2300 Maitland Center Parkway
Suite 340
Maitland, Florida 32751
(407) 660-1199
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)

Thomas V. Huber
Collegis, Inc.
2300 Maitland Center Parkway
Suite 340
Maitland, Florida 32751
(407) 660-1199
(Name, address, including zip code, and telephone number, including area code, of agent for service)

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 being offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. o

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. o

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. o

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. o

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. o

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information contained 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.

Prior to this offering, there has been no public market for our common stock. The initial public offering price of the common stock is expected to be between $ and $ per share. We will apply to have our common stock quoted on The Nasdaq Stock Market's National Market under the symbol "CLGS."

We are selling shares of common stock and the selling stockholders are selling an aggregate of shares of common stock. We will not receive any of the proceeds from the shares of common stock sold by the selling stockholders.

The underwriters have an option to purchase a maximum of additional shares from certain selling stockholders to cover over-allotments of shares.

		Price to Public		Underwriting Discounts and Commissions		Proceeds to Collegis		Proceeds to Selling Stockholders
Per Share		$		$		$		$
Total		$		$		$		$

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.

		Page
PROSPECTUS SUMMARY		1
RISK FACTORS		7
FORWARD-LOOKING STATEMENTS		14
USE OF PROCEEDS		14
DIVIDEND POLICY		14
CAPITALIZATION		15
DILUTION		16
SELECTED FINANCIAL DATA		17
UNAUDITED PRO FORMA FINANCIAL DATA		18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		20
BUSINESS		27
MANAGEMENT		40
RELATED PARTY TRANSACTIONS		50
PRINCIPAL AND SELLING STOCKHOLDERS		52
DESCRIPTION OF CAPITAL STOCK		55
SHARES ELIGIBLE FOR FUTURE SALE		58
CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS FOR NON-U.S. HOLDERS		60
UNDERWRITING		64
NOTICE TO CANADIAN RESIDENTS		68
LEGAL MATTERS		69
EXPERTS		69
ADDITIONAL INFORMATION		69
INDEX TO FINANCIAL STATEMENTS		F-1

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.

Until , 2002 (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.

This summary highlights information contained elsewhere in this prospectus. This summary may not contain all of the information that you should consider before deciding to invest in our common stock. We urge you to read this entire prospectus carefully, especially the risks of investing in our common stock discussed under "Risk Factors" and our financial statements and notes to those statements.

We are a leading provider of integrated technology services to colleges and universities in the United States. We provide the majority of our services pursuant to long-term contracts under which our on-site personnel reorganize, develop and manage our clients' technology resources. Our solutions address an array of technology-related issues facing colleges and universities, including assessment and development of strategic plans for technology resources, application of technology to enhance traditional teaching methodologies, new curricula design and deployment and long-term management of technology resources. We focus on both academic and administrative aspects of institutional operations, helping clients to increase revenues, improve efficiency and enhance competitiveness in the higher education market. Working on-site with our clients, we combine a wide variety of services into a comprehensive solution, positioning us as a long-term strategic partner to colleges and universities.

The foundation of our solutions is broad expertise in the following areas: higher education institutional strategy, technology resource management, instructional and learning technologies and development of new curricula. We design tailored solutions for each client by formulating a detailed perspective on the client's unique strategic challenges, whether operational, financial or competitive in nature. We then deliver our services through a client service structure that is designed to define objectives, provide accountability in results and regularly reassess our clients' needs. Our functional expertise includes:

We believe we are uniquely positioned to be the long-term strategic partner of choice to U.S. colleges and universities. Unlike technology vendors, systems integrators, broader consulting organizations and specialty service providers, we offer our clients all of the following:

Our business model facilitates company-wide collaboration of technical resources to leverage our collective knowledge and capture best practices and methodologies developed from our broad experience within the higher education market, providing a scalable resource base to benefit our clients. We utilize centralized expertise to provide our clients with technical solutions that they could not easily develop or acquire on their own. At the same time, we tailor our on-site service offerings to the unique needs of each client, providing clear accountability and defined results from a single, comprehensive service partner.

Our integrated service offering enables us to deliver an identifiable return on investment to our clients from a strategic, operational and financial perspective. Specifically, our services enable post-secondary institutions to:

Our mission is to partner with our clients to enhance the post-secondary educational experience for students, faculty and administrators.

We have a proven track record of delivering consistent results to our clients, helping them address their most critical business and technology issues. We have over 15 years of experience in successfully providing technology-related solutions to colleges and universities and currently have over 100 significant engagements with post-secondary institutions across the country. Based upon our successful client relationships, we have earned a reputation for providing high quality services and technical expertise. Because references and referrals play a significant role in obtaining new business in the higher education market, these relationships provide a foundation for future growth.

Substantially all of our revenue is generated through the delivery of services under fixed-priced contracts that typically have initial terms of three to seven years. Although these contracts are for a fixed term, they are ordinarily renewed or expanded prior to expiration. Since 1997, we have experienced a dollar weighted renewal rate on our technology management contracts in excess of 90%. In most instances, when our contracts are extended, the scope of services is also expanded. Our business model provides us with a significant component of recurring and predictable revenue with over 75% of our total annual revenue having been contractually committed at the beginning of each of the last five years. We achieved compound annual revenue growth of 31.0% from 1997 to 2001.

We offer our services to community, regional and national colleges and universities in the United States. According to the Digest of Education Statistics, 2001, a report published by the U.S. Department of Education, as of Spring 2001, there were approximately 4,100 of these institutions with aggregate annual operating budgets of over $270 billion serving approximately 15 million degree-seeking students. The DOE estimates that by 2010 post-secondary enrollments will increase to approximately 17 million degree-seeking students. We expect that enrollments will also rise as more working adults and other non-traditional students elect to continue their educations to obtain additional skills training or specialized certifications to increase their earning potential. The rising numbers of high school graduates, escalating enrollments by working adults and other non-traditional students and rapid growth in non-degree studies are straining the physical and faculty resources of many institutions, particularly mid-sized institutions and community colleges.

In addition to increasing enrollments, U.S. colleges and universities currently face a number of other challenges, including managing budgetary constraints, outdated technology and administrative systems, rising demand for technology-enhanced education and services and increased competition for students. A growing number of for-profit, post-secondary education providers has further intensified competition among schools for students. Although prevalent among institutions of all sizes, these challenges are particularly acute at mid-sized colleges and universities and community colleges in large, metropolitan areas. Currently, we focus primarily on this market segment because we believe these institutions can benefit most from our services.

Our goal is to become the primary provider of integrated strategic advisory, education delivery and technology management solutions to post-secondary institutions of all sizes. We intend to pursue the following growth strategies to attain this goal:

We were formed in Pennsylvania in 1986. On May 23, 1996, we reincorporated in Delaware. On August 31, 2001, we acquired Eduprise, Inc. in exchange for shares of our common stock.

Our principal executive offices are located at 2300 Maitland Center Parkway, Suite 340, Maitland, Florida 32751. Our telephone number at that location is (407) 660-1199. Our web site is http://www.collegis.com. The information contained on our web site is not incorporated by reference into this prospectus. References in this prospectus to "Collegis", "we", "us" and "our" refer to Collegis, Inc.

Except as otherwise indicated, the information in this prospectus assumes the inclusion of 731,994 shares of common stock issuable to certain selling stockholders for resale in this offering upon exercise of all outstanding warrants and does not assume inclusion of the following:

The following table summarizes our statement of operations during the periods indicated. You should read the data set forth below in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our financial statements and related notes thereto included elsewhere in this prospectus. The summary pro forma financial data have been derived from the unaudited pro forma financial data included elsewhere in this prospectus, which have been prepared by applying certain pro forma adjustments resulting from our acquisition of Eduprise, Inc. on August 31, 2001. The pro forma data assumes that the Eduprise acquisition occurred on January 1, 2001. The pro forma financial statements are presented for information purposes only and have been derived from, and should be read in connection with, our financial statements, including the notes thereto included elsewhere in this prospectus. For additional information regarding the pro forma financial statements, see "Unaudited Pro Forma Financial Data" included elsewhere in this prospectus.

The following table is a summary of our balance sheets as of December 31, 1999, 2000 and 2001 and June 30, 2002, and as adjusted assuming completion of this offering, as of June 30, 2002. To calculate the "As Adjusted" data, we have assumed the sale by us of shares of common stock in this offering at an assumed initial public offering price of $ per share, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us, and the application of the net proceeds from this offering.

This offering involves a high degree of risk. You should carefully consider the risks described below, together with all of the other information included in this prospectus, before deciding whether to invest in our common stock. If any of the following risks actually occurs, there could be a material adverse effect on our business, financial condition or results of operations. In this case, the trading price of our common stock could decline, and you could lose all or part of your investment.

Because we are dependent on the higher education industry, unfavorable events impacting the higher education market could adversely affect our business, financial condition and results of operations.

Substantially all of our clients are colleges and universities. Unfavorable events or economic conditions adversely impacting the higher education market could have a material adverse effect on our business, financial condition and results of operations. For example, a general economic downturn could further intensify the competitive pressures facing colleges and universities that constitute a significant market for our services. Unfavorable events or adverse economic conditions could decrease our pool of potential clients or affect the willingness or financial ability of post-secondary institutions to engage us as a service provider.

If our existing clients do not renew or upgrade our services upon expiration of a contract or if we fail to persuade additional post-secondary institutions to use our services, our revenues and results of operations will be adversely affected.

Historically, when providing technology management services, we have formed long-term relationships with our clients. A significant portion of our revenues comes from renewals of or upgrades to existing contracts prior to their expiration. If our clients do not renew or upgrade expired contracts, our revenues and results of operations will be adversely affected. Because our services typically cost more than our clients have historically budgeted for such expenses, we must convince clients that our services will generate a sufficient return to justify the additional investment. Our ability to increase revenues will be impaired if we are unsuccessful in persuading additional colleges and universities to use our services.

Due to the importance that our potential clients in the higher education market place on referrals and reputation during the selection of vendors, our failure or inability to meet a client's expectations may harm our reputation and adversely affect our business.

We believe the higher education market is unique in the importance that colleges and universities place on reputation and trust. We depend on our existing relationships with clients and our reputation for high-quality professional services and integrity to attract and retain clients. Because client referrals are an important component in obtaining new engagements in the higher education market, a failure or inability to meet a client's expectations could seriously damage our reputation and adversely affect our ability to attract new business.

A reduction in government funding to our clients could have a negative effect on our revenues.

Federal and state governments provide various forms of direct and indirect support for higher education in the form of direct appropriations, subsidies, grants and guaranteed student loan programs. Accordingly, most of the colleges and universities that we serve or intend to serve depend substantially on government funding. The government appropriations process is often slow, unpredictable and subject to economic and political factors outside our control. During 2001, we derived 16% of our revenue from services provided to New Jersey-based community colleges and 16% from services provided to Florida-based community colleges. Curtailments or substantial reductions in government-

funded or sponsored institutions and programs, or termination or renegotiation of government-funded contracts, could have a material adverse impact on or result in the delay or termination of our revenues associated with these programs and contracts. Additionally, certain of our contracts provide that if the client is affected by a reduction in funding, then the amounts owed to us may be reduced, subject to a pro rata reduction in the level of services we provide.

If growth in the use of technology in higher education does not continue or continues more slowly than we expect, demand for our services may decrease and our revenues could decline.

Our business is dependent upon continued growth in the use of technology in education by our clients and prospective clients. The successful use of new technology in education generally requires that students, faculty and administrators understand and accept the new technology. Institutions that have already invested substantial resources in traditional operations, systems, administration and educational techniques may be reluctant or slow to adopt a new approach if they perceive that the new technology will be rejected by students, faculty or administrators or that it may make some of their existing personnel and infrastructure obsolete. If the growth in the use of technology does not continue or continues more slowly than we expect, demand for our services may decrease and our revenues could decline.

Our success is dependent on our ability to attract and retain key personnel in a highly competitive marketplace.

Our business involves the delivery of professional and technical services and is labor intensive. Our performance depends on the continued service of our key technical employees and client managers and our ability to continue to attract, train, retain and motivate such personnel. Competition for such personnel is intense, particularly for highly skilled and experienced technology personnel and client managers who also have backgrounds serving higher education. Such technical personnel are in great demand and are likely to remain a limited resource for the foreseeable future. Competitive forces may require us to increase the compensation of our personnel. We may not be able to pass any such increase on to our clients. As a result, we may not be able to attract or retain sufficient numbers of highly skilled employees in the future. The inability to do so could have a material adverse effect upon our business, operating results or financial condition. Our ability to achieve our growth strategy also depends in large part upon the efforts of our senior management. The loss of the services of one or more of our key officers could adversely affect our business and operating results.

Our failure to anticipate technological advances or meet evolving industry standards could adversely affect the value of our services to existing and prospective clients and could result in decreased demand for our services.

Our success will depend, in part, on our ability to anticipate and develop solutions that keep pace with changes in information technology, evolving industry standards and changing client needs and preferences. To successfully serve our clients, we must stay abreast of new technology initiatives, including administrative systems and academic courseware. In addition, we must anticipate and effectively respond to changes within the higher education industry, especially changes in how our clients deliver education services to students. Our failure to anticipate and address these developments could have a material adverse effect on our business, financial condition or results of operations. In addition, services or technologies developed by third parties may render our services less competitive.

Potential liability claims from our services may adversely affect our business.

Our services, especially the management of a substantial portion of an institution's technology resources, involve key aspects of computer systems and are typically critical to a client's operations. Failures in a client's system could result in a claim for substantial damages against us, regardless of our

actual responsibility or the terms in our client contracts. In addition, although we believe that our services and procedures do not infringe upon the proprietary rights of third parties, we cannot be certain that such a claim would not be asserted against us. Any infringement claim against us could result in costly litigation or a materially adverse settlement, regardless of the merits of such litigation. We maintain general liability insurance coverage, including coverage for errors and omissions and coverage against infringement claims. Our general liability insurance coverage has an aggregate policy limit of $22 million. Our errors and omissions coverage has a policy limit of $10 million. However, such coverage may not continue to be available on acceptable terms, or may not be available in sufficient amounts to cover one or more large claims. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could each have a material adverse effect on our business, financial condition and results of operations. Although we attempt to contractually limit our liability, we may be legally prevented from doing so with respect to certain clients.

Our failure to accurately estimate the expenses required to complete our contracts may adversely impact our financial condition and results of operations.

Substantially all of our revenues are generated under long-term fixed-price contracts that subject us to the risk of cost overruns and inflation. In the future we may not be able to include inflation adjustments in our contracts or to successfully manage our individual project costs. In addition, changes in the scope of services to be provided, estimates of percentage completed or profitability may result in revisions to our revenue. If we fail to accurately estimate the resources and related expenses required for a contract or fail to complete our contractual obligations in a manner consistent with the budget upon which the contract was based, our business, financial condition and results of operations could be adversely impacted.

The variability and length of the sales cycle for our services may make our operating results unpredictable and volatile.

Approval of our engagement as an institution's technology partner by a college or university may require input from, and the authorization of, several different constituencies, including the institution's administrators, faculty and board of trustees or other governing body. In certain instances the approval of state or local government agencies or regulatory bodies may be required before an engagement can be finalized. As a result, the period between our initial contact with a potential customer and the purchase of our services by that customer typically ranges from three to nine months. Other factors that contribute to our long sales cycle include:

Our long sales cycle makes it difficult for us to predict if and when a potential engagement will actually occur.

Our revenues, operating results and profitability will fluctuate from quarter to quarter, which may result in increased volatility of our share price.

Variations in our revenues, operating results and profitability from quarter to quarter have occurred in the past, and are likely to occur in the future. These variations may result from a number of factors, including:

Due to the foregoing factors, it is possible that in some future periods our results of operations will be below the expectations of public market analysts and investors. This may lead to volatility in our share price.

Our success is dependent upon our relationships and contracts with certain key clients.

We have derived and expect to continue to derive a significant portion of our revenue from a relatively limited number of clients. Our top five clients accounted for approximately 24.3% of our revenue in 2001. For the six months ended June 30, 2002, our top five clients accounted for approximately 28.1% of our revenue. The loss of any one or more of our major clients could have a material adverse effect on our business, financial condition or results of operations.

Our continued growth could strain our financial, managerial and human resources, which may harm our business.

We continue to experience significant growth, which has placed, and could continue to place, a strain on our financial, managerial and human resources. From December 31, 1997 through June 30, 2002, the number of our full-time employees increased from approximately 290 to over 790. We expect that the number of our employees will continue to increase for the foreseeable future and such increases may occur in large groups as a result of signing large client contracts. Our future performance and profitability will depend on our ability to integrate new employees into our workforce successfully, particularly in light of the decentralized nature of our workforce. To manage our growth, we must continue to implement and improve our managerial controls and procedures along with our operational and financial systems. We may not have made adequate allowances for the costs associated with this expansion, our systems, procedures or controls may be inadequate to support our operations and our management may be unable to successfully offer and expand our services. If we are unable to manage our growth effectively, our business, results of operations and financial condition could be materially adversely affected.

We operate in a highly competitive market and increasing competition could result in decreased demand for our services, lower margins and loss of market share.

The market for professional and technology management services is competitive, highly fragmented and subject to rapid technological change. Our primary competitive challenge is overcoming the initial resistance to our services from the internal information technology departments of our prospective clients. We compete for clients and experienced personnel with a number of companies having significantly greater financial, technical and marketing resources and revenues than we have. Our competitors include systems consulting and integration services providers, software and professional service organizations and general management consulting firms. Current and potential competitors may make strategic acquisitions or establish cooperative relationships to increase their service offerings to

post-secondary institutions. Accordingly, it is possible that new competitors or alliances may emerge and rapidly gain significant market share. Increased competition could result in downward pricing pressures and loss of market share for us.

Our failure to successfully integrate any future acquisitions could strain our managerial, operational and financial resources.

We may, from time to time, pursue acquisitions of businesses, products or technologies that complement or expand our existing business to meet client and market demands for new services or enhanced skills. Our success in executing our acquisition strategy will depend on our ability to identify potential targets that meet our criteria, including a reputation as a leading service provider with strong client relationships and a complementary culture. Our management has had limited experience in making acquisitions, and we may not be able to complete the acquisitions on acceptable terms or we may not be able to successfully integrate any acquired assets or businesses into our operations. Acquisitions involve a number of risks, including the diversion of management's attention from day-to-day operations to the assimilation of the operations and personnel of the acquired companies and the incorporation of acquired operations, customer lists, products or technologies. In addition, we may require additional debt or equity financing to consummate future acquisitions, which financing may not be available on terms satisfactory to us, if at all. We may issue shares of our common stock as part of the consideration for an acquisition, which may dilute our earnings per share. We cannot assure you that any acquisitions will be successfully completed or that, if one or more acquisitions is completed, the acquired businesses, products or technologies will generate sufficient revenue to offset the associated costs or other adverse effects.

Misuse or misappropriation of our proprietary rights could adversely affect our results of operations.

Although we do not develop software or systems for license, our performance is in part dependent upon our internal information and communication systems, databases, tools, and the methodologies that we have developed to serve our clients. We have no patents and consequently, we rely on a combination of nondisclosure and other contractual arrangements and copyright, trademark and trade secret laws to protect our proprietary systems, information and procedures. In addition, we enter into and rely upon confidentiality agreements with our employees and clients and limit access to and distribution of our proprietary information. The steps that we take to protect our proprietary rights may not be adequate to prevent the misappropriation of our proprietary rights. In addition, we may not detect unauthorized use or take appropriate steps to enforce our proprietary rights. Ownership of intellectual property created in providing services to our clients is the subject of negotiation and is frequently assigned to the client. We generally retain the right to use any intellectual property that is developed during a client engagement that is of general applicability and is not specific to the client engagement. Issues relating to the ownership of and rights to use intellectual property developed during the course of a client engagement can be complicated, and clients may demand assignment of ownership or restrict the use of the work that we produce in the future. In addition, disputes may arise that affect our ability to resell or reuse such intellectual property.

Because there has been no prior public market for our common stock, we cannot predict the extent of investor interest in our common stock and the market price of the common stock may decline below the initial public offering price.

Prior to this offering, there has been no public market for our common stock. We cannot predict the extent to which investor interest in our common stock will lead to the development of an active trading market or how liquid that market might become. The market price of the common stock may decline below the initial public offering price. The initial public offering price for the shares has been

determined by negotiations between us and the representatives of the underwriters and may not be indicative of prices that will prevail in the trading market following the completion of this offering.

The stock market has experienced significant price and volume fluctuations that have affected the market prices of companies in recent years. These fluctuations may continue to occur and disproportionately impact our stock price. Factors that could have a significant impact on the market price of our common stock include:

In particular, the realization of any of the risks described in these "Risk Factors" could have a dramatic and material adverse impact on the market price of our common stock. In the past, following periods of volatility in the market price of a company's securities, securities class-action litigation has often been instituted. This type of litigation could result in substantial costs and a diversion of management's attention and resources, which could materially affect our business, financial condition or results of operations.

The future sale of shares of our common stock by existing stockholders may negatively affect our stock price.

If our existing stockholders sell substantial amounts of our common stock, including shares issuable upon the exercise of outstanding options in the public market following this offering, the market price of our common stock could fall. These sales also might make it more difficult for us to sell equity securities in the future at a time and price that we deem appropriate. After this offering, we will have outstanding shares of common stock. Of these shares, the shares being offered in this offering will be freely tradable. Our directors, executive officers, existing stockholders and warrant holders and substantially all of our option holders have agreed to the lock-up restrictions described in "Underwriting." After these lock-up agreements expire 180 days from the date of this prospectus, an additional shares will be eligible for sale in the public market. Sales of substantial amounts of common stock (including shares issued in connection with future acquisitions that may be issued with registration rights), or the availability of such shares for sale, may adversely affect the prevailing market price for the common stock and could impair our ability to obtain additional capital through an offering of our equity securities.

You will incur immediate and substantial dilution and may experience further dilution.

The initial public offering price of our common stock is substantially higher than the pro forma net tangible book value per share of the outstanding common stock immediately after the offering. If you purchase common stock in this offering, you will incur immediate and substantial dilution in the pro forma net tangible book value per share of the common stock from the price you pay for the common stock. To the extent outstanding options and warrants to purchase common stock are exercised, there

will be further dilution. Moreover, there can be no assurance that we will not require additional funds to support our working capital requirements or for other purposes, in which case we may seek to raise such additional funds through public or private equity financings or from other sources. Any such financing may result in additional dilution to our stockholders.

Control by principal stockholders may delay or prevent a change of control of us, which could adversely affect the market price of our common stock.

Upon completion of this offering, certain of our existing shareholders will continue to beneficially own a significant percentage of our outstanding common stock and will have substantial ability to control matters submitted to our stockholders for approval, including the election and removal of directors and any merger, consolidation or sale of all or substantially all of our assets, and to control our management and affairs. Accordingly, this concentration of ownership may have the effect of delaying, deferring or preventing a change in control of us, impeding a merger, consolidation, takeover or other business combination involving us or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, which in turn could materially adversely affect the market price of our common stock.

A third-party could be prevented from acquiring your shares of stock at a premium to the market price because of our anti-takeover provisions in our charter and bylaws and Delaware law.

The following provisions of our certificate of incorporation and by-laws may discourage, delay or prevent a merger or acquisition that you may consider favorable, including transactions in which you might otherwise receive a premium for your shares:

In addition, some provisions of Delaware law, particularly the "business combinations" statute in Section 203 of the Delaware General Corporation Law, may also discourage, delay or prevent someone from acquiring us or merging with us. See "Description of Capital Stock" for detailed information on these provisions.

We have broad discretion to use the proceeds from this offering, and our use of these proceeds may not yield a favorable return.

We have not identified specific uses for a significant portion of the net proceeds of this offering. Accordingly, our management will have significant flexibility in applying the net proceeds of this offering. Although we have no plans, commitments or agreements with respect to any material acquisitions as of the date of this prospectus, we may seek acquisitions of businesses that are complementary to ours, and a portion of the net proceeds may be used for such acquisitions.

Because it is unlikely that we will pay dividends, you will only be able to benefit from holding our stock if the stock price appreciates.

We have never declared or paid any cash dividends on our capital stock and do not anticipate paying any cash dividends in the foreseeable future. We presently intend to retain any future earnings for funding growth and, therefore, do not expect to pay any dividends in the foreseeable future. As a result of not collecting a dividend, you will not experience a return on your investment, unless the price of our common stock appreciates and you sell your shares of common stock.

This prospectus contains "forward-looking statements." Such forward-looking statements are contained principally in the sections entitled "Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of Results of Operations and Financial Condition" and "Business." These forward-looking statements include, but are not limited to, statements about our plans, objectives, expectations and intentions and other statements contained in this prospectus that are not historical facts.

When used in this prospectus, the words "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "plan," "seek," "should," "will" or "would" or the negative of these terms or similar expressions are generally intended to identify forward-looking statements. Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements, including our plans, objectives, expectations and intentions and other factors discussed under "Risk Factors." Also, these forward-looking statements represent our estimates and assumptions only as of the date of this prospectus. We undertake no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

We estimate that our net proceeds from the sale of the shares of common stock we are offering pursuant to this prospectus will be approximately $ , at an assumed initial public offering price of $ per share and after deducting the underwriting discounts and commissions and our estimated offering expenses. We will not receive any proceeds from the sale of shares by the selling stockholders.

The principal purposes of this offering are to provide working capital to expand our operations and to fund general corporate purposes. In addition, we may use a portion of the net proceeds to acquire or invest in complementary businesses, although we currently have no commitments or agreements with respect to any such transactions. Pending such uses, the net proceeds will be invested in short-term investment-grade instruments, certificates of deposit or direct or guaranteed obligations of the U.S. government. See "Risk Factors — We have broad discretion to use the proceeds from this offering, and our use of these proceeds may not yield a favorable return" for a description of several risks relating to our use of proceeds.

