UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                              -------------------

                                    FORM 10-K
                              -------------------

    FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

(Mark One)

     [X]        ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                SECURITIES EXCHANGE ACT OF 1934

                    For the fiscal year ended March 31, 2003

                                       OR

     [   ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                SECURITIES EXCHANGE ACT OF 1934

          For the transition period from ____________ to ____________ .

                       Commission File Number: 333-104650

                               DIGITALTHINK, INC.
             (Exact name of registrant as specified in its charter)

            Delaware                                             94-3244366
 (State or other jurisdiction of                             (I.R.S. Employer
 Incorporation or organization)                              Identification No.)

 601 Brannan Street, San Francisco, California                     94107
   (Address of principal executive offices)                      (Zip code)

                                 (415) 625-4000
              (Registrant's telephone number, including area code)

           Securities registered pursuant to Section 12(b) of the Act:

    Title of each class                    Name of Exchange on which registered
           None                                            None

           Securities registered pursuant to Section 12(g) of the Act:
                     Common Stock, $.001 par value per share
                                (Title of Class)

Indicate  by check  mark  whether  the  registrant:  (1) has filed  all  reports
required to be filed by Section 13 or 15(d) of the Securities Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes [X ] No [ ]

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Exchange Act Rule 12b-2. Yes [ ] No [ X ]

The aggregate market value of registrant's  voting stock held by  non-affiliates
of  registrant,  based  upon  the  closing  sale  price of the  common  stock on
September 30, 2002, as reported on the Nasdaq National Market, was approximately
$32.4  million.  Shares of common stock held by each  officer and director  have
been  excluded  in that  such  persons  may be  deemed  to be  affiliates.  This
determination of affiliate status is not necessarily a conclusive  determination
for other purposes.

Outstanding shares of registrant's  common stock, $.001 par value, as of May 27,
2003: 44,186,732

                       DOCUMENTS INCORPORATED BY REFERENCE

Parts of certain  sections of the Proxy Statement to be filed in connection with
the 2003 Annual Meeting of Stockholders  are incorporated by reference into Part
III of this Annual Report on Form 10-K where indicated.
<PAGE>

This document contains  forward-looking  statements that relate to future events
or  our  future  financial   performance.   In  some  cases,  you  can  identify
forward-looking  statements by terminology such as "may,"  "should,"  "expects,"
"plans,"  "anticipates,"   "believes,"  "estimates,"   "forecasts,"  "predicts,"
"intends,"  or  "potential"  or the  negative of such terms or other  comparable
terminology.  In addition, these forward-looking statements include, but are not
limited  to,  statements  regarding  the  following:  (1) our ability to compete
effectively in the e-learning market, (2) our plans to develop new solutions and
products,  (3)  our  business  strategies  and  plans,  and  (4)  our  strategic
relationships with Electronic Data System, Incorporated ("EDS") and others. Many
of the statements we make regarding the future are only predictions. Although we
believe that the expectations  reflected in the  forward-looking  statements are
reasonable  based on our current  beliefs,  we cannot  guarantee future results,
levels of  activity,  performance  or  achievements.  The risks set forth in the
section in Item 1 below  entitled  "Risk Factors" and elsewhere in this document
could  cause our  future  operating  results  to differ  materially  from  those
contemplated by our forward-looking statements. In addition, factors that we are
not currently aware of could harm our future operating results.

                                     PART I

Item 1. Business

DigitalThink Overview

We  provide  custom  e-learning  solutions  designed  to address  the  strategic
business  objectives  of our  customers  by helping  them to  improve  workforce
development,  sales force effectiveness and customer  acquisition and retention.
We can host and centrally  manage software and content,  significantly  reducing
our customers' learning  infrastructure  costs and enabling us to rapidly update
or customize their courses.  Our web-based  solutions  deliver content to large,
geographically dispersed groups who can access courses from anywhere, at anytime
through a standard  web-browser.  Our courseware  solutions include  application
training,  new hire and  product  training,  compliance  and  industry  specific
training,  to name a few. Our solutions also allow customers to generate revenue
opportunities by offering branded  e-learning  solutions to their customers.  In
addition,  we also  offer  web-based  tracking  and  reporting  tools  that  our
customers   use  to  measure  and  evaluate   participants'   progress  and  the
effectiveness  of their learning  programs.  In the last year we released the L5
Learning Delivery System, a 24/7 available,  open,  scalable and standards-based
platform. L5 includes a comprehensive learning environment that allows customers
to  launch  DigitalThink  created  courseware,  client  created  courseware  and
third-party content.

With  the  acquisition  of  Horn  Interactive  in  April  2003,  a  provider  of
simulation-based  custom  e-learning  products and services,  we are now able to
provide  innovative  simulation  design  and  development  capabilities  to  our
customers.  We  believe  we have  expanded  our  position  as a leader in custom
e-learning  courseware by  addressing  the growing  market for  simulation-based
learning.

As of March 31, 2003, we had delivered courses on more than 700 subjects to over
525 customers in a variety of industries including technology, retail, financial
services, automotive,  healthcare, and telecommunications.  Our customers either
pay us to develop  custom  courses  for their  specific  requirements  or select
courses from our catalog, or both.  Customers that have purchased solutions from
us over the past fiscal year include  Abercrombie & Fitch, the American Bankers'
Association, Automatic Data Processing, BearingPoint (formerly KPMG Consulting),
Charles Schwab, CitiGroup,  Circuit City, Cisco Systems, EDS, Lincoln Financial,
Marsh, Percepta, RedHat, Sara Lee, SonicWall and Sun Microsystems.

Industry Background

Today's   businesses  face  rapidly  changing   environments   characterized  by
increasing  competition,  economic  globalization and  technological  change. To
compete  effectively,   businesses  must  improve  business  processes,   reduce
operating  costs,  extend  barriers  to entry and  shorten  product  development
cycles.  The  emergence of the Internet as a business  platform has  accelerated
these trends and  presented new  opportunities  in many  industries  for leading
companies to create a competitive advantage.

Senior executives at these leading  companies realize that a fundamental  source
of  competitive  advantage is the depth,  consistency  and currency of knowledge
possessed by their employees,  distributors,  suppliers and customers. Employees
who know more about a company's  business  are  generally  able to perform  more
effectively. Sales professionals and distributors who understand the benefits of
a company's services achieve better results. Customers who learn the benefits of
a product's  features tend to be more loyal,  less expensive to support and more
likely  to  purchase  again.   Driving  knowledge  to  the  extended  enterprise
effectively  reduces the  time-to-market of new products and services,  improves
sales channel productivity and reduces customer support costs.

In an attempt to address today's competitive challenges, businesses are spending
large  amounts on  learning  and skills  development.  Based on annual  industry
report by Training  Magazine in 2002,  businesses  spend  nearly  $54.2  billion
annually  on  learning  programs  in the  United  States.  As the  Internet  and
e-learning continue to demonstrate measurable results for businesses, we believe

                                      -1-
<PAGE>
more dollars will be spent on e-learning  programs.  To date, most dollars spent
on corporate learning has been on in-person,  instructor-led  training programs.
We have found that these traditional  learning  methodologies are less effective
than e-learning for certain types of business purposes because they are:

    o   Difficult to deploy across an organization and its extended enterprise.
        Many businesses find it difficult to effectively deliver up-to-date
        content in a timely and consistent manner to large,
        geographically-dispersed groups. The traditional solution of scheduling
        corporate education programs at specific times in single locations
        results in logistical challenges and opportunity costs that often lower
        participation rates and limit a company's ability to extend knowledge to
        its extended enterprise.

    o   Difficult to customize and update. Instructor-led content is often
        prepared in advance to provide for the production and distribution of
        printed or videotaped materials, which are then updated at fixed
        intervals and delivered using an instructor-led, standardized curriculum
        of pre-scheduled meetings in set physical locations. As a result,
        print-based content cannot be updated and distributed to learners as
        rapidly as web-based content, and instructor-led sessions using these
        materials may fail to incorporate the latest information on new
        products, strategies and processes for specific uses or customers.

    o   Difficult to personalize on a large scale. Instructor-led learning
        programs are typically designed to address the needs of large groups,
        which can impair the effectiveness of the individual learning
        experience. If a participant cannot have his or her individual question
        answered or cannot access supplemental tutoring after the course
        sessions have concluded, learning may not actually occur. The cost of
        assembling a large group in a central location is often justified
        because of the economics of presenting material to a mass audience.
        Actual learning, by contrast, occurs on an individual level. The mass
        approach rarely provides sufficient time for individuals to ask
        questions, much less to be tutored and critiqued.

    o   Unable to track and monitor learning effectiveness. Tracking student
        performance in traditional corporate classroom programs is avoided as it
        typically requires additional expenses for manual test administration,
        grading and recording.

    o   Costly and slow. Traditional learning initiatives require prolonged
        absences of valuable employees due to travel to course locations and
        attendance at scheduled course meetings, resulting in significant
        opportunity costs due to lost work. In addition, course materials must
        be printed and delivered using traditional means. As a result,
        businesses are unable to continuously educate their extended enterprises
        on new products, strategies and processes in a timely manner. With
        e-learning, participants can learn at anytime from a computer, without
        having to schedule classrooms or meetings, and without having to travel
        to a classroom facility.

In response to these  limitations,  many  businesses  are seeking more effective
learning  solutions.   The  Internet  is  transforming  the  corporate  learning
marketplace  by  offering  innovative  ways to  design  and  deliver  knowledge.
According to International Data Corporation,  the corporate e-learning market is
projected to grow from $6.6 billion in 2002 to more than $23.7  billion in 2006.
By leveraging the Internet,  businesses can instantly and simultaneously  deploy
content to a broad, global audience. This content can be easily and continuously
accessed,  modified  and  refreshed  and  learning  programs  can be enhanced as
participants  use e-mail and chat rooms to establish  interactive  relationships
with  instructors  and peers.  Web-based  technologies  can also offer real-time
tracking of participant performance.

Internal training  organizations and external  corporate  learning providers are
geared  to  instructor-led  training  and their  set of  skills  is  limited  to
classroom  scheduling and instruction.  To compete effectively in the e-learning
market, these organizations would need to develop a broad range of competencies,
including  technology  development,  content  creation,  web-hosting  and online
community management. Companies are seeking outsourced and integrated e-learning
solutions as a means of more effectively educating their extended enterprise.

The DigitalThink Solution

We enable our customers to change the way their  employees and customers  learn.
Through a focus on custom content development and delivery, we enable executives
to address critical business  initiatives and sustain  competitive  advantage in
key  areas  such  as new  product  rollouts,  application  training,  management
development, new-hire training and sales effectiveness.

The key components of our solutions include:

Custom Content Development.  With thousands of hours of custom content developed
and millions of learning  events around the globe, we are one of the largest and
most proven  developers  of custom  e-learning.  Our  learning  strategists  and
instructional  designers work with subject matter experts to build award-winning
content that leverages  adult  learning  theory and best  practices,  creating a
learning  experience that drives  measurable  results  against  customer-defined
learning objectives.

                                      -2-
<PAGE>
We leverage best-practice  frameworks developed through experience with hundreds
of customers  across  thousands of courses.  These Expert Course Designs (XCDs),
addressing  common  business  needs  such as  QuickStart  Application  Training,
Branded   Customer   Services,   Product   Sales   Simulation,   and   Technical
Certification,  enable  customers  to achieve  the  efficiencies  and results of
starting their initiatives with proven instructional strategy, visual design and
interactivities.  XCDs  enable  us to  produce  high-quality,  effective  custom
content more quickly than typical custom course development allows.

For optimal learner  performance and  time-to-competency,  our custom content is
personalized  based on  pre-assessments  or in-course  performance  and includes
exercises  for  practical  application.  With  the  recent  acquisition  of Horn
Interactive,  DigitalThink  extends its  leadership  in the emerging  market for
simulation-based  learning,  offering customers immersive  e-learning  featuring
complex,  realistic  simulations for appropriate training contexts such as sales
training and management development.

All our custom  courseware  is built to be Shareable  Content  Object  Reference
Model ("SCORM")  compliant.  SCORM is a suite of technical standards that enable
web-based  learning systems to find,  import,  share,  reuse and export learning
content in a standardized  way. SCORM 1.2 has rapidly  emerged as the e-learning
industry  standard,  and our  leadership  in  supporting  and  leading the SCORM
standard  ensures that customer  content  investments are portable and reusable.
Custom content we have developed can be deployed to any  SCORM-compliant  LMS or
delivered through our L5 Learning Delivery System.

