capital stock, Element K's membership
units, provisions of our certificate of incorporation and by-laws and provisions
of Element K's limited liability company agreement are only summaries. For a
more detailed description, see Element K Corporation's certificate of
incorporation and by-laws and Element K's limited liability company agreement,
copies of which we have filed as exhibits to the registration statement of which
this prospectus forms a part.

The authorized capital stock of Element K Corporation consists of
150,000,000 shares of Class A common stock, par value $.01 per share, 1,000
shares of Class B common stock, par value $.01 per share, and 50,000,000 shares
of preferred stock, par value $.01 per share.

COMMON STOCK

As of the completion of the initial public offering, there will be
10,817,500 shares of Class A common stock issued and outstanding, excluding
825,000 shares to be issued if the underwriters exercise their over-allotment
option in full. In addition, there will be one share of Class B common stock
issued and outstanding and beneficially held of record by Wasserstein Perella.

Voting rights. Holders of Class A common stock are entitled to one vote
per share. The holder of Class B common stock is entitled to a number of votes
per share equal to 250 plus the number of membership units held by all members
of Element K other than Element K Corporation.

Except as otherwise provided by law, and subject to any voting rights
granted to holders of any outstanding shares of preferred stock, the holders of
our outstanding shares of Class A common stock and the holders of our
outstanding shares of Class B common stock will vote together as one class on
all matters on which stockholders are entitled to vote. Except as otherwise
provided by law, and subject to any voting rights granted to holders of any
outstanding preferred stock, amendments to our certificate of incorporation must
be approved by a majority of votes entitled to be cast by all holders of Class A
common stock and Class B common stock, voting together as a single class,
provided that amendments to the certificate of incorporation that would alter or
change the powers, preferences or special rights of Class A common stock or
Class B common stock so as to affect them adversely also must be approved by a
majority of the votes entitled to be cast by the holders of the shares affected
by the amendment, voting as a separate class. Any amendment to our certificate
of incorporation to increase or decrease the authorized shares of any class
requires the approval of the holders of a majority of the common stock, voting
together as a single class.

Dividends. Holders of Class A common stock and Class B common stock will
share equally on a per share basis, based on the number of shares of common
stock held, in any dividend declared by the board of directors, but this right
may be limited by any preferential rights of any outstanding preferred stock.
Dividends consisting of shares of Class A common stock and Class B common stock
may be paid only as follows: (1) shares of Class A common stock may be paid only
to holders of Class A common stock, and shares of Class B common stock may be
paid only to holders of Class B common stock; and (2) shares will be paid
proportionally with respect to each outstanding share of Class A common stock
and Class B common stock. We may not subdivide or combine shares of either class
of common stock without at the same time proportionally subdividing or combining
shares of the other class.

Conversion of Class B common stock. The one share of Class B common stock
currently outstanding is convertible into 250 shares of Class A common stock at
any time at the option of the holder.

Other rights. In the event of any merger or consolidation of Element K
Corporation with or into another company in connection with which shares of our
common stock are converted into or exchangeable for shares of stock, other
securities or property (including cash), all holders of common stock, regardless
of class, will be entitled to receive the same kind and amount of shares of
stock and other securities and property, including cash. In this event, shares
of each class of common stock with the conversion rights shall be calculated as
if it were converted.

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<PAGE> 83

Upon our liquidation, dissolution or winding up, after payment in full of
debts and other liabilities of Element K Corporation and of the amounts required
to be paid to holders of preferred stock, if any, all holders of our common
stock, regardless of class, are entitled to share ratably in any assets
available for distribution to holders of our common stock with each share of
Class B common stock being calculated as if it were converted into 250 shares of
Class A common stock.

No shares of any class of common stock are subject to redemption or have
preemptive rights to purchase additional shares of common stock.

Upon consummation of the initial public offering, all the outstanding
shares of Class A common stock and Class B common stock will be legally issued,
fully paid and nonassessable.

PREFERRED STOCK

Upon the closing of the initial public offering, the board of directors
will be authorized, without stockholder approval, to issue from time to time up
to 50 million shares of preferred stock in one or more series and to fix or
alter the designations, preferences, rights and any qualifications, limitations
or restrictions of the shares of each series. The specific matters that our
board may determine include the following:

- the designation of each series;

- the number of shares of each series;

- the rate of any dividends;

- whether any dividends will be cumulative or noncumulative;

- the terms of any redemption;

- the amount payable in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of our company;

- rights and terms of any conversion or exchange;

- restrictions on the issuance of shares of the same series or any other
series; and

- any voting rights.

Upon completion of the initial public offering, all outstanding shares of Series
A preferred stock will automatically convert into shares of Element K
Corporation Class A common stock on a one-for-one basis.

STOCK OPTIONS

As of June 30, 2000, options to purchase a total of 1,107,500 shares of
Class A common stock were outstanding. None of the shares underlying these
options will be eligible for sale immediately following the completion of the
initial public offering because these options are generally not exercisable
prior to February 10, 2001.

Under the 2000 Stock Option Plan, we may not grant options exercisable into
greater than 10% of the then outstanding shares of Class A common stock, and
under the 2000 Non-Employee Director Stock Option Plan, we may not grant options
exercisable into greater than 150,000 shares of Class A common stock. We refer
you to "Management -- 2000 Stock Option Plan", "-- 2000 Non-Employee Director
Stock Option Plan" and "Shares Eligible for Future Sale."

LIMITATION ON LIABILITY OF DIRECTORS

Our certificate of incorporation provides that our directors will not be
personally liable to us or our stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability imposed by law, as in effect
from time to time:

- for any breach of the director's duty of loyalty to us or our
stockholders;

- for any act or omission not in good faith or which involved intentional
misconduct or a knowing violation of law;

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- for unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware General
Corporation Law; and

- for any transaction from which the director derived an improper personal
benefit.

The inclusion of this provision in our certificate of incorporation may
have the effect of reducing the likelihood of derivative litigation against our
directors and may discourage or deter stockholders or us from bringing a lawsuit
against our directors for breach of their duty of care, even though such an
action, if successful, might otherwise have benefitted us and our stockholders.

ANTI-TAKEOVER EFFECTS OF PROVISIONS OF DELAWARE LAW AND ELEMENT K CORPORATION'S
CERTIFICATE OF INCORPORATION AND BY-LAWS

Some of the provisions of our certificate of incorporation and bylaws and
Section 203 of the Delaware General Corporation Law could have the following
effects, among others:

- delaying, deferring or preventing a change in control;

- delaying, deferring or preventing the removal of our existing management;

- deterring potential acquirors from making an offer to our stockholders;
and

- limiting our stockholders' opportunity to realize premiums over
prevailing market prices of our common stock in connection with offers by
potential acquirors.

This could be the case, notwithstanding that a majority of our stockholders
might benefit from such a change in control or offer. The following is a summary
of these provisions.

Classified board of directors. The directors will be divided into three
classes, designated Class I, Class II and Class III. Each class will consist, as
nearly as possible, of one-third of the total number of directors. The term of
the initial Class I directors will terminate on the date of the 2001 annual
meeting; the term of the initial Class II directors will terminate on the date
of the 2002 annual meeting; and the term of the initial Class III directors will
terminate on the date of the 2003 annual meeting. At each succeeding annual
meeting of stockholders, beginning in 2001, successors to the class of directors
whose term expires at that annual meeting will be elected for a three-year term.
If the number of directors is changed, any increase or decrease will be
apportioned among the classes to maintain the number of directors in each class
as nearly equal as possible, and any additional director of any class elected to
fill a vacancy resulting from an increase in the class will hold office for a
term that will coincide with the remaining term of that class, but a decrease in
the number of directors will not shorten the term of any incumbent director.

Directors, and not stockholders, fix the size of our board of
directors. Our certificate of incorporation and bylaws provide that the number
of directors shall be fixed from time to time exclusively pursuant to a
resolution adopted by a majority of our board of directors, but in no event
shall it consist of less than one nor more than 15 members.

Board vacancies to be filled by remaining directors and not
stockholders. Our certificate of incorporation and bylaws provide that any
vacancies on our board of directors will be filled by the affirmative vote of
the majority of the remaining directors, even if less than a quorum, or by a
sole remaining director. In any event, no vacancy shall be filled by our
stockholders.

Advance notice for stockholder proposals. Our bylaws contain provisions
requiring that advance notice be delivered to us of any business to be brought
by a stockholder before an annual meeting and providing for procedures to be
followed by stockholders in nominating persons for election to our board of
directors. Generally, such advance notice provisions require that the
stockholder must give written notice to us not less than 60 calendar days before
the date our proxy statement was released to stockholders in connection with our
previous year's annual meeting. Our bylaws provide that the notice must set
forth specific information regarding the stockholder and each director nominee
by the stockholder or other business proposed by the stockholder. Our bylaws
provide that as long as USEP or Wasserstein Perella

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beneficially owns 30% or more of the combined voting power of the outstanding
common stock, USEP and Wasserstein Perella are exempt from the foregoing
provision.

Stockholder action; special meetings of stockholders. Our certificate of
incorporation and bylaws provide that special meetings of our stockholders may
be called only by the board of directors, the chairman or the chief executive
officer.

Section 203 of the Delaware General Corporation Law. Element K Corporation
is a Delaware corporation and subject to Section 203 of the Delaware General
Corporation Law. Generally, Section 203 prohibits a publicly held Delaware
company from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the time such stockholder became
an interested stockholder unless, as described below, specified conditions are
satisfied. Thus, it may make acquisition of control of our company more
difficult. The prohibitions in Section 203 of the Delaware General Corporation
Law do not apply if:

- prior to the time the stockholder became an interested stockholder, the
board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming
an interested stockholder;

- upon consummation of the transaction, which resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced; and

- at or subsequent to the time the stockholder became an interested
stockholder, the business combination is approved by the board of
directors and authorized by the affirmative vote of at least 66 2/3% of
the outstanding voting stock that is not owned by the interested
stockholder.

Under Section 203 of the Delaware General Corporation Law, a "business
combination" includes:

- any merger or consolidation of the corporation with the interested
stockholder;

- any sale, lease, exchange or other disposition, except proportionately as
a stockholder of such corporation, to or with the interested stockholder
of assets of the corporation having an aggregate market value equal to
10% or more of either the aggregate market value of all the assets of the
corporation or the aggregate market value of all the outstanding stock of
the corporation;

- transactions resulting in the issuance or transfer by the corporation of
stock of the corporation to the interested stockholder;

- transactions involving the corporation, which have the effect of
increasing the proportionate share of the corporation's stock of any
class or series that is owned by the interested stockholder; and

- transactions in which the interested stockholder receives financial
benefits provided by the corporation.

Under Section 203 of the Delaware General Corporation Law, an "interested
stockholder" generally is:

- any person that owns 15% or more of the outstanding voting stock of the
corporation;

- any person that is an affiliate or associate of the corporation and was
the owner of 15% or more of the outstanding voting stock of the
corporation at any time within the three-year period immediately prior to
the date on which it is sought to be determined whether or not such
person is an interested stockholder; or

- the affiliates or associates of either of the above-stated categories of
persons.

Because Wasserstein Perella owned 100% of our voting stock before we became
a public company Section 203 of the Delaware General Corporation Law by its
terms is currently not applicable to business combinations with Wasserstein
Perella even though Wasserstein Perella owns 15% or more of our

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outstanding voting stock. If any other person acquires 15% or more of our
outstanding voting stock, such person will be subject to the provisions of
Section 203 of the Delaware General Corporation Law.

Under some circumstances, Section 203 of the Delaware General Corporation
Law makes it more difficult for an "interested stockholder" to effect various
business combinations with us for a three-year period, although our stockholders
may elect to exclude us from the restrictions imposed thereunder. By virtue of
its effective control of our company, Wasserstein Perella is in a position to
elect to exclude us from the restrictions under Section 203. Currently,
Wasserstein Perella has indicated to us that it has no intention to do so.

TRANSACTIONS WITH INTERESTED PARTIES

Our certificate of incorporation includes provisions addressing potential
conflicts of interest between us and USEP, Wasserstein Perella and each of their
affiliates. In addition, our certificate of incorporation includes provisions
regulating and defining our conduct as it may involve us, USEP and Wasserstein
Perella and our and their subsidiaries, directors and officers. Our certificate
of incorporation provides that no contract or transaction:

- between us and USEP or us and Wasserstein Perella or any of their
affiliates,

- between us and any entity in which one or more of our directors or
officers has a financial interest, which we refer to as a "related
entity", or

- between us and any of our directors or officers, USEP, any subsidiary of
USEP, Wasserstein Perella, any subsidiary of Wasserstein Perella or any
related entity

shall be void or voidable solely because:

- USEP, any affiliate of USEP, Wasserstein Perella, any affiliate of
Wasserstein Perella, or any related entity, or any of each of their or
our directors or officers are parties to the contract or transaction, or

- any of those directors or officers is present at or participates in the
meeting of the board of directors of committee of the board that
authorizes the contract or transaction.

ELEMENT K MEMBERSHIP UNITS

Interests in Element K are represented by membership units. Membership
units of Element K are economically equivalent, except with regard to tax
treatment, to shares of our Class A common stock. Under its limited liability
company agreement, Element K is authorized to issue membership units designated
as common units or preferred units, in multiple classes and with varying rights
and preferences. Element K is also authorized to issue warrants, options and
similar securities that are convertible into membership units.

Membership units (other than membership units owned by Element K
Corporation) are exchangeable for shares of our Class A common stock on a
one-for-one basis. If USEP and the co-investors exchanged their membership units
immediately following the initial public offering, the shares they would receive
in exchange for the membership units would collectively represent approximately
60.6% of our outstanding Class A common stock (58.9% if the underwriters
exercise their over-allotment option in full).

The number of outstanding membership units owned by Element K Corporation
will at all times equal the number of shares of Class A common stock. The net
cash proceeds received by Element K Corporation from any issuance of shares of
common stock, including due to the exercise of options issued under the 2000
Stock Option Plan, will be concurrently transferred to Element K in exchange for
membership units equal in number to the number of shares of common stock issued
by Element K Corporation.

Upon the completion of the initial public offering, the terms of Element
K's limited liability company agreement provide that Element K Corporation will
act as the manager of Element K. This will allow
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<PAGE> 87

Element K Corporation to exercise considerable control over the business, policy
and affairs of Element K, including authorization to elect board members and
appoint the officers of Element K.

Nevertheless, under the terms of the limited liability company agreement
there are several provisions that may affect the direction of Element K and
Element K Corporation that are beyond our control as manager of Element K. The
limited liability company agreement contains provisions that allow USEP, in its
discretion, to compel the holders of the outstanding membership units in Element
K to exchange their units on a one-for-one basis into shares of Element K
Corporation, having, to the extent possible, similar terms and conditions as the
membership units exchanged. The limited liability company agreement also grants
USEP the option to compel the sale of all or substantially all of Element K to a
third party, whether by the sale of membership units, merger or similar
transactions. Furthermore, provisions in both the limited liability company
agreement and our certificate of incorporation grant USEP the right to compel
Element K Corporation to cause a reorganization that would result in an exchange
of all outstanding membership units in Element K and all shares of common stock
in Element K Corporation into capital stock of a newly formed holding company of
Element K Corporation, on a one-for-one basis.

REGISTRATION RIGHTS

We have granted registration rights to some of our stockholders and some
holders of membership units in Element K relating to their shares of Class A
common stock, Class B common stock or shares of Class A common stock issuable in
exchange for their membership units in Element K, as applicable. All holders
with registration rights have agreed not to exercise their registration rights
until 180 days following the initial public offering date without the consent of
Credit Suisse First Boston Corporation. Registration of these securities under
the Securities Act would result in those shares becoming freely tradeable by
persons not affiliated with us. For a more complete explanation of these
registration rights, please see "Related Party Transactions -- Registration
Rights."

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for our Class A common stock is
.

NASDAQ STOCK MARKET LISTING

We have applied to list our Class A common stock on The Nasdaq Stock
Market's National Market under the symbol "LMNK."

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SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the initial public offering, we will have outstanding
10,817,500 shares of Class A common stock and one share of Class B common stock,
convertible into 250 shares of Class A common stock. The 5,500,000 shares
(6,325,000 shares if the underwriters exercise their over-allotment option in
full) of Class A common stock to be sold in the initial public offering will be
freely tradable without restrictions or further registration under the
Securities Act, except that shares purchased by our affiliates will be subject
to the resale limitations of Rule 144. Neither the shares of Class A common
stock issuable upon exchange of membership units in Element K nor upon
conversion of the share of Class B common stock owned by USEP may be sold in the
absence of registration under the Securities Act other than pursuant to Rule 144
under the Securities Act or another exemption from registration under the
Securities Act.

In general, under Rule 144:

- a person who has beneficially owned shares of Class A common stock as to
which at least one year has elapsed since such shares were sold by us or
by an affiliate in a transaction or chain of transactions not involving a
public offering ("restricted securities"), or

- an affiliate who holds shares of Class A common stock that are not
restricted securities

may sell, within any three-month period, a number of shares that does not exceed
the greater of 1% of our Class A common stock then outstanding or the average
weekly trading volume in the Class A common stock during the four calendar weeks
preceding the date on which notice of the sale required under Rule 144 was
filed. Sales under Rule 144 are also subject to provisions relating to the
manner and notice of sale and availability of current public information about
us.