We have never declared or paid any cash dividends on our capital stock and do not anticipate paying any cash dividends in the foreseeable future. We presently intend to retain future earnings, if any, to finance the expansion of our business. Any payments of dividends will be at the discretion of our board of directors and will be dependent upon our financial condition, results of operations, capital requirements, general business conditions and other factors that our board of directors may deem relevant.

The following table sets forth our actual and our as adjusted capitalization as of June 30, 2002. Our as adjusted capitalization gives effect to:

This table should be read in conjunction with "Selected Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the financial statements and the notes to those statements included elsewhere in this prospectus.

Our net tangible book value as of June 30, 2002 was approximately $22.2 million or $1.28 per share, based on the number of shares of common stock outstanding as of June 30, 2002. Net tangible book value per share is equal to the amount of our total tangible assets less total liabilities, divided by the number of outstanding shares of common stock. After giving effect to the sale of common stock offered by us pursuant to this prospectus at an assumed initial public offering price of $ per share, our receipt of the estimated net proceeds from this offering and the issuance of 731,994 shares of common stock upon the exercise of all outstanding warrants, our pro forma net tangible book value as of June 30, 2002 would have been approximately $ million, or $ per share. This represents an immediate increase in pro forma net tangible book value of $ per share to existing stockholders and an immediate dilution of $ per share to new investors purchasing shares of common stock in this offering. The following table illustrates this per share dilution:

The following table summarizes the differences between existing stockholders and the new investors with respect to the number of shares of common stock purchased from us, the total consideration paid and the average price per share paid before deducting the underwriting discounts and commissions and our estimated offering expenses.

The foregoing discussion and table assumes the issuance of 731,994 shares of common stock to certain selling stockholders for resale in this offering upon exercise of all outstanding warrants. The foregoing discussion and table assumes no exercise of any outstanding stock options. As of June 30, 2002, there were 4,930,985 options outstanding to purchase common stock. To the extent that any of these options are exercised, there will be further dilution to the new investors.

If the underwriters exercise their over-allotment option in full, the following will occur:

The following selected financial data is qualified by reference to, and should be read in conjunction with, our financial statements and the notes to such statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus. The selected statement of income data presented for the years ended December 31, 1999, 2000 and 2001 and the balance sheet data as of December 31, 2000 and 2001, are derived from our audited financial statements and are included elsewhere in this prospectus. The selected statement of income data presented for the years ended December 31, 1997 and 1998 and the balance sheet data as of December 31, 1997, 1998 and 1999 have been derived from our audited financial statements not included in this prospectus. The selected statement of income data for the six months ended June 30, 2001 and 2002 and the balance sheet data as of June 30, 2002 are derived from our unaudited financial statements included elsewhere in this prospectus. These unaudited financial statements have been prepared on the same basis as our audited financial statements and, in our opinion, include all material adjustments, consisting only of normal recurring adjustments, necessary to present fairly this unaudited financial information. Such financial information may not be indicative of results for a full year.

On August 31, 2001, we acquired all of the outstanding capital stock of Eduprise, Inc. Eduprise's historical data for the eight months ended August 31, 2001 are derived from Eduprise's financial statements that are included elsewhere in this prospectus. Eduprise's historical data for the six months ended June 30, 2001 are derived from Eduprise's financial statements that are not included in this prospectus. The pro forma data assumes that this transaction occurred as of January 1, 2001 for both periods.

The total purchase price for Eduprise was approximately $20.3 million, consisting of shares of common stock ($19.4 million), other equity securities ($0.7 million) and related costs ($0.3 million). The purchase price was allocated to tangible assets ($9.5 million), intangible assets ($1.4 million), which will be amortized over three years, and goodwill ($9.4 million).

The pro forma financial information should be read in conjunction with our historical financial statements for the year ended December 31, 2001, the unaudited historical financial statements for the six months ended June 30, 2001 and the unaudited historical financial information for Eduprise for the eight months ended August 31, 2001, included elsewhere in this prospectus. The pro forma information is not necessarily indicative of future earnings or earnings that would have been reported for the periods presented had the Eduprise acquisition been completed at the beginning of the earliest period presented. Further, the unaudited pro forma income statement for the six months ended June 30, 2001 should not necessarily be taken as an indication of the earnings for a full year.

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

The following discussion and analysis should be read with "Selected Financial Data" and our financial statements and notes included elsewhere in this prospectus. The discussion in this prospectus contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. The cautionary statements made in this prospectus should be read as applying to all related forward-looking statements wherever they appear in this prospectus. Our actual results could differ materially from those discussed here. Factors that could cause or contribute to these differences include those discussed in "Risk Factors," as well as those discussed elsewhere in this prospectus.

Revenue recognition. Substantially all of our revenue is generated through the delivery of services under multi-year, fixed-priced contracts. We do not sell hardware or software. Revenue is recognized as services are provided, primarily on a straight-line basis over each contract year. Revenue from contracts to provide strategic consulting, instructional design and support, course development and program management services is recognized as the services are performed. For these contracts, changes in scope of services to be provided, estimates of percentage completed or profitability may result in revisions to revenue and are recognized in the period in which such revisions are determined. To date, our operations have not been materially affected from one period to the next by changes in our estimated costs to complete a contract. The vast majority of our revenue results from the delivery of day-to-day services to a client and, therefore, are generally not subject to changes in the estimate of costs to complete a contract. Revenue includes reimbursable expenses charged to the client in accordance with Emerging Issues Task Force Topic No. D-103. Reimbursable expenses have averaged approximately 4% of revenue. In the early periods of new contracts, the percentage of reimbursable expenses to revenue is slightly higher. Billings are based on payment schedules that may differ from the timing of revenue recognition. These differences are reflected in our balance sheets as either unbilled receivables on contracts or deferred revenue.

Fixed-price contracts subject us to the risk of cost overruns and inflation. This risk is partially mitigated by contract clauses that allow for fee increases in the event of inflation and by the active management of individual project costs by our on-site, regional and corporate management teams. To date, we have not incurred a loss under a fixed-price contract.

Because our services are provided under multi-year agreements, a substantial portion of our revenue is committed at the beginning of the year. Committed revenue at the beginning of each of the last five years represented in excess of 75% of the total annual revenue for such year. Remaining revenues are derived from new client engagements and additional services sold to existing clients. As of January 1, 2002, we had approximately $74.9 million of full year 2002 revenue contracted for under multi-year agreements.

At December 31, 2001, approximately $75 million of revenue under existing multi-year contracts was expected to be recognized in the succeeding twelve months. At June 30, 2002, approximately $86 million of revenue under existing multi-year contracts was expected to be recognized in the succeeding twelve months. The above amounts do not include any amounts related to anticipated

renewals or extensions of existing contracts nor the signing of new contracts. We expect to be able to meet the obligations under our multi-year contracts at margins approximating our historical levels. Since 1997, we have experienced a dollar weighted renewal rate on our technology management contracts in excess of 90%. In most instances, when our contracts are extended, the scope of our services is also expanded.

Cost of services. Cost of services consists of direct costs to provide services to our customers and primarily includes salaries and wages and related fringe benefits of our employees directly serving customers through our strategic services, client services and technical services groups. Cost of services also includes any cost of subcontractors and outside consultants and other direct costs, such as travel expenses.

Selling, general and administrative. Selling, general and administrative expenses include the salaries and wages and related fringe benefits of our employees not performing work directly for customers, and occupancy and other costs necessary to support those employees. Among the functions included in these expenses are sales and marketing, corporate services (accounting, information systems support, legal, human resources and recruiting) and senior management and its support staff. In future periods we expect our general and administrative expenses to increase as a result of our incurring customary costs associated with being a public company.

We acquired all of the capital stock of Eduprise, Inc. on August 31, 2001 in exchange for 4,291,950 shares of our common stock and the assumption of options and warrants to purchase 342,238 shares of our common stock. Eduprise became an integral part of our learning technology services division. In June 1999, we sold our learning technology solutions division to a group of investors who operated it as Eduprise. In 1998 and 1999, we reflected the division's results as a discontinued operation. After our disposition of the division, we continued to provide related services under our existing contracts through a subcontract with Eduprise. Prior to June 1999, the division was engaged in the development of instructional and Internet software applications. Subsequent to our disposition, Eduprise discontinued its focus on the development of software applications and shifted its focus to developing and enhancing services related to the integration of technology into the learning process. The results of Eduprise have been included in our financial statements since September 1, 2001. For more detailed information about our acquisition of Eduprise, see "Unaudited Pro Forma Financial Data" and "Business — Eduprise Acquisition" included elsewhere in this prospectus.

The acquisition of Eduprise was accounted for in accordance with Statement of Financial Accounting Standard ("SFAS") No. 141 "Business Combinations" ("SFAS 141"), which requires all business combinations initiated after June 30, 2001 to be accounted for under the purchase method. SFAS 141 also sets forth guidelines for applying the purchase method of accounting in the determination of intangible assets, including goodwill acquired in a business combination, and expands financial disclosures concerning business combinations. The assets acquired and liabilities assumed were recorded at estimated fair values as determined by our management, based on information available and on assumptions as to future operations. We obtained independent appraisals of the fair values of the acquired property and equipment and identified intangible assets and their remaining useful lives. We also completed the review and determination of the fair values of the other assets acquired and liabilities assumed.

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States, which require us to make estimates and assumptions. Our most critical accounting policies relate to revenue recognition (discussed above), compensation costs related to our stock-based

compensation plans and the assumptions and estimates used in accounting for our acquisition of Eduprise, particularly those related to the fair value of certain acquired assets including the intangible asset related to contractual customer relationships and a deferred tax asset related to operating loss carryforwards.

The following table sets forth, for the periods indicated, statements of income data as a percentage of revenue:

Revenue. Revenue increased 41.3% from $32.8 million for the six months ended June 30, 2001 to $46.4 million for the six months ended June 30, 2002. Of the total increase, $4.0 million was attributable to our acquisition of Eduprise. The balance of the increase in our revenue reflects the addition of new clients after the first quarter of 2001 and our undertaking additional work for existing clients. Exclusive of the impact of our Eduprise acquisition, our revenue increased $9.6 million or 29.3%.

Cost of services. Cost of services increased 44.1% from $20.1 million for the six months ended June 30, 2001 to $28.9 million for the six months ended June 30, 2002. The increase was due primarily to the number of additional professional staff required to support our growth during the period. We increased the number of our professional staff from 568 at June 30, 2001 to 694 at June 30, 2002. As a percentage of revenue, cost of services increased to 62.4% in the six months ended June 30, 2002 from 61.2% in the six months ended June 30, 2001 primarily due to the signing in late 2001 and early 2002 of several large client contracts with margins somewhat lower than our historical average and a relative increase in reimbursable expenses.

Selling, general and administrative. Selling, general and administrative expenses increased 48.0% from $8.1 million in the six months ended June 30, 2001 to $11.9 million in the six months ended June 30, 2002. Of this increase, $3.1 million was attributable to the acquisition of Eduprise and $0.7 million was from continued investment in corporate infrastructure to support our growth. As a percentage of revenue, selling, general and administrative expenses increased from 24.5% in the six months ended June 30, 2001 to 25.7% in the six months ended June 30, 2002. This increase is due primarily to Eduprise's higher level of selling, general and administrative expenses relative to its revenue recognized by us since the date of acquisition. We believe that as we realize the synergies of the merger, further consolidate Eduprise's operations and eliminate certain redundant support activities, the percentage of selling, general and administrative expenses to revenue will return to historical levels.

Depreciation and amortization. Depreciation and amortization was $0.3 million in the six months ended June 30, 2001 and $0.9 million in the six months ended June 30, 2002. Depreciation expense increased from $0.3 million in the six months ended June 30, 2001 to $0.6 million in the six months ended June 30, 2002 due to equipment additions related to our acquisition of Eduprise and to support the growth in our corporate infrastructure. Amortization expense of intangible assets related to the Eduprise acquisition was $0.3 million in the three months ended June 30, 2002.

Stock compensation expense. Stock compensation expense in the six months ended June 30, 2002 of $0.2 million relates to amortization of the costs of unvested replacement options issued to former Eduprise employees and deferred compensation costs.

Operating income. Operating income remained consistent between periods. As a percentage of revenue, operating income decreased from 13.3% in the six months ended June 30, 2001 to 9.6% in the six months ended June 30, 2002. This decrease was primarily due to the inclusion of Eduprise's higher level of selling, general and administrative expenses relative to its revenue in the results for the six months ended June 30, 2002 and the increased cost of services related to the large client contracts discussed above.

Interest expense, net. Neither interest expense nor interest income was material in either six month period.

Income tax expense. Our effective tax rate for the six months ended June 30, 2002 and June 30, 2001 was 40%.

Revenue. Revenue increased 24.8% from $56.4 million in 2000 to $70.4 million in 2001. Revenue related to Eduprise recognized since the date of acquisition was $3.1 million in 2001. The balance of the increase in revenue primarily reflects the addition of new clients during 2001 and our undertaking additional work for existing clients. Exclusive of the impact of our Eduprise acquisition, our revenue increased $10.9 million or 19.3%.

Cost of services. Cost of services increased 23.6% from $34.7 million in 2000 to $42.9 million in 2001. The increase was primarily due to the number of additional professional staff required to support our growth during the period. We increased the number of our professional staff from 516 at December 31, 2000 to 631 at December 31, 2001. As a percentage of revenue, cost of services decreased slightly from 61.6% in 2000 to 61.0% in 2001 due to the write-off of certain software costs in 2000.

Selling, general and administrative. Selling, general and administrative expenses increased 49.2% from $12.5 million in 2000 to $18.7 million in 2001. Of this increase, $3.5 million was attributable to costs associated with increased sales, recruiting and other corporate staff and support systems reflecting

our continued investment in corporate infrastructure to support our growth and $2.7 million was attributable to the acquisition of Eduprise. As a percentage of revenue, selling, general and administrative expenses increased from 22.2% in 2000 to 26.6% in 2001. This increase was due primarily to Eduprise's higher level of selling, general and administrative expenses relative to its revenue recognized by us since the date of acquisition.

Depreciation and amortization. Depreciation and amortization was $0.6 million in 2000 and $1.3 million in 2001. Depreciation expense increased by $0.2 million to $0.8 million in 2001 due to equipment additions related to our acquisition of Eduprise and to support the growth in our corporate infrastructure. Amortization expense of intangible assets related to the Eduprise acquisition was $0.5 million in 2001.

Stock compensation expense. Stock compensation expense in 2001 includes the $0.2 million of amortization of the costs of unvested replacement options issued to former Eduprise employees and deferred compensation and $0.5 million of expense related to vested replacement options issued to former Eduprise employees. The 2000 expense relates to the repurchase of stock from a former officer (see Note 9 to our audited financial statements).

Operating income. Operating income decreased 12.0% from $7.7 million in 2000 to $6.8 million in 2001. As a percentage of revenue, operating income decreased from 13.7% in 2000 to 9.6% in 2001. The decrease in operating income is due primarily to Eduprise's higher level of selling, general and administrative expenses relative to its revenue recognized by us since the date of acquisition.

Interest expense, net. Interest expense decreased from $0.6 million in 2000 to $0.4 million in 2001. This decrease is due to reduced debt levels and lower average interest rates. Interest income in both periods was $0.3 million as the effect of increased average invested cash balances in 2001 was offset by lower average interest rates.

Revenue. Revenue increased 13.4% from $49.7 million in 1999 to $56.4 million in 2000. The increase in revenue primarily reflects the addition of new clients during 2000 and our undertaking additional work for existing clients.

Cost of services. Cost of services increased 13.6% from $30.5 million in 1999 to $34.7 million in 2000. The increase was primarily due to the number of additional professional staff required to support our growth during the period. We increased the number of our professional staff from 466 at December 31, 1999 to 516 at December 31, 2000. As a percentage of revenue, cost of services increased from 61.5% in 1999 to 61.6% in 2000. Increased operating efficiency and lower reimbursable expenses were offset by the write-off of certain software costs in 2000.

Selling, general and administrative. Selling, general and administrative expenses increased 8.8% from $11.5 million in 1999 to $12.5 million in 2000. This increase was primarily attributable to costs associated with increased sales, recruiting and other corporate staff and support systems reflecting our continued investment in corporate infrastructure to support growth. As a percentage of revenue, these expenses decreased to 22.2% in 2000 from 23.2% in 1999.

Depreciation and amortization. Depreciation and amortization increased from $0.2 million in 1999 to $0.6 million in 2000.

Stock compensation expense. Stock compensation expense in 2000 relates to the repurchase of stock from a former officer (see Note 9 to our audited financial statements).

Terminated transaction costs. During 1999, we incurred $0.7 million of legal, accounting and other miscellaneous costs in connection with two anticipated merger transactions that were not completed.

Operating income. Operating income increased 15.2% from $6.7 million in 1999 to $7.7 million in 2000. As a percentage of revenue, operating income increased from 13.5% in 1999 to 13.7% in 2000. This increase was primarily due to growth in revenue and improved operational efficiencies.

Interest expense, net. Interest expense was $0.6 million in 2000 and 1999. The effect of reduced debt levels was offset by higher average interest rates. Interest income increased from $0.2 million in 1999 to $0.3 million in 2000 due primarily to the increased average invested cash balances in 2000.

The following table sets forth certain unaudited quarterly operating information on an actual and a percentage of revenue basis for each of the ten quarters ending June 30, 2002. This data has been prepared on the same basis as the audited financial statements contained elsewhere in this prospectus and includes all normal recurring adjustments necessary for the fair presentation of the information for the periods presented, when read in conjunction with our financial statements and related notes thereto. Results for any previous fiscal quarter are not necessarily indicative of results for the full year or for any future quarter.

Quarterly revenue increases are due to the addition of new clients and undertaking additional work for existing clients. Results of operations beginning September 1, 2001 include the results of Eduprise. The increase in selling, general and administrative expenses as a percentage of revenue for the third and fourth quarters of 2001 was primarily due to the inclusion of Eduprise, which maintained a higher cost structure as an independent business. As we have integrated Eduprise into our operations, the corresponding costs have declined due to synergies and the benefits of consolidation. Additionally, in the fourth quarter of each fiscal year, adjustments are made to certain estimates, such as annual bonuses that are accrued throughout the year, but only paid upon the achievement of certain growth and profitability targets. The quarterly fluctuations in operating income are also due to the timing of certain charges such as a stock compensation charge in the first quarter of 2000 and the write-off of the remaining carrying value of capitalized software in the fourth quarter of 2000.

Cash flow from operations. Our primary source of liquidity has been cash flow from operations. We frequently structure our billings to take into account our clients' fluctuating cash flows. For example, our fixed-price contracts may provide for delayed billing arrangements early in a contract to coincide with clients' budget cycles. We manage the billings associated with each of our contracts to assure that our cash collections in every year exceed our cash expenditures on each contract. We generally experience a reduced level of cash flow from operations in the first six months of the calendar year as the timing of the receipt of contract payments is more heavily weighted to the July through December period to coincide with the peak cash inflows experienced by our clients. We anticipate that cash flows from operations will be positive for the full year 2002.

Cash flow from investing activities. Net cash used in investing activities is largely attributable to capital expenditures for office equipment and personal computers to support our internal expansion. We have no material commitments for capital expenditures. However, we will continue to need computer and office equipment as we expand our operations. In 2001, the acquisition of Eduprise resulted in an increase in cash of $4.1 million.

Cash flows from financing activities. Cash used in financing activities has primarily been to repay amounts outstanding under our long-term credit agreement. On July 9, 2002, we repaid our obligations under our long-term credit agreement. In 2000, we used cash of $2.2 million to repurchase shares of our common stock held by a former officer.

Our secured term loan facility, under which we initially borrowed $9.5 million, was entered into to finance the acquisition of us by our controlling stockholders in 1996. On July 9, 2002, we repaid all amounts outstanding under the term loan facility and terminated the facility. In addition, we had a $3.0 million revolving credit facility with the same bank. The revolving facility was put in place as a back-up facility and has not been used to finance our working capital or other capital needs. The revolving credit facility expired pursuant to its terms in June 2002. We have no plans to replace the term loan facility and anticipate obtaining a new revolving facility following the offering, which will again be used as a back-up facility.

We believe the net proceeds from the sale of the common stock offered hereby, together with the funds generated by operations, will provide adequate cash to fund our anticipated cash needs over at least the next 12 months and for the foreseeable future. Such needs may include investments in new products and services, expansion of the internal infrastructure to support future growth and acquisitions of complementary businesses.

In October 2001, the Financial Accounting Standards Board issued SFAS 144 "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS 144 supercedes SFAS 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of." SFAS 144 applies to all long-lived assets (including discontinued operations) and amends Accounting Principles Board Opinion No. 30 "Reporting Results of Operations — Reporting the Effects of Disposal of a Segment of a Business." SFAS 144 is effective for our fiscal year 2002. We have determined that the adoption of SFAS 144 will have no impact on our financial position and results of operations.

In November 2001, the Emerging Issues Task Force issued Topic No. D-103 "Income Statement Characterization of Reimbursements Received for 'Out-of-Pocket' Expenses Incurred." EITF Topic No. D-103 requires companies to report reimbursements received for out-of-pocket expenses incurred as revenue, rather than as a reduction of expense. We have historically accounted for reimbursements of out-of-pocket expenses in the manner prescribed by EITF Topic No. D-103.

We are a leading provider of technology services to colleges and universities in the United States. We provide the majority of our services pursuant to long-term contracts under which our on-site personnel reorganize, develop and manage our clients' technology resources. We offer a full suite of academic and administrative services that enhance our clients' competitiveness and institutional reputations. We enable post-secondary institutions to:

Our mission is to partner with our clients to enhance the post-secondary educational experience for students, faculty and administrators.

We offer our services to community, regional and national colleges and universities in the United States. According to the Digest of Education Statistics, 2001, a report published by the U.S. Department of Education, as of Spring 2001, there were approximately 4,100 of these institutions with aggregate annual operating budgets of over $270 billion. Colleges and universities face a number of challenges, including managing rising enrollments, budgetary constraints, outdated technology and administrative systems, rising demand for technology-enhanced education and increased competition for students. We believe that a significant opportunity exists in the higher education market to help colleges and universities address these challenges.

Rising Enrollments. In 2001, post-secondary institutions in the U.S. served approximately 15 million degree-seeking students. The U.S. Department of Education estimates that by 2010 post-secondary enrollments will increase to approximately 17 million degree-seeking students. We expect that enrollments will also rise as more working adults and other non-traditional students elect to continue their educations to obtain additional skills training or specialized certifications to increase their earning potential. The increasing student population will continue to strain the physical, faculty and financial resources of many institutions, particularly mid-sized institutions and community colleges.

Budgetary Constraints. For the last several years, increases in costs for post-secondary institutions have outpaced national rates of inflation. At the same time, post-secondary institutions in most states have faced a slow, but steady decline in public funding as a percentage of their total operating budgets. Additionally, the levels of annual contributions and returns from endowments to colleges and universities may not keep pace with increases in costs due to declines in the stock market and personal wealth of donors. To remain competitive, colleges and universities are under pressure to resist continued tuition increases and find alternative means to fund their operations. To meet these pressures, colleges and universities focus principally on effective cost control measures, but are also increasingly exploring ways to generate additional revenues and maximize financial returns on their investments.

Outdated Technology and Administrative Systems. Technology-based infrastructure and administrative systems in many post-secondary institutions are outdated and inefficient. Aging software

and hardware impede an institution's ability to compete, both on a cost and quality of education basis, with colleges and universities that have upgraded technology systems. We estimate that nearly 20% of private university information technology officers view replacement of outdated technology and administrative systems as their most significant near-term issue. As institutions move to improve their technology infrastructure and administrative systems, there is an increased need for experienced providers of technology services and solutions to assist them. Although institutions of all sizes are being forced to upgrade their technology infrastructures, mid-sized institutions and community colleges, in particular, face challenges in improving outdated and inefficient systems. These institutions often lack the technological and managerial resources to effectively upgrade and manage their technology infrastructure.

Increased Demand for Technology-Enhanced Education. As elementary and secondary schools continue to integrate more technology-enhanced education initiatives into the classroom, a new generation of technology-savvy students is entering the higher education market. These students expect technology-enhanced learning experiences, inside and outside of the classroom. In addition, working adults, who often lack the time or schedule flexibility to attend all of their classes in a traditional setting, are interested in convenient, non-traditional educational opportunities. Technology-delivered learning, coupled with online access to course material and administrative resources, allows post-secondary institutions to offer their services to a broader market. Such programs enable colleges and universities to increase utilization of existing physical facilities by blending both traditional and technology-based learning. The increased demand for technology-enhanced educational offerings is evidenced by the rapid growth of blended learning programs and online enrollments. Based on market research, we believe that 90% of all post-secondary institutions will offer some form of technology-enhanced learning programs by 2005.

Increased Competition for Students. Post-secondary institutions compete with one another to attract students. A growing number of for-profit, post-secondary education providers has further intensified competition among schools for students. When deciding which school to attend, students increasingly consider, among other factors, the breadth of curricula offered, an institution's technology resources and its ability to provide high quality technology-enhanced educational experiences and programs that accommodate student lifestyles and time constraints. Institutions that fail to respond to these market demands face a competitive disadvantage in attracting students. Competition for students is particularly strong at mid-sized institutions and community colleges in large, metropolitan areas. Currently, we focus primarily on serving this market segment because we believe these institutions can benefit most from our services. According to the U.S. Department of Education, there are approximately 1,390 institutions with estimated aggregate annual budgets of $82 billion in this market segment.

Focused exclusively on the higher education market, our solutions address an array of technology-related issues currently facing colleges and universities, including assessment and development of strategic plans for technology resources, application of technology to enhance traditional teaching methodologies, new curricula design and deployment and long-term management of technology resources. Our integrated service offering enables us to deliver an identifiable return on investment to our clients from a strategic, operational and financial perspective.