Learning Delivery.  We are a leader in the e-learning  industry,  due in part to
the  introduction  of our L5 Learning  Delivery  System,  designed with over six
years of  experience  and  millions of courses  delivered to  customers.  The L5
Learning  Delivery System lowers total costs of e-learning,  maximizes  learning
impact, and essentially eliminates delivery failures.

o Lower total costs of e- learning.  Our L5 Learning Delivery System enables the
  separation of learning content from course functionality and branding,
  removing the  need to  hard-code  these  features  into  the  content.  As a
  result, we significantly  reduce the cost of content  maintenance and increase
  the reuse of content across business units and channels. The L5 Learning
  Delivery System also maximizes  content  investments  across the  enterprise
  by serving as a central delivery system for all SCORM-compliant  content,
  replacing the recurring costs of content  integration to multiple  learning
  systems with the efficiencies of a single, standards-based deployment to the
  L5 Learning Delivery System for global content  delivery.  Additionally,
  leveraging the L5 Learning  Delivery System's hosted   web-services   approach
  eliminates the significant, and often underestimated,  capital  and  human
  resource  costs  associated  with  scaling e-learning   from  an  initial
  pilot  program  to  achieve   business   impact enterprise-wide.

o Maximize  learning impact.  Our L5 Learning  Delivery System includes a robust
  Learning  Environment,  an asynchronous virtual classroom that improves the
  effectiveness of all SCORM-compliant  content, whether developed by us or by
  our  customers or partners.  The L5 Learning  Environment  includes the
  following  features and learner services, leverageable by all content
  delivered from the platform:

       o  Personalization and dynamic navigation that adjusts course sequence,
          allowing learners to see only content that is relevant to them.
       o  Active collaboration giving learners access to an online community of
          peers to discuss course-related topics.
       o  Built-in notes to let learners capture key information as they
          progress through each course, and save or print them for easy
          reference at any time.
       o  Expert tutoring that allows learners to get feedback on their
          individual work, answers to specific questions, and personalized
          guidance whenever needed.
       o  Targeted web-searches to enable learners to access the most current
          materials available on the Internet or their company's intranet.

o Essentially eliminate  delivery  failures.   Our  approximate  $50  million
  investment in research and  development, infrastructure  and learner  support
  ensures high-performance delivery for any number of concurrent learners. The
  L5 Learning  Delivery System  is one of the  most scalable web-services in the
  industry, with millions of learning events delivered and a system
  infrastructure designed to handle many times current traffic levels.  We
  manage and maintain our delivery architecture to ensure courses are available
  24 hours per day, 7 days per week, 365 days per year, and we  consistently
  lead the industry with uptime exceeding 99.7%. For mobile learners and
  low-bandwidth  situations, we plan to offer the L5  Desktop  Client  in the
  Summer of 2003,  allowing  courses  to be downloaded from the L5 Learning
  Delivery  System and taken offline.  Completion and  performance  data are
  synchronized  when  the  learner  reconnects  to the network.

As an open platform,  the benefits of the L5 Learning Delivery System extend not
only to content we developed, but to any SCORM content developed by our partners
or our customers.  Fully integrated into the L5 Learning Delivery System, the L5
Developer  Portal  provides tools and training to enable  content  developers to
successfully  author and deploy content to the L5 Learning Delivery System using
any certified SCORM-compliant authoring tool, such as Dreamweaver.

                                       -3-
<PAGE>
Management and Integration.  The L5 Learning Delivery System provides the option
to  leverage  the  L5  Administration  module,  providing  essential  management
functionality  that provides customers  "instant-on"  capabilities to launch and
track their e-learning initiatives quickly and efficiently. For customers with a
third party Learning  Management System ("LMS"),  the L5 LMS Connector  provides
integration for seamless data exchange between systems.

In  addition,  the L5  Learning  Delivery  System  includes  the L5  Reporting &
Analysis module which provides  customers with tracking and reporting related to
customer-defined learning objectives,  providing more granular and flexible data
analysis than that available through LMS systems alone.

To leverage existing business  infrastructure  and processes,  the L5 Enterprise
Gateway Connector  provides  customers a  standards-based  (XML/SOAP) and secure
protocol to reliably  integrate the L5 Learning Delivery System with a company's
enterprise business applications,  including enterprise resource planning (ERP),
learning  management (LMS), human resource  management (HRMS),  e-commerce,  and
customer relationship management (CRM) systems.

Strategy

Our vision is to enable our customers to achieve outstanding business results by
changing the way people learn. We intend to do this through ongoing focus on our
customers  requirements,   translating  them  into  world-class  solutions.  Key
elements of our strategy include:

    o   Develop long-term strategic relationships with our customers. We believe
        that e-learning solutions will become increasingly critical to a
        business' ability to compete successfully. As a leading provider of
        custom e-learning content development and delivery, we become an
        increasingly strategic resource for our customers as they address
        critical business initiatives through e-learning. We plan to extend our
        presence within our customers' enterprises by helping our customers
        understand the effectiveness of our solutions in a broad range of
        operational initiatives.

    o   Vertical and horizontal focus. We have increased our focus on providing
        solutions to meet requirements specific to the technology, retail,
        financial services, automotive, healthcare and telecommunications
        sectors. We intend to continue to provide solutions tailored to the
        specific business needs in these areas, including trends toward
        cost-cutting, customer retention, and new product introduction.

    o   Leverage development alliances and reseller relationships. We plan to
        grow both our direct and indirect sales channels to better service our
        existing markets and penetrate new markets. Our technology platform can
        be easily adapted to a variety of learning uses and our partners are
        building content to be hosted and delivered by us on behalf of their
        customer.

Customers

Our customers can use our custom  e-learning  solutions to compress the learning
cycle,  increase  knowledge  throughout the extended  enterprise,  enhance brand
equity and customer service and reduce operational costs.

As of March 31, 2003, we have delivered courses to over 525 customers, including
many large  corporations.  Our customers use our custom e-learning  solutions to
address strategic  business needs in three broad areas:  workforce  development,
sales force  effectiveness and customer  acquisition and retention.  A workforce
development  customer  uses our  e-learning  solutions  to achieve a  particular
strategic objective by teaching or reinforcing employee skills. Sales executives
use  e-learning to improve the sales  performance  of their internal or external
sales channels by deploying skills and product education quickly into the field.
Customer retention customers use our products and services to provide e-learning
to their  external  customers as an attractive new revenue stream or as a source
of goodwill or brand enhancement.

Content and Courses

We   currently   offer  our   customers   more  than  700   subjects   from  our
custom-developed  and e-learning  catalog.  Depending on topic area, each course
consists of one to several hours of student work,  including  lessons,  quizzes,
interactive applets,  simulations,  and hands-on participant exercises,  some of
which are graded and  commented  upon by our tutors  before  being  returned via
email to  participants.  All of our courses have been designed to take advantage
of our e-learning environment and leverage Internet technologies, such as e-mail
and  discussion  boards,  in  order to  provide  participants  with an  engaging
learning  experience and extensive  interaction with our tutors.  In addition to
pre-developed  courses,  we develop customized content for our customers.  These
customized  courses  incorporate the significant domain knowledge of our clients
and can be rapidly  redesigned  for other  customers  in the same  industry.  We
typically  retain  intellectual  rights to our content and can reuse elements of
the courses for other customers.

                                       -4-
<PAGE>
Products and Technology

Our e-learning  environment  consists of technologies  that we have designed and
created to function as an integrated  solution.  By employing  standard Internet
technologies  and a hosted content  delivery  model,  we are able to provide our
customers  with a high  quality,  efficient  means  to  educate  their  extended
enterprise.

Content Delivery System

We  can  host  the  e-learning  environments  of  our  customers.  In  a  hosted
environment,  the  courses and our  content  delivery  system are located on our
servers  but can be  accessed  through the Web or the  customer's  intranet.  By
centralizing all infrastructure and hosting  requirements,  our customers derive
the following significant benefits:

    o   customers do not need to install or manage any software;

    o   content can be updated and infrastructure  technology can be improved
        continuously  without adversely impacting our clients and at a lower
        cost to us;

    o   customers avoid the need to make significant investments in technology
        infrastructure such as servers, databases, technical staff or technical
        support; and

    o   participants can access course content at anytime, from anywhere,
        through the use of a standard modem and web-browser.

Deployed Solution

Our deployed  delivery  option is targeted at companies  that need an e-learning
solution that resides within their own technical environment.  With this option,
customers  can host  their  own  learning  management  systems  and then add our
content from either our catalog or custom courses we design for them, or both.

System Architecture

The  architecture of our content delivery system is designed to scale rapidly to
provide large student  populations with  tutor-supported  e-learning content. In
addition,  we have developed our content delivery system using standard Internet
technologies such as Java and HTML,  facilitating the delivery of our content to
our customers'  web-browsers.  We utilize a single code base to deliver content.
As a result, any improvement made in our software for one customer automatically
benefits all other customers.

Our content is stored in a database as structured  "learning  elements." We have
developed  a  templating  system  that  automatically   controls  the  graphical
presentation,  or "look and  feel," of a course,  as well as course  navigation.
This content storage and delivery  approach allows us to personalize the content
for individuals in each course and minimizes  content or formatting  errors.  In
addition,  this structure enables the rapid  customization of course content for
different  customers.  Our technology was developed  internally without deriving
any  elements  from a  legacy  application  or a  previously  existing  learning
delivery system.

Course Enrollment Options

Our customers can choose  several  different  methods to allow  participants  to
access our courses. Enrollments can be managed by authorized personnel using our
corporate  administration  system.  Alternatively,  participants can self-enroll
using  an  intranet  or  Internet  e-commerce  option.  Our  system  can also be
integrated with third-party  enterprise software applications to allow automated
enrollments  using a  learning  management  or other  data  base  administration
system.

Tracking and Reporting System

Each participant's  learning activities are fully tracked in our database.  This
comprehensive  tracking  ability allows a participant to start a course at work,
and  continue at home or while  traveling.  Regardless  of their  location,  our
system  recognizes  each  participant,  tracks their course progress and records
their  performance.  Using only a standard  web-browser,  managers  can run both
standardized and custom reports on participant enrollments and progress, gaining
visibility into the learning status of their extended enterprise.

                                      -5-
<PAGE>
Course Tutoring

Our  technology  allows us to increase the  efficiency  and  scalability  of our
tutoring   resources.   The  ability  of  tutors   worldwide  to  interact  with
participants through standard Internet communication methodologies significantly
increases the pool of tutor candidates we can recruit. In addition, our database
system allows multiple tutors to support the same course as grading and exercise
submissions can be accessed and responded to by any tutor.  Duplication of tutor
work is prevented by our message queuing technology.

Collaboration Tools

We  host  and  make  available  to our  customers  proprietary  and  third-party
collaboration tools, which currently include instant messaging software,  e-mail
solutions,  chat rooms,  discussion boards and real-time  communications.  These
collaboration  tools are designed to create a learning  environment that fosters
collaboration   between  peers  and  a  high  degree  of   interaction   between
participants and tutors.

Testing and Assessment

Our system offers comprehensive testing and assessment  capabilities,  which can
be customized  for specific  learning  solutions and  customers.  Assessment and
testing  capabilities  include  multiple  choice,  multiple  answer quizzes with
randomized question sets, tutor-scored and commented exercises,  and interactive
testing applets and simulations.

Full Integration with Corporate Infrastructures

Our custom  e-learning  solutions can be fully  integrated  with our  customers'
corporate  information   technology  systems,   including  their  web-sites  and
intranets. As a result, course participants do not necessarily realize that they
are accessing  content hosted from our servers.  Our integration  layer provides
adapters for learning  management  systems.  We design our course  content to be
compatible with our customers' security concerns and bandwidth limitations.

Scalable Architecture

Our  system has been  designed  to scale  rapidly  and to  consistently  deliver
content to large  numbers of  participants.  We use load  testing to measure our
system capacity and identify potential  bottlenecks.  Improvements to our system
architecture increase system capacity beyond current demands.

