As filed with the Securities and Exchange Commission on February 11, 1999

Registration No. 333-63241
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------

Amendment No. 2
to
FORM S-1
REGISTRATION STATEMENT
under
The Securities Act of 1933
----------------
Argosy Education Group, Inc.
(Exact name of registrant as specified in its charter)
----------------
Illinois 36-2855674
(State or other (I.R.S. Employer 8200
jurisdiction of (Primary Standard
Identification No.) Industrial
incorporation or Classification Code
organization) Number)
Two First National Plaza
20 South Clark Street, 3rd Floor
Chicago, Illinois 60603
Telephone: (312) 899-9900
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
----------------
Michael C. Markovitz
Chairman
Two First National Plaza
20 South Clark Street, 3rd Floor
Chicago, Illinois 60603
Telephone: (312) 899-9900
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
Lawrence D. Levin
Keith S. Crow Mark D. Wood
Gerald T. Nowak
Kirkland & Ellis Katten Muchin & Zavis
200 East Randolph Drive 525 West Monroe Street, Suite 1600
Chicago, Illinois 60601 Chicago, Illinois 60661
Telephone: (312) 861-2000 Telephone: (312) 902-5200
----------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
----------------
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until this Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+Information contained herein is subject to completion or amendment. A +
+registration statement relating to these securities has been filed with the +
+Securities and Exchange Commission. These securities may not be sold nor may +
+offers to buy be accepted prior to the time the registration statement +
+becomes effective. This prospectus shall not constitute an offer to sell or +
+the solicitation of an offer to buy nor shall there be any sale of these +
+securities in any State in which such offer, solicitation or sale would be +
+unlawful prior to registration or qualification under the securities laws of +
+any such State. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

SUBJECT TO COMPLETION, DATED FEBRUARY 11, 1999

PROSPECTUS

2,000,000 Shares

[LOGO OF ARGOSY EDUCATION GROUP APPEARS HERE]

Argosy Education Group, Inc.
Class A Common Stock
--------
All of the shares of Class A Common Stock, par value $.01 per share ("Class A
Common Stock"), of Argosy Education Group, Inc. (the "Company") offered hereby
(the "Offering") are being offered by the Company.

Prior to the Offering there has been no public market for the Class A Common
Stock. It is currently estimated that the initial public offering price will be
between $14.00 and $16.00 per share. See "Underwriting" for information
relating to the factors to be considered in determining the initial public
offering price. The Class A Common Stock has been approved for inclusion on the
Nasdaq National Market under the symbol "ARGY," subject to official notice of
issuance.

Upon completion of the Offering, the Company will have 2,000,000 shares of
Class A Common Stock and 4,900,000 shares of Class B Common Stock, par value
$.01 per share ("Class B Common Stock"), outstanding. The Class A Common Stock
and Class B Common Stock (collectively, the "Common Stock") are substantially
identical except with respect to voting power and conversion rights. The Class
A Common Stock is entitled to one vote per share, and the Class B Common Stock
is entitled to ten votes per share. Immediately after the Offering, Michael C.
Markovitz, the Company's founder and Chairman, will own 100% of the Class B
Common Stock (representing approximately 96.1% of the aggregate voting power of
the Common Stock, assuming no exercise of the Underwriters' over-allotment
option) and thus will control all matters submitted to a vote of the holders of
Common Stock. Each share of Class B Common Stock converts automatically into
one share of Class A Common Stock upon sale or other transfer to a party other
than a Permitted Transferee (as defined herein). See "Description of Capital
Stock."
See "Risk Factors" beginning on page 9 for a discussion of material risks
that should be considered by prospective purchasers of the Class A Common Stock
offered hereby.
--------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CON-
TRARY IS A CRIMINAL OFFENSE.
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- --------------------------------------------------------------------------------

Underwriting
Price to Discounts and Proceeds to
Public Commissions (1) Company (2)
- ------------------------------------------------------

Per Share $ $ $
Total (3) $ $ $
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(1) For information regarding indemnification of the Underwriters, see
"Underwriting."

(2) Before deducting expenses of the Offering, estimated at $1,000,000, payable
by the Company.

(3) The Company's sole shareholder has granted the Underwriters a 30-day option
to purchase up to an aggregate of 300,000 additional shares of Class A
Common Stock on the same terms and conditions as the securities offered
hereby solely to cover over-allotments, if any. See "Underwriting." If such
option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Selling Shareholder will be
$ , $ and $ , respectively. Proceeds to Company will not be
affected by exercise of the over-allotment option.
--------
The shares of Class A Common Stock are being offered by the several
Underwriters named herein, subject to prior sale, when, as and if accepted by
them and subject to certain conditions. It is expected that certificates for
the shares of Class A Common Stock offered hereby will be available for
delivery on or about , 1999 at the offices of Salomon Smith Barney Inc.,
333 West 34th Street, New York, New York 10001.
--------
Salomon Smith Barney
ABN AMRO Rothschild

, 1999 a division of ABN AMRO Incorporated

[Inside front cover art]

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

Argosy
Education
Group

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

American Schools of
Professional Psychology

ASPP grants postgraduate level degrees in a variety of specialties within the
field of clinical psychology. The Company offers a doctorate in clinical
psychology, master's of arts degrees in clinical psychology and professional
counseling and a master's of science degree in health services administration.
Pictured at left is the Two First National Plaza building, which houses the
Company's principal executive offices and ASPP's Chicago campus on four of its
floors.

University of Sarasota

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

Medical Institute of Minnesota

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

PrimeTech Institute

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

Ventura Group

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

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

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements,
including the notes thereto, appearing elsewhere in this Prospectus.
Prospective investors should consider carefully, among other things, the
information set forth under "Risk Factors" in this Prospectus. Unless otherwise
noted or where the context otherwise requires, all information herein (i) gives
effect to an approximately 2,941-for-one stock split of all outstanding shares
of common stock, the subsequent conversion of all outstanding shares of common
stock into shares of Class B Common Stock and the authorization of the Class A
Common Stock (such stock split, authorization and conversion are collectively
referred to in this Prospectus as the "Stock Conversion") and (ii) does not
give effect to the exercise of the Underwriters' over-allotment option. As used
in this Prospectus, unless the context indicates otherwise, the term "Company"
refers to Argosy Education Group, Inc. and its subsidiaries, including all of
their schools and campuses; the term "school" means a campus or group of
campuses known by a single name (such as the American Schools of Professional
Psychology or the University of Sarasota); the term "campus" means a single
location of any school (such as the Rolling Meadows campus of the Illinois
School of Professional Psychology); and the term "institution" means a main
campus and its additional locations, as such are defined under regulations of
the United States Department of Education ("DOE"). References to fiscal years
refer to the Company's fiscal year ended September 30, 1994, eleven months
ended August 31, 1995 and fiscal years ended August 31, 1996, 1997 and 1998.

The Company

The Company is the nation's largest for-profit provider of doctoral level
programs. The Company's mission is to provide academically-oriented,
practitioner-focused education in fields with numerous employment opportunities
and strong student demand. In addition to doctoral and master's degrees in
psychology, education and business, the Company also awards bachelor's degrees
in business, associate degrees in allied health professions and diplomas in
information technology. At November 30, 1998, approximately 63% of the
Company's students were enrolled in doctoral programs. In 1997, the Company
graduated approximately 335 clinical psychology doctoral students out of
approximately 4,000 clinical psychology doctoral degrees conferred nationwide.
The Company operates 14 campuses in eight states and the Province of Ontario,
Canada, and had a total of approximately 4,500 students, representing 48 states
and 30 foreign countries, enrolled as of November 30, 1998.

The Company was founded in 1975, when the Company's Chairman, Michael C.
Markovitz, Ph.D., recognized a demand for a non-research oriented professional
school that would educate and prepare students for careers as clinical
psychology practitioners. To address this demand, the Company started the
Illinois School of Professional Psychology in Chicago, Illinois in 1976 and, in
its first year of operations, received several thousand inquiries for admission
to a class of 70 students for the doctorate in clinical psychology ("PsyD")
degree. The continuing demand for high quality, practitioner-focused psychology
postgraduate education led the Company to expand the renamed American Schools
of Professional Psychology ("ASPP") to nine campuses located across the United
States. In response to a broader demand for quality career education, the
Company has expanded beyond the psychology curriculum with the acquisitions of
(i) the University of Sarasota ("U of S"), a degree-granting institution
focusing primarily on postgraduate business and education (March 1992); (ii)
the Medical Institute of Minnesota ("MIM"), a degree-granting institution
focusing on a variety of allied health professions (February 1998); and (iii)
PrimeTech Institute ("PrimeTech"), an institution granting diplomas in computer
programming and other information technology fields and in paralegal studies
(November 1998). In addition, the Company became the largest provider of
postgraduate psychology license examination preparation courses and materials
in the United States by its acquisition of the Ventura test preparation
business ("Ventura") in August 1997. Through Ventura, the Company also provides
professional licensure examination materials and

workshops for social work; marriage, family and child counseling; marriage and
family therapy; and counseling certification examinations nationwide.

The Company operates the following schools:

. American Schools of Professional Psychology grants doctoral and master's
degrees in clinical psychology and related disciplines at nine campuses
located in Illinois (2), Minnesota, Georgia, Virginia, Hawaii, Arizona,
Florida and California. ASPP is accredited by the North Central
Association of Colleges and Schools ("NCA"), and four of its campuses are
accredited by the American Psychological Association ("APA").

. University of Sarasota grants doctoral, master's and bachelor's degrees
at two campuses located in Sarasota and Tampa, Florida, and is preparing
to operate a campus in Southern California, pending regulatory approval.
U of S is accredited by the Southern Association of Colleges and Schools
("SACS").

. Medical Institute of Minnesota grants associate degrees at one campus in
Minneapolis, Minnesota. MIM is institutionally accredited by the
Accrediting Bureau of Health Education Schools ("ABHES"), and
additionally holds individual programmatic accreditation appropriate to
each degree program offered.

. PrimeTech Institute awards diplomas at two campuses in Ontario, Canada,
and is preparing to operate a campus in Scarborough, Ontario, pending
regulatory approval.

In addition, Ventura publishes materials and holds workshops in select cities
across the United States to prepare individuals to take various national and
state administered oral and written health care licensure examinations in
psychology and other mental health disciplines.

Business Strategy

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

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

Growth Strategy

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

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

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

14 campuses, four of which were for-profit and four of which were originally
not-for-profit, and the Ventura test preparation business. The Company believes
there are significant opportunities to acquire schools which can serve as
platforms for program and campus expansion. Prime acquisition candidates are
those that have the potential to be quickly developed into profitable,
accredited, degree-granting schools offering programs consistent with the
Company's mission.

The Offering

Class A Common Stock offered by
the Company...................... 2,000,000 shares
Common Stock to be outstanding
after the Offering:
Class A Common Stock............ 2,000,000 shares (1)
Class B Common Stock............ 4,900,000 shares
Total......................... 6,900,000 shares
Use of Proceeds by the Company.... Repayment of certain indebtedness of the
Company, including notes payable to the
Company's sole shareholder, and for general
corporate purposes. See "Use of Proceeds."
Nasdaq National Market symbol..... "ARGY"

- --------

(1) Excludes an aggregate of 1,125,000 shares which, prior to the consummation
of the Offering, will be reserved for issuance under the Company's 1999
Stock Plan and Employee Stock Purchase Plan (each as defined below and
collectively, the "Stock Plans"). See "Management--Stock Plans."

Summary Consolidated Financial and Other Data

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

Three Months
Ended
Year Ended August 31, Pro Forma November 30, Pro Forma
------------------------- As Adjusted -------------- As Adjusted
1996 1997 1998 1998 (1) 1997 1998 1998 (1)
------- ------- ------- ----------- ------ ------ -----------
(in thousands, except per share amounts)

Statement of Operations
Data:
Net revenue............. $17,840 $20,460 $29,352 $29,352 $7,249 $9,341 $9,341
Operating expenses:
Cost of education...... 9,370 10,661 15,075 15,075 3,301 4,251 4,251
Selling expenses....... 263 516 1,102 1,102 137 361 361
General and
administrative
expenses.............. 5,174 5,432 9,104 9,304 1,745 2,487 2,537
Related party general
and administrative
expense (2)........... 1,710 993 2,271 -- 308 424 --
------- ------- ------- ------- ------ ------ ------
Total operating
expenses............ 16,517 17,602 27,552 25,481 5,491 7,523 7,149
------- ------- ------- ------- ------ ------ ------
Income from operations.. 1,323 2,858 1,800 3,871 1,758 1,818 2,192
Interest income
(expense), net......... 249 390 (244) 67 (27) (32) 66
Other income (expense),
net.................... 21 (48) (12) (12) (4) (4) (4)
------- ------- ------- ------- ------ ------ ------
Income before provision
for income taxes (3)... 1,593 3,200 1,544 3,926 1,727 1,782 2,254
Provision for income
taxes (3).............. 30 37 29 1,570 27 24 902
------- ------- ------- ------- ------ ------ ------
Net income.............. $ 1,563 $ 3,163 $ 1,515 $ 2,356 $1,700 $1,758 $1,352
======= ======= ======= ======= ====== ====== ======
Basic and diluted
earnings per share
(4)(5):
Historical............. $0.32 $0.65 $0.31 $0.35 $0.36
Pro forma as adjusted.. $0.40 $0.22
Weighted average common
shares outstanding--
basic and diluted
(4)(5)................. 4,900 4,900 4,900 5,920 4,900 4,900 6,065
Other Data:
EBITDA (6).............. $1,722 $3,296 $2,738 $1,949 $2,087
EBITDA margin (6)....... 9.7% 16.1% 9.3% 26.9% 22.3%
Cash flows from:
Operating activities... $2,736 $3,908 $2,582 $1,892 $1,317
Investing activities... (392) (9,123) (226) 1,755 1,682
Financing activities... (124) 5,193 (3,853) (3,617) (115)
Student population (7).. 2,858 3,253 4,514 3,253 4,542
Number of campuses (8).. 8 8 10 8 14

As of November 30, 1998
----------------------------
Pro Forma
Pro Forma As Adjusted
Actual (9) (9)(10)
------ --------- -----------

Balance Sheet Data:
Cash, cash equivalents
and short-term
investments............ $9,543 $9,543 $18,970
Working capital......... 2,954 (8,199) 16,898
Total assets............ 25,862 26,509 35,936
Long-term debt
(excluding current
maturities)............ 5,074 5,074 3,271
Shareholders' equity
(deficit).............. 10,638 (212) 26,688

- --------

(1) Pro forma for (i) the elimination of the management fee the Company paid
to MCM Management Corporation ("Management Corp") of approximately
$2,271,000 and $424,000 for the year ending August 31, 1998 and the three
months ending November 30, 1998, respectively; (ii) an increase in general

and administrative expenses reflecting cash compensation to be paid to Dr.
Markovitz under the terms of his employment agreement, which would have
been approximately $200,000 for the year ending August 31, 1998 and
$50,000 for the three months ended November 30, 1998; and (iii) a
provision for federal and state corporate income taxes at a combined
effective income tax rate of 40%, and as adjusted for the Offering and the
application of the net proceeds therefrom as described under "Use of
Proceeds," as if such transactions had occurred on September 1, 1997.

(2) Represents amounts paid to Management Corp., an affiliate of Michael C.
Markovitz, for services rendered by Dr. Markovitz during the period
presented. Dr. Markovitz is the sole shareholder and employee of
Management Corp. Dr. Markovitz did not receive any compensation for
services rendered to the Company, other than through this management fee.
Through Management Corp., Dr. Markovitz provides services characteristic
of a principal executive officer, including strategic direction and
oversight for the Company, daily management oversight and consultation on
business acquisitions and other corporate business matters. Upon
completion of the Offering, the relationship with Management Corp. will
be terminated, and Dr. Markovitz will become an employee of the Company.
Dr. Markovitz will enter into an employment agreement that provides for
an initial annual base salary of $200,000 plus performance-based
compensation, which is currently expected to be paid in the form of stock
options. Dr. Markovitz's anticipated cash compensation has been
classified as general and administrative expenses in the pro forma as
adjusted statement of operations data. Although this represents a
significant change in the way Dr. Markovitz is compensated for the
services he provides to the Company, the nature of the services provided
by Dr. Markovitz will not change. The Company does not anticipate that it
will require additional services (beyond those to be rendered by Dr.
Markovitz under his employment agreement) or incur additional costs
(beyond the compensation payable to Dr. Markovitz under his employment
agreement) because of the termination of its relationship with Management
Corp. The Company believes that the pro forma adjustment to modify the
compensation arrangement for Dr. Markovitz is necessary to reflect the
impact of the Offering on the historical results of the Company.
(3) Prior to the Offering, the Company was an S corporation and not subject
to federal (and certain state) corporate income taxes.
(4) Weighted average common shares outstanding used in computing historical
and pro forma basic and diluted earnings per share consists of only
actual common shares outstanding, as the Company has no common stock
equivalents.

(5) Pro forma as adjusted weighted average common shares outstanding for the
year ended August 31, 1998 and the three months ended November 30, 1998
reflects the imputed issuance in the Offering of approximately 1,020,000
and 1,165,000 shares attributable to the repayment of the Shareholder
Loans and the repayment of the indebtedness as described in "Use of
Proceeds," as if the Offering had occurred at the beginning of the period
presented.

(6) "EBITDA" equals income from operations plus depreciation and
amortization. EBITDA margin is EBITDA as a percentage of net revenue.
EBITDA and EBITDA margin are presented because such data is used by
certain investors to assess liquidity and ability to generate cash. The
Company considers EBITDA to be an indicative measure of the Company's
operating performance because EBITDA can be used to measure the Company's
ability to service debt, fund capital expenditures and expand its
business; however, such information should not be considered as an
alternative to net income, operating profit, cash flows from operations,
or any other operating or liquidity performance measure prescribed by
generally accepted accounting principles ("GAAP"). Cash expenditures for
various long-term assets, interest expense and income taxes that have
been and will be incurred are not reflected in the EBITDA presentation
and could be material to an investor's understanding of the Company's
liquidity and profitability. The Company's method of calculating EBITDA
may not be comparable to that of other companies.
(7) Reflects actual student population as of the end of the period indicated,
not including participants in Ventura test preparation programs.
(8) Reflects the total number of campuses operated by the Company as of the
end of the period indicated.

(9) Gives effect to (i) the conversion of the Company from an S corporation
to a C corporation and (ii) the payment of the Distribution (as defined),
which would have been approximately $11.5 million, as if such
transactions had occurred on November 30, 1998.

(10) As adjusted for the Offering and the application of the net proceeds
therefrom as described under "Use of Proceeds," as if such transactions
had occurred on November 30, 1998.

RISK FACTORS

In addition to the other information contained in this Prospectus, the
following risk factors should be considered carefully in evaluating the
Company and its business before purchasing any shares of Class A Common Stock
offered hereby. This Prospectus contains certain forward-looking statements
that are based on the beliefs of, as well as assumptions made by and
information currently available to, the Company's management. The words
"believe," "anticipate," "intend," "estimate," "expect" and similar
expressions are intended to identify such forward-looking statements, but are
not the exclusive means of identifying such statements. Such statements
reflect the current views of the Company or its management and are subject to
certain risks, uncertainties and assumptions, including, but not limited to,
those set forth in the following risk factors. Should one or more of these
risks or uncertainties materialize, or should underlying assumptions prove
incorrect, the Company's actual results, performance or achievements in fiscal
1999 and beyond could differ materially from those expressed in, or implied
by, such forward-looking statements. Subject to its obligations under federal
securities laws, the Company undertakes no obligation to release publicly any
revisions to any such forward-looking statements that may reflect events or
circumstances after the date of this Prospectus.

Substantial Dependence on Student Financial Aid; Potential Adverse Effects of
Regulation

Students attending the Company's schools finance their education through a
combination of individual resources (including earnings from full or part-time
employment), government-sponsored financial aid and other sources, including
family contributions and scholarships provided by the Company. The Company
estimates that over 51% of the students at its U.S. schools receive some
government-sponsored (federal or state) financial aid. For fiscal 1998,
approximately 46%, or $13.0 million, of the Company's net revenue (on a cash
basis) was derived from some form of such government-sponsored financial aid
received by the students enrolled in its schools. In addition, approximately
70% of the students attending PrimeTech receive Canadian government-sponsored
financial aid. A reduction in U.S. or Canadian government funding levels could
lead to lower enrollments at the Company's schools and require the Company to
seek alternative sources of financial aid for its students. If student
enrollments are lowered or such alternative sources cannot be arranged, the
Company's business, results of operations and financial condition would be
materially and adversely affected.

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

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

The Company is required to engage an independent auditor to conduct a
compliance review of each U.S. institution's Title IV Program operations and
to submit the results of such audits to the DOE on an annual basis. The
Company has complied with its obligations in this regard on a timely basis.
Based upon the most recent

annual compliance audits of the Company's U.S. institutions and upon other
reviews and audits by independent and governmental entities relating to
compliance with the requirements established by the HEA and the regulations
thereunder, the Company's institutions have been found to be in substantial
compliance with the requirements for participating in the Title IV Programs,
and the Company believes that its institutions continue to be in substantial
compliance with those requirements. The Company believes its institutions to
be in substantial compliance with the Title IV requirements because there are
no areas of material non-compliance that would bring into question the
continued eligibility of the Company's institutions to participate in Title IV
Programs.

Under the rule limiting the amount of net revenues that may be derived from
the Title IV Programs, commonly referred to as the "85/15 Rule," an
institution would be disqualified from participation in those programs if more
than 85% of its net revenues (on a cash basis) in any fiscal year was derived
from the Title IV Programs. The Company has calculated that, since this
requirement took effect in 1995, none of the Company's U.S. institutions
derived more than 80% of its net revenue (on a cash basis) from the Title IV
Programs for any fiscal year, and that for fiscal 1998 the range for the
Company's U.S. institutions that participated in Title IV Programs was from
approximately 48% to approximately 77%. Congress has recently enacted
legislation that will change the 85/15 Rule to a "90/10 Rule." See "Risk That
Legislative Action Will Reduce Financial Aid Funding or Increase Regulatory
Burden."

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

In the event of a failure of the Company to comply with applicable Title IV
Program requirements, the affected institution could be required to repay
improperly disbursed Title IV Program funds and could be assessed an
administrative fine of up to $25,000 per violation of Title IV Program
requirements. In addition, the DOE could transfer that institution from the
"advance" system of payment of Title IV Program funds, under which an
institution requests and receives funding from the DOE in advance based on
anticipated needs, to the "reimbursement" or cash monitoring system of
payment, under which an institution must disburse funds to students and
document their eligibility for Title IV Program funds before receiving funds
from the DOE or from Federal Family Education Loan ("FFEL") program lenders.
Violations of Title IV Program requirements could also subject an institution
or the Company to sanctions under the False Claims Act, as well as other civil
and criminal penalties. Penalties under the False Claims Act can amount to up
to $10,000 per violation, in addition to treble damages which may be sought by
the government as a result of the action constituting the false claim. The
failure by any of the Company's institutions to comply with applicable
federal, state or accrediting agency requirements could result in the
limitation, suspension or termination of that institution's ability to
participate in the Title IV Programs or the loss of state licensure or
accreditation. Any such event could have a material adverse effect on the
Company's business, results of operations or financial condition. There are no
proceedings for any such purposes pending against any of the Company's
institutions, and the Company has no reason to believe that any such
proceeding is contemplated. See "Financial Aid and Regulation--Federal
Oversight of the Title IV Programs."

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

student and institutional participation in the Title IV Programs. The 1998
Amendments also change or modify some requirements. These changes and
modifications include increasing the revenues that an institution may derive
from Title IV funds from 85% to 90% and revising the requirements pertaining
to the manner in which institutions must calculate refunds to students. The
1998 Amendments also prohibit institutions that are ineligible for
participation in Title IV loan programs due to student default rates in excess
of applicable thresholds from participating in the Pell Grant program. Other
changes expand participating institutions' ability to appeal loss of
eligibility owing to such default rates. The 1998 Amendments further permit an
institution to avoid the interruption of eligibility for the Title IV Programs
upon a change of ownership which results in a change of control by submitting
a materially complete application for recertification of eligibility within 10
business days of such a change of ownership. Regulations to implement the 1998
Amendments are subject to negotiated rulemaking and, therefore, the
regulations will likely not become effective until July 1, 2000. The Company
does not believe that the 1998 Amendments will have a material adverse effect
on its business operations. None of the Company's institutions derives more
than 80% of its revenue from Title IV funds and no institution has student
loan default rates in excess of current thresholds. The Company also believes
that its current refund policy will satisfy the new refund requirements.