We believe that we are uniquely positioned to be the long-term strategic partner of choice to U.S. colleges and universities. Unlike technology vendors, systems integrators, broader consulting organizations and specialty service providers, we offer our clients all of the following:

Dedicated Focus and Specialized Expertise in Higher Education. Because we focus exclusively on the higher education market, we have accumulated a detailed understanding of the strategic technology

needs of post-secondary institutions that enables us to apply proven methodologies, skills and solutions to problems in a cost-effective and timely fashion. We believe that we provide our clients the most complete, industry-specific knowledge base and the greatest access to centralized expertise in the higher education market. In addition, we believe our competitive position is enhanced by our understanding of the unique cultural environment of colleges and universities, where academic considerations often drive technology investment and implementation decisions.

Comprehensive Service Offering. We are a single-source provider of a comprehensive range of technology-based services for post-secondary institutions. Our services provide clients with both strategic and tactical value by developing new sources of revenue and increasing efficiency to save costs. Through a unique client service approach, we tailor our services to address the specific strategic, education delivery and technology management needs of each institution. Our business model also captures best practices from our broad experience within the higher education market, providing a scalable resource base to benefit our clients. Our breadth of expertise and service approach enable us to provide clear accountability and defined results.

Objective Assessment and Advice. We are experts in dealing with most leading higher education applications and technology, but we do not create or sell software or hardware. As a result, we have a comprehensive understanding of the complexity of our clients' technology environments and are impartial to any specific hardware, software or systems. We complete detailed assessments of each client's present and future needs, and make unbiased recommendations regarding the most appropriate software or systems to meet the client's objectives within its budget. We believe our vendor-neutral approach is a competitive advantage because our clients can trust that our expert assessment and advice is not influenced by external factors or competing loyalties.

Ongoing Technology Management. We leverage the best practices developed through our extensive experience to provide our clients with comprehensive technology management and support, with a focus on continuous improvement and accountability. Most of our personnel work at a client's site and become intimately involved in the day-to-day operation of an institution's technology systems. As a result, we become an integral part of each client's institutional strategy and information technology functions to effectively serve as its strategic technology partner. We develop high-level relations between our professionals and an institution's senior administrators to ensure the highest quality of service and continue to explore new ways to enhance the competitiveness and success of our clients. Our strong client relationships are evidenced by the number, length and renewal rate of our client contracts. Since 1997, we have experienced a dollar weighted renewal rate on our technology management contracts in excess of 90%. In most instances, when our contracts are extended, the scope of services is also expanded.

Size, Stability and a Proven Track Record. We have over 15 years experience in successfully providing technology-related solutions to colleges and universities and are currently engaged in over 100 relationships with post-secondary institutions across the country. Based upon our successful client engagements to date, we have earned a reputation for providing high quality services and technical expertise. We believe that our reputation, our long-standing relationships with influential members of the higher education community and our high degree of "referenceability" among clients are a significant comfort to institutions attempting to choose a long-term partner.

Our goal is to become the primary provider of integrated strategic advisory, education-delivery and technology management solutions to post-secondary institutions of all sizes. We intend to pursue the following growth strategies to attain this goal:

Expand Our Client Base by Capitalizing on Our Established Reputation. Our 15 years of experience in providing technology service to colleges and universities, along with our technical expertise, has enabled us to establish a reputation as education-technology solutions experts. By expanding our sales force under experienced and knowledgeable leadership and further refining our sales approach, we plan to capitalize on our high quality reputation to further penetrate this marketplace. Because references and referrals play a significant role in establishing new business relationships in the higher education market, we intend to target new clients by highlighting our outstanding performance record and strong institutional relationships. While we currently focus primarily on large community colleges and mid-sized institutions, we plan to expand beyond this primary market to larger public and private institutions throughout the U.S.

Broaden and Upgrade Existing Client Relationships. Over time, we have expanded our areas of focus into a broad array of complementary services. Drawing on our breadth of expertise, we continuously assess each institution's needs and market additional solutions to maximize our clients' return on investment. We plan to continue to aggressively market and expand the breadth of services we offer to existing clients to increase the length and scope of our contracts. Our ability to both recommend and deliver additional services to our clients enables us to adapt to our clients' changing needs and to solidify our position as their long-term strategic and technology partner.

Further Develop Our Curriculum Solutions Division. In 2001, we launched our curriculum solutions division to offer turnkey and customized curricula programs that generate additional revenues for our clients. Currently, our curriculum solutions offerings include training programs to enable clients to offer training in Microsoft, Cisco, Oracle and Sun coursework and certification programs. As we develop our curriculum solutions service offerings into new program areas, we plan to aggressively market and offer these services to further enhance our long-term strategic partnerships with our clients. We believe there are numerous opportunities in the continuing education field to expand our curriculum solutions offerings to additional areas such as executive business education, teacher training and allied health.

Expand Services Through Internal Development and Acquisition. As the higher education market evolves, we plan to internally develop additional skill sets to complement or expand our current offerings. In addition, because the market for higher education technology and professional services companies is highly fragmented, we believe that numerous acquisition opportunities exist. These opportunities provide us with a rapid, cost-effective method to add technology professionals, broaden our existing client base and establish new or expand our existing service offerings. Potential areas into which we may expand will be determined by client needs and market forces, but could include alumni relationship management, marketing and fundraising, student affairs and campus activity management.

The following case studies represent how several of our clients have engaged us to deploy our solutions to meet their needs.

Salt Lake City Community College. In December 2001, we entered into a five-year contract with Salt Lake City Community College, a community college with an enrollment of more than 60,000 students. SLCC recently adopted a stated goal to be a "learning technology center of excellence" among post-secondary institutions throughout the Western states. College and state officials decided to partner with us on a comprehensive sole-source basis due to our reputation and combined experience in campus networks, college administrative systems and online learning systems.

Our initial strategic assessment identified a number of immediate opportunities for improvement, including organizational structure, administrative systems and on-going technology reliability. Following a detailed execution plan, we have worked quickly to reorganize SLCC's information technology employees and to centralize responsibility for the college's systems and networks under our on-site chief information officer. In addition, we have assisted the college with its conversion to a new administrative system application. We now monitor and manage all aspects of the college's technology network and resources. Furthermore, to manage rising enrollments and space limitations, we are working with the college to expand online course offerings and increase the number of students taking those courses. Although still early in our partnering relationship, we believe we have already provided SLCC with a significant return on its investment from an operational perspective.

The University of Baltimore. In the summer of 1998, we entered into a contract with the University of Baltimore, a public university with an enrollment of approximately 5,000 upper-division and graduate students. Serving a student population comprised of approximately 90% working adults with an average age of 32, UB needed to launch new web-enabled instructional programs and student services to provide greater flexibility and accessibility to students. The university set an ambitious goal of developing, marketing and implementing its new programs and support services in a manner that would quickly recoup its investment. UB elected to partner with us because of our unmatched expertise and experience in emerging instructional and learning technologies.

In only six months, we helped UB launch the first fully-online MBA program accredited by the American Assembly of Collegiate Schools of Businesses. In addition, we have developed new instructional and administrative applications that bring greater convenience and quality to classroom-based courses. The webMBA program was named in the Top 25 MBA Programs by U.S. News and World Report in 2002. Currently, webMBA courses account for more than half of all MBA credit hours at UB. The additional revenue and competitive advantage created by the webMBA program illustrate a measurable return on investment for UB from a strategic and financial perspective.

Valencia Community College. In 1998, we partnered with Valencia Community College, a two-year public institution located in Orlando, Florida with an enrollment of approximately 53,000 students. Valencia initially contracted with us to provide comprehensive on-site technology management leadership to oversee the technology resources of the college's seven campuses. Beginning in 2001, acting on a strategic plan that we developed with college officials, Valencia expanded the scope of our engagement to include support for software implementation and learning technology solutions. Through the contract expansion, we have become Valencia's comprehensive strategic and technology services provider.

Currently, we are redesigning and redeploying Valencia's web presence to increase functionality and create an enterprise education portal for students, faculty and administration. In addition, we are providing extensive training services to faculty to enhance the college's learning technology initiatives, including distance learning and web-enhanced coursework. Our instructional design professionals are also supporting the college's migration to a new course management system to increase functionality, security, uniformity and ease of use for faculty, administrative staff and students. Our on-site leadership is helping drive technological efficiency and effectiveness for Valencia in accordance with its stated strategic goals for "learner-centered excellence in education."

Loyola Marymount University. Seeking to become the "premier Catholic higher education institution of the West," Loyola Marymount University engaged our strategic services group to advise it in the development of its institutional technology strategy. The initial contact came through our business alliance with Cisco Systems, who was already working on the LMU campus and recommended us to help the institution achieve its technology objectives. Members of our strategic services and learning technology services divisions worked together to provide a systematic assessment of LMU's goals and present capabilities. Our strategic assessment clearly demonstrated that LMU's desire for

improved network infrastructure, online learning access, web-enhanced coursework and additional institutional efficiencies would benefit from a comprehensive, long-term technology partner. As a result of our initial assessment, LMU engaged us to provide strategic services, technology management and learning technology solutions. In January 2002, just a few months after completion of initial assessment, we signed a seven-year agreement with LMU that positions the university to accomplish its desired goals for growth and greater technology access for all of its students, faculty and staff.

We partner with our clients to help them achieve their educational missions by assessing, planning, implementing and supporting new education delivery strategies and reliable technology infrastructure. In working with our clients, we combine a wide variety of services into a comprehensive solution, positioning us as a long-term strategic partner to colleges and universities. The foundation of our solutions is broad expertise in the following areas: higher education institutional strategy, technology resource management, instructional and learning technologies and the development of new curricula development. We design tailored solutions for each client by formulating a detailed perspective on the client's unique strategic challenges, whether operational, financial or competitive in nature. We then deliver our services through a client service structure that is designed to define objectives, provide accountability in results, and regularly reassess our clients' needs. In doing so, we draw upon centralized resources and areas of expertise to provide each client with accessible, cost-effective solutions that bring scalable best practices and industry know-how to each challenge. Our functional expertise includes:

The diagram below illustrates the breadth in service offerings among our primary solutions areas. Delivered through our client services group and supported by our technical services group experts and resources, we believe we offer the most comprehensive strategic and technology solutions available in the higher education market.

Strategic Services. We employ a consultative approach to understand the unique needs of each institution and to develop and implement plans to maximize the utility and value of technology to our client's institutional strategy. With our sole focus on higher education and with no loyalty to any specific software, system or platform, we undertake a comprehensive assessment of each client's needs and help create integrated academic and administrative plans to help achieve the client's goals. We believe that our consultants bring superior insight to higher education issues and challenges. Our strategic services group includes only senior technology and education professionals who draw upon their extensive experience to help our clients develop sound strategies to more effectively compete in the rapidly changing higher education market.

We strengthen our relationships with clients through annual evaluations assessing the effectiveness of our strategic solutions. We believe the collective expertise of our dedicated strategic service consultants is an important competitive advantage that enables us to establish strong client relationships.

Technology Management Solutions. We provide management, leadership and support of campus technology and infrastructure to improve functionality and productivity. Blending leadership from our on-site client service professionals with centralized technical resources and methodologies, we assume complete operational responsibility for our clients' technology resources. Our technology management

services leverage the best practices developed through our extensive higher education experience to provide our clients with a greater return on their technology investments.

Learning Technology Solutions. We provide enterprise-wide learning technology solutions to support our clients' individual academic missions and instructional goals. Drawing on our unique expertise in higher education applications, we assist in the design and development of online courses and other technology- enhanced educational initiatives, as well as integration of related administrative and student service applications. By introducing new course management systems, facilitating technology-based training and assisting in course development, we increase faculty acceptance, satisfaction and effectiveness in using technology to enhance the education process while minimizing the disruptive impact of new technologies and practices. We are able to rapidly develop and launch instructionally sound courseware and new online educational initiatives to provide new sources of revenue for our clients. Our services enable our clients to provide educational content through a custom blend of online and classroom delivery that better utilizes classroom space, reduces strain on faculty resources and enhances the educational experience for faculty and students.

Curriculum Solutions. Capitalizing on our industry alliances, we offer our clients fully-developed certification and professional education course materials. Our curriculum solutions, which range from single-course material additions to comprehensive turn-key programs, are a scalable resource that allows post-secondary institutions to generate additional revenue by offering broader curricula and reaching new target student groups. Our curriculum solutions allow institutions to avoid significant

curriculum development costs and to quickly respond to market demands for new educational programs and appeal to a greater number of students, including non-degree students seeking continuing education. We currently offer turnkey information technology certification training programs that provide students with training in Microsoft, Cisco, Oracle and Sun and other vendor coursework and certification programs. We also offer customized programs that create a blended solution focused on a specific market segment.

We have a number of additional relationships that are currently in different phases of negotiation to obtain content from other post-secondary institutions and third-party corporate providers with a focus on developing additional curriculum solutions in executive business education, teacher training and allied health areas.

Our client services group is responsible for managing all ongoing aspects of our client relationships. Our focus is to establish a responsive and accountable customer service environment to effectively and efficiently meet our clients' needs. Our client services group includes on-site resources, regional management and corporate oversight and support. Our on-site employee base, consisting of over 600 employees as of June 30, 2002, provides a range of technology services that include the support of networks, web sites, administrative applications, portals, help desk, system applications and other technology related functions. Our on-site client service resources also include approximately 50 chief information officers who are responsible for managing our extensive on-site employee base. Our chief information officers draw upon their significant higher education industry experience and technical expertise, as well as company-wide standards and methodologies, to manage and coordinate the delivery of our services and solutions to our clients. Regional vice presidents oversee and provide support to the chief information officers located within their respective regions and are accountable for attaining the financial performance expectations set forth by our executive management and ensuring consistency in the quality of services delivered. Finally, our senior client service management reviews regional resource allocation and utilization and arranges for additional support resources to ensure that our services and solutions are effectively deployed to meet our clients' needs.

Our on-site presence fosters an atmosphere of open communication between our staff and clients. In addition, we maintain a comprehensive quality management program to manage client expectations and measure client satisfaction. This includes conducting quarterly surveys of faculty, administration and students and annual evaluations to assess how successfully our solutions are addressing our clients' needs. In addition, we commission independent third-parties to conduct bi-annual reviews to gauge client satisfaction of our services. Our quality management program is an important tool in ensuring that our services are effectively deployed to meet our clients' strategic and technology needs.

Our technical services group is integrally involved at the outset of each client engagement, offering initial client technology assessments, startup transition teams and interim staffing, providing an immediate impact on our clients. As the client relationship evolves, our technical services group

enhances our service offering by supplementing the on-site efforts of our client services group with highly skilled remote expertise from our corporate headquarters. Our technical services group consists of over 75 employees with extensive experience in the higher education market and expertise across the full spectrum of hardware, software and systems specific to post-secondary institutions. Our technical proficiency spans data and voice networking, web services, help desk management and complex applications unique to post-secondary institutions. Through our sophisticated network operations center, we continuously monitor our clients' key network and computing infrastructures. Using secure virtual private network connections over the Internet, on-site professionals can gain immediate access to our complete technical resources. This approach allows us to efficiently allocate highly-skilled technical resources to our clients that may otherwise be cost prohibitive or unavailable at the client's location.

Our technical services group facilitates company-wide collaboration of technical resources to leverage our collective knowledge and expertise from all on-site and corporate resources. In addition to centralized technical expertise, we maintain a database of searchable best practices, methodologies and custom developed integration applications. Our technical services group also maintains a suite of on-line productivity-enhancement tools through which our employees can collaborate with peers, access shared document libraries, obtain training, track client support activities and find specific skill sets located anywhere within the company. As we continue to grow, our clients will benefit from our increased institutional depth of knowledge and breadth of experience within the higher education industry.

Through our marketing activities, we attempt to position ourselves as the partner of choice among post-secondary institutions for their technology solutions. We employ a variety of business development and marketing techniques to enhance our brand recognition and communicate our value proposition to prospective clients. These techniques include generating focused leads through customer references and alliance relationships. We also endeavor to position ourselves as a thought leader and increase our brand recognition within the higher education market through publication of case studies and coordinated media releases with our existing clients. Our senior executives frequently speak at industry seminars and conferences addressing technology initiatives in higher education. We also sponsor The Collegis Leadership Alliance, an annual executive summit for higher education executives and leaders in our target market. The summit is designed to share best practices and discuss trends regarding technology issues facing post-secondary institutions.

We sell our services to new clients directly through our sales and marketing staff and to existing clients through our client services group. Due to the unique culture of colleges and universities, we attempt to capitalize on referrals from existing clients and the experience and contacts of our personnel in the higher education industry. As of June 30, 2002, we had over 40 full-time employees engaged in sales and marketing activities. We have organized our sales personnel into separate geographic teams, each of which is given financial objectives for its respective region. Our typical sales cycle is three to nine months, calculated from the time of identification of a prospective client to execution of a definitive contract.

Our fees are individually negotiated with each client and are tied to the services requested and the amount of resources we believe are necessary to accomplish the client's goals. Because of the long-term nature of our contracts, our fees typically contain pricing escalators tied to a consumer price index or our client's salary structure to protect against inflation. As part of our sales cycle, we prepare a detailed pro forma estimate of our expenses, including salary expenses. Our senior financial management team reviews and approves each pro forma budget to ensure that it is consistent with our target margins and monitors actual performance against the budget throughout the term of the contract.

Our ability to effectively serve our clients depends in large part on attracting, retaining and motivating talented, creative and experienced professionals at all levels. Upon commencement of a client engagement we retain a large portion of the client's existing information technology staff and supplement this staff with our personnel and high quality recruits. We believe our dedicated recruiting efforts provide us with a significant competitive advantage. We dedicate significant resources to recruiting employees with extensive information technology and higher education experience. As of June 30, 2002, we had six full-time employees engaged exclusively in recruiting activities. Our recruiting personnel work closely and actively with our client services and technical services groups to establish the criteria for hiring individuals with the necessary experience and expertise to provide high quality service to our clients. Each recruiter is assigned to specific clients and is expected to know and support the special staffing needs of the client. Our recruiters have hiring targets and receive incentive compensation based on hiring performance and retention. Our recruiting personnel utilize a comprehensive recruiting information system that tracks recruitment activities and contains an internal database containing over 17,000 resumes of information technology professionals with a focus on higher education. Recruiting activities are continually monitored and adjusted to meet our hiring needs.

We have historically experienced turnover rates that we believe are below industry averages for technology professional services companies principally due to our extensive professional development opportunities within the higher education marketplace. We believe our management structure and corporate culture, which offer opportunities for promotion, comprehensive and specialized training programs and extensive benefits packages, maximize our ability to recruit and retain experienced staff to serve our clients.

We currently provide our services and solutions to over 100 colleges and universities located throughout the United States. Our clients include community, regional and national colleges and universities. Our top five clients accounted for approximately 24.3% and 28.1% of our revenue in 2001 and the six months ended June 30, 2002, respectively. Our technology management agreements typically have initial terms of three to seven years. Although our contracts are for a fixed term, they are typically renewed or expanded prior to expiration. Since 1997, we have experienced a dollar weighted renewal rate of our technology management contracts in excess of 90%. During 2001, we had 32 clients that each contributed in excess of $1.0 million to our annual revenue under long-term agreements.

Our higher education industry expertise has fostered relationships with leading hardware, software, instructional technology and publishing companies. Our alliances generally take the form of informal, non-exclusive, co-marketing arrangements. We believe that our alliance relationships allow us to offer our clients comprehensive expertise in technology, hardware and applications. These arrangements also provide reciprocal benefits by ensuring that our mutual clients more fully benefit from the capabilities of our alliance partners' products. We also believe that these alliance relationships increase access to potential clients, expand service offerings and expertise. Although we collaborate with our alliance colleagues, we do not compromise our neutrality with regard to any client's decision relating to its systems, software or equipment.

We acquired all of the capital stock of Eduprise, Inc. on August 31, 2001 for 4,291,950 shares of our common stock and the assumption of options and warrants to purchase 342,238 shares of our common stock. The transaction had a value of approximately $20.3 million. Eduprise has been fully

integrated into our organization and has become an integral part of our learning technology solutions division. Our acquisition of Eduprise helps fulfill our vision of becoming a comprehensive, integrated provider of strategic advisory, education-delivery and technology management solutions to colleges and universities.

We initially created Eduprise, then called the COLLEGIS Learning Network, as an operating division in 1997 to develop and support the distance learning initiatives of our clients. Through June 1999, the division was engaged in the development of instructional and Internet software applications and providing hosting, maintenance and support of that software as part of our overall service contracts with selected institutions. In the Spring of 1999, we determined that the capital costs required to fund the development of the division's software would negatively impact our profits. Furthermore, we believed that the division's focus on developing software was inconsistent with our orientation as a software-neutral services provider. Based on its prospects, we determined that the growth of the division would benefit from dedicated capital provided by outside investors and on May 31, 1999, we sold the division. The new owner renamed the business Eduprise, Inc. and subsequently raised approximately $20 million in private equity financing from JP Morgan Partners and Arena Capital Investment Fund, as well as investments by substantially all of our then-existing shareholders.

In 2000, Eduprise discontinued its focus on software development and shifted its focus to providing services related to the integration of technology into the learning process. As a result, Eduprise's business operations became more congruent with our service offerings. As our clients increasingly sought to integrate their learning technology initiatives with their traditional information technology departments, we worked closely with Eduprise to jointly market and cross-sell our service offerings. Based on our collaborative successes, we determined that our clients would be best served by combining our operations.

We believe our exclusive focus on the higher education industry is unique. Our primary competitive challenge is overcoming the initial resistance to our services from the internal information technology departments of our prospective clients. Additionally, the market for external professional and technology management services is competitive, highly fragmented and subject to rapid technological and market changes. We compete for clients and experienced personnel with a number of companies having significantly greater financial, technical and marketing resources and revenues than we have. Our competitors include systems consulting and integration services providers, software and professional service organizations, and general management consulting firms.

We believe we compete favorably in each of these areas and particularly excel in our focus and specialization in the higher education marketplace, product and vendor independence and our depth of knowledge and experience.

As of June 30, 2002, we had approximately 790 full-time employees. None of our employees is represented by a labor union, and we consider our relationship with our employees to be good.

Our headquarters and administrative, sales and marketing operations are located in Maitland, Florida, where we lease approximately 25,600 square feet of office space. This lease expires on November 15, 2002. In addition to our headquarters, we lease 21,200 square feet of office space in a building located in Morrisville, North Carolina. This lease expires on January 2, 2004. We believe that we will require additional space as our business expands and that we will be able to obtain suitable space as needed.

Set forth below is the name, age, position and a brief account of the business experience of each of our executive officers, directors and key employees as of June 30, 2002.

Name	Age	Position
Thomas V. Huber	46	President, Chief Executive Officer and Director
Robert C. Bowers	56	Executive Vice President, Chief Financial Officer and Director
Dr. William H. Graves	61	Vice Chairman
Robert J. Abel	43	Chief Marketing Officer, Senior Vice President, Business Development and General Manager, Learning Technology Services
Janelle A. Baltzer	52	Senior Vice President, Strategic Services
Joseph N. Battista	47	Senior Vice President, Client Services
J. Michael Locke	34	Senior Vice President, Curriculum Solutions
Michael P. Purcell	44	Senior Vice President, Sales and Marketing
Cleatous J. Simmons	57	Senior Vice President, General Counsel and Secretary
Keith E. Thompson	41	Senior Vice President, Technical Services
Dr. Marvin Wachman⁽¹⁾	85	Chairman Emeritus, Director
Robert E. King⁽²⁾	66	Chairman
Robert H. Atwell⁽²⁾	71	Director
James E. Cowie⁽³⁾	47	Director
Bernard Goldstein⁽³⁾	71	Director
Dr. Thurston E. Manning⁽²⁾	76	Director
Kenneth G. Pigott⁽¹⁾⁽³⁾	58	Director
Jane Ryland⁽¹⁾	57	Director

Thomas V. Huber has served as a director since October 2000 and as president and chief executive officer since January 2002. From September 2001 until December 2001, Mr. Huber served as president of the Collegis division and chief operating officer. From October 2000 to September 2001, he served as our chief executive officer. Prior to joining us, from 1998 to 2000, Mr. Huber served as president of the CBS Worldwide Division of Fiserv, Inc., an application software provider and systems integrator for the financial industry, and as acting president of the CBS Worldwide Division of Fiserv, Inc. in 1997. Additionally, Mr. Huber has held senior management positions with Citicorp, Newtrend, L.P., Paramount Communications and Ernst & Young LLP.

Robert C. Bowers has served as a director since April 1996, as executive vice president since May 1996 and chief financial officer since 1997. Mr. Bowers served as secretary from August 2001 until May 2002. Mr. Bowers served as vice president and chief financial officer of HTE Inc. from June 1995 to May 1996 and as senior vice president and chief financial officer of Newtrend, L.P. from June 1985 to December 1994.

Dr. William H. Graves has served as a director since November 1997 and currently serves as vice chairman. In this capacity, Dr. Graves serves as our chief academic officer. Dr. Graves served as our senior vice president of instructional technologies from November 1997 until he founded Eduprise in 1999. Dr. Graves has also served as president of the COLLEGIS Research Institute from

November 1997 until its dissolution in 2001. From 1967 to 1999, Dr. Graves was on the faculty at the University of North Carolina at Chapel Hill (professor of mathematics) and also served in various academic and administrative positions and as senior technology officer. In 1989 he founded the University's Institute for Academic Technology and directed it until joining us in November 1997.