Affiliates must comply with the requirements of Rule 144, including the
one-year holding period requirement, to sell shares of common stock that are
restricted securities. Furthermore, if a period of at least two years has
elapsed from the date restricted securities were acquired from us or an
affiliate, a holder of restricted securities who is not an affiliate at the time
of the sale and has not been an affiliate at any time during the three months
prior to the sale would be entitled to sell the shares without regard to the
volume limitation and other conditions described above.

Shares of Class A common stock reserved for issuance under the 2000 Stock
Option Plan and the 2000 Non-Employee Director Stock Option Plan may be either
authorized but unissued shares or treasury shares obtained by us through private
market purchases. See "Management -- 2000 Stock Option Plan" and
"Management -- 2000 Non-Employee Director Stock Option Plan." We intend to
register under the Securities Act the shares of Class A common stock issuable
upon the exercise of options granted pursuant to the 2000 Stock Option Plan and
the 2000 Non-Employee Director Stock Option Plan.

Prior to the initial public offering, there has been no public market for
our Class A common stock. Although we can make no prediction as to the effect,
if any, that sales of Class A common stock by our existing stockholders would
have on the market price of our Class A common stock, sales of substantial
amounts of our Class A common stock or the availability of the shares for sale
could adversely affect prevailing market prices.

We have agreed that we will not offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, or file with the Securities and
Exchange Commission a registration statement under the Securities Act of 1933
relating to any shares of our Class A common stock or securities convertible
into or exchangeable or exercisable for any shares of our Class A common stock,
or publicly disclose the intention to make any such offer, sale, pledge,
disposition or filing, without the prior written consent of Credit Suisse First
Boston Corporation for a period of 180 days after the initial public offering
date, except for grants of stock options or stock awards pursuant to the terms
of any plan in effect on the initial public offering date; issuances of
securities pursuant to the exercise of employee stock options outstanding on the
initial public offering date or employee stock purchases pursuant to the terms
of any plan in effect on the initial public offering date; the filing of
registration statements on Form S-8 with the Commission registering shares of

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common stock issuable under our stock option plans in effect on the initial
public offering date; issuances of Class A common stock in connection with an
exchange of membership units in Element K; issuances of Class A common stock in
connection with a conversion of Class B common stock; issuances of securities or
Class A common stock or securities convertible into or exchangeable or
exercisable for any shares of our Class A common stock, in connection with any
reorganization of Element K Corporation in accordance with the Element K limited
liability company agreement described in this prospectus; and issuances of
securities in connection with the acquisition of stock or assets of other
companies so long as, in each case, the recipient of the securities agrees in
writing to be bound by the restrictions outlined above.

Our officers and directors and all of our existing shareholders have agreed
that they will not offer, sell, contract to sell, pledge or otherwise dispose
of, directly or indirectly, any shares of our Class A common stock or securities
convertible into or exchangeable or exercisable for any shares of our Class A
common stock, enter into a transaction which would have the same effect, or
enter into any swap, hedge or other arrangement that transfers, in whole or in
part, any of the economic consequences of ownership of our Class A common stock,
whether any such transaction is to be settled by delivery of our Class A common
stock or such other securities, in cash or otherwise, or publicly disclose the
intention to make any such offer, sale, pledge or disposition, or to enter into
any such transaction, swap, hedge or other arrangement, without, in each case,
the prior written consent of Credit Suisse First Boston Corporation for a period
of 180 days after the initial public offering date. Officers, directors and
existing stockholders will be permitted to pledge securities or securities
convertible into or exchangeable or exercisable for any shares of our Class A
common stock as security in connection with the pledge agreement relating to the
Press Credit Agreement, both of which are dated February 10, 2000. Credit Suisse
First Boston Corporation has no current intention to release any shares subject
to lock-up agreements. In considering whether to release any shares, Credit
Suisse First Boston Corporation would consider, among other things, the
particular circumstances surrounding the request, including, but not limited to,
the number of shares requested to be released, the possible impact on the market
for our Class A common stock, the reasons for the request and whether the holder
of our Class A common stock requesting the release is an officer, director or
affiliate of ours. In considering such a request, Credit Suisse First Boston
Corporation would not consider its own position, if any, in the securities as a
factor.

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IMPORTANT UNITED STATES FEDERAL TAX CONSEQUENCES
TO NON-U.S. HOLDERS OF OUR CLASS A COMMON STOCK

The following is a general summary of the material United States federal
income and estate tax consequences of the purchase, ownership, and sale or other
taxable disposition of the Class A common stock by any person or entity (a
"non-U.S. Holder") other than:

- a citizen or resident of the United States;

- a partnership, corporation or other entity created or organized in or
under the laws of the United States or of any political subdivision
thereof;

- a trust, if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United
States persons have the authority to control all substantial decisions of
the trust or the trust has a valid election in effect under applicable
U.S. Treasury regulations to be treated as a U.S. Person; or

- an estate, the income of which is includible in gross income for United
States federal income tax purposes regardless of its source.

This summary does not address all tax considerations that may be relevant to
non-U.S. Holders in light of their particular circumstances or to certain
non-U.S. Holders that may be subject to special treatment under United States
federal income or estate tax laws. This summary assumes that a non-U.S. Holder
holds Class A common stock as a capital asset and has not acquired the Class A
common stock in connection with the performance of services. This summary is
based upon the Internal Revenue Code, existing, temporary and proposed
regulations promulgated thereunder and administrative and judicial decisions,
all of which are subject to change, possibly with retroactive effect. In
addition, this summary does not address the effect of any state, local or
foreign tax laws. Each prospective purchaser of Class A common stock should
consult its tax advisor with respect to the tax consequences of purchasing,
owning and disposing of the Class A common stock.

DIVIDENDS

Dividends paid to a non-U.S. Holder of Class A common stock generally will
be subject to a withholding of United States federal income tax at a 30 percent
rate or such lower rate as may be specified by an applicable income tax treaty
unless:

- the dividend is effectively connected with the conduct of a trade or
business of the non-U.S. Holder within the United States; or

- if a tax treaty applies, it is attributable to a United States permanent
establishment of the non-U.S. Holder

in which cases the dividend will be taxed at ordinary federal income tax rates.
If the non-U.S. Holder is a corporation, such effectively connected income may
also be subject to an additional "branch profits tax." A non-U.S. Holder may be
required to satisfy certain certification requirements in order to claim treaty
benefits or otherwise claim a reduction of, or exemption from, the withholding
described above.

SALE OR OTHER DISPOSITION OF CLASS A COMMON STOCK

A non-U.S. Holder generally will not be subject to United States federal
income tax in respect of any gain recognized on the sale or other taxable
disposition of Class A common stock unless:

- the gain is effectively connected with the conduct of a trade or business
of the non-U.S. Holder within the United States;

- in the case of a non-U.S. Holder who is an individual and holds the Class
A common stock as a capital asset, the holder is present in the United
States for 183 or more days in the taxable year of the sale or other
taxable disposition and certain other tests are met; or

- the non-U.S. Holder is subject to tax pursuant to the provisions of
United States federal income tax law applicable to certain United States
expatriates.

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ESTATE TAX

Class A common stock owned or treated as owned by an individual non-U.S.
Holder at the time of death will be includible in the individual's gross estate
for United States federal estate tax purposes, unless an applicable treaty
provides otherwise, and may be subject to United States federal estate tax.

BACKUP WITHHOLDING AND INFORMATION REPORTING

Dividends. United States backup withholding tax generally will not apply
to dividends paid on the Class A common stock that are subject to the 30 percent
or reduced treaty rate of United States withholding tax previously discussed. We
must report annually to the Internal Revenue Service and to each non-U.S. Holder
the amount of dividends paid to, and the tax withheld with respect to, such
holder, regardless of whether any tax was withheld. This information may also be
made available to the tax authorities in the non-U.S. Holder's country of
residence.

Sale or Other Disposition of Common Stock. Upon the sale or other taxable
disposition of Class A common stock by a non-U.S. Holder to or through a United
States office of a broker, the broker must backup withhold at a rate of 31
percent and report the sale to the Internal Revenue Service, unless the holder
certifies its non-U.S. Holder status under penalties of perjury or otherwise
establishes an exemption. Upon the sale or other taxable disposition of Class A
common stock by a non-U.S. Holder to or through the foreign office of a United
States broker, or a foreign broker with a certain relationship to the United
States, the broker must report the sale to the Internal Revenue Service (but not
backup withhold) unless the broker has documentary evidence in its files that
the seller is a non-U.S. Holder and certain other conditions are met or the
holder otherwise establishes an exemption.

Backup withholding is not an additional tax. Amounts withheld under the
backup withholding rules generally are allowable as a refund or credit against a
non-U.S. Holder's United States federal income tax liability, if any, provided
that the required information is furnished to the Internal Revenue Service on a
timely basis.

The U.S. Treasury Department has issued regulations generally effective for
payments made after December 31, 2000 that will affect the procedures to be
followed by a non-U.S. Holder in establishing such holder's status as a non-U.S.
Holder for purposes of the withholding, backup withholding and information
reporting rules described herein. In general, such regulations do not
significantly alter the substantive withholding and information reporting
requirements, but unify current certification procedures and forms and clarify
reliance standards. Prospective investors should consult their tax advisors
concerning the effect of such regulations on an investment in the Class A common
stock.

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UNDERWRITING

Under the terms and subject to the conditions contained in an underwriting
agreement dated , 2000, we have agreed to sell to the
underwriters named below, for whom Credit Suisse First Boston Corporation, Chase
Securities Inc. and Thomas Weisel Partners LLC are acting as representatives,
the following respective numbers of shares of Class A common stock:

<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ---------
<S> <C>
Credit Suisse First Boston Corporation......................
Chase Securities Inc. ......................................
Thomas Weisel Partners LLC..................................

---------
Total.................................................. 5,500,000
=========
</TABLE>

The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of Class A common stock in the initial public offering
if any are purchased, other than those shares covered by the over-allotment
option described below. The underwriting agreement also provides that if an
underwriter defaults, the purchase commitments of non-defaulting underwriters
may be increased or the offering of Class A common stock may be terminated.

We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to 825,000 additional shares of our Class A common stock at the
initial public offering price less the underwriting discounts and commissions.
The option may be exercised only to cover any over-allotments of Class A common
stock.

The underwriters propose to offer the shares of Class A common stock
initially at the public offering price on the cover page of this prospectus and
to the selling group members at that price less a concession of $ per share.
The underwriters and the selling group members may allow a discount of $ per
share on sales to other broker/dealers. After the initial public offering, the
public offering price and concession and discount to dealers may be changed by
the representatives.

The following table summarizes the compensation and estimated expenses we
will pay.

<TABLE>
<CAPTION>
PER SHARE TOTAL
----------------------------- -----------------------------
WITHOUT WITH WITHOUT WITH
OVERALLOTMENT OVERALLOTMENT OVERALLOTMENT OVERALLOTMENT
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Underwriting Discounts and Commissions paid
by us...................................... $ $ $ $
Expenses payable by us....................... $ $ $ $
</TABLE>

The underwriters have informed us that they do not expect discretionary
sales to exceed 5% of the shares of Class A common stock being offered.

We have agreed that we will not offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, or file with the Securities and
Exchange Commission a registration statement under the Securities Act of 1933
relating to, any shares of our Class A common stock or securities convertible
into or exchangeable or exercisable for any shares of our Class A common stock,
or publicly disclose the intention to make any such offer, sale, pledge,
disposition or filing, without the prior written consent of Credit Suisse First
Boston Corporation for a period of 180 days after the date of this prospectus,
except for grants of stock options or stock awards pursuant to the terms of any
plan in effect on the date of this prospectus; issuances of securities pursuant
to the exercise of employee stock options outstanding on the date of this
prospectus or employee stock purchases pursuant to the term of any plan in
effect on the date of this prospectus; the filing of registration statements on
Form S-8 with the Commission registering shares of common stock issuable under
our stock option plans in effect on the date of this prospectus; issuances of
Class A common stock in connection with an exchange of membership units in
Element K; issuances of

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Class A common stock in connection with a conversion of Class B common stock;
issuances of securities or Class A common stock or securities convertible into
or exchangeable or exercisable for any shares of our Class A common stock, in
connection with any reorganization of Element K Corporation in accordance with
the Element K liability limited company agreement described in this prospectus;
and issuances of securities in connection with the acquisition of stock or
assets of other companies so long as, in each case, the recipient of the
securities agrees in writing to be bound by the restrictions outlined above.

Our officers and directors and all our existing stockholders have agreed
that they will not offer, sell, contract to sell, pledge or otherwise dispose
of, directly or indirectly, any shares of our Class A common stock or securities
convertible into or exchangeable or exercisable for any shares of our Class A
common stock, enter into a transaction which would have the same effect, or
enter into any swap, hedge or other arrangement that transfers, in whole or in
part, any of the economic consequences of ownership of our Class A common stock,
whether any such transaction is to be settled by delivery of our Class A common
stock or such other securities, in cash or otherwise, or publicly disclose the
intention to make any such offer, sale, pledge or disposition, or to enter into
any such transaction, swap, hedge or other arrangement, without, in each case,
the prior written consent of Credit Suisse First Boston Corporation for a period
of 180 days after the date of this prospectus. Officers, directors and existing
stockholders will be permitted to pledge securities or securities convertible
into or exchangeable or exercisable for any shares of our Class A common stock
as security in connection with the pledge agreement relating to the Press Credit
Agreement both of which are dated February 10, 2000.

The underwriters have reserved for sale, at the initial public offering
price, up to shares of our Class A common stock for our directors,
officers, employees and certain other persons associated with us who have
expressed an interest in purchasing Class A common stock in the initial public
offering. The number of shares available for sale to the general public in the
initial public offering will be reduced to the extent such persons purchase such
reserved shares. Any reserved shares not so purchased will be offered by the
underwriters to the general public on the same terms as other shares.

We have agreed to indemnify the underwriters against liabilities under the
Securities Act or to contribute to payments which the underwriters may be
required to make in that respect.

We have applied to list the shares of Class A common stock on The Nasdaq
Stock Market's National Market under the symbol "LMNK."

Prior to the initial public offering, there has been no public market for
our Class A common stock. The initial public offering price will be determined
by negotiations between us and the representatives, and may not reflect the
market price for our Class A common stock that may prevail following the
offering. We will consider, among others, the following principal factors in
determining the initial public offering price:

- the information in this prospectus and otherwise available to the
representatives;

- the market conditions for initial public offerings;

- the history of and the prospects for the industry in which we compete;

- our past and present operations;

- our past and present earnings and current financial position;

- the ability of our management;

- our prospects for future earnings;

- the present state of our development and our current financial condition;

- the recent market prices of, and the demand for, publicly traded common
stock of generally comparable companies; and

- the general condition of the securities markets at the time of the
offering.

88
<PAGE> 94

We can offer no assurance that the initial public offering price will
correspond to the price at which our Class A common stock will trade in the
public market subsequent to the initial public offering or that an active
trading market for our Class A common stock will develop and continue after the
offering.

In connection with the initial public offering the underwriters may engage
in stabilizing transactions, over-allotment transactions, syndicate covering
transactions and penalty bids in accordance with Regulation M under the
Securities Exchange Act of 1934.

- Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.

- Over-allotment involves sales by the underwriters of shares in excess of
the number of shares the underwriters are obligated to purchase, which
creates a syndicate short position. The short position may be either a
covered short position or a naked short position. In a covered short
position, the number of shares over-allotted by the underwriters is not
greater than the number of shares that which they may purchase in the
over-allotment option. In a naked short position, the number of shares
involved is greater than the number of shares in the over-allotment
option. The underwriters may close out any short position by either
exercising their over-allotment option and/or purchasing share in the
open market.

- Syndicate covering transactions involve purchases of the common stock in
the open market after the distribution has been completed in order to
cover syndicate short positions. In determining the source of shares to
close out the short position, the underwriters will consider, among other
things, the price of shares available for purchase in the open market as
compared to the price at which they may purchase shares through the
over-allotment option. If the underwriters sell more shares than could be
covered by the over-allotment option -- a naked short position -- that
position can only be closed out by buying shares in the open market. A
naked short position is more likely to be created if the underwriters are
concerned that there may be downward pressure on the price of the shares
in the open market after pricing that could adversely affect investors
who purchase in the offering.

- Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by the
syndicate member is purchased in a stabilizing or syndicate covering
transaction to cover syndicate short positions.

These stabilizing transactions, syndicate covering transactions and penalty bids
may have the effect of raising or maintaining the market price of the common
stock or preventing or retarding a decline in the market price of the common
stock. As a result the price of the common stock may be higher than the price
that might otherwise exist in the open market. These transactions may be
effected on The Nasdaq Stock Market's National Market or otherwise and, if
commenced, may be discontinued at any time.

Press has engaged an affiliate of Credit Suisse First Boston Corporation to
arrange the refinancing of the Press Credit Facility.

A prospectus in electronic format may be made available on the Web sites
maintained by one or more of the underwriters participating in the offering. The
representatives may agree to allocate a number of shares to underwriters for
sale to their online brokerage account holders. Internet distributions will be
allocated by the underwriters that will make Internet distributions on the same
basis as other allocations.