The process of reauthorizing the HEA by the U.S. Congress takes place
approximately every five years. The Title IV Programs are subject to
significant political and budgetary pressures during and between
reauthorization processes. There can be no assurance that government funding
for the Title IV Programs will continue to be available or maintained at
current levels. A reduction in government funding levels could lead to lower
enrollments at the Company's schools and require the Company to seek
alternative sources of financial aid for students enrolled in its schools.
Given the significant percentage of the Company's net revenue that is
indirectly derived from the Title IV Programs, the loss of or a significant
reduction in Title IV Program funds available to students at the Company's
schools would have a material adverse effect on the Company's business,
results of operations and financial condition. In addition, there can be no
assurance that current requirements for student and institutional
participation in the Title IV Programs will not change or that one or more of
the present Title IV Programs will not be replaced by other programs with
materially different student or institutional eligibility requirements.

Potential Loss of Student Financial Aid in the Event of Failure to Meet
Financial Responsibility Standards

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

institution is required to post a letter of credit in favor of the DOE in an
amount equal to 25% of total Title IV Program refunds paid by the institution
in its prior fiscal year. None of the Company's institutions has made late
Title IV Program refunds requiring it to post a letter of credit in favor of
the DOE.

In November 1997, the DOE issued new regulations, which took effect July 1,
1998 and revised the DOE's standards of financial responsibility. These new
standards replace the numeric tests described above with three ratios: an
equity ratio, a primary reserve ratio and a net income ratio, which are
weighted and added together to produce a composite score for the institution.
The Company and each of its institutions may demonstrate financial
responsibility by meeting the new standards or the old standards for fiscal
years that began on or after July 1, 1997 but on or before June 30, 1998.

Under the new standards, an institution need only satisfy a composite score
standard. The ratio methodology of these standards takes into account an
institution's total financial resources and determines a combined score of the
measures of those resources along a common scale (from negative 1.0 to
positive 3.0). It allows a relative strength in one measure to mitigate a
relative weakness in another measure.

If an institution achieves a composite score of at least 1.5, it is
financially responsible without further oversight. If an institution achieves
a composite score from 1.0 to 1.4, it is in the "zone" and is subject to
additional monitoring, but may continue to participate as a financially
responsible institution, for up to three years. Additional monitoring may
require the school to (i) notify the DOE, within 10 days of certain changes,
such as an adverse accrediting action; (ii) file its financial statements
earlier than the six month requirement following the close of the fiscal year;
and (iii) subject the school to a cash monitoring payment method. If an
institution has a composite score below 1.0, it fails to meet the financial
responsibility standards unless it qualifies under an alternative standard
(i.e., letter of credit equal to 50% of the Title IV program funds expended
from the prior fiscal year or equal to at least 10% of the Title IV program
funds expended from the prior fiscal year and provisional certification
status). The institution may also be placed on the cash monitoring payment
method or the reimbursement payment method.

The Company applied these new regulations to its financial statements as of
August 31, 1998, the end of the Company's most recently completed fiscal year,
and determined that the Company and each of its institutions satisfied the new
standards. The composite score and the individual score for each of the three
ratios, for the Company and each of its institutions is set forth below.

Primary Net
Composite Reserve Equity Income
Score Ratio Ratio Ratio
--------- ------- ------ ------

The Company..................................... 1.52 .42 .28 .82
Institutions:
ASPP.......................................... 2.13 .75 .75 .63
U of S........................................ 1.50 .31 .29 .90
MIA........................................... 1.97 .90 .92 .15

The Company has also applied these new regulations to its financial
statements as of November 30, 1998 and determined that the Company and each of
its institutions satisfied the new standards.

Potential Loss of Student Financial Aid in the Event of High Student Loan
Default Rates

The Company is substantially dependent on continued participation by its
institutions in the student loan programs included in the Title IV Programs.
For fiscal 1998, federally guaranteed or funded student loans represented
approximately 46%, or $13.0 million, of the Company's net U.S. tuition revenue
(on a cash basis). Under the HEA, an institution could lose its eligibility to
participate in some or all of the Title IV Programs if the rate of defaults of
its students on their FFEL loans (referred to as the "cohort default rate")
exceeds specified rates for specified periods of time. An institution's annual
cohort default rate on FFEL loans, including a "weighted average" cohort
default rate for institutions that participate in this loan program, is
calculated as the rate at which borrowers scheduled to begin repayment on such
loans in one year default on those loans by the

end of the following year. If an institution's cohort default rate is 25% or
greater in any one of the three most recent federal fiscal years, the DOE may
determine that the institution lacks administrative capability and may place
that institution on "provisional certification" status for up to four years.
Provisional certification does not limit an institution's access to Title IV
Program funds, but does subject that institution to closer review by the DOE
and possible summary adverse action if that institution commits violations of
Title IV Program requirements. If an institution has cohort default rates of
25% or greater for three consecutive federal fiscal years, that institution
will no longer be eligible to participate in the FFEL programs for the
remainder of the federal fiscal year in which the determination of
ineligibility is made and for the two subsequent federal fiscal years. An
institution whose cohort default rate for any federal fiscal year exceeds 40%
may have its eligibility to participate in all of the Title IV Programs
limited, suspended or terminated. In addition, if an institution's cohort
default rate for loans under the Federal Perkins Loan ("Perkins") program
exceeds 15% for any federal award year, the DOE may determine that the
institution lacks administrative capability and place the institution on
provisional certification status for up to three years. None of the Company's
institutions has published FFEL or Perkins cohort default rates of 15% or
greater for any of the past three federal fiscal years. In 1995, the range of
FFEL cohort default rates of the Company's institutions was from 2.2% to
10.9%. The range of FFEL cohort default rates of the Company's institutions
for fiscal 1996 was from zero to 7.4%. See "Financial Aid and Regulation--
Federal Oversight of the Title IV Programs--Cohort Default Rates."

Loss of Students, Faculty and Financial Aid Program Participation in the Event
of a Failure to Maintain Accreditations

The Company believes that the accreditation of its institutions is a
significant factor in its students' decisions to attend, and in its faculty
members' decisions to teach at, the Company's schools. Any failure to maintain
accreditation could have a material adverse effect on the Company's ability to
attract and retain qualified students and faculty. In addition, in order to
participate in the Title IV Programs, an institution must be accredited by an
accrediting agency recognized by the DOE. Certain states also require
institutions to maintain accreditation as a condition of continued
authorization to grant degrees. In addition, certain states require various
health professionals, including clinical psychologists, to have graduated from
a school with professional accreditation in order to qualify for a license to
practice in such state. Each of the Company's U.S. institutions is accredited
by an accrediting agency recognized by the DOE and certain of the campuses
maintain programmatic accreditation from the applicable professional
organization, such as the APA. The Company seeks APA accreditation for
programs at its campuses as they become eligible to apply for such
accreditation. Although accreditation is not currently required at any of the
Company's campuses, failure to obtain such accreditation in Florida and
Virginia could adversely affect state authorization of these campuses in
future periods or the ability of graduates of these campuses to obtain state
licenses to practice. The HEA requires accrediting agencies recognized by the
DOE to review and monitor many aspects of an institution's operations and to
take appropriate action when the institution fails to comply with the
accrediting agency's standards. Any failure of the Company's institutions to
maintain their accreditations would have a material adverse effect on the
Company's business, results of operations and financial condition. See
"Financial Aid and Regulation--Accreditation."

Discontinuance of Operations and Loss of Financial Aid Program Participation
in the Event of a Failure to Maintain State Licenses or Authorizations

In order to operate and award degrees and diplomas, and to participate in
the Title IV Programs, a campus must be licensed or authorized to offer its
programs by the relevant agencies of the state in which such campus is
located. Each state has its own standards and requirements for licensure or
authorization, which vary substantially among the states. Typically, state
laws require that a campus demonstrate that it has the personnel, resources
and facilities appropriate to its instructional programs. Each of the
Company's U.S. campuses is licensed or authorized by the relevant agencies of
the state in which such campus is located. Program approval for the Company's
clinical psychology program in the State of Virginia recently expired, and an
application to extend the approval is pending. If any of the Company's
campuses were to lose its state license or authorization, such campus would
not only lose its eligibility to participate in the Title IV Programs, but
would be required to discontinue operations. In particular, the loss of ASPP's
authorization to offer degrees in Illinois would have a material adverse
effect on the Company, because a significant percentage of the Company's
revenues are derived

from the operation of the Illinois ASPP campuses (28.4% in fiscal 1998). The
Illinois Board of Higher Education, the entity which authorizes the Illinois
ASPP campuses to offer degrees, regulates all non-public degree granting
institutions within the state. The Board requires ASPP to demonstrate
compliance with regulations in areas such as admissions, curriculum,
facilities, equipment, instructional materials, qualifications of school
personnel, fiscal resources, tuition and refund policy, record-keeping and
recruitment. The Company believes its Illinois ASPP campuses are fully
authorized to offer degrees in the state of Illinois. No other state accounted
for 20% or more of the Company's revenues in fiscal 1998.

Although the Company believes that all of its campuses maintain adequate
personnel, resources and facilities, the loss by any of the Company's
institutions of their state licenses or authorizations would have a material
adverse effect on the Company's business, results of operations and financial
condition. See "Financial Aid and Regulation--State Authorization."

Loss of Financial Aid Program Participation in the Event of a Change of
Ownership or Control

When an institution undergoes a "change of ownership" that results in a
"change of control," as defined in the HEA and applicable regulations, that
institution becomes ineligible to participate in the Title IV Programs and may
receive and disburse only certain previously committed Title IV Program funds
to its students until it has applied for and received recertification from the
DOE. This standard applies both to the Company and to any institution acquired
by the Company. Approval of an application for recertification must be based
upon a determination by the DOE that the institution under its new ownership
is in compliance with the requirements of institutional eligibility. The time
required to act on such an application can vary substantially and may take
several months. If an institution is recertified following a change of
ownership, it will be on a provisional basis. Provisional certification does
not limit an institution's access to Title IV Program funds, but does subject
that institution to closer review by the DOE and possible summary adverse
action if that institution commits violations of Title IV Program
requirements. The regulations implementing the 1998 Amendments, which will not
likely become effective until July 1, 2000, may permit an institution to avoid
the interruption of eligibility for the Title IV Programs upon a change of
ownership which results in a change of control by submitting a materially
complete application for recertification of eligibility within 10 business
days of such a change of ownership.

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

The Company believes that the Offering will not constitute a change of
ownership resulting in a change in control under the HEA or DOE regulations
because of Dr. Markovitz's continued voting control. The Company submitted a
written request to the DOE to confirm this conclusion. However, the DOE has
yet to respond. If the DOE were to determine that the Offering constitutes a
change of ownership resulting in a change in control, the Company's
participation in Title IV Programs could be terminated until the Company is
recertified by the DOE. Further, if the Offering were determined to constitute
a change of ownership resulting in a change in control under state and/or
accrediting agency standards, the Company would be required to reestablish the
state authorization and accreditation of each of the affected U.S. campuses.
Based upon its review of applicable state and accrediting agency standards,
the Company does not believe that the Offering will constitute a change of

ownership resulting in a change of control for state authorization or
accreditation purposes, except that notice and an application for continuation
of authority to operate may be required after the Offering by the Department of
Consumer Affairs, Bureau of Private Postsecondary and Vocational Education of
the State of California, and will be required by the Board for Private
Postsecondary Education of the State of Arizona. Other than as set forth above,
the Company has obtained the agreement of each of the relevant agencies that
the Offering will not constitute a change of ownership resulting in a change of
control.

Once the Company is publicly traded, the potential adverse implications of a
change of ownership resulting in a change in control could influence future
decisions by the Company and its shareholders regarding the sale, purchase,
transfer, issuance or redemption of the Company's capital stock. Under certain
circumstances, a sale or transfer by Michael C. Markovitz of a substantial
amount of Class B Common Stock (which would convert upon such sale or transfer
to Class A Common Stock) could constitute a change in ownership resulting in a
change of control. There are no restrictions on Dr. Markovitz's ability to
transfer his shares of Class B Common Stock, other than under Federal
securities laws. However, under the Company's Articles of Incorporation and
Bylaws, the Class B Common Stock will automatically convert into Class A Common
Stock upon sale or transfer, except transfers to certain family members and
trusts of Dr. Markovitz. See "--Voting Control by Principal Shareholder."

Dependence on Canadian Financial Aid; Potential Adverse Effects of Canadian
Regulation

Approximately 70% of the students attending PrimeTech receive student
financial assistance from Canadian federal and/or provincial financial aid
programs. Specifically, Canadian students are eligible to receive loans under
the Canada Student Loan ("CSL") program. Students who are residents of the
province of Ontario receive financial assistance under both the CSL program and
the Ontario Student Assistance Plan ("OSAP").

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

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

Expansion and Acquisition Plans May Present Difficulties

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

authorization and approvals. In the case of entirely separate, free standing
U.S. institutions, a minimum of two years' operating history is required for
them to be eligible for Title IV Program funding.

Acquisitions involve a number of special risks and challenges, including the
diversion of management's attention, integration of the operations and
personnel of acquired companies, adverse short-term effects on reported
operating results and the possible loss of key employees. Continued growth
through acquisitions may also subject the Company to unanticipated business or
regulatory uncertainties or liabilities. In addition, when the Company
acquires an existing school, a significant portion of the purchase price for
such school typically will be allocated to goodwill and other intangibles
(e.g., intellectual property and covenants not-to-compete). The Company
amortizes goodwill over periods of 15 to 40 years and other intangible assets
over periods of two to ten years. In addition, the Company's acquisition of a
school would constitute a change in ownership resulting in a change of control
with respect to such school for purposes of eligibility to participate in the
Title IV Programs and for state licensing and accreditation purposes. See "--
Potential Adverse Effects of Regulation; Loss of Financial Aid Program
Participation in the Event of a Change of Ownership or Control." Generally,
the Company intends to acquire schools subject to the condition that they be
recertified promptly for such eligibility by the DOE. The failure of the
Company to manage its expansion and acquisition program effectively could have
a material adverse effect on the Company's business, results of operations or
financial condition.

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

Difficulties in Entering New Business Areas

Historically, the Company's primary business activity has been providing
postgraduate education in the field of clinical psychology. Since 1992, the
Company has also been providing postgraduate degrees in education and
business. Through its acquisitions of Ventura (August 1997), MIM (February
1998) and PrimeTech (November 1998), the Company has recently begun providing
programs at the associate and diploma level and publishing materials and
holding workshops for mental health licensure preparation. In addition, the
Company may from time to time enter other new business areas, including
providing programs in other academic fields. The Company may not be able to
perform in any of these new areas at the level it has historically performed
in its traditional business activities.

Revenue Growth or Operating Margins May Decline Due to Competition

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

Dependence on Certain Industries

The Company's schools offer programs in clinical psychology, education,
business, allied health professions and information technology, and the demand
for the Company's educational programs is correlated to employment
opportunities in these particular markets. Approximately 47% of the Company's
students as of November 30, 1998 were enrolled in psychology programs. The
Company believes that managed care and other health care cost containment
initiatives can lead to reduced compensation for health care providers such as
clinical psychologists and reduced demand for psychologists with advanced
degrees such as those offered by the Company, thereby having an adverse impact
on the demand for certain of the programs offered by the Company. These and
other adverse economic and market conditions in the industries that employ
graduates of the Company's schools could have a material adverse effect on the
business, financial condition or results of operations of the Company. See
"Business--Graduate Employment."

Reliance on Key Personnel

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

Year 2000 Problem

The "Year 2000 Problem" is the potential for computer processing errors
resulting from the use of computer programs that have been written using two
digits, rather than four, to denote a year (e.g., using the digits "99" to
denote 1999). Computer programs using this nomenclature can misidentify
references to dates after 1999 as meaning dates early in the twentieth century
(e.g., "1902" rather than "2002"). The Year 2000 Problem is commonly
considered to be prevalent in computer programs written as recently as the
mid-1990s, and can cause such programs to generate erroneous information, to
otherwise malfunction or to cease operations altogether.

The Company is in the process of installing a new management information
system in its corporate headquarters and expects such installation to be
completed by June 1999 . In addition, the Company's schools each have stand-
alone computer systems and networks for internal use and for communication
with its students and with corporate headquarters. There can be no assurance
that the installation of the Company's new system will proceed smoothly or
that additional management time or expense will not be required to
successfully complete such installation. Although the Company expects that its
new computer system will be free of the Year 2000 Problem and, based upon its
review of its other internal computer systems, all such systems will be free
of the Year 2000 Problem, there can be no assurance that this new computer
system will not be affected by the Year 2000 Problem, that the Company's
existing systems will not be affected by the Year 2000 Problem, or that a
failure of any other parties, such as the DOE or other government agencies on
which the Company depends for student financial assistance or the financial
institutions involved in the processing of student loans, to address the Year
2000 Problem will not have a material adverse effect on the Company's
business, results of operations or financial condition. In particular, there
can be no assurance that malfunctions relating to the Year 2000 Problem will
not result in the misreporting of financial information by the Company. The
Company has made inquiries of substantially all of its material vendors
regarding the Year 2000 Problem and has not detected any significant issues
relating to the Year 2000 Problem. However, the Company has not made a formal
assessment of the computer programs used by government agencies or other third
parties with which the company interacts, or an assessment of its own
vulnerability to the failure of such programs to be free of the Year 2000
Problem. The Company does not have any formal contingency plans relating to
the Year 2000 Problem.

The Company believes that the most reasonably likely worst case scenario for
the Company regarding the Year 2000 Problem is a failure of the DOE to
adequately ensure payment of financial aid amounts. The 1998 Amendments
require the DOE to take steps to ensure that the processing, delivery and
administration of grant, loan and work assistance provided under the Title IV
Programs are not interrupted because of the Year 2000 Problem. This
legislation also authorizes the DOE to postpone certain HEA requirements to
avoid overburdening institutions and disrupting the delivery of student
financial assistance as a consequence of this problem. There can be no
assurance, however, that assistance will not be interrupted or that any DOE
requirements would be postponed so that there would be no material adverse
effect on the Company's schools. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Year 2000 Problem."

Voting Control by Principal Shareholder

The Company's founder and Chairman, Michael C. Markovitz, beneficially owns
all of the outstanding shares of Class B Common Stock. Each share of Class B
Common Stock has ten votes as compared to one vote for each share of Class A
Common Stock. Following consummation of the Offering, Dr. Markovitz will
control 96.1% (95.2% if the Underwriters' over-allotment option is exercised
in full) of the voting power of the Common Stock. As a result of such stock
ownership, Dr. Markovitz will be able to control the outcome of all matters
submitted to a vote of the holders of Common Stock, including the election of
all Directors, amendments to the Company's Articles of Incorporation (the
"Articles") and By-laws and approval of significant corporate transactions.
See "Description of Capital Stock." Such voting power could also have the
effect of delaying, deterring or preventing a change in control of the Company
that might be otherwise beneficial to shareholders. See "Security Ownership of
Certain Beneficial Owners and Management."

Anti-Takeover Provisions Could Deter Beneficial Transactions

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

Restrictions under the Credit Agreement

The Company has received a commitment letter from The Bank of America
regarding a $20 million revolving credit facility (the "Credit Agreement").
The Credit Agreement is intended to provide funds for possible acquisitions
and other general corporate purposes. The Company currently expects to have
approximately $3.6 million of outstanding indebtedness immediately following
the Offering, none of which is expected to be outstanding under the Credit
Agreement. The Company has no current plans to incur additional indebtedness
under the Credit Agreement. It is anticipated that the Credit Agreement will
restrict the Company and its subsidiaries' ability to take certain actions,
including incurring additional indebtedness and substantially altering the
Company's current method of conducting business. The Credit Agreement is also
expected to contain certain financial covenants and ratios that may have the
effect of restricting the Company's ability to take certain actions in light
of their impact on the Company's financial condition or results of operations.
A breach of any covenants contained in the Credit Agreement could result in an
event of default thereunder and allow the lenders to accelerate the maturity
of the indebtedness outstanding under the Credit Agreement. The Bank of
America has indicated its willingness to enter into the Credit Agreement;
however, there can be no assurance that the Credit Agreement will be executed.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations--Liquidity and Capital Resources."

Broad Discretion as to Use of Proceeds

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

Absence of Public Market; Possible Volatility of Stock Price; Immediate and
Substantial Dilution

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

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

The initial public offering price of the Class A Common Stock offered hereby
is substantially higher than the net book value of the currently outstanding
Common Stock. Therefore, purchasers of the Class A Common Stock offered hereby
will experience immediate and substantial dilution of $12.18 per share in the
net tangible book value of the Class A Common Stock. See "Dilution."

Shares Eligible for Future Sale

Upon consummation of the Offering, the Company will have 6,900,000 shares of
Common Stock outstanding. The 2,000,000 shares of Class A Common Stock sold in
the Offering will be freely tradeable without restriction or further
registration under the Securities Act of 1933, as amended (the "Securities
Act"), unless held by an "affiliate" of the Company, as that term is defined
in the Securities Act. The Company, and certain persons holding Common Stock
or options to purchase Common Stock, at the time of the Offering, have agreed
not to sell, offer to sell, solicit any offer to buy, contract to sell, grant
any option to purchase or otherwise transfer or dispose of any shares of
Common Stock or any securities convertible into, or exchangeable or
exercisable for, Common Stock, without the prior written consent of Salomon
Smith Barney Inc. on behalf of the Underwriters, for a period of 180 days
after the date of this Prospectus. Upon the expiration of these lock-up
arrangements all of the 4,900,000 shares of Common Stock issued and
outstanding as of the date of this Prospectus will be eligible for immediate
sale in the public market subject in certain cases to compliance with volume
and other limitations under Rule 144 of the Securities Act ("Rule 144"). No
prediction can be made as to the effect, if any, that sales of shares of
Common Stock or the availability of shares of Common Stock for sale will have
on the market price of the Class A Common Stock from time to time. The sale of
a substantial number of shares held by existing shareholders, whether pursuant
to subsequent public offerings or otherwise, or the perception that such sales
could occur, could adversely affect the market price of the Class A Common
Stock and could materially impair the Company's future ability to raise
capital through an offering of equity securities. See "Shares Eligible For
Future Sale" and "Underwriting."

THE COMPANY

The Company is an Illinois corporation that currently owns and operates ASPP
directly, and owns and operates U of S, MIM, PrimeTech and Ventura through its
wholly owned subsidiaries. Historically, Dr. Markovitz separately owned and
operated each of the businesses that are now owned by the Company, other than
PrimeTech.

The following chart illustrates the Company's current organizational
structure:

Prior to the Offering, the Company will effect the Stock Conversion,
consisting of an approximately 2,941-for-one stock split of all outstanding
shares of common stock and the subsequent conversion of all outstanding shares
of common stock into shares of Class B Common Stock and the authorization of
the Class A Common Stock.

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

The Company intends to pay to Dr. Markovitz a distribution equal to all of
the Company's undistributed earnings, certain capital contributions and the
net deferred income tax asset which the Company has as of the consummation of
the Offering (the "Distribution"). It is not possible at this time to
determine the exact amount of the Distribution because it will be based upon
the portion of the Company's net income for 1999 that precedes the
consummation of the Offering. The Company currently estimates that such amount
will be approximately $12.0 million. The Distribution will be paid in the form
of a note issued by the Company to Dr. Markovitz (the "Distribution Loan")
before consummation of the Offering, which note will be repaid shortly after
consummation of the Offering.

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

USE OF PROCEEDS

The net proceeds to the Company from the sale of shares of Class A Common
Stock offered hereby are estimated to be $26.9 million, assuming an initial
public offering price of $15.00 per share and after deducting estimated
underwriting discounts and commissions and expenses of the Offering. The
Company will not receive any proceeds from the exercise of the over-allotment
option granted to the Underwriters by the Company's sole shareholder. See
"Underwriting."

The Company intends to use approximately $5.0 million of the net proceeds of
the Offering to repay notes payable to the Company's lenders (the "Bank
Notes"), which were issued in connection with the acquisitions of Ventura and
MIM and for general corporate purposes. The Bank Notes bear interest at an
average blended rate of 8.0% per annum, become due at various times through
2004 and may be prepaid at anytime without premium or penalty.