Robert J. Abel has served as chief marketing officer since September 2001 and general manager, learning technology solutions since May 2002. From May 1999 until September 2001, Mr. Abel was vice president of strategy and business development for Eduprise. Prior to joining Eduprise, Mr. Abel was senior director of online learning products and services at Oracle from November 1996 to May 1999. Mr. Abel also has management experience at National Semiconductor and TRW, Inc.

Janelle A. Baltzer has served as senior vice president of strategic services since May 2000. Prior to joining us, Ms. Baltzer was a partner with Baltzer-Sutton Associates from January 1997 to May 2000, where her responsibilities included delivering information technology consulting services to post-secondary institutions. Ms. Baltzer was vice president of information services and chief information officer for the Apollo Group, Inc. from December 1995 to December 1996.

Joseph N. Battista has served as senior vice president of client services since January 2000. From June 1999 until December 1999, he served as senior vice president and chief financial officer of Eduprise, Inc. From 1997 to May 1999, he was vice president of client services. From 1995 to 1997, Mr. Battista served as our vice president and chief financial officer. Prior to joining us, Mr. Battista was chief operating officer of ScanGraphics from 1990 to 1995 and chief financial officer of The WEFA Group from 1987 to 1990. He was also chief financial officer of Chase Econometrics from 1982 to 1987.

J. Michael Locke has served as senior vice president of curriculum solutions since September 2001. Prior to joining us, Mr. Locke served as the chief financial officer of Eduprise from February 2000 until September 2001. From September 1997 to January 2000, Mr. Locke was a vice president in the Investment Banking group at Banc of America Securities in San Francisco where he focused in the education and training sector. From 1992 to 1995, Mr. Locke was a corporate finance attorney with Sullivan & Cromwell.

Michael P. Purcell has served as senior vice president of sales and marketing since April 2001. From May 2000 to April 2001, Mr. Purcell was vice president of sales at Postini in Redwood City, CA, responsible for worldwide sales and delivery of email value added applications. From 1982 through 2000, Mr. Purcell held a number of sales and management positions with IBM.

Cleatous J. Simmons has served as senior vice president and general counsel since February 2002. He has served as secretary since May 2002. Mr. Simmons was a senior partner and practice group manager at the law firm of Lowndes, Drosdick, Doster, Kantor & Reed, P.A. in Orlando, Florida from May 1977 to February 2002.

Keith E. Thompson has served as senior vice president of the technical services division since July 1999 and was vice president of the technical services division from June 1997 to July 1999. From 1995 until June 1997, he served as vice president of operations for Software Support, Inc., a call center company providing technical support for OEMs, ISPs, and software manufacturers. From 1990 through 1995, Mr. Thompson served as director business data processing for Newtrend, L.P. focusing on technology outsourcing to the financial industry.

Dr. Marvin Wachman has served as a director since 1993 and is currently chairman emeritus of the board of directors. Dr. Wachman served as chairman of the board of directors from February 1995 to August 2001 and co-chairman until April 2002. Dr. Wachman currently serves as president emeritus of Temple University. He was chancellor of Temple University from 1982 to May 2002 and was president

of Temple University from 1973 to 1982. Dr. Wachman is a former president of Lincoln University and a past president of the Pennsylvania Association of Colleges & Universities.

Robert E. King has served as a director since April 1996 and currently serves as chairman of the board of directors. From September 2001 until January 2002, Mr. King served as our interim chief executive officer. Mr. King served from May 1996 to May 1998 as chairman of the executive committee of the board of directors. Since 1994, Mr. King has served as chairman of Salt Creek Ventures, an organization specializing in equity investments in technology and education/training companies. He also serves as a director of DeVry, Inc. and LaPetite Academy, Inc. From 1983 to 1994, Mr. King was chairman and chief executive officer of Newtrend, L.P. Mr. King also founded and served as chief executive officer of DELTAK, Inc. (now known as NetG, Inc., a subsidiary of Thomson, Inc.).

Robert H. Atwell has served as a director since November 1996. Since 2001, Mr. Atwell has served as an associated consultant with A.T. Kearney, Inc. Mr. Atwell currently serves as president emeritus of the American Council of Education. From December 1996 until December 2000, he served as an independent consultant. From 1984 to 1996, he served as president of the American Council of Education and served as its executive vice president from 1978 to 1984. From 1970 to 1978, Mr. Atwell was president of Pitzer College, one of the Claremont Colleges located in California. From 1965 to 1970, he was vice chancellor for administration of the University of Wisconsin and before that he held a variety of posts with the federal government. He is also a member of the board of directors of Education Management Corporation, Ed Verify, Argosy University and Eckerd College.

James E. Cowie has served as a director since April 1996. Mr. Cowie is a managing partner of Frontenac Company and has been a partner since 1989. Mr. Cowie currently serves as a director of divine, inc., Lante Corporation and Seurat Company and is a trustee of the Illinois Institute of Technology. Prior to joining Frontenac in 1988, Mr. Cowie was a vice president at Merrill Lynch Capital Markets.

Bernard Goldstein has served as a director since April 1996. Since 1997, Mr. Goldstein has served as an independent consultant. He also serves as a director of Broadview International, LLC, SPSS, Inc., Sungard Data Systems Inc. and Allscripts Healthcare Solutions, Inc. Mr. Goldstein is a former partner and managing director of Broadview International, LLC and former chairman of National CSS, Inc.

Dr. Thurston E. Manning has served as a director since November 1996. Since 1991, he has been a self-employed consultant in higher education administration and accreditation, and a director of DeVry, Inc. Dr. Manning formerly served from 1987 to 1991 as president of the Council on Post-Secondary Accreditation, from 1975 to 1987 as director and executive officer of the Commission on Institutions of Higher Education of the North Central Association of Colleges and Schools, from 1971 to 1974 as president of the University of Bridgeport and from 1964 to 1971 as vice president for Academic Affairs of the University of Colorado.

Kenneth G. Pigott has served as a director since April 1996. He also serves as managing partner of Pigott & Company, a private investment company he founded 20 years ago. Since 2001, Mr. Pigott has served as chairman of USA.NET, Inc., a leading provider of E-messaging systems solutions and since 1997, he has been chairman of Compass Asset Management, LLC, a money management firm that deploys options based strategies. Mr. Pigott is a former chairman of Specialty Packaging Products, Inc. and of Intertech Resources, Inc. and is a former partner of Winston & Strawn.

Jane N. Ryland has served as a director since November 1998. She is a consultant in education technology, and has served as a membership consultant to Internet2 since January 2000 and was director of member activities from October 1998 to January 2000. Ms. Ryland also currently serves as a director of Online Computer Library Center, Inc., a global library consortium. Ms. Ryland was president of CAUSE (the professional association for information technology managers in higher

education) from 1986 to 1998, and has formerly held positions in both higher education and the technology industry.

We currently have 11 directors and one vacancy on our board of directors. Our board of directors is divided into three classes of directors serving staggered three-year terms. As a result, one-third of the board of directors will be elected each year. The authorized number of directors may be changed only by resolution of the board of directors or a vote of stockholders holding 66²/3% of our outstanding common stock. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one third of the directors. These provisions allow the board of directors to fill vacancies of or increase the size of the board of directors, and may deter a stockholder from removing incumbent directors and filling such vacancies with its own nominees in order to gain control of the board.

Our board has resolved that William H. Graves, Robert E. King and Marvin Wachman will serve as Class I Directors whose terms expire at the 2003 annual meeting of stockholders. Robert H. Atwell, Robert C. Bowers, James E. Cowie and Bernard Goldstein will serve as Class II directors whose terms expire at the 2004 annual meeting of stockholders. Thomas V. Huber, Thurston E. Manning, Kenneth G. Pigott and Jane N. Ryland will serve as Class III directors whose terms expire at the 2005 annual meeting of stockholders.

We have established an audit committee, a compensation committee and a nominating committee. The audit committee reviews our internal accounting procedures and considers and reports to the board of directors with respect to other auditing and accounting matters, including the selection of our independent auditors, the scope of annual audits, fees to be paid to our independent auditors and the performance of our independent auditors. The audit committee currently consists of Messrs. Cowie (chairman), Goldstein and Pigott.

The compensation committee reviews and recommends to the board of directors the salaries, benefits and stock option grants of all employees, consultants, directors and other individuals compensated by us. The compensation committee also administers our stock option and other employee benefits plans. The compensation committee currently consists of Dr. Manning (chairman) and Messrs. Atwell and King.

The nominating committee reviews and recommends nominees for election to the board of directors, candidates for board committee membership and employment as senior officers. The nominating committee currently consists of Dr. Wachman (chairman), Mr. Pigott and Ms. Ryland.

Non-employee directors not otherwise affiliated with one of our significant stockholders receive $10,000 a year and $1,000 for each board or board committee meeting attended. All of our non-employee directors not otherwise affiliated with one of our significant stockholders have received stock option grants under our 1996 Stock Option Plan and will be eligible to receive stock option grants under our 2002 Stock Incentive Plan.

In 2001, 2000 and 1999, we paid $25,000 to each of Mr. Pigott and Frontenac Company, an entity affiliated with Mr. Cowie, as additional consideration for Messrs. Pigott and Cowie's board activities. These payments were approved by a majority of the board of directors, including a majority of the independent directors. Upon consummation of this offering, these additional payments will no longer

be made and Messrs. Pigott and Cowie will be entitled to compensation in accordance with the preceding paragraph.

Except for Mr. King, no member of the compensation committee has been an officer or employee of ours at any time. None of our existing executive officers serves as a member of the board of directors or compensation committee of any other company that has one or more executive officers serving as a member of our board of directors or compensation committee. Mr. King, our interim chief executive officer from September 2001 to January 2002 and a member of the compensation committee, is also a director of DeVry, Inc. Dr. Manning, one of our directors and a member of the compensation committee, is also a director of DeVry, Inc. Prior to the formation of the compensation committee, the full board of directors made decisions relating to compensation of our executive officers.

We are party to an agreement with Salt Creek Ventures, LLC, an entity owned and controlled by our chairman, Robert E. King, under which Salt Creek Ventures provides us with a variety of advisory services, including corporate development activities such as acquisitions, joint ventures and strategic partnerships, strategic planning and competitive assessment and selective sales support through senior client relationships. The contract also requires that Salt Creek Ventures provide supplemental secretarial and administrative services and support staff personnel to our board of directors. From September 2001 until January 2002, Mr. King served as our interim chief executive officer. Under the agreement, we are obligated to pay Salt Creek Ventures $62,500 per calendar quarter for so long as the agreement is in effect. Amounts paid to Salt Creek Ventures in 1999, 2000 and 2001 were $50,000, $125,000 and $162,500, respectively. The agreement is continuous subject to termination upon mutual agreement of the parties or by either party with one year's prior notice. The agreement, including the amounts paid to Salt Creek Ventures thereunder, has been unanimously approved by all of our directors, including all of the independent directors.

Our certificate of incorporation and bylaws provide that our directors and officers shall be indemnified by us to the fullest extent authorized by Delaware law, as it now exists or may in the future be amended, against all expenses and liabilities reasonably incurred in connection with their service for or on our behalf. In addition, the certificate of incorporation provides that our directors will not be personally liable for monetary damages to us or our stockholders for breaches of their fiduciary duty as directors, unless they violated their duty of loyalty to us or to our stockholders, acted in bad faith, knowingly or intentionally violated the law, authorized illegal dividends or redemptions or derived an improper personal benefit from their action as directors. We have obtained insurance which insures our directors and officers against specified losses and which insures us against specific obligations to indemnify our directors and officers.

The following table shows all compensation received during the year ended December 31, 2001 by our chief executive officer, interim chief executive officer and our five other highest-paid executive officers.

The following table sets forth information regarding stock options granted to the persons listed on the Summary Compensation Table for 2001. We have never granted any stock appreciation rights.

Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values

The following table sets forth information concerning the exercise of stock options during the fiscal year ended December 31, 2001 by the persons listed in the Summary Compensation Table and the fiscal year-end value of unexercised options.

						Number of Unexercised Options at December 31, 2001		Value of Unexercised In-the-Money Options at December 31, 2001
		Shares Acquired upon Exercise
Name		Value Realized
	Exercisable		Unexercisable		Exercisable		Unexercisable
Thomas V. Huber		—		—		202,500		607,500	—	—
Robert E. King		—		—		—		—	—	—
Robert C. Bowers		—		—		—		—	—	—
Michael P. Purcell		—		—		—		170,000	—	—
Janelle A. Baltzer		—		—		20,196		110,098	—	—
Joseph N. Battista		—		—		168,433		27,567	—	—
Keith E. Thompson		—		—		77,500		35,000	—	—

In September 2000, we entered into an at-will employment letter agreement with Thomas V. Huber, our chief executive officer, pursuant to which we agreed to pay Mr. Huber an annual base salary of $350,000 and an annual bonus of up to $250,000. The actual amount of any annual bonus is determined in accordance with an executive performance incentive plan. In the event that Mr. Huber is terminated without cause, we have agreed to continue paying his base salary and benefits for a period of 12 months after such termination.

In 1996, the board of directors adopted and our stockholders approved the 1996 Stock Option Plan. The plan is designed to enhance our long-term profitability and stockholder value by aligning the interests of selected directors, officers, employees and consultants with our performance targets.

The 1996 Stock Option Plan is administered by the board of directors, which has exclusive authority to grant awards under the plan and to make all interpretations and determinations affecting the plan. The board has the sole discretion, for example, to determine the individuals to be granted options, the number of shares of common stock to be subject to each option granted, the exercise price of each option, the conditions with respect to vesting and exercisability of options and all other conditions of any grant of options under the plan. The board may delegate all or any portion of the authority granted to it under the plan to a committee appointed by the board.

Participation in the plan is limited to our directors, officers, employees and consultants who are selected from time to time by the board or by a committee appointed by the board. Awards under the plan may be in the form of incentive stock options meeting the requirements of Section 422 of the Internal Revenue Code or non-statutory options which are not intended to meet the requirements of Section 422 of the Internal Revenue Code.

We have reserved an aggregate of 7,400,000 shares of common stock for issuance under the 1996 Stock Option Plan. As of June 30, 2002, options to purchase 4,930,985 shares of common stock were outstanding. There will be no further options issued under the 1996 Stock Option Plan.

Our 2002 Stock Incentive Plan was adopted by the board of directors and approved by our stockholders in July 2002. The 2002 Stock Incentive Plan will be effective upon consummation of this offering and is designed enhance our profitability and stockholder value by providing long-term incentives to selected directors, officers, employees and consultants that are consistent with our objectives and by aligning the interests of selected individuals with those of our stockholders.

The 2002 Stock Incentive Plan provides for the grant of options intended to qualify as "incentive stock options" under Section 422 of the Internal Revenue Code of 1986, as amended, "nonqualified stock options" that are not intended to meet the requirements of Code Section 422, restricted stock awards, stock appreciation rights and performance shares. Participation in the 2002 Stock Incentive Plan is limited to those directors, officers, employees and consultants who are selected to receive awards.

The compensation committee of the board of directors, which consists of at least two "outside directors" within the meaning of Code Section 162(m), administers the 2002 Stock Incentive Plan. Subject to the terms of the 2002 Stock Incentive Plan, the compensation committee determines the individuals to be granted awards, the type of award to be granted, the number of shares of common stock to be subject to each award, the exercise price of each award, the conditions with respect to vesting and exercisability of awards, all other conditions of any award granted under the 2002 Stock Incentive Plan, possible amendments to the terms of these awards and the interpretation of the terms of, and adoption of rules for, the 2002 Stock Incentive Plan.

Initially, up to 2,500,000 shares of common stock will be reserved for issuance under the 2002 Stock Incentive Plan. The number of shares reserved will increase automatically as of the first day of each calendar year beginning on January 1, 2003, by an amount equal to 2.5% of the total number of shares of our common stock then outstanding.

Each option granted pursuant to the 2002 Stock Incentive Plan will be designated at the time of grant as either an "incentive stock option" or a "non-qualified stock option." The compensation committee determines the exercise price of each option issued under the 2002 Stock Incentive Plan, provided that in the case of incentive stock options, the exercise price may not be less than 100% of the grant date fair market value of the shares of common stock covered by such options. If an incentive stock option is granted to an employee who owns more than 10% of the total combined voting power of all classes of our outstanding capital stock, then the exercise price thereof may not be less than 110% of the grant date fair market value of the common stock covered by such option. The aggregate fair market value (determined at the time the option is granted) of the shares as to which an employee may first exercise incentive stock options in any one calendar year may not exceed $100,000. The compensation committee may impose any other conditions to exercise that it deems appropriate.

Stock appreciation rights may be awarded pursuant to the 2002 Stock Incentive Plan along with, in addition to, or in tandem with, other awards under the 2002 Stock Incentive Plan. Upon the exercise of a stock appreciation right, an individual will be entitled to receive an amount in cash and/or shares of stock equal in value to the excess of the fair market value of the stock in respect of which the stock appreciation right shall have been exercised over the grant price of the stock appreciation right, which price will equal the fair market value of the common stock on the date of grant. The individual shall have the right to determine the form of payment.

Restricted stock may be awarded pursuant to the 2002 Stock Incentive Plan along with, in addition to, or in tandem with, other awards under the 2002 Stock Incentive Plan and/or cash awards made outside the 2002 Stock Incentive Plan. The purchase price for shares of restricted stock may be less than their fair market value (determined without regard to the restrictions) on the award date and may be zero. The compensation committee will establish the restriction on the restricted stock, which may be based on our performance, the individual's performance and/or the individual's period of employment.

Performance shares may be awarded pursuant to the 2002 Stock Incentive Plan along with, in addition to, or in tandem with, other awards under the 2002 Stock Incentive Plan and/or cash awards made outside the 2002 Stock Incentive Plan. The award of performance shares will be conditioned on the attainment of specified performance goals. The compensation committee will establish the vesting or other conditions applicable to performance shares.

Our Employee Stock Purchase Plan was adopted by the board and approved by the stockholders in July 2002. The Employee Stock Purchase Plan will be effective upon consummation of this offering. The Employee Stock Purchase Plan is designed to allow our eligible employees to purchase shares of common stock, at semi-annual intervals, with their accumulated payroll deductions. The Employee Stock Purchase Plan is intended to qualify for the tax treatment provided under Code Section 423.

Initially, 1,000,000 shares of our common stock have been reserved for issuance under the Employee Stock Purchase Plan.

The Employee Stock Purchase Plan has a series of successive purchase periods, each with a maximum duration of six months. All individuals who have been employed by us at least six months, who are not considered "highly compensated employees" under Code Section 414(q) and who own less than 5% of our common stock may join an offering period on any semi-annual grant date. Semi-annual grant dates will occur on January 1 and July 1 of each year. Individuals who become eligible employees after the start date of a purchase period may join the Employee Stock Purchase Plan on any subsequent semi-annual grant date.

Subject to the terms of the Employee Stock Purchase Plan, semi-annual purchase dates will occur on June 30 and December 31 of each year. A participant may contribute up to 10% of his or her gross compensation, including salary, bonuses and commissions, through payroll deductions, and the accumulated deductions will be applied to the purchase of shares on each semi-annual purchase date. In no event, however, may any participant purchase shares worth more than $25,000 during any calendar year. For each purchase period, the purchase price per share will be equal to 85% of the fair market value per share on the applicable grant date or, if lower, 85% of the fair market value per share on the semi-annual purchase date.

Generally, should we be acquired by either merger, sale of substantially all of our assets or sale of more than 20% of our common stock, then all outstanding options to purchase shares will be assumed by the successor entity or will be exercised automatically immediately prior to the effective date of the acquisition. The purchase price will be equal to 85% of the fair market value per share on the grant date of the purchase period in which the acquisition occurs or, if lower, 85% of the fair market value per share immediately prior to the acquisition.

The Employee Stock Purchase Plan will terminate on the tenth anniversary of the effective date of this offering, when all of the shares of common stock reserved for issuance under the Employee Stock Purchase Plan have been purchased or at the discretion of the board of directors.

In each of the past six years, we have established an annual performance incentive plan pursuant to which substantially all of our employees were made eligible to be paid a bonus based on individual performance and our results of operations for such fiscal year. We currently anticipate establishing a performance incentive plan in 2002. The compensation committee of our board of directors approves levels of allocations of the bonus pool among employee groups and cash bonuses, if any, are paid following our annual audit. In 2001, we contributed $960,000 for payment under the 2001 performance incentive plan.

In June 1999, we sold our learning technology solutions division to one of our minority stockholders for $30,000 who operated it as Eduprise. Eduprise assumed $430,000 of deferred revenue and accrued expenses. In connection with the initial formation of the learning technology solutions division, the division recognized a liability to us of approximately $116,000. This liability remained in place after we sold the division to Eduprise. As of December 31, 1999, Eduprise owed us approximately $167,000, which was due on demand. This amount was repaid during 2000 and at August 31, 2001, no amounts were due to or from Eduprise. After our disposition of the division, we retained the rights to computer software and related intellectual property developed by the division and granted a royalty-free license to Eduprise for the use of this intellectual property. We continued to provide related services under our existing contracts through a subcontracting arrangement with Eduprise. We paid Eduprise service fees related to this arrangement of $287,000 in the eight months ended August 31, 2001, $430,000 in 2000 and $301,000 in 1999.

Subsequent to our disposition, Eduprise raised approximately $20 million in a private equity financing led by JP Morgan Partners and Arena Capital Investment Fund that included investments by substantially all of our then-existing shareholders, including most of our directors and two entities affiliated with one of our significant shareholders, Frontenac VI Limited Partnership. On August 31, 2001, we reacquired Eduprise through the issuance of 4.3 million shares of our common stock and the assumption of options and warrants to purchase 342,000 shares of our common stock. Subsequent to the sale of Eduprise by us, the following affiliates of Collegis made investments in Eduprise for which they directly and indirectly received shares of capital stock of Eduprise that were exchanged for shares of our common stock in our August 2001 reacquisition of Eduprise.

For more detailed information about our acquisition of Eduprise, see "Unaudited Pro Forma Financial Data," "Business — Eduprise Acquisition" and the Eduprise, Inc. financial statements included elsewhere in this prospectus.

In connection with the formation of Eduprise, the rights and obligations of a services agreement between Collegis and the Collegis Research Institute ("CRI"), a not-for-profit research organization related to us through common directors was assumed by Eduprise. In connection with the services agreement, Eduprise was obligated to provide to CRI certain outsourcing, management and administrative services and to serve as liaison on behalf of CRI with outside advisors, and CRI agreed to reimburse Eduprise for its costs of providing such services. During 1999, Eduprise provided approximately $150,000 in services to CRI for which it was reimbursed. The services agreement was terminated in 2000, and no amounts were due from CRI at December 31, 2000.

In connection with a former officer's severance agreement dated December 31, 1999, we agreed to repurchase 190,000 outstanding shares of our capital stock from the officer for $3.00 per share. In addition, the former officer's remaining options were cancelled.

In December 1998, as part of a severance agreement with a former officer, we loaned the officer $571,400. The loan was secured by the former officer's 600,000 shares of our capital stock and was repayable under a full recourse promissory note. In March 2000, the former officer exercised 327,000 options to purchase our common stock at $0.56 per share. We simultaneously repurchased and retired all of the former officer's shares of our capital stock for $3,303,000. We issued a promissory note to the former officer in the amount of $1,651,500, which accrues interest at 6.5% and is payable quarterly commencing on June 30, 2000. Any outstanding principal and any accrued but unpaid interest on this note is payable on March 31, 2003. The remainder of the consideration was paid in cash. The former officer used the cash consideration to repay all amounts outstanding under the December 1998 promissory note.

For detailed information about certain transactions with Messrs. Pigott, Cowie and King, see "Management—Director Compensation" and "—Compensation Committee Interlocks and Insider Participation."

The following table sets forth certain information regarding beneficial ownership of our common stock as of June 30, 2002 and as adjusted to reflect the sale of the shares of common stock offered pursuant to this prospectus by:

Except as indicated in the footnotes to this table, the persons named in the table have sole voting and investment power with respect to all shares of our common stock shown as beneficially owned by them. Beneficial ownership and percentage ownership are determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. The table below assumes that the underwriters over-allotment is not exercised. It is therefore based on shares of our common stock outstanding prior to this offering and shares outstanding immediately after this offering.

The following information describes our common stock and preferred stock, as well as options and warrants to purchase our common stock, and provisions of our certificate of incorporation and our bylaws. This description is only a summary. You should also refer to the certificate and bylaws which have been filed with the SEC as exhibits to our registration statement, of which this prospectus forms a part.

Upon completion of this offering, our authorized capital stock will consist of shares of common stock, par value $0.01 per share, and 1,000,000 shares of preferred stock, par value $0.01 per share.

As of June 30, 2002, there were 17,378,236 shares of common stock outstanding and held of record by 108 stockholders, including 748,000 redeemable shares of common stock. The shares of redeemable common stock are subject to put options granted by us to a former officer as part of an incentive, put and noncompetition agreement.

There will be shares of common stock outstanding upon the closing of this offering, which gives effect to the issuance of shares of common stock offered by us under this prospectus.

Each share of common stock will have identical rights and privileges in every respect upon the closing of this offering. The holders of our common stock are entitled to vote upon all matters submitted to a vote of our stockholders and are entitled to one vote for each share of common stock held. Subject to the prior rights and preferences, if any, applicable to shares of our preferred stock, the holders of common stock are entitled to receive such dividends, payable in cash, stock or otherwise, as may be declared by our board of directors out of any funds legally available for the payment of dividends. If we voluntarily or involuntarily liquidate, dissolve or wind-up, the holders of common stock will be entitled to receive after distribution in full of the preferential amounts, if any, to be distributed to the holders of preferred stock or any series of preferred stock, all of the remaining net assets available for distribution ratably in proportion to the number of shares of common stock held by them. Holders of common stock have no preferences or any preemptive conversion or exchange rights.