Thomas Weisel Partners, LLC, one of the representatives of the
underwriters, was organized and registered as a broker-dealer in December 1998.
Since December 1998, Thomas Weisel Partners has been named as a lead or
co-manager on numerous public offerings of equity securities. Thomas Weisel
Partners does not have any material relationship with us or any of our officers,
directors or other controlling persons, except with respect to its contractual
relationship with us pursuant to the underwriting agreement entered into in
connection with the offering.

89
<PAGE> 95

NOTICE TO CANADIAN RESIDENTS

RESALE RESTRICTIONS

The distribution of the Class A common stock in Canada is being made only
on a private placement basis exempt from the requirement that we prepare and
file a prospectus with the securities regulatory authorities in each province
where trades of Class A common stock are effected. Accordingly, any resale of
the Class A common stock in Canada must be made in accordance with applicable
securities laws which will vary depending on the relevant jurisdiction and which
may require resales to be made in accordance with available statutory exemptions
or pursuant to a discretionary exemption granted by the applicable Canadian
securities regulatory authority. Purchasers are advised to seek legal advice
prior to any resale of the Class A common stock.

REPRESENTATIONS OF PURCHASERS

Each purchaser of Class A common stock in Canada who receives a purchase
confirmation will be deemed to represent to us and the dealer from whom the
purchase confirmation is received that (i) such purchaser is entitled under
applicable provincial securities laws to purchase such Class A common stock
without the benefit of a prospectus qualified under such securities laws, (ii)
where required by law, such purchaser is purchasing as principal and not as
agent, and (iii) such purchaser has reviewed the text above under "Resale
Restrictions."

RIGHTS OF ACTION (ONTARIO PURCHASERS)

The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by the
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.

ENFORCEMENT OF LEGAL RIGHTS

All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Canadian purchasers to effect service of process within Canada upon the
issuer or such persons. All or a substantial portion of the assets of the issuer
and such persons may be located outside of Canada and, as a result, it may not
be possible to satisfy a judgment against the issuer or such persons in Canada
or to enforce a judgment obtained in Canadian courts against such issuer or
persons outside of Canada.

NOTICE TO BRITISH COLUMBIA RESIDENTS

A purchaser of Class A common stock to whom the Securities Act (British
Columbia) applies, is advised that such purchaser is required to file with the
British Columbia Securities Commission a report within ten days of the sale of
any Class A common stock acquired by such purchaser pursuant to the initial
public offering. Such report must be in the form attached to British Columbia
Securities Commission Blanket Order BOR #95/17, a copy of which may be obtained
from us. Only one such report must be filed in respect of Class A common stock
acquired on the same date and under the same prospectus exemption.

TAXATION AND ELIGIBILITY FOR INVESTMENT

Canadian purchasers of Class A common stock should consult their own legal
and tax advisers with respect to the tax consequences of an investment in the
Class A common stock in their particular circumstances and with respect to the
eligibility of the Class A common stock for investment by the purchasers under
relevant Canadian legislation.

90
<PAGE> 96

LEGAL MATTERS

The legality of the Class A common stock offered in this prospectus and
certain tax and other legal matters will be passed upon for us by Skadden, Arps,
Slate, Meagher & Flom LLP. Certain legal matters will be passed upon for the
underwriters by Cravath, Swaine & Moore, New York, New York. Skadden, Arps,
Slate, Meagher & Flom LLP and Cravath, Swaine & Moore provide legal services to
Wasserstein Perella from time to time on various matters.

EXPERTS

The financial statements included in this prospectus and elsewhere in the
registration statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
said reports.

WHERE YOU CAN FIND MORE INFORMATION

This prospectus is part of a registration statement on Form S-1 that we
have filed with the Securities and Exchange Commission under the Securities Act,
with respect to our Class A common stock offered in this prospectus. This
prospectus does not contain all the information which is in the registration
statement. Certain parts of the registration statement are omitted as allowed by
the rules and regulations of the SEC. For further information on us and the
Class A common stock, you should refer to our registration statement and its
exhibits. This prospectus summarizes material provisions of contracts and other
documents to which we refer you. Since the prospectus may not contain all the
information that you may find important, you should review the full text of
these documents. We have included copies of these documents as exhibits to our
registration statement. You can inspect and copy the registration statement and
the reports and other information we file at the SEC's Public Reference Room at
450 Fifth Street, N.W., Washington, D.C. 20549. You can obtain information on
the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
The same information will be available for inspection and copying at the
regional offices of the SEC located at 7 World Trade Center, 13th Floor, New
York, NY 10048 and at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. The SEC also maintains a Web site which provides online
access to reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC at the address
www.sec.gov.

After the offering, we will be subject to the information and periodic
reporting requirements of the Securities Exchange Act of 1934. We will fulfill
these requirements by filing periodic reports, proxy statements and other
information with the SEC. We intend to furnish our stockholders with annual
reports containing consolidated financial statements certified by an independent
accounting firm. We have applied to list our Class A common stock on The Nasdaq
Stock Market's National Market. Reports, proxy statements and other information
concerning us can be inspected at the National Association of Securities
Dealers, Inc. 1735 K Street, N.W., Washington, D.C. 20006. You may also inspect
our SEC reports and other information at Nasdaq's Web site at www.nasdaq.com.

91
<PAGE> 97

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
ELEMENT K CORPORATION
Balance Sheet as of June 30, 2000 (Unaudited)............... F-3
Statement of Operations for the period from January 18, 2000
(inception) through June 30, 2000 (Unaudited)............. F-4
Statement of Stockholder's Deficit for the Period from
January 18, 2000 (inception) through June 30, 2000
(Unaudited)............................................... F-5
Statement of Cash Flows for the Period from January 18, 2000
(inception) through June 30, 2000 (Unaudited)............. F-6
Notes to Financial Statements (Unaudited)................... F-7
Report of Independent Public Accountants.................... F-9
Balance Sheet as of April 12, 2000.......................... F-10
Statement of Operations for the period from January 18, 2000
(inception) through April 12, 2000........................ F-11
Statement of Stockholder's Deficit for the Period from
January 18, 2000 (inception) through April 12, 2000....... F-12
Statement of Cash Flows for the Period from January 18, 2000
(inception) through April 12, 2000........................ F-13
Notes to Financial Statements............................... F-14

ELEMENT K HOLDINGS LLC
Balance Sheet as of June 30, 2000 (Unaudited)............... F-16
Statement of Operations and Members' Equity for the Three
Months Ended June 30, 2000 and for the period from
February 10, 2000 through June 30, 2000 (Unaudited)....... F-17
Statement of Cash Flows for the Period from February 10,
2000 through June 30, 2000 (Unaudited).................... F-18
Notes to Financial Statements (Unaudited)................... F-19

ELEMENT K CONTENT LLC
Balance Sheet as of June 30, 2000 (Unaudited)............... F-23
Statement of Operations and Members' Equity for the Three
Months Ended June 30, 2000 and for the period from
February 10, 2000 through June 30, 2000 (Unaudited)....... F-24
Statement of Cash Flows for the Period from February 10,
2000 through June 30, 2000 (Unaudited).................... F-25
Notes to Financial Statements (Unaudited)................... F-26

ELEMENT K CORPORATION PREDECESSOR BUSINESS
Statement of Operations and Division Deficit for the Three
and Six Months Ended June 30, 1999 (Unaudited)............ F-29
Statement of Cash Flows for the Six Months Ended June 30,
1999 (Unaudited).......................................... F-30
Notes to Financial Statements (Unaudited)................... F-31
Report of Independent Public Accountants.................... F-35
Balance Sheets as of December 31, 1998 and 1999............. F-36
Statements of Operations and Division Deficit for the Years
Ended December 31, 1997, 1998 and 1999.................... F-37
Statements of Cash Flows for the Years Ended December 31,
1997, 1998 and 1999....................................... F-38
Notes to Financial Statements............................... F-39
</TABLE>

F-1
<PAGE> 98

<TABLE>
<S> <C>
ELEMENT K CONTENT LLC PREDECESSOR BUSINESS
Statement of Operations and Division Equity for the Three
and Six Months Ended June 30, 1999 (Unaudited)............ F-43
Statement of Cash Flows for the Six Months Ended June 30,
1999 (Unaudited).......................................... F-44
Notes to Financial Statements (Unaudited)................... F-45
Report of Independent Public Accountants.................... F-48
Balance Sheets as of December 31, 1998 and 1999............. F-49
Statements of Operations and Division Equity for the years
ended December 31, 1997, 1998 and 1999.................... F-50
Statements of Cash Flows for the years ended December 31,
1997, 1998 and 1999....................................... F-51
Notes to Financial Statements............................... F-52
</TABLE>

F-2
<PAGE> 99

ELEMENT K CORPORATION

BALANCE SHEET

AS OF JUNE 30, 2000

(UNAUDITED)

ASSETS

<TABLE>
<S> <C>
ASSETS:
Investment in Element K Holdings LLC...................... $ 1,000
--------
TOTAL ASSETS................................................ $ 1,000
========
</TABLE>

LIABILITIES AND STOCKHOLDER'S DEFICIT

<TABLE>
<S> <C>
LIABILITIES:
Accounts payable and accrued liabilities.................. $ 10,000
--------

STOCKHOLDER'S DEFICIT:
Class B Common Stock: $.01 par value; 1 share authorized;
1 issued and outstanding............................... $ 1,000
Accumulated deficit....................................... $(10,000)
--------
Total stockholder's deficit................................. $ (9,000)
--------
TOTAL LIABILITIES AND STOCKHOLDER'S DEFICIT................. $ 1,000
========
</TABLE>

The accompanying notes to financial statements are an integral part of these
statements.
F-3
<PAGE> 100

ELEMENT K CORPORATION

STATEMENT OF OPERATIONS

FOR THE PERIOD FROM JANUARY 18, 2000 (INCEPTION) THROUGH JUNE 30, 2000

(UNAUDITED)

<TABLE>
<S> <C>
OPERATING EXPENSES:
General and administrative................................ $ 10,000
--------
Loss from operations................................... $(10,000)
PROVISION FOR INCOME TAXES:................................. --
--------
Net loss............................................... $(10,000)
========
</TABLE>

The accompanying notes to financial statements are an integral part of these
statements.
F-4
<PAGE> 101

ELEMENT K CORPORATION

STATEMENT OF STOCKHOLDER'S DEFICIT

FOR THE PERIOD FROM JANUARY 18, 2000 (INCEPTION) THROUGH JUNE 30, 2000

(UNAUDITED)

<TABLE>
<CAPTION>
CLASS B COMMON
STOCK TOTAL
---------------- ACCUMULATED STOCKHOLDER'S
SHARES AMOUNT DEFICIT DEFICIT
------ ------ ----------- -------------
<S> <C> <C> <C> <C>
Balance at January 18, 2000 (inception).......... -- $ -- $ -- $ --
Initial contribution by stockholder.............. 1 1,000 -- 1,000
Net loss......................................... -- -- (10,000) (10,000)
-- ------ -------- --------
Balance at June 30, 2000......................... 1 $1,000 $(10,000) $ (9,000)
== ====== ======== ========
</TABLE>

The accompanying notes to financial statements are an integral part of these
statements.
F-5
<PAGE> 102

ELEMENT K CORPORATION

STATEMENT OF CASH FLOWS

FOR THE PERIOD FROM JANUARY 18, 2000 (INCEPTION) THROUGH JUNE 30, 2000

(UNAUDITED)

<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.................................................. $(10,000)
Adjustments to reconcile net loss to net cash from
operating activities:
Accounts payable and accrued liabilities............... 10,000
--------
Net cash from operating activities................... --
--------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in Element K Holdings LLC...................... $ (1,000)
--------
CASH FLOWS FROM FINANCING ACTIVITIES
Contribution from stockholder............................. $ 1,000
--------
NET INCREASE IN CASH AND CASH EQUIVALENTS................... $ --
CASH AND CASH EQUIVALENTS, beginning of period.............. $ --
--------
CASH AND CASH EQUIVALENTS, end of period.................... $ --
========
</TABLE>

The accompanying notes to financial statements are an integral part of these
statements.
F-6
<PAGE> 103

ELEMENT K CORPORATION

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2000

(UNAUDITED)

1. BASIS OF PRESENTATION

Element K Corporation ("Element K Corporation" or the "Company"), a
Delaware corporation, was formed on January 18, 2000 as WBT Corp. and
subsequently changed its name to Element K Corporation. The Company, upon
formation, issued one share of Class B common stock to WP Management Partners,
LLC ("WP Partners") for $1,000. This share is convertible into 250 shares of
Class A common stock. On February 10, 2000, Element K Corporation purchased 250
membership units in Element K Holdings LLC, representing a 0.001% ownership
interest, for $1,000. This cost-method investment is reflected on the balance
sheet as an Investment in Element K Holdings LLC. Element K Holdings LLC owns
Element K LLC, which acquired Element K Corporation Predecessor Business on
February 10, 2000. Element K Holdings LLC and Element K LLC are referred to
collectively as "Element K." Element K is controlled by Wasserstein Perella
Group, Inc.

The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principals for complete
financial statements. In the opinion of management the interim financial
statements include all adjustments, which are of a normal recurring nature, that
management considers necessary to fairly present the financial position and
results of operations for such periods. Results of operations of interim periods
are not necessarily indicative of results for a full year.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying financial statements reflect the application of the
accounting policies as described below.

ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets, liabilities, revenues and
expenses as of the dates and for the periods presented. Actual results could
differ from those estimates.

CASH AND CASH EQUIVALENTS

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

LONG-LIVED ASSETS

The Company reviews for the impairment of long-lived assets in accordance
with SFAS No. 121, Accounting for Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of. When events or changes in circumstances
indicate that the carrying amount of that asset may not be recoverable an
impairment loss would be recognized when the sum of the undiscounted future net
cash flows expected to result from the use of the asset and its eventual
disposition is less than its carrying amount.

INCOME TAXES

The Company accounts for income taxes under SFAS No. 109, Accounting for
Income Taxes. Under SFAS No. 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their tax bases. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets or liabilities of a change in tax rates is recognized in the
period that the tax change occurs.

F-7
<PAGE> 104
ELEMENT K CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(UNAUDITED)

RECENTLY ISSUED ACCOUNTING STANDARDS

In June 1998, SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities was issued. This standard is effective for all fiscal years
beginning after June 15, 2000. The adoption of this standard is not expected to
have a material impact on the financial statements of the Company.

SEGMENT REPORTING

The Company adopted SFAS No. 131, Disclosures About Segments of an
Enterprise and Related Information, in the fiscal year ended December 31, 1999.
SFAS No. 131 establishes standards for reporting information regarding operating
segments in annual financial statements and requires selected information for
those segments to be presented in interim financial reports issued to
stockholders. SFAS No. 131 also establishes standards for related disclosures
about products and services and geographic areas. Operating segments are
identified as components of an enterprise about which separate and discrete
financial information is available for evaluation by the chief decision maker,
or decision making group, in making decisions how to allocate resources and
assess performance. The Company's chief operating decision maker, as defined
under SFAS No. 131, is the chief executive officer. To date, the Company has
viewed its operations and manages its business as one segment. As a result, the
financial information disclosed herein represents all of the material
information related to the Company's principal operating segment.

3. INCOME TAXES

For the period from January 18, 2000 through June 30, 2000, the Company
incurred taxable losses and generated approximately $10,000 of net operating
loss carryforwards available to offset future taxable income. In accordance with
SFAS No. 109, the Company recognized a deferred tax asset of approximately
$3,400 primarily resulting from the above mentioned net operating loss
carryforward. A full valuation allowance has been recorded related to the
deferred tax asset as a result of management's uncertainty as to the realization
of such asset. Accordingly, no net tax provision has been recorded. There are no
other temporary differences.

4. STOCKHOLDER'S EQUITY

COMMON STOCK

The authorized capital stock of Element K Corporation consists of
150,000,000 shares of Class A common stock, par value $.01 per share, and 1,000
shares of Class B common stock, par value $.01 per share. The holders of shares
of Class A common stock and the holders of shares of Class B common stock will
vote together as one class on all matters on which stockholders are entitled to
vote. The one share of Class B common stock currently outstanding is convertible
into 250 shares of Class A common stock at any time at the option of the holder.

PREFERRED STOCK

The Board of Directors is authorized to issue up to an aggregate of
50,000,000 shares of $.01 par value preferred stock. The rights and
characteristics of the preferred stock are at the discretion of the Board of
Directors. As of June 30, 2000 there was no preferred stock outstanding.

5. PUBLIC OFFERING

The Company plans to file a registration statement on Form S-1 with the
Securities and Exchange Commission for a public offering of Class A common
stock. The number of shares to be offered and the initial offering price will be
determined at a future date. The Company intends to use the net proceeds of the
offering to buy membership units in Element K and to acquire the remaining
membership units in Content.

F-8
<PAGE> 105

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholder of Element K Corporation:

We have audited the accompanying balance sheet of Element K Corporation (a
Delaware corporation) (the Company, formerly WBT Corp.) as of April 12, 2000 and
the related statements of operations, stockholder's deficit and cash flows for
the period from January 18, 2000 (inception) through April 12, 2000. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our 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 Element K Corporation as of
April 12, 2000, and the results of its operations and its cash flows for the
period from January 18, 2000 (inception) through April 12, 2000 in conformity
with accounting principles generally accepted in the United States.