High-Availability Systems

Our systems have been designed to maximize availability,  with redundancy in the
areas in which we  believe  failures  are most  likely  to  occur.  We have also
implemented  redundant  network  connections  to the Internet,  a  load-balanced
redundant  web-server  and a  highly-redundant  storage  array to safeguard  our
information.  In addition,  locating our web-servers with Cable and Wireless,  a
leading  web-hosting firm, provides us with backup power,  constant  monitoring,
physical  security,  seismic  resistance,  fire  suppression and climate control
systems. We are vulnerable to certain types of failures,  including catastrophic
failure of the Cable and Wireless site due to natural  disasters or other events
and simultaneous  failure of our primary and redundant systems. We are currently
building a redundant fail-over site in Sacramento,  California,  to mitigate any
risk with regards to a catastrophic failure at Cable and Wireless. The redundant
fail-over site is expected to be completed by the first half of fiscal 2004.

Sales and Marketing

We sell our custom e-learning  solutions  primarily through our own direct sales
organization.  We also sell indirectly  through  channel  partners and strategic
alliance partners. Our direct sales organization focuses on developing long-term
relationships with large corporate  customers.  Our channel partners,  including
Sun Educational Services, Red Hat and others, leverage their unique distribution
models to reach differentiated  industries,  international  markets and customer
segments. We also have alliance  relationships with EDS, BearingPoint  (formerly
KPMG  Consulting)  and  others,  who work  with us to  jointly  sell our  custom
e-learning  solutions and resell our courses as  components of their  e-learning
offerings targeted at specific industries.

Competition

The e-learning market is evolving quickly and is subject to rapid  technological
change,  shifts in customer  demands and  evolving  learning  methodologies.  To
succeed, we must continue to upgrade our technology, expand our course offerings
and distinguish our solution. As competition  continues to intensify,  we expect
the   e-learning   market  to  undergo   significant   price   competition   and
consolidation.  We  expect  to face  price  pressures  from  competitors  as our
potential  customers  demand more value for their  education  budgets and as our
competitors become mature.

                                      -6-
<PAGE>
The e-learning market is highly fragmented with no single competitor  accounting
for a dominant  market  share,  and  competition  is  intense.  In  addition  to
competing with other suppliers of technology-based  learning solutions,  we also
compete with third-party suppliers of instructor-led  education and learning and
internal training departments.

Our  competitors  vary in size and in the scope and  breadth of the  courses and
services they offer.  Several of our competitors have longer operating histories
and  significantly  greater  financial,  technical and marketing  resources.  In
addition,   larger  companies  may  enter  the  e-learning  market  through  the
acquisition  of  our  competitors.   We  anticipate  increased   competition  as
additional entrants join the e-learning market.

Intellectual Property and Proprietary Rights

Our  success  depends  on our  ability  to protect  our  proprietary  rights and
technology. We rely on a combination of copyrights,  trademarks,  service marks,
trade secret laws and  employee  and  third-party  nondisclosure  agreements  to
protect our proprietary rights.  Despite our efforts,  unauthorized  parties may
attempt to duplicate or copy our courses or our  delivery  technology  or obtain
and use  information  that we regard as proprietary and third parties may assert
that our technology and intellectual  property  infringes  patents,  trademarks,
copyrights  and trade  secrets.  The laws of many  countries  do not protect our
proprietary  rights  to the  same  extent  as the  laws  of the  United  States.
Effective trademark, service mark, copyright and trade secret protection may not
be available in every country in which we provide our courses and services.

Our name and  corporate  logo are  registered  trademarks  and we own the domain
names digitalthink.com,  digitalthink.org, and digitalthink.net. It is possible,
however,  that third parties  could acquire  trademarks or domain names that are
substantially similar or conceptually similar to our trademarks or domain names.
This could  decrease the value of our  trademarks or domain names and could hurt
our business. The regulation of domain names in the United States and in foreign
countries could change. The relationship  between  regulations  governing domain
names and laws protecting  trademarks and similar proprietary rights is unclear.
As a result, we may not acquire or maintain exclusive rights to our domain names
in the United States or in other countries in which we conduct business.

We may  from  time  to time  encounter  disputes  over  rights  and  obligations
concerning  intellectual property. We obtain the content for many of our courses
from our  customers  and it is possible that the use of this content may subject
us to the intellectual  property claims of third parties.  Although we generally
seek  indemnification  from our  customers  to protect  us from  these  types of
claims, we may not be fully protected from extensive damage claims or claims for
injunctive  relief. Our customers may assert that some of the courses we develop
for our general  catalog or under  contract with other  customers may improperly
use their  proprietary  content.  Our  involvement  in any litigation to resolve
intellectual  property  ownership  matters would require us to incur substantial
costs and divert  management's  attention and  resources.  We cannot predict the
effect of a failure to prevail in any litigation of this kind.

We are currently defending two intellectual  property actions, both of which are
described under Item 3 of this report. We believe that both of these actions are
without merit and intend to vigorously  defend  ourselves  against both of them.
Although  we believe  that both of these  actions  will be  resolved in a manner
favorable to DigitalThink, we cannot presently determine the outcome. An adverse
resolution  of  either  of  these  matters,  or  protracted  litigation,   could
significantly negatively impact our financial position and results of operations
and could divert significant management resources.

Employees

As of March 31,  2003,  we employed  410 persons.  Of these  employees,  68 were
employed in course development, 136 were in custom courseware development, 55 in
sales and marketing,  73 in research and  development,  28 in  web-delivery  and
customer  support  and 50 in general  and  administration.  Of these  employees,
approximately  210 were located in the United States and  approximately 200 were
located in India.

                                      -7-
<PAGE>
                                  RISK FACTORS

You should consider the risks described below before making any investment
decision with respect to our stock. We believe that the risks and uncertainties
described below are the principal material risks facing our company as of the
date of this report. In the future, we may become subject to additional risks
that are not currently known to us. Our business, financial condition or results
of operations could be materially adversely affected by any of the following
risks. The trading price of our common stock could decline due to any of the
following risks.

WE HAVE A HISTORY OF LOSSES  AND AN  ACCUMULATED  DEFICIT  OF $218.4  MILLION AT
MARCH 31, 2003.  WE EXPECT  FUTURE  LOSSES OVER THE NEXT TWO QUARTERS AND WE MAY
NOT ACHIEVE PROFITABILITY WITHIN THE TIMEFRAMES PUBLIC STOCKHOLDERS ANTICIPATE.

We have experienced losses in each quarter since our inception.  Our accumulated
deficit  as of March 31,  2003 was  $218.4  million.  We have  never  achieved a
profitable  quarter and we may continue to incur quarterly losses if our revenue
growth does not meet expectations while our current expense structure remains in
place.  If we do achieve  profitability,  we will need to  continue  to generate
revenues  greater than  expenses on a quarterly or annual basis in the future to
continue being  profitable.  We plan to develop and acquire new course offerings
with new areas of expertise that may increase operating losses if those expenses
are not immediately offset by new revenues.

DEMAND FOR OUR PRODUCTS  AND SERVICES  HAVE BEEN AND MAY CONTINUE TO BE AFFECTED
BY ADVERSE ECONOMIC CONDITIONS AFFECTING THE INFORMATION TECHNOLOGY INDUSTRY.

The  information  technology  industry has been in a period of economic  decline
during 2001 and 2002,  and appears to be continuing in 2003. As a result,  there
has been a reduced level of investment by businesses in  information  technology
products and systems. When businesses are reducing investment in technologies or
slowing  the rate of  adoption  of new  technologies  and  systems,  they have a
reduced need for training of their employees, customers and others in the use of
these  systems.  In addition,  many of our current and potential  customers have
experienced adverse changes in their financial performance,  whether as a result
of the general  weakening of the economy or other  factors.  Some  companies may
delay  training  initiatives  or,  if these  companies  continue  to  experience
disappointing  operating  results,  whether  as a  result  of  adverse  economic
conditions,  competitive  issues or other  factors,  they may decrease or forego
education and training  expenditures overall before limiting other expenditures.
As a result of these  factors,  and  possibly  also due to the  aftermath of the
September 11, 2001 terrorist  attacks,  our new contract  signings in the second
half of  fiscal  2002  were  materially  and  adversely  affected,  this in turn
impacted our revenues in fiscal 2003.  Continuation of the economic  downturn in
the United  States,  as well as  continuation  of the current  adverse  economic
conditions in the information  technology industry,  may harm our future results
of operations.

WE HAVE A SIGNIFICANT  BUSINESS  PRESENCE IN INDIA,  AND RISKS  ASSOCIATED  WITH
DOING BUSINESS THERE COULD DISRUPT OR HARM OUR BUSINESS.

In order to reduce costs associated with course development, we have established
a significant presence in India through the addition of several new employees to
two  organizations  we acquired in fiscal  2002.  As of March 31,  2003,  we had
approximately 200 employees in three separate  locations in India.  Difficulties
that we could encounter with our Indian  operations or with other  international
operations that we may establish in the future include the following:

     o   difficulties in staffing and managing international operations;
     o   multiple, conflicting and changing governmental laws and regulations;
     o   fluctuations in currency exchange rates;
     o   political and economic instability, including the potential for more
         terrorist acts;
     o   developments between the nations of India and Pakistan regarding the
         threat of war;
     o   adverse tax consequences;
     o   difficulties in protecting our intellectual property rights;
     o   increases in tariffs, duties, price controls or other restrictions on
         foreign currencies; and
     o   trade barriers imposed by foreign countries.

In  particular,  continuing  tensions  between  India and Pakistan  could have a
direct impact on our  operations.  Recently,  due to heightened  concerns in the
region, the United States State Department has issued an advisory against travel
to India.  However,  the Company continues to conduct normal operations in India
along with the associated  travel of United States employees  visiting India and
vice versa.

                                      -8-
<PAGE>
If we encounter these problems in connection  with our operations in India,  our
revenues  could fall below  expectations,  which  would  harm our  business  and
operating results. In this event, our stock price could decline.

OUR LIMITED OPERATING  HISTORY AND THE NEW AND EMERGING  E-LEARNING MARKET MAKES
IT DIFFICULT TO EVALUATE OUR BUSINESS AND FUTURE PROSPECTS.

We commenced  operations in April 1996 and did not begin to generate significant
revenues  until fiscal 1999.  In the fiscal year ended 2003,  we had revenues of
$42.1  million and expenses of $53.4  million,  excluding  the  one-time  charge
related to Statement of Financial Accounting Standards ("SFAS") No. 142 of $50.2
million.  We are  still in the  early  stages of our  development,  which,  when
combined  with the new and  emerging  e-learning  market,  and general  economic
factors  affecting  the  technology  sector,  make it  difficult to evaluate our
business or our prospects.  Because of our limited operating history,  we have a
limited and  unproven  ability to  forecast  sales and predict the trends in the
e-learning market and in our business.

WE MAY NOT BE ABLE TO SECURE NECESSARY FUNDING IN THE FUTURE; ADDITIONAL FUNDING
MAY RESULT IN DILUTION TO OUR STOCKHOLDERS.

We  require  substantial  working  capital  to fund  our  business.  We have had
significant  operating  losses since  inception.  We expect to use our available
cash  resources and  anticipated  revenues to fund continued  operations,  build
courseware, and possibly make future acquisitions.  We believe that our existing
capital  resources will be sufficient to meet our capital  requirements at least
for the next  twelve  months.  However,  if our  capital  requirements  increase
materially  from  those  currently   planned  or  if  revenues  fall  below  our
expectations,  we may require additional  financing sooner than anticipated.  If
additional  funds are raised  through  the  issuance of equity  securities,  the
percentage  ownership  of our  stockholders  will be reduced,  stockholders  may
experience dilution,  or such equity securities may have rights,  preferences or
privileges  senior  to those of the  holders  of our  common  stock.  Additional
financing may not be available  when needed on terms  favorable to us or at all.
If adequate funds are not available or are not available on acceptable terms, we
may be unable to develop or enhance our products and services, take advantage of
future opportunities or respond to competitive pressures.

OUR QUARTERLY OPERATING RESULTS ARE SUBJECT TO FLUCTUATIONS THAT COULD CAUSE OUR
STOCK PRICE TO DECLINE.

Our revenue and operating  results are volatile and difficult to predict and may
be  susceptible  to  declines  in  future  periods.  Our  quarterly  results  of
operations  may fluctuate  significantly  in the future due to the delays in the
progress of ongoing work,  shortfalls in orders or the timing of when the orders
are  booked  in  the  quarter.  We  therefore  believe  that  quarter-to-quarter
comparisons  of our operating  results may not be an accurate  indication of our
future   performance.   In  the  event  of  a  revenue  or  order  shortfall  or
unanticipated expenses in some future quarter or quarters, our operating results
may be below the expectations of public market analysts or investors. In such an
event,  the price of our common stock may decline  significantly.  Our operating
expenses are largely fixed in the short term and based, to a significant degree,
on our  estimates of future  revenue.  We will likely be unable to, or may elect
not to,  reduce  spending  quickly  enough  to  offset  any  unexpected  revenue
shortfall.  Therefore,  any significant  shortfall in revenue in relation to our
expectations  would  cause our  quarterly  results  for a  particular  period to
decline.