The Company also intends to use approximately $12.0 million of the net
proceeds of the Offering to pay the Distribution Loan, $0.7 million to repay
indebtedness to Dr. Markovitz incurred in connection with the Company's
purchase of the stock of MCM Plaza, a company wholly owned by Dr. Markovitz,
and $0.3 million to repay indebtedness to Dr. Markovitz incurred in connection
with the PrimeTech acquisition (such amounts, together with the Distribution
Loan, the "Shareholder Loans"). The Shareholder Loans bear interest at 8.0%
per annum, are payable upon demand and may be prepaid at anytime without
premium or penalty. See "Management--Compensation Committee Interlocks and
Insider Participation."

The Company intends to use the remaining $8.9 million of the net proceeds of
the Offering for working capital and general corporate purposes, including new
program development at existing campuses, the addition of new campuses and the
possible acquisition of additional businesses that are consistent with the
Company's mission of providing academically-oriented, practitioner-focused
education in fields with numerous employment opportunities and strong student
demand. The Company currently has no agreements, understandings or commitments
with respect to any acquisitions. The Company has not determined the specific
allocation of the remainder of the net proceeds among the various uses
described above, and, accordingly, investors in the Offering must rely upon
management's judgment with respect to the use of such proceeds.

DIVIDEND POLICY

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

CAPITALIZATION

The following table sets forth the cash, cash equivalents and short-term
investments and the consolidated capitalization of the Company (i) at November
30, 1998, (ii) pro forma for (a) the conversion of the Company from an S
corporation to a C corporation and (b) the payment of the estimated
Distribution and (iii) as adjusted to give effect to the sale by the Company
of 2,000,000 shares of Class A Common Stock offered hereby (assuming an
initial public offering price of $15.00 per share) and the application of the
estimated net proceeds as described under "Use of Proceeds." This table should
be read in conjunction with the Company's consolidated financial statements
and notes thereto appearing elsewhere in this Prospectus.

As of November 30, 1998
------------------------------
Pro Forma
Actual Pro Forma As Adjusted
------- --------- -----------
(dollars in thousands)

Cash, cash equivalents and short-term
investments.................................... $ 9,543 $ 9,543 $ 18,970
======= ======= ========
Long-term debt, less current maturities......... $ 5,074 $ 5,074 $ 3,271
Shareholders' equity (deficit):
Preferred stock, $.01 par value, 5,000,000
shares authorized, no shares issued and
outstanding on an as adjusted basis.......... --
Class A Common Stock, $.01 par value,
30,000,000 shares authorized, 2,000,000
shares issued and outstanding on an as
adjusted basis (1)........................... 20
Class B Common Stock, $.01 par value,
10,000,000 shares authorized, 4,900,000
shares issued and outstanding on an adjusted
basis........................................ 49
Common stock, $.01 par value, 10,000,000
shares authorized, 4,900,000 shares issued
and outstanding on an actual basis, no shares
authorized, issued or outstanding on an as
adjusted basis............................... 49 49 --
Additional paid-in capital (2)................ 6,456 456 27,336
Unrealized gain on investments................ 3 3 3
Purchase price in excess of predecessor
carryover basis (3).......................... (720) (720) (720)
Retained earnings (2)......................... 4,850 -- --
------- ------- --------
Total shareholders' equity (deficit).......... 10,638 (212) 26,688
------- ------- --------
Total capitalization........................ $15,712 $ 4,862 $ 29,959
======= ======= ========

- --------

(1) Excludes an aggregate of 1,125,000 shares which, prior to the consummation
of the Offering, will be reserved for issuance under the Company's Stock
Plans. See "Management--Stock Plans."

(2) Additional paid-in capital and retained earnings have been adjusted to
reflect the capitalization of retained earnings to additional paid-in
capital upon conversion of the Company to a C corporation. The amount
capitalized is net of the adjustments necessary to (i) record deferred
income taxes upon conversion of the Company to a C corporation and (ii)
reflect payment of the Distribution, which would have been approximately
$11.5 million as of November 30, 1998.
(3) Reflects the purchase price of MCM Plaza's stock in excess of the
historical book value of the underlying net assets.

DILUTION

The net tangible book value of the Company as of November 30, 1998 was
approximately $3.4 million, or $0.70 per share of Common Stock. Net tangible
book value per share represents the amount of the Company's total tangible
assets less its total liabilities, divided by the number of shares of Common
Stock outstanding. After giving effect to (i) the receipt of $26.9 million of
estimated net proceeds from the sale by the Company of shares of Class A
Common Stock in the Offering (assuming an initial public offering price of
$15.00 per share), (ii) the recording of deferred income taxes upon conversion
of the Company from an S corporation to a C corporation and (iii) the payment
of the Distribution, the pro forma net tangible book value of the Company at
November 30, 1998 would have been $19,479,000, or $2.82 per share of Common
Stock. This represents an immediate dilution in net tangible book value of
$12.18 per share to new investors purchasing shares in the Offering. The
following table illustrates this dilution:

Assumed initial public offering price per share.................. $15.00
Net tangible book value per share at November 30, 1998......... $0.70
Decrease per share attributable to the recording
of deferred income taxes and the payment
of the Distribution .......................................... (2.21)
-----
Pro forma net tangible book value per share at November 30,
1998.......................................................... (1.51)
Increase per share attributable to the Offering (1)............ 4.33
-----
Pro forma as adjusted net tangible book value per share
after the Offering............................................ 2.82
------
Dilution of net tangible book value per share to purchasers
of shares in the Offering..................................... $12.18
======

- --------
(1) After deduction of underwriting discounts and commissions and estimated
expenses of the Offering.

The following table summarizes, on a pro forma basis as of November 30,
1998, the number of shares of Common Stock purchased from the Company, the
total consideration paid and the average price per share paid by the existing
shareholder and by new investors purchasing shares in the Offering:

Shares Purchased Total Consideration
----------------- ------------------- Average Price
Number Percent Amount Percent Per Share
--------- ------- ----------- ------- -------------

Existing shareholders...... 4,900,000 71.0% $ 504,666 1.7% $ 0.10
Investor purchasing shares
in the Offering........... 2,000,000 29.0 30,000,000 98.3 15.00
--------- ----- ----------- -----
Total.................. 6,900,000 100.0% $30,504,666 100.0%
========= ===== =========== =====

SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA

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

Eleven Three Months
Months Ended
Year Ended Ended Year Ended August 31, November 30,
September 30, August 31, ------------------------- --------------
1994 1995 (1) 1996 1997 1998 1997 1998
------------- ---------- ------- ------- ------- ------ ------
(dollars in thousands)

Statement of Operations
Data:
Net revenue............. $11,061 $14,041 $17,840 $20,460 $29,352 $7,249 $9,341
Operating expenses:
Cost of education...... 5,496 7,251 9,370 10,661 15,075 3,301 4,251
Selling expenses....... 317 325 263 516 1,102 137 361
General and
administrative
expenses.............. 3,079 3,763 5,174 5,432 9,104 1,745 2,487
Related party general
and administrative
expense (2)........... 624 1,244 1,710 993 2,271 308 424
------- ------- ------- ------- ------- ------ ------
Total operating
expenses............ 9,516 12,583 16,517 17,602 27,552 5,491 7,523
------- ------- ------- ------- ------- ------ ------
Income from operations.. 1,545 1,458 1,323 2,858 1,800 1,758 1,818
Interest income......... 12 123 304 497 357 109 141
Interest expense........ (40) (1) (55) (107) (601) (136) (173)
Other income (expense),
net.................... 21 -- 21 (48) (12) (4) (4)
------- ------- ------- ------- ------- ------ ------
Income before provision
for income taxes as
reported............... 1,538 1,580 1,593 3,200 1,544 1,727 1,782
Provision for income
taxes.................. 40 30 30 37 29 27 24
------- ------- ------- ------- ------- ------ ------
Net income.............. $1,498 $1,550 $1,563 $3,163 $1,515 $1,700 $1,758
======= ======= ======= ======= ======= ====== ======
Other Data:
EBITDA (3).............. $1,741 $1,748 $1,722 $3,296 $2,738 $1,949 $2,087
EBITDA margin (3)....... 15.7% 12.4% 9.7% 16.1% 9.3% 26.9% 22.3%
Cash flows from:
Operating activities... $1,097 $1,638 $2,736 $3,908 $2,582 $1,892 $1,317
Investing activities... (401) (2,531) (392) (9,123) (226) 1,755 1,682
Financing activities... (823) 371 (124) 5,193 (3,853) (3,617) (115)
Capital expenditures,
net.................... 224 195 404 341 597 63 243
Student population (4).. 2,304 2,644 2,858 3,253 4,514 3,253 4,542
Number of campuses (5).. 7 7 8 8 10 8 14

As of As of August 31, As of
September 30, ------------------------------- November 30,
1994 1995 (1) 1996 1997 1998 1998
------------- -------- ------ ------- ------- ------------
(dollars in thousands)

Balance sheet data:
Cash, cash equivalents
and short-term
investments............ $2,533 $3,596 $5,384 $ 6,728 $ 3,843 $9,543
Working capital......... 523 1,848 3,316 4,412 2,459 2,954
Total assets............ 4,637 6,452 8,336 17,580 23,475 25,862
Long-term debt
(excluding current
maturities)............ 62 292 243 6,354 5,165 5,074
Shareholder's equity.... 2,280 3,830 5,236 7,448 8,922 10,638

- --------
(1) Prior to fiscal 1995, the Company's fiscal year end was September 30.
During fiscal 1995, the Company changed its year end to August 31. Fiscal
1995 represents the Company's results of operations for the eleven months
ended August 31, 1995. All fiscal years subsequent to 1995 represent the
twelve months ended August 31 of the year indicated.

(2) Represents amounts paid to Management Corp., an affiliate of Dr.
Markovitz, for services rendered by Dr. Markovitz during the period
presented. Dr. Markovitz is the sole shareholder and employee of
Management Corp. Dr. Markovitz did not receive any compensation for
services rendered to the Company, other than through this management fee.
Through Management Corp., Dr. Markovitz provides services characteristic
of a principal executive officer, including strategic direction and
oversight for the Company, daily management oversight, consultation on
business acquisitions and other corporate business matters. Upon
completion of the offering, the relationship with Management Corp. will be
terminated, and Dr. Markovitz will become an employee of the Company. Dr.
Markovitz will enter into an employment agreement that provides for an
initial annual base salary of $200,000 plus performance-based
compensation, which is currently expected to be paid in the form of stock
options. Although this represents a significant change in the way Dr.
Markovitz is compensated for the services he provides to the Company, the
nature of the services provided by Dr. Markovitz will not change. The
Company does not anticipate that it will require additional services
(beyond those to be rendered by Dr. Markovitz under his employment
agreement) or incur additional costs (beyond the compensation payable to
Dr. Markovitz under his employment agreement) because of the termination
of its relationship with Management Corp.

(3) "EBITDA" equals income from operations plus depreciation and amortization.
EBITDA margin is EBITDA as a percentage of net revenue. EBITDA and EBITDA
margin are presented because such data is used by certain investors to
assess liquidity and ability to generate cash. The Company considers
EBITDA to be an indicative measure of the Company's operating performance
because EBITDA can be used to measure the Company's ability to service
debt, fund capital expenditures and expand its business; however, such
information should not be considered as an alternative to net income,
operating profit, cash flows from operations, or any other operating or
liquidity performance measure provided by GAAP. Cash expenditures for
various long-term assets, interest expense and income taxes that have been
and will be incurred are not reflected in the EBITDA presentation and
could be material to an investor's understanding of the Company's
liquidity and profitability. The Company's method of calculating of EBITDA
may not be comparable to that of other companies.
(4) Reflects actual student population as of the end of the period indicated,
not including participants in Ventura test preparation programs.
(5) Reflects the total number of campuses operated by the Company as of the
end of the period indicated.

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

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

Background and Overview

The Company provides for-profit postgraduate education with a primary focus
on doctoral level programs. As of November 30, 1998, the Company's schools had
approximately 4,500 students enrolled representing 48 states and 30 foreign
countries. The Company's schools offer programs in clinical psychology,
education, business, allied health professions and information technology and
are approved and accredited to offer doctoral, master's, bachelor's and
associate degrees as well as to award diplomas. Approximately 63% of the
Company's students are enrolled in doctoral programs. The Company operates 14
campuses in eight states and the Province of Ontario, Canada. Additionally,
the Company is preparing to operate two new campuses, pending regulatory
approval.

The Company's principal sources of revenue are tuition, workshop fees and
sales of related study materials. Students attending the Company's schools
finance their education through a combination of individual resources
(including earnings from full or part-time employment), government-sponsored
financial aid and other sources, including family contributions and
scholarships provided by the Company. During fiscal 1998, approximately 46% of
the Company's net cash receipts were derived indirectly from the Title IV
Programs.

The Company derived approximately 87% and 91% of its net revenue from
tuition in fiscal 1998 and the three months ended November 30, 1998,
respectively. Tuition payments are made at the beginning of each term, and the
start date for each term varies by school and program. Payment of each term's
tuition may be made by cash or financial aid. If a student withdraws from
school prior to the completion of the term, the Company refunds a portion of
the tuition already paid, based upon the number of classes the student has
attended. For students receiving financial aid, the timing of the refunds for
withdrawal is based on federal, state and accrediting agency standards. The
scholarships that the Company grants to certain students are recorded as a
reduction of tuition revenue. Tuition revenue is recognized ratably over the
term of each program, while fees for the three to four day workshops held by
Ventura are recognized on the first day of the workshop. Revenue from sales of
related study materials is recognized on the date of shipment.

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

The Company also generates revenue from textbook sales and property rental.
In fiscal 1998 and the three months ended November 30, 1998, less than 13% and
9%, respectively, of the Company's net revenue was derived from these sources,
respectively.

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

General and administrative expenses include salaries and benefits of
personnel in accounting, human resources, corporate and school administration
functions and all corporate office expenses. Also included in general and
administrative expenses are depreciation expense associated with computer
laboratories, equipment, furniture and fixtures, and amortization expense
associated with intangible assets, consisting primarily of goodwill,
intellectual property and covenants not-to-compete with previous owners of the
schools or campuses.

The related party general and administrative expense is a management fee
paid to Management Corp. Dr. Markovitz is the sole shareholder and employee of
Management Corp. He did not receive any compensation for services rendered to
the Company, other than through the management fee. Through Management Corp.,
Dr. Markovitz has provided services characteristic of a principal executive
officer, including strategic direction and oversight for the Company, daily
management oversight, consultation on business acquisitions and other
corporate business matters. Upon completion of the Offering, the relationship
with Management Corp. will be terminated, and Dr. Markovitz will become an
employee of the Company. Dr. Markovitz will enter into an employment agreement
with the Company that provides for an initial annual base salary of $200,000
plus performance-based compensation, which is currently expected to be paid in
the form of stock options. Although this represents a significant change in
the way Dr. Markovitz is compensated for the services he provides to the
Company, the nature of the services provided by Dr. Markovitz will not change.
The Company does not anticipate that it will require additional services
(beyond those to be rendered by Dr. Markovitz under his employment agreement)
or incur additional costs (beyond the compensation payable to Dr. Markovitz
under his employment agreement) because of the termination of the relationship
with Management Corp.

Prior to fiscal 1995, the Company's fiscal year end was September 30. During
fiscal 1995, the Company changed its year end to August 31. Fiscal 1995
represents the Company's results of operations for the eleven months ended
August 31, 1995. All fiscal years subsequent to 1995 represent the twelve
months ended August 31 of the year indicated.

Recent Acquisitions

On August 26, 1997, the Company acquired Ventura for an aggregate purchase
price of $4.1 million, and, on February 3, 1998, the Company acquired MIM for
an aggregate purchase price of $2.4 million. Both acquisitions were accounted
for as purchases.

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

On November 30, 1998, the Company completed its acquisition of PrimeTech.
Dr. Markovitz initially acquired a one-third interest in PrimeTech in November
1995 and, together with the other owners, sold his interest to the Company on
November 30, 1998. Under the acquisition agreement, the Company was required
to pay the former owners a total of $500,000 (Canadian Dollars) upon closing
and is obligated to issue shares of the Company's common stock, the fair value
of which is equal to 102% of PrimeTech's net income, as defined in such
agreement, in each of PrimeTech's next three fiscal years. Dr. Markovitz
received a note from the Company for his pro rata share of the initial payment
$166,666 (Canadian Dollars); the other owners received cash. The acquisition
will be accounted for as a purchase. For the year ended November 30, 1998,
PrimeTech's net loss was approximately $310,000 (Canadian Dollars). The
purchase price was determined by arms-length negotiations between the other
owners on behalf of themselves and Dr. Markovitz, on the one hand, and
representatives of the Company (other than Dr. Markovitz), on the other hand.

Results of Operations

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

Three Months
Year Ended August Ended
31, November 30,
------------------- --------------
1996 1997 1998 1997 1998
----- ----- ----- ------ ------

Statement of Operations Data:
Net revenue............................... 100.0% 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Cost of education....................... 52.5 52.1 51.4 45.5 45.5
Selling expenses........................ 1.5 2.5 3.8 1.9 3.9
General and administrative expenses..... 29.0 26.5 31.0 24.1 26.6
Related party general and administrative
expense................................ 9.6 4.9 7.7 4.2 4.5
----- ----- ----- ------ ------
Total operating expenses.............. 92.6 86.0 93.9 75.7 80.5
----- ----- ----- ------ ------
Income from operations.................... 7.4 14.0 6.1 24.3 19.5
Interest/other income (expense), net...... 1.5 1.7 (0.9) (0.4) (0.4)
----- ----- ----- ------ ------
Income before provision for income taxes.. 8.9 15.7 5.2 23.9 19.1
Provision for income taxes................ 0.2 0.2 0.0 0.4 0.3
----- ----- ----- ------ ------
Net income................................ 8.7% 15.5% 5.2% 23.5% 18.8%
===== ===== ===== ====== ======

Three Months Ended November 30, 1998 Compared to Three Months Ended November
30, 1997

Net Revenue. Net revenue increased 28.9% from $7.2 million for the three
months ended November 30, 1997 to $9.3 million for the three months ended
November 30, 1998, due in part to additional net revenue of $1.2 million from
the acquisition of MIM. For schools owned by the Company during fiscal 1997,
the average number of students attending the schools increased 18.1%, and the
average tuition increased 5.1%.

Cost of Education. Cost of education increased 28.8% from $3.3 million for
the three months ended November 30, 1997 to $4.3 million for the three months
ended November 30, 1998, primarily due to additional teaching costs of $0.7
million incurred at MIM. Cost of education as a percentage of net revenue was
relatively constant.

Selling Expenses. Selling expenses increased 163.5% from $0.1 million for
the three months ended November 30, 1997 to $0.4 million for the three months
ended November 30, 1998 and, as a percentage of net revenue, increased from
1.9% to 3.9%, primarily due to the acquisition of MIM, which requires the use
of more costly advertising media than each of ASPP, U of S and Ventura. This
acquisition accounted for approximately 42.0% of the dollar amount of the
increase. In addition, the Company marketed new programs and increased
promotional expense in fiscal 1998.

General and Administrative Expenses. General and administrative expenses
increased 42.5% from $1.7 million for the three months ended November 30, 1997
to $2.5 million for the three months ended November 30, 1998 and, as a
percentage of net revenue, increased from 24.1% to 26.6%, primarily due to
additional costs associated with MIM, which accounted for approximately 36.5%
of the dollar amount of the increase. The Company also hired personnel at its
corporate office in fiscal 1998 to expand the depth of its management.

Related Party General and Administrative Expense. Related party general and
administrative expense increased 37.7% from $0.3 million for the three months
ended November 30, 1997 to $0.4 million for the three months ended November
30, 1998 and, as a percentage of net revenue, increased from 4.2% to 4.5%.

Interest/Other Income (Expense), Net. Interest/other income (expense), net
remained relatively constant and was immaterial for the three months ended
November 30, 1997 and the three months ended November 30, 1998.

Provision for Income Taxes. The provision for income taxes was immaterial
for both the three months ended November 30, 1997 and the three months ended
November 30, 1998.

Net Income. Net income increased 3.4% from $1.7 million for the three months
ended November 30, 1997 to $1.8 million for the three months ended November
30, 1998 due to the factors described above.

Year Ended August 31, 1998 Compared to Year Ended August 31, 1997

Net Revenue. Net revenue increased 43.5% from $20.5 million for fiscal 1997
to $29.4 million for fiscal 1998, primarily due to additional net revenue of
$6.3 million from the acquisitions of Ventura and MIM. For schools owned by
the Company during fiscal 1997, the total number of students attending the
schools increased 38.8%, and the average tuition increased 5.1% during 1998.

Cost of Education. Cost of education increased 41.4% from $10.7 million for
fiscal 1997 to $15.1 million for fiscal 1998, due to additional teaching costs
to meet the growth in the number of students attending the schools and the
development of new programs. Cost of education, as a percentage of net
revenue, decreased slightly from 52.1% in 1997 to 51.4% in 1998 due to the
acquisition of Ventura, whose programs have lower cost of education than the
Company's other programs. This benefit was partially offset by the acquisition
of MIM, which has higher costs of education as a percentage of net revenue.

Selling Expenses. Selling expenses increased 113.6% from $0.5 million for
fiscal 1997 to $1.1 million for fiscal 1998 and, as a percentage of net
revenue, increased from 2.5% to 3.8%, primarily due to the acquisitions of
each of Ventura and MIM, which require the use of more costly advertising
media than each of ASPP and U of S. Selling expenses of schools acquired
during 1998 accounted for approximately 70.1% of the dollar amount of the
increase. In addition, the Company marketed new programs and increased
promotion for ASPP'S Arizona, Minnesota and Virginia campuses in fiscal 1998.

General and Administrative Expenses. General and administrative expenses
increased 67.6% from $5.4 million for fiscal 1997 to $9.1 million for fiscal
1998 and, as a percentage of net revenue, increased from 26.5% to 31.0%,
primarily due to additional costs associated with Ventura and MIM, which
accounted for approximately 51.9% of the dollar amount of the increase. The
Company also hired personnel at its corporate office to expand the depth of
its management.

Related Party General and Administrative Expense. Related party general and
administrative expense increased 128.7% from $1.0 million for fiscal 1997 to
$2.3 million for fiscal 1998 and, as a percentage of net revenue, increased
from 4.9% to 7.7%.

Interest/Other Income (Expense), Net. Interest/other income (expense), net
decreased 174.9% from $0.3 million for fiscal 1997 to $(0.3) million for
fiscal 1998 and, as a percentage of net revenue, decreased from 1.7% to
(0.9)%. Interest income decreased from $0.5 million for fiscal 1997 to $0.4
million for fiscal 1998. Interest expense of $0.6 million as a result of
additional borrowings to finance the acquisitions of Ventura and MIM exceeded
interest income earned on the Company's investments during fiscal 1998.

Provision for Income Taxes. The provision for income taxes was immaterial
for both fiscal 1997 and fiscal 1998.

Net Income. Net income decreased 52.1% from $3.2 million for fiscal 1997 to
$1.5 million for fiscal 1998, due to the increase in related party general and
administrative expense and additional interest expense in fiscal 1998 related
to the Company's acquisitions.

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

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

Cost of Education. Cost of education increased 13.8% from $9.4 million in
fiscal 1996 to $10.7 million in fiscal 1997, due to additional teaching costs
to meet the growth in the number of students attending the schools and the
development of new academic programs. As a percentage of net revenue, cost of
education remained relatively constant.

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

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

Related Party General and Administrative Expense. Related party general and
administrative expense decreased 41.9% from $1.7 million in fiscal 1996 to
$1.0 million in fiscal 1997 and, as a percentage of net revenue, decreased
from 9.6% to 4.9%.

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

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

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

Seasonality; Variations in Quarterly Results of Operations

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

The following table sets forth unaudited quarterly financial data for the
fiscal years ended August 31, 1997 and 1998 and the three months ended
November 30, 1998 and, for the fiscal years, such data expressed as a
percentage of the Company's totals with respect to such information for the
applicable quarters. The Company believes that this information includes all
adjustments (consisting solely of normal recurring adjustments)

necessary for a fair presentation of such quarterly information when read in
conjunction with the consolidated financial statements included elsewhere
herein. The operating results for any quarter are not necessarily indicative
of the results for any future period.