Our certificate of incorporation authorizes the issuance of 1,000,000 shares of preferred stock, par value $0.01 per share. As of June 30, 2002, there were no shares of preferred stock outstanding. Our board of directors is authorized to provide for the issuance of shares of preferred stock in one or more series, and to fix for each series voting rights, if any, designation, preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions as may be provided in a resolution or resolutions adopted by the board of directors. The board of directors may authorize the issuance of shares of preferred stock with terms and conditions which could discourage a takeover or other transaction that holders of some or a majority of shares of common stock might believe to be in their best interests or in which holders of common stock might receive a premium over the market price for their shares.

As of June 30, 2002, options to purchase a total of 4,930,985 shares of our common stock were outstanding at a weighted average exercise price of $2.94. Options to purchase a total of 2,500,000 shares of common stock may be granted under our 2002 Stock Incentive Plan.

As of June 30, 2002, we had outstanding a warrant to purchase 549,824 shares of common stock to J.P. Morgan Partners (23A SBIC), LLC at an exercise price of $0.23375 per share and a warrant to purchase 182,170 shares of common stock to U.S. Bancorp Piper Jaffray at an exercise price of $5.38 per share. The J.P. Morgan warrant was issued in 1996 and is currently exercisable. The U.S. Bancorp Piper Jaffray warrant was issued in 2000 in connection with U.S. Bancorp Piper Jaffray's efforts in leading a private equity financing for Eduprise. This warrant was assumed by us in connection with the Eduprise acquisition. The U.S. Bancorp Piper Jaffray warrant is currently exercisable. In connection with this offering, the warrant holders have decided to exercise all outstanding warrants and offer the 731,994 shares of common stock issuable thereby as selling stockholders. See "Principal and Selling Stockholders."

Anti-Takeover Effects of Certain Provisions of Delaware Law and the Certificate of Incorporation and Bylaws

Some provisions of our certificate of incorporation and bylaws, which provisions are summarized in the following paragraphs, may be deemed to have an anti-takeover effect and may delay, defer or prevent a tender offer or takeover attempt that a stockholder might consider in its best interest, including those attempts that might result in a premium over the market price for the shares held by stockholders.

We are subject to Section 203 of the Delaware General Corporation Law, or DGCL Section 203, which regulates corporate acquisitions. DGCL Section 203 prevents certain Delaware corporations, including those whose securities are listed for trading on the Nasdaq National Market, from engaging, under certain circumstances, in a "business combination" with any "interested stockholder" for three years following the date that such stockholder became an interested stockholder. For purposes of DGCL Section 203, a "business combination" includes, among other things, a merger or consolidation involving us and the interested stockholder and the sale of more than 10% of our assets. In general, DGCL Section 203 defines an "interested stockholder" as any entity or person beneficially owing 15% or more of our outstanding voting stock and any entity or person affiliated with or controlling or controlled by such entity or person. A Delaware corporation may "opt out" of DGCL Section 203 with an express provisions in its original certificate of incorporation or an express provision in its certificate of incorporation or bylaws resulting from amendments approved by the holders of at least a majority of the corporation's outstanding voting shares. We have not "opted out" of the provisions of DGCL Section 203.

Our board of directors is divided into three classes of directors serving staggered three-year terms. As a result, approximately one-third of the board of directors will be elected each year. These provisions, when coupled with the provision of our certificate of incorporation authorizing the board of directors to fill vacant directorships or increase the size of the board of directors, may deter a stockholder from removing incumbent directors and simultaneously gaining control of the board of directors by filling the vacancies created by such removal with its own nominees.

Our certificate of incorporation expressly denies stockholders the right to cumulate votes in the election of directors.

Our certificate of incorporation eliminates the ability of stockholders to act by written consent. Our bylaws further provide that special meetings of our stockholders may be called at any time only by the chairman of the board or the president or at the written request of a majority of the board of directors and by no other persons.

Advance Notice Requirements for Stockholder Proposals and Director Nominations

Our bylaws provide that stockholders seeking to bring business before an annual meeting of stockholders, or to nominate candidates for election as directors at an annual meeting of stockholders, must provide timely notice in writing. To be timely, a stockholder's notice must be delivered to or mailed and received at our principal executive offices not less than sixty days nor more than ninety days prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided, that in the event that the annual meeting is called for a date that is not within thirty days before or after such anniversary date, notice by the stockholder in order to be timely must be received not later than the close of business on the tenth day following the date on which notice of the date of the annual meeting was mailed to stockholders or made public, whichever first occurs. Our bylaws also specify certain requirements as to the form and content of a stockholder's notice. These provisions may preclude stockholders from bringing matters before an annual meeting of stockholders or from making nominations for directors at an annual meeting of stockholders.

The authorized but unissued shares of common stock and preferred stock are available for future issuance without stockholder approval. These additional shares may be utilized for a variety of corporate purposes, including future public offerings to raise additional capital, corporate acquisitions and employee benefit plans. The existence of authorized but unissued shares of common stock and preferred stock could render more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise.

The Delaware General Corporation Law provides generally that the affirmative vote of a majority of the shares entitled to vote on any matter is required to amend a corporation's certificate of incorporation or bylaws, unless a corporation's certificate of incorporation or bylaws, as the case may be, requires a greater percentage. Our certificate of incorporation requires the affirmative vote of the holders of 66²/3% of the outstanding shares of our common stock to approve a business combination transaction that is not approved by a majority of the board of directors or amend the provisions of our certificate of incorporation and bylaws, including those provisions relating to the classified board of directors, action by written consent and the ability of stockholders special meetings.

The transfer agent and registrar for our common stock is LaSalle Bank National Association.

Prior to this offering, there has been no public market for our common stock. Future sales of substantial amounts of our common stock in the public market could adversely affect prevailing market prices. Furthermore, since no shares will be available for sale shortly after this offering because of contractual and legal restrictions on resale as described below, sales of substantial amounts of our common stock in the public market after these restrictions lapse could adversely affect the prevailing market price and our ability to raise equity capital in the future.

Upon completion of this offering, we will have outstanding an aggregate of shares of common stock, assuming no exercise of the underwriters' over-allotment option and no exercise of outstanding options after , 2002. Of these shares, all of the shares sold in this offering will be freely tradable without restriction or further registration under the Securities Act, unless these shares are purchased by "affiliates" as that term is defined in Rule 144 under the Securities Act. The remaining shares of common stock held by existing stockholders are restricted securities. Restricted securities may be sold in the public market only if registered or if they qualify for an exemption from registration described below under Rules 144 or 144(k) promulgated under the Securities Act.

As a result of the contractual restrictions described below and the provisions of Rules 144 and 144(k), the restricted shares will be available for sale in the public market as follows:

All of our officers, directors, existing stockholders and warrant holders and substantially all of our option holders have agreed to the lock-up restrictions described in "Underwriting."

In general, under Rule 144 as currently in effect, beginning ninety days after the date of this prospectus, a person or persons whose shares are aggregated, who has beneficially owned restricted securities for at least one year, including the holding period of any prior owner except an affiliate, would be entitled to sell within any three-month period a number of shares that does not exceed the greater of:

Sales under Rule 144 are also subject to matter of sale provisions and notice requirements and to the availability of current public information about us.

Under Rule 144(k), a person who is not deemed to have been one of our affiliates at any time during the 90 days preceding a sale, and who has beneficially owned the shares proposed to be sold for at least two years, including the holding period of any prior owner except an affiliate, is entitled to sell these shares without complying with the manner of sale, public information, volume limitation or notice provisions of Rule 144. Upon the expiration of the 180-day lock-up period, shares of our common stock will qualify as "144(k) shares."

Following the completion of this offering, we intend to file a registration statement on Form S-8 under the Securities Act covering shares of common stock reserved for issuance under our stock option plan. The registration statement will become effective automatically upon filing. Upon completion of this offering, options to purchase shares of common stock are expected to be issued and outstanding, of which shares are expected to be vested. Accordingly, shares registered under the registration statement will, subject to vesting provisions and Rule 144 volume limitations applicable to our affiliates, be available for sale in the open market immediately after the 180-day lock-up agreements expire.

At any time six months following the effective date of this offering, the holders of 30% or more of the shares of common stock held by our existing stockholders will be entitled to demand, under certain circumstances, the registration of their shares under the Securities Act. We are not required to effect more than one registration for such holders pursuant to these demand registration rights, under certain circumstances. We may postpone for a period not to exceed 90 days the filing or effectiveness of any registration statement filed in connection with a demand registration if we determine in good faith that such filing would require disclosure of a material fact that would have a material adverse effect on us to engage in any acquisition of assets or any merger, consolidation or tender offer. Additionally, subject to certain conditions and limitations, we have agreed to permit our existing stockholders to include their shares of common stock in any primary offering pursuant to a registration statement filed with the SEC or whenever our securities then issued and outstanding are to be registered under the Securities Act upon compliance with certain notice provisions set forth in the agreement. These registration rights are subject to conditions and limitations, including the right of the underwriters of an offering to limit the number of shares of common stock held by security holders with registration rights to be included in such registration.

We are generally required to bear all expenses arising from these registrations. We have further agreed to indemnify, to the fullest extent permitted by law, each stockholder and certain of their affiliates against all losses, claims, damages, liabilities and expenses caused by any untrue or alleged untrue statement of a material fact contained in any registration statement, any prospectus or preliminary prospectus or any amendment thereof or supplement thereto, any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading or any violation of federal or state blue sky laws.

Registration of any of the shares of our common stock held by security holders with registration rights would result in such shares becoming freely tradable without restriction under the Securities Act immediately upon effectiveness of such registration.

All holders with registration rights have agreed not to exercise their registration rights until 180 days following the date of this prospectus without the prior written consent of Credit Suisse First Boston Corporation.

The following is a summary of certain U.S. federal income and estate tax consequences of the acquisition, ownership, and disposition of our common stock purchased pursuant to this offering by a holder that, for U.S. federal income tax purposes, is not a "U.S. person", as that term is defined below. A beneficial owner of our common stock who is not a U.S. person is referred to below as a "non-U.S. holder." This summary is based upon current provisions of the Internal Revenue Code of 1986, as amended (the "Code"), Treasury regulations promulgated thereunder, judicial opinions, administrative rulings of the U.S. Internal Revenue Service (the "IRS") and other applicable authorities, all as in effect as of the date hereof. These authorities may be changed, possibly retroactively, resulting in United States federal tax consequences different from those set forth below. We have not sought, and will not seek, any ruling from the IRS or opinion of counsel with respect to the statements made in the following summary, and there can be no assurance that the IRS will not take a position contrary to such statements or that any such contrary position taken by the IRS would not be sustained.

This summary is limited to non-U.S. holders who purchase our common stock issued pursuant to this offering and who hold our common stock as a capital asset (generally, property held for investment). This summary also does not address the tax considerations arising under the laws of any foreign, state or local jurisdiction, or under United States federal estate or gift tax laws (except as specifically described below). In addition, this summary does not address tax considerations that may be applicable to an investor's particular circumstances or to investors that may be subject to special tax rules, including, without limitation:

In addition, if a partnership (including any entity treated as a partnership for United States federal income tax purposes) is a holder, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. A HOLDER THAT IS A PARTNERSHIP, AND PARTNERS IN SUCH PARTNERSHIP, SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE TAX CONSEQUENCES OF THE DIRECT OR INDIRECT PURCHASE, OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK.

YOU ARE URGED TO CONSULT YOUR TAX ADVISOR WITH RESPECT TO THE APPLICATION OF THE UNITED STATES FEDERAL INCOME TAX LAWS TO YOUR PARTICULAR SITUATION AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE FEDERAL ESTATE OR GIFT TAX RULES OR UNDER THE LAWS OF ANY STATE, LOCAL, FOREIGN OR OTHER TAXING JURISDICTION OR UNDER ANY APPLICABLE TAX TREATY WITH RESPECT TO THE ACQUISITION, OWNERSHIP, AND DISPOSITION OF OUR COMMON STOCK.

We do not have a present intention to pay dividends on our shares of common stock. In general, however, if distributions are paid on shares of our common stock, such distributions will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles, and any excess will constitute a return of capital that is applied against and reduces your adjusted tax basis in our common stock, and then any remainder will constitute gain on the common stock. Dividends paid to a non-U.S. holder will generally be subject to withholding of U.S. federal income tax at the rate of 30% or such lower rate as may be specified by an applicable income tax treaty. If the dividend is effectively connected with the non-U.S. holder's conduct of a trade or business in the U.S. or, if a tax treaty applies, attributable to a U.S. permanent establishment maintained in the U.S. by such non-U.S. holder, the dividend will not be subject to U.S. federal withholding tax (provided certain certification requirements are met, as described below) but will be subject to U.S. federal income tax imposed on net income on the same basis that applies to U.S. persons generally, and in such case, the non-U.S. holder would be required to file a U.S. federal tax return. Additionally, a non-U.S. holder that is treated as a corporation for U.S. federal income tax purposes may be subject to the branch profits tax at a rate of 30% or such lower rate that may be specified in an applicable income tax treaty on the actual or deemed repatriation of its "effectively connected earnings and profits," subject to certain adjustments and exceptions.

In order to claim the benefit of a tax treaty or to claim exemption from withholding because the income is effectively connected with the conduct of a trade or business in the U.S., a non-U.S. holder must provide a properly executed IRS Form W-8BEN for treaty benefits or W-8ECI for effectively connected income (or such successor forms as the IRS designates), prior to the payment of dividends. These forms must be periodically updated. Non-U.S. holders may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund.

A non-U.S. holder will generally not be subject to U.S. federal income tax, including by way of withholding, on gain recognized on a sale or other disposition of our common stock unless any of the following is true:

Because the determination of whether we are a USRPHC depends on the fair market value of our United States real property interests relative to the fair market value of our other business assets, there can be no assurance that we will not become a USRPHC in the future. As long as our common stock is regularly traded on an established securities market, however, such common stock will be treated as United States real property interests only if, in general, a non-U.S. holder holds more than 5 percent of such regularly traded common stock.

Unless an applicable treaty provides otherwise, gain described in the first bullet point above will be subject to the U.S. federal income tax imposed on net income on the same basis that applies to U.S. persons generally and, for corporate holders under certain circumstances, the branch profits tax, but will generally not be subject to U.S. federal income tax withholding. Gain described in the second bullet point above will be subject to a flat 30% U.S. federal income tax, which may be offset by U.S. source capital losses. Non-U.S. holders should consult any applicable income tax treaties that may provide for different rules.

Our common stock owned or treated as owned by an individual who at the time of death is a non-U.S. holder will be included in his or her estate for U.S. federal estate tax purposes, unless an applicable estate tax treaty provides otherwise.

Under U.S. Treasury regulations, we must report annually to the IRS and to each non-U.S. holder the amount of dividends paid to such non-U.S. holder and the tax withheld with respect to those dividends. These information reporting requirements apply even if withholding was not required because the dividends were effectively connected dividends or withholding was reduced or eliminated by an applicable tax treaty. Pursuant to an applicable tax treaty, that information may also be made available to the tax authorities in the country in which the non-U.S. holder resides.

Backup withholding generally will not apply to payments of dividends made by us or our paying agents, in their capacities as such, to a non-U.S. holder of our common stock if the holder has provided the required certification (e.g. IRS Form W-8BEN) that it is not a U.S. person as described above or certain other requirements are met. Notwithstanding the foregoing, backup withholding may apply if either we or our paying agent has actual knowledge, or reason to know, that the holder is a U.S. person.

Payments of the proceeds from a disposition or a redemption effected outside the U.S. by a non-U.S. holder of our common stock made by or through a foreign office of a broker generally will not be subject to information reporting or backup withholding. However, information reporting (but not backup withholding) generally will apply to such a payment if the broker has certain connections with the U.S. unless the broker has documentary evidence in its records that the beneficial owner is a non-U.S. holder and specified conditions are met or an exemption is otherwise established.

Payment of the proceeds from a disposition by a non-U.S. holder of common stock made by or through the U.S. office of a broker is generally subject to information reporting and backup withholding unless the non-U.S. holder certifies as to its non-U.S. holder status under penalties of perjury (and we and our paying agent do not have actual knowledge, or reason to know, that the holder is a U.S. person) or otherwise establishes an exemption from information reporting and backup withholding.

Backup withholding is not an additional tax. Any amounts that we withhold under the backup withholding rules will be refunded or credited against the non-U.S. holder's U.S. federal income tax liability if certain required information is furnished to the IRS. Non-U.S. holders should consult their own tax advisors regarding application of backup withholding in their particular circumstance and the availability of, and procedure for obtaining an exemption from, backup withholding under current Treasury regulations.

Under the terms and subject to the conditions contained in an underwriting agreement dated , 2002, we and the selling stockholders have agreed to sell to the underwriters named below, for whom Credit Suisse First Boston Corporation, Banc of America Securities LLC and U.S. Bancorp Piper Jaffray Inc. are acting as representatives, the following respective numbers of shares of common stock:

Underwriter			Number of Shares
Credit Suisse First Boston Corporation
Banc of America Securities LLC
U.S. Bancorp Piper Jaffray Inc.


	Total

The underwriting agreement provides that the underwriters are obligated to purchase all the shares of common stock in the 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 may be terminated.

The selling stockholders have granted to the underwriters a 30-day option to purchase on a pro rata basis up to an aggregate of additional outstanding shares at the initial public offering price less the underwriting discounts and commissions. The option may be exercised only to cover any over-allotments of common stock.

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

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

The representatives have informed us and the selling stockholders that they do not expect discretionary sales to exceed 5% of the shares of 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 Commission a registration statement under the Securities Act relating to, any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, or publicly disclose the intention to make any 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 (i) issuances pursuant to the exercise of

currently outstanding warrants or options and (ii) grants of employee stock options pursuant to the plans described in the prospectus.

Our officers, directors, stockholders, including the selling stockholders, and warrant holders and substantially all of our option holders have agreed that they will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, enter into a transaction that 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 common stock, whether any of these transactions are to be settled by delivery of our common stock or other securities, in cash or otherwise, or publicly disclose the intention to make any offer, sale, pledge or disposition, or to enter into any 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.

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

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

We will apply to list the shares of common stock on The Nasdaq National Market subject to official notice of issuance under the symbol "CLGS."

Prior to this offering, there has been no public market for our common stock. The initial public offering price will be determined by negotiation between us and the representatives, provided that the offering price will be no higher than the price recommended by Credit Suisse First Boston Corporation, as the qualified independent underwriter. The principal factors that will be considered in determining the public offering price will include:

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

In January 2000, U.S. Bancorp Piper Jaffray received from Eduprise, Inc. a warrant to purchase shares of Eduprise Series A preferred stock for providing financial services in connection with a private equity financing. At that time, five employees of U.S. Bancorp Piper Jaffray also purchased shares of Eduprise Series A preferred stock. The exercise price of the warrant and the purchase price of the common stock equaled the per share purchase price paid by all investors in the private equity financing. In connection with our acquisition of Eduprise in August 2001, we issued U.S. Bancorp Piper Jaffray a replacement warrant to purchase 182,170 shares of our common stock at an exercise price of $5.38 and issued the five U.S. Bancorp Piper Jaffray employees an aggregate of 18,575 shares of our common stock in exchange for all of their shares of Eduprise Series A preferred stock. In response to recently adopted NASD rules regarding conflicts of interest, U.S. Bancorp Piper Jaffray will exercise its warrant in full on the offering date and it and its employees will sell all the stock they beneficially own in the offering. Since such conflicts exist between U.S. Bancorp Piper Jaffray and us, the offering must be conducted in accordance with the applicable provisions of Rule 2720 of the NASD Conduct Rules. Rule 2720 requires that the initial public offering price of the shares of common stock not be higher than that recommended by a "qualified independent underwriter" meeting certain standards. The NASD is a self-regulatory association created by the Maloney Act, which requires that registered broker-dealers be members of it. The NASD sets standards for its members, which must be complied with and which include underwriting standards and conflicts. Accordingly, Credit Suisse First Boston Corporation has agreed to assume the responsibilities of acting as the qualified independent underwriter in pricing the offering and conducting due diligence. The initial public offering price of the shares of common stock will be no higher than the price recommended by Credit Suisse First Boston Corporation.

Certain of the shares to be sold by the selling stockholders were acquired by such selling stockholders in connection with our reacquisition of Eduprise in August 2001. See "Related Party Transactions" for more detailed information regarding this transaction.

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

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

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

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

By purchasing common stock in Canada and accepting a purchase confirmation, a purchaser is representing to us, the selling stockholders and the dealer from whom the purchase confirmation is received that:

Under Ontario securities legislation, a purchaser who purchases a security offered by this prospectus during the period of distribution will have a statutory right of action for damages, or while still the owner of the shares, for rescission against us and the selling stockholders in the event that this prospectus contains a misrepresentation. A purchaser will be deemed to have relied on the misrepresentation. The right of action for damages is exercisable not later than the earlier of 180 days from the date the purchaser first had knowledge of the facts giving rise to the cause of action and three years from the date on which payment is made for the shares. The right of action for rescission is exercisable not later than 180 days from the date on which payment is made for the shares. If a purchaser elects to exercise the right of action for rescission, the purchaser will have no right of action for damages against us or the selling stockholders. In no case will the amount recoverable in any action exceed the price at which the shares were offered to the purchaser, and if the purchaser is shown to have purchased the securities with knowledge of the misrepresentation, we and the selling stockholders will have no liability. In the case of an action for damages, we and the selling stockholders will not be liable for all or any portion of the damages that are proven to not represent the depreciation in value of the shares as a result of the misrepresentation relied upon. These rights are in addition to, and without derogation from, any other rights or remedies available at law to an Ontario purchaser. The foregoing is a summary of the rights available to an Ontario purchaser. Ontario purchasers should refer to the complete text of the relevant statutory provisions.

All of our directors and officers as well as the experts named herein and the selling stockholders, 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 us or those persons. All or a substantial portion of our assets and the assets of those persons may be located outside of Canada and, as a result, it may not be possible to satisfy a judgment against us or those persons in Canada or to enforce a judgment obtained in Canadian courts against us or those persons outside of Canada.

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

The validity of the shares of common stock offered hereby will be passed upon for us by Winston & Strawn, Chicago, Illinois. Stanford J. Goldblatt, a partner of Winston & Strawn, owns 37,769 shares of our common stock and 43,722 options to purchase shares of our common stock. Certain legal matters will be passed upon for the underwriters by Katten Muchin Zavis Rosenman, Chicago, Illinois.

The financial statements of Collegis, Inc. as of December 31, 2001 and 2000, and for each of the three years in the period ended December 31, 2001 and the financial statements of Eduprise, Inc. as of December 31, 2000 and 1999, and for the year ended December 31, 2000 and the period from June 1, 1999 to December 31, 1999, included in this prospectus have been audited by Deloitte & Touche LLP, independent auditors, as stated in their reports appearing herein, and have been so included in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.

We have filed with the SEC a registration statement on Form S-1 (including exhibits, schedules and amendments) under the Securities Act of 1933 with respect to the shares of common stock to be sold in this offering. This prospectus does not contain all the information set forth in the registration statement. For further information with respect to us and the shares of common stock to be sold in this offering, reference is made to the registration statement. Statements contained in this prospectus as to the contents of any material contract, agreement or other document referred to are not necessarily complete. Whenever a reference is made in this prospectus to any material contract or other document of ours, the reference may not be complete, and you should refer to the exhibits that are a part of the registration statement for a copy of the contract or document.

You may read and copy all or any portion of the registration statement or any other information we file at the SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. You can request copies of these documents, upon payment of a duplicating fee, by writing to the SEC. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference rooms. Our SEC filings, including the registration statement, are also available to you on the SEC's web site (http://www.sec.gov).

As a result of this offering, we will become subject to the information and reporting requirements of the Securities Exchange Act of 1934, and, in accordance with those requirements, will file periodic reports, proxy statements and other information with the SEC.

We have audited the accompanying balance sheets of Collegis, Inc. (formerly CollegisEduprise, Inc. and COLLEGIS, Inc.) (the "Company") as of December 31, 2001 and 2000, and the related statements of income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, such financial statements present fairly, in all material respects, the financial position of Collegis, Inc. as of December 31, 2001 and 2000, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America.

COLLEGIS, INC.

STATEMENTS OF INCOME

(amounts in thousands, except per share data)

COLLEGIS, INC.

NOTES TO FINANCIAL STATEMENTS

(amounts in thousands, except per share data)

Nature of Operations — On August 31, 2001 COLLEGIS, Inc. ("COLLEGIS") acquired Eduprise, Inc. ("Eduprise") (see Note 2). The merged entity was renamed CollegisEduprise, Inc. and in May 2002 the name was changed to Collegis, Inc. (the "Company" or "Collegis"). The combined enterprise is focused on the higher education market and offers a comprehensive set of services from strategic consulting, instructional development, program management, business planning, marketing services, software integration services, hosting and help desk and complete management services outsourcing.

COLLEGIS has provided services in the areas that include academic and instructional systems, administrative applications and networking and Internet services. These services have normally been bundled into a multi-year contract with lengths ranging from three to seven years. COLLEGIS also provided services in strategic consulting, instructional design and support, course development, program management and application hosting services.

Eduprise has provided services related to the integration of Internet technologies into the learning process. Its revenues have been generated from the provision of strategic consulting, instructional design and support, course development, program management, and software application hosting services.

Eduprise was a division of the Company until its sale to a minority shareholder of the Company in June 1999. COLLEGIS and Eduprise continued to have certain common shareholders and directors.

Basis of Presentation — These financial statements have been prepared on the basis of accounting principles generally accepted in the United States of America.