ARTHUR ANDERSEN LLP

New York, New York

April 12, 2000

F-9
<PAGE> 106

ELEMENT K CORPORATION

BALANCE SHEET

AS OF APRIL 12, 2000

<TABLE>
<S> <C>
ASSETS
ASSETS:
Investment in Element K Holdings LLC...................... $ 1,000
========
Total assets................................................ $ 1,000
========
LIABILITIES AND STOCKHOLDER'S DEFICIT
LIABILITIES:
Accounts payable and accrued liabilities.................. $ 10,000
--------
STOCKHOLDER'S DEFICIT:
Class B Common Stock: $.01 par value; 1 share authorized;
1 issued and outstanding............................... $ 1,000
Accumulated deficit....................................... $(10,000)
--------
Total stockholder's deficit................................. $ (9,000)
--------
Total liabilities and stockholder's deficit................. $ 1,000
========
</TABLE>

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

F-10
<PAGE> 107

ELEMENT K CORPORATION

STATEMENT OF OPERATIONS

FOR THE PERIOD FROM JANUARY 18, 2000 (INCEPTION) THROUGH APRIL 12, 2000

<TABLE>
<S> <C>
OPERATING EXPENSES:
General and administrative.................................. $ 10,000
---------
Loss from operations...................................... $ (10,000)
PROVISION FOR INCOME TAXES:................................. --
---------
Net Loss.................................................. $ (10,000)
=========
</TABLE>

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

F-11
<PAGE> 108

ELEMENT K CORPORATION

STATEMENT OF STOCKHOLDER'S DEFICIT

FOR THE PERIOD FROM JANUARY 18, 2000 (INCEPTION) THROUGH APRIL 12, 2000

<TABLE>
<CAPTION>
CLASS B COMMON
STOCK TOTAL
---------------- ACCUMULATED STOCKHOLDER'S
SHARES AMOUNT DEFICIT DEFICIT
------ ------ ----------- -------------
<S> <C> <C> <C> <C>
Balance at January 18, 2000 (inception).......... -- $ -- $ -- $ --
Initial contribution by stockholder.............. 1 1,000 -- 1,000
Net loss......................................... -- -- (10,000) (10,000)
-- ------ -------- --------
Balance at April 12, 2000........................ 1 $1,000 $(10,000) $ (9,000)
== ====== ======== ========
</TABLE>

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

F-12
<PAGE> 109

ELEMENT K CORPORATION

STATEMENT OF CASH FLOWS

FOR THE PERIOD FROM JANUARY 18, 2000 (INCEPTION) THROUGH APRIL 12, 2000

<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $(10,000)
Adjustments to reconcile net loss to net cash from
operating activities:
Accounts payable and accrued liabilities............... 10,000
--------
Net cash from operating activities................... --
--------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in Element K Holdings LLC...................... $ (1,000)
--------
CASH FLOWS FROM FINANCING ACTIVITIES
Contribution from stockholder............................. $ 1,000
--------
NET INCREASE IN CASH AND CASH EQUIVALENTS................... $ --
CASH, beginning of period................................... $ --
--------
CASH, end of period......................................... $ --
========
</TABLE>

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

F-13
<PAGE> 110

ELEMENT K CORPORATION

NOTES TO FINANCIAL STATEMENTS

APRIL 12, 2000

1. BASIS OF PRESENTATION

Element K Corporation ("Element K Corp." or the "Company"), a Delaware
corporation, was formed on January 18, 2000 as WBT Corp. and subsequently
changed its name to Element K Corporation. The Company, upon formation, issued
one share of Class B common stock to WP Management Partners, LLC ("WP Partners")
for $1,000. This share is convertible into 250 shares of Class A common stock.
On February 10, 2000, Element K Corp. purchased 250 membership units in Element
K Holdings LLC, representing a 0.002% ownership interest, for $1,000. This
cost-method investment is reflected on the balance sheet as an Investment in
Element K Holdings LLC. Element K Holdings LLC owns Element K LLC, which
acquired Element K Corporation Predecessor Business on February 10, 2000.
Element K Holdings LLC and Element K LLC are referred to collectively as
"Element K". Element K is controlled by Wasserstein Perella Group, Inc.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying financial statements reflect the application of the
accounting policies as described below.

ESTIMATES

CASH AND CASH EQUIVALENTS

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

LONG-LIVED ASSETS

INCOME TAXES

The Company accounts for income taxes under SFAS No. 109, Accounting for
Income Taxes. Under SFAS No. 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their tax bases. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years i which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets or liabilities of a change i tax rates is recognized in the
period that the tax change occurs.

RECENTLY ISSUED ACCOUNTING STANDARDS

F-14
<PAGE> 111

ELEMENT K CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

SEGMENT REPORTING

3. INCOME TAXES

For the period from January 18, 2000 through April 12, 2000, the Company
incurred taxable losses and generated approximately $10,000 of net operating
loss carryforwards available to offset future taxable income. In accordance with
SFAS No. 109, the Company recognized a deferred tax asset of approximately
$3,400 primarily resulting from the above mentioned net operating loss
carryforward. A full valuation allowance has been recorded related to the
deferred tax asset as a result of management's uncertainty as to the realization
of such asset. Accordingly, no net tax provision has been recorded. There are no
other temporary differences.

4. STOCKHOLDERS' EQUITY

COMMON STOCK

The authorized capital stock of Element K Corp. consists of 150,000,000
shares of Class A common stock, par value $.01 per share, and 1,000 shares of
Class B common stock, par value $.01 per share. The holders of shares of Class A
common stock and the holders of shares of Class B common stock will vote
together as one class on all matters on which stockholders are entitled to vote.
The one share of Class B common stock currently outstanding is convertible into
250 shares of Class A common stock at any time at the option of the holder.

PREFERRED STOCK

The Board of Directors is authorized to issue up to an aggregate of
50,000,000 shares of $.01 par value preferred stock. The rights and
characteristics of the preferred stock are at the discretion of the Board of
Directors. As of April 12, 2000 there was no preferred stock outstanding.

5. PUBLIC OFFERING

F-15
<PAGE> 112

ELEMENT K HOLDINGS LLC

BALANCE SHEET

AS OF JUNE 30, 2000

(UNAUDITED)

<TABLE>
<S> <C>
ASSETS

CURRENT ASSETS:
Cash and cash equivalents................................. $ 3,542,015
Accounts receivable, net of allowance for doubtful
accounts of $506,000................................... 7,786,490
Prepaid expenses and other current assets................. 4,701,499
------------
Total current assets................................... 16,030,004
------------
PROPERTY AND EQUIPMENT, AT COST:
Computer equipment........................................ 3,679,463
Office equipment.......................................... 98,981
Furniture and fixtures.................................... 20,386
Less - Accumulated depreciation........................... (1,044,657)
------------
Property and equipment, net............................ 2,754,173
------------
Goodwill and identifiable intangibles, net................ 53,878,481
Note receivable........................................... 2,000,000
Investment in affiliate................................... 39,563
Deposits and other assets................................. 1,325,264
------------
TOTAL ASSETS................................................ $ 76,027,485
============

LIABILITIES AND MEMBERS' EQUITY

CURRENT LIABILITIES:
Accounts payable.......................................... $ 1,776,226
Accrued expenses.......................................... 3,262,847
Due to affiliate.......................................... 2,749,825
Deferred revenue, current portion......................... 13,432,171
------------
Total current liabilities.............................. 21,221,069
------------
DEFERRED REVENUE, NET OF CURRENT PORTION.................... 480,366

COMMITMENTS AND CONTINGENCIES
MEMBERS' EQUITY:
Members' equity........................................... 82,972,223

Accumulated deficit....................................... (28,646,173)
------------
Total members' equity....................................... 54,326,050
------------

TOTAL LIABILITIES AND MEMBERS' EQUITY....................... $ 76,027,485
============
</TABLE>

The accompanying notes to financial statements are an integral part of this
statement.
F-16
<PAGE> 113

ELEMENT K HOLDINGS LLC

STATEMENT OF OPERATIONS AND MEMBERS' EQUITY

(UNAUDITED)

<TABLE>
<CAPTION>
FOR THE PERIOD
FROM
FOR THE THREE FEBRUARY 10,
MONTHS ENDED 2000 THROUGH
JUNE 30, 2000 JUNE 30, 2000
------------- --------------
<S> <C> <C>
NET REVENUES:
Subscription revenues..................................... $ 3,457,201 $ 4,945,954
Royalty revenues.......................................... 2,729,820 4,254,955
Other revenues............................................ 709,043 918,162
------------ ------------
TOTAL NET REVENUES.......................................... 6,896,064 10,119,071
------------ ------------
COST OF NET REVENUES:
Cost of subscription revenues............................. 1,742,766 2,463,925
Cost of royalty revenues.................................. 427,727 606,733
Cost of other revenues.................................... 215,169 287,384
------------ ------------
TOTAL COSTS OF NET REVENUES................................. 2,385,662 3,358,042
------------ ------------
GROSS PROFIT................................................ 4,510,402 6,761,029
------------ ------------
OPERATING EXPENSES:
Research and development.................................. 5,783,093 7,809,644
Selling and marketing..................................... 7,926,908 9,403,781
General and administrative................................ 1,755,943 2,523,114
Depreciation and amortization............................. 6,177,118 9,531,084
------------ ------------
TOTAL OPERATING EXPENSES 21,643,062 29,267,673
------------ ------------
Loss from operations................................... (17,132,660) (22,506,594)
Equity in loss of affiliate............................ (4,065,743) (6,139,579)

PROVISION FOR INCOME TAXES.................................. -- --
------------ ------------
Net loss............................................... (21,198,403) (28,646,173)
Members' equity, beginning.................................. 61,373,230 68,821,000
Net contributions from members.............................. 14,151,223 14,151,223
------------ ------------
Members' equity, ending..................................... $ 54,326,050 $ 54,326,050
============ ============
</TABLE>

The accompanying notes to financial statements are an integral part of this
statement.
F-17
<PAGE> 114

ELEMENT K HOLDINGS LLC

STATEMENT OF CASH FLOWS

(UNAUDITED)

<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
FEBRUARY 10, 2000
THROUGH
JUNE 30, 2000
-----------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $(28,646,173)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization.......................... 9,531,084
Equity in loss of affiliate............................ 6,139,579
Changes in current assets and liabilities:
Accounts receivable.................................. (3,552,730)
Prepaid expenses and other current assets............ (4,175,788)
Accounts payable..................................... 1,307,879
Accrued expenses..................................... 1,314,013
Deferred revenue..................................... 5,060,414
Deposits and other assets............................ (1,325,265)
Due to affiliates.................................... 2,749,825
------------
Net cash used in operating activities............. (11,597,162)
------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Element K Corporation Predecessor
Business............................................... (58,359,326)
Acquisition of interest in Content Business............... (6,179,142)
Loan to Isopia............................................ (2,000,000)
Purchases of property and equipment....................... (1,294,578)
------------
Net cash used in investing activities............. (67,833,046)
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Contributions from members................................ 82,972,223
------------
Net cash provided by financing activities......... 82,972,223
------------
NET INCREASE IN CASH AND CASH EQUIVALENTS................... 3,542,015
CASH AND CASH EQUIVALENTS, beginning of period.............. --
------------
CASH AND CASH EQUIVALENTS, end of period.................... $ 3,542,015
============
</TABLE>

The accompanying notes to financial statements are an integral part of this
statement.
F-18
<PAGE> 115

ELEMENT K HOLDINGS LLC

NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

1. BASIS OF PRESENTATION

Element K Holdings LLC (the "Company") acquired Element K Predecessor
Business on February 10, 2000 for $57 million. The acquisition was accounted for
as a purchase and as a result the Company has recorded goodwill in the
accompanying balance sheet. The Company is indirectly controlled by Wasserstein
Perella Group, Inc.

The Company is a leading provider of Web-based learning, or e-learning,
designed to address the strategic objectives of businesses and government
organizations by helping them build knowledge, expand competencies and enhance
productivity. The Company's operations are currently conducted in the United
States and Canada, and internationally through resellers.

The Company is subject to risks common to rapidly growing, technology-based
companies, including limited operating history, dependence on key personnel,
rapid technological change, competition from substitute services and larger
companies, inability to protect intellectual property, proprietary rights and
Internet domain name and the need for continued market acceptance of the
Company's products and services. Further, the Company has never operated as a
stand-alone company until February 10, 2000 and may not be successful as a
stand-alone company as the Company expects future losses and may not achieve or
maintain profitability.

The accompanying financial statements of the Company are unaudited;
however, in the opinion of management, such financial statements include all
adjustments, consisting of normal recurring adjustments, necessary for the fair
presentation of the results for the period presented. The results of operations
are not necessarily indicative of the results that might be expected for the
full year.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying financial statements reflect the application of the
accounting policies as described below.

Estimates

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

Cash and Cash Equivalents

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

Concentrations of Credit Risk and Significant Customer

Statement of Financial Accounting Standards (SFAS) No. 105, Disclosure of
Information About Financial Instruments with Off-Balance-Sheet Risk and
Financial Instruments with Concentrations of Credit Risk, requires disclosure of
any significant off-balance-sheet and credit risk concentrations. The Company
has no significant off-balance-sheet credit risk such as foreign exchange
contracts, option contracts or other foreign hedging arrangements. The Company's
accounts receivable are unsecured, and the Company is at risk to the extent that
such amounts become uncollectible. The Company has not experienced any material
losses related to its accounts receivable from individual customers or groups of
customers.

F-19
<PAGE> 116
ELEMENT K HOLDINGS LLC

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(UNAUDITED)

Royalty Agreements

Prepayments of royalty fees under certain royalty agreements are charged to
operations on a usage basis.

Software Development Costs and Research and Development Costs

The Company follows the provisions of Statement of Position (SOP) 98-1,
Accounting for the Costs of Computer Software Developed or Obtained for Internal
Use, related to internally developed software and therefore capitalizes Website
development costs with estimated useful lives in excess of one year. To date,
the Company has not incurred Web site development costs with estimated useful
lives in excess of one year.

The Company charges all research and development expenses to operations as
incurred. Included in research and development expenses are costs related to
content development, technology development and other product development.

The Company does not develop software for sale to outside parties.

Property and Equipment

Property and equipment is stated at cost. The Company provides for
depreciation by charges to operations on a straight-line basis over the
estimated useful lives of those assets as follows:

<TABLE>
<S> <C>
Computer equipment.......................................... 3-5 years
Office equipment............................................ 5 years
Furniture and fixtures...................................... 7 years
</TABLE>

Betterments, renewals and extraordinary repairs that extend the life of the
asset are capitalized; other repairs and maintenance are expensed as incurred.

Long-Lived Assets

The Company reviews for the impairment of long-lived assets in accordance
with SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of. When events or changes in circumstances
indicate that the carrying amount of that asset may not be recoverable, an
impairment loss would be recognized when the sum of the undiscounted future net
cash flows expected to result from the use of the asset and its eventual
disposition is less than its carrying amount. An impairment loss is measured as
the amount by which the carrying amount of the asset exceeds the fair value of
the asset.

Goodwill and Other Identifiable Intangibles

Goodwill and other identifiable intangibles are the result of the
acquisition of the Element K Predecessor Business by the Company on February 10,
2000. The Company has received an appraisal on its identifiable intangibles and
is accordingly amortizing these over their respective remaining lives. Goodwill
and identifiable intangibles are being amortized over 1 to 3 years in the
accompanying financial statements.

Note Receivable

In May 2000 the Company loaned $2,000,000 to Isopia. The note receivable
bears interest at 6% during the first year and at 7% thereafter. Interest is
payable quarterly in arrears beginning on August 1,

F-20
<PAGE> 117
ELEMENT K HOLDINGS LLC

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(UNAUDITED)

2001. The note receivable is convertible into Isopia common stock at any time
during the period ending on the fifth anniversary of the issue date of the note
and matures on the day following the fifth anniversary of the issue date of the
note. In addition, the Company is committed to loan and or invest an additional
$8,000,000, payable in four equal installments through October 2000.

Revenue Recognition

Subscription revenues consist of the sale of annual and multi-year
contracts for use of the Company's e-learning service. Subscription revenue,
less estimated cancellations, is deferred and recognized ratably over the term
of the subscription, generally 12 months. Estimated cancellations are based upon
historical cancellation information.

Royalty revenues are derived from the licensing of content and are
recognized over the life of a contract or on a usage basis, as applicable.

Other revenue is derived primarily from the sale of CD-ROM based products
and is recognized at the time of shipment. Fulfillment of CD-ROM sales is
outsourced to an affiliate.

Advertising Costs

The Company expenses all advertising costs as incurred.

Fair Value of Financial Instruments

Financial instruments consist mainly of accounts receivable and accounts
payable. The carrying amounts of these instruments approximate their fair value.

Recently Issued Accounting Standards

In June 1998, SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities was issued. This standard is effective for all fiscal
quarters beginning after June 15, 2000. The adoption of this standard is not
expected to have a material impact on the financial statements.

Segment Reporting

Operating segments are identified as components of an enterprise about which
separate and discrete financial information is available for evaluation by the
chief decision maker, or decision making group, in making decisions on how to
allocate resources and assess performance. The Company's chief operating
decision maker, as defined under SFAS No. 131, is the chief executive officer.
To date, the Company has viewed its operations and manages its business as one
segment. As a result, the financial information disclosed herein represents all
of the material information related to the Company's principal operating
segment.