Fiscal Year Ended Fiscal Year Ended
August 31, 1997 August 31, 1998 Three Months
------------------------------- -------------------------------- Ended
1st 3rd 4th 1st 3rd November 30,
Qtr 2nd Qtr Qtr Qtr Qtr 2nd Qtr Qtr 4th Qtr 1998
------ ------- ------ ------ ------ ------- ------ ------- ------------
(dollars in thousands)

Net revenue............. $5,466 $4,850 $6,198 $3,946 $7,247 $6,724 $8,771 $ 6,610 $9,341
% of fiscal year total.. 26.7% 23.7% 30.3% 19.3% 24.7% 22.9% 29.9% 22.5%
Income from operations.. $1,624 $ 579 $1,379 $ (724) $1,741 $ 585 $ 936 $(1,462) $1,818
% of fiscal year total.. 56.8% 20.3% 48.2% (25.3)% 96.7% 32.5% 52.0% (81.2)%

Liquidity and Capital Resources

Since its formation, the Company has financed its operating activities
primarily through cash generated from operations. Acquisitions have been
financed primarily through debt instruments. Net cash provided by operating
activities decreased from $1.9 million in the three months ended November 30,
1997 to $1.3 million in the three months ended November 30, 1998, due
primarily to changes in operating assets and liabilities. Net cash provided by
operating activities decreased to $2.6 million in fiscal 1998 from $3.9
million in fiscal 1997 and $2.7 million in fiscal 1996, due primarily to
changes in the level of net income.

Capital expenditures were $0.4 million, $0.3 million, $0.6 million and $0.2
million in fiscal 1996, 1997, 1998 and the three months ended November 30,
1998, respectively. Capital expenditures are expected to increase in the
future as student population increases and the Company continues to upgrade
and expand current facilities and equipment. The Company plans to invest
approximately $0.5 million in upgrading its computer systems during fiscal
1999. The Company has no other commitment for material capital expenditures.

Following the consummation of the Offering, the Company expects to enter
into the Credit Agreement with The Bank of America providing for revolving
credit borrowings of up to $20 million. Borrowings under the Credit Agreement
are expected to bear interest at a variable rate equal to (at the Company's
option) the principal lender's prime rate as in effect from time to time or
the London Inter-Bank Offered Rate plus, in each case, a margin of between 25
and 250 basis points, depending on the type of loan and the Company's ratio of
funded debt to EBITDA. In addition, the Credit Agreement is expected to
provide for an unused commitment fee of 37.5 basis points on commitments
available but unused under the Credit Agreement, as well as certain other
customary fees. The Credit Agreement is expected to provide for a blanket lien
on all material assets of the Company and a pledge of the capital stock of all
the Company's material subsidiaries, as well as upstream guarantees from all
such subsidiaries. It is anticipated that the Credit Agreement will restrict
the Company and its subsidiaries' ability to take certain actions, including
incurring additional indebtedness or altering the Company's current method of
doing business. The Credit Agreement is also expected to contain certain
financial covenants and ratios that may have the effect of restricting the
Company's ability to take certain actions in light of their impact on the
Company's financial condition or results of operations. The Credit Agreement
is expected to terminate approximately three years after the consummation of
the Offering, unless extended.

The Company's cash flow from operations on a long-term basis is dependent on
the receipt of funds from the Title IV Programs. For fiscal 1998, the
Company's U.S. institutions derived approximately 48% to approximately 77% of
their respective net revenue (on a cash basis) from the Title IV Programs. The
HEA and its implementing regulations establish specific standards of financial
responsibility that must be satisfied in order to qualify for participation in
the Title IV Programs.

The DOE requires that Title IV Program funds collected by an institution for
unbilled tuition be kept in separate cash or cash equivalent accounts until
the students are billed for the portion of their program related to these
Title IV Program funds. In addition, all funds transferred to the Company
through electronic funds transfer programs are held in a separate cash account
until certain conditions are satisfied. As of November 30, 1998, the Company
held an immaterial amount of funds in these separate accounts. The
restrictions on any cash held in these accounts have not significantly
affected the Company's ability to fund daily operations.

The Company intends to use approximately $5.0 million of the net proceeds
from the Offering to repay the Bank Notes, which were issued in connection
with the acquisition of Ventura, MIM, and for general corporate purposes, and
to use approximately $13.0 million to repay the Shareholder Loans. The Company
intends to use the remainder of the net proceeds for working capital and
general corporate purposes, including new academic program development at
existing campuses, the addition of new campuses and the possible acquisition
of additional businesses that are complementary to the business of the
Company. The Company has not determined the specific allocation of the
remainder of the net proceeds among the various uses described above, and,
accordingly, investors in the Offering must rely upon management's judgment
with respect to the use of such proceeds. See "Use of Proceeds."

Upon consummation of the Offering, the only indebtedness outstanding will be
indebtedness in the aggregate amount of $2.3 million secured by the real
estate that is owned by MCM Plaza and leased by U of S, which bears interest
at a rate of 9.0% and matures in 2007 and 2008, and certain indebtedness of
the Company to the sellers of MIM and Ventura, which aggregates $1.3 million,
bears interest at rates of 6.25% and 8.0% and matures in 2001 and 2002. This
indebtedness is expected to be permitted under the Credit Agreement.

Market Risk

The Company is exposed to the impact of interest rate changes, foreign
currency fluctuations and changes in the market value of its investments. It
does not enter into interest rate caps or collars or other hedging
instruments.

The Company's exposure to changes in interest rates is limited to borrowings
under line of credit agreements and bank note payables which have variable
interest rates tied to the prime rate. The weighted average annual interest
rate of these credit agreements and bank note payables was 8.0% at both August
31, 1998 and November 30, 1998. In addition, the Company has debt with fixed
annual rates of interest ranging from 6.25% to 9.0% totaling $3.4 million at
November 30, 1998. The Company estimates that the fair value of each of its
debt instruments approximated its market value at November 30, 1998.

The Company is subject to fluctuations in the value of the Canadian dollar
vis-a-vis the U.S. dollar. Its investment in its Canadian operations is not
significant and the fair value of the assets and liabilities of these
operations at November 30, 1998 approximated their fair value.

From time to time, the Company invests excess cash in marketable securities.
These investments principally consist of U.S. Treasury notes, corporate bonds,
short term commercial paper and money market accounts, the fair value of which
approximated current market rates at November 30, 1998.

Year 2000 Problem

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

The Company is in the process of installing a new management information
system in its corporate headquarters and expects such installation to be
complete by June 1999. In addition, the Company's schools each have stand-
alone computer systems and networks for internal use and for communication
with its students and with corporate headquarters. There can be no assurance
that the installation of the Company's new system will proceed smoothly or
that additional management time or expense will not be required to
successfully complete such installation. Although the Company expects that its
new computer system will be free of the Year 2000 Problem and, based upon its
review of its other internal computer systems, expects such other systems will
be free of the Year 2000 Problem, there can be no assurance that this new
computer system will not be affected by the Year 2000 Problem, that the
Company's existing systems will not be affected by the Year 2000 Problem, or
that a failure of any other parties, such as the DOE or other government
agencies on which the Company depends for student financial assistance or the
financial institutions involved in the processing of student loans, to address
the Year 2000 Problem will not have a material adverse effect on the Company's
business, results of operations or financial condition. In particular, there
can be no assurance that malfunctions relating to the Year 2000 Problem will
not result in the misreporting of financial information by the Company. The
Company has made inquiries of substantially all of its material vendors
regarding the Year 2000 Problem, and has not detected any significant issues
relating to the Year 2000 Problem. However, the Company has not made a formal
assessment of the computer programs used by the DOE or other government
agencies or other third parties with which the company interacts, or an
assessment of its own vulnerability to the failure of such programs to be free
of the Year 2000 Problem. The Company does not have any formal contingency
plans relating to the Year 2000 Problem.

The Company believes that most reasonably likely worst case scenario for the
Company regarding the Year 2000 Problem is a failure of the DOE to adequately
ensure payment of financial aid amounts. The 1998 Amendments require the DOE
to take steps to ensure that the processing, delivery and administration of
grant, loan and work assistance provided under the Title IV Programs are not
interrupted because of the Year 2000 Problem. This legislation also authorizes
the DOE to postpone certain HEA requirements to avoid overburdening
institutions and disrupting the delivery of student financial assistance as a
consequence of this problem. There can be no assurance, however, that
assistance will not be interrupted or that any DOE requirements would be
postponed so that there would be no material adverse effect on the Company's
schools. See "Risk Factors--Year 2000 Problem; New Company Computer System."

Inflation

The Company has historically implemented tuition increases each year at or
above the rate of inflation. Average tuition increases at the Company's
schools for fiscal 1996, 1997 and 1998 were 5.0%, 5.1% and 5.1%, respectively.

Recent Accounting Pronouncements

Recent pronouncements of the Financial Accounting Standards Board include
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivatives Instruments and for Hedging Activities," SFAS No. 132, "Employers'
Disclosures about Pension and Other Post Retirement Benefits," SFAS No. 131,
"Disclosure about Segments of an Enterprise and Related Information," SFAS No.
130, "Reporting Comprehensive Income," SFAS No. 129, "Disclosure of
Information about Capital Structure," and SFAS No. 128, "Earnings Per Share."
SFAS Nos. 129 and 128 specify guidelines as to the method of computation of,
as well as presentation and disclosure requirements for, earnings per share.
The Company adopted SFAS No. 128 and SFAS No. 130 for all periods presented in
this Registration Statement. The other statements discussed above are
effective for fiscal years beginning after December 15, 1997 and earlier
application is not permitted. The adoption of these statements is not expected
to have a material effect on the Company's consolidated financial position or
results of operations. The impact of these pronouncements on the disclosures
in the financial statements has not been determined.

BUSINESS

General

The Company is the nation's largest for profit provider of doctoral level
programs. The Company's mission is to provide academically-oriented,
practitioner-focused education in fields with numerous employment
opportunities and strong student demand. In addition to doctoral and masters
degrees in psychology, education and business, the Company also awards
bachelor's degrees in business, associate degrees in allied health professions
and diplomas in information technology. At November 30, 1998, approximately
63% of the Company's students were enrolled in doctoral programs. In 1997, the
Company graduated approximately 335 clinical psychology doctoral students out
of approximately 4,000 clinical psychology doctoral degrees conferred
nationwide. The Company operates 14 campuses in eight states and the Province
of Ontario, Canada, and had a total of approximately 4,500 students,
representing 48 states and 30 foreign countries, enrolled as of November 30,
1998.

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

The Company operates the following schools:

. American Schools of Professional Psychology grants doctoral and master's
degrees in clinical psychology and related disciplines at nine campuses
located in Illinois (2), Minnesota, Georgia, Virginia, Hawaii, Arizona,
Florida and California. ASPP is accredited by NCA, and four of its
campuses are accredited by the APA.

. Medical Institute of Minnesota grants associate degrees at one campus in
Minneapolis, Minnesota. MIM is institutionally accredited by ABHES, and
additionally holds individual programmatic accreditation appropriate to
each degree program offered.

. PrimeTech Institute awards diplomas at two campuses in Ontario, Canada,
and is preparing to operate a campus in Scarborough, Ontario, pending
regulatory approval.

In addition, Ventura publishes materials and holds workshops in select
cities across the United States to prepare individuals to take various
national and state administered oral and written health care licensure
examinations in psychology and other mental health disciplines.

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

Year
School and Campus Locations Opened Date Acquired Accreditation
- ---------------------------------------------- ------ -------------- -------------

American Schools of Professional Psychology NCA
Illinois School of
Professional
Psychology/Chicago..... Chicago, IL 1976 -- APA
Illinois School of
Professional
Psychology/Meadows..... Rolling Meadows, IL 1979 March 1994
Minnesota School of
Professional
Psychology............. Minneapolis, MN 1987 -- APA
Georgia School of
Professional
Psychology............. Atlanta, GA 1990 -- APA
American School of
Professional
Psychology/Virginia.... Arlington, VA 1994 --
American School of
Professional
Psychology/Hawaii...... Honolulu, HI 1979 March 1994 APA
Arizona School of
Professional
Psychology............. Phoenix, AZ 1997 --
Florida School of
Professional
Psychology (1)......... Tampa, FL 1995 September 1998
American School of
Professional
Psychology/Rosebridge.. Corte Madera, CA 1998 September 1998
University of Sarasota SACS
University of
Sarasota/Honore........ Sarasota, FL 1969 March 1992
University of
Sarasota/Tampa......... Tampa, FL 1997 --
University of
Sarasota/California
(2).................... Orange, CA
Medical Institute of
Minnesota.............. Minneapolis, MN 1961 February 1998 ABHES
PrimeTech Institute
PrimeTech
Institute/North York... North York, Ontario 1989 November 1998
PrimeTech Institute/City
Campus................. Toronto, Ontario 1995 November 1998
PrimeTech
Institute/Scarborough
(2).................... Scarborough, Ontario

- --------

(1) Historically operated as a unit of the University of Sarasota.

(2) These campuses will be established if and when all required regulatory
approvals have been obtained. The Company has applications pending for all
such approvals.

Industry Overview

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

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

NCES estimates that, over the next several years, initial enrollments in
postsecondary education institutions by working adults will increase more
rapidly than initial enrollments of recent high school graduates.

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

Business Strategy

Focusing on Advanced Degrees. Approximately 63% of the Company's students
are enrolled in doctoral programs, with an additional 18% pursuing master's
degrees and the remainder pursuing bachelor's or associate degrees or
diplomas. Management believes that the Company's emphasis on advanced degree
programs provides greater predictability of tuition revenue and reduces
recruitment cost per enrolled student, as compared to lower level degree
programs, due to a number of factors, including the longer term of most
advanced degree programs, the higher student retention rates experienced in
more advanced degree programs and the narrower target markets for advanced
degree programs. Consistent with this philosophy, the Company plans to expand
some of its associate degree programs, such as those offered by MIM, to
bachelor's degree programs. By offering more advanced degree programs, the
Company can also take advantage of the tendency of many graduates of master's,
bachelor's and associate degree programs to continue their education at the
same institution if appropriate advanced degree programs are offered.

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

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

and class scheduling and other program administrative improvements which can
improve the students' educational experience.

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

Growth Strategy

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

Adding New Campuses. The Company seeks to expand its presence into new
geographic locations. Six of the Company's 14 campuses were developed by the
Company internally. The Company regularly evaluates new locations for
developing additional campuses and believes that significant opportunities
exist for doing so. For example, of the 21 metropolitan areas in the United
States with a population in excess of two million persons, nine do not have a
graduate school of professional psychology that awards the PsyD degree. The
Company also believes there is demand in Southern California for the type of
programs offered by U of S and has received approval from SACS to open a
branch campus of U of S in Southern California. The Company intends to proceed
with the development of this branch campus as soon as it receives approval
from the State of California. The Company has also recently been granted a
license to open a new PrimeTech campus in Scarborough, Ontario.

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

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

Acquisitions. Based on recent experience and internal research, the Company
believes that, in both the for-profit and not-for-profit postgraduate
education industry, most schools are small, stand-alone entities without the
benefits of centralized professional management, scale economies in purchasing
and advertising or the financial strength of a well-capitalized parent
company. The Company intends to capitalize on this fragmentation by acquiring
and consolidating attractive schools and educational programs. The Company has
acquired eight of its 14 campuses, four of which were for-profit and four of
which were originally not-for-profit, and the Ventura test preparation
business. The Company believes there are significant opportunities to acquire
schools which can serve as platforms for program and campus expansion. Prime
acquisition candidates are those that have the potential to be quickly
developed into profitable, accredited degree-granting schools offering
programs consistent with the Company's mission.

Programs of Study

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

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

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

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

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

on innovative solutions to health care delivery problems by drawing on both
business and interpersonal behavior theory.

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

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

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

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

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

PrimeTech. PrimeTech offers diploma programs in network engineering,
internet engineering, software programming and paralegal studies. The programs
typically consist of 12-18 months of full-time course work, which can be taken
on a part-time basis and which is completed on-site.

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

Student Body

Recruitment

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

The general reputation of the Company's schools and referrals from current
students, alumni and employers are the largest sources of new students. The
Company believes that over 60% of ASPP's students for the 1997 fiscal year
were enrolled through referrals from current and former students as well as
employees and others who have worked with ASPP's graduates. The Company also
employs marketing tools such as its web sites and creates publications and
other promotional materials for the Company's schools, participates in school
fairs and uses other traditional recruitment techniques common to
undergraduate and postgraduate institutions. The goal of the Company's
recruitment efforts is to increase awareness of the Company's schools among
potential applicants in a cost-effective and dignified manner.

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

The following table sets forth certain statistics regarding the student body
at each of the Company's schools for the 1998-99 academic year:

Number of Average
School Students Age % Postgraduate
- ----------------------------------------------- --------- ------- --------------

American Schools of Professional Psychology.... 2,043 33 100%
University of Sarasota......................... 1,649 41 98%
Medical Institute of Minnesota................. 567 27 0%
PrimeTech Institute............................ 283 30 0%

Admission

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

Retention

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

withdrawals, the Company counsels students early in the application process to
gauge their commitment to completing their chosen course of study.

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

Tuition and Fees

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

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

Average Total Length of
School Tuition Program
- ------------------------------------------------------- ------------- ---------

American Schools of Professional Psychology
PsyD................................................. $ 52,440 4 years
MA (Clinical)........................................ 24,908 2 years
MA (Counseling)...................................... 19,008 2 years
MSHSA................................................ 22,500 2 years
University of Sarasota
DBA, EdD............................................. $ 21,180 3 years
MEd.................................................. 15,650 2 years
EdS.................................................. 10,590 2 years
MBA.................................................. 9,640 2 years
MA................................................... 16,600 2 years
BSBA................................................. 14,250 2 years
Medical Institute of Minnesota
Veterinary Technician, Radiologic Technologist,
Medical Lab Technician, Diagnostic Medical
Sonographer......................................... $ 18,900 18 months
Histotechnician, Medical Assistant................... 16,250 18 months
PrimeTech Institute
Software Programming Engineer........................ $ 14,500 18 months
Software Programmer.................................. 11,600 13 months
PC/LAN............................................... 7,000 12 months
Internet Service/Support Engineer.................... 6,150 12 months
Legal Secretary...................................... 6,000 12 months
LAN Professional, Paralegal.......................... 5,500 12 months
Microcomputer Business Application Administration.... 4,500 12 months
Desktop Publishing Specialist........................ 4,000 12 months
Accounting Assistant................................. 3,700 12 months

Graduate Employment

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

Faculty

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

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

Full-Time Adjunct
School Faculty Faculty(1) Highest Degree of Full-Time Faculty
- ------------------------ --------- ---------- --------------------------------------------

American Schools of
Professional
Psychology............. 85 166 100% Doctoral (PhD or PsyD)
University of Sarasota.. 32 11 95% Doctoral, 5% Master's
Medical Institute of 23 26 9% Doctoral, 13% Master's, 43% Bachelor's,
Minnesota.............. 9% Associate, 26% Certificate
PrimeTech Institute..... 15 2 12% Doctoral, 38% Master's, 50% Bachelor's

- --------

(1) Represents faculty members teaching at least one class during the 1998-99
academic year.

Governance of the Company's Schools

Each ASPP campus is managed locally by a Dean who reports to the Provost of
ASPP (John E. Sites). U of S is headed by a Provost who reports to the Board of
U of S. Both PrimeTech and MIM are headed by Unit Presidents (George Schwartz
and Philip Miller, respectively) each of whom reports to his respective board
of directors. Each of these Provosts and Unit Presidents also consult with the
President of the Company (Harold J. O'Donnell). Scott Abels, General Manager of
Ventura, reports to the President of the Company.

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

Competition

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

Employees

As of November 30, 1998, the Company employed 348 persons. Of this number,
32 were employed in the Company's corporate headquarters, 155 were full-time
or permanent part-time faculty members and 161 were working as administrative
or support staff deployed at the various Company locations. None of the
Company's employees are unionized. The Company believes its relations with its
employees are generally good.

Facilities

The following table sets forth certain information as of November 30, 1998
with respect to the principal properties leased by the Company and its
subsidiaries. The Company believes that its facilities are in substantial
compliance with applicable environmental laws and with the Americans With
Disabilities Act. All of the Company's facilities are leased except the
University of Sarasota's Honore campus, which is owned by the Company. See
"Management--Compensation Committee Interlocks and Insider Participation."

Campus Square Footage
- ----------------------------------------------------------------- --------------

American Schools of Professional Psychology
Illinois School of Professional Psychology/Chicago............... 37,831
Illinois School of Professional Psychology/Meadows............... 10,469
Minnesota School of Professional Psychology...................... 9,457
Georgia School of Professional Psychology........................ 9,725
American School of Professional Psychology/Virginia.............. 7,976
American School of Professional Psychology/Hawaii................ 6,596
Arizona School of Professional Psychology........................ 8,673
Florida School of Professional Psychology........................ 5,410
American School of Professional Psychology/Rosebridge............ 4,184
University of Sarasota
University of Sarasota/Honore Campus............................. 18,940
University of Sarasota/Tampa Campus.............................. 5,410
Medical Institute of Minnesota................................... 62,300
PrimeTech Institute
PrimeTech Institute/North York................................... 9,199
PrimeTech Institute/City Campus.................................. 8,681
Ventura.......................................................... 15,540

Legal Proceedings

The Company, Dr. Markovitz and certain other companies in which Dr.
Markovitz has an interest have been named as defendants in Charlena Griffith,
et al. v. University Hospital, L.L.C. et al., a class action lawsuit filed in
November 1997 and currently pending in the United States District Court for
the Northern District of Illinois, Eastern Division. No specific amount of
damages is sought by the plaintiffs. This lawsuit arose in connection with the
closing of a for-profit psychiatric hospital located in Chicago, which was
established in 1989 by Dr. Markovitz and operated under the name University
Hospital ("University Hospital"). University Hospital was substantially
dependent on Medicare reimbursement for its revenues. In May 1997, after
continued Medicare reimbursement to University Hospital was effectively
terminated, University Hospital ceased operations and made an assignment for
the benefit of its creditors, which is ongoing. The Company owned a 95% equity
interest in University Hospital at the time of the assignment for the benefit
of its creditors.

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

The Company, Dr. Markovitz and the other defendants in this lawsuit deny all
claims asserted and are vigorously defending themselves. The cost of defense
has not been borne by the Company. Dr. Markovitz has entered into an
indemnification agreement with the Company providing that the cost of the
defense and any settlement amounts or damage awards will be paid by Dr.
Markovitz. The Company believes that the potential loss, as it relates to this
matter, is not probable and that an estimate of the potential settlement
amounts or damage awards cannot be made at this time. However, the Company
does not expect the ultimate outcome of this matter to have a material adverse
effect on its results of operations or financial condition.

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

FINANCIAL AID AND REGULATION

Accreditation

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

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

All of the Company's U.S. campuses are accredited by an accrediting agency
recognized by the DOE. These accrediting agencies are the North Central
Association of Colleges and Schools ("NCA"), the Southern Association of
Colleges and Schools ("SACS"), the Accrediting Bureau of Health Education
Schools/Programs ("ABHES") and the American Psychological Association ("APA").
NCA, SACS and ABHES are institutional accrediting bodies which accredit the
entire institution. The APA is a programmatic accrediting body which does not
accredit the entire institution, but only specific programs offered by the
institution. ASPP is institutionally accredited by NCA to offer both doctoral
and master's degrees at its campuses in Illinois, Minnesota, Georgia,
Virginia, Hawaii and Arizona. ASPP's Chicago, Minneapolis, Atlanta and Hawaii
campuses also have programmatic accreditation by the APA. U of S is
institutionally accredited by SACS to award doctoral, master's and bachelor's
degrees in business, doctoral and master's degrees in education and doctoral
and master's degrees in psychology. MIM is approved by the State of Minnesota
to award associate degrees in a variety of allied health fields, is
institutionally accredited by ABHES, a nationally recognized accreditor of
allied health care institutions, and additionally holds individual
programmatic accreditation appropriate to each degree program offered. The
Company is seeking APA accreditation for programs at its Florida and Virginia
campuses. Although accreditation is not currently required, failure to obtain
such accreditation could adversely affect state authorization of these
campuses in future periods or the ability of graduates of these campuses to
obtain state licenses to practice. PrimeTech is approved as a private
vocational school in the Province of Ontario, Canada, to award diplomas upon
successful completion of the following main programs: network engineering,
internet engineering, software programming and paralegal studies.