IN  RECOGNIZING  REVENUES  WE  DEPEND  ON  THE  TIMELY  ACHIEVEMENT  OF  VARIOUS
MILESTONES,  AND OUR  INABILITY TO  RECOGNIZE  REVENUES IN  ACCORDANCE  WITH OUR
EXPECTATIONS WILL HARM OUR OPERATING RESULTS.

In  accordance  with our  revenue  recognition  policy,  our  ability  to record
revenues depends upon several factors.  These factors include  acceptance by our
customers of new courses and the pace of  participant  registrations  in courses
once they are  completed  and made  available  for access.  Most of our customer
contracts  provide  that at least a  portion  of our  revenues  depend on either
course  completion or participant  registration,  or both.  Revenues from custom
course development accounted for approximately 47% of our total revenues for the
fiscal year ended March 31, 2003. Our ability to recognize  revenues from custom
courses  depends upon our customers  providing us with subject  matter  experts,
content and prompt  acceptance  of our work through  each stage of  development.
Accordingly,  if customers do not meet all project deadlines in a timely manner,
we will not be able to recognize  the  revenues  associated  with that  project,
which would harm our operating results.

In addition, if the expected number of participants do not sign up for a course,
our ability to  recognize  revenues  will be delayed,  which could also harm our
operating results in any quarter. Participant registration depends in large part
on the  promotional  activities  of our  customers.  If  customers  fail to take
necessary measures to require employee  enrollment in courses or if they fail to
promote  the course  effectively  to persons  outside  their  organization,  our
ability to recognize revenues and our operating results, could be harmed.

                                      -9-
<PAGE>
WE ARE  LIKELY  TO BE  DEPENDENT  UPON A SMALL  GROUP OF MAJOR  CUSTOMERS  FOR A
SIGNIFICANT  PORTION OF OUR  REVENUES,  AND CHANGES IN SALES TO THESE  CUSTOMERS
COULD HARM OUR PERFORMANCE.

We expect that we will continue to depend upon a small number of customers for a
significant  portion of our revenues.  As a result,  our operating results could
suffer  if we lost  any of  these  customers  or if these  customers  slowed  or
cancelled purchases or delayed payment in any future fiscal or quarterly period.
In the fiscal year ended 2003, our five largest  customers  accounted for 67% of
our total  revenues of $42.1  million  compared to 54% of our total  revenues of
$43.4 million for the fiscal year ended 2002. We expect that our major customers
will continue to account for a significant portion of our revenues during future
fiscal  periods  until we are able to  increase  the  number of new or  existing
long-term, large customers.  Accordingly, changes in these customers' businesses
and in their views regarding the value of e-learning in general and our products
and services in particular could harm our financial performance.

THE LENGTH AND  VARIABILITY  OF OUR SALES CYCLE MAY MAKE OUR  OPERATING  RESULTS
UNPREDICTABLE AND VOLATILE.

The period between our initial  contact with a potential  customer and the first
purchase of our solution by that  customer  typically  ranges from three to nine
months. In some cases the cycle has extended for close to two years.  Because we
rely on relatively  few large sales for a  substantial  portion of our revenues,
these long sales cycles can adversely  affect our financial  performance  in any
quarter.  Factors that may contribute to the variability and length of our sales
cycle include the time periods required for:

  o our education of potential customers about the benefits of our e-learning
    solutions;
  o our potential customers' assessment of the value of online solutions
    compared to traditional educational solutions;
  o our potential customers' evaluation of competitive online solutions; and
  o our potential customers' internal budget and approval processes.

Our lengthy  sales cycle  limits our ability to forecast  the timing and size of
specific sales. This, in turn, makes it difficult to predict quarterly financial
performance.

IF WE RELEASE UPDATED  FUNCTIONALITY OR NEW PRODUCTS  CONTAINING DEFECTS, WE MAY
NEED TO RECONFIGURE  AND  RE-RELEASE  AND OUR BUSINESS AND  REPUTATION  WOULD BE
HARMED.

Products  as complex as ours often  contain  unknown  and  undetected  errors or
performance  problems.  Many  serious  defects are  frequently  found during the
period immediately following introduction and initial deployment of new products
or enhancements to existing products. Although we attempt to resolve all serious
errors  before we release  products to them,  our products  are not  error-free.
These errors or performance  problems could result in lost revenues or delays in
customer acceptance and would be detrimental to our business and reputation.  As
is typical in the industry,  with each release we have discovered  errors in our
products  after  introduction.  We will not be able to detect  and  correct  all
errors before releasing our products  commercially  and these undetected  errors
could  be  significant.  We  cannot  assure  that  these  undetected  errors  or
performance  problems in our existing or future  products will not be discovered
in the future or that known errors considered minor by us will not be considered
serious by our customers, resulting in a decrease in our revenues.

OUR INTERNATIONAL PRESENCE COULD SUBJECT US TO NEW RISKS BECAUSE OF CURRENCY AND
POLITICAL CHANGES, LEGAL AND CULTURAL DIFFERENCES OR ECONOMIC INSTABILITY.

Our strategy includes  international  sales. Our current plans include continued
sales  overseas,  which began during  fiscal 2001,  as well as the creation of a
partner-based support infrastructure for customers around the world. In addition
to our  operations  in India,  we could be affected by  political  and  monetary
changes,  including instability in the Middle East and Central Asia, and changes
required by the European Union.

This international  presence will require significant  management  attention and
financial  resources and could harm our financial  performance by increasing our
costs. We have very limited  experience in marketing,  selling and  distributing
courses internationally.  We could become subject to additional risks as we grow
internationally, including:

o  difficulties in staffing and managing international operations;
o  inability to develop content localized for international jurisdictions;
o  protectionist laws and business practices that favor local competition;
o  multiple, conflicting and changing governmental laws and regulations;
o  slower adoption of e-learning solutions;

                                      -10-
<PAGE>
o  different learning styles;
o  longer sales and payment cycles;
o  difficulties in collecting accounts receivable;
o  fluctuations in currency exchange rates;
o  political and economic instability;
o  adverse tax consequences;
o  little or no protection of our intellectual property rights in certain
   foreign countries;
o  increases in tariffs, duties, price controls or other restrictions on foreign
   currencies; and
o  trade barriers imposed by foreign countries.

If we encounter  these problems in connection  with our current and future sales
growth internationally,  our revenues could fall below expectations, which would
harm our business and operating  results.  In this event,  our stock price could
decline.

OUR GROWTH DEPENDS ON HIRING AND RETAINING  QUALIFIED PERSONNEL IN A COMPETITIVE
EMPLOYMENT MARKET.

The  growth of our  business  and  revenues  will  depend in large part upon our
ability to attract and retain  sufficient  numbers of highly skilled  employees,
particularly  database engineers,  course content developers,  web designers and
sales  personnel.  We plan for most of this new  hiring to take  place in India.
Education  and  Internet  related  industries  create high demand for  qualified
personnel and candidates  experienced in both areas are limited.  Our failure to
attract and retain  sufficient  skilled personnel may limit the rate at which we
can grow,  which will harm our business and financial  performance.  Our success
will depend in large part upon our ability to attract and retain  employees.  We
face  competition  in this regard from other  companies,  but we believe that we
maintain good relations with our employees. None of our employees are members of
organized labor groups.

THE GROWTH OF OUR BUSINESS REQUIRES WIDE ACCEPTANCE OF E-LEARNING SOLUTIONS.

The market for  e-learning  solutions is new and rapidly  evolving.  A number of
factors could impact the acceptance of our e-learning solutions, including:

o   historic reliance on traditional education methods;
o   limited allocation of our customers' and prospective customers' education
    budgets to e-learning; and
o   ineffective use of online learning solutions.

Our  e-learning  solutions  are  new,  largely  untested  and less  familiar  to
prospective customers than more established education methods. If the market for
e-learning fails to develop or develops more slowly than we expect,  we will not
achieve our growth and revenue targets and our stock price will likely decline.

WE MAY NOT HAVE ADEQUATE  RESOURCES TO COMPETE  EFFECTIVELY,  ACQUIRE AND RETAIN
CUSTOMERS AND ATTAIN FUTURE GROWTH IN THE HIGHLY COMPETITIVE E-LEARNING MARKET.

The e-learning market is evolving quickly and is subject to rapid  technological
change,  shifts in customer demands and evolving  learning  methodologies.  As a
result,  customers and potential customers have more choices. This challenges us
to distinguish our offerings.  If we fail to adapt to changes and competition in
our industry,  we may lose existing customers or fail to gain new customers.  No
single  competitor  accounts for a dominant  market share,  yet  competition  is
intense. We compete primarily with:

o    third-party suppliers of instructor-led education and learning;
o    internal education departments; and
o    other suppliers of technology-based learning solutions.

Due to the high market fragmentation,  we do not often compete head-to-head with
any particular company. On occasion,  our customers may evaluate our solution by
comparison with solutions  offered by other  e-learning  companies or even their
own in-house development capabilities. These companies may include publicly-held
companies and other regional web development  organizations.  We may not provide
solutions  that  compare  favorably  with  traditional  or  new   instructor-led
techniques or other  technology-based  learning  methodologies.  Our competitors
vary in size and in the scope and  breadth  of the  courses  and  services  they
offer.   Several  of  our  competitors  have  longer  operating   histories  and
significantly  greater  financial,  technical  and marketing  resources.  Larger
companies  may  enter the  e-learning  market  through  the  acquisition  of our
competitors.  We anticipate  that the lack of significant  entry barriers to the
e-learning market will allow other  competitors to enter the market,  increasing
competition.

                                      -11-
<PAGE>
To  succeed,  we must  continue  to expand our  course  offerings,  upgrade  our
technology  and  distinguish  our  solution.  We  may  not  be  able  to  do  so
successfully.  Any failure by us to anticipate or respond  adequately to changes
in technology  and customer  preferences,  or any  significant  delays in course
development or implementation, could impact our ability to capture market share.
As  competition  continues  to  intensify,  we expect the  e-learning  market to
undergo  significant price competition.  We also expect to face increasing price
pressure from  customers,  as they demand more value for their  learning-related
expenditures.  Increased  competition,  or our inability to compete successfully
against current and future competitors,  could reduce operating margins, loss of
market share and thought leadership resulting in a diminution of our brand.

WE RELY ON  COOPERATION  FROM OUR  CUSTOMERS  AND THIRD  PARTIES TO DEVELOP  AND
DELIVER  COURSES AND OUR BUSINESS WILL SUFFER IF SUCH  COOPERATION  OCCURS IN AN
UNTIMELY OR INEFFICIENT MANNER.

To be  competitive,  we must develop and  introduce on a timely basis new course
offerings,  which  meet the needs of  companies  seeking  to use our  e-learning
solutions.  The quality of our learning  solutions  depends in large part on our
ability  to  frequently  update  our  courses  and  develop  new  content as the
underlying  subject matter changes.  We create courses by incorporating  subject
matter  expertise  provided by our customers and third party content  developers
into an  e-learning  delivery  platform.  The quality of our courses  depends on
receiving  content and  cooperation  from our customers,  subject matter experts
provided by our customers,  and  third-party  content  developers.  If we do not
receive  materials from these sources in a timely manner,  we may not be able to
develop or deliver  specialized  courses to our  customers in the expected  time
frame.  Even if we do  receive  necessary  materials  from  third  parties,  our
employees and consultants must complete their work in a timely manner or we will
not meet  customer or revenue  expectations.  In the past,  we have  experienced
delays in obtaining access to our customers' experts, which has contributed to a
longer  development  cycle and  inefficient  allocation  of our  resources.  Any
prolonged  delays,  even when caused by our customers,  can result in failure to
satisfy a customer's demands, damage our reputation and our inability to achieve
our revenue goals.

OUR PLANS TO EXPAND THE SCOPE OF OUR  COURSES TO FIELDS  OTHER THAN  INFORMATION
TECHNOLOGY DEPENDS ON OUR ABILITY TO DEVELOP  RELATIONSHIPS WITH EXPERTS, AND IF
WE ARE UNABLE TO ATTRACT THE RIGHT EXPERTS, WE MAY NOT BE SUCCESSFUL IN ENTERING
NEW FIELDS.