F-21
<PAGE> 118
ELEMENT K HOLDINGS LLC

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(UNAUDITED)

3. RELATED PARTY RELATIONSHIP

Related Parties

During the period February 10, 2000 through June 30, 2000 the Company
shared certain support services with other related parties. These shared
services included human resource costs, finance and accounting costs,
information technology costs and facilities costs. In preparing the accompanying
financial statements, a portion of these costs have been allocated to the
Company and included in the accompanying statement of operations for the period
February 10, 2000 through June 30, 2000. These allocated costs totaled
approximately $2,203,000. The allocation of the shared services cost was based
upon various allocation factors determined by management. Human resources,
finance and accounting and information technology costs were allocated based
upon a headcount factor and facilities costs have been allocated based upon a
square footage factor. Management believes that the methods used to allocate the
costs described above are reasonable.

The Company operates in a facility leased by a related party. During the
period, the Company was allocated a fee for leased facilities based upon a
square footage factor. During the period, this allocation totaled approximately
$190,000.

On February 10, 2000, certain officers of the Company acquired shares of
common stock at the then fair market value. As part of this transaction, these
officers entered into individual loan agreements with an affiliate. These loan
receivables were subsequently contributed to the Company. All of these officer
loans have been repaid.

4. COMMITMENTS AND CONTINGENCIES

Litigation

In December 1998, a suit was filed by a third party against Ziff-Davis. The
suit alleges a breach of contract under a software license agreement and also
alleges other claims. In June 2000, Ziff-Davis settled this lawsuit, and
included in the settlement that Pacifica is barred from bringing another action
arising out of the same facts or circumstances against Element K, its
predecessor business or its affiliates.

F-22
<PAGE> 119

ELEMENT K CONTENT LLC

BALANCE SHEET

AS OF JUNE 30, 2000

(UNAUDITED)

ASSETS

<TABLE>
<S> <C>
CASH AND CASH EQUIVALENTS................................... $ --
PREPAID ASSETS AND OTHER CURRENT ASSETS..................... 2,064,615
PROPERTY AND EQUIPMENT, AT COST:
Computer equipment........................................ 5,347,389
Furniture and fixtures.................................... 1,057,275
Leasehold improvements.................................... 654,490
Office equipment.......................................... 491,803
Less -- Accumulated depreciation.......................... (2,571,967)
-----------
Property and equipment, net............................ 4,978,990
Goodwill and identifiable intangibles, net................ 18,628,115
-----------
TOTAL ASSETS................................................ $25,671,720
===========
</TABLE>

LIABILITIES AND MEMBERS' EQUITY

<TABLE>
<S> <C>
CURRENT LIABILITIES:
Accounts payable.......................................... $ 1,182,381
Accrued expenses.......................................... 1,501,146
Deferred revenue.......................................... 2,547,919
Due to affiliate.......................................... 398,629
-----------
Total current liabilities.............................. 5,630,075
Members' preferred equity................................... 20,000,000
Members' common equity...................................... 6,504,360
Accumulated deficit......................................... (6,462,715)
-----------
TOTAL LIABILITIES AND MEMBERS' EQUITY....................... $25,671,720
===========
</TABLE>

The accompanying notes to financial statements are an integral part of this
statement.
F-23
<PAGE> 120

ELEMENT K CONTENT LLC

STATEMENT OF OPERATIONS AND MEMBERS' EQUITY

(UNAUDITED)

<TABLE>
<CAPTION>
FOR THE
FOR THE PERIOD FROM
THREE MONTHS FEBRUARY 10, 2000
ENDED THROUGH
JUNE 30, 2000 JUNE 30, 2000
------------- -----------------
<S> <C> <C>
ROYALTY REVENUES:
Element K Press LLC....................................... $ 1,481,343 $ 2,528,575
Element K Holdings LLC.................................... 1,043,935 1,397,555
----------- -----------
TOTAL REVENUES.............................................. 2,525,278 3,926,130
----------- -----------

OPERATING EXPENSES.......................................... 6,805,008 10,388,845
----------- -----------
Net loss............................................... (4,279,730) (6,462,715)
Members' equity, beginning............................. 24,321,375 26,504,360
----------- -----------
Members' equity, ending................................ $20,041,645 $20,041,645
=========== ===========
</TABLE>

The accompanying notes to financial statements are an integral part of this
statement.
F-24
<PAGE> 121

ELEMENT K CONTENT LLC

STATEMENT OF CASH FLOWS
(UNAUDITED)

<TABLE>
<CAPTION>
FOR THE PERIOD FROM
FEBRUARY 10, 2000
THROUGH
JUNE 30, 2000
-------------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $ (6,462,715)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization.......................... 4,702,381
Changes in assets and liabilities:
Prepaid assets and other current assets.............. (1,131,576)
Accounts payable..................................... 814,207
Accrued expenses..................................... 719,812
Deferred revenue..................................... 2,547,919
Due to affiliates.................................... 398,629
------------
Net cash provided by operating activities......... 1,588,657
------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Element K Content LLC Predecessor
Business............................................... (25,566,731)
Purchases of property and equipment....................... (2,526,286)
------------
Net cash used in investing activities............. (28,093,017)
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Contribution from members................................. 26,504,360
------------
Net cash provided by financing activities......... 26,504,360
------------
NET DECREASE IN CASH AND CASH EQUIVALENTS................... --
CASH AND CASH EQUIVALENTS, beginning of period.............. --
------------
CASH AND CASH EQUIVALENTS, end of period.................... $ --
============
</TABLE>

The accompanying notes to financial statements are an integral part of this
statement.
F-25
<PAGE> 122

ELEMENT K CONTENT LLC

NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

1. BASIS OF PRESENTATION

Element K Content LLC ("Content"), acquired Element K Content LLC
Predecessor Business on February 10, 2000 for $25 million. The acquisition was
accounted for as a purchase and as a result Content has recorded goodwill in the
accompanying balance sheet. Content is controlled indirectly by Wasserstein
Perella Group, Inc.

Content is subject to the risks common to other similar entities, which
primarily relates to the continued support by the Members to fund operations.
Further, Content has never operated as a stand-alone company and may not be
successful as a stand-alone company as Content expects future losses and may not
achieve or maintain profitability.

The accompanying financial statements of Content are unaudited; however, in
the opinion of management, such financial statements include all adjustments,
consisting of normal recurring adjustments necessary for the fair presentation
of the results for the period presented. The results of operations are not
necessarily indicative of the results that might be expected for the full year.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying financial statements reflect the application of the
accounting policies as described below.

Estimates

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

Cash and Cash Equivalents

Content considers all highly liquid instruments purchased with a remaining
maturity of three months or less to be cash equivalents.

Software Development Costs and Research and Development Costs

Content follows the provisions of Statement of Position (SOP) 98-1,
Accounting for the Costs of Computer Software Developed or Obtained for Internal
Use, related to internally developed software and therefore capitalizes Web site
development costs with estimated useful lives in excess of one year. To date,
Content has not incurred Web site development costs with estimated useful lives
in excess of one year.

Content charges all research and development expenses to operations as
incurred. Included in research and development are costs related to content
development.

Content does not develop software for sale to outside parties.

F-26
<PAGE> 123
ELEMENT K CONTENT LLC

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

(UNAUDITED)

Property and Equipment

Property and equipment is stated at cost. Content provides for depreciation
and amortization by charges to operations on a straight-line basis over the
estimated useful lives of those assets as follows:

Leasehold improvements are amortized over the shorter of their useful lives
or the lease term.

Betterments, renewals and extraordinary repairs that extend the life of the
asset are capitalized; other repairs and maintenance are expensed as incurred.

Long-Lived Assets

Content reviews for the impairment of long-lived assets in accordance with
SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of. When events or changes in circumstances
indicate that the carrying amount of that asset may not be recoverable, an
impairment loss would be recognized when the sum of the undiscounted future net
cash flows expected to result from the use of the asset and its eventual
disposition is less than its carrying amount. An impairment loss is measured as
the amount by which the carrying amount of the asset exceeds the fair value of
the asset.

Goodwill and Other Identifiable Intangibles

Goodwill and other identifiable intangibles are the result of the
acquisition of the Element K Predecessor Business by the Company on February 10,
2000. The Company has received an appraisal on its identifiable intangibles and
is accordingly amortizing these over their respective remaining lives. Goodwill
and identifiable intangibles are being amortized over 3 to 10 years in the
accompanying financial statements.

Revenue Recognition and Operating Expenses

Content's revenue consists of reimbursements of expenses incurred by
Content on behalf of affiliates pursuant to a royalty arrangement. Content's
operating expenses consist primarily of payroll and related expenses, contract
labor, depreciation and amortization and allocated costs.

Recently Issued Accounting Standards

In June 1998, SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities, was issued. This standard is effective for all fiscal
quarters beginning after June 15, 2000. The adoption of this standard is not
expected to have a material impact on the financial statements of Content.

Segment Reporting

Content adopted SFAS No. 131, Disclosures About Segments of an Enterprise
and Related Information, in the fiscal year ended December 31, 1999. SFAS No.
131 establishes standards for reporting information regarding operating segments
in annual financial statements and requires selected information for those
segments to be presented in interim financial reports issued to stockholders.
SFAS No. 131 also establishes standards for related disclosures about products
and services and geographic areas. Operating segments are identified as
components of an enterprise about which separate and discrete

F-27
<PAGE> 124
ELEMENT K CONTENT LLC

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

(UNAUDITED)

financial information is available for evaluation by the chief decision maker,
or decision making group, in making decisions how to allocate resources and
assess performance. Content's chief operating decision-maker, as defined under
SFAS No. 131, is the chief executive officer. To date, Content has viewed its
operations and manages its business as one segment. As a result, the financial
information disclosed herein represents all of the material information related
to Content's principal operating segment.

3. RELATED PARTY RELATIONSHIP

Related Parties

During the period, Content provided certain services for affiliates. These
services primarily consisted of content development services. Content developed
training material for online distribution, classroom based training material and
printed material. Content charged its affiliates a royalty for the use of this
content in its products and services.

During the period, Content shared certain support services with affiliates.
These shared service costs included human resource costs, finance and accounting
costs, information technology costs and facilities costs. For the accompanying
financial statements, a portion of these costs have been allocated to Content
and included in the accompanying statements, of operations for the period. These
allocated costs totaled approximately $1,060,000. The allocation of the shared
service cost was based upon various allocation factors determined by management.
Human resources, finance and accounting and information technology costs were
allocated based upon a headcount factor and facilities costs have been allocated
based upon a square footage factor. Management believes that the methods used to
allocate the costs described above are reasonable.

Content operates in a facility leased by an affiliate. During the period,
Content was allocated a fee for leased facilities based upon a square footage
factor. During the period, this allocation totaled approximately $89,000.

F-28
<PAGE> 125

ELEMENT K CORPORATION PREDECESSOR BUSINESS
(A CARVE-OUT BUSINESS OF ZIFF DAVIS INC.)

STATEMENT OF OPERATIONS AND DIVISION DEFICIT

(UNAUDITED)

<TABLE>
<CAPTION>
FOR THE THREE FOR THE SIX
MONTHS ENDED MONTHS ENDED
JUNE 30, 1999 JUNE 30, 1999
------------- -------------
<S> <C> <C>
NET REVENUES:
Subscription revenues..................................... $ 1,025,970 $ 1,794,387
Royalty revenues.......................................... 1,238,895 2,075,306
Other revenues............................................ 201,192 313,717
----------- -----------
TOTAL NET REVENUES.......................................... 2,466,057 4,183,410
----------- -----------
COST OF NET REVENUES:
Cost of subscription revenues............................. 1,073,275 1,789,491
Cost of royalty revenues.................................. 29,728 61,040
Cost of other revenues.................................... 8,403 14,963
----------- -----------
TOTAL COSTS OF NET REVENUES................................. 1,111,406 1,865,494
----------- -----------
GROSS PROFIT................................................ 1,354,651 2,317,916
----------- -----------
OPERATING EXPENSES:
Research and development.................................. 1,393,724 2,694,210
Selling and marketing..................................... 812,923 1,637,086
General and administrative................................ 825,391 1,642,512
Depreciation.............................................. 48,280 101,055
----------- -----------
TOTAL OPERATING EXPENSES 3,080,318 6,074,863
----------- -----------
Loss from operations................................... (1,725,667) (3,756,947)
PROVISION FOR INCOME TAXES.................................. -- --
----------- -----------
Net loss............................................... (1,725,667) (3,756,947)
Division Deficit, beginning................................. (1,591,724) (1,023,867)
Net contributions from parent.......................... 2,386,351 3,849,774
----------- -----------
Division Deficit, ending.................................... $ (931,040) $ (931,040)
=========== ===========
</TABLE>

The accompanying notes to financial statements are an integral part of this
statement.
F-29
<PAGE> 126

ELEMENT K CORPORATION PREDECESSOR BUSINESS
(A CARVE-OUT BUSINESS OF ZIFF DAVIS INC.)

STATEMENT OF CASH FLOWS

(UNAUDITED)

<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
JUNE 30, 1999
-------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $(3,756,947)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation........................................... 101,055
Changes in current assets and liabilities:
Accounts receivable.................................. (151,605)
Prepaid expenses and other current assets............ (191,230)
Accounts payable..................................... 159,231
Accrued expenses..................................... 186,867
Deferred revenue..................................... 423,366
-----------
Net cash used in operating activities............. (3,229,263)
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment....................... (620,511)
-----------
Net cash used in investing activities............. (620,511)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net contributions from parent............................. 3,849,774
-----------
Net cash provided by financing activities......... 3,849,774
-----------
NET CHANGE IN CASH AND CASH EQUIVALENTS..................... --
CASH AND CASH EQUIVALENTS, beginning of period.............. --
-----------
CASH AND CASH EQUIVALENTS, end of period.................... $ --
===========
</TABLE>

The accompanying notes to financial statements are an integral part of this
statement.
F-30
<PAGE> 127

ELEMENT K CORPORATION PREDECESSOR BUSINESS
(A CARVE-OUT BUSINESS OF ZIFF DAVIS INC.)

NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

1. BASIS OF PRESENTATION

The Element K Corporation Predecessor Business operated as a division (the
"Division") of Ziff Davis Education ("ZDE") until it was acquired on February
10, 2000. Until February 10, 2000, ZDE operated as a division of Ziff Davis Inc.
(the "Parent"). The Division is the predecessor of Element K Holdings LLC.

The accompanying financial statements include the accounts of the Element K
Corporation Predecessor Business (a carve-out business of Ziff Davis Inc.) on a
stand-alone basis as if it had been an independent reporting entity for the
period presented. The financial information included herein may not necessarily
reflect the financial position, results of operations or cash flows of the
Division in the future, nor what the financial position, results of operations
or cash flows would have been if it had been a separate, stand-alone company
throughout the period covered.

The Division is a leading provider of Web-based learning, or e-learning,
designed to address the strategic objectives of businesses and government
organizations by helping them build knowledge, expand competencies and enhance
productivity. The Division's operations are currently conducted in the United
States and Canada, and internationally through resellers.

The Division is subject to risks common to rapidly growing,
technology-based companies, including limited operating history, dependence on
key personnel, rapid technological change, competition from substitute services
and larger companies, inability to protect intellectual property, proprietary
rights and Internet domain name and the need for continued market acceptance of
the Division's products and services. Further, the Division has never operated
as a stand-alone company and may not be successful as a stand-alone company as
the Division expects future losses and may not achieve or maintain
profitability. In addition, pending litigation could have an adverse effect on
the Division (See Note 4).

The accompanying financial statements of the Division are unaudited;
however, in the opinion of management, such financial statements include all
adjustments, consisting of normal recurring adjustments, necessary for the fair
presentation of the results for the period presented. The results of operations
are not necessarily indicative of the results that might be expected for the
full year.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying financial statements reflect the application of the
accounting policies as described below.

Estimates

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

Cash and Cash Equivalents

The Division considers all highly liquid instruments purchased with a
remaining maturity of three months or less to be cash equivalents. During the
first two quarters of 1999, the Division's net cash source and use were remitted
and reimbursed by the Parent and as a result, the Division did not maintain
separate cash balances. Accordingly, the Division had no cash or cash
equivalents as of June 30, 1999.

F-31
<PAGE> 128
ELEMENT K CORPORATION PREDECESSOR BUSINESS
(A CARVE-OUT BUSINESS OF ZIFF DAVIS INC.)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(UNAUDITED)

Concentrations of Credit Risk and Significant Customer

Statement of Financial Accounting Standards (SFAS) No. 105, Disclosure of
Information About Financial Instruments with Off-Balance-Sheet Risk and
Financial Instruments with Concentrations of Credit Risk, requires disclosure of
any significant off-balance-sheet and credit risk concentrations. The Division
has no significant off-balance-sheet credit risk such as foreign exchange
contracts, option contracts or other foreign hedging arrangements. The
Division's accounts receivable are unsecured, and the Division is at risk to the
extent that such amounts become uncollectible. The Division has not experienced
any material losses related to its accounts receivable from individual customers
or groups of customers.

Royalty Agreements

Prepayments of royalty fees under royalty agreements are charged to
operations on a usage basis.

Software Development Costs and Research and Development Costs

The Division follows the provisions of Statement of Position (SOP) 98-1,
Accounting for the Costs of Computer Software Developed or Obtained for Internal
Use, related to internally developed software. In accordance with the policy of
the Parent, the Division has expensed all Web site development costs as
incurred.