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

Revenue Recognition — Substantially all of the Company's revenues are generated under multi-year, fixed-priced contracts. Revenues are recognized as services are provided, primarily on a straight-line basis over each contract year. Revenues generated from strategic consulting, instructional design and support, course development and program management services are recognized as the services are performed. For these contracts, changes in scope of services to be provided, estimates of percentage completed or profitability may result in revisions to revenue and are recognized in the period in which such revisions are determined. Revenue includes reimbursable expenses charged to the client. The Company's agreements are not subject to refund provisions or attainment of specific milestones or acceptable provisions. The Company does not usually require deposits for its contracts.

Deferred Revenue — The typical payment terms of the Company's contracts require the payment of scheduled monthly amounts over the life of a contract and generally allow for billing one month in advance of the service being performed. However, billing schedules and payment terms are structured to coincide with the peak cash flow experienced by the Company's clients. The differences between the scheduled billings and revenue recognized is recorded as either deferred revenue (if billings exceed revenue recognized) or unbilled receivables (if revenue recognized exceeds billings) on the balance sheet.

Cost of Services — Cost of services are the direct costs to provide services to customers and primarily consists of salaries and wages and related fringe benefits. Costs of services also includes any cost of subcontractors and outside consultants and other direct costs (some of which may be reimbursed by clients), such as travel expenses.

Cash and Cash Equivalents — Cash and cash equivalents consist primarily of amounts held in demand deposit accounts and amounts in highly liquid time deposit instruments having an original maturity of three months or less, and are recorded at cost which approximates fair value.

Property and Equipment — Property and equipment is stated as cost less accumulated depreciation and is depreciated over the estimated useful lives of the related assets under the straight-line method. The estimated useful lives range from three to seven years.

Income Taxes — The provision for income taxes is calculated under the liability method. Deferred tax assets and liabilities are recorded based on the difference, if any, between the financial statement and tax bases of assets and liabilities at the enacted tax rates.

Financial Instruments — The carrying amounts for cash and cash equivalents, trade accounts receivable, unbilled receivables on contracts, income taxes receivable, prepaid expenses, accounts payable, accrued expenses and certain other assets and liabilities approximate fair value because of the short-term nature of these items. Because of its variable interest rate, the carrying amount of the long-term debt approximates its fair value.

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of accounts receivable. The Company believes that concentrations of credit risk are limited due to the credit quality of the Company's customers (see Note 14). Trade receivable credit losses for the three years ended December 31, 2001 were not material.

Business Combinations — Statement of Financial Accounting Standard ("SFAS") No. 141 "Business Combinations" requires all business combinations initiated after June 30, 2001 to be accounted for under the purchase method. Accordingly, the acquisition of Eduprise was accounted under the purchase method. SFAS 141 also sets forth guidelines for applying the purchase method of accounting in the determination of intangible assets, including goodwill acquired in a business combination, and expands financial disclosures concerning business combinations.

Goodwill and Intangibles — SFAS 142 "Goodwill and Other Intangible Assets" requires the use of a non-amortization approach to account for purchased goodwill and intangible assets with indefinite lives. Other intangible assets will continue to be amortized over their estimated useful lives. Under the non-amortization approach, goodwill and intangible assets with indefinite lives will not be amortized, but be tested for impairment annually, or more frequently if events or changes in circumstances indicate that these assets might be impaired. The provisions of SFAS 142 were effective for the goodwill and intangible assets arising in the acquisition of Eduprise.

Software — The Company has developed selected software products for sale in connection with its instructional and Internet service offerings. These products first achieved technological feasibility in 1998. Computer software development and production costs have been capitalized in accordance with SFAS 86, "Accounting for the Costs of Computer Software to Be Sold, Leased or Otherwise Marketed." Such costs are capitalized once technological feasibility has been achieved. Capitalized software development costs are reported at the lower of amortized cost or net realizable value.

Commencing upon initial product release, these costs were amortized over their estimated economic life, generally five years, under the straight-line method. At December 31, 2000, the remaining carrying value of the capitalized software costs (of $206) was written off (see Note 5). Amortization of software development costs was $475 and $185 during 2000 and 1999, respectively. The amortization and write off of software costs are included in cost of services.

Earnings Per Share — Basic earnings per share is computed based on the average number of common shares outstanding. Diluted earnings per share reflect the increase in average shares outstanding that would result from the assumed exercise of outstanding stock options and warrants, calculated using the treasury stock method. The denominator in the calculation is based on the following weighted-average number of common shares:

	December 31,			June 30,
	1999	2000	2001	2002
				(Unaudited)
Basic	14,026	13,282	14,504	17,378
Dilutive effect of stock and warrants	1,656	976	1,012	1,412

Diluted	15,682	14,258	15,516	18,790

Interim Financial Information — The financial information as of June 30, 2002 and for the six month periods ended June 30, 2002 and 2001 are unaudited and have been prepared on the same basis as the audited financial statements included herein. In the opinion of management, the unaudited financial statements include all adjustments, consisting only of normal recurring items, necessary to present fairly the periods indicated. Results of operations for the interims periods are not necessarily indicative of the results for the full year.

The acquisition of Eduprise closed on August 31, 2001, at which time COLLEGIS acquired 100% of the capital stock of Eduprise and all outstanding and unexercised options and warrants of Eduprise were converted into options or warrants to purchase the Company's Common Stock (see Note 3). The purchase price, aggregating $20.34 million, consisted of 4,292 shares of Common Stock with a fair value of $19.36 million; replacement options for 160 shares of Common Stock, for Eduprise option holders whose options were vested, with a fair value of $.66 million; replacement warrants to purchase 182 shares of Common Stock, with a fair value of $.03 million; and professional fees and other costs aggregating $.29 million. Replacement options to purchase 320 shares of Common Stock were issued to Eduprise option holders whose options were not vested. The fair value of these unvested replacement options of $733 was charged to deferred compensation and is being amortized over the remaining vesting period. The fair value of the stock was determined by an independent valuation. The fair value of options and warrants were determined using the Black-Scholes option-pricing model. Additionally, the Company agreed to issue options to purchase an aggregate of up to 1,149 shares of Common Stock to certain Eduprise employees at an exercise price equal to fair market value at the closing date and extended the term of options to purchase 148 shares of Common Stock held by certain former Eduprise employees (the options were to have expired in 2001). The intrinsic value of the extended options of $464 was expensed in 2001.

The assets acquired and liabilities assumed were recorded at estimated fair values as determined by the Company's management based on information available and on assumptions as to future operations. The Company obtained independent appraisals of the fair values of the acquired property and equipment and identified intangible assets and their remaining useful lives. The Company also completed the review and determination of the fair values of the other assets acquired and liabilities assumed. A summary of the allocation of the purchase price to the assets acquired and liabilities assumed in the acquisition follows:

Cash acquired	$	4,103
Other working capital		(55	)
Property and equipment		961
Deferred taxes		4,642
Long-term debt		(134	)
Intangible assets		1,440
Goodwill		9,383

Total purchase price	$	20,340

The intangible assets relate to contractual customer relationships and will be amortized on the straight-line method over three years. Amortization expense in 2001 was $480. The goodwill is not deductible for income tax purposes.

The results of Eduprise have been included in the financial statements since August 31, 2001. The following unaudited pro forma financial information for the years ended December 31, 2001 and 2000, assumes the Eduprise acquisition occurred as of the beginning of the respective periods, after giving effect to certain adjustments, including the amortization of intangible assets and the related tax effects. The pro forma results have been prepared for comparative purposes only and are not necessarily indicative of the operating results that would have occurred had the acquisition been consummated as of the dates indicated, nor are they necessarily indicative of future operating results.

	Pro Forma
	2000			2001
Revenue	$	60,455		$	75,717
Stock compensation expense		1,720			922
Operating income (loss)		(1,416	)		1,908
Net income (loss)		(609	)		1,225
Net income (loss) per share — diluted		(0.03	)		0.07

Common Stock — Prior to the acquisition of Eduprise, on August 31, 2001 the capitalization of COLLEGIS included the following series of common stock, all having a par value of $.01:

All series had the same rights except that (i) Series A Non-voting and Series B had no right to vote and (ii) Series A was senior to the Series B and Series C with respect to dividend and liquidation preferences.

Coincident with the acquisition of Eduprise, the Series A and Series B shares were converted into voting common stock with no preferences and designated "Common Stock" ($.01 par value), the authorization to issue Series A, Series B and Series C was cancelled, and the outstanding COLLEGIS warrants and options were amended to provide for the purchase of Common Stock. Subsequent to the conversion, the Company has 17,377 shares outstanding and has authorized the issuance of 25,000 shares.

Redeemable Common Stock — Included in the number of Common Stock shares issued and outstanding are 748 redeemable shares at December 31, 2001, 2000 and 1999 (the "Redeemable Common Stock"). The Redeemable Common Stock is subject to a put option granted by the Company to a former officer as part of an Incentive, Put and Noncompetition Agreement (the "Put Agreement"). In the event of a triggering sale, as defined, the former officer may sell her shares to the Company at a price of $1.22 per share. The Put Agreement expires upon the completion of an IPO or other qualifying sale. At December 31, 2001 and 2000, the fair market value of the underlying common stock was in excess of the maximum redemption price.

Warrants to purchase 550 shares of Common Stock at a price of $0.23375, issued to a former lender, and warrants to purchase 182 shares of Common Stock at a price of $5.38, issued to replace a warrant issued by Eduprise, were outstanding at December 31, 2001.

In June of 1999, the Company sold its Collegis Learning Network division ("CLN") to Eduprise. Located in North Carolina, CLN was principally engaged in the development of the Company's instructional and Internet software applications, providing outsourcing services related to the hosting, maintenance and support of the software as part of the Company's overall service contracts with selected institutions.

CLN had service revenue of $865 in 1999. Proceeds from the sale were $30, which approximated the book value of the net assets sold. The assets sold consisted principally of property and equipment and lease deposits with a net book value of $460. Eduprise assumed $430 of deferred revenue and accrued expenses. The 1999 financial statements reflect CLN as a discontinued operation.

In connection with the transaction, the Company retained the rights to the computer software and related intellectual property developed by CLN up to the date of the sale, and granted a royalty-free

license to Eduprise for the use of this intellectual property. The Company continued to provide related services under the terms of its existing service contracts, but outsourced these services to Eduprise at negotiated rates. Service fees charged to the Company by Eduprise were $287 in 2001 (for the eight months ended August 31, 2001), $430 in 2000 and $301 in 1999.

During 2000, Eduprise announced that it would no longer support the computer software developed by CLN. As a result, the remaining carrying value of the capitalized software costs was charged to expense, as the recoverability of such amounts was doubtful.

The Company has a consulting agreement with Salt Creek Ventures ("Salt Creek"). The principal of Salt Creek is the Chairman of the Company's Board of Directors, who was also the Chief Executive Officer of the Company from September 2001 to January 2002, and the agreement relates to the provision of services by the Chairman. Amounts paid to Salt Creek in 2001, 2000 and 1999 were $163, $125 and $50, respectively.

The Company has a credit agreement with a lender that provides for maximum borrowings of up to $9,500, reduced annually through scheduled principal/commitment reductions, as defined; calls for additional mandatory principal reductions in the event the Company has excess cash flows, as defined; and expires December 31, 2003 (the "Credit Agreement"). Borrowings under the Credit Agreement bear interest at either the prime rate plus a variable spread (as defined in the Credit Agreement, 5.25% and 10.00% at December 31, 2001 and 2000, respectively) or LIBOR plus a variable spread (as defined in the Credit Agreement, 5.31% and 8.62% at December 31, 2001 and 2000, respectively) at the option of the Company. Interest is payable quarterly. At December 31, 2001 and 2000, the Company had $1,822 and $4,649 designated as LIBOR borrowings, respectively. At December 31, 2001 and 2000, the Company had $438 and $400 designated as prime borrowings, respectively. Borrowings under the Credit Agreement are secured by substantially all of the assets of the Company.

The Credit Agreement restricts dividends and loans without the prior written consent of the lender, makes the Company subject to certain covenants and requires the Company to maintain certain financial ratios. At December 31, 2001, the Company was in compliance with all covenants and ratios.

Debt issuance costs of $91 incurred in connection with the Credit Agreement have been capitalized and are reflected in the Balance Sheets at December 31, 2001 and 2000 net of accumulated amortization of $65 and $49, respectively.

In June of 1999, the Company amended the Credit Agreement to provide for additional borrowings under a revolving line of credit of up to $3,000, based on eligible accounts receivable ("Line of Credit"). Borrowings under the Line of Credit bear interest at either the prime rate plus a variable spread or LIBOR plus a variable spread (as defined in the Credit Agreement), at the option of the Company. Interest is payable quarterly. Outstanding borrowings are payable in June of 2002. At December 31, 2001 and 2000, the Company had no amounts outstanding under the Line of Credit.

	2000			2001
Furniture and equipment	$	1,571		$	3,406
Leasehold improvements		353			587
Computer software		449			891

		2,373			4,884
Accumulated depreciation and amortization		(1,209	)		(2,674	)

Property and equipment — net	$	1,164		$	2,210

Depreciation and amortization expense related to property and equipment was $802, $615 and $229 in 2001, 2000 and 1999, respectively.

	2000		2001
Accounts payable and accrued liabilities	$	1,609	$	2,295
Accrued compensation		1,081		2,137
Accrued group health insurance		515		843

Total accounts payable and accrued liabilities	$	3,205	$	5,275

Accrued Group Health Insurance — The Company is self-insured for portions of its group medical and dental liability costs. The amounts in excess of the self-insurance levels are fully insured. Accruals are based on claims filed and an estimate for claims incurred but not reported.

Terminated Transaction Costs — During 1999, the Company incurred $702 of legal, accounting and other miscellaneous costs in connection with two anticipated merger transactions. These transactions were not completed. $118 was paid in 1999, the remainder in 2000.

In December 1998, as part of a severance agreement with a former officer and in order to finance the officer's exercise of an option to acquire 600 shares of Series A Voting, the Company loaned the former officer $571. The loan was secured by the former officer's 600 shares of Series A Voting and was repayable under a full recourse promissory note (the "Note"). The sale or transfer of the former officer's Series A Voting shares was restricted during the time the loan remained unpaid. The Note bore interest at 7% per annum. Interest was payable quarterly and principal was due on December 31, 2000.

In March 2000, the former officer exercised 327 options to purchase shares of Series B at $0.56 per share. Simultaneously, the Company repurchased and retired all of the former officer's shares, including the 600 shares of Series A Voting and 501 shares (including the 327 shares above) of Series B, for total consideration of $3,303. The former officer received a promissory note from the

Company in the amount of $1,652 (the "Note Payable"), and the remainder in cash. The cash received by the former officer was used to pay all amounts outstanding under the Note. Interest on the Note Payable accrues at a rate of 6.5% and is payable quarterly. The Note Payable matures on March 31, 2003.

In accordance with the provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), the Company recognized $797 of special compensation expense related to the repurchase of the 327 shares of Series B, representing the difference between the fair market value of the stock on the date of repurchase and the exercise price of the related options.

The COLLEGIS, Inc. 1996 Stock Option Plan (the "1996 Plan") was adopted on June 19, 1996. Under the provisions of the 1996 Plan, options to purchase shares of Series B may be granted to selected directors, officers, employees, and consultants of the Company at the discretion of the Board of Directors. Option terms, including the number of shares subject to the options, the exercise price and the conditions with respect to the vesting or exercisability of such options, are determined at the sole discretion of the Board of Directors. During 2000, the Board of Directors increased the maximum number of shares authorized to be issued under the 1996 Plan to 7,400 shares. During 2001 and 2000, options were generally granted with exercise prices greater than or equal to the fair value of the Series B at the date of grant. In 2001, options to purchase 259 shares granted within six months of the acquisition of Eduprise had exercise prices below $4.51. The intrinsic value of these options was remeasured using a fair value of $4.51 and the resulting intrinsic value of $391 was charged to deferred compensation. Options generally vest over four to six years and expire seven years from the date of grant.

In connection with a former officer's severance agreement dated December 31, 1999, the Company agreed to repurchase the former officer's 190 outstanding Series B shares for $3.00 per share. The share repurchase was completed in January 2000 and the related shares were retired. In addition, the officer's remaining 660 options were cancelled. The termination of the options resulted in a charge to equity of $906 in 1999, related to the deferred tax impacts of compensation expense recorded in 1998 related to these options.

The following summarizes the option shares outstanding and exercisable, by exercise price, at December 31:

	2001
Exercise Price	Options Outstanding	Weighted-avg. Remaining Life	Options Exercisable	Weighted-avg. Remaining Life
$0.57	573	1.6	573	1.6
0.87	344	4.7	142	4.6
1.38	724	2.5	740	2.5
2.00	142	3.3	109	3.3
3.00	1,642	5.8	334	5.8
4.51	1,111	6.6	278	6.6
4.88	364	3.9	288	3.9

Total	4,900	4.7	2,464	3.5

	2000
Exercise Price	Options Outstanding	Weighted-avg. Remaining Life	Options Exercisable	Weighted-avg. Remaining Life
$0.57	573	2.6	573	2.6
1.38	791	3.5	654	3.5
2.00	191	4.3	118	4.3
3.00	1,385	6.7
4.88	411	4.9	229	4.9

Total	3,351	4.9	1,574	3.4

The fair value of each option grant has been estimated on the date of grant using the Black-Scholes option-pricing model based on the following weighted-average assumptions for options granted in 2001 and 2000:

	1999		2000		2001
Expected future dividend yield	0.00	%	0.00	%	0.00	%
Risk-free interest rate	5.12	%	5.91	%	4.51	%
Expected life (years)	5.00		5.00		5.00

As the Company's stock is not publicly traded, the effects of volatility have been ignored.

In October 1995, Statement of Financial Accounting Standards No. 123, ("SFAS 123") "Accounting for Stock-Based Compensation", was issued and is effective for financial statements for fiscal years beginning after December 15, 1995. As permitted by that statement, the Company will continue to measure compensation cost for stock option plans in accordance with APB 25. Had compensation cost

for the Company's stock option plans been determined consistent with the fair value method prescribed by SFAS 123, the impact on the Company's net income would have been as follows:

		1999		2000		2001
Income from continuing operations:
	As reported	$	3,800	$	4,452	$	4,047
	Pro forma		3,584		4,666		4,334
Net income:
	As reported		3,249		4,452		4,047
	Pro forma		3,033		4,666		4,334
Net income per share — diluted:
	As reported		0.21		0.31		0.26
	Pro forma		0.24		0.31		0.28

The special compensation expense recorded in 2000 related to the repurchase of shares from a former officer (see Note 9) are not reflected in the pro forma amounts above, as such compensation expense would not be recorded under the provisions of SFAS 123.

The Company has a 401(k) defined contribution profit-sharing plan for all eligible employees. The Company provides matching contributions of 50% of employee contributions up to 6% of the employees' compensation and may contribute additional amounts at the discretion of the Board of Directors. The Company made matching contributions of $760, $519 and $399 in 2001, 2000 and 1999, respectively.

Leases — The Company leases certain equipment and office facilities under agreements classified as operating and capital leases. These leases contain renewal options for terms up to 10 years, with adjustments in annual rentals for inflationary increases. Rental expense charged to operations for all operating leases was approximately $1,315 and $523 in 2001 and 2000, respectively. The following represents future minimum lease commitments under noncancellable leases at December 31, 2001:

Year Ending December 31	Operating Leases		Capital Leases
2002	$	1,857	$	57
2003		1,189		57
2004		507		20
2005		18		—

Future minimum lease payments	$	3,571		134

Less imputed interest				(17	)

Total capital lease obligation				117
Short-term portion				(46	)

Long-term portion			$	71

From time to time, the Company is engaged in litigation incidental to its business; however, in the judgment of the Company's management, there are no significant legal proceedings pending against the Company that could have a material adverse impact on the financial condition or results of operations of the Company.

Employment Agreements — The Company's Chief Executive Officer has an employment agreement under which, if he is terminated without cause, he is entitled to receive a cash payment of up to a year's salary and benefits.

		2001			2000			1999
Current:
	Federal	$	2,221		$	2,660		$	929
	State		595			736			284
Deferred:
	Federal		(89	)		(337	)		770
	State		(51	)		(87	)		184

Total income tax expense			2,676			2,972			2,167
Benefit allocated to discontinued operations			—			—			368

Income tax expense		$	2,676		$	2,972		$	2,535

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows at December 31:

The Company has operating loss carryforwards of $14,300 at December 31, 2001, expiring through 2020. The Company has established a valuation reserve at December 31, 2001 for potential limitations of the Eduprise net operating loss carryforwards as a result of the acquisition. Management believes it is more likely than not that the deferred tax assets, except for those related to the Eduprise net operating loss carryforwards, will be fully realized as the Company anticipates future taxable income sufficient to support the net deferred tax asset at December 31, 2001.

The Company operates primarily in one industry segment. The Company has derived and expects to continue to derive a significant portion of its revenues from a relatively limited number of customers. During 2001 and 2000, no single customer accounted for more than 6.8% and 6.3% of total revenues, respectively.

Additionally, the Company derives a significant portion of its revenues from public institutions whose fiscal stability is dependent, in part, on state and local government funding. A decrease in government funding in a state or local municipality in which the Company derives a significant portion of its revenue could have a material adverse effect on the Company's business, financial condition or results of operations. During the years ended December 31, 2001 and 2000, the Company derived 16% and 18%, respectively, of its revenue from services provided to New Jersey-based community colleges, and 16% and 13%, respectively, from services provided to Florida-based community colleges.

To the Board of Directors and Stockholders of
Eduprise, Inc.
Morrisville, North Carolina

We have audited the accompanying balance sheets of Eduprise, Inc. as of December 31, 2000 and 1999, and the related statements of operations, stockholders' equity (deficit), and cash flows for the year ended December 31, 2000 and for the period from June 1, 1999 through December 31, 1999. These financial statements are the responsibility of Eduprise, Inc.'s management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, such financial statements present fairly, in all material respects, the financial position of Eduprise, Inc. as of December 31, 2000 and 1999, and the results of its operations and its cash flows for the year ended December 31, 2000 and for the period from June 1, 1999 through December 31, 1999 in conformity with accounting principles generally accepted in the United States of America.

EDUPRISE, INC.

BALANCE SHEETS

DECEMBER 31, 1999 AND 2000 AND AUGUST 31, 2001 (UNAUDITED)

EDUPRISE, INC.

STATEMENTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2000 AND

PERIOD FROM JUNE 1, 1999 TO DECEMBER 31, 1999 AND

EIGHT MONTHS ENDED AUGUST 31, 2001 (UNAUDITED)

EDUPRISE, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

YEAR ENDED DECEMBER 31, 2000 AND PERIOD FROM JUNE 1, 1999 TO

DECEMBER 31, 1999 AND EIGHT MONTHS ENDED AUGUST 31, 2001 (UNAUDITED)

EDUPRISE, INC.
STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 2000 AND
PERIOD FROM JUNE 1, 1999 TO DECEMBER 31, 1999 AND
EIGHT MONTHS ENDED AUGUST 31, 2001 (UNAUDITED)

EDUPRISE, INC.

NOTES TO FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2000 AND PERIOD FROM JUNE 1, 1999

TO DECEMBER 31, 1999 AND EIGHT MONTHS ENDED AUGUST 31, 2001,

(unaudited as to August 31, 2001 information)

Eduprise, Inc. ("Eduprise" or the "Company") is a service and solutions provider for the e-learning marketplace which assists organizations in integrating Internet technologies into the learning process. The Company's revenues are generated from the provision of a comprehensive set of services including strategic consulting, instructional design and support, course development, program management, and application hosting services. All of the Company's operations are focused in one segment.

The Company was originally incorporated in the State of Delaware on December 31, 1998 as CLN, Inc., a wholly owned subsidiary of COLLEGIS, Inc. ("Collegis"). On May 17, 1999, CLN, Inc. changed its name to Eduprise.com, Inc.

On May 31, 1999, Collegis transferred all of the assets and liabilities of its Collegis Learning Network business, with a fair value of approximately $30,000, to Eduprise.com. Prior to acquiring the Collegis Learning Network business, Eduprise.com had not commenced operations. Collegis then sold all of the outstanding common shares of Eduprise.com (1,000 common shares) to Mr. John Canning, a minority shareholder (approximately 1.0% ownership interest) of Collegis for $30,000. The sale of assets has been accounted for in accordance with the purchase method of accounting. A summary of the purchase price allocation for the Collegis transaction is as follows:

Property and equipment	$	551,702
Other assets		7,478
Deferred revenue		(219,750	)
Liabilities assumed		(309,430	)

	$	30,000

On August 31, 1999, Mr. Canning contributed all 1,000 outstanding shares of Eduprise.com to EDU, L.L.C. ("EDU"), a limited liability corporation owned by Mr. Canning. EDU then transferred $3,470,000 in cash to Eduprise.com in exchange for 6,000,000 shares of Eduprise's common stock, $0.01 par value, at a price of approximately $.58 per share. The original 1,000 shares of Eduprise.com then owned by EDU were cancelled in connection with this transaction.

On September 22, 2000 the Company changed its name from Eduprise.com, Inc. to Eduprise, Inc.

Unaudited Financial Statements — The financial statements as of August 31, 2001, and for the eight months ended August 31, 2001, are unaudited. In addition, disclosure information subsequent to April 17, 2001, (the original issuance date of the 2000 financial statements) is unaudited. In the opinion of management, the unaudited balance sheet at August 31, 2001, and the unaudited statements of operations, stockholders' equity (deficit), and cash flows for the eight months ended August 31, 2001, include all adjustments, which include only normal recurring adjustments, necessary to present the financial position and results of operations and cash flows for the period then ended in accordance with accounting principles generally accepted in the United States of America. The results of operations for

the eight months ended August 31, 2001, are not necessarily indicative of results to be expected for a full fiscal year or any other period.

Cash and Cash Equivalents — The Company considers all money market accounts, debt instruments purchased with an original maturity of three months or less, and other highly liquid investments to be cash equivalents.