Each of the institutional accrediting agencies that accredits the Company's
campuses has standards pertaining to areas such as curricula, institutional
objectives, long-range planning, faculty, administration, admissions, record-
keeping, library resources, facilities, finances and student refunds, among
others. Certain institutional substantive changes, including changes of
ownership and the addition of new facilities and programs may require review
and approval from accrediting agencies. Institutions which apply for
accreditation typically receive a visiting team which reviews the
institution's compliance with these standards. Based on the team's report and
the institution's response, the accrediting agency grants or denies
accreditation. The accrediting agencies which accredit the institution's
campuses assess annual fees and require that institutions pay for the costs
associated with team visits and other substantive reviews of the institution
resulting from changes to the institution or its curricula. The Company
believes that it incurred costs of approximately $20,000 in fiscal 1998
directly related to accreditation.

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

Student Financial Assistance

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

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

Nature of Federal Support for Postsecondary Education in the United States

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

On October 1, 1998, legislation was enacted which reauthorized the student
financial assistance programs of the HEA. The 1998 Amendments continue many of
the current requirements for student and institutional participation in the
Title IV Programs. The 1998 Amendments also change or modify some
requirements. These

changes and modifications include increasing the revenues that an institution
may derive from Title IV funds from 85% to 90% and revising the requirements
pertaining to the manner in which institutions must calculate refunds to
students. The 1998 Amendments also prohibit institutions that are ineligible
for participation in Title IV loan programs due to student default rates in
excess of applicable thresholds from participating in the Pell Grant program.
Other changes expand participating institutions' ability to appeal loss of
eligibility owing to such default rates. The 1998 Amendments permit an
institution to avoid the interruption of eligibility for the Title IV Programs
upon a change of ownership which results in a change of control by submitting
a materially complete application for recertification of eligibility within 10
business days of such a change of ownership. Regulations to implement the 1998
Amendments are subject to negotiated rulemaking and will not likely become
effective until July 1, 2000. The Company does not believe that the 1998
Amendments will adversely or materially affect its business operations. None
of the Company's institutions derives more than 80% of its revenue from Title
IV funds and no institution has student loan default rates in excess of
current thresholds. The Company also believes that its current refund policy
satisfies the new refund requirements. See "Risk Factors--Risk That
Legislative Action Will Reduce Financial Aid Funding or Increase Regulatory
Burden."

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

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

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

FSEOG. FSEOG awards are designed to supplement Pell grants for the neediest
students. FSEOG grants generally range in amount from $100 to $4,000 per year;
however, the availability of FSEOG awards is limited by the amount of funds
allocated to an institution under a formula that takes into account the size
of the institution, its costs and the income levels of its students. The
Company is required to make a 25% matching contribution for all FSEOG program
funds disbursed. Resources for this institutional contribution may include
institutional grants, scholarships and other eligible funds (i.e., funds from
foundations and other charitable organizations) and, in certain states,
portions of state scholarships and grants. At this time, only MIM participates
in the FSEOG program.

FFEL. The FFEL program consists of two types of loans, Stafford loans, which
are made available to students, and PLUS loans, which are made available to
parents of students classified as dependents. Under the Stafford loan program,
a student may borrow up to $2,625 for the first academic year, $3,500 for the
second academic year and, in some educational programs, $5,500 for each of the
third and fourth academic years. Graduate and professional students may borrow
up to $8,500 per academic year. Students with financial need qualify for
interest subsidies while in school and during grace periods. Students who are
classified as independent can increase their borrowing limits and receive
additional unsubsidized Stafford loans. Such students can obtain an additional
$4,000 for each of the first and second academic years and, depending upon the
educational program, an additional $5,000 for each of the third and fourth
academic years. Graduate and professional students may borrow up to an
additional $10,000 per academic year. The obligation to begin repaying
Stafford loans does not commence until six months after a student ceases to be
enrolled on at least a half-time basis. Amounts received by students in the
Company's institutions under the Stafford program in fiscal 1998 equaled
approximately 46% of the Company's net tuition revenue (on a cash basis). PLUS
loans may be obtained by the parents of a dependent student in an amount not
to exceed the difference between the total cost of that student's education
(including allowable expenses) and other aid to which that student is
entitled. At this time, none of the Company's institutions participates in the
PLUS program.

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

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

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

Federal Oversight of the Title IV Programs

The substantial amount of federal funds disbursed through the Title IV
Programs coupled with the large numbers of students and institutions
participating in those programs have led to instances of fraud, waste and
abuse. As a result, the United States Congress has required the DOE to
increase its level of regulatory oversight of institutions to ensure that
public funds are properly used. Each institution which participates in the
Title IV Programs must annually submit to the DOE an audit by an independent
accounting firm of that institution's compliance with Title IV Program
requirements, as well as audited financial statements. The DOE also conducts
compliance reviews, which include on-site evaluations of several hundred
institutions each year, and directs student loan guaranty agencies to conduct
additional reviews relating to the FFEL programs. In addition, the Office of
the Inspector General of the DOE conducts audits and investigations of
institutions in certain circumstances. Under the HEA, accrediting agencies and
state licensing agencies also have responsibilities for overseeing
institutions' compliance with Title IV Program requirements. As a result, each
participating institution, including each of the Company's institutions, is
subject to frequent and detailed oversight and must comply with a complex
framework of laws and regulations or risk being required to repay funds or
becoming ineligible to participate in the Title IV Programs. In addition,
because the DOE periodically revises its regulations (e.g., in November 1997,
the DOE published new regulations with respect to financial responsibility
standards which took effect July 1, 1998) and changes its interpretation of
existing laws and regulations, there can be no assurance that the DOE will
agree with the Company's understanding of each Title IV Program requirement.
See "--Financial Responsibility Standards."

Largely as a result of this increased oversight, the DOE has reported that
1,500 institutions have either ceased to be eligible for or have voluntarily
relinquished their participation in some or all of the Title IV Programs since
October 1, 1992. This has reduced competition among institutions with respect
to certain markets and educational programs.

Cohort Default Rates. A significant component of the Congressional
initiative aimed at reducing fraud, waste and abuse was the imposition of
limitations on participation in the Title IV Programs by institutions whose
former students defaulted on the repayment of federally guaranteed or funded
student loans at an "excessive" rate. Since the DOE began to impose sanctions
on institutions with cohort default rates above certain levels, the DOE has
reported that over 1,000 institutions have lost their eligibility to
participate in some or all of the Title IV Programs. However, many
institutions, including all of the Company's institutions, have responded by
implementing aggressive student loan default management programs aimed at
reducing the likelihood of students failing to repay their loans in a timely
manner. An institution's cohort default rates under the FFEL programs are
calculated on an annual basis as the rate at which student borrowers scheduled
to begin repayment on their loans in one federal fiscal year default on those
loans by the end of the next federal fiscal year. Any institution whose cohort
default rate equals or exceeds 25% for any one of the three most recent
federal fiscal years may be found by the DOE to lack administrative capability
and, on that basis, placed on provisional certification status for up to three
years. Provisional certification status does not limit an institution's access
to Title IV Program funds but does subject that institution to closer review
by the DOE and possible summary adverse action if that institution commits
violations of Title IV Program requirements. Any institution whose cohort
default rates equal or exceed 25% for three consecutive years will no longer
be eligible to participate in the FFEL programs for the remainder of the
federal fiscal year in which the DOE determines that such institution has lost
its eligibility and for the two subsequent federal fiscal years. In addition,
an institution whose cohort default rate for any federal fiscal year exceeds
40% may have its eligibility to participate in all of the Title IV Programs
limited, suspended or terminated. Since the calculation of cohort default
rates involves the collection of data from many non-governmental agencies
(i.e., lenders, private guarantors or services), as well as the DOE, the HEA
provides a formal process for the review and appeal of the accuracy of cohort
default rates before the DOE takes any action against an institution based on
such rates. In addition to the foregoing, if an institution's cohort default
rate for loans under the Perkins program exceeds 15% for any federal award
year (i.e., July 1 through June 30), that institution may be placed on
provisional certification status for up to three years. Furthermore, as a
result of the 1998 Amendments to the HEA, institutions that are ineligible to
participate in the Title IV loan program due to student loan default rates
will also become ineligible to participate in the Pell Grant Program.

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

Increased Regulatory Scrutiny. The HEA provides for a three-part initiative,
referred to as the Program Integrity Triad, intended to increase regulatory
scrutiny of postsecondary education institutions. One part of the Program
Integrity Triad expands the role of accrediting agencies in the oversight of
institutions participating in the Title IV Programs. As a result, the
accrediting agencies which review and accredit the Company's campuses have
increased the breadth of such reviews and have expanded their examinations in
such areas as financial responsibility and timeliness of student refunds. The
Program Integrity Triad provisions also require each accrediting agency
recognized by the DOE to undergo comprehensive periodic reviews by the DOE to
ascertain whether such accrediting agency is adhering to required standards.
Each accrediting agency that reviews any of the Company's campuses has been
reviewed by the DOE under these provisions and has been approved for
recognition by the DOE. These accrediting agencies are NCA, SACS and ABHES.
NCA, SACS and ABHES are institutional accreditors which review the entire
institution. The Company relies upon NCA, SACS and ABHES accreditation to
establish eligibility to participate in the Title IV programs. Three ASPP
campuses have programmatic accreditation from the APA, which also is
recognized by the DOE. The Company, however, does not rely upon APA
accreditation to establish Title IV program eligibility.

A second part of the Program Integrity Triad tightens the standards to be
applied by the DOE in evaluating the financial responsibility and
administrative capability of institutions participating in the Title IV
Programs. In addition, the Program Integrity Triad mandates that the DOE
periodically review the eligibility and certification

to participate in the Title IV Programs of every such eligible institution. By
law, all institutions were required to undergo such a recertification review
by the DOE by 1997 and are required to undergo such a recertification review
every six years thereafter. Under these standards, each of the Company's
institutions will be evaluated by the DOE more frequently than in the past. A
denial of recertification would preclude an institution from continuing to
participate in the Title IV Programs.

A third part of the Program Integrity Triad required each state to establish
a State Postsecondary Review Entity ("SPRE") to review certain institutions
within that state to determine their eligibility to continue participating in
the Title IV Programs. The United States Congress has declined to provide
funding for the SPREs, and Congress has repealed the SPRE program.
Nevertheless, state requirements are important to an institution's eligibility
to participate in the Title IV Programs because an institution and its
programs must be licensed or otherwise authorized to operate in the state in
which it offers education or training in order to be certified as eligible.
See "State Authorization."

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

An institution that is determined by the DOE not to meet any one of the
standards of financial responsibility is nonetheless entitled to participate
in the Title IV Programs if it can demonstrate to the DOE that it is
financially responsible on an alternative basis. An institution may do so by
posting surety either in an amount equal to 50% (or greater, as the DOE may
require) of total Title IV Program funds received by students enrolled at such
institution during the prior year or in an amount equal to 10% (or greater, as
the DOE may require) of such prior year's funds if the institution also agrees
to provisional certification and to transfer to the reimbursement or cash
monitoring system of payment for its Title IV Program funds. The DOE has
interpreted this surety condition to require the posting of an irrevocable
letter of credit in favor of the DOE. Alternatively, an institution may
demonstrate, with the support of a statement from a certified public
accountant and other information specified in the regulations, that it was
previously in compliance with the numeric standards and that its continued
operation is not jeopardized by its financial condition. Under a separate
standard of financial responsibility, if an institution has made late Title IV
Program refunds to students in its prior two years, the institution is
required to post a letter of credit in favor of the DOE in an amount equal to
25% of total Title IV Program refunds paid by the institution in its prior
fiscal year.

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

The Company has applied these new regulations to its financial statements as
of August 31, 1998, the end of the Company's most recently completed fiscal
year, and has determined that the Company and each of its institutions
satisfied the new standards as of that date. The composite score and the
individual score for each of the three ratios, for the Company and each of its
institutions is set forth below:

Primary Net
Composite Reserve Equity Income
Score Ratio Ratio Ratio
--------- ------- ------ ------

The Company............................... 1.52 .42 .28 .82
Institutions:
ASPP.................................... 2.13 .75 .75 .63
U of S.................................. 1.50 .31 .29 .90
MIA..................................... 1.97 .90 .92 .15

The Company has also applied these new regulations to its financial
statements as of November 30, 1998 and determined that the Company and each of
its institutions satisfied the new standards.

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

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

Generally, if an institution eligible to participate in the Title IV
Programs adds an educational program after it has been designated as an
eligible institution, the institution must apply to the DOE to have the
additional program designated as eligible. However, an institution is not
obligated to obtain DOE approval of an additional program that leads to a
professional, graduate, bachelor's or associate degree or which prepares
students for gainful employment in the same or related recognized occupation
as an educational program that has previously been designated as an eligible
program at that institution and meets certain minimum length requirements.
Furthermore, short-term educational programs, which generally consist of those
programs that provide at least

300 but less than 600 clock hours of instruction, are eligible only for FFEL
funding and only if they have been offered for a year and the institution can
demonstrate, based on an attestation by its independent auditor, that 70% of
all students who enroll in such programs complete them within a prescribed
time and 70% of those students who graduate from such programs obtain
employment in the recognized occupation for which they were trained within a
prescribed time. In the event that an institution erroneously determines that
an educational program is eligible for purposes of the Title IV Programs
without the DOE's express approval, the institution would likely be liable for
repayment of Title IV Program funds provided to students in that educational
program. The Company does not believe that the DOE's regulations will create
significant obstacles to its plans to add new programs because any new
programs offered by its campuses will lead to professional, graduate,
bachelor's or associate degrees or prepare students for gainful employment in
the same or related recognized occupation as education programs which were
previously offered by the Company's campuses.

Certain of the state authorizing agencies, OSAP, and accrediting agencies
with jurisdiction over the Company's campuses also have requirements that may,
in certain instances, limit the ability of the Company to open a new campus,
acquire an existing campus, establish an additional location of an existing
institution or begin offering a new educational program. The Company does not
believe that such standards will have a material adverse effect on the Company
or its expansion plans, because the standards for approval of new programs or
expanding institutions are generally no more stringent than the standards
applied by the states, OSAP and accrediting agencies in originally granting
accreditation and licensure to the campuses. Compliance with state and OSAP
standards generally requires notification of the proposed change and, in some
states, approval by the accrediting agency. Based on its current practice of
meeting or exceeding both state and accrediting agency standards, the Company
believes that it will be able to obtain any accreditation or state approvals
to initiate new programs or expand its campuses. If the Company were unable to
meet those standards, its ability to add programs or expand its campuses would
be materially adversely affected.

The "85/15 Rule." Under a provision of the HEA commonly referred to as the
"85/15 Rule," a proprietary institution, such as each of the Company's U.S.
institutions, would cease being eligible to participate in the Title IV
Programs if, on a cash accounting basis, more than 85% of its net revenues for
the prior fiscal year was derived from the Title IV Programs. As discussed
above, Congress recently amended the 85/15 Rule to a 90/10 Rule in the 1998
Amendments to the HEA. Any institution that violates this rule immediately
becomes ineligible to participate in the Title IV Programs and is unable to
apply to regain its eligibility until the following fiscal year. The Company
has calculated that, since this requirement took effect in 1995, none of the
Company's U.S. institutions derived more than 80% of its net revenue (on a
cash basis) from the Title IV Programs for any award year, and that for fiscal
1998 the range for the Company's U.S. institutions was from approximately 48%
to approximately 77%. For 1997, the independent auditors of the Company or the
institution, if applicable, examined management's assertion that each of the
Company's U.S. institutions complied with these requirements and opined that
such assertion was fairly stated in all material respects. The Company
regularly monitors compliance with this requirement in order to minimize the
risk that any of its U.S. institutions would derive more than the maximum
percentage of its revenue from the Title IV Programs for any fiscal year. If
an institution appears likely to approach the maximum percentage threshold,
the Company would evaluate the appropriateness of making changes in student
funding and financing to ensure compliance with the Rule.

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

State Authorization

Each of the Company's campuses is authorized to offer educational programs
and grant degrees or diplomas by the state in which such campus is located.
The level of regulatory oversight varies substantially from state to state. In
some states, the campuses are subject to licensure by the state education
agency and also by a separate higher education agency. State laws establish
standards for instruction, qualifications of faculty, location and

nature of facilities, financial policies and responsibility and other
operational matters. State laws and regulations may limit the ability of the
Company to obtain authorization to operate in certain states, to award degrees
or diplomas or offer new degree programs. Certain states prescribe standards
of financial responsibility that are different from those prescribed by the
DOE. The Company believes that each of its campuses is in substantial
compliance with state authorizing and licensure laws. Program approval for the
Company's doctor of clinical psychology program in the State of Virginia
recently expired, and an application to extend the approval is pending.

The Company derived 28.4% of its fiscal 1998 revenues from the operation of
the Illinois ASPP campuses. The Illinois Board of Higher Education, the entity
which authorizes the Illinois ASPP campuses to offer degrees, regulates all
non-public degree granting institutions within the state. The Board requires
ASPP to demonstrate compliance with regulations in areas such as admissions,
curriculum, facilities, equipment, instructional materials, qualifications of
school personnel, fiscal resources, tuition and refund policy, record-keeping
and recruitment. The Company's Illinois ASPP campuses are fully authorized to
offer degrees in the state of Illinois. No other state accounted for 20% or
more of the Company's revenue in fiscal 1998.

Canadian Regulation

The Ontario Ministry of Education and Training ("OMET") provides financial
assistance to eligible students through OSAP, which includes two main
components, the CSL program and the Ontario Student Loans Program ("OSLP")
program. To maintain its right to administer OSAP, an institution, such as the
PrimeTech campuses in Toronto, must, among other things, be registered and in
good standing under the PVSA and abide by the rules, regulations and
administrative manuals of the CSL, OSLP and other OSAP-related programs. In
order to attain initial eligibility, an institution must establish, among
other things, that it has been in good standing under the PVSA for at least 12
months, that it has offered an eligible program for at least 12 months and
that it has graduated at least one class in an eligible program that satisfies
specific requirements with respect to class size and graduation rate. In
addition, the institution must offer full-time programs at the postsecondary
level, award a diploma or certificate upon successful completion of the
program, have minimum admission requirements for entering students, require
students to participate fully in their studies, monitor students' progress and
maintain academic records, and advise OMET before taking any action that could
result in its failing to meet OMET's requirements. When applying for initial
eligibility an institution must also file with OMET a request for OSAP
designation with a description of the procedures to be implemented to
administer the OSAP financial aid office. During the first two years of
initial eligibility, the institution must have its administration of OSAP
independently audited, and full eligibility will not be granted unless these
audits establish that the institution has properly administered OSAP. The
institution can only administer CSL funds, and cannot administer OSLP funds,
until it has gained full eligibility. Once an institution has gained OSAP
eligibility, the institution must advise OMET before it takes any material
action that may result in its failure or inability to meet any rules,
regulations or requirements related to OSAP. Both of the Company's Canadian
campuses are fully eligible to administer CSL and OSLP Funds.

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

Institutions participating in OSAP, such as the PrimeTech campuses in
Toronto, cannot submit applications for loans to students enrolled in
educational programs that have not been designated as OSAP-eligible by OMET.
To be eligible, among other things, a program must be registered with the
Private Vocational Schools Unit, must be of a certain minimum length and must
lead to a diploma or certificate. Each of the PrimeTech educational programs
has been designated OSAP eligible by OMET and the Company does not anticipate
that these program approval requirements will create significant problems with
respect to its plans to add new educational programs.

An institution cannot automatically acquire OSAP-designation through
acquisition of other OSAP-eligible institutions. When there is a change of
ownership, including a change in controlling interest, in a non-incorporated
OSAP-eligible institution, OMET will require evidence of the institution's
continued capacity to properly administer the program before extending OSAP
designation to the new owner. The Company does not

believe that the Offering will be considered a change of ownership for
purposes of OSAP. Under OSAP regulations, a change or reorganization which
significantly affects the institution's administration of OSAP funds such that
the institution's prior record of administering such funds is no longer
relevant results in the OMET considering the institution to be a new
institution. The Company believes that the Offering will not result in
PrimeTech being considered a new institution under OSAP regulations because
the parent corporation and PrimeTech's administration of OSAP funds will not
change as a result of the Offering. Given that OMET periodically revises its
regulations and other requirements and changes its interpretations of existing
laws and regulations, there can be no assurance that OMET will agree with the
Company's understanding of each OMET requirement.

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

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

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

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

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

MANAGEMENT

Executive Officers, Directors and Key Employees

Set forth below is the name, age as of January 31, 1999, and a brief account
of the business experience of the Company's executive officers and directors
and certain key employees:

Name Age Position
- -------------------------------------- --- -------------------------------------

Michael C. Markovitz.................. 48 Chairman of the Board of Directors
Harold J. O'Donnell................... 68 President and Director
Charles T. Gradowski.................. 49 Chief Financial Officer
Theodore J. Herst..................... 74 Director
Karen M. Knab......................... 50 Director
Michael W. Mercer..................... 47 Director
Kalman K. Shiner...................... 56 Director
Leslie M. Simmons..................... 69 Director
Scott Ables........................... 37 General Manager, Ventura
Philip Miller......................... 49 Unit President, MIM
George Schwartz....................... 49 Unit President, PrimeTech
John E. Sites......................... 60 Provost, ASPP
Lisa Doyle............................ 31 Controller
Jean Norris........................... 33 Vice President, Enrollment Management
Jamie Wyse............................ 44 Vice President, Business Development

Directors and Executive Officers

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

Harold J. O'Donnell, Ph.D., has served as President of the Company since
1992 and has been a Director since February 1999. From 1976 to 1991, Dr.
O'Donnell served in a series of management positions with Apollo Group, Inc.,
a for-profit education company, including Director of the Southern California
Program of Institute for Professional Development (1976 to 1979), Executive
Vice President of Institute for Professional Development (1979 to 1982),
Executive Vice President of University of Phoenix (1979 to 1987) and Provost
of University of Phoenix (1987 to 1992). From 1974 to 1976, Dr. O'Donnell
served as Deputy Manpower Director for the Long Beach Commission on Economic
Opportunity. Dr. O'Donnell has served as an adviser to colleges and
universities in California, Indiana, Illinois and Florida involving
developmental and regional accreditation issues with accrediting bodies such
as NCA, SACS and the Western Association of Schools and Colleges. Dr.
O'Donnell received his doctoral degree in educational administration from the
University of Notre Dame and his master's degree in English literature from
Catholic University of America. He continued his postdoctoral training in
programs at Stanford University, the University of California at Los Angeles
and the University of San Francisco.

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

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

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

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

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

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

John E. Sites was a Director of the Company from 1994 to February 1999 and
became Provost of ASPP in February 1999. Mr. Sites served as Vice President
for Program Development for American InterContinental University from 1997 to
1999. Mr. Sites served as President of the American InterContinental
University in Dubai (United Arab Emirates) (1996 to 1997), Senior Vice
President of American InterContinental University in London (1994 to 1996) and
Associate Executive Director of the Commission on Colleges, SACS (1989 to
1993). Mr. Sites served for over twenty years at Brenau College as a Faculty
Member, Department Chair, Academic Dean and Executive Vice President.

Other Key Employees

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

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

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

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

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

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

Committees of the Board of Directors

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

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

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

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

Compensation of Directors

Historically, the Company's directors have received $700 for attending each
Board meeting. After the consummation of the Offering, the Company's directors
will also be compensated in the form of stock option grants, initially to be
annual grants of options to purchase 4,000 shares of Class A Common Stock at
the fair market value thereof on the date of grant. Additionally, directors of
U of S, MIM and PrimeTech will be compensated in the form of annual grants of
options to purchase 1,000 shares of Class A Common Stock at the fair market
value thereof on the date of grant. All directors are reimbursed for all
travel-related expenses incurred in connection with their activities as
directors.

Executive Compensation

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

SUMMARY COMPENSATION TABLE

Annual Compensation
------------------------------
Other Annual
Name and Principal Position Salary(1) Bonus Compensation
- --------------------------- --------- ------- ------------

Michael C. Markovitz.......................... $ -- $ -- $7,611,089(2)
Chairman
Harold J. O'Donnell........................... 114,700 58,341 10,781(3)
President
Charles T. Gradowski.......................... 86,883 15,000 6,264(3)
Chief Financial Officer

- --------
(1) Includes amounts earned in fiscal 1998, but deferred at each Named
Executive Officer's election pursuant to the Company's 401(k) Plan.