Our strategy involves broadening the fields presently covered by our courses. In
particular, to date we have been primarily focused on courses in the information
technology  area. We are currently  planning to develop or have  introduced  new
course offerings including global business skills,  financial  services,  retail
and other fields.  These new course  offerings  may encompass  areas in which we
have little or no experience or expertise.  Therefore, our ability to expand our
courses  into these areas will depend in part on our  ability to  negotiate  and
execute content  development  relationships  with recognized  experts or leading
corporations in the new fields.  If we cannot locate these experts,  we may fail
to develop the courses that our current and future  customers  will demand.  The
failure to expand our course offerings to new fields could constrain our revenue
growth and harm our future prospects.

TO REMAIN COMPETITIVE, WE MUST KEEP PACE WITH RAPID TECHNOLOGICAL CHANGES IN OUR
INDUSTRY.

Rapidly  changing  technologies,   frequent  new  service  introductions,  short
development cycles and evolving standards characterize the e-learning market. We
must adapt to rapidly  changing  technologies  by maintaining  and improving the
performance features and reliability of our courses. We may experience technical
difficulties   that  could   delay  or  prevent  the   successful   development,
introduction  or marketing of new courses and related  services.  For  instance,
adding  capabilities  to deliver  video over the  Internet to our courses may be
desired  by  some  customers,  but may  nevertheless  pose a  serious  technical
challenge and could have a negative impact on our ability to develop and deliver
courses on a profitable basis. In addition,  any new enhancements to our courses
must  meet  the  requirements  of our  current  and  prospective  customers  and
participants.  We could  incur  substantial  costs to  modify  our  services  or
infrastructure to adapt to rapid technological change.

THE  EXPECTED  GROWTH IN OUR BUSINESS  REQUIRES  CONTINUOUS  IMPROVEMENT  TO OUR
TECHNOLOGY  INFRASTRUCTURE AND A FAILURE TO MAKE SUCH IMPROVEMENTS COULD LEAD TO
CUSTOMER DISSATISFACTION AND REVENUE LOSSES.

In order meet existing and anticipated  demand,  we must continue to improve the
capacity of our technology  infrastructure.  Our success requires the continuing
and  uninterrupted  performance  of our internal  computer  network and Internet
course servers.  Any system failure that causes  interruptions  or delays in our
ability to make our  courses  accessible  to  customers  could  reduce  customer
satisfaction.  If  sustained  or  repeated,  a system  failure  could reduce the
attractiveness  of our courses and services,  resulting in  significant  revenue
losses.  We are  particularly  vulnerable to network  failures during periods of
rapid growth when our roster of courses and participants can outpace our network
capacity.  The  continued  viability  of our  business  requires  us to  support
multiple participants  concurrently and deliver fast response times with minimal
network delays.  Any failure to meet these capacity  requirements  could lead to
additional   expenditures,   lost  business  opportunities  and  damage  to  our
reputation and competitive position.

                                      -12-
<PAGE>
ANY  FAILURE  OF, OR CAPACITY  CONSTRAINTS  IN, THE SYSTEMS OF THIRD  PARTIES ON
WHICH WE RELY COULD ADVERSELY AFFECT OUR BUSINESS.

Our success is highly  dependent on the  consistent  performance of our Internet
and communications  infrastructure.  Our communications hardware and some of our
other  computer  hardware  operations  are located at the  facilities of Cable &
Wireless in Santa Clara,  California with a back-up facility (fail-over site) in
Sacramento,  California.  Unexpected  events  such as natural  disasters,  power
losses and  vandalism  could  damage our systems.  Telecommunications  failures,
computer  viruses,  electronic  break-ins,  earthquakes,  fires,  floods,  other
natural  disasters or other similar  disruptive  problems could adversely affect
the operation of our systems.  Despite precautions we have taken,  unanticipated
problems affecting our systems in the future could cause interruptions or delays
in the delivery of our courses.

Our telecommunications vendor and our co-location facilities together provide us
with our Internet  connection.  Their failure to provide  sufficient  and timely
data  communications  capacity and network  infrastructure  could cause  service
interruptions or slower response times, resulting in reduced customer demand for
our courses and services.  Our insurance policies may not adequately  compensate
us for any  losses  that may occur due to any  damages or  interruptions  in our
systems.  We could be  required  to make  capital  expenditures  in the event of
damage.  Any system failures could adversely affect customer usage in any future
quarters,  which could adversely  affect our revenues and operating  results and
harm our reputation with corporate customers, subscribers and commerce partners.

We do not currently have a fully  redundant  fail-over site or a formal disaster
recovery  plan.  Our  web-site  must  accommodate  a high  volume of traffic and
deliver courses and other  information in a timely manner. If our Web site fails
for any reason or if we experience periods of unscheduled downtimes,  even for a
short period of time, our business and reputation would be materially harmed. We
cannot accurately  project the rate or timing of any increases in traffic to our
Web site and the failure to expand and upgrade the Web site or any system error;
failure or extended  downtime could  materially  harm our business,  reputation,
financial  condition  or  results  of  operations.  We  are in  the  process  of
developing a fully redundant fail-over site in Sacramento,  California, expected
to be operational in the first half of fiscal 2004.

WE MAY BECOME  SUBJECT TO GOVERNMENT  REGULATION  AND LEGAL  UNCERTAINTIES  THAT
COULD REDUCE  DEMAND FOR OUR PRODUCTS AND SERVICES OR INCREASE THE COST OF DOING
BUSINESS, THEREBY ADVERSELY AFFECTING OUR FINANCIAL RESULTS.

We are not  currently  subject to direct  regulation  by any domestic or foreign
governmental agency, other than regulations  applicable to businesses generally,
export  control laws and laws or  regulations  directly  applicable  to Internet
commerce.  However, due to the increasing popularity and use of the Internet, it
is possible that a number of laws and regulations may become applicable to us or
may be adopted in the future with respect to the Internet  covering  issues such
as:

      o user privacy;
      o taxation;
      o content;
      o right to access personal data;
      o copyrights;
      o distribution; and
      o characteristics and quality of services.

The applicability of existing laws governing issues such as property  ownership,
copyrights, and other intellectual property issues, encryption, taxation, libel,
export or import matters and personal privacy to the Internet is uncertain.  The
vast  majority of these laws were adopted prior to the broad  commercial  use of
the Internet and related  technologies.  As a result, they do not contemplate or
address the unique issues of the Internet and related  technologies.  Changes to
these laws,  including some recently proposed changes,  could create uncertainty
in the  Internet  marketplace.  Such  uncertainty  could  reduce  demand for our
services  or  increase  the cost of doing  business  due to  increased  costs of
litigation or increased service delivery costs.

                                      -13-
<PAGE>
OUR INABILITY TO PROTECT OUR  INTELLECTUAL  PROPERTY AND PROPRIETARY  RIGHTS AND
OUR  INTERNET  DOMAIN  NAME COULD  LEAD TO  UNAUTHORIZED  USE OF OUR  COURSES OR
RESTRICT OUR ABILITY TO MARKET OUR COURSES.

Our  success  depends  on our  ability  to protect  our  proprietary  rights and
technology. We rely on a combination of copyrights,  trademarks,  service marks,
trade secret laws and  employee  and  third-party  nondisclosure  agreements  to
protect our proprietary rights.  Despite our efforts,  unauthorized  parties may
attempt to duplicate or copy our courses or our  delivery  technology  or obtain
and use  information  that we regard as proprietary and third parties may assert
that our technology and intellectual  property  infringes  patents,  trademarks,
copyrights  and trade  secrets.  The laws of many  countries  do not protect our
proprietary  rights  to the  same  extent  as the  laws  of the  United  States.
Effective trademark, service mark, copyright and trade secret protection may not
be available in every country in which we provide our courses and services.

We have  registered  the  trademark  DigitalThink  and we own the  domain  names
digitalthink.com,  digitalthink.org,  digitalthink.net. It is possible, however,
that  third  parties   could  acquire   trademarks  or  domain  names  that  are
substantially similar or conceptually similar to our trademarks or domain names.
This could  decrease the value of our  trademarks or domain names and could hurt
our business. The regulation of domain names in the United States and in foreign
countries could change. The relationship  between  regulations  governing domain
names and laws protecting  trademarks and similar proprietary rights is unclear.
As a result, we may not acquire or maintain exclusive rights to our domain names
in the United States or in other countries in which we conduct business.

We may  from  time  to time  encounter  disputes  over  rights  and  obligations
concerning  intellectual property. We obtain the content for many of our courses
from our  customers  and it is possible that the use of this content may subject
us to the intellectual  property claims of third parties.  Although we generally
seek  indemnification  from our  customers  to protect  us from  these  types of
claims, we may not be fully protected from extensive damage claims or claims for
injunctive  relief. Our customers may assert that some of the courses we develop
for our general  catalog or under  contract with other  customers may improperly
use their  proprietary  content.  Our  involvement  in any litigation to resolve
intellectual  property  ownership  matters would require us to incur substantial
costs and divert  management's  attention and  resources.  We cannot predict the
effect of a failure to prevail in any litigation of this kind.

WE ARE SUBJECT TO PENDING LEGAL PROCEEDINGS AND MAY BECOME SUBJECT TO ADDITIONAL
PROCEEDINGS. THESE PROCEEDINGS COULD HARM OUR BUSINESS.

In October 2001, a complaint was filed in the United States  District  Court for
the Southern  District of New York against the Company,  certain of its officers
and  directors,  and  certain  underwriters  of  the  Company's  initial  public
offering.  The complaint was  purportedly  filed on behalf of a class or certain
persons who purchased  DigitalThink's common stock between February 24, 2000 and
December 6, 2000.  The complaint  alleges  violations by us and our officers and
directors of the  Securities  Act of 1933 in  connection  with  certain  alleged
compensation  arrangements  entered into by the  underwriters in connection with
the offering.  Substantially similar complaints have been filed against over 300
other issuers that have had initial public offerings since 1998.

In August 2002, a complaint  was filed in the United States  District  Court for
the Northern  District of California by IP Learn,  LLC against  DigitalThink and
two of its  customers.  The  complaint  alleges that we have  infringed  certain
patents that have been assigned to IP Learn.  Substantially  similar  complaints
have been filed against other  companies in the e-learning  industry,  including
Skillsoft Corporation, Saba Software, Inc. and Docent, Inc.

In November 2002, a complaint was filed in the United States  District Court for
the Southern District of Texas, Houston Division by IP Innovation LLC v. Thomson
Learning, Inc., Skillsoft Corporation, eCollege.com, DigitalThink, Inc., Docent,
Inc., Blackboard, Inc., Global Knowledge Network, Inc. and The Princeton Review.
The complaint  alleges that we and the other  defendants have infringed a patent
that has been assigned to IP Innovation.

We believe that all of these  actions are without merit and intend to vigorously
defend  ourselves  against all of them.  Although  we believe  that all of these
actions  will be  resolved  in a manner  favorable  to us, we  cannot  presently
determine  the  outcome.  An  adverse  resolution  of any of these  matters,  or
protracted  litigation,  could  significantly  negatively  impact our  financial
position  and results of  operations  and could  divert  significant  management
resources.

We may be from time to time  involved in other  lawsuits  and legal  proceedings
that arise in the ordinary  course of business.  An adverse  resolution of these
matters could significantly negatively impact our financial position and results
of operations.

THE PRICE OF OUR COMMON STOCK HAS FLUCTUATED  SIGNIFICANTLY  IN THE PAST AND MAY
CONTINUE TO DO SO.

Our common stock price has  fluctuated  significantly  since our initial  public
offering in February  2000.  While much of the  fluctuation  in our common stock
price may be due to our  business  and  financial  performance,  we believe that

                                      -14-
<PAGE>
these  fluctuations  are also due to fluctuations in the stock market in general
based on  factors  not  directly  related  to our  performance,  such as general
economic  conditions  or  prevailing  interest  rates.  As  a  result  of  these
fluctuations  in the price of our common stock,  it is difficult to predict what
the price of our common  stock will be at any point in the  future,  and you may
not be able to sell your  common  stock at or above the price  that you paid for
it.

PROVISIONS  OF OUR CHARTER  DOCUMENTS  AND DELAWARE  LAW MAY HAVE  ANTI-TAKEOVER
EFFECTS  THAT  COULD  PREVENT A CHANGE  IN OUR  CONTROL,  EVEN IF THIS  WOULD BE
BENEFICIAL TO STOCKHOLDERS.