The Division charges all research and development expenses to operations as
incurred. Included in research and development are costs related to content
development, technology development and other product development.

The Division does not develop software for sale to outside parties.

Property and Equipment

Property and equipment is stated at cost. The Division provides for
depreciation by charges to operations on a straight-line basis over the
estimated useful lives of those assets as follows:

Betterments, renewals and extraordinary repairs that extend the life of the
asset are capitalized; other repairs and maintenance are expensed as incurred.

Long-Lived Assets

The Division reviews for the impairment of long-lived assets in accordance
with SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of. When events or changes in circumstances
indicate that the carrying amount of that asset may not be recoverable, an
impairment loss would be recognized when the sum of the undiscounted future net
cash flows expected to result from the use of the asset and its eventual
disposition is less than its carrying amount. An impairment loss is measured as
the amount by which the carrying amount of the asset exceeds the fair value of
the asset.

Revenue Recognition

Subscription revenues consist of the sale of annual and multi-year
contracts for use of the Division's e-learning service. Subscription revenue,
less estimated cancellations, is deferred and recognized ratably

F-32
<PAGE> 129
ELEMENT K CORPORATION PREDECESSOR BUSINESS
(A CARVE-OUT BUSINESS OF ZIFF DAVIS INC.)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(UNAUDITED)

over the term of the subscription, generally 12 months. Estimated cancellations
are based upon historical cancellation information.

Royalty revenues are derived from the licensing of content to a related
party (See Note 3) and third party customers. Royalty revenue is recognized over
the life of a contract or on a usage basis, as applicable.

Other revenue is derived from the sale of CD-ROM based products and is
recognized at the time of shipment. Fulfillment of CD-ROM sales is outsourced to
a separate division of ZDE.

Advertising Costs

The Division expenses all advertising costs as incurred.

Income Taxes

For 1999, the results of the Division were included in the consolidated tax
return of the Parent. The Division's policy is to calculate income taxes as if
it were a separate company using the separate company return method. The
Division has not recorded a tax provision due to its historical net operating
losses.

Fair Value of Financial Instruments

Financial instruments consist mainly of accounts receivable and accounts
payable. The carrying amounts of these instruments approximate their fair value.

Recently Issued Accounting Standards

Segment Reporting

The Division adopted SFAS No. 131, Disclosures About Segments of an
Enterprise and Related Information, in the fiscal year ended December 31, 1999.
SFAS No. 131 establishes standards for reporting information regarding operating
segments in annual financial statements and requires selected information for
those segments to be presented in interim financial reports issued to
stockholders. SFAS No. 131 also establishes standards for related disclosures
about products and services and geographic areas. Operating segments are
identified as components of an enterprise about which separate and discrete
financial information is available for evaluation by the chief decision maker,
or decision making group, in making decisions how to allocate resources and
assess performance. The Division's chief operating decision-maker, as defined
under SFAS No. 131, is the chief executive officer. To date, the Division has
viewed its operations and manages its business as one segment. As a result, the
financial information disclosed herein represents all of the material
information related to the Division's principal operating segment.

3. PARENT AND RELATED PARTY RELATIONSHIP

Parent

During the first two quarters of 1999, the Parent allocated certain
overhead costs to the Division. The allocated costs included in general and
administrative expenses on the accompanying statement of

F-33
<PAGE> 130
ELEMENT K CORPORATION PREDECESSOR BUSINESS
(A CARVE-OUT BUSINESS OF ZIFF DAVIS INC.)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(UNAUDITED)

operations. The allocation includes costs associated with services the Parent
provided to the Division such as corporate sales and marketing, licensing, human
resources, employee benefit plans, facilities, legal and information technology
costs. The allocation by the Parent was based upon such factors as actual usage,
headcount, square footage or relative contribution. Following the completion of
the acquisition described in Note 5, corporate allocations ceased.

Related Parties

The Division shared certain support services with other divisions of ZDE.
These shared services included sales and marketing expense, content development
expense, human resource costs, finance and accounting costs, information
technology costs and facilities costs. In preparing the accompanying financial
statements, a portion of these costs have been allocated to the Division and
included in the accompanying statements of operations. The allocation of the
shared services cost was based upon various allocation factors determined by
management. Sales and marketing costs have been allocated based primarily upon
actual amounts incurred by the Division. Content development costs have been
allocated based upon actual usage amounts. Human resources, finance and
accounting and information technology costs were allocated based upon a
headcount factor and facilities costs have been allocated based upon a square
footage factor. Management believes that the methods used to allocate the costs
described above are reasonable.

The Division outsourced its content development to the Element K Content
LLC Predecessor Business (the "Content Division") of ZDE. Under this
arrangement, the Division supplied the Content Division with content to be
repurposed for Internet distribution. In exchange for performing these services,
a portion of the Content Division expenses were allocated to the Division.

4. COMMITMENTS AND CONTINGENCIES

Litigation

In December 1998, a suit was filed by a third party against the Parent. The
suit alleges a breach of contract under a software license agreement and also
alleges other claims.

5. SUBSEQUENT EVENT

On February 10, 2000, the Division was acquired by an investor group led by
U.S. Equity Partners, L.P., a private equity fund managed by Wasserestein
Perella Group, Inc., an international investment bank based in New York, New
York. In exchange for all of the assets of the Division, the Parent received $57
million.

F-34
<PAGE> 131

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Element K Corporation:

We have audited the accompanying balance sheets of Element K Corporation
Predecessor Business (a carve-out business of Ziff Davis Education which was a
division of Ziff Davis Inc. and predecessor of Element K Corporation) as of
December 31, 1998 and 1999, and the related statements of operations and
division deficit and cash flows for each of the three years in the period ended
December 31, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Element K Corporation
Predecessor Business as of December 31, 1998 and 1999, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States.

ARTHUR ANDERSEN LLP

Rochester, New York
March 15, 2000

F-35
<PAGE> 132

ELEMENT K CORPORATION PREDECESSOR BUSINESS
(A CARVE-OUT BUSINESS OF ZIFF DAVIS INC.)

BALANCE SHEETS
AS OF DECEMBER 31, 1998 AND 1999

ASSETS

<TABLE>
<CAPTION>
1998 1999
---------- ----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................. $ -- $ --
Accounts receivable, net of allowance for doubtful
accounts of $149,000 and $299,000, in 1998 and 1999,
respectively........................................... 1,827,907 4,400,974
Prepaid expenses and other current assets................. 379,602 890,131
---------- ----------
Total current assets................................... 2,207,509 5,291,105
---------- ----------
PROPERTY AND EQUIPMENT, AT COST:
Computer equipment........................................ 613,369 2,340,176
Office equipment.......................................... 21,091 86,441
Furniture and fixtures.................................... 3,316 6,967
Less -- Accumulated depreciation.......................... (215,624) (577,332)
---------- ----------
Property and equipment, net............................ 422,152 1,856,252
---------- ----------
TOTAL ASSETS................................................ $2,629,661 $7,147,357
========== ==========
</TABLE>

LIABILITIES AND DIVISION DEFICIT

<TABLE>
<CAPTION>
1998 1999
----------- -----------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable.......................................... $ 81,225 $ 468,778
Accrued expenses.......................................... 657,346 1,447,783
Deferred revenue, current portion......................... 2,914,957 7,702,848
----------- -----------
Total current liabilities.............................. 3,653,528 9,619,409
----------- -----------
DEFERRED REVENUE, NET OF CURRENT PORTION.................... -- 519,011

COMMITMENTS AND CONTINGENCIES

DIVISION DEFICIT............................................ (1,023,867) (2,991,063)
----------- -----------
TOTAL LIABILITIES AND DIVISION DEFICIT...................... $ 2,629,661 $ 7,147,357
=========== ===========
</TABLE>

The accompanying notes to financial statements are an integral part of these
statements.
F-36
<PAGE> 133

ELEMENT K CORPORATION PREDECESSOR BUSINESS
(A CARVE-OUT BUSINESS OF ZIFF DAVIS INC.)

STATEMENTS OF OPERATIONS AND DIVISION DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

<TABLE>
<CAPTION>
1997 1998 1999
---------- ----------- -----------
<S> <C> <C> <C>
NET REVENUES:
Subscription revenues.............................. $ 224,815 $ 1,737,260 $ 4,945,924
Royalty revenues................................... 2,874,024 2,998,739 4,955,345
Other revenues..................................... -- 194,515 639,771
---------- ----------- -----------
TOTAL NET REVENUES................................... 3,098,839 4,930,514 10,541,040
---------- ----------- -----------
COST OF NET REVENUES:
Cost of subscription revenues...................... 122,066 1,192,940 3,751,742
Cost of royalty revenues........................... 108,015 120,814 116,688
Cost of other revenues............................. -- 22,341 25,418
---------- ----------- -----------
TOTAL COSTS OF NET REVENUES.......................... 230,081 1,336,095 3,893,848
---------- ----------- -----------
GROSS PROFIT......................................... 2,868,758 3,594,419 6,647,192
---------- ----------- -----------
OPERATING EXPENSES:
Research and development........................... 1,353,811 3,527,401 7,199,485
Selling and marketing.............................. 897,788 2,199,015 4,017,792
General and administrative......................... 637,432 1,842,849 3,282,581
Depreciation....................................... 108,345 107,279 361,708
---------- ----------- -----------
TOTAL OPERATING EXPENSES 2,997,376 7,676,544 14,861,566
---------- ----------- -----------
Loss from operations............................ (128,618) (4,082,125) (8,214,374)
PROVISION FOR INCOME TAXES........................... -- -- --
---------- ----------- -----------
Net loss........................................ (128,618) (4,082,125) (8,214,374)
Division Deficit, beginning.......................... -- (167,085) (1,023,867)
Net contributions from parent................... (38,467) 3,225,343 6,247,178
---------- ----------- -----------
Division Deficit, ending............................. $ (167,085) $(1,023,867) $(2,991,063)
========== =========== ===========
</TABLE>

The accompanying notes to financial statements are an integral part of these
statements.
F-37
<PAGE> 134

ELEMENT K CORPORATION PREDECESSOR BUSINESS
(A CARVE-OUT BUSINESS OF ZIFF DAVIS INC.)

STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

<TABLE>
<CAPTION>
1997 1998 1999
---------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................................... $ (128,618) $(4,082,125) $(8,214,374)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation.................................... 108,345 107,279 361,708
Changes in current assets and liabilities:
Accounts receivable........................... (880,457) (947,450) (2,573,067)
Prepaid expenses and other current assets..... (288,873) (90,729) (510,529)
Accounts payable.............................. 63,142 18,083 387,553
Accrued expenses.............................. 136,537 520,809 790,437
Deferred revenue.............................. 1,569,148 1,345,809 5,306,902
---------- ----------- -----------
Net cash provided by (used in) operating
activities............................... 579,224 (3,128,324) (4,451,370)
---------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment................ (540,757) (97,019) (1,795,808)
---------- ----------- -----------
Net cash used in investing activities...... (540,757) (97,019) (1,795,808)
---------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net contributions from parent...................... (38,467) 3,225,343 6,247,178
---------- ----------- -----------
Net cash (used in) provided by financing
activities............................... (38,467) 3,225,343 6,247,178
---------- ----------- -----------
NET CHANGE IN CASH AND CASH EQUIVALENTS.............. -- -- --
CASH AND CASH EQUIVALENTS, beginning of year......... -- -- --
---------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of year............... $ -- $ -- $ --
========== =========== ===========
</TABLE>

The accompanying notes to financial statements are an integral part of these
statements.
F-38
<PAGE> 135

ELEMENT K CORPORATION PREDECESSOR BUSINESS
(A CARVE-OUT BUSINESS OF ZIFF DAVIS INC.)

NOTES TO FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

The accompanying financial statements include the accounts of the Element K
Corporation Predecessor Business (a carve-out business of Ziff Davis Inc.) on a
stand-alone basis as if it had been an independent reporting entity for the
periods presented. The financial information included herein may not necessarily
reflect the financial position, results of operations or cash flows of the
Division in the future, nor what the financial position, results of operations
or cash flows would have been if it had been a separate, stand-alone company
throughout the periods covered.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying financial statements reflect the application of the
accounting policies as described below.

Estimates

Cash and Cash Equivalents

The Division considers all highly liquid instruments purchased with a
remaining maturity of three months or less to be cash equivalents. During 1997,
1998 and 1999, the Division's net cash source and use were remitted and
reimbursed by the Parent and as a result, the Division did not maintain separate
cash balances. Accordingly, the Division had no cash or cash equivalents as of
December 31, 1998 and 1999.

Concentrations of Credit Risk and Significant Customer

F-39
<PAGE> 136
ELEMENT K CORPORATION PREDECESSOR BUSINESS
(A CARVE-OUT BUSINESS OF ZIFF DAVIS INC.)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

or other foreign hedging arrangements. The Division's accounts receivable are
unsecured, and the Division is at risk to the extent that such amounts become
uncollectible. The Division has not experienced any material losses related to
its accounts receivable from individual customers or groups of customers. In
fiscal 1997 and 1998 the Division did not have any customer who accounted for
greater than 10% of net revenues. In 1999, the Division had one customer, a
related party (See Note 3), who accounted for 16% of net revenues.

Royalty Agreements

Included in prepaid expenses on the accompanying balance sheets is
approximately $357,000 and $778,000 as of December 31, 1998 and 1999,
respectively, related to prepayments of royalty fees under certain royalty
agreements (see Note 6). These royalty fees are charged to operations on a usage
basis.

Software Development Costs and Research and Development Costs

The Division does not develop software for sale to outside parties.

Property and Equipment

Property and equipment is stated at cost. The Division provides for
depreciation by charges to operations on a straight-line basis over the
estimated useful lives of those assets as follows:

Betterments, renewals and extraordinary repairs that extend the life of the
asset are capitalized; other repairs and maintenance are expensed as incurred.

Long-Lived Assets

Revenue Recognition

F-40
<PAGE> 137
ELEMENT K CORPORATION PREDECESSOR BUSINESS
(A CARVE-OUT BUSINESS OF ZIFF DAVIS INC.)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

over the term of the subscription, generally 12 months. Estimated cancellations
are based upon historical cancellation information.

Other revenue is derived from the sale of CD-ROM based products and is
recognized at the time of shipment. Fulfillment of CD-ROM sales is outsourced to
a separate division of ZDE.

Advertising Costs

The Division expenses all advertising costs as incurred.

Income Taxes

For the years 1997, 1998 and 1999, the results of the Division were
included in the consolidated tax return of the Parent. The Division's policy is
to calculate income taxes as if it were a separate company using the separate
company return method. The Division has not recorded a tax provision due to its
historical net operating losses.

Fair Value of Financial Instruments

Financial instruments consist mainly of accounts receivable and accounts
payable. The carrying amounts of these instruments approximate their fair value.

Recently Issued Accounting Standards

Segment Reporting

3. COMMITMENTS AND CONTINGENCIES

Royalty Agreements

During 1997, 1998 and 1999, the Division entered into certain royalty
agreements with outside parties. These agreements permit the use of certain
training content by the Division in exchange for a royalty fee.

F-41
<PAGE> 138
ELEMENT K CORPORATION PREDECESSOR BUSINESS
(A CARVE-OUT BUSINESS OF ZIFF DAVIS INC.)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

These royalty fees are generally based upon a percentage of revenues earned by
the Division through the use of the licensed content. The royalty fee percentage
ranges from 5% to 60% of product sales, as defined in the respective agreements.
Royalty fees included in cost of subscription revenues in the accompanying
statements of operations for 1997, 1998 and 1999 totaled approximately $29,000,
$161,000 and $1,217,000, respectively.

One royalty agreement includes minimum royalty payments annually over the
life of the three year contract. Under this agreement, the Division is required
to pay minimum royalties of $500,000, $1,250,000 and $1,500,000 in 2000, 2001
and 2002, respectively. After a period, as defined in the agreement, the
Division may elect to reduce its payments in 2001 and 2002 to $250,000 per year
by forfeiting the exclusivity right and increasing the royalty rate from the
greater of $25 per subscriber or 15% to 25% of subscription revenues, as defined
in the agreement. If the Division makes such an election, the Division may also
eliminate the 2002 minimum payment by terminating the agreement within 90 days
of December 31, 2001.

Litigation

In December 1998, a suit was filed by a third party against the Parent. The
suit alleges a breach of contract under a software license agreement and also
alleges other claims. The third party is seeking, among other things, injunctive
relief and damages. The Division cannot be certain that the Parent will be
successful in its defense of these claims. If the litigation is decided
adversely to the Parent, it may have a material adverse impact on the operations
of the Division. Related to the acquisition of the Division, as described in
Note 8, the Division has been indemnified by the Parent for any and all damages
assessed against the Company in the pre-acquisition period.

4. EMPLOYEE BENEFIT PLAN

Employees of the Division who have met certain eligibility requirements are
eligible to participate in the 401(k) Plan (the Plan) sponsored by the Parent.
Under the terms of the Plan, employees may elect to make tax-deferred
contributions to the Plan. In addition, the Parent may at their discretion, make
a contribution to the Plan. Contributions made by the Parent to the plan have
been included in the allocation of costs described in Note 3.

5. SUBSEQUENT EVENT

F-42
<PAGE> 139

ELEMENT K CONTENT LLC PREDECESSOR BUSINESS
(A CARVE-OUT BUSINESS OF ZIFF DAVIS INC.)