(2) Dr. Markovitz, as the Company's sole shareholder, received other annual
compensation of $5,339,857 from the Company in 1998 in the form of cash
distributions out of the Company's accumulated earnings and profits. In
addition, Management Corp., an affiliate of Dr. Markovitz, received
payments of $2,271,232 in 1998 for services performed by Dr. Markovitz.
Dr. Markovitz is the sole shareholder and employee of Management Corp. He
did not receive any compensation for services rendered to the Company,
other than through this management fee through Management Corp., Dr.
Markovitz provided strategic direction and oversight for the Company,
daily management oversight, consultation on business acquisitions and
other corporate business matters in addition to services characteristic of
a principal executive officer. Upon completion of the Offering, the
relationship with Management Corp. will be terminated, and Dr. Markovitz
will become an employee of the Company. Dr. Markovitz will enter into an
employment agreement which provides for an initial annual base salary from
the Company of $200,000 plus performance-based compensation, which is
currently intended to be in the form of stock options. Although this
represents a significant change in the way Dr. Markovitz is compensated
for the services he provides to the Company, the nature of the services
provided by Dr. Markovitz will not change. The Company does not anticipate
that it will require additional services (beyond those to be rendered by
Dr. Markovitz under his employment agreement) or incur additional costs
(beyond the compensation payable to Dr. Markovitz under his employment
agreement) because of the termination of its relationship with Management
Corp.
(3) Represents contributions made by the Company under its 401(k) Plan.

Stock Plans

Pre-Existing Stock Option Grants, Exercises and Holdings

No persons held any options to purchase Common Stock or stock appreciation
rights as of the end of fiscal 1998.

1999 Stock Incentive Plan

Prior to the consummation of the Offering, the Board and stockholder of the
Company will approve the Company's 1999 Stock Incentive Plan (the "1999 Stock
Plan"). The 1999 Stock Plan will be administered by the Compensation
Committee. Certain employees, directors, officers, advisors and consultants of
the Company will be eligible to participate in the 1999 Stock Plan
("Participants"). The Compensation Committee will be authorized under the 1999
Stock Plan to select the Participants and determine the terms and conditions
of the awards under the 1999 Stock Plan. The 1999 Stock Plan provides for the
issuance of the following types of incentive awards: stock options, stock
appreciation rights, restricted stock, performance grants and other types of
awards that the Compensation Committee deems consistent with the purposes of
the 1999 Stock Plan. An aggregate of 750,000 shares of Class A Common Stock of
the Company will be reserved for issuance under the 1999 Stock Plan, subject
to certain adjustments reflecting changes in the Company's capitalization.

Options granted under the 1999 Stock Plan may be either incentive stock
options ("ISOs") or such other forms of non-qualified stock options ("NQOs")
as the Compensation Committee may determine. ISOs are intended to qualify as
"incentive stock options" within the meaning of Section 422 of the Code. The
exercise price of (i) an ISO granted to an individual who owns shares
possessing more than 10% of the total combined voting power of all classes of
stock of the Company (a "10% Owner") will be at least 110% of the fair market
value of a share of Class A Common Stock on the date of grant and (ii) an ISO
granted to an individual other than a 10% Owner and an NQO will be at least
100% of the fair market value of a share of Class A Common Stock on the date
of grant.

Options granted under the 1999 Stock Plan may be subject to time vesting and
certain other restrictions at the sole discretion of the Compensation
Committee. Subject to certain exceptions, the right to exercise an option
generally will terminate at the earlier of (i) the first date on which the
initial grantee of such option is not employed by the Company for any reason
other than termination without cause, death or permanent disability or (ii)
the expiration date of the option. If the holder of an option dies or suffers
a permanent disability while still employed by the Company, the right to
exercise all unexpired installments of such option shall be accelerated and
shall vest as of the latest of the date of such death, the date of such
permanent disability and the date of the discovery of such permanent
disability, and such option shall be exercisable, subject to certain
exceptions, for 180 days after such date. If the holder of an option is
terminated without cause, to the extent the option has vested, such option
will be exercisable for 30 days after such date.

All outstanding awards under the 1999 Stock Plan will terminate immediately
prior to consummation of a liquidation or dissolution of the Company, unless
otherwise provided by the Board. In the event of the sale of all or
substantially all of the assets of the Company or the merger of the Company
with another corporation, all restrictions on any outstanding awards will
terminate and Participants will be entitled to the full benefit of their
awards immediately prior to the closing date of such sale or merger, unless
otherwise provided by the Board.

The Board generally will have the power and authority to amend the 1999
Stock Plan at any time without approval of the Company's stockholders, subject
to applicable federal securities and tax laws limitations (including
regulations of the Nasdaq National Market).

The Company currently anticipates granting options to purchase an aggregate
of approximately 225,000 shares of Class A Common Stock to directors,
executives and other employees contemporaneous with the consummation of the
Offering. Such options may be ISOs or NQOs.

Stock Purchase Plan

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

Subject to certain restrictions, each employee of the Company who is a U.S.
resident or a U.S. citizen temporarily on location at a facility outside of
the United States will be eligible to participate in the Stock Purchase Plan
if he or she has been employed by the Company for more than one year.
Participation will be discretionary for eligible employees. The Company will
reserve 375,000 shares of Class A Common Stock for issuance in connection with
the Stock Purchase Plan. Elections to participate and purchases of stock will
be made on a quarterly basis. Each participating employee contributes to the
Stock Purchase Plan by choosing a payroll deduction in any specified amount,
with a specified minimum deduction per payroll period. A participating
employee may increase or decrease the amount of such employee's payroll
deduction, including a change to a zero deduction, as of the beginning of any
month. Elected contributions will be credited to participants' accounts at the
end of each calendar quarter.

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

401(k) Plan

The Company has a tax-qualified employee savings and retirement plan (the
"401(k) Plan") covering all of the Company's full-time employees. Pursuant to
the 401(k) Plan, employees may elect to reduce their current compensation up
to the statutorily prescribed annual limit ($9,500 in 1998) and have the
amount of such reduction contributed to the 401(k) Plan. The 401(k) Plan
provides for contributions to the 401(k) Plan by the Company on behalf of all
participants. The Company contributes an amount equal to 6% of an eligible
employee's annual earnings on a discretionary basis. The 401(k) Plan is
intended to qualify under Section 401 of the Code so that contributions by
employees or by the Company to the 401(k) Plan, and income earned on plan
contributions, are not taxable to employees until withdrawn, and so that
contributions by the Company will be deductible by the Company when made. The
trustees under the 401(k) Plan, at the direction of each participant, invest
such participant's assets in the 401(k) Plan in selected investment options.

Compensation Committee Interlocks and Insider Participation

In fiscal 1998, the compensation of the Company's executives was determined
by a majority of the Company's Board, consisting of Dr. Markovitz, Karen M.
Knab, Michael W. Mercer, Kalman K. Shiner, Leslie M. Simmons and John E.
Sites.

The Company has historically paid certain management fees from time to time
to Management Corp., a company wholly owned by Michael C. Markovitz, the
Company's Chairman, for services rendered. Dr. Markovitz is the sole
shareholder and employee of Management Corp. He did not receive any
compensation for services rendered to the Company, other than through the
management fee the Company paid Management Corp. Through Management Corp., Dr.
Markovitz provides services characteristic of a principal executive officer,
including strategic direction and oversight for the Company, daily management
oversight, consultation on business acquisitions and other corporate business
matters. Such amounts totaled $1.0 million, $2.3 million and $0.4 million
during fiscal 1997 and 1998 and the three months ended November 30, 1998,
respectively. These amounts represent the only business transactions between
the Company and Management Corp. during such time period.

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

On August 30, 1998, Dr. Markovitz issued a note to the Company in the form
of a capital contribution totaling $6,000,000, secured by his stock in the
Company, which bore interest at a rate of 4.33% and was due upon demand. The
note and accrued interest thereon were repaid in full as of December 10, 1998.

As of August 31, 1998, the Company had loaned approximately $165,000 to
Prime Tech, an entity then one-third owned by Dr. Markovitz. The note is
unsecured and bears interest at 8.0%. The Company purchased 100% of Prime Tech
on November 30, 1998.

On November 30, 1998, the Company completed the acquisition of PrimeTech.
Dr. Markovitz initially acquired a one-third interest in PrimeTech in November
1995 and, together with the other owners, sold his interest to the Company.
The aggregate purchase price was determined by arms-length negotiations
between the other owners on behalf of themselves and Dr. Markovitz, on the one
hand, and representatives of the Company (other than Dr. Markovitz), on the
other hand.

The Company made distributions to its shareholder of $0.2 million, $0.9
million, $5.3 million and $0.04 million to Dr. Markovitz in fiscal 1996,
fiscal 1997, fiscal 1998 and the three months ended November 30, 1998,
respectively. In addition, as described under "The Company," the Company
intends to pay to Dr. Markovitz the Distribution. It is not possible at this
time to determine the exact amount of the Distribution because it will be
based upon the Company's income for the portion of fiscal 1999 income which
precedes the consummation of the Offering. The Company currently estimates
that the Distribution as of the consummation of the Offering will be
approximately $12.0 million. The Distribution will be paid in the form of the
Distribution Loan, which will be repaid immediately after consummation of the
Offering.

U of S had historically leased 18,940 square feet of a building owned by MCM
Plaza, a company wholly owned by Dr. Markovitz, for lease payments aggregating
$189,400 per year. On August 31, 1998, Dr. Markovitz sold the stock of MCM
Plaza to the Company for an aggregate consideration equal to its appraised
value of approximately $3.3 million, less liabilities assumed of approximately
$2.6 million to which the property was subject. The purchase price, based upon
an independent third-party appraisal, exceeded the historical book value of
the underlying net assets by $0.7 million. MCM Plaza had acquired the property
on which U of S is located for a purchase price of approximately $2.2 million
in April 1997.

Dr. Markovitz indirectly owned and operated Illinois Alternatives, Inc.
("Illinois Alternatives One"), a company formed by him in 1994 to provide
social work case management on behalf of the Illinois Department of Children
and Family Services for children in need of psychological treatment. Effective
December 31, 1997, the business of Illinois Alternatives One was transferred
to IA Acquisition Corporation, which assumed the name "Illinois Alternatives,
Inc." ("Illinois Alternatives Two"), 30% of the stock of which is owned by Dr.
Markovitz. The Company has historically paid certain administrative and other
expenses on behalf of Illinois Alternatives Two. The total amount owed to the
Company from Illinois Alternatives Two for such advances was approximately
$106,000 and $105,000 at August 31, 1998 and November 30, 1998, respectively.
The largest amount of these advances outstanding at any one time in fiscal
1998 was $192,000 in April 1998. Illinois Alternatives Two paid a management
fee to the Company of approximately $174,000 and $36,000 during fiscal 1998
and the three months ended November 30, 1998, respectively, related to such
services. Since August 31, 1998, the Company has continued to provide
accounting services to Illinois Alternatives Two for $12,000 per month and the
Company expects this arrangement to continue.

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

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

A class action lawsuit has been filed on behalf of former employees of
University Hospital against Dr. Markovitz, the Company, University Hospital
and certain other companies in which Dr. Markovitz has an interest. Dr.
Markovitz has agreed to indemnify the Company for any losses resulting from
such lawsuit. See "Business--Legal Proceedings."

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

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The table below sets forth certain information regarding the equity
ownership of the Company as of January 31, 1999 by (i) each person or entity
known to the Company who beneficially owns five percent or more of a class of
Common Stock of the Company, (ii) each Director and Named Executive Officer of
the Company and (iii) all Directors and executive officers of the Company as a
group. Unless otherwise stated, each of the persons named in the table has
sole voting and investment power with respect to the securities beneficially
owned by him or her as set forth opposite his or her name. Beneficial
ownership of the Common Stock listed in the table has been determined in
accordance with the applicable rules and regulations promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").

Prior to the Offering After the Offering
------------------------------ ------------------------------
Number of Number of
Directors, Named Number of Number of Percent of Class A Class A Number of Percent of
Executive Officers Class A Class B Voting Shares Shares Class B Voting
and 5% Shareholders Shares Shares Power Offered (1) Shares Power
------------------- --------- --------- ---------- --------- --------- --------- ----------

Michael C. Markovitz
(2).................... -- 4,900,000 100.0% -- -- 4,900,000 96.1%
Harold J. O'Donnell..... -- -- -- -- -- -- --
Charles T. Gradowski.... -- -- -- -- -- -- --
Theodore J. Herst....... -- -- -- -- 4,000 -- *
Karen M. Knab........... -- -- -- -- 5,000 -- *
Michael W. Mercer....... -- -- -- -- 4,000 -- *
Kalman K. Shiner........ -- -- -- -- 4,000 -- *
Leslie M. Simmons....... -- -- -- -- 5,000 -- *
All Directors and
Officers as a group (8
persons)............... -- 4,900,000 100.0% -- 22,000 4,900,000 96.1%

- --------
* Less than one percent.

(1) Represents the immediately exercisable portion of options that the Company
intends to grant to such person contemporaneous with the consummation of
the Offering. The Company currently anticipates granting options to
purchase an aggregate of approximately 225,000 shares of Class A Common
Stock to directors, executives and other employees contemporaneous with
the consummation of the Offering.

(2) If the Underwriters exercise their over-allotment option in full, Dr.
Markovitz will sell 300,000 shares of Class B Common Stock, which will
automatically convert into an equal number of shares of Class A Common
Stock immediately prior to the sale. In such event, after the Offering,
Dr. Markovitz will beneficially own no shares of Class A Common Stock and
4,600,000 shares of Class B Common Stock, comprising 95.2% of the total
voting power of the Common Stock.

DESCRIPTION OF CAPITAL STOCK

General Matters

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

Prior to the Offering, the Company had one class of common stock
outstanding. In connection with the Offering, the Company's existing common
stock will undergo an approximately 2,941-for-one stock split and then be
converted into Class B Common Stock, and the Class A Common Stock will become
authorized. At the time of the Offering, the total amount of authorized
capital stock of the Company will consist of 30,000,000 shares of Class A
Common Stock, par value $0.01 per share, 10,000,000 shares of Class B Common
Stock, par value $0.01 per share and 5,000,000 shares of Preferred Stock, par
value $1.00 per share (the "Preferred Stock"). Upon completion of the
Offering, 2,000,000 shares of Class A Common Stock, 4,900,000 shares of Class
B Common Stock and no shares of Preferred Stock will be issued and
outstanding. Additionally, 1,125,000 shares of Class A Common Stock will be
reserved for issuance under the Stock Plans and 4,900,000 shares of Class A
Common Stock will be reserved for issuance upon conversion of the Class B
Common Stock.

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

Class A Common Stock

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

The Class A Common Stock has been approved for inclusion on the Nasdaq
National Market under the symbol "ARGY," subject to official notice of
issuance.

Class B Common Stock

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

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

Preferred Stock

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

Certain Provisions of the Amended and Articles of Incorporation and By-laws

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

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

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

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

Certain Provisions of Illinois Law

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

Limitations on Liability and Indemnification of Officers and Directors

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

Transfer Agent and Registrar

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

SHARES ELIGIBLE FOR FUTURE SALE

Upon the consummation of the Offering, the Company will have outstanding
6,900,000 shares of Common Stock. All of the shares of Class A Common Stock
sold in the Offering will be freely tradeable under the Securities Act, unless
purchased by "affiliates" of the Company as that term is defined under the
Securities Act. Upon the expiration of lock-up arrangements between the
Company, certain shareholders and the Underwriters, which will occur 180 days
after the date of this Prospectus (the "Effective Date"), all of the 4,900,000
shares of Common Stock issued and outstanding as of the date of this
Prospectus (the "Restricted Shares") will become immediately eligible for
sale, subject to compliance with Rule 144 of the Securities Act as described
below (other than the holding period required by Rule 144, which has already
been satisfied).

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned Restricted Shares for
at least one year will be entitled to sell in any three-month period a number
of shares that does not exceed the greater of: (i) 1% of the number of shares
of Common Stock then outstanding (approximately 6,900 shares immediately after
the Offering) or (ii) the average weekly trading volume of the Class A Common
Stock on the Nasdaq National Market during the four calendar weeks immediately
preceding the date on which the notice of sale is filed with the Securities
and Exchange Commission. Sales pursuant to Rule 144 are subject to certain
requirements relating to manner of sale, notice and availability of current
public information about the Company. A person (or persons whose shares are
aggregated) who is not deemed to have been an affiliate of the Company at any
time during the 90 days immediately preceding the sale and who has
beneficially owned Restricted Shares for at least two years is entitled to
sell such shares pursuant to Rule 144(k) without regard to the limitations and
requirements described above.

The Company's officers, directors and sole shareholder have agreed with the
Underwriters that until 180 days after the Effective Date they shall not,
directly or indirectly, sell, offer to sell, solicit any offer to buy,
contract to sell, grant any option to purchase or otherwise transfer or
dispose of any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock, or in any manner transfer all or
a portion of the economic consequences associated with the ownership of the
Common Stock, or cause a registration statement covering any shares of Common
Stock to be filed, without the prior written consent of Salomon Smith Barney
Inc., subject to certain limited exceptions. The Company has also agreed not
to directly or indirectly, sell, offer to sell, solicit any offer to buy,
contract to sell, grant any option to purchase or otherwise transfer or
dispose of any shares of Common Stock or any securities convertible into, or
exercisable or exchangeable for, Common Stock or cause a registration
statement covering any shares of Common Stock to be filed, for a period of 180
days after the Effective Date, without the prior written consent of Salomon
Smith Barney Inc., subject to certain limited exceptions, including grants of
options pursuant to, and issuance of shares of Class A Common Stock upon
exercise of options under, the 1999 Stock Plan.

The Company intends to file registration statements covering the sale of
1,125,000 shares of Class A Common Stock reserved for issuance under the Stock
Plans. See "Management--Stock Plans." Such registration statement is expected
to be filed as soon as practicable after the date of this Prospectus and will
automatically become effective upon the filing. Accordingly, shares registered
under such registration statement will be available for sale in the public
market unless such shares are subject to vesting restrictions and subject to
limitations on resale by "affiliates" pursuant to Rule 144.

UNDERWRITING

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

Number of
Name of Underwriter Shares
------------------- ----------

Salomon Smith Barney Inc.......................................
ABN AMRO Incorporated..........................................
----------
Total...................................................... 2,000,000
==========

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

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

The Company's sole shareholder has granted to the Underwriters an option,
exercisable for thirty days from the date of this Prospectus, to purchase up
to 300,000 additional shares of Class A Common Stock at the price to public
set forth on the cover page of this Prospectus minus the underwriting
discounts and commissions. The Underwriters may exercise such option solely
for the purpose of covering over-allotments, if any, in connection with the
Offering of the shares offered hereby. To the extent such option is exercised,
each Underwriter will be obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional shares as the number of
shares set forth opposite each Underwriter's name in the preceding table bears
to the total number of shares listed in such table.

The Company, its officers and directors and its sole shareholder, who will
hold an aggregate of 4,900,000 shares of Common Stock after this Offering,
have agreed that, for a period of 180 days following the date of this
Prospectus, they will not, without the prior written consent of Salomon Smith
Barney Inc., sell, offer to sell, solicit any offer to buy, contract to sell,
grant any option to purchase (other than under the Stock Option Plan), or
otherwise transfer or dispose of any shares of Common Stock, or any securities
convertible into, or exercisable or exchangeable for, Common Stock, except
that the Company may grant options under the Stock Option Plan and may issue
shares of Class A Common Stock pursuant to the exercise of options granted
under the Stock Option Plan.

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

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

Up to an aggregate of 100,000 shares of Class A Common Stock, or
approximately 5% of the shares offered hereby, have been reserved for sale at
the public offering price to certain employees of the Company and other
persons designated by the Company. The maximum investment of any such person
may be limited by the Company in its sole discretion. The number of shares of
Class A Common Stock available for sale to the general public will be reduced
to the extent such persons purchase such reserved shares. Any reserved shares
not so purchased will be offered by the Underwriters to the general public on
the same basis as the other shares offered hereby. This program will be
administered by Salomon Smith Barney Inc.

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

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

LEGAL MATTERS

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

EXPERTS

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

AVAILABLE INFORMATION

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

INDEX TO FINANCIAL STATEMENTS

Page
----

Argosy Education Group, Inc. and Subsidiaries
Report of Independent Public Accountants................................ F-2
Consolidated Balance Sheets as of August 31, 1997 and 1998 and November
30, 1998 (unaudited)................................................... F-3
Consolidated Statements of Operations for the years ended August 31,
1996, 1997 and 1998 and the three months ended November 30, 1997
(unaudited) and 1998 (unaudited)....................................... F-4
Consolidated Statements of Shareholder's Equity for the years ended
August 31, 1996, 1997 and 1998 and the three months ended November 30,
1998 (unaudited)....................................................... F-5
Consolidated Statements of Cash Flows for the years ended August 31,
1996, 1997 and 1998 and the three months ended November 30, 1997
(unaudited) and 1998 (unaudited)....................................... F-6
Notes to Consolidated Financial Statements.............................. F-7

F-1

After the stock split discussed in Note 14 to the Company's consolidated
financial statements is effected, we expect to be in a position to render the
following audit report.

Arthur Andersen LLP

Chicago, Illinois

December 11, 1998

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholder of
Argosy Education Group, Inc.:

We have audited the accompanying consolidated balance sheets of ARGOSY
EDUCATION GROUP, INC. (an Illinois corporation) AND SUBSIDIARIES as of August
31, 1997 and 1998 and the related consolidated statements of operations,
shareholder's equity and cash flows for each of the three years in the period
ended August 31, 1998. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Argosy
Education Group, Inc. and Subsidiaries as of August 31, 1997 and 1998, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended August 31, 1998 in conformity with generally
accepted accounting principles.