We have put in place a Shareholder Rights Plan that grants existing stockholders
additional rights in the event that a single holder acquires greater than 15% of
our  shares.  In July 2002,  our Board  amended the  Shareholder  Rights Plan to
permit WaldenVC and their  affiliated  entities and persons to purchase,  in the
aggregate,  up to 20% of the  outstanding  shares of  DigitalThink.  At the same
time, we also entered into an agreement with WaldenVC,  in which WaldenVC agreed
to vote  their  shares in  direct  proportion  to the  votes  cast by all of our
stockholders in each stockholder election.

Provisions of our amended and restated certificate of incorporation,  bylaws and
Delaware law could make it more  difficult for a third party to acquire us, even
if doing so would be beneficial to our stockholders. These provisions include:

o   a classified board of directors, in which our board is divided into three
    classes with three year terms with only one class elected at each annual
    meeting of stockholders, which means that a holder of a majority of our
    common stock will need two annual meetings of stockholders to gain control
    of the board;
o   a provision that prohibits our stockholders from acting by written consent
    without a meeting;
o   a  provision  that  permits  only the board of  directors,  the  president
    or the  chairman  to call  special  meetings of stockholders; and
o   a provision that requires advance notice of items of business to be brought
    before stockholders meetings.

Amending any of the above  provisions will require the vote of the holders of 66
2/3% of our outstanding common stock.

                    WHERE YOU CAN FIND ADDITIONAL INFORMATION

We file annual,  quarterly  and special  reports,  proxy  statements,  and other
information  with the SEC.  You may  read and copy any  document  we file at the
SEC's public  reference room at Room 1024, 450 Fifth Street,  N.W.,  Washington,
D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the
public  reference rooms. Our SEC filings are also available to the public at the
SEC's web site at  http://www.sec.gov.  Additional  information  about us may be
found on our web site at http://www.digitalthink.com.

                                      -15-
<PAGE>
Item 2. Properties

We currently lease a total of approximately  116,000 square feet of office space
in  two  locations  in  San   Francisco,   California   and  we  have  subleased
approximately 42,000 square feet of this space to a third party. In addition, we
have  approximately  25,000 square feet of leased building space in Minneapolis,
Minnesota,  which we have subleased,  approximately  4,000 square feet of leased
building  space in Troy,  Michigan,  approximately  3,000  square feet of leased
office space in Chisholm,  Minnesota,  approximately 3,000 square feet of leased
office  space in Chicago,  Illinois,  approximately  8,000 square feet of leased
building space in the United Kingdom and a total of approximately  30,000 square
feet of leased  building space in India in the cities of Kolkata,  Bangalore and
Hyderabad.  These  leases  expire at  varying  dates  through  2016 and  include
renewals at our option.

In March  2002,  we  consolidated  our sales,  administrative  and  content  and
technology  development  facilities from a total of approximately 244,000 square
feet into approximately 100,000 square feet. As a result, we took a $6.8 million
charge to earnings with respect to leases for excess or closed facilities, which
represents the excess of such remaining lease  obligations over estimated market
value, net of anticipated  sublease income.  Amounts accrued (net of anticipated
sublease  proceeds) related to the consolidation of facilities will be paid over
the respective lease terms through 2016.  During the fiscal year ended March 31,
2003, four sites have been vacated: Chisholm, Minnesota; Minneapolis, Minnesota;
Troy, Michigan; and our office in the United Kingdom.

Item 3. Legal Proceedings

In October 2001, a complaint was filed in the United States  District  Court for
the Southern District of New York against DigitalThink,  certain of our officers
and directors,  and certain  underwriters  of our initial public  offering.  The
complaint  was  purportedly  filed on behalf of a class or certain  persons  who
purchased  DigitalThink's common stock between February 24, 2000 and December 6,
2000.  The complaint  alleges  violations by  DigitalThink  and its officers and
directors of the  Securities  Act of 1933 in  connection  with  certain  alleged
compensation  arrangements  entered into by the  underwriters in connection with
the offering.  Substantially similar complaints have been filed against over 300
other issuers that have had initial public  offerings since 1998. The plaintiffs
seek unspecified monetary damages and other relief.

In August 2002, a complaint  was filed in the United States  District  Court for
the Northern  District of California by IP Learn,  LLC against  DigitalThink and
two of its  customers.  The complaint  alleges that  DigitalThink  has infringed
certain  patents  that have been  assigned  to IP Learn.  Substantially  similar
complaints have been filed against other  companies in the e-learning  industry,
including  Skillsoft  Corporation,  Saba  Software,  Inc.  and Docent,  Inc. The
plaintiffs seek unspecified monetary damages and other relief.

In November 2002, a complaint was filed in the United States  District Court for
the Southern District of Texas, Houston Division by IP Innovation LLC v. Thomson
Learning, Inc., Skillsoft Corporation, eCollege.com, DigitalThink, Inc., Docent,
Inc., Blackboard, Inc., Global Knowledge Network, Inc. and The Princeton Review.
The complaint  alleges that DigitalThink and the other defendants have infringed
a  patent  that  has  been  assigned  to  IP  Innovation.  The  plaintiffs  seek
unspecified monetary damages and other relief.

We believe these  lawsuits are without  merit and intend to defend  against them
vigorously.

Item 4. Submission of Matters to a Vote of Security Holders

We did not submit any  matters to a vote of security  holders  during the fourth
quarter ended March 31, 2003.

                                      -16-
<PAGE>
                                   MANAGEMENT

Executive Officers of the Registrant

<TABLE>

<S>                               <C>   <C>
Michael W. Pope..............     36    President and Chief Executive Officer
Robert J. Krolik.............     34    Chief Financial Officer and Secretary
Todd A. Clyde................     38    Vice President, Consulting and Market
                                          Solutions
Linda T. Drumright...........     42    Vice President, Engineering
Michael Schroeder............     43    Vice President, Human Resources
Umberto Milletti.............     37    Vice President, Solutions Management
J. Jay Tyler.................     48    Executive Vice President, Sales and
                                          Marketing
</TABLE>

Michael W. Pope has served as our  President and Chief  Executive  Officer since
April 2002.  Prior to that he was Vice President,  Chief Financial  Officer from
October 1999 to April 2002.  From June 1992 to October 1999,  Mr. Pope served in
various  positions  at  Dionex  Corporation,  a  manufacturer  and  marketer  of
chromatography systems and related products for chemical analysis, most recently
as Chief  Financial  Officer  from  April 1994 to October  1999.  Mr.  Pope is a
director of Dionex Corporation.  Mr. Pope holds a B.A. in Quantitative Economics
from Stanford  University  and a M.B.A.  from the Haas School of Business at the
University of California at Berkeley.

Robert J. Krolik has served as Chief Financial  Officer since April 2002 and has
served as  Secretary  since  April  2003.  From  March 2001 to April 2002 he was
Corporate Controller. Prior to that he was Chief Financial Officer of Karna LLC,
a technology  company,  from  September  1999 to March 2001.  From April 1997 to
September 1999 he was Director of Finance of SRI Consulting,  a consulting firm.
From July 1991 to March 1997 he held  various  positions at Arthur  Andersen,  a
public  accounting  firm, most recently as manager from July 1996 to March 1997.
Mr. Krolik holds a B.B.A. in Finance from the University of Texas at Austin.  He
is also a Certified Public Accountant.

Todd A.  Clyde has served as Vice  President,  Consulting  and Market  Solutions
since January 2001. Prior to that he was Vice President, Learning Solutions from
March 1998 to December  2000.  From October  1986 to March 1998,  Mr. Clyde held
several  positions  with  Andersen  Consulting  (now  Accenture),  a  management
consulting  firm,  most  recently as Senior  Manager.  Mr. Clyde holds a B.A. in
Management Science from the University of California at San Diego.

Linda T. Drumright has served as Vice President, Engineering since October 1999.
From  August  1998 to October  1999,  Ms.  Drumright  served as Vice  President,
Budgeting, Planning and Forecasting Application Product Development for Hyperion
Solutions Corporation,  a developer of enterprise analytic application software.
Prior to that, from July 1997 to August 1998, she was the Senior Director of the
Tools and  Applications  Division at Arbor Software  Corp., a database  software
developer,  and  from  June  1990 to  July  1997,  she  held  several  technical
positions,  including Senior Manager,  at Sybase,  Inc., an enterprise  software
company.  Ms.  Drumright holds a B.A. in Computer Science from the University of
California at Berkeley.

Michael  Schroeder has served as Vice  President,  Human  Resources  since April
2003.  Prior to that he was Vice  President,  Human Resources at Alphablox Corp.
from August 2000 to August 2002 . From August 1992 to August 2000, Mr. Schroeder
served in various  positions at Synopsys  Inc.,  a  manufacturer  of  high-level
design  automation  software used in the development of integrated  circuits and
systems,  most recently as Vice  President,  Human  Resources for Business Group
Operations.  Prior to this he worked at Apple  Computer  as a Senior  Employment
Consultant from March 1988 to August 1992. Mr. Schroeder attended the University
of Wisconsin, Milwaukee from 1978-1981 as a Russian Language major.

Umberto Milletti is one of our co-founders and has served as our Vice President,
Solutions  Management  since  April  1996.  From March 1993 to March  1996,  Mr.
Milletti  was  Director  of  Product  Development  at  Knowledge  Revolution,  a
developer of educational and engineering software.  Mr. Milletti holds a B.S. in
Electrical   Engineering   from  Tufts  University  and  a  M.S.  in  Electrical
Engineering and Computer Science from the University of California at Berkeley.

J. Jay Tyler has served as Executive Vice President of Sales and Marketing since
January 2003.  Prior to that he was the Senior Vice President of WorldWide Sales
at Clarify,  Inc., an enterprise software company,  from January 1999 to January
2001. From January 1995 through  December 1998 he was a Group Vice President for
Gartner Group a leading provider of I.T. research and advisory  services.  Prior
to this he worked at Xerox for 18 years, most recently as National Sales Manager
for the Printing  Systems  Division.  Mr.  Tyler holds a B.S. in Marketing  from
California State University, Chico.

                                      -17-
<PAGE>
                                     PART II

Item 5. Market for Registrant's Common Equity and Related Stock Matters

Our common stock is traded on the Nasdaq National Market System under the symbol
DTHK. The following table sets forth, for the period indicated, the low and high
bid prices per share for our common  stock as  reported  by the Nasdaq  National
Market.

<TABLE>
<CAPTION>
                                   Fiscal Year ended         Fiscal Year ended
                                     March 31, 2003           March 31, 2002
                                 ---------------------   -----------------------
                                    Low         High         Low          High
                                 ---------  ----------   ----------    ---------
<S>                              <C>        <C>          <C>           <C>
     First quarter...............$   0.85     $   2.30    $   5.34      $  10.38
     Second quarter..............$   0.95     $   2.10    $   6.39      $  15.20
     Third quarter...............$   1.00     $   2.40    $   5.87      $  12.19
     Fourth quarter. ............$   1.54     $   2.90    $   2.16      $  11.65
</TABLE>

As of May  27,  2003  there  were  approximately  5,650  holders  of  record  of
DigitalThink Common Stock.

No dividends  have been paid on our common stock since  inception.  We currently
intend to retain all future earnings, if any, for use in our business and do not
anticipate paying cash dividends in the foreseeable future.

                      EQUITY COMPENSATION PLAN INFORMATION

For information  regarding  common stock that may be issued upon the exercise of
options,  warrants and other  rights  granted  under our  existing  compensation
plans, see Item 12 of Part III of this Report.

                                      -18-
<PAGE>
Item 6. Selected Financial Data

    The following selected consolidated financial data should be read in
conjunction with the Consolidated Financial Statements and related notes thereto
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing elsewhere in this Form 10-K.