Property and Equipment — Property and equipment is carried at cost and is being depreciated using the straight-line method over the estimated useful lives of the related assets over periods ranging from 3 to 7 years. Maintenance and repairs are charged to expense when incurred; improvements are capitalized. Upon the sale or retirement of assets, the cost and accumulated depreciation are removed from the account and any gain or loss is recognized.

Fair Value of Financial Instruments — The carrying amounts for cash and cash equivalents, trade accounts receivable, unbilled receivables on contracts, prepaid expenses, accounts payable, accrued expenses, and certain other assets and liabilities approximate fair value because of the short-term nature of these items. The carrying amounts of capital leases approximate fair value as the terms of the lease approximated market conditions at December 31, 2000 and 1999.

Income Taxes — The tax effect of losses for all periods presented are recorded under the provisions of Statement of Financial Accounting Standards ("SFAS") No. 109, Accounting for Income Taxes. Under SFAS No. 109, deferred income taxes are recognized for the tax consequences of "temporary" differences by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. Valuation allowances are established when necessary to reduce deferred tax assets to the amount that is more likely than not expected to be realized. As of August 31, 2001 and December 31, 2000 and 1999, the net deferred tax assets have been fully reserved.

Revenue Recognition — Eduprise derives revenues from the provision of a comprehensive set of services including strategic consulting, instructional design and support, course development, program management, and software application hosting services. Eduprise's customers do not have the contractual right to take possession of the Company's proprietary software. Therefore, in accordance with Emerging Issues Task Force ("EITF") Abstract 00-3, Application of AICPA Statement of Position 97-2, Software Revenue Recognition, to Arrangements That Include the Right to Use Software Stored on Another Entity's Hardware, licensing and hosting revenues from contractual arrangements are generally recognized ratably over the contractual period. All other revenues are recognized as the services are performed. Amounts billed or received for which services have not yet been provided are recorded as deferred revenues in the current liabilities section of the accompanying balance sheet.

Stock Split — On March 10, 2000, the Company effected a six-for-one stock split of the Company's capital stock. All references to authorized and issued common shares, options and warrants in the accompanying financial statements and notes have been retroactively adjusted to reflect this stock split for all periods presented.

Stock Compensation — For stock and equity instruments granted to employees, Eduprise follows Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. Eduprise follows the disclosure requirements of SFAS No. 123, Accounting for Stock-Based Compensation. For stock and equity instruments issued to non-employees, the Company follows the provisions of SFAS No. 123 and EITF Abstract 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services.

Stock Warrants — Warrants to purchase preferred stock issued in connection with equity financings are recorded at amounts based on the warrant's relative estimated fair values at time of issuance and credited to additional paid-in capital. Any resulting discount is amortized as dividends over the term of the equity's minimum redemption period using the interest method.

Beneficial Conversion Features — Beneficial conversion features resulting from the issuance of equity instruments with an effective conversion price less than current fair market value are computed in accordance with EITF 00-27, Application of EITF Issue 98-5, Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios to Certain Convertible Instruments. Any resulting discount is amortized as dividends over the term of the equity's minimum redemption period using the interest method.

Comprehensive Income (Loss) — Eduprise follows the guidance of SFAS No. 130, Reporting Comprehensive Income. SFAS No. 130 requires that an enterprise (a) classify items of other comprehensive income by their nature in a financial statement and (b) display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in capital in the equity section of the balance sheet. There were no items of other comprehensive income during 1999, 2000 or 2001.

Customer Concentrations — Accounts receivable are unsecured, and the Company is at risk to the extent that such amounts become uncollectible. Ongoing credit evaluations of customers' financial condition are performed by management. Actual bad debt expense and the allowance for uncollectible receivables as of August 31, 2001, and December 31, 2000 and 1999 are insignificant.

At December 31, 1999, one account represented approximately 34% of gross trade receivables. At December 31, 2000, two accounts represented approximately 35% of gross trade receivables. At August 31, 2001, three accounts represented approximately 36% of gross trade receivables.

During 1999, three customers each accounted for more than 10% of the Company's total revenue. These three customers accounted for a total of 55% of the Company's total revenue. During 2000, one customer accounted for more than 10% of the Company's total revenue. This one customer accounted for a total of 13% of the Company's total revenue. During the eight months ended August 31, 2001, one customer accounted for more than 10% of the Company's revenue. This customer accounted for a total of 10.2% of the Company's total revenue. In addition, Collegis, a related party, accounted for approximately 17.6% of total revenues for the period from June 1, 1999 to December 31, 1999. During 2000, Collegis accounted for approximately 9.5% of total revenues. During the eight months ended August 31, 2001, Collegis accounted for approximately 5.1% of total revenues.

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

Reclassifications — Certain 1999 and 2000 amounts have been reclassified to conform to the 2001 presentation.

Recent Accounting Pronouncements — In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. This statement, as amended, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives), and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. Eduprise adopted the new reporting guidelines on January 1, 2001. The initial adoption of SFAS No. 133 did not have a significant impact on its financial position or results of operations.

Property and equipment at December 31, 1999 and 2000 and August 31, 2001 are summarized as follows:

Leases — The Company leases certain equipment and office facilities under agreements classified as operating and capital leases. These leases contain renewal options for terms up to 10 years, with adjustments in annual rentals for inflationary increases. Rental expense charged to operations for all operating leases totaled approximately $302,000 for the eight month period ended August 31, 2001, $313,500 for the year ended December 31, 2000 and $158,000 for the period from June 1, 1999 to

December 31, 1999. As of August 31, 2001, future minimum lease commitments on leases that had initial or remaining non-cancelable lease terms of one year or longer, are as follows:

Year Ending December 31	Operating Leases		Capital Leases
2001	$	475,488	$	19,068
2002		1,343,147		57,204
2003		1,188,527		57,204
2004		507,439		19,885
2005		18,193		—

Future minimum lease payments	$	3,532,794		153,361

Less imputed interest				(18,913	)

Total capital lease obligation				134,448
Short-term portion				(45,146	)

Long-term portion			$	89,302

The components of Eduprise's net deferred tax asset as of December 31, 2000 and 1999 and August 31, 2001, are as follows:

		1999			2000			2001
								(Unaudited)
Deferred tax assets:
	Net operating loss carryforwards	$	1,056,000		$	3,984,000		$	5,506,000
	Organizational costs		31,000			24,000			20,000
	Compensation for nonqualified stock options		32,000			176,000			245,000
	Other		11,000			(40,000	)		79,000

	Total deferred tax assets		1,130,000			4,144,000			5,850,000
	Valuation allowance		(1,130,000	)		(4,144,000	)		(5,850,000	)

Net deferred tax assets		$	—		$	—		$	—

Based on management's evaluation of the positive and negative evidence impacting the realization of the deferred tax assets, a valuation allowance has been provided. Management has considered Eduprise's history of losses and concluded that as of December 31, 1999 and 2000 and August 31, 2001, the net deferred tax assets should be fully reserved as it is uncertain that the deferred tax assets will be realized.

For the period from June 1, 1999 to December 31, 1999, the year ended December 31, 2000 and the eight months ended August 31, 2001, reported income taxes differ from income tax benefit that would result from applying the federal statutory rate of 34% to pretax loss due to the following:

	1999			2000			2001
							(Unaudited)
Computed expected tax benefit	$	(994,000	)	$	(2,684,000	)	$	(1,570,000	)
State tax benefit, net of federal benefit		(150,000	)		(365,000	)		(213,000	)
Meals and entertainment		4,000			20,000			13,000
Other		10,000			15,000			64,000
Change in valuation allowance		1,130,000			3,014,000			1,706,000

Income tax benefit	$	—		$	—		$	—

Eduprise has operating and economic loss carryforwards of approximately $14.3 million at August 31, 2001 and $10 million at December 31, 2000, expiring through 2020, which can be offset against future federal and state taxable income. Under the Tax Reform Act of 1986, the amounts of and benefits from net operating losses carried forward may be impaired or limited in certain circumstances. Events which might cause limitations in the amount of net operating losses that Eduprise may utilize in any one year include, but are not limited to, a cumulative change in ownership of more than 50% over a three-year period. At December 31, 2000, the effect of such limitations, if imposed, is not expected to be significant. The completion of the acquisition of Eduprise by Collegis on August 31, 2001 (see Note 9) may limit future utilization of such loss carryforwards.

On January 28, 2000, the Company completed the sale of 4,607,640 shares of Series A convertible redeemable preferred stock to several financial investors and several private investors for cash consideration of $14,874,998 ($3.23 per share). The Company's net proceeds from the sale totaled $14,271,154 (net of offering costs of $603,844).

In January 2000, in connection with the Series A preferred stock offering, the Company issued a warrant to U.S. Bancorp Piper Jaffray to purchase 303,870 shares of preferred stock. The exercise price is $3.23 per share. The warrant expires on the earlier of the second anniversary of an initial public offering of the Company's capital stock or January 28, 2005. The value of the warrant, as determined under the Black-Scholes model, was determined to be $869,824. In addition, the Series A preferred stock contained a beneficial conversion feature with an intrinsic value of $869,825. The amount of the proceeds allocated to the warrants and the beneficial conversion feature was accounted for as a discount on the preferred stock and is being amortized as dividends over the term of the equity's minimum redemption period using the interest method.

On March 20, 2000, Eduprise completed the sale of 619,195 shares of its Series A preferred stock to EDU at a price of $3.23 per share. Total proceeds of the sale were $2,000,000 (net of offering costs of $65,672). During 2001, the Company paid additional offering costs for two investors totaling $26,743.

Dividends Rights — The Series A preferred stock bears cumulative dividends at 8.0% per annum, when and if declared by the Board of Directors. As of August 31, 2001, the Board of Directors have not declared any dividends, therefore, no dividends are accrued.

Conversion Rights — Each holder of Series A preferred stock shall have the right to convert all such shares at any time into shares of Eduprise's common stock at a 1:1 conversion ratio. Interest on such dividends shall not compound with respect to the accrued and unpaid dividends of any prior year. The Series A preferred stock automatically converts into common stock upon (a) the election of two-thirds of the Series A preferred shares then outstanding or (b) immediately prior to closing of an initial public offering of common stock under the Securities Act of 1933 with net proceeds of at least $25,000,000 and a per share offering price of at least $6.46 per share (subject to adjustment for subsequent splits of the common stock). Upon the conversion of any Series A preferred share into common stock, the holder of each Series A preferred share shall receive in cash the aggregate amount of dividends on their preferred shares, if any, that have been declared by the Board of Directors but not yet paid. Accrued but undeclared dividends do not convert into common stock.

Liquidation Privileges — Upon the dissolution, liquidation, or winding up of Eduprise, whether voluntary or involuntary, each share of Series A shall be entitled to receive, prior to and in preference to any distribution of any assets of the Company to the holders of common stock, an amount of $3.23 per Series A share, plus declared but unpaid dividends. Upon the Series A liquidation preference, the remaining assets of the Company shall be distributed between the holders of Series A preferred stock ratably until the holders shall receive the full amount to which they would otherwise be entitled.

Mandatory Redemption Features — One-third of the Series A preferred stock is redeemable at the option of the holder on January 31, 2005, 2006, and 2007, at a price equal to the original purchase price plus any declared and unpaid dividends. As of December 31, 2000 and August 31, 2001, the minimum mandatory redemption amounts totaled approximately $5,625,000 in 2005, 2006, and 2007. The carrying value of the Series A Preferred stock will be increased by periodic accretion, in the form of accrued dividends, so that the carrying value will equal the mandatory redemption value on the final mandatory redemption date. Such accretion totaled $303,469 in 2000 and $240,083 for the eight months ended August 31, 2001.

As discussed in Note 1, Eduprise was originally capitalized as a wholly owned subsidiary of Collegis, with 1,000 shares of common stock outstanding. On May 31, 1999, Collegis sold its interest in Eduprise to Mr. John Canning, a minority shareholder of Collegis and a founding member of EDU. In August 1999, Mr. Canning contributed the 1,000 outstanding shares of Eduprise to EDU. In August 1999, Eduprise issued 6,000,000 shares to EDU, L.L.C. in exchange for $3,500,000 in cash. The original 1,000 shares then owned by EDU were cancelled in this transaction.

The Company has adopted and approved the 1999 Stock Option Plan (the "Plan") which provides for the issuance of up to 1,741,950 incentive or nonstatutory stock options thereunder to directors, officers and employees of the Company. On February 9, 2000, the Company amended the Plan whereby the total aggregate number of options that may be granted increased to 3,600,000. Generally, options vest 25% each year over a four-year period. Stock compensation expense of $177,284, $310,459 and $80,645, respectively, was recognized for the eight month period ended August 31, 2001, and the periods ended December 31, 2000 and 1999 for options granted to employees during those respective periods. Stock compensation expense of $2,838 and $64,127 was recognized for the eight month period ended August 31, 2001 and the year ended December 31, 2000, respectively, for options granted to nonemployees in 2000. Had compensation cost for all options granted been determined based on the fair value at the grant date for awards under the Plan consistent with the method of SFAS No. 123, Accounting for Stock-Based Compensation, the effect on the Company's net loss would have been to increase the net loss by approximately $4,300 for the eight-month period ended August 31, 2001, to increase the net loss by approximately $19,000 in 2000 and to increase net loss by approximately $5,000 in 1999.

The estimated weighted-average grant-date fair value of options granted for the years ended December 31, 1999 and 2000 and eight months ended August 31, 2001 are as follows:

		1999		2000		2001
						(Unaudited)
Exercise price less than market price:
	Weighted-average exercise price	$	0.17	$	0.17	$	—
	Weighted-average grant-date fair value	$	0.50	$	0.90	$	—
Exercise price greater then market price:
	Weighted-average exercise price	$	—	$	2.50	$	1.15
	Weighted-average grant-date fair value	$	—	$	0.02	$	0.10

The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions used for grants in 2001, 2000 and 1999, respectively: dividend yield of 0% for all periods, risk-free interest rates of 6.0%, 5.15% and 6.4%, expected lives of 4 years, and volatility of 142%. Volatility is used only for those options granted to non-employees in 2001 and 2000. No options were granted to non-employees in 1999. A summary of

the status of the Company's Plan as of August 31, 2001 and December 31, 2000 and 1999 and changes during these periods ended on those dates is presented below:

The following table summarizes information about fixed stock options outstanding at December 31, 2000:

The following table summarizes information about fixed stock options outstanding at August 31, 2001 (unaudited):

In January 2000, in connection with the Series A offering, the Company issued a warrant to U.S. Bancorp Piper Jaffray, Inc. to purchase 303,870 shares of Series A preferred stock. The exercise price is $3.23. The warrant has a term of 5 years and expires on the earlier of the second anniversary of an initial public offering of the Company's capital stock or January 28, 2005. The fair value of the warrant as of the grant date was estimated at $2.86 per share.

The Company has a 401(k) plan for all eligible employees. Eduprise provides a matching contribution as a percentage of employee contributions. This matching percentage, which was 50% of the first 6% of employee contributions through August 31, 2001, is determined based on management's discretion each year. Employer matching contributions vest over a three-year period as follows: 33% at the end of year one, 66% at the end of year two and 100% at the end of year three. Eduprise's contributions to the plan amounted to approximately $108,000 for the eight month period ended August 31, 2001, $143,000 in 2000 and $46,000 in 1999.

On May 31, 1999, Eduprise entered into a mutual support agreement with Collegis. This agreement specifies Eduprise's right to the perpetual use of intellectual property that was developed by Collegis and the performance of various services for Collegis for agreed-upon fees. In connection with this agreement, Eduprise recognized approximately $287,000, $430,000 and $301,000 of services revenue from Collegis during the eight month period ended August 31, 2001, and the periods ended December 31, 2000 and 1999, respectively. The support agreement terminates on January 1, 2019.

In connection with the formation of the Company, Eduprise assumed the rights and obligations of Collegis' services agreement with the Collegis Research Institute ("CRI"), a not-for-profit research organization related to the Company through common directors. In connection with the services agreement, Eduprise was obligated to provide to CRI outsourcing, management and administrative services and to serve as liaison on behalf of CRI with outside advisors, to the extent such services are authorized by the President of CRI. CRI has agreed to reimburse the Company for its costs in providing such services. Amounts received from CRI as reimbursement of the cost of services provided are accounted for as a reduction of the related expense amounts in the statement of operations. During 1999, the Company provided approximately $150,000 in services and costs to CRI. At December 31, 1999 amounts were due from CRI in the amount of approximately $87,000 and are classified as due from related party in the accompanying balance sheet. This agreement was terminated in 2000, and no amounts were due from CRI at December 31, 2000.

During 1999, the Company issued a $1,000,000 note payable to a shareholder. The note was due on demand, bore interest at 7.0% per annum, and was repaid in full during 1999.

In connection with the initial formation of the Company as a wholly owned subsidiary of Collegis, the Company recognized a liability to Collegis of approximately $116,000. As of December 31, 1999, Eduprise owed Collegis approximately $167,000, which was due on demand. This was repaid during

2000. At December 31, 2000 amounts due from Collegis totaled $68,283. At August 31, 2001, no amounts were due to or from Collegis.

On August 31, 2001, Collegis acquired all of the capital stock of Eduprise. The merged entity was renamed CollegisEduprise, Inc. All outstanding shares of preferred and common stock of Eduprise were exchanged for shares of common stock of Collegis and all outstanding and unexercised options and warrants of Eduprise were converted into options or warrants to purchase Collegis common stock. The aggregate purchase price of the acquisition was approximately $20.34 million. The accompanying financial statements of Eduprise as of August 31, 2001 are presented immediately prior to the closing of the Collegis acquisition.

The following table sets forth fees payable by us in connection with the issuance and distribution of our common stock in this offering. Collegis, Inc. will bear all of the expenses shown below. All such fees and expenses, except the Securities and Exchange Commission registration fee and the NASD filing fee, are estimated:

Securities and Exchange Commission Registration Fee		$	6,900
NASD Filing Fee			8,000
Nasdaq Stock Market Listing Fee			*
Transfer Agent Fees and Expenses			*
Printing and Engraving Fees and Expenses			*
Legal Fees and Expenses			*
Accounting Fees and Expenses			*
Director and Officer Insurance			*
Miscellaneous			*

	Total	$	*

Subsection (a) of Section 145 of the Delaware General Corporation Law ("DGCL") provides that a corporation 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 whether civil, criminal or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. Section 145 further provides that a corporation similarly may indemnify any such person serving in any such capacity who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor, against expenses (including attorneys' fees) actually and reasonably incurred in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Delaware Court of Chancery or such other court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all of the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.

Our Certificate of Incorporation and By-Laws provide that indemnification shall be to the fullest extent permitted by the DGCL for all of our current or former directors or officers.

As permitted by the DGCL, our Certificate of Incorporation provides that directors shall have no personal liability to us or our stockholders for monetary damages for breach of fiduciary duty as a director, except (i) for any breach of a director's duty of loyalty, (ii) for acts or omissions not in good faith or which involve intentional misconduct or knowing violations of law, (iii) under Section 174 of the DGCL or (iv) for any transaction in which a director derives an improper personal benefit.

Since January 1, 1999, we have issued the following securities which were not registered under the Securities Act:

In each of the above instances, exemption from registration was claimed on the grounds that the issuance of such securities did not involve any public offering within the meaning of Section 4(2) of the Securities Act.

(a) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions described in Item 14, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

(c) 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.

Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Amendment No. 2 to Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Maitland, in the State of Florida, on the 8^th day of August, 2002.

Pursuant to the requirements of the Securities Act, this Amendment No. 2 to Registration Statement has been signed below by the following persons in the capacities and on the dates indicated:

Delaware		7379		23-2414968
(State or other jurisdiction of incorporation or organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification Number)

Common stock offered by us		shares
Common stock offered by selling stockholders		shares
Common stock to be outstanding after this offering		shares
Use of proceeds		To provide working capital for our operations and to fund general corporate purposes.
Proposed Nasdaq National Market symbol		CLGS

		Years ended December 31,												Six months ended June 30,
		1999			2000			2001			Pro Forma 2001			2001			Pro Forma 2001			2002
		(in thousands, except per share data)
Statement of Income Data:
Revenue		$	49,707		$	56,376		$	70,359		$	75,717		$	32,821		$	36,801		$	46,378
Operating expenses:
	Cost of services		30,546			34,703			42,893			46,644			20,090			23,090			28,942
	Selling, general and administrative		11,526			12,539			18,709			24,661			8,055			12,257			11,922
	Depreciation and amortization		244			631			1,297			1,582			316			765			851
	Other operating expenses		702			797			679			922			—			460			230

Total operating expenses			43,018			48,670			63,578			73,809			28,461			36,572			41,945

Operating income			6,689			7,706			6,781			1,908			4,360			229			4,433
Interest expense (income), net			354			282			58			(135	)		103			(67	)		4

Income before income taxes			6,335			7,424			6,723			2,043			4,257			296			4,429
Income tax expense			2,535			2,972			2,676			818			1,694			118			1,772

Income from continuing operations			3,800			4,452			4,047			1,225			2,563			178			2,657
Loss from discontinued operations⁽¹⁾			551			—			—			—			—			—			—

Net income		$	3,249		$	4,452		$	4,047		$	1,225		$	2,563		$	178		$	2,657

Earnings Per Share — Diluted:
Income from continuing operations		$	0.25		$	0.31		$	0.26		$	0.07		$	0.18		$	0.01		$	0.14
Net income		$	0.21		$	0.31		$	0.26		$	0.07		$	0.18		$	0.01		$	0.14
Weighted average shares outstanding			15,682			14,258			15,516			18,392			13,941			18,233			18,790
Additional Financial Information:
Cash flows from operating activities		$	3,592		$	7,007		$	6,059					$	(1,150	)				$	(664	)
Cash flows from investing activities			(833	)		(187	)		3,203						(525	)					(259	)
Cash flows from financing activities			(1,241	)		(3,879	)		(2,789	)					(826	)					(896	)
EBITDA⁽²⁾			7,118			9,018			8,078						4,676						5,284

	December 31,						June 30, 2002
	1999		2000		2001		Actual		As Adjusted
	(in thousands)
Balance Sheet Data:
Cash and cash equivalents	$	5,296	$	8,237	$	14,710	$	12,891	$
Working capital		5,485		6,614		13,657		17,068
Intangible assets		681		—		10,343		10,103
Total assets		15,766		19,529		44,857		47,011
Long-term obligations		4,630		3,515		1,723		1,652
Stockholders' equity		2,471		4,611		29,407		32,295

				As of June 30, 2002
				Actual			As Adjusted
				(in thousands, except share and per share data)
Current maturities of long-term debt				$	1,480
Long-term debt					1,652
Stockholders' equity:
	Preferred stock, $0.01 par value per share; 1,000,000 shares authorized; no shares issued and outstanding				—
	Common stock, $0.01 par value per share; 25,000,000 shares authorized; 17,378,236 shares issued and outstanding; shares issued and outstanding as adjusted				174
	Warrants				438
	Paid-in capital				28,623
	Deferred compensation				(678	)
	Treasury stock				(11,731	)
	Retained earnings				15,469

		Total stockholders' equity			32,295

			Total capitalization	$	35,427

Credit Suisse First Boston	Banc of America Securities LLC

U.S. Bancorp Piper Jaffray

Assumed initial public offering price per share			$
Net tangible book value per share at June 30, 2002	$	1.28
Increase per share attributable to new investors in this offering

Pro forma net tangible book value per share after this offering

Net tangible book value dilution per share to new investors in this offering			$

	Shares Purchased			Total Consideration
	Shares Purchased			Total Consideration			Average Price Per Share
	Number	Percent		Amount	Percent		Average Price Per Share
Existing stockholders			%	$		%	$
New investors							$

Total		100.0	%	$	100.0	%

		Years Ended December 31,										Six Months Ended June 30,
		1997		1998		1999		2000		2001		2001		2002
		(in thousands, except per share data)
Statement of Income Data:
Revenue		$	23,882	$	36,890	$	49,707	$	56,376	$	70,359	$	32,821	$	46,378
Operating expenses:
	Cost of services		14,147		21,992		30,546		34,703		42,893		20,090		28,942
	Selling, general and administrative		6,002		8,751		11,526		12,539		18,709		8,055		11,922
	Depreciation and amortization		153		166		244		631		1,297		316		851
	Other operating expenses⁽¹⁾		487		3,357		702		797		679		—		230

Total operating expenses			20,789		34,266		43,018		48,670		63,578		28,461		41,945

Operating income			3,093		2,624		6,689		7,706		6,781		4,360		4,433
Interest expense, net			869		650		354		282		58		103		4

Income before income taxes			2,224		1,974		6,335		7,424		6,723		4,257		4,429
Income tax expense			938		802		2,535		2,972		2,676		1,694		1,772

Income from continuing operations			1,286		1,172		3,800		4,452		4,047		2,563		2,657
Loss from discontinued operations⁽²⁾			—		52		551		—		—		—		—

Net income⁽³⁾		$	1,016	$	1,120	$	3,249	$	4,452	$	4,047	$	2,563	$	2,657

Earnings Per Share — Diluted:
Income from continuing operations		$	0.09	$	0.08	$	0.25	$	0.31	$	0.26	$	0.18	$	0.14
Net income		$	0.07	$	0.07	$	0.21	$	0.31	$	0.26	$	0.18	$	0.14
Weighted average shares outstanding			13,682		14,995		15,682		14,258		15,516		13,941		18,790

	As of December 31,
	As of December 31,											June 30, 2002
	1997			1998		1999		2000		2001		June 30, 2002
	(in thousands)
Balance Sheet Data:
Cash and cash equivalents	$	3,568		$	3,778	$	5,296	$	8,237	$	14,710	$	12,891
Working capital		2,793			4,491		5,485		6,614		13,657		17,068
Intangible assets		—			569		681		—		10,343		10,103
Total assets		8,257			12,480		15,766		19,529		44,857		47,011
Long-term obligations		8,150			6,900		4,630		3,515		1,723		1,652
Stockholders' equity (deficit)		(4,340	)		119		2,471		4,611		29,407		32,295