Chicago, Illinois

December 11, 1998 (except with respect

to the matters discussed in the second and

third paragraphs of Note 12 and Note 14,

as to which the dates are December 21, 1998, December 30, 1998 and February
, 1999)

F-2

ARGOSY EDUCATION GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

August 31, November 30, 1998
---------------- ------------------
Pro Forma
1998
ASSETS 1997 1998 Actual (Note 12)
------ ------- ------- ------- ---------
(Unaudited)

Current Assets:
Cash and cash equivalents.................... $ 4,209 $ 2,712 $ 5,596 $ 5,596
Short-term investments....................... 2,519 1,131 3,947 3,947
Receivables--
Students, net of allowance for doubtful
accounts of $30, $230 and $302 at August
31, 1997 and 1998 and November 30, 1998,
respectively.............................. 221 451 764 764
Other...................................... 126 222 101 101
Shareholder note receivable.................. 505 6,000 1,268 1,268
Due from related entities.................... -- 271 105 105
Inventories.................................. 108 94 80 80
Prepaid expenses............................. 117 485 741 741
Deferred income taxes........................ -- -- -- 344
------- ------- ------- -------
Total current assets..................... 7,805 11,366 12,602 12,946
------- ------- ------- -------
Property and equipment, net.................... 3,188 3,870 4,660 4,660
Other assets:
Non-current investments...................... 1,451 1,073 916 916
Deposits..................................... 405 475 475 475
Deferred income taxes........................ -- -- -- 303
Intangibles, net............................. 4,731 6,691 7,209 7,209
------- ------- ------- -------
Total other assets....................... 6,587 8,239 8,600 8,903
------- ------- ------- -------
Total assets............................. $17,580 $23,475 $25,862 $26,509
======= ======= ======= =======

LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)
----------------------------------------------

Current Liabilities:
Current maturities of long-term debt......... $ 264 $ 3,362 $ 3,581 $ 3,581
Accounts payable............................. 590 1,157 1,080 1,080
Accrued payroll and related expenses......... 557 833 711 711
Accrued expenses............................. 266 751 756 756
Deferred revenue............................. 1,716 2,084 2,321 2,321
Due to former owners of acquired businesses.. -- -- 249 249
Shareholder distribution..................... -- 720 950 12,447
------- ------- ------- -------
Total current liabilities................ 3,393 8,907 9,648 21,145
------- ------- ------- -------
Long-term debt, less current maturities........ 6,354 5,165 5,074 5,074
Deferred rent.................................. 385 481 502 502
Commitments and contingencies
Shareholder's equity (deficit):
Common stock--10,000,000 shares authorized,
$.01 par value, 4,900,000 shares issued and
outstanding................................. 49 49 49 49
Additional paid-in capital................... 456 6,456 6,456 456
Accumulated other comprehensive income....... (17) 2 3 3
Purchase price in excess of predecessor carry
over basis.................................. -- (720) (720) (720)
Retained earnings............................ 6,960 3,135 4,850 --
------- ------- ------- -------
Total shareholder's equity (deficit)..... 7,448 8,922 10,638 (212)
------- ------- ------- -------
Total liabilities and shareholder's
equity (deficit)........................ $17,580 $23,475 $25,862 $26,509
======= ======= ======= =======

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

F-3

ARGOSY EDUCATION GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

Three Months
Years Ended August 31, Ended November 30,
------------------------- --------------------
1996 1997 1998 1997 1998
------- ------- ------- --------- ---------
(Unaudited)

Net revenue................... $17,840 $20,460 $29,352 $ 7,249 $ 9,341
------- ------- ------- --------- ---------
Operating expenses:
Cost of education........... 9,370 10,661 15,075 3,301 4,251
Selling expenses............ 263 516 1,102 137 361
General and administrative
expenses................... 5,174 5,432 9,104 1,745 2,487
Related party general and
administrative expense..... 1,710 993 2,271 308 424
------- ------- ------- --------- ---------
Total operating expenses.. 16,517 17,602 27,552 5,491 7,523
------- ------- ------- --------- ---------
Income from operations.... 1,323 2,858 1,800 1,758 1,818
------- ------- ------- --------- ---------
Other income (expense):
Interest income............. 304 497 357 109 141
Interest expense............ (55) (107) (601) (136) (173)
Other income (expense)...... 21 (48) (12) (4) (4)
------- ------- ------- --------- ---------
Total other income
(expense), net........... 270 342 (256) (31) (36)
------- ------- ------- --------- ---------
Income before provision
for income taxes......... 1,593 3,200 1,544 1,727 1,782
Provision for income taxes.... 30 37 29 27 24
------- ------- ------- --------- ---------
Net income.................... $ 1,563 $ 3,163 $ 1,515 $ 1,700 $ 1,758
======= ======= ======= ========= =========
Earnings per share:
Basic and diluted........... $ 0.32 $ 0.65 $ 0.31 $ 0.35 $ 0.36
======= ======= ======= ========= =========
Weighted average shares
outstanding--basic and
diluted.................... 4,900 4,900 4,900 4,900 4,900
======= ======= ======= ========= =========
Pro forma data (unaudited):
Income before provision for
income taxes, as reported.. $ 1,544 $ 1,727 $ 1,782
Pro forma related party
general and administrative
expense adjustment......... (2,071) (258) (374)
------- --------- ---------
Income before provision for
income taxes, as adjusted.. 3,615 1,985 2,156
Pro forma provision for
income taxes............... 1,446 794 862
------- --------- ---------
Pro forma net income........ $ 2,169 $1,191 $ 1,294
======= ========= =========
Pro forma earnings per
share--basic and diluted... $ 0.44 $ 0.24 $ 0.26
======= ========= =========
Pro forma weighted average
shares outstanding--basic
and diluted................ 4,900 4,900 4,900
======= ========= =========

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

F-4

ARGOSY EDUCATION GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY

(In thousands)

Common Stock--
$.01 par value, Purchase
10,000,000 shares Price in
authorized Accumulated Excess of
------------------ Additional Other Predecessor Total
Comprehensive Shares Paid-in Comprehensive Carryover Retained Shareholder's
Income Outstanding Amount Capital Income Basis Earnings Equity
------------- ----------- ------ ---------- ------------- ----------- -------- -------------

BALANCE, August 31,
1995................... 4,900 $49 $ 454 $ -- $ -- $ 3,327 $ 3,830
Net income and
comprehensive
income............... $1,563 -- -- -- -- -- 1,563 1,563
======
Shareholder
distributions........ -- -- -- -- -- (158) (158)
Shareholder
contribution......... -- -- 1 -- -- -- 1
----- --- ------ ----- ----- ------- -------
BALANCE, August 31,
1996................... 4,900 49 455 -- -- 4,732 5,236
Net income............ $3,163 -- -- -- -- -- 3,163 3,163
Unrealized loss on
investments.......... (17) -- -- -- (17) -- -- (17)
------
Comprehensive income.. $3,146
======
Shareholder
distributions........ -- -- -- -- -- (935) (935)
Shareholder
contribution......... -- -- 1 -- -- -- 1
----- --- ------ ----- ----- ------- -------
BALANCE, August 31,
1997................... 4,900 49 456 (17) -- 6,960 7,448
Net income............ $1,515 -- -- -- -- -- 1,515 1,515
Unrealized gain on
investments.......... 19 -- -- -- 19 -- -- 19
------
Comprehensive income.. $1,534
======
Shareholder
distributions........ -- -- -- -- -- (5,340) (5,340)
Shareholder
contribution......... -- -- 6,000 -- -- -- 6,000
Purchase price in
excess of predecessor
carryover basis...... -- -- -- -- (720) -- (720)
----- --- ------ ----- ----- ------- -------
BALANCE, August 31,
1998................... 4,900 49 6,456 2 (720) 3,135 8,922
Net income............ $1,758 -- -- -- -- -- 1,758 1,758
Unrealized gain on
investments.......... 1 -- -- -- 1 -- -- 1
------
Comprehensive income.. $1,759
======
Shareholder
distribution......... -- -- -- -- -- (43) (43)
----- --- ------ ----- ----- ------- -------
BALANCE, November 30,
1998 (unaudited)....... 4,900 $49 $6,456 $ 3 $(720) $ 4,850 $10,638
===== === ====== ===== ===== ======= =======

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

F-5

ARGOSY EDUCATION GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

Three Months
Ended
Years Ended August 31, November 30,
------------------------ ----------------
1996 1997 1998 1997 1998
------ ------- ------- ------- -------
(Unaudited)

Cash flows from operating
activities:
Net income....................... $1,563 $ 3,163 $ 1,515 $ 1,700 $ 1,758
Adjustments to reconcile net
income to net cash provided by
operating activities--
Depreciation and amortization.. 399 438 938 191 269
Changes in operating assets and
liabilities, net of acquired
businesses--
Receivables, net............. (45) (38) 1 (425) (91)
Inventories.................. (27) 53 67 18 14
Prepaid expenses............. (14) (56) (354) (24) (200)
Deposits..................... 378 (154) (65) (4) --
Accounts payable............. (35) 251 231 82 (249)
Accrued payroll and related
expenses.................... 113 70 256 31 (118)
Accrued expenses............. 67 (26) 284 56 (20)
Deferred revenue............. 179 102 (384) 249 (67)
Deferred rent................ 158 105 93 18 21
------ ------- ------- ------- -------
Net cash provided by
operating activities...... 2,736 3,908 2,582 1,892 1,317
------ ------- ------- ------- -------
Cash flows from investing
activities:
Purchase of property and
equipment, net.................. (404) (341) (597) (63) (243)
Sale (purchase) of investments,
net............................. 12 (1,985) 1,784 1,825 (2,111)
Business acquisitions, net of
cash acquired................... -- (6,292) (1,918) -- (186)
Shareholder note receivable...... -- (505) 505 (7) --
------ ------- ------- ------- -------
Net cash used in investing
activities................ (392) (9,123) (226) 1,755 1,682
------ ------- ------- ------- -------
Cash flows from financing
activities:
Proceeds from issuance of long-
term debt....................... 193 6,296 3,029 80 150
Payments of long-term debt....... (160) (169) (1,271) (206) (207)
Borrowings from (payments to)
related entities, net........... -- -- (271) 180 (14)
Shareholder distributions........ (158) (935) (5,340) (3,671) (44)
Shareholder contributions........ 1 1 -- -- --
------ ------- ------- ------- -------
Net cash (used in) provided
by financing activities..... (124) 5,193 (3,853) (3,617) (115)
------ ------- ------- ------- -------
Net increase (decrease) in cash and
cash equivalents.................. 2,220 (22) (1,497) 30 2,884
Cash and cash equivalents,
beginning of year................. 2,011 4,231 4,209 4,209 2,712
------ ------- ------- ------- -------
Cash and cash equivalents, end of
year.............................. $4,231 $ 4,209 $ 2,712 $ 4,239 $ 5,596
====== ======= ======= ======= =======
Supplemental disclosures of cash
flow information:
Cash paid for--
Interest....................... $ 48 $ 107 $ 549 $ 55 $ 155
Taxes.......................... 30 17 41 -- 6
====== ======= ======= ======= =======
Supplemental disclosure of non-cash
investing and financing
activities:
Acquisitions of various schools
and businesses--
Fair value of assets acquired.. $ -- $ 6,677 $ 3,346 $ -- $ 1,561
Net cash used in acquisitions.. -- (6,292) (1,918) -- (186)
------ ------- ------- ------- -------
Liabilities assumed or
incurred.................... $ -- $ 385 $ 1,428 $ -- $ 1,375
====== ======= ======= ======= =======
Supplemental disclosure of non-cash
shareholder activities:

On August 31, 1998, the shareholder of the Company issued a note to the
Company in the form of a capital contribution totaling $6,000,000.

During the three months ended November 30, 1998, the Company received
marketable securities with a fair market value of approximately $4,732,000
from the shareholder for partial repayment of the shareholder note receivable.

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

F-6

ARGOSY EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information for the Three Months Ended November 30, 1997 and 1998 is
Unaudited)

1. Description of the Business and Basis of Presentation

The consolidated financial statements of Argosy Education Group, Inc.
(formerly known as American Schools of Professional Psychology, Inc. ("ASPP"))
(the "Company") include the accounts of the Company and its wholly owned
subsidiaries, University of Sarasota, Inc. ("U of S"), Argosy International,
Inc. ("Ventura"), the Medical Institutes of America, Inc. ("MIA") and
PrimeTech Corporation Inc. and 1184267 Ontario Inc. (collectively
"PrimeTech"). Prior to being subsidiaries of the Company, the companies, other
than PrimeTech, were separate entities owned by the same shareholder. Through
various transactions, these companies were contributed by the shareholder to
the Company. On November 30, 1998, the Company acquired 100% of the
outstanding stock of PrimeTech. The Company continues to conduct business
under its historical name, ASPP.

The Company provides programs in clinical psychology, education, business
and allied health professions and offers courses and materials for post-
graduate psychology license examinations in the United States. The Company
operates through four business units and is approved and accredited to offer
doctoral, master's, bachelor's and associate degrees as well as to award
diplomas through 14 campuses in eight states.

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

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

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

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

PrimeTech awards diplomas at two campuses in Ontario, Canada, and awards
non-degree certificates in network engineering and software programming.

F-7

ARGOSY EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The contribution by the shareholder of businesses under common control and,
as described in Note 3, the Company's purchase of MCM University Plaza, Inc.'s
stock from its shareholder have been accounted for in a manner similar to a
pooling of interests. In addition, the results of operations of acquired
businesses have been consolidated for all periods subsequent to the date of
acquisition. The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All significant intercompany
transactions and balances have been eliminated in consolidation.

2. Significant Accounting Policies

The principal accounting policies of the Company are as follows:

Concentration of Credit Risk

The Company extends unsecured credit for tuition to a significant portion of
the students who are in attendance at its schools. A substantial portion of
credit extended to students is repaid through the students' participation in
various federally funded financial aid programs under Title IV of the Higher
Education Act of 1965, as amended (the "Title IV Programs"). The following
table presents the amount and percentage of the Company's cash receipts
collected from the Title IV Programs for the years ended August 31, 1996, 1997
and 1998 and the three months ended November 30, 1997 and 1998 (dollars in
thousands):

For the Three
For the Years Ended Months Ended
August 31, November 30,
------------------------- --------------
1996 1997 1998 1997 1998
------- ------- ------- ------ ------
(Unaudited)

Total Title IV funding........... $ 9,131 $ 9,035 $13,011 $3,646 $4,854
Total cash receipts.............. $18,883 $20,982 $28,514 $7,259 $9,566
Total Title IV funding as a
percentage of total cash
receipts........................ 48% 43% 46% 50% 51%
======= ======= ======= ====== ======

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

Cash and Cash Equivalents

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

Restricted Cash

Cash received from the U.S. Government under various student aid grant and
loan programs is considered to be restricted. Restricted cash is held in
separate bank accounts and does not become available for general use by the
Company until the financial aid is credited to the accounts of students and
the cash is transferred to an operating account. Restricted cash is not
included in the accounts of the Company and was immaterial at August 31, 1997
and 1998 and at November 30, 1998.

F-8

ARGOSY EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Investments

The Company invests excess cash in investments consisting primarily of
equity securities, corporate bonds (maturing from six to 15 months) and U.S.
Government treasury notes (maturing from one to 22 months). The investments
are considered available for sale, stated at their fair market value and
classified based upon their maturity dates.

At August 31, 1997 and 1998 and November 30, 1998, investments consisted of
the following (dollars in thousands):

August 31,
------------- November 30,
1997 1998 1998
------ ------ ------------
(Unaudited)

Fair value--
Equity securities........................... $ -- $ -- $2,722
Corporate bonds............................. 2,272 1,412 1,306
U.S. Government treasury notes.............. 1,698 792 799
Term deposits............................... -- -- 36
------ ------ ------
Total investments at fair value........... 3,970 2,204 4,863
Valuation allowance/unrealized gain........... 17 (2) (3)
------ ------ ------
Total investments at cost................. $3,987 $2,202 $4,860
====== ====== ======

Advertising and Marketing Costs

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

Inventories

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

Property and Equipment

Property and equipment are stated at cost. Depreciation and amortization are
recognized utilizing both accelerated and straight-line methods. Leasehold
improvements are amortized over their estimated useful lives or lease terms,
whichever is shorter. Maintenance, repairs and minor renewals and betterments
are expensed; major improvements are capitalized. The estimated useful lives
and cost basis of property and equipment at August 31, 1997 and 1998 and
November 30, 1998, are as follows (dollars in thousands):

August 31,
------------- November 30,
1997 1998 1998 Life
------ ------ ------------ ----------
(Unaudited)

Land............................... $ 517 $ 517 $ 517
Building........................... 1,905 2,066 2,066 40 years
Office equipment................... 864 851 912 3-7 years
Furniture and fixtures............. 272 338 343 5-7 years
Leasehold improvements............. 151 526 676 4-10 years
Computer equipment and software.... 365 631 1,309 3-5 years
Instructional equipment and
materials......................... 434 722 758 3-7 years
------ ------ ------
4,508 5,651 6,581
Less--Accumulated depreciation and
amortization...................... 1,320 1,781 1,921
------ ------ ------
$3,188 $3,870 $4,660
====== ====== ======

F-9

ARGOSY EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Intangible Assets

Intangible assets include goodwill, intellectual property and covenants not-
to-compete related to business acquisitions and the buyout of a former
shareholder. Intangible assets are being amortized on a straight-line basis
over their estimated useful lives. At August 31, 1997 and 1998 and November
30, 1998, the cost basis and useful lives of intangible assets consist of the
following (dollars in thousands):

August 31,
------------- November 30,
1997 1998 1998 Life
------ ------ ------------ -----------
(Unaudited)

Goodwill........................... $4,614 $6,811 $7,458 15-40 years
Intellectual property.............. 390 600 600 2-4 years
Covenants not-to-compete........... 252 252 252 5-10 years
------ ------ ------
5,256 7,663 8,310
Less--Accumulated amortization..... 525 972 1,101
------ ------ ------
$4,731 $6,691 $7,209
====== ====== ======

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

Revenue Recognition

Revenue consists primarily of tuition revenue from courses taught at the
schools and workshop fees and sales of related materials. Tuition revenue from
courses taught is recognized on a straight-line basis over the length the
applicable course is taught. Revenue from workshops is recognized on the date
of the workshop. If a student withdraws, future revenue is reduced by the
amount of refund due to the student. Refunds are calculated in accordance with
federal, state and accrediting agency standards. Revenue from rental of the
Company's owned facility is recognized on a straight-line basis over the life
of the leases. Textbook sales are recorded upon shipment. Revenue from rent
and textbook sales represent less than 2%, 3%, 13%, 3% and 9% of the Company's
net revenue for the fiscal years ended August 31, 1996, 1997 and 1998 and the
three months ended November 30, 1997 and 1998, respectively. Revenue is stated
net of scholarships and grants given to the students, which totaled
approximately $765,000, $684,000, $705,000, $214,000 and $195,000 for the
fiscal years ended August 31, 1996, 1997 and 1998 and three months ended
November 30, 1997 and 1998, respectively. Deferred revenue represents the
portion of payments received but not earned and is reflected as a current
liability in the accompanying consolidated balance sheets as such amount is
expected to be earned within the next year.

Management's Use of Estimates

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

Financial Instruments

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

F-10

ARGOSY EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

New Accounting Pronouncements

Earnings Per Share

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

Comprehensive Income

In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income" ("SFAS No. 130"), which establishes standards
for reporting of comprehensive income. This pronouncement requires that all
items recognized under accounting standards as components of comprehensive
income, as defined in the pronouncement, be reported in a financial statement
that is displayed with the same prominence as other financial statements.
Comprehensive income includes all changes in equity during a period except
those resulting from investments by owners and distributions to owners. The
financial statement presentation required under SFAS No. 130 is effective for
all fiscal years beginning after December 15, 1997. As of November 30, 1998,
the Company had adopted this pronouncement.

Segment Reporting

In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosure about Segments of an Enterprise and Related Information" ("SFAS
No. 131"), which amends the requirements for a public enterprise to report
financial and descriptive information about its reportable operating segments.
Operating segments, as defined in the pronouncement, are components of an
enterprise about which separate financial information is available that is
evaluated regularly by the Company in deciding how to allocate resources and
in assessing performance. The financial information is required to be reported
on the basis that it is used internally for evaluating segment performance and
deciding how to allocate resources to segments. The disclosure required by
SFAS No. 131 is effective for all fiscal years beginning after December 15,
1997. As of November 30, 1998, the impact of this pronouncement had not been
determined by the Company.

Start-Up Costs

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

F-11

ARGOSY EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

3. Business Acquisitions

Real Estate Operation

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

Ventura

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

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

MIA

On February 3, 1998, MIA purchased 100% of the capital stock of MIM for a
purchase price of approximately $2,368,000. The acquisition was accounted for
as a purchase and, accordingly, the acquired assets and assumed liabilities
have been recorded at their estimated fair value at the date of the
acquisition. The purchase price, subject to certain modifications, exceeded
the fair market value of net assets acquired resulting in goodwill of
approximately $1,962,000. The final purchase price adjustment is still being
negotiated, and the negotiations are expected to be completed in early
February 1999. The Company does not expect a material adjustment to the
initial purchase price. The purchase price was financed with approximately
$2,068,000 in short-term borrowings and cash from operations.

F-12

ARGOSY EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

PrimeTech

On November 30, 1998, the Company acquired 100% of the outstanding stock of
PrimeTech, Canadian schools which award non-degree certificates in network
engineering and software programming. The shareholder of the Company owned a
one-third interest in PrimeTech. Under the acquisition agreement, the Company
was required to pay the former owners a total of $500,000 (Canadian Dollars)
upon closing and is obligated to issue shares of the Company's common stock,
the fair value of which is equal to 102% of PrimeTech's net income, as defined
in such agreement, in each of PrimeTech's next three fiscal years. The
Company's shareholder received a note for $166,666 (Canadian Dollars) from the
Company representing his pro rata share of the initial payment; the other
owners received cash. The purchase price was determined by arm's-length
negotiations between the other owners on behalf of themselves and the
shareholder, and representatives of the Company (excluding the shareholder).
The acquisition will be accounted for as a purchase.

The following unaudited pro forma results of operations data (in thousands,
except per share data) for the years ended August 31, 1997 and 1998 and the
three months ended November 30, 1998, assumes that the business acquisitions
described above occurred at the beginning of the year preceding the year of
the acquisition. The unaudited pro forma results below are based on historical
results of operations including adjustments for interest, depreciation and
amortization and do not necessarily reflect actual results that would have
occurred.

Year Ended Three Months
August 31, Ended
--------------- November 30,
1997 1998 1998
------- ------- ------------
(In thousands, except per
share amounts)

Net revenue.................................. $29,267 $33,420 $9,869
Net income................................... $ 2,301 $ 1,537 $1,746
======= ======= ======
Earnings per share--basic and diluted........ $ 0.47 $ 0.31 $ 0.36
======= ======= ======

F-13

ARGOSY EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

4. Debt

Debt of the Company at August 31, 1997 and 1998 and November 30, 1998,
consists of the following:

August 31,
------------- November 30,
1997 1998 1998
------ ------ ------------
(Unaudited)
(dollars in thousands)

Borrowings under line of credit agreements...... $ 56 $ 441 $ 588
Bank note payable, bearing interest at the
bank's prime rate (8.5% at November 30, 1998),
requiring monthly interest payments of $14,500
and a final principal payment on March 31,
1999, secured by the assets of ASPP............ -- 2,023 2,023
Bank note payable, bearing interest at the one
year U.S. treasury note rate plus 2% (7.512% at
November 30, 1998), requiring monthly principal
payments of $27,976 through September 1, 2004,
secured by the assets of AR.................... 2,350 2,042 1,958
Promissory note with the former owner of AATBS,
bearing interest at 6.25%, requiring an initial
payment of $400,000 on January 1, 1998,
quarterly principal and interest payments of
$75,000 through October 1, 2002 and a final
payment of $375,000 on January 1, 2002, secured
by the assets of AATBS......................... 1,605 1,131 1,075
Mortgage debt, bearing interest at 9%, requiring
monthly principal and interest payments of
$18,378 through March 31, 2007 and a final
payment of $1,830,368 on April 30, 2007,
secured by related real estate................. 2,182 2,157 2,150
Promissory note with the former owner of MIM,
bearing interest at 8%, requiring monthly
principal and interest payments of $9,426
through May 31, 2001, unsecured................ -- 285 262
Bank note payable, bearing interest at the one
year U.S. treasury rate plus 2% (7.512% at
November 30, 1998), requiring monthly principal
payments of $1,786 through September 1, 2004,
secured by the assets of AATBS and Ventura..... 150 130 125
Bank note payable, bearing interest at the
bank's prime rate plus 1% (9.5% at November 30,
1998), requiring monthly payments of interest
only, principal due on February 12, 1999,
unsecured...................................... 80 80 80
Bank note payable, bearing interest at 9%,
requiring monthly principal and interest
payments of $1,462 through May 18, 2008,
secured by real estate......................... -- 113 111
Business improvement loans, bearing interest at
the prime rate plus 3% (6.75% at November 30,
1998), requiring monthly principal payments of
$4,810 through 2002............................ -- -- 142
Bank note payable, bearing interest at the
bank's prime rate (8.5% at November 30, 1998),
requiring monthly principal payments of $8,333
through July 31, 1999, secured by certain
assets of ASPP................................. 192 125 98
Capital lease obligations, bearing interest at
an average effective rate of 6.99%, secured by
the related assets............................. -- -- 43
Other........................................... 3 -- --
------ ------ ------
6,618 8,527 8,655
Less--Current maturities........................ 264 3,362 3,581
------ ------ ------
$6,354 $5,165 $5,074
====== ====== ======

F-14

ARGOSY EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The Company has three line-of-credit agreements with various banks which
provide for aggregate maximum borrowings of $700,000, expiring at various
times beginning on March 31, 1999. Amounts outstanding under these agreements
bear interest at rates ranging from prime to prime plus 2% (8.5% to 10.5% at
November 30, 1998) and are secured by the assets of MIM, AATBS, Ventura and
ASPP. As of November 30, 1998, outstanding borrowings under these agreements
totaled approximately $588,000.

The Company is required to maintain certain financial ratios under its
various credit agreements. As of November 30, 1998, the Company was either in
compliance with or has obtained waivers for its covenants.

At November 30, 1998, future annual principal payments of long-term debt are
as follows (dollars in thousands):

November 30--
1999............................ $3,581
2000............................ 812
2001............................ 765
2002............................ 791
2003............................ 409
2004 and thereafter............. 2,297
------
$8,655
======

5. Income Taxes

All of the consolidated entities have elected to include their income and
expenses with those of their shareholder for federal income tax purposes (an
"S Corporation election"). Accordingly, the consolidated statements of
operations for the fiscal years ended August 31, 1996, 1997 and 1998 and the
three months ended November 30, 1997 and 1998 do not include a provision for
federal income taxes. The S Corporation election will terminate immediately
prior to the consummation of the proposed initial public offering ("IPO" or
the "Offering," Note 12). The Company has recorded a provision for state
income taxes.