<TABLE>
<CAPTION>

                                               Year Ended March 31,
                                     -------------------------------------------
                                      1999     2000      2001      2002    2003
                                     ------   ------    ------    ------  ------
                                         (In thousands, except per share data)
<S>                                  <C>      <C>       <C>       <C>      <C>
Revenues:
  Delivered Learning fees (1)...... $ 1,034  $ 4,994  $17,978 $ 20,401 $ 22,518
  Learning Solution services (1)...     813    5,821   20,680   22,955   19,609
                                     ------  -------   ------   -------  -------
         Total revenues............   1,847   10,815   38,658   43,356   42,127
                                     ------  -------   ------   -------  -------
Costs and expenses:
  Cost of Delivered Learning fees...    855    2,409    5,509    6,619    4,834
  Cost of Learning Solution services    361    3,337   11,211   11,934    6,911
  Content research and development..  1,657    4,082    6,092    7,094    5,747
  Technology research and development 1,005    3,687   11,791   11,318    7,166
  Selling and marketing.............. 2,970   11,596   23,105   21,208   13,418
  General and administrative.........   622    2,342    6,046    7,355    6,853
  Depreciation.......................   236      915    3,190    5,274    6,870
  Amortization of warrants...........    --       --   13,131   11,003        9
  Stock-based compensation *.........    58    3,663    5,432    1,888      349
  Amortization of goodwill and other
      intangibles...................     --       --    3,602    7,208    1,364
  Write-off of in-process research
      and development................    --       --    7,118      --        --
  Impairment of goodwill.............    --       --       --   10,437       --
  Acquisition-related charges........    --       --       --    5,792       --
  Restructuring charge (recovery)....    --       --       --    9,778      (83)
                                      ------  -------  ------  -------   -------
         Total costs and expenses.... 7,764   32,031   96,227  116,908   53,438
                                      ------  -------  ------  -------   -------
Loss from operations.................(5,917) (21,216) (57,569) (73,552) (11,311)
Penalty income recognized (1)........    --       --       --   10,000       --
Interest and other income............   166    1,055    5,344    1,911      255
                                      ------  -------  ------  -------   -------
Net loss before cumulative effect of
      accounting change..............(5,751) (20,161) (52,225) (61,641) (11,056)
Cumulative effect of accounting
      change.........................    --       --       --       --  (50,189)
                                      ------  -------  ------  -------   -------
Net loss........................... $(5,751)$(20,161)$(52,225)$(61,641)$(61,245)
                                    ======== ======= ========= =======  ========
Accretion of redeemable convertible
 preferred stock....................$ 3,518 $  7,593 $     -- $     -- $      --
                                    -------- ------- -------- -------- ---------
Loss attributable to common
 shareholders.......................$(9,269)$(27,754)$(52,225)$(61,641)$(61,245)
                                    -------- ------- -------- -------- ---------
Basic and diluted loss per
  common share......................$ (2.26)$  (3.87)$  (1.51)$  (1.61)$  (1.49)
                                    -------- ------- -------- -------- ---------
Shares used in basic and diluted
  loss per common share.............  4,095    7,164   34,524   38,176   41,203
                                    -------- ------- -------- -------- ---------
Pro forma basic and diluted loss
  per common share(2)............... $(0.56) $ (1.09)$  (1.51)$  (1.61)$  (1.49)
                                    ======== ======= ========= =======  ========
Shares used in pro forma basic
  and diluted net loss per
  common share (3).................. 16,687   25,412   34,524   38,176   41,203
                                    ======== ======= ========= =======  ========
</TABLE>

<TABLE>
<CAPTION>

                                                      March 31,
                                   -------------------------------------------
                                     1999     2000     2001     2002    2003
                                   -------  ------    ------   ------  -------
<S>                                 <C>       <C>      <C>      <C>     <C>
Balance sheet data:
Cash and cash equivalents and
 marketable securities......     $  9,455 $ 96,698 $ 64,038 $ 31,110  $ 22,668
Current assets..............       10,604  102,812   77,183   38,564    31,314
Current liabilities.........        2,251   12,296   22,543   21,127    19,138
Working capital (4).........        8,353   90,516   54,640   17,437    12,176
Total assets................       11,330  110,176  111,687  136,272    73,612
Redeemable convertible
    preferred stock.........       24,583       --       --       --        --
Long-term restructuring charge
   and capital lease
   obligations..............           --       --       17    5,419     4,716
Accumulated deficit.........      (15,573) (43,327) (95,552)(157,193) (218,438)
Total stockholders' equity
   (deficit)................     $(15,505)$ 97,880 $ 89,127 $109,726  $ 49,758
(*) Stock-based compensation:
    Cost of Delivered Learning
       fees.................     $      3 $    143 $    121 $     28  $      3
    Cost of Learning Solution
       services.............            4      318      500      165        35
    Content research and
       development..........            4       72       76       34         3
    Technology research and
       development..........           13      473    1,329      555        87
    Selling and marketing...           25    1,042    1,391      451       111
    General and administrative          9    1,615    2,015      655       110
                                  -------- --------  -------  -------- ---------
    Total....................    $     58 $  3,663 $  5,432 $  1,888  $    349
                                  ======== ======= ========= =======  ==========
</TABLE>

                                      -19-
<PAGE>
(1) Reflects the forgiveness of the penalty associated with the restructuring of
an agreement with EDS resulting in a reduction of revenues of $8.8 million and
$1.2 million for Delivery Learning fees and Learning Solution services,
respectively, and $10 million of penalty income recognized in the fiscal year
ended March 31, 2002.
(2) Pro forma basic and diluted loss per common share is computed by dividing
net loss by the weighted average number of shares outstanding for the period and
the weighted average number of common shares resulting from the assumed
conversion of outstanding shares of redeemable convertible preferred stock. All
shares of preferred stock were converted to common shares at the initial public
offering dated February 25, 2000.
(3) Shares used in pro forma basic and diluted net loss per common share assumes
the conversion of preferred stock into an equivalent number of shares of common
stock at time of issuance.
(4) Working capital is the difference between current assets and current
liabilities.

                                      -20-
<PAGE>
Item 7. Management's  Discussion and Analysis of Financial Condition and Results
of Operations

The following  Management's  Discussion and Analysis of Financial  Condition and
Results of Operations  contains  forward-looking  statements  based upon current
expectations that involve risks and  uncertainties.  When used in this document,
the words "intend,"  "anticipate,"  "believe,"  "estimate," "plan," and "expect"
and  similar  expressions  as  they  relate  to  us  are  included  to  identify
forward-looking  statements. Our actual results and the timing of certain events
could  differ  materially  from  those  anticipated  in  these   forward-looking
statements as a result of certain factors, including those set forth under "Risk
Factors" in this document.

Overview

We  provide  custom  e-learning  solutions  designed  to address  the  strategic
business  objectives  of our  customers  through  training  courseware  and  the
delivery of that courseware on a robust  technology  platform.  We completed the
initial  development of our delivery  technology  and initial  content and began
significant  sales and marketing  efforts in fiscal year 1998. In November 1999,
we reincorporated in Delaware from California.

We provide  online  learning  courses and services,  which we refer to as custom
e-learning solutions. We were founded in April 1996. In fiscal 1997, we invested
in both course content  development and research and development as we built our
course offerings and technology, releasing our first course in the later part of
fiscal 1997. Since fiscal 1998, we have made significant  investments in content
research and development,  sales and marketing  activities,  technology research
and development,  Web delivery,  and customer support. We experienced  headcount
fluctuations during this period. We grew from 40 employees on March 31, 1998, to
235 on March 31, 2000,  to 441 on March 31, 2001,  to 464 employees on March 31,
2002, and decreased to 410 employees at March 31, 2003.  Our revenues  increased
from  $200,000 in fiscal 1998,  to $1.8 million in fiscal 1999, to $10.8 million
in fiscal  2000,  to $38.7  million in fiscal  2001,  and  decreased  from $43.4
million in fiscal 2002, to $42.1 million in fiscal 2003.

Sources of Revenues and Revenue Recognition Policy

We deliver our custom e-learning solutions through a catalog of existing courses
and through  customized content tailored to the specific needs of our customers.
We  refer  to  the  individuals  taking  courses  as  participants.   Customized
e-learning  courses have  accounted  for, and we expect will continue to account
for, a significant portion of our total revenues.

Delivered Learning fees allow access to training systems,  courses hosted by the
Company,  tutor  support,  and  other  learning  materials  for a fixed  period,
typically six to twelve months.  Revenues for Learning Solution services include
custom course development and consulting services.

We generate  revenues by delivering  courses  included in our course  catalog as
well as delivering our customized e-learning courses to participants.  Customers
that enter into Delivered Learning contracts provide participants with access to
our online courses and tutor support. Additionally,  customers are provided with
access to management systems that allow them to track and monitor  participants'
performance.  Delivered Learning contracts typically allow for a specific number
of registered participants, based on a per participant fee. These contracts also
typically limit the period of time over which  participants can register for and
complete an online course. We begin  recognizing  these Delivered  Learning fees
when a participant  registers for a course.  These fees are  recognized  ratably
over the time period a participant has access to the course,  which is typically
six to twelve months.  Customers typically pay for the courses in advance of the
anticipated  timeframe of course registration and do not receive refunds for the
unused  portion of the available  registrations  agreed to in the  contract.  In
cases where we allow  unlimited  access to our courses for a specific  period of
time, revenue is recognized ratably over the term of the contract.

We also derive  revenues from  contracts  that require  development  of tailored
e-learning  solutions.  Typically,  these Learning Solution service revenues are
generated  from course content  development,  performance  consulting  services,
implementation  services,  instructional  plan design, and release of the course
for access by participants and are recognized as earned in accordance with AICPA
Statement of Position  ("SOP") 81-1,  Accounting for Performance of Construction
Production-Type  Contracts,  as  development  progresses  on the  percentage  of
completion method. We measure the percentage of completion based on the ratio of
actual custom  development or service costs incurred to date, to total estimated
costs to complete the custom course or service.  Provisions for estimated losses
on  incomplete  contracts  will  be  made on a  contract-by-contract  basis  and
recognized  in the  period  in which  such  losses  become  probable  and can be
reasonably estimated.  To date, there have been no such losses. Custom contracts
typically  call for  non-refundable  payments  due upon  achievement  of certain
milestones in the production of courses or in consulting services.

Delivered  Learning  fees  and  Learning  Solution  service  revenues  are  each
recognized  only when  collection is probable and there is evidence that we have
completed our obligation.  If a contract  includes both Delivered  Learning fees
and Learning Solution services, the revenues are apportioned consistent with the

                                      -21-
<PAGE>
value  associated  with each and the term of the contract.  In all cases,  these
revenues are recognized in accordance with the policies detailed above.

We have entered into revenue  sharing  agreements with some of our customers and
have certain reseller agreements.  Under revenue sharing agreements,  we receive
royalties or similar  payments based on sales of courses by the customer.  Under
reseller agreements, we provide the reseller with courses at a discount from our
list price. The reseller then assumes responsibility for sales,  marketing,  and
related  activities,  and we would  not  expect to incur  significant  sales and
marketing expenses in connection with reseller sales.

We have  experienced  losses in each quarter since our inception and expect that
our quarterly  losses will  continue at least through the next two quarters.  We
expect that these losses will result in large part from our ongoing  emphasis on
course  development.  As of March 31,  2003,  we had an  accumulated  deficit of
$218.4  million.  In addition,  we derive a significant  portion of our revenues
from a limited  number of customers and the  percentage of our revenues from any
one customer can be material. For example, in fiscal 2003, our largest customer,
EDS,  accounted for 37.1% and another customer  accounted for 14.4% of our total
revenues of $42.1  million.  In fiscal 2002,  EDS accounted for 8.8% and another
customer  accounted for 15.5% of our total revenues of $43.4  million,  or 25.9%
and 12.6%,  respectively,  when  excluding  the  forgiveness  of a $10.0 million
penalty  associated with the  restructuring  of an agreement with EDS. We expect
that EDS and other major  customers  will  continue to account for a significant
portion of our  revenues  during  future  fiscal  periods.  Sales to our largest
customer comprised 10% of our revenues in fiscal 2001.

Stock-Based Compensation

Deferred stock compensation represents the difference between the estimated fair
value of the common stock for accounting  purposes and the option exercise price
at the date of grant.  We recorded  deferred stock  compensation  of $390,000 in
fiscal 1999,  and $11.3 million in fiscal 2000,  and $1.6 million in fiscal 2001
in connection  with an  acquisition.  These amounts are being amortized over the
four-year  vesting  period of the options  using the multiple  option  approach.
Stock-based  compensation  expense of $3.7  million was recorded in fiscal 2000,
$5.4 million was  recorded in fiscal  2001,  $1.9 million was recorded in fiscal
2002,  and  $349,000  was  recorded  in  fiscal  2003.  See  Note 8 of  Notes To
Consolidated Financial Statements.