		Year Ended December 31, 2001
		Collegis Historical		Eduprise 8 months ended August 31, 2001			Pro Forma Adjustments			Pro Forma
		(in thousands, except per share data)
Revenue		$	70,359	$	5,684		$	(326	)⁽¹⁾	$	75,717
Operating expenses:
	Cost of services		42,893		3,751			—			46,644
	Selling, general and administrative		18,709		6,278			(326	)⁽¹⁾		24,661
	Depreciation and amortization		1,297		285			—	⁽²⁾		1,582
	Stock compensation		679		180			63	⁽³⁾		922

Total operating expenses			63,578		10,494			(263	)		73,809

Operating income (loss)			6,781		(4,810	)		(63	)		1,908
Interest expense (income), net			58		(193	)		—			(135	)

Income (loss) before income taxes			6,723		(4,617	)		(63	)		2,043
Income tax expense (benefit)			2,676		—			(1,858	)⁽⁴⁾		818

Net income (loss)		$	4,047	$	(4,617	)	$	1,795		$	1,225

Earnings per share:
	Basic	$	0.28							$	0.07
	Weighted average shares outstanding		14,504								17,380
	Diluted	$	0.26							$	0.07
	Weighted average shares outstanding		15,516								18,392

		Six Months Ended June 30, 2001
		Collegis Historical		Eduprise Historical			Pro Forma Adjustments			Pro Forma
		(in thousands, except per share data)
Revenue		$	32,821	$	4,234		$	(254	)⁽¹⁾	$	36,801
Operating expenses:
	Cost of services		20,090		3,000			—			23,090
	Selling, general and administrative		8,055		4,456			(254	)⁽¹⁾		12,257
	Depreciation and amortization		316		209			240	⁽²⁾		765
	Stock compensation		—		135			325	⁽³⁾		460

Total operating expenses			28,461		7,800			311			36,572

Operating income (loss)			4,360		(3,566	)		(565	)		229
Interest expense (income), net			103		(170	)		—			(67	)

Income (loss) before income taxes			4,257		(3,396	)		(565	)		296
Income tax expense (benefit)			1,694		—			(1,576	)⁽⁴⁾		118

Net income (loss)		$	2,563	$	(3,396	)	$	1,011		$	178

Earnings per share:
	Basic	$	0.20							$	0.01
	Weighted average shares outstanding		13,079								17,371
	Diluted	$	0.18							$	0.01
	Weighted average shares outstanding		13,941								18,233

	Three months ended
	March 31, 2000		June 30, 2000		Sept. 30, 2000		Dec. 31, 2000		March 31, 2001		June 30, 2001		Sept. 30, 2001		Dec. 31, 2001		March 31, 2002		June 30, 2002
	(in millions, except per share amounts)
Revenue	$	13.4	$	13.8	$	14.2	$	14.8	$	15.9	$	17.0	$	17.7	$	19.8	$	22.8	$	23.6
Cost of services		8.5		8.2		8.5		9.6		9.7		10.4		10.8		11.9		14.3		14.7
Selling, general and administrative		2.9		3.1		3.4		3.1		3.8		4.2		4.8		6.0		5.9		6.0
Depreciation and amortization		0.1		0.1		0.1		0.1		0.1		0.2		0.3		0.7		0.4		0.4
Stock compensation expense		0.8		—		—		—		—		—		0.5		0.2		0.1		0.1

Operating income		1.1		2.4		2.2		2.0		2.2		2.1		1.3		1.1		2.1		2.4
Net income	$	0.7	$	1.4	$	1.2	$	1.2	$	1.3	$	1.3	$	0.8	$	0.7	$	1.2	$	1.4

Earnings per share — diluted	$	0.05	$	0.10	$	0.09	$	0.08	$	0.09	$	0.09	$	0.06	$	0.04	$	0.07	$	0.08

	Annual Compensation
Name and Principal Position	Salary			Bonus		Other Annual Compensation			All Other Compensation⁽¹⁾
Thomas V. Huber Chief Executive Officer	$	350,000		$	217,567		—		$	5,250
Robert E. King Interim Chief Executive Officer		162,500	⁽²⁾		—		—			—
Robert C. Bowers Executive Vice President and Chief Financial Officer		202,500			84,050		—			5,306
Michael P. Purcell Senior Vice President, Sales and Marketing		236,497			—	$	31,641	⁽³⁾		2,200
Janelle A. Baltzer Senior Vice President, Strategic Services		190,876			41,000		—			2,150
Joseph N. Battista Senior Vice President, Client Services		150,000			61,500		—			4,500
Keith E. Thompson Senior Vice President, Technical Services		150,000			61,500		—			4,500

	Individual Grants
							Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term
	Number of Securities Underlying Options Granted	Percent of Total Options Granted to Employees in Fiscal Year
Name				Exercise or Base Price (per share)		Expiration Date
Name				Exercise or Base Price (per share)		Expiration Date	5%		10%
Thomas V. Huber	—	—			—	—		—		—
Robert E. King	—	—			—	—		—		—
Robert C. Bowers	—	—			—	—		—		—
Michael P. Purcell	170,000	9.5	%	$	3.00	4/10/08	$	207,621	$	483,837
Janelle A. Baltzer	25,000	1.4	%		3.00	1/1/08		30,533		71,153
Joseph N. Battista	—	—			—	—		—		—
Keith E. Thompson	—	—			—	—		—		—

Name		Investment in Eduprise		Collegis Shares Received in August 2001 Eduprise Acquisition
Directors and Named Executive Officers:
	Robert C. Bowers	$	93,704	24,181
	Keith E. Thompson		5,980	1,543
	Dr. Marvin Wachman		5,876	1,516
	Robert E. King (1)		2,205,476	638,285
	James E. Cowie (2)		5,753,190	1,122,872
	Bernard Goldstein		25,768	6,649
	Dr. William H. Graves		14,952	3,858
	Dr. Thurston E. Manning		4,684	1,208
	Kenneth G. Pigott (3)		976,988	275,170
	Jane Ryland		1,320	340
5% Stockholders:
	Frontenac VI Limited Partnership		753,212	194,379
	Claire Reid		130,512	33,680

	Shares		Weighted-avg. exercise price		Weighted-avg. fair value of options granted
Outstanding at January 1, 1999	3,476		$	1.89
Granted	68			3.53	$	1.89
Exercised	(13	)		1.69
Cancelled or forfeited	(731	)		2.96

Outstanding at December 31, 1999	2,800			1.91
Granted	1,384			3.00		0.75
Exercised	(332	)		0.57
Cancelled or forfeited	(502	)		2.71

Outstanding at December 31, 2000	3,350			2.37
Granted	1,789			3.53		0.82
Exercised	(10	)		1.69
Cancelled or forfeited	(229	)		2.96

Outstanding at December 31, 2001	4,900			2.78

Exercisable at December 31, 2000	1,574			1.63

Exercisable at December 31, 2001	2,465		$	2.17

		Shares beneficially owned prior to this offering			Number of shares being offered		Shares beneficially owned after this offering
Name of Beneficial Owner⁽¹⁾		Number of shares	Percent		Number of shares	Percent	Number of shares	Percent
Directors and Named Executive Officers:
	Thomas V. Huber⁽²⁾	202,500	1.15	%
	Robert C. Bowers⁽²⁾	749,588	4.31	%
	Michael P. Purcell⁽²⁾	42,500	*
	Janelle A. Baltzer⁽²⁾	46,446	*
	Joseph N. Battista⁽²⁾	168,433	*
	Keith E. Thompson⁽²⁾	106,543	*
	Dr. Marvin Wachman⁽²⁾	61,472	*
	Robert E. King⁽³⁾	2,991,673	17.22	%
	Robert H. Atwell⁽²⁾	41,956	*
	James E. Cowie⁽⁴⁾	6,161,164	35.45	%
	Bernard Goldstein⁽²⁾	199,874	1.15	%
	Dr. William H. Graves	191,562	1.09	%
	Dr. Thurston E. Manning⁽²⁾	43,164	*
	Kenneth G. Pigott⁽⁵⁾	2,486,762	14.31	%
	Jane Ryland⁽²⁾	31,856	*
	All Directors and Named Executive Officers as a group (consisting of 14 persons)	13,525,493	74.03	%
5% Stockholders:
	Frontenac VI Limited Partnership⁽⁶⁾	5,232,671	30.11	%
	J.P. Morgan Partners (23A SBIC), LLC⁽⁷⁾	1,478,317	8.51	%
	Claire Reid⁽⁸⁾	906,680	5.22	%
	Frontenac VII Limited Partnership⁽⁶⁾	884,279	5.09	%
Other Selling Stockholders:⁽⁹⁾
	Learning Tree International, Inc.	185,698	1.07	%
	U.S. Bancorp Piper Jaffray Inc.⁽¹⁰⁾	182,170	1.05	%

	Per Share		Total
	Without Over-allotment	With Over-allotment	Without Over-allotment	With Over-allotment
Underwriting Discounts and Commissions paid by us	$	$	$	$
Expenses payable by us	$	$	$	$
Underwriting Discounts and Commissions paid by selling stockholders	$	$	$	$

Independent Auditors' Report		F-2
Balance Sheets as of December 31, 2000 and 2001 and June 30, 2002 (unaudited)		F-3
Statements of Income for each of the fiscal years in the three-year period ended December 31, 2001 and for the three months ended June 30, 2001 and June 30, 2002 (unaudited)		F-4
Statements of Stockholders' Equity for each of the fiscal years in the three-year period ended December 31, 2001 and for the three months ended June 30, 2001 and June 30, 2002 (unaudited)		F-5
Statements of Cash Flows for each of the fiscal years in the three-year period ended December 31, 2001 and for the three months ended June 30, 2001 and June 30, 2002 (unaudited)		F-6
Notes to Financial Statements		F-7
Eduprise, Inc.
Independent Auditors' Report		F-20
Balance Sheets as of December 31, 1999 and 2000 and August 31, 2001 (unaudited)		F-21
Statements of Operations for year ended December 31, 2001, period from June 1, 1999 to December 31, 1999 and eight months ended August 31, 2001 (unaudited)		F-22
Statements of Stockholders' Equity (Deficit) for year ended December 31, 2000, period from June 1, 1999 to December 31, 1999 and eight months ended August 31, 2001 (unaudited)		F-23
Statements of Cash Flows for year ended December 31, 2000, period from June 1, 1999 to December 31, 1999 and eight months ended August 31, 2001 (unaudited)		F-24
Notes to Financial Statements		F-25

			Common Stock							Treasury Stock
			Common Stock							Treasury Stock					Additional Paid-In Capital			Deferred Compen- sation			Share- holder note			Retained Earnings
			Shares		Par			Warrants		Shares		Cost			Additional Paid-In Capital			Deferred Compen- sation			Share- holder note			Retained Earnings			Total
Balance, January 1, 1999			14,021		$	140		$	404	11,274		$	(18,943	)	$	16,820		$	—		$	(571	)	$	2,269		$	119
	Exercise of stock options (Note 10)		13													9												9
	Income tax effect of terminated options															(906	)											(906	)
	Net income																								3,249			3,249

Balance, December 31, 1999			14,034			140			404	11,274			(18,943	)		15,923			—			(571	)		5,518			2,471
	Exercise of stock options (Note 10)		332			3										185												188
	Income tax effect of exercised options															4												4
	Repayment of shareholder note (Note 9)																					571						571
	Repurchase of shares (Notes 9 and 10)		(1,291	)		(12	)									(1,858	)								(1,205	)		(3,075	)
	Net income																								4,452			4,452

Balance, December 31, 2000			13,075			131			404	11,274			(18,943	)		14,254			—			—			8,765			4,611
	Exercise of stock options (Note 10)		10													17												17
	Income tax effect of exercised options															5												5
	Issuance in connection with acquisition (Note 2):
		Common stock	4,292			43				(4,292	)		7,212			12,102												19,357
		Options														1,389			(733	)								656
		Warrants							34																			34
		Extension of option terms														464												464
	Issuance of stock options (Note 10)															391			(391	)								—
	Amortization of deferred compensation																		216									216
	Net income																					—			4,047			4,047

Balance, December 31, 2001			17,377			174			438	6,982			(11,731	)		28,622			(908	)		—			12,812			29,407
	Exercise of stock options (unaudited)		1													1												1
	Amortization of deferred compensation (unaudited)																		230									230
	Net income (unaudited)																					—			2,657			2,657

Balance, June 30, 2002 (unaudited)			17,378		$	174		$	438	6,982		$	(11,731	)	$	28,623		$	(678	)	$	—		$	15,469		$	32,295

See notes to financial statements.

		2000		2001
Deferred tax assets:
	Net operating loss	$	—	$	5,493
	Accrued expenses and other		341		375
	Deferred revenue		417		656
	Amortization of bond discount related to warrants		175		170
	Other		—		112

Total gross deferred tax assets			933		6,806
Deferred tax liabilities:
	Prepaid expenses		117		142
	Property and equipment		45		82
	Intangible assets		—		402
	Other		53		—

Total gross deferred tax liabilities			215		626

Total gross deferred taxes			718		6,180
Valuation allowance			—		(958	)

Net deferred taxes		$	718	$	5,222

	1999		2000		2001
Tax at federal statutory rate	34.0	%	34.0	%	34.0	%
State taxes	5.7		5.7		5.5
Permanent differences and other	0.3		0.3		0.5

Effective rate	40.0	%	40.0	%	40.0	%

			1999			2000			2001
									(Unaudited)
ASSETS
Current Assets:
	Cash and cash equivalents		$	612,776		$	8,746,657		$	4,102,632
	Accounts receivable			159,080			543,758			979,310
	Unbilled accounts receivable			—			258,057			316,914
	Prepaid assets			109,230			139,203			355,562
	Other current assets			14,000			34,536			76,262
	Due from related party (Note 8)			86,918			68,283			—

		Total current assets		982,004			9,790,494			5,830,680

Property and Equipment, Net (Note 2)				601,565			985,801			961,492

Total Assets			$	1,583,569		$	10,776,295		$	6,792,172

Liabilities and Stockholders' Equity (Deficit)
Current Liabilities:
	Accounts payable		$	207,018		$	125,139		$	136,683
	Accrued expenses			135,017			457,970			352,582
	Accrued incentive compensation			—			205,000			222,815
	Accrued sales and use tax payable			147,519			91,335			91,645
	Current portion of capital lease obligations (Note 3)			—			21,338			45,146
	Deferred revenue			272,201			490,444			976,061
	Due to related party (Note 8)			167,012			—			—

		Total current liabilities		928,767			1,391,226			1,824,932

Capital Lease Obligations (Note 3)				—			42,996			89,302
Commitments and Contingencies (Note 3)
Series A Convertible Redeemable Preferred Stock (Note 5) — $.01 par value; 5,227,152 shares authorized, issued, and outstanding at December 31, 2000 and August 31, 2001; aggregate liquidation preference and redemption amount of $16,874,998 at December 31, 2000 and August 31, 2001				—			14,769,404			14,982,744
Stockholders' Equity (Deficit) (Note 6):
	Common stock — $.01 par value; 6,000,000 shares authorized, issued, and outstanding at December 31, 1999 and 2000 and Augut 31, 2001			60,000			60,000			60,000
	Additional paid-in capital			3,520,645			5,634,878			5,815,000
	Accumulated deficit			(2,925,843	)		(11,122,209	)		(15,979,806	)

		Total stockholders' equity (deficit)		654,802			(5,427,331	)		(10,104,806	)

Total Liabilities and Stockholders' Equity (Deficit)			$	1,583,569		$	10,776,295		$	6,792,172

			1999			2000			2001
									(Unaudited)
Revenues:
	Revenues		$	1,399,202		$	4,077,138		$	5,397,137
	Revenues from related party (Note 8)			301,000			430,000			287,000

		Total revenues		1,700,202			4,507,138			5,684,137

Operating Expenses:
	Professional services			1,103,829			2,906,565			3,750,752
	Sales and marketing			964,278			3,216,938			2,680,941
	General and administrative (Notes 7 and 8)			1,930,859			4,552,425			3,597,627
	Research and development			453,271			1,740,347			—
	Stock compensation charges (Note 6)			80,645			374,586			180,122
	Depreciation (Note 2)			99,397			291,910			285,038

		Total operating expenses		4,632,279			13,082,771			10,494,480

Operating Loss				(2,932,077	)		(8,575,633	)		(4,810,343	)

Other Income (Expense):
	Interest income			23,733			682,736			203,362
	Interest expense (Note 8)			(17,499	)		—			(10,533	)

		Other income, net		6,234			682,736			192,829

Net Loss				(2,925,843	)		(7,892,897	)		(4,617,514	)
Accretion of Discount on Series A Preferred Stock (Note 5)				—			(303,469	)		(240,083	)

Net Loss Applicable to Common Stockholders			$	(2,925,843	)	$	(8,196,366	)	$	(4,857,597	)

		Number of Shares		Common Stock		Additional Paid-in Capital		Accumulated Deficit			Total
	Issuance of shares in formation of company	1,000		$	10	$	29,990	$	—		$	30,000
	Cancellation of common stock	(1,000	)		—		—		—			—
	Sale of common stock	6,000,000			59,990		3,410,010		—			3,470,000
	Compensation for stock options issued	—			—		80,645		—			80,645
	Net loss	—			—		—		(2,925,843	)		(2,925,843	)

Balance, December 31, 1999		6,000,000			60,000		3,520,645		(2,925,843	)		654,802
	Issuance of warrants for common stock and beneficial conversion feature	—			—		1,739,647		—			1,739,647
	Compensation for stock options issued	—			—		374,586		—			374,586
	Net loss	—			—		—		(7,892,897	)		(7,892,897	)
	Accretion of discount on Series A Preferred Stock	—			—		—		(303,469	)		(303,469	)

Balance, December 31, 2000		6,000,000			60,000		5,634,878		(11,122,209	)		(5,427,331	)
	Compensation for stock options issued (unaudited)	—			—		180,122		—			180,122
	Net loss (unaudited)	—			—		—		(4,617,514	)		(4,617,514	)
	Accretion of discount on Series A Preferred Stock (unaudited)	—			—		—		(240,083	)		(240,083	)

Balance, August 31, 2001 (unaudited)		6,000,000		$	60,000	$	5,815,000	$	(15,979,806	)	$	(10,104,806	)

					1999			2000			2001
											(Unaudited)
Operating Activities:
	Net loss				$	(2,925,843	)	$	(7,892,897	)	$	(4,617,514	)
	Adjustments to reconcile net loss to net cash used in operating activities:
		Loss on disposal of property and equipment				—			5,158			33,862
		Depreciation				99,397			291,910			285,038
		Compensation for stock options issued				80,645			374,586			180,122
	Changes in operating assets and liabilities:
		Accounts receivable and amounts due from related party				(245,998	)		(624,100	)		(426,126	)
		Prepaid expenses and other current assets				(115,752	)		(50,509	)		(258,085	)
		Accounts payable and amounts due to related party				258,090			(248,891	)		11,544
		Accrued expenses				89,046			471,769			(87,263	)
		Deferred revenue				52,451			218,243			485,617

				Net cash used in operating activities		(2,707,964	)		(7,454,731	)		(4,392,805	)

Investing Activities —
	Purchases of property and equipment					(149,260	)		(616,970	)		(205,559	)

Financing Activities:
	Proceeds from sale of Series A preferred stock, net					—			14,465,935			(26,743	)
	Proceeds from sale of common stock					3,470,000			—			—
	Issuance of notes payable to related parties					1,000,000			—			—
	Repayment of notes payable to related parties					(1,000,000	)		—			—
	Repayment of capital lease obligation											(18,918	)
	Proceeds of warrants and beneficial conversion feature					—			1,739,647

				Net cash provided by (used in) financing activities		3,470,000			16,205,582			(45,661	)

Net Increase (Decrease) in Cash and Cash Equivalents						612,776			8,133,881			(4,644,025	)
Cash and Cash Equivalents:
	Beginning of year					—			612,776			8,746,657

	End of year				$	612,776		$	8,746,657		$	4,102,632

Supplemental Disclosure of Cash Flow Information:
	Cash paid for interest				$	17,499			—		$	10,533
Supplemental Schedule of Non-Cash Investing and Financing Activities:
	During 1999, Eduprise, Inc. was formed in a spin-off transaction from COLLEGIS, Inc. as noted in Note 1. In connection with this transaction the following assets and liabilities were assumed:
			Property and equipment								$	551,702
			Other assets								$	7,478
			Deferred revenue								$	219,750
			Other liabilities								$	309,430
	During the eight months ended August 31, 2001 and the year ended December 31, 2000, Eduprise, Inc., recorded dividends totaling $240,083 and $303,469, respectively, on its Series A Preferred Stock related to the accretion of the initial discount on the stock.
	During the eight months ended August 31, 2001 and the year ended December 31, 2000, Eduprise, Inc., acquired property totaling $89,032, and $64,334 respectively, under capital leases.

	Depreciable Lives	1999			2000			2001
								(Unaudited)
Fixtures and furniture	7 years	$	224,619		$	397,254		$	473,287
Equipment	3 years		421,545			803,091			860,319
Software	3 years		52,817			163,858			217,170
Leasehold improvements and other	3 years		1,981			10,096			79,845

Total			700,962			1,374,299			1,630,621
Less accumulated depreciation			(99,397	)		(388,498	)		(669,129	)

Property and equipment, net		$	601,565		$	985,801		$	961,492

	1999			2000			2001
	Shares	Weighted- Average Exercise Price		Shares	Weighted- Average Exercise Price		Shares	Weighted- Average Exercise Price
							(Unaudited)
Outstanding at beginning of period	—	$	—	1,741,938	$	0.17	2,436,659	$	0.61
Granted	1,741,938	$	0.17	1,111,250	$	1.24	378,325	$	1.15
Exercised	—	$	—	—	$	—	—	$	—
Terminated	—	$	—	416,529	$	0.49	367,841	$	0.82

Outstanding at end of year	1,741,938	$	0.17	2,436,659	$	0.61	2,447,143	$	0.65

Options exercisable at period end	—	$	—	396,776	$	0.17	815,841	$	0.43

	Options Outstanding				Options Exercisable
Exercise Prices	Number Outstanding at 12/31/00	Weighted- Average Remaining Contractual Life	Weighted- Average Exercise Price		Number Exercisable at 12/31/00	Weighted- Average Exercise Price
$0.17	1,982,909	2.63	$	0.17	396,776	$	0.17
$2.50	458,750	3.25	$	2.50	—	$	0.00

	2,441,659	2.75	$	0.61	396,776	$	0.17

	Options Outstanding				Options Exercisable
Exercise Prices	Number Outstanding at 8/31/01	Weighted- Average Remaining Contractual Life	Weighted- Average Exercise Price		Number Exercisable at 8/31/01	Weighted- Average Exercise Price
$0.17	1,751,618	1.96	$	0.17	650,809	$	0.17
$1.00	288,650	3.58	$	1.00
$2.50	406,875	2.58	$	2.50	165,032	$	2.50

	2,447,143	2.28	$	0.65	815,841	$	0.43

Exhibit Number		Description
1.1		Form of Underwriting Agreement.
3.1		Amended and Restated Certificate of Incorporation of Collegis, Inc.
3.2		Amended and Restated By-laws of Collegis, Inc.**
4.1		Specimen Certificate for Collegis, Inc. common stock.**
4.2		Amended and Restated Registration, Stockholders' and Joinder Agreement between Collegis, Inc. and the stockholders named therein, dated as of August 31, 2001.**
5.1		Opinion of Winston & Strawn (including consent).**
10.1		Stock Option Plan of Collegis, Inc., dated as of April 11, 1996 and subsequently amended.**
10.2		Form of 1996 Stock Option Plan Agreement.**
10.3		2002 Collegis, Inc. Stock Incentive Plan.**
10.4		2002 Collegis, Inc. Employee Stock Purchase Plan.**
10.5		Letter Agreement between Collegis, Inc. and Thomas V. Huber dated as of September 20, 2000.**
10.6		Salt Creek Ventures Consulting Agreement.**
23.1		Consents of Deloitte & Touche, LLP.
23.2		Consent of Winston & Strawn (contained in the opinion filed as Exhibit 5.1).**
24.1		Power of Attorney (included in signature pages).**

Signature	Title	Date

/s/ ROBERT E. KING* Robert E. King	Chairman of the Board of Directors	August 8, 2002
/s/ THOMAS V. HUBER Thomas V. Huber	Director, President and Chief Executive Officer (Principal Executive Officer)	August 8, 2002
/s/ ROBERT C. BOWERS Robert C. Bowers	Director, Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)	August 8, 2002
/s/ MARVIN WACHMAN* Marvin Wachman	Director, Chairman Emeritus of Board of Directors	August 8, 2002
/s/ DR. WILLIAM H. GRAVES* Dr. William H. Graves	Director, Vice Chairman	August 8, 2002
/s/ ROBERT H. ATWELL* Robert H. Atwell	Director	August 8, 2002
/s/ JAMES E. COWIE* James E. Cowie	Director	August 8, 2002

/s/ BERNARD GOLDSTEIN* Bernard Goldstein	Director	August 8, 2002
/s/ DR. THURSTON E. MANNING* Dr. Thurston E. Manning	Director	August 8, 2002
/s/ KENNETH G. PIGOTT* Kenneth G. Pigott	Director	August 8, 2002
/s/ JANE RYLAND* Jane Ryland	Director	August 8, 2002

COLLEGIS, INC.

/s/ THOMAS V. HUBER

Thomas V. Huber

President and Chief Executive Officer