Upon effective termination of the S Corporation election, the Company will
record a deferred income tax asset and a related tax benefit. If the effective
date of the Offering had been November 30, 1998, a deferred income tax asset
and income tax benefit of approximately $647,000 would have been recorded.
Deferred income taxes are recorded under the asset and liability method of
accounting for income taxes, which requires the recognition of deferred income
taxes based upon the tax consequences of "temporary differences" by applying
enacted statutory tax rates applicable to future years to differences between
the financial statements carrying amounts and the tax basis of existing assets
and liabilities. As of November 30, 1998, deferred income taxes would have
consisted of the following (dollars in thousands):

Deferred income tax assets:
Deferred rent..................................................... $201
Payroll and related............................................... 176
Allowance for doubtful accounts................................... 104
Depreciation and amortization..................................... 102
Other............................................................. 64
----
Total deferred income tax assets................................ $647
====

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

F-15

ARGOSY EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

6. Leases

Facilities and Equipment Leases

The Company maintains operating leases for its educational and office
facilities and for certain office and computer equipment. The facility leases
generally require the Company to pay for pro rata increases in property taxes,
maintenance and certain operating expenses. Rent expense under operating
leases, recognized on a straight-line basis over the term of the lease
(excluding property taxes, maintenance and operation costs), totaled,
$1,118,777, $1,087,204, $1,617,784, $335,584 and $465,120 for the fiscal years
ended August 31, 1996, 1997 and 1998 and the three months ended November 30,
1997 and 1998, respectively.

Real Estate Rental Income

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

At November 30, 1998, the approximate future minimum rental income and
commitments under operating leases that have initial or remaining
noncancellable lease terms in excess of one year are as follows (dollars in
thousands):

Real Estate
and Total
Lease Sublease Operating Capital
Commitments Income Leases Leases
----------- ----------- --------- -------

As of November 30,
Remainder of 1999............ $ 1,191 $(189) $1,002 $35
2000......................... 1,310 (219) 1,091 9
2001......................... 1,400 (127) 1,273 --
2002......................... 1,488 (75) 1,413 --
2003......................... 1,449 (33) 1,416 --
2004......................... 1,252 (5) 1,247 --
2005 and thereafter.......... 2,398 -- 2,398 --
------- ----- ------ ---
$10,488 $(648) $9,840 44
======= ===== ======
Less: Amount representing
interest at an average
effective rate of 6.99%.. .. 1
---
Present value of net minimum
rent payments............... 43
Less: Amounts due within one
year........................ 35
---
$ 8
===

7. Commitments and Contingencies

Letters of Credit

The Company has outstanding irrevocable letters of credit totaling
approximately $709,000 as of November 30, 1998, which were primarily issued in
connection with leases for office facilities.

Litigation

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

F-16

ARGOSY EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The plaintiffs in the lawsuit, former employees of the Hospital, allege that
(i) the Hospital was closed without proper notice to employees in violation of
the Worker Adjustment and Retraining Notification Act; (ii) employee
contributions to the Hospital's profit sharing plan made prior to the Hospital
closing were not delivered to the plan in violation of the Employee Retirement
Income Security Act of 1974; (iii) the Hospital failed to pay the final
compensation due its employees prior to the Hospital closing in violation of
the Illinois Wage Payment and Collection Act, and (iv) the defendants
converted for their own use and benefit the amount of the plaintiffs' last
paycheck, accrued vacation, profit sharing contributions and credit union
contributions. The Company, the shareholder of the Company and the other
defendants in the lawsuit deny all claims asserted and are vigorously
defending themselves. The cost of the defense has not been borne by the
Company. The shareholder will enter into an indemnification agreement with the
Company. The agreement will provide that the cost of the defense and any
settlement amounts or damage awards will be paid by Dr. Markovitz. The Company
believes that the potential loss, as it relates to this matter, is not
probable and that an estimate of the potential settlement amounts or damage
awards cannot be made at this time. The Company does not believe that the
results of this matter will have a material effect on its results of
operations or financial position.

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

8. Regulatory

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

In November 1997, the DOE issued new regulations, which took effect July 1,
1998 and revised the DOE's standards of financial responsibility. These new
standards replace the numeric tests described above with three different
ratios: an equity ratio, a primary reserve ratio and a net income ratio, which
are weighted and added together to produce a composite score for the
institution. The Company and each of its institutions may demonstrate
financial responsibility by meeting the new standards or the old standards for
fiscal years that began on or after July 1, 1997 but on or before June 30,
1998.

The new standards employ a ratio methodology under which an institution need
only satisfy a single standard--the composite score standard. The ratio
methodology takes into account an institution's total financial resources and
provides a combined score of the measures of those resources along a common
scale (from negative 1.0 to positive 3.0). It allows a relative strength in
one measure to mitigate a relative weakness in another measure.

F-17

ARGOSY EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

If an institution achieves a composite score of at least 1.5, it is
financially responsible without further oversight. If an institution achieves
a composite score from 1.0 to 1.4, it is in the "zone," is subject to
additional monitoring, and may continue to participate as a financially
responsible institution for up to three years. Additional monitoring may
require the school to (1) notify the DOE, within 10 days of certain changes,
such as an adverse accrediting action; (2) file its financial statements
earlier than the six month requirement following the close of the fiscal year
and (3) subject the school to a cash monitoring payment method. If an
institution achieves a composite score below 1.0, it fails to meet the
financial responsibility standards unless it qualifies under the provisions of
an alternative standard (i.e., letter of credit equal to 50% of the Title IV
program funds expended from the prior fiscal year or equal to at least 10% of
the Title IV program funds expended from the prior fiscal year and provisional
certification status). The institution may also be placed on the cash
monitoring payment method or the reimbursement payment method. The Company
applied these new regulations to its financial statements as of August 31,
1998 and November 30, 1998 and has determined that the Company and each of its
institutions satisfied the new standards as of these dates based upon their
composite scores.

On October 1, 1998, legislation was enacted which reauthorized the student
financial assistance programs of the HEA ("1998 Amendments"). The 1998
Amendments continue many of the current requirements for student and
institutional participation in the Title IV Programs. The 1998 Amendments also
change or modify some requirements. These changes and modifications include
increasing the revenues that an institution may derive from Title IV funds
from 85% to 90% and revising the requirements pertaining to the manner in
which institutions must calculate refunds to students. The 1998 Amendments
also prohibit institutions that are ineligible for participation in Title IV
loan programs due to student default rates in excess of applicable thresholds
from participating in the Pell Grant program. Other changes expand
participating institutions' ability to appeal loss of eligibility owing to
such default rates. The 1998 Amendments further permit an institution to avoid
the interruption of eligibility for the Title IV Programs upon a change of
ownership which results in a change of control by submitting a materially
complete application for recertification of eligibility within 10 business
days of such a change of ownership. Regulations to implement the 1998
Amendments are subject to negotiated rulemaking, and, therefore, the
regulations will likely not become effective until July 1, 2000. The Company
does not believe that the 1998 Amendments will have a material adverse effect
on its business operations. None of the Company's institutions derives more
than 80% of its revenue from Title IV funds and no institution has student
loan default rates in excess of current thresholds. The Company also believes
based on its current refund policy that it will satisfy the new refund
requirements.

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

F-18

ARGOSY EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

agency of the state in which such campus is located. In addition, in order to
participate in the Title IV Programs, an institution must be accredited by an
accrediting agency recognized by the DOE. Each of the Company's schools is
accredited by an accrediting agency recognized by the DOE.

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

9. Related-Party Transactions

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

On August 30, 1998, the shareholder of the Company issued a note to the
Company in the form of a capital contribution totaling $6,000,000. The note is
secured by the shareholder's stock in the Company, bears interest at 4.33% and
is due upon demand. Approximately $4,700,000 was repaid on November 30, 1998.
The remaining principal and accrued interest thereon was repaid in full on
December 10, 1998.

A company owned by the shareholder of the Company provides management
services for the Company and its schools. For the years ended August 31, 1996,
1997 and 1998 and the three months ended November 30, 1997 and 1998 the
Company incurred and paid expenses totaling $1,709,900, $993,441, $2,271,232,
$307,800 and $424,000, respectively, related to such services. Upon
consummation of the IPO, such services will no longer be provided by the
affiliated company.

As of August 31, 1998, the Company had loaned approximately $165,000 to
PrimeTech, an entity one-third owned by the shareholder of the Company. The
note is unsecured and bears interest at 8.0%. The Company purchased 100% of
PrimeTech on November 30, 1998 (Note 3).

The Company pays certain administrative and other expenses on behalf of an
entity partially owned by the shareholder of the Company. The total amount
owed to the Company from this entity for such advances was approximately
$106,000 and $105,000 at August 31, and November 30, 1998, respectively. The
affiliated entity paid a management fee to the Company of approximately
$174,000 and $36,000 during fiscal 1998 and the three months ended November
30, 1998, respectively, related to such services.

10. Profit-Sharing Plan

The Company maintains a 401(k) profit-sharing plan that covers full-time
employees. Employees can contribute up to 15%. Contributions to the plan are
made at the discretion of the Board of Directors as well as by employees in
lieu of current salary. Contributions by the Company totaled $332,689,
$389,632, $455,778, $109,693 and $134,847 for the years ended August 31, 1996,
1997 and 1998 and the three months ended November 30, 1997 and 1998,
respectively.

F-19

ARGOSY EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

11. Valuation and Qualifying Accounts

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

Balance at Net Charges Increase Due Balance at
Beginning to Operating to End of
of Period Expenses Acquisitions Period
---------- ------------ ------------ ----------

Student receivable
allowance activity for
the year ended August
31, 1996 $ 5 $ 25 $-- $ 30
Student receivable
allowance activity for
the year ended August
31, 1997 $ 30 $-- $-- $ 30
Student receivable
allowance activity for
the year ended August
31, 1998 $ 30 $177 $ 23 $230
Student receivable
allowance activity for
the three months ended
November 30, 1998
(unaudited) $230 $ 33 $ 39 $302

12. Subsequent Events

On September 10, 1998, the Company filed a registration statement on Form S-
1 under the Securities Act of 1933 to sell shares of its common stock in the
IPO. The Company intends to use a portion of the net proceeds from the
Offering to repay certain outstanding debt which totaled $5.0 million at
November 30, 1998 and to pay a distribution to its shareholder.

The Company believes that the IPO will not constitute a change of ownership
resulting in a change in control under the HEA or DOE regulations. The Company
submitted a written request to the DOE to confirm this conclusion. However,
the DOE misinterpreted certain information provided in the Company's request
as indicating that the Company had already undergone a change in ownership
resulting in a change of control. The Company believes that the facts clearly
indicate that the Company has not undergone an unreported change in ownership
resulting in a change of control and the Company is working with the DOE to
rectify the error. If the DOE finally determines that the Company has
previously undergone an unreported change of ownership resulting in a change
of control or that the Offering constitutes a change in ownership resulting in
a change of control, the Company's participation in Title IV Programs could be
terminated and the Company could be required to repay to the DOE Title IV
Program funds advanced to the Company's schools since the dates of such
putative changes of control.

On December 30, 1998, the Company received a commitment letter from a
syndicate of banks for a $20 million revolving credit facility. The credit
facility is intended to provide funds for possible acquisitions and other
general corporate purposes.

13. Pro Forma Data (Unaudited)

In connection with the Offering, the Company will convert to a C Corporation
resulting in the recording of deferred income tax assets, as discussed in Note
5. Prior to the consummation of the Offering, the Company intends to declare a
distribution (the "Distribution") equal to the Company's undistributed
earnings, certain capital contributions and the net deferred income tax asset
as of the consummation of the Offering. The Company also intends to enter into
a tax indemnification agreement with its shareholder prior to the consummation
of the Offering. As of November 30, 1998, the Distribution would have equaled
approximately $11.5 million. Retained earnings of the Company, after recording
the Distribution and deferred income taxes, will be reclassified to additional
paid-in-capital in connection with the termination of the Company's S
Corporation election.

F-20

ARGOSY EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Concluded)

The unaudited pro forma balance sheet gives effect to the recording of the
deferred income taxes and the Distribution. No other contemplated transactions
in connection with the Offering are included in the unaudited pro forma
balance sheet information.

The pro forma net income and pro forma net income per share (i) includes a
related party general and administrative expense adjustment, which eliminates
the management fee the Company paid to a company owned by the shareholder of
approximately $2,271,000, $308,000 and $424,000 for the year ended August 31,
1998 and three months ended November 30, 1997 and 1998, respectively, and (ii)
reflects cash compensation which would have paid to the shareholder under his
employment agreement of approximately $200,000, $50,000 and $50,000 for the
year ended August 31, 1998 and the three months ended November 31, 1997 and
1998, respectively. These pro forma adjustments reflect the fact that, upon
completion of the Offering, the relationship with the related party will be
terminated, and the shareholder will become an employee of the Company. Under
an employment agreement to be entered in connection with the IPO, the
shareholder will serve as the Company's chairman. He will perform the same
services which he performed in the past through a related party which received
the management fee. However, his compensation will include an initial annual
base salary of $200,000 plus performance-based compensation, currently
expected to be paid in the form of stock options. Although this represents a
significant change in the way the shareholder is compensated for the services
he provides to the Company, the nature of the services provided by him will
not change. The Company does not anticipate that it will require additional
services (beyond those to be rendered by the shareholder under his employment
agreement) or incur additional costs (beyond the amounts payable to the
shareholder under his employment agreement) because of the termination of its
relationship with the related party. The pro forma adjustment to reduce the
related party general and administrative expense gives effect to the change in
compensation to the shareholder and therefore reflects the impact of the
Offering on the historical results of the Company. Pro forma net income and
pro forma net income per share also include a provision for income taxes
assuming a combined effective federal and state income tax rate of 40%.

Supplemental pro forma earnings per share for the year ended August 31, 1998
and the three months ended November 30, 1997 and 1998 of $0.31, $0.32, and
$0.31, respectively, is computed based upon (i) a reduction in interest
expense (net of tax benefit) resulting from the application of net proceeds of
the contemplated offering to reduce indebtedness of the Company and (ii) the
pro forma weighted average number of shares of common stock outstanding
adjusted to reflect the assumed sale by the Company of approximately
1,020,000, 557,000 and 1,165,000 shares of common stock in the Offering for
the year ended August 31, 1998 and for the three months ended November 30,
1997 and 1998, respectively, resulting in net proceeds sufficient to pay
indebtedness, the Distribution and previously unpaid shareholder
distributions.

14. Stock Split

On , the Company declared a 2,941.1765-for-one stock split and
converted all outstanding shares of common stock into Class B common stock.
The Company also authorized Class A common stock and preferred stock. The
Company's capital stock will then consist of 30,000,000 shares of Class A
common stock, with a par value of $0.01 per share; 10,000,000 shares of Class
B common stock, with a par value of $0.01 per share; and 5,000,000 shares of
preferred stock, with a par value of $0.01 per share. Class A common stock and
Class B common stock have identical rights except that each share of Class B
common stock is entitled to ten votes on all matters submitted to a vote of
shareholders as compared to one vote for each share of Class A common stock
and Class B common stock may be (and in certain cases are required to be)
converted into Class A common stock on a share-for-share basis. The effect of
the stock split has been retroactively reflected for all periods presented in
the accompanying consolidated financial statements.

F-21

[Inside back cover art]

[Map showing the Company's locations together with the following text:]

Changing Lives
ARGOSY EDUCATION GROUP

www.argosyeducation.com

University of Medical Institute American Schools of Professional
Sarasota of Minnesota Psychology
www.sarasota.edu www.aspp.edu

www.mim.tec.mn.us

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

612-844-0064 Phoenix, AZ 85021 808-735-0109
410 Ware Blvd, 602-216-2600
Suite 300

Tampa, FL 33619 PrimeTech Institute
800-850-6488 50 El Camino Drive 1701 Golf Road,
www.primetechinstitute.com Suite 101
Corte Madera, CA
94925

Rolling Meadows, IL
60008

5001 Yonge Street,
Ventura Group Suite 302
Willowdale, Ontario 415-927-2477 847-290-7400
www.aatbs.com M2N 6P6

5126 Ralston Street 416-225-1862 410 Ware Blvd
Ventura, CA 93003 Suite 300 5503 Green Valley
Drive

800-472-1931 Tampa, FL 33619
94 Cumberland 813-246-4419 Bloomington, MN
Street, Suite 700 55437

612-844-0064

Toronto, Ontario 990 Hammond Drive
M5RIA3 Atlanta, GA 30328
416-929-0121 888-671-4777 1400 Wilson Blvd,
Suite 110
Arlington, VA 22209
703-243-5300

20 S. Clark Street
Suite 300

Chicago, IL 60603
312-201-0200

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

No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus in connection with the offer contained herein, and, if given or
made, such information or representations must not be relied upon as having
been authorized by the Company, or by any of the Underwriters. This Prospectus
does not constitute an offer to sell, or a solicitation of an offer to buy,
the Class A Common Stock in any jurisdiction or to any person to whom it is
unlawful to make such offer in such jurisdiction. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that there has not been any change in the affairs of the Com-
pany since the date hereof.

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

TABLE OF CONTENTS

Page
----

Prospectus Summary........................................................ 3
Risk Factors.............................................................. 9
The Company............................................................... 20
Use of Proceeds........................................................... 21
Dividend Policy........................................................... 21
Capitalization............................................................ 22
Dilution.................................................................. 23
Selected Historical Consolidated Financial and Other Data................. 24
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 26
Business.................................................................. 34
Financial Aid and Regulation.............................................. 45
Management................................................................ 55
Security Ownership of Certain Beneficial Owners and Management............ 62
Description of Capital Stock.............................................. 63
Shares Eligible for Future Sale........................................... 66
Underwriting.............................................................. 67
Legal Matters............................................................. 69
Experts................................................................... 69
Available Information..................................................... 69
Index to Financial Statements............................................. F-1

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

Until , 1999 (25 days after the date of this Prospectus), all deal-
ers effecting transactions in the Class A Common Stock, whether or not partic-
ipating in this distribution, may be required to deliver a Prospectus. This
delivery requirement is in addition to the obligation of dealers to deliver a
Prospectus when acting as underwriters and with respect to their unsold allot-
ments or subscriptions.

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- -------------------------------------------------------------------------------
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2,000,000 Shares

Argosy Education
Group, Inc.

Class A Common Stock

AEG LOGO USED HERE

--------

PROSPECTUS
, 1999

--------

Salomon Smith Barney

ABN AMRO Rothschild

a division of ABN AMRO
Incorporated

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

PART II--INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

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

SEC registration fee.......................................... $ 10,178
NASD filing fee............................................... 3,950
Nasdaq National Market fees................................... 61,875
Blue sky fees and expenses (including attorneys' fees and
expenses).................................................... 10,000
Printing and engraving expenses............................... 100,000
Transfer agent's fees and expenses............................ 10,000
Accounting fees and expenses.................................. 335,000
Legal fees and expenses....................................... 365,000
Directors and officers insurance.............................. 100,000
Miscellaneous expenses........................................ 3,997
----------
Total..................................................... $1,000,000
==========

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

Item 14. Indemnification of Directors and Officers.

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

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

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

II-1

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

Section 10 of the Underwriting Agreement also provides for indemnification
by the Underwriters of the Company's officers and directors for certain
liabilities under the Securities Act.

Item 15. Recent Sales of Unregistered Securities.

None.

Item 16. Exhibits and Financial Statement Schedules.

Exhibit
Number Description
------- -----------

1.1* Form of Underwriting Agreement
3.1* Form of Articles of Incorporation of the Company
3.2* Form of By-laws of the Company
4.1* Form of Specimen Stock Certificate
5.1* Opinion of Kirkland & Ellis
10.1* Argosy Education Group, Inc. 1999 Stock Incentive Plan
10.2* Argosy Education Group, Inc. Employee Stock Discount Purchase Plan
Tax Indemnification Agreement, dated February 10, 1999, between the
10.3* Company and Dr. Markovitz
Term Note of Academic Review, Inc., dated August 27, 1997, in favor
10.4*** of Northern Trust Company
10.5*** Real Estate Mortgage and Security Agreement, dated April 30, 1997,
among MCM University Plaza, Inc. and Northern Trust Bank of Florida,
N.A.
Lease Agreement, dated July 21, 1995, between Park Central Corp. and
10.6*** U of S
10.7*** Standard Tenancy Agreement, dated December 10, 1992, between Lakeside
Commons Partners and the Company, as amended by Lease Amendment,
dated March 17, 1994, between Lakeside Commons Partners and the
Company
10.8*** Tenant Lease, dated June 21, 1995, between CKSS Associates and the
Company
10.9*** Lease Agreement, dated January 20, 1997, between Reed Union School
District and California Graduate School of Psychology
10.10*** Lease, dated September 8, 1994, between American National Bank and
Trust Company of Chicago and The Company, as amended by Amendment to
Lease, dated November 28, 1997, between American National Bank and
Trust Company of Chicago and the Company
10.11*** Lease Agreement, dated July 3, 1996, between Continental Offices Ltd.
and the Company, as amended by First Amendment, to Lease Agreement,
dated July 3, 1996, between Continental Offices Ltd. and the Company
10.12*** Office Lease, dated May 28, 1997, between Presson Advisory, L.L.C.
and the Company
10.13*** Lease, dated May 3, 1997, between Control Data Corporation and the
Company, and amended by Letter Agreement, dated December 8, 1994

II-2

Exhibit
Number Description
------- -----------

10.14*** Lease, dated August 1, 1997, between Oneida Realty Company and the
Company
10.15*** Lease Agreement, dated May 3, 1994, between Arlington Park Realty
Corporation and the Company
10.16*** Standard Industrial/Commercial Multi-Tenant Lease--Modified Net,
dated November 3, 1995, between the Gordon Family Trust and AATBS,
and addenda and amendments thereto
10.17*** Lease, dated October 11, 1991, between MEPC American Properties
Incorporated and Medical Institute of Minnesota, Inc. and amendments
thereto.
10.18*** Indenture of Sublease, dated June 9, 1997, between Royal Bank of
Canada and PrimeTech Corporation
10.19*** Lease, dated March 14, 1997, between Cumberland-Bellair Investment,
Inc. and 1184266 Ontario Inc.
10.20*** Stock Purchase Agreement, dated April 15, 1998, among PrimeTech
Canada Inc., George Schwartz, P.M.T. Holdings Inc. and Michael
Markovitz
10.21*** Stock Purchase Agreement, dated February 3, 1998, between Medical
Institutes of America, Inc. and Phillip Miller
10.22*** Agreement to Purchase and Redeem Stock, dated August 26, 1997, among
Ventura, Steven H. Santini and Association for Advanced Training in
the Behavioral Sciences
10.23*** Agreement to Purchase Assets, dated August 26, 1997, among Academic
Review, Inc., an Illinois corporation, Academic Review, Inc., a
California corporation and Steven H. Santini
10.24* Purchase and Sale Agreement, dated August 31, 1998, between
University of Sarasota, Inc. and Michael C. Markovitz
10.25*** Software License and Service Agreement, dated March 31, 1998, between
SCT Software & Resource Management Corporation and the Company
10.26*** Purchase of Services Agreement, dated January 1, 1998, between
Illinois Alternatives, Inc. and the Company
10.27* Form of Distribution Loan note
10.28* Employment Agreement, dated February 10, 1999, between the Company
and Dr. Markovitz
10.29* Indemnification Agreement, dated February 10, 1999, between the
Company and Dr. Markovitz
21.1* Subsidiaries of the Company
23.1* Consent of Kirkland & Ellis (included in Exhibit 5.1)
23.2* Consent of Arthur Andersen LLP
27.1* Financial Data Schedule

- --------
*Filed herewith.

***Previously filed.

Item 17. Undertakings.

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

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred

II-3

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.

The undersigned registrant hereby undertakes that:

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

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

II-4

SIGNATURES

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
Chicago, State of Illinois on February 11, 1999.

Argosy Education Group, Inc.

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

* * * *

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to Registration Statement and power of attorney have been signed on
February 11, 1999, by the following persons in the capacities indicated with
respect to Argosy Education Group, Inc.:

Signature Capacity
--------- --------

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

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

/s/ Harold J. O'Donnell Director
___________________________________________
Harold J. O'Donnell

* Director
___________________________________________
Theodore J. Herst

* Director
___________________________________________
Michael W. Mercer

* Director
___________________________________________
Karen M. Knab

* Director
___________________________________________
Kalman K. Shiner

* Director
___________________________________________
Leslie M. Simmons

*The undersigned, by signing his name hereto, does sign and execute this
Amendment No. 1 to Registration Statement on behalf of the above-named
Directors and officers of the Registrant pursuant to a Power of Attorney
executed by each such Director and officer and filed with the Securities
and Exchange Commission.

/s/ Michael C. Markovitz
By: _________________________________
Michael C. Markovitz
As Attorney-in-Fact

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