STATEMENT OF OPERATIONS AND DIVISION EQUITY

(UNAUDITED)

<TABLE>
<CAPTION>
FOR THE FOR THE
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1999 JUNE 30, 1999
------------------ ----------------
<S> <C> <C>
REIMBURSED COSTS:
Element K Predecessor Business.......................... $ 747,951 $1,475,417
Other ZDE divisions..................................... 1,213,501 2,426,563
---------- ----------
TOTAL REIMBURSED COSTS.................................... 1,961,452 3,901,980
---------- ----------

COST CENTER OPERATING EXPENSES............................ 1,961,452 3,901,980
---------- ----------
Net income........................................... -- --
Division Equity, beginning................................ 2,426,563 2,228,208
Net contributions from division...................... 167,087 365,442
---------- ----------
Division Equity, ending................................... $2,593,650 $2,593,650
========== ==========
</TABLE>

The accompanying notes to financial statements are an integral part of this
statement.
F-43
<PAGE> 140

ELEMENT K CONTENT LLC PREDECESSOR BUSINESS
(A CARVE-OUT BUSINESS OF ZIFF DAVIS INC.)

STATEMENTS OF CASH FLOWS

(UNAUDITED)

<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
JUNE 30, 1999
-------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ --
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 437,919
Changes in current assets and liabilities:
Prepaid expenses and other current assets............ 17,675
Accounts payable..................................... 82,922
Accrued expenses..................................... 13,036
---------
Net cash provided by operating activities......... 551,552
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment....................... (916,994)
---------
Net cash used in investing activities............. (916,994)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Contributions from division............................... 365,442
---------
Net cash provided by financing activities......... 365,442
---------
NET INCREASE IN CASH AND CASH EQUIVALENTS...................
CASH AND CASH EQUIVALENTS, beginning of period.............. --
---------
CASH AND CASH EQUIVALENTS, end of period.................... $ --
=========
</TABLE>

The accompanying notes to financial statements are an integral part of this
statement.
F-44
<PAGE> 141

ELEMENT K CONTENT LLC PREDECESSOR BUSINESS
(A CARVE-OUT BUSINESS OF ZIFF DAVIS INC.)

NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

1. BASIS OF PRESENTATION

The Element K Content LLC Predecessor Business operated as a cost center
(the "Cost Center") of Ziff Davis Education ("ZDE" or the "Division") until its
acquisition on February 10, 2000. Until February 10, 2000, ZDE operated as a
division of Ziff Davis Inc. (the "Parent"). The Cost Center is the predecessor
of Element K Content LLC.

The accompanying financial statements include the accounts of the Element K
Content LLC Predecessor Business (a carve-out business of Ziff Davis Inc.) on a
stand-alone basis as if it had been an independent reporting entity for the
period presented. The financial information included herein may not necessarily
reflect the financial position, results of operations or cash flows of the Cost
Center in the future, nor what the financial position, results of operations or
cash flows would have been if it had been a separate, stand-alone company
throughout the period covered.

Until the date of the acquisition, the Cost Center provided content
development services to certain divisions of ZDE.

The Cost Center is subject to the risks common to other similar entities,
which primarily relates to the continued support by the Parent to fund
operations. Further, the Cost Center has never operated as a stand-alone company
and may not be successful as a stand-alone company as the Cost Center expects
future losses and may not achieve or maintain profitability.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying financial statements reflect the application of the
accounting policies as described below.

Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets, liabilities, revenues and
expenses as of and for the period presented. Actual results could differ from
those estimates.

Cash and Cash Equivalents

The Cost Center considers all highly liquid instruments purchased with a
remaining maturity of three months or less to be cash equivalents. During the
first two quarters of 1999, payments were made by the Parent and as a result,
the Cost Center did not maintain separate cash balances. Accordingly, the Cost
Center had no cash or cash equivalents as of June 30, 1999.

Software Development Costs and Research and Development Costs

The Cost Center follows the provisions of Statement of Position (SOP) 98-1,
Accounting for the Costs of Computer Software Developed or Obtained for Internal
Use, related to internally developed software.

F-45
<PAGE> 142
ELEMENT K CONTENT LLC PREDECESSOR BUSINESS
(A CARVE-OUT BUSINESS OF ZIFF DAVIS INC.)

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

(UNAUDITED)

The Cost Center charges all research and development expenses to operations
as incurred. Included in research and development are costs related to content
development.

The Cost Center does not develop software for sale to outside parties.

Property and Equipment

Property and equipment is stated at cost. The Cost Center provides for
depreciation and amortization by charges to operations on a straight-line basis
over the estimated useful lives of those assets as follows:

<TABLE>
<S> <C>
Computer equipment...................................... 3-5 years
Office equipment........................................ 5 years
Furniture and fixtures.................................. 7 years
</TABLE>

Leasehold improvements are amortized over the shorter of their useful lives
or the lease term.

Betterments, renewals and extraordinary repairs that extend the life of the
asset are capitalized; other repairs and maintenance are expensed as incurred.

Long-Lived Assets

The Cost Center reviews for the impairment of long-lived assets in
accordance with SFAS No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of. When events or changes in
circumstances indicate that the carrying amount of that asset may not be
recoverable, an impairment loss would be recognized when the sum of the
undiscounted future net cash flows expected to result from the use of the asset
and its eventual disposition is less than its carrying amount. An impairment
loss is measured as the amount by which the carrying amount of the asset exceeds
the fair value of the asset.

Revenue Recognition and Cost Center Operating Expenses

The Cost Center's revenue consists of reimbursements of expenses incurred
by the Cost Center on behalf of other divisions of the Parent. The Cost Center's
operating expenses consist primarily of payroll and related expenses, contract
labor, depreciation and amortization and allocated costs (See Note 3).

Income Taxes

For 1999, the results of the Cost Center were included in the consolidated
tax return of the Parent. The Cost Center's policy is to calculate income taxes
as if it were a separate company using the separate return method. The Cost
Center has not recorded a tax provision due to the fact that it operates at a
break-even level as all costs are reimbursed by other divisions of the Parent.
The Cost Center had no net temporary differences between income tax and
financial reporting, therefore, there has been no recognition of deferred taxes.

Recently Issued Accounting Standards

F-46
<PAGE> 143
ELEMENT K CONTENT LLC PREDECESSOR BUSINESS
(A CARVE-OUT BUSINESS OF ZIFF DAVIS INC.)

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

(UNAUDITED)

Segment Reporting

The Cost Center adopted SFAS No. 131, Disclosures About Segments of an
Enterprise and Related Information, in the fiscal year ended December 31, 1999.
SFAS No. 131 establishes standards for reporting information regarding operating
segments in annual financial statements and requires selected information for
those segments to be presented in interim financial reports issued to
stockholders. SFAS No. 131 also establishes standards for related disclosures
about products and services and geographic areas. Operating segments are
identified as components of an enterprise about which separate and discrete
financial information is available for evaluation by the chief decision maker,
or decision making group, in making decisions how to allocate resources and
assess performance. The Cost Center's chief operating decision-maker, as defined
under SFAS No. 131, is the chief executive officer. To date, the Cost Center has
viewed its operations and manages its business as one segment. As a result, the
financial information disclosed herein represents all of the material
information related to the Cost Center's principal operating segment.

3. PARENT AND RELATED PARTY AND RELATIONSHIP

Parent

The Parent allocated certain overhead costs to the Cost Center. The
allocated costs included in cost center operating expenses on the accompanying
statement of operations. This allocation includes costs associated with services
the Parent provided to the Cost Center such as corporate sales and marketing,
licensing, human resources, employee benefit plans, facilities, legal,
accounting and information technology costs. The allocation by the Parent was
based upon such factors as actual usage, headcount, square footage or relative
contribution. Following the completion of the acquisition described in Note 4
corporate allocations ceased.

Related Parties

The Cost Center provided certain services for divisions of ZDE. These
services primarily consisted of content development services. The Cost Center
developed training material for online distribution, classroom based training
material and printed material. The Cost Center was reimbursed by the other
divisions for all of their costs incurred.

The Cost Center shared certain support services with other divisions of
ZDE. These shared services included human resource costs, finance and accounting
costs, information technology costs and facilities costs. For the accompanying
financial statements a portion of these costs have been allocated to the Cost
Center and included in the accompanying statements of operations. The allocation
of the shared services cost was based upon various allocation factors determined
by management. Human resources, finance and accounting and information
technology costs were allocated based upon a headcount factor and facilities
costs have been allocated based upon a square footage factor. Management
believes that the methods used to allocate the costs described above are
reasonable. The costs that were allocated to the Cost Center were reimbursed
through charges to other divisions of ZDE, including the Element K Corporation
Predecessor Business.

4. SUBSEQUENT EVENT

On February 10, 2000, the Cost Center was acquired by an investment group
led by U.S. Equity Partners, L.P., a private equity fund managed by Wasserstein
Perella Group, Inc., an international investment bank based in New York, New
York. In exchange for all of the assets of the Cost Center, the Parent received
$25 million.

F-47
<PAGE> 144

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Element K Corporation:

We have audited the accompanying balance sheets of Element K Content LLC
Predecessor Business (a carve-out business of Ziff Davis Education which was a
division of Ziff Davis Inc. and predecessor of Element K Content LLC) as of
December 31, 1998 and 1999, and the related statements of operations and
division equity and cash flows for each of the three years in the period ended
December 31, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Element K Content LLC
Predecessor Business as of December 31, 1998 and 1999, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States.

ARTHUR ANDERSEN LLP

Rochester, New York
March 15, 2000

F-48
<PAGE> 145

ELEMENT K CONTENT LLC PREDECESSOR BUSINESS
(A CARVE-OUT BUSINESS OF ZIFF DAVIS INC.)

BALANCE SHEETS
AS OF DECEMBER 31, 1998 AND 1999

ASSETS

<TABLE>
<CAPTION>
1998 1999
---------- -----------
<S> <C> <C>
CASH AND CASH EQUIVALENTS................................... $ -- $ --
PREPAID ASSETS AND OTHER CURRENT ASSETS..................... 20,590 11,338
PROPERTY AND EQUIPMENT, AT COST:
Computer equipment........................................ 1,795,047 3,953,765
Office equipment.......................................... 275,561 327,963
Furniture and fixtures.................................... 1,022,748 1,022,748
Leasehold improvements.................................... 304,890 391,179
Less -- Accumulated depreciation and amortization......... (922,244) (1,835,860)
---------- -----------
Property and equipment, net............................ 2,476,002 3,859,795
---------- -----------
TOTAL ASSETS................................................ $2,496,592 $ 3,871,133
========== ===========
</TABLE>

LIABILITIES AND DIVISION EQUITY

<TABLE>
<CAPTION>
1998 1999
---------- -----------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable.......................................... $ 42,650 $ 246,552
Accrued expenses.......................................... 225,734 349,656
---------- -----------
Total current liabilities.............................. 268,384 596,208
---------- -----------
DIVISION EQUITY IN COST CENTER.............................. 2,228,208 3,274,925
---------- -----------
TOTAL LIABILITIES AND DIVISION EQUITY....................... $2,496,592 $ 3,871,133
========== ===========
</TABLE>

The accompanying notes to financial statements are an integral part of these
statements.
F-49
<PAGE> 146

ELEMENT K CONTENT LLC PREDECESSOR BUSINESS
(A CARVE-OUT BUSINESS OF ZIFF DAVIS INC.)

STATEMENTS OF OPERATIONS AND DIVISION EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

<TABLE>
<CAPTION>
1997 1998 1999
---------- ---------- ----------
<S> <C> <C> <C>
REIMBURSED COSTS:
Element K Predecessor Business....................... $ 575,099 $1,538,677 $3,112,855
Other ZDE divisions.................................. 6,353,115 7,373,907 4,968,620
---------- ---------- ----------
TOTAL REIMBURSED COSTS................................. 6,928,214 8,912,584 8,081,475
---------- ---------- ----------

COST CENTER OPERATING EXPENSES......................... 6,928,214 8,912,584 8,081,475
---------- ---------- ----------
Net income........................................ -- -- --
Division Equity, beginning............................. -- 1,259,693 2,228,208
Net contributions from division................... 1,259,693 968,515 1,046,717
---------- ---------- ----------
Division Equity, ending................................ $1,259,693 $2,228,208 $3,274,925
========== ========== ==========
</TABLE>

The accompanying notes to financial statements are an integral part of these
statements.
F-50
<PAGE> 147

ELEMENT K CONTENT LLC PREDECESSOR BUSINESS
(A CARVE-OUT BUSINESS OF ZIFF DAVIS INC.)

STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

<TABLE>
<CAPTION>
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................ $ -- $ -- $ --
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................. 424,041 498,203 913,616
Changes in current assets and liabilities:
Prepaid assets and other current assets...... (39,416) 18,826 9,252
Accounts payable............................. 84,435 (41,785) 203,902
Accrued expenses............................. 208,941 16,793 123,922
----------- ----------- -----------
Net cash provided by operating
activities.............................. 678,001 492,037 1,250,692
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment............... (1,937,694) (1,460,552) (2,297,409)
----------- ----------- -----------
Net cash used in investing activities..... (1,937,694) (1,460,552) (2,297,409)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Contributions from division....................... 1,259,693 968,515 1,046,717
----------- ----------- -----------
Net cash provided by financing
activities.............................. 1,259,693 968,515 1,046,717
----------- ----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS........... -- -- --
CASH AND CASH EQUIVALENTS, beginning
of year........................................... -- -- --
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of year.............. $ -- $ -- $ --
=========== =========== ===========
</TABLE>

The accompanying notes to financial statements are an integral part of these
statements.
F-51
<PAGE> 148

ELEMENT K CONTENT LLC PREDECESSOR BUSINESS
(A CARVE-OUT BUSINESS OF ZIFF DAVIS INC.)

NOTES TO FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

The accompanying financial statements include the accounts of the Element K
Content LLC Predecessor Business (a carve-out business of Ziff Davis Inc.) on a
stand-alone basis as if it had been an independent reporting entity for the
periods presented. The financial information included herein may not necessarily
reflect the financial position, results of operations or cash flows of the Cost
Center in the future, nor what the financial position, results of operations or
cash flows would have been if it had been a separate, stand-alone company
throughout the periods covered.

Until the date of the acquisition, the Cost Center provided content
development services to certain divisions of ZDE.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying financial statements reflect the application of the
accounting policies as described below.

Estimates

Cash and Cash Equivalents

The Cost Center considers all highly liquid instruments purchased with a
remaining maturity of three months or less to be cash equivalents. During 1997,
1998 and 1999, payments were made by the Parent and as a result, the Cost Center
did not maintain separate cash balances. Accordingly, the Cost Center had no
cash or cash equivalents as of December 31, 1998 and 1999.

Software Development Costs and Research and Development Costs

The Cost Center charges all research and development expenses to operations
as incurred. Included in research and development are costs related to content
development.

The Cost Center does not develop software for sale to outside parties.

F-52
<PAGE> 149
ELEMENT K CONTENT LLC PREDECESSOR BUSINESS
(A CARVE-OUT BUSINESS OF ZIFF DAVIS INC.)

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

Property and Equipment

Leasehold improvements are amortized over the shorter of their useful lives
or the lease term.

Betterments, renewals and extraordinary repairs that extend the life of the
asset are capitalized; other repairs and maintenance are expensed as incurred.

Long-Lived Assets

Revenue Recognition and Cost Center Operating Expenses

The Cost Center's revenue consists of reimbursements of expenses incurred
by the Cost Center on behalf of affiliates. The Cost Center's operating expenses
consist primarily of payroll and related expenses, contract labor, depreciation
and amortization and allocated costs.

Recently Issued Accounting Standards

Segment Reporting

F-53
<PAGE> 150

[ELEMENTK LOGO]
<PAGE> 151

[ALTERNATE PAGE FOR THE MARKET MAKING PROSPECTUS]

SUBJECT TO COMPLETION, DATED AUGUST , 2000

[ELEMENTK LOGO]

Class A Common Stock

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

INVESTING IN OUR CLASS A COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" ON
PAGE 8.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

The date of this prospectus is , .
<PAGE> 152
[ALTERNATE PAGE FOR THE MARKET MAKING PROSPECTUS]

------------------
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
MANAGEMENT............................ 64
RELATED PARTY TRANSACTIONS............ 71
PRINCIPAL STOCKHOLDERS................ 74
DESCRIPTION OF CAPITAL STOCK AND
MEMBERSHIP UNITS.................... 77
SHARES ELIGIBLE FOR FUTURE SALE....... 83
IMPORTANT UNITED STATES FEDERAL TAX
CONSEQUENCES TO NON-U.S. HOLDERS OF
OUR CLASS A COMMON STOCK............ 85
PLAN OF DISTRIBUTION.................. 87
LEGAL MATTERS......................... 91
EXPERTS............................... 91
WHERE YOU CAN FIND MORE INFORMATION... 91
INDEX TO FINANCIAL STATEMENTS......... F-1
</TABLE>

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

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT, AS THIS DOCUMENT MAY BE AMENDED OR SUPPLEMENTED
AFTER THAT DATE IN THE EVENT OF ANY SUBSEQUENT MATERIAL CHANGES. FOR ADDITIONAL
INFORMATION ABOUT ELEMENT K REQUIRED TO BE FILED UNDER THE SECURITIES AND
EXCHANGE ACT OF 1934, YOU SHOULD VISIT THE SECURITIES AND EXCHANGE COMMISSION'S
WEB SITE AT www.sec.gov.

i
<PAGE> 153
[ALTERNATE PAGE FOR THE MARKET MAKING PROSPECTUS]

USE OF PROCEEDS

We will not receive any proceeds in connection with sales of the
outstanding shares of Class A common stock offered by this prospectus. All
offers and sales of outstanding shares of Class A common stock will be for the
account of Wasserstein Perella in connection with market making transactions.

DIVIDEND POLICY

Neither Element K Corporation nor Element K has declared or paid any cash
dividends or distributions since their inception, or has any obligation to pay
any cash dividends or distributions in the future, except Element K is required
to pay distributions to its members to the extent necessary to enable those
members to pay taxes incurred with respect to taxable income of Element K. In
the event that the members' tax liabilities exceed the cash available to
Element K, distributions will be made first to Element K Corporation, with any
remaining cash distributed to the other members on a pro rata basis. We
currently intend to cause Element K to retain future earnings, if any, less any
tax distributions, to finance the expansion of our business.

20
<PAGE> 154
[ALTERNATE PAGE FOR THE MARKET MAKING PROSPECTUS]

PLAN OF DISTRIBUTION

This prospectus may be used by any broker-dealer subsidiary of Wasserstein
Perella Group, Inc., in connection with offers and sales of outstanding shares
of Class A common stock in market making transactions at negotiated prices
related to prevailing market prices at the time of sale. Wasserstein Perella may
act as principal or agent in such transactions. Wasserstein Perella has no
obligation to make a market in any of the securities and may discontinue any
market making activities at any time without notice, at its sole discretion.

Wasserstein Perella is a member of the NASD and may participate in
distributions of the outstanding securities. Accordingly, any offerings of the
outstanding securities in which Wasserstein Perella participates will conform
with provisions of Rule 2720 of the Conduct Rules of the NASD.

87
<PAGE> 155
[ALTERNATE PAGE FOR THE MARKET MAKING PROSPECTUS]

LEGAL MATTERS

The legality of the Class A common stock offered in this prospectus and
certain tax and other legal matters will be passed upon for us by Skadden, Arps,
Slate, Meagher & Flom LLP. Skadden, Arps, Slate, Meagher & Flom LLP provides
legal services to Wasserstein Perella from time to time on various matters.

EXPERTS

WHERE YOU CAN FIND MORE INFORMATION

91
<PAGE> 156

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

Set forth below is a table of the registration fee for the Securities and
Exchange Commission, the filing fee for the National Association of Securities
Dealers, Inc., the listing fee for the Nasdaq National Market and estimates of
all other expenses to be incurred in connection with the issuance and
distribution of the securities described in this registration statement, other
than underwriting discounts and commissions:

<TABLE>
<S> <C>
SEC registration fee........................................ $ 20,038
NASD filing fee............................................. 8,090
Nasdaq National Market application and listing fee.......... 95,000
Printing expenses........................................... 600,000
Legal fees and expenses..................................... 1,000,000
Accounting fees and expenses................................ 1,000,000
Transfer agent and registrar fees........................... 20,000
Miscellaneous expenses...................................... 256,872
----------
Total.................................................. $3,000,000
==========
</TABLE>

---------------
* To follow by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 102 of the Delaware General Corporation Law ("DGCL") as amended
allows a corporation to eliminate the personal liability of directors of a
corporation to the corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, except where the director breached his
duty of loyalty, failed to act in good faith, engaged in intentional misconduct
or knowingly violated a law, authorized the payment of a dividend or approved a
stock repurchase in violation of Delaware corporate law or obtained an improper
personal benefit.

Section 145 of the Delaware General Corporation Law provides, among other
things, that we may indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding (other than an action by or in the right of Element K Corporation) by
reason of the fact that the person is or was a director, officer, agent or
employee of Element K Corporation or is or was serving at our request as a
director, officer, agent, or employee of another corporation, partnership, joint
venture, trust or other enterprise against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement actually and reasonably incurred
by the person in connection with such action, suit or proceeding. The power to
indemnify applies (a) if such person is successful on the merits or otherwise in
defense of any action, suit or proceeding, or (b) if such person acted in good
faith and in a manner he reasonably believed to be in the best interest, or not
opposed to the best interest, of Element K Corporation, and with respect to any
criminal action or proceeding had no reasonable cause to believe his conduct was
unlawful. The power to indemnify applies to actions brought by or in the right
of Element K Corporation as well but only to the extent of defense expenses
(including attorney's fees but excluding amounts paid in settlement) actually
and reasonably incurred and not to any satisfaction of judgment or settlement of
the claim itself, and with the further limitation that in such actions no
indemnification shall be made in the event of any adjudication of liability to
Element K Corporation, unless the court believes that in light of all the
circumstances indemnification should apply.

Section 174 of the DGCL provides, among other things, that a director, who
wilfully or negligently approves of an unlawful payment of dividends or an
unlawful stock purchase or redemption, may be held

II-1
<PAGE> 157

liable for such actions. A director who was either absent when the unlawful
actions were approved or dissented at the time, may avoid liability by causing
his or her dissent to such actions to be entered in the books containing the
minutes of the meetings of the board of directors at the time such action
occurred or immediately after such absent director receives notice of the
unlawful acts.

Our amended and restated certificate of incorporation and our amended and
restated by-laws provide for indemnification of our directors, officers,
employees and other agents to the extent and under the circumstances permitted
by the Delaware General Corporation Law. We will enter into agreements with our
directors and executive officers that will require, among other things, that
Element K Corporation indemnify them against certain liabilities that may arise
by reason of their status or service as directors and executive officers to the
fullest extent permitted by Delaware law. We will also purchase directors and
officers liability insurance, which will provide coverage against certain
liabilities, including liabilities under the Securities Act.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

On February 10, 2000, Element K Corporation issued one share of Class B
common stock to WP Partners in a private placement. No underwriters, brokers or
other agents were involved in this transaction. These securities were issued
pursuant to an exemption from registration provided by Section 4(2) of the
Securities Act.

On July 21, 2000 we issued a total of 548,247 shares of Series A
convertible preferred stock to some of the existing investors in Element K. Each
of these persons has represented that such person is either a qualified
institutional buyer or an institutional accredited investor. Each share of
Series A convertible preferred stock was priced at $9.12, and Element K
Corporation raised proceeds of $5,000,000 in the aggregate from the offering. In
addition, pursuant to an option and holdback agreement, dated July 21, 2000,
these same investors were granted an option to purchase an additional 548,244
shares of Series A convertible preferred stock at $9.12 per share. In August
2000, this option was exercised in full and as a result, Element K Corporation
received additional proceeds of $4,999,985.28. Each share of Series A preferred
stock is convertible into one share of Class A common stock and will convert
automatically upon completion of this offering. No underwriters, brokers or
other agents were involved in these transactions. These securities have been
issued pursuant to an exemption from registration provided by Section 4(2) of
the Securities Act.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits:

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1.1 Form of underwriting agreement.
3.1 Amended and restated certificate of incorporation of the
registrant.
3.2 Amended and restated by-laws of the registrant.
4.1 Specimen certificate for shares of Class A common stock.
4.2 Specimen certificate for shares of Class B common stock.
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP as to
the legality of the securities being offered.
10.1** Letter Agreement dated as of February 10, 2000, by and among
WP Management Partners LLC (Wasserstein Perella), WBT
Operating LLC (Element K LLC) and WBT Holdings LLC (Element
K Holdings LLC).
10.2 Financial services agreement, dated as of May 3, 2000, by
and between WP Management Partners LLC (Wasserstein
Perella), WBT Holdings LLC (Element K Holdings LLC) and WBT
Operating LLC (Element K LLC).
</TABLE>

II-2
<PAGE> 158

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.3** Credit agreement dated February 10, 2000, by Training Media
Operating LLC (Element K Press LLC) and among Fleet Bank and
the other lenders identified therein.
10.4** Subscription agreement, dated as of February 10, 2000, by
and between U.S. Equity Partners, L.P. and WBT Holdings LLC
(Element K Holdings LLC).
10.5** Subscription agreement, dated as of February 10, 2000, by
and between U.S. Equity Partners (Offshore), L.P. and WBT
Holdings LLC (Element K Holdings LLC).
10.6** Subscription agreement, dated as of February 10, 2000, by
and between TMCT Ventures, L.P. and WBT Holdings LLC
(Element K Holdings LLC).
10.7** Subscription agreement, dated as of February 10, 2000, by
and between Highfields Capital Management, L.P. and WBT
Holdings LLC (Element K Holdings LLC).
10.8** Subscription agreement, dated as of February 10, 2000, by
and between Bank of America Capital and WBT Holdings LLC
(Element K Holdings LLC).
10.9** Purchase agreement by and between WP Education Holdings LLC
and ZD Inc., dated as of November 17, 1999.
10.10** Agreement between ZD Education and SmartPlanet Inc.
10.11** Agreement, dated as of February 10, 2000, between ZDNet and
ZD Education.
10.12** Sublease agreements between Training Media Operating LLC
(Element K Press LLC) and WBT Operating LLC (Element K LLC).
10.13** Shared services agreement, dated as of February 10, 2000, by
and among Content Media LLC (Element K Content LLC),
Training Media Operating LLC (Element K Press LLC) and WBT
Operating LLC (Element K LLC).
10.14** Trademark license agreement, dated as of February 10, 2000,
between Training Media Holdings LLC (Element K Press
Holdings LLC) and WBT Operating LLC (Element K LLC).
10.15** Reseller agreement, dated as of February 10, 2000, between
Training Media Operating LLC (Element K Press LLC) and WBT
Operating LLC (Element K LLC).
10.16** WBT Holdings LLC (Element K Holdings LLC) 2000 Stock Option
Plan.
10.17** Employment agreement of Lance D'Amico, dated as of March 21,
2000.
10.18** WBT Holdings LLC (Element K Holdings LLC) Limited Liability
Company Agreement, dated as of February 10, 2000, by and
among U.S. Equity Partners L.P., U.S. Equity Partners
(offshore), Element K Corporation and the persons listed in
the Schedule of Management Members and Non-Management
Members.
10.19** Supplemental Limited Liability Company Agreement between
Element K Holdings LLC and Bruce Barnes.
10.20** Supplemental Limited Liability Company Agreement between
Element K Holdings LLC and Bruce Barnes Annuity Trust.
10.21** Supplemental Limited Liability Company Agreement between
Element K Holdings LLC and Lance D'Amico.
10.22** Form of severance agreement between Element K Holdings LLC
and Messrs. Cohen, Krause and Nulty.
10.23** Form of indemnification agreement for officers and directors
of Element K Corporation.
21.1** Subsidiaries of the registrant.
</TABLE>

II-3
<PAGE> 159

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 5.1).
</TABLE>

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

** Previously filed.

(b) Financial Statement Schedules:

The schedules have been omitted because of the absence of circumstances
under which they could be required.

ITEM 17. UNDERTAKINGS

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

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

The undersigned registrant hereby undertakes that:

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

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

(3) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:

(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and

II-4
<PAGE> 160

(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.

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

(5) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.

II-5
<PAGE> 161

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Rochester,
State of New York, on August 14, 2000.

Element K Corporation

By: /s/ BRUCE BARNES
------------------------------------
Name: Bruce Barnes
Title: Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities indicated on August 14, 2000.

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

/s/ BRUCE BARNES Chief Executive Officer and Director
----------------------------------------------------- (Principal Executive Officer)
Bruce Barnes

* Chief Financial Officer (Principal Financial
----------------------------------------------------- Officer and Principal Accounting Officer)
Howard Cohen

* Chairman of the Board of Directors
-----------------------------------------------------
Bruce Wasserstein

* Director
-----------------------------------------------------
Anup Bagaria

* Director
-----------------------------------------------------
Robert Fogelson

* Director
-----------------------------------------------------
Ellis Jones

* Director
-----------------------------------------------------
Terence Nulty
</TABLE>

* /s/ BRUCE BARNES

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

* By Bruce Barnes, Attorney-in-Fact

II-6
<PAGE> 162

POWER OF ATTORNEY

The undersigned director of Element K Corporation, a Delaware corporation,
hereby constitutes and appoints Bruce Barnes, Terence Nulty, Howard Cohen and
Lance D'Amico each of them, severally, as his attorney-in-fact and agent, with
full power of substitution and resubstitution, in his name and on his behalf, to
sign in any and all capacities this registration statement and any and all
amendments (including post-effective amendments) and exhibits to this
registration statement, any subsequent registration statement for the same
offering which may be filed under Rule 462(b) under the Securities Act of 1933,
as amended, and any and all amendments (including post-effective amendments) and
exhibits thereto, and any and all applications and other documents relating
thereto, with the Securities and Exchange Commission, with full power and
authority to perform and do any and all acts and things whatsoever which any
such attorney or substitute may deem necessary or advisable to be performed or
done in connection with any or all of the above-described matters, as fully as
each of the undersigned could do if personally present and acting, hereby
ratifying and approving all acts of any such attorney or substitute.

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

Director
-----------------------------------------------------
Thomas Unterman
</TABLE>

II-7
<PAGE> 163

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE
------- ----------- ----
<C> <S> <C>
1.1 Form of underwriting agreement..............................
3.1 Amended and restated certificate of incorporation of the
registrant..................................................
3.2 Amended and restated by-laws of the registrant..............
4.1 Specimen certificate for shares of Class A common stock.....
4.2 Specimen certificate for shares of Class B common stock.....
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP as to
the legality of the securities being offered................
10.1** Letter Agreement dated as of February 10, 2000, by and among
WP Management Partners LLC (Wasserstein Perella), WBT
Operating LLC (Element K LLC) and WBT Holdings LLC (Element
K Holdings LLC).............................................
10.2 Financial services agreement, dated as of May 3, 2000, by
and between WP Management Partners LLC (Wasserstein
Perella), WBT Holdings LLC (Element K Holdings LLC) and WBT
Operating LLC (Element K LLC)...............................
10.3** Credit agreement dated February 10, 2000, by Training Media
Operating LLC (Element K Press LLC) and among Fleet Bank and
the other lenders identified therein........................
10.4** Subscription agreement, dated as of February 10, 2000, by
and between U.S. Equity Partners, L.P. and WBT Holdings LLC
(Element K Holdings LLC)....................................
10.5** Subscription agreement, dated as of February 10, 2000, by
and between U.S. Equity Partners (Offshore), L.P. and WBT
Holdings LLC (Element K Holdings LLC).......................
10.6** Subscription agreement, dated as of February 10, 2000, by
and between TMCT Ventures, L.P. and WBT Holdings LLC
(Element K Holdings LLC)....................................
10.7** Subscription agreement, dated as of February 10, 2000, by
and between Highfields Capital Management, L.P. and WBT
Holdings LLC (Element K Holdings LLC).......................
10.8** Subscription agreement, dated as of February 10, 2000, by
and between Bank of America Capital and WBT Holdings LLC
(Element K Holdings LLC)....................................
10.9** Purchase agreement by and between WP Education Holdings LLC
and ZD Inc., dated as of November 17, 1999..................
10.10** Agreement between ZD Education and SmartPlanet Inc. ........
10.11** Agreement, dated as of February 10, 2000, between ZDNet and
ZD Education................................................
10.12** Sublease agreements between Training Media Operating LLC
(Element K Press LLC) and WBT Operating LLC (Element K
LLC)........................................................
10.13** Shared services agreement, dated as of February 10, 2000, by
and among Content Media LLC (Element K Content LLC),
Training Media Operating LLC (Element K Press LLC) and WBT
Operating LLC (Element K LLC)...............................
10.14** Trademark license agreement, dated as of February 10, 2000,
between Training Media Holdings LLC (Element K Press
Holdings LLC) and WBT Operating LLC (Element K LLC).........
10.15** Reseller agreement, dated as of February 10, 2000, between
Training Media Operating LLC (Element K Press LLC) and WBT
Operating LLC (Element K LLC)...............................
10.16** WBT Holdings LLC (Element K Holdings LLC) 2000 Stock Option
Plan........................................................
</TABLE>

<PAGE> 164

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE
------- ----------- ----
<C> <S> <C>
10.17** Employment agreement of Lance D'Amico, dated as of March 21,
2000........................................................
10.18** WBT Holdings LLC (Element K Holdings LLC) Limited Liability
Company Agreement, dated as of February 10, 2000, by and
among U.S. Equity Partners L.P., U.S. Equity Partners
(offshore), Element K Corporation and the persons listed in
the Schedule of Management Members and Non-Management
Members.....................................................
10.19** Supplemental Limited Liability Company Agreement between
Element K Holdings LLC and Bruce Barnes.....................
10.20** Supplemental Limited Liability Agreement between Element K
Holdings LLC and Bruce Barnes Annuity Trust.................
10.21** Supplemental Limited Liability Company Agreement between
Element K Holdings LLC and Lance D'Amico....................
10.22** Form of severance agreement between Element K Holdings LLC
and Messrs. Cohen, Krause and Nulty.........................
10.23** Form of indemnification agreement for officers and directors
of Element K Corporation....................................
21.1** Subsidiaries of the registrant..............................
23.1 Consent of Arthur Andersen LLP..............................
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 5.1)...................................
</TABLE>

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

** Previously filed.