Net Operating Loss Carryforwards

From  inception  through  March 31, 2003, we incurred net losses for federal and
state income tax purposes and have not  recognized  any income tax  provision or
benefit.  As of March 31, 2003, we had approximately $126 million of federal and
$86 million of state net operating loss carryforwards.  These net operating loss
carryforwards  begin to expire in 2008 and 2005 for federal and state  purposes,
respectively. The difference between book accumulated deficit and cumulative tax
net operating  losses at March 31, 2003 is due  primarily to permanent  goodwill
related to our stock  acquisitions  and warrant  expense that are not deductible
for tax purposes.  Given our limited  operating  history and losses  incurred to
date,  coupled with difficulty in forecasting  future results,  a full valuation
allowance has been recorded.  Furthermore,  as a result of changes in our equity
ownership  from our  preferred  stock  offerings  and initial  public  offering,
utilization  of  net  operating  losses  and  tax  credits  may  be  subject  to
substantial annual limitations.  This is due to the ownership change limitations
provided by the Internal Revenue Code and similar state  provisions.  The degree
of any such  limitation  cannot  presently be  estimated.  To date,  we have not
performed an evaluation to determine if such a limitation exists, and we may not
perform such an evaluation until and unless we are profitable in the future. The
annual  limitation may result in the expiration of net operating  losses and tax
credits  before  utilization.  See  Note 7 of Notes  To  Consolidated  Financial
Statements.

Acquisition of Arista Knowledge Systems

On July 6, 2000 we acquired Arista Knowledge Systems, Inc. ("Arista"), a company
providing  Internet-based  learning  management  systems.   DigitalThink  issued
approximately  746,000  shares of  DigitalThink  common  stock in  exchange  for
outstanding  stock,  options  and  warrants  of  Arista.  The total  cost of the
acquisition,  including  transaction costs, was approximately $26.3 million. The
acquisition  was  accounted  for as a  purchase;  accordingly,  the  results  of
operations of Arista have been  included  with our results of  operations  since
July  6,  2000.  Of the  purchase  price,  $7.1  million  represented  purchased
in-process  technology  that was estimated to be 70% complete in its development
at the time of  acquisition.  The  in-process  technology  represented a turnkey
solution  for  education  and  knowledge  distribution  systems that had not yet
reached   technological   feasibility   and  had  no  alternative   future  use.
Accordingly,  this amount was  immediately  expensed  upon  consummation  of the
acquisition.  The value of intangibles was based upon management's  estimates of
after-tax  cash flow.  The valuation gave  consideration  to the following:  (i)
comprehensive due diligence concerning all potential intangibles; (ii) the value
of developed and core technology, ensuring that the relative allocations to core
technology and in-process  research and  development,  were  consistent with the
contribution of final products;  (iii) the allocation to in-process research and
development  was based  upon a  calculation  that only  considered  the  efforts
completed as of the date of the transaction, and only cash flows associated with
one generation of products currently in-process; and (iv) it was performed by an
independent  valuation group. A discount rate of 28% was used for the in-process
technology.  Intangible  assets acquired were being amortized on a straight-line
basis over a period of up to four years.  As part of our  ongoing  review of our

                                      -22-
<PAGE>
operations and financial performance, we performed an assessment of the carrying
value of  long-lived  assets to be held for using  including  goodwill and other
intangible  assets  recorded in connection  with our various  acquisitions.  The
assessment was performed pursuant to SFAS No. 121, Accounting for the Impairment
of Long-Lived  Assets and Long-Lived Assets to Be Disposed Of. The conclusion of
that assessment was that the value of the technology  purchased  associated with
the Arista  acquisition was no longer being used our current  product  offerings
and was not part of the product roadmap for the future. As a result, we recorded
charges of $10.4  million to  write-off  the Arista  goodwill  during the fourth
quarter of fiscal 2002 as it no longer had any recoverable value.

Acquisition of LearningByte International

Effective August 28, 2001, we acquired LearningByte International, Inc. ("LBI"),
a provider of custom  e-learning  courseware,  in exchange  for an  agreement to
issue  approximately 4.7 million shares of DigitalThink  common stock and assume
warrants to purchase  approximately  500,000  shares of our common stock,  for a
total purchase price of approximately $68 million,  including transaction costs.
The acquisition of LBI was accounted for as a purchase;  accordingly the results
of operations  of LBI have been  included  with our results of operations  since
August 28, 2001. The assets  acquired and  liabilities  assumed were recorded at
estimated fair values as determined by management based on information currently
available and on current  assumptions  as to future  operations  and based on an
independent  appraisal  of the fair  value of the  acquired  intangible  assets.
Identifiable intangible assets acquired of $6.8 million are being amortized on a
straight-line  basis over a weighted average period of 4.6 years.  Goodwill will
not  be  amortized  in  accordance  with  SFAS  No.  142,   Goodwill  and  Other
Intangibles.

In  connection  with the LBI  acquisition,  we recorded a charge of $5.8 million
comprised  of  approximately  $5.3  million for the  write-off  of internal  use
software  made  obsolete  by  the  acquisition  of  LBI  and  $0.5  million  for
severance-related costs.

Acquisition of TCT Technical Training Pvt. Ltd.

Effective  November  16, 2001,  we acquired TCT  Technical  Training  Pvt.  Ltd.
("TCT"),  of  Kolkata,  India,  a developer  of content  for custom  courseware.
DigitalThink  acquired  all the  outstanding  shares of TCT for $500,000 in cash
after we received  governmental  approval in November  2001. TCT has been acting
exclusively  as a  contractor  to the  DigitalThink  since April 2001,  when the
transaction was first announced.  Upon acquisition,  $215,000 was recorded as an
intangible  that was amortized over one year, and $285,000  represented  the net
fair market value of tangible  assets  acquired  and  liabilities  assumed.  The
acquisition of TCT was accounted for as a purchase.  TCT's results of operations
have been included in our results of operations  since the effective date of the
acquisition.

Acquisition of Horn Interactive

On April 16, 2003, we acquired Horn  Interactive,  Inc.,  ("Horn") a provider of
simulation-based  learning products and services.  DigitalThink  acquired all of
the outstanding  shares of Horn in exchange for 2,000,000 shares of DigitalThink
stock for a purchase price of  approximately  $5.0 million.  The transaction was
accounted for as a purchase.  Accordingly,  Horn's results of operations will be
included in our results of operations from and after April 16, 2003.

Strategic Alliance with Electronic Data Systems Corporation

On July 11,  2000,  we entered into an agreement  with  Electronic  Data Systems
("EDS")  pursuant to which EDS was issued two  performance  warrants to purchase
shares of DigitalThink  common stock. Under the terms of the warrant,  EDS could
earn the right to purchase up to 1,553,319  shares of DigitalThink  common stock
upon delivery of  third-party  customers  that  resulted in a certain  aggregate
amount of contractually  committed revenues. If EDS failed to meet the specified
aggregate revenue targets, EDS agreed to pay us $5 million pursuant to the terms
of each warrant, for a total potential non-performance penalty of $10 million.

We  calculated  a  fixed  non-cash   charge  of  $38  million  related  to  this
transaction,  based on the fair value of the warrants  issued.  A portion of the
warrants vested at the date of the transaction  resulting in an immediate charge
of $4.9 million.  Amortization of the remaining warrant expense was scheduled to
occur over three years from July 2000 through July 2003,  in  proportion  to the
amount of revenue  generated under the agreement,  or on a straight-line  basis,
whichever  was faster.  Through March 31, 2002,  amortization  was recorded on a
straight-line basis totaling $24.1 million.

On March 27, 2002, we restructured the agreement  entered into with EDS, whereby
EDS  surrendered  its  vested  and  unvested  warrants  to  purchase  shares  of
DigitalThink   common   stock  and  we  has  forgave   the  $10  million   total
non-performance penalty associated with these warrants. As a result, a charge of
approximately $10 million was recorded as a reduction of revenue and a credit of
approximately $10 million was recorded as other income.

                                      -23-
<PAGE>
Impairment of Goodwill and Other Long-Lived Assets

As part of our ongoing review of our operations  and financial  performance,  we
performed an assessment  of the carrying  value of our  long-lived  assets to be
held  for use  including  goodwill  and  other  intangible  assets  recorded  in
connection with our various acquisitions.  The assessment was performed pursuant
to SFAS  121,  Accounting  for  the  Impairment  of  Long-Lived  Assets  and for
Long-Lived  Assets to Be Disposed Of. The conclusion of that assessment was that
the value of the technology purchased associated with the Arista acquisition was
no longer being  utilized in current  product  offerings and was not part of the
product  roadmap  for the  future.  As a result,  we  recorded  charges of $10.4
million to write off the  Arista  goodwill  during the fourth  quarter of fiscal
2002 as it no longer had any recoverable value.

Effective April 1, 2002, we adopted SFAS No. 141,  Business  Combinations.  SFAS
No.  141  requires  that  the  purchase  method  of  accounting  be used for all
combinations initiated after June 30, 2001. The adoption of SFAS No. 141 did not
have an impact on our results of operations, financial position or liquidity.

Effective April 1, 2002, we adopted SFAS No. 142,  Goodwill and Other Intangible
Assets.  SFAS No. 142  addresses  the initial  recognition  and  measurement  of
intangible assets acquired outside of a business  combination and the accounting
for goodwill and other intangible assets subsequent to their  acquisition.  SFAS
No. 142 provides  that  intangible  assets with finite useful lives be amortized
and that  goodwill  and  intangible  assets  with  indefinite  lives will not be
amortized,  but  will  rather  be  tested  at  least  annually  for  impairment.
Intangible assets, including goodwill, that are not subject to amortization will
be tested for impairment  annually,  or more  frequently if events or changes in
circumstances  indicate  that  the  asset  might be  impaired,  using a two step
impairment  assessment.  The  first  step  of  the  impairment  test  identifies
potential  impairment  and  compares the fair value of the  reporting  unit (the
Company in this case) with its carrying amount,  including goodwill. If the fair
value of the  reporting  unit  exceeds  its  carrying  amount,  goodwill  of the
reporting unit is not considered impaired, and the second step of the impairment
test is not necessary.  If the carrying amount of the reporting unit exceeds its
fair value, the second step of the impairment test shall be performed to measure
the amount of the  impairment  loss, if any.  During the second  quarter  ending
September 30, 2002, we performed the required  impairment  tests of goodwill and
indefinite-lived  intangible  assets as of April 1, 2002 in accordance with SFAS
No.  142.  We  incurred  a  reduction  in  goodwill  of $50.2  million  upon the
completion  of our  analysis,  which  resulted  in a charge  to the  results  of
operations  from the  cumulative  effect  of the  adoption  of a new  accounting
principle during the fiscal year ended March 31, 2003. The analysis was prepared
by an independent third-party valuator. The impaired goodwill was not deductible
for taxes,  and as a result,  no tax  benefit  was  recorded  in relation to the
charge. The Company performed its annual goodwill impairment analysis on October
31, 2002,  using a valuation model based on market  capitalization  adjusted for
outstanding  debt,  consistent  with the model  used as of April 1,  2002.  This
analysis indicated that no additional adjustments were required to the remaining
goodwill balance at that time.

Restructuring Charge

Since the middle of fiscal 2002,  DigitalThink and its industry have experienced
a progressive downturn in business conditions, the primary direct cause of which
has been a decrease in new training  initiatives  and a decrease in expenditures
by most Fortune 1000  companies.  We believe that this decrease is  attributable
to, among other things:  constrained  capital  markets and the general  economic
slowdown  in the United  States.  The result has been a decrease  in the overall
demand for e-learning training. In response,  buyers are exhibiting caution when
making significant  expenditures.  Moreover, as the economic slowdown continues,
some of our current  customers  have delayed  committed  e-learning  projects to
reduce their spending.

In March of fiscal 2002, we strategically  restructured our business in response
to the  current  market  environment  and as part of our  continuing  program to
create  efficiencies  within our  operations.  We recorded  total  restructuring
charges of $9.8 million, which included the following:

o  Reducing our workforce by approximately 80 employees, mainly within the
   learning services organization, resulting in a $650,000 severance charge.
   Approximately $440,000 was paid in March 2002, and approximately $210,000
   was paid in the first and second quarters of fiscal 2003.

o  Consolidating our sales, administrative and content and technology
   development facilities through site closures, from a total of approximately
   244,000 square feet into approximately  100,000 square feet. During the
   fiscal year ended March 31, 2003, four sites have been vacated:
   Chisholm, Minnesota; Minneapolis, Minnesota; Troy, Michigan; and our office
   in the United Kingdom.  Property and equipment that was disposed or removed
   from operations resulted in a charge of $2.3 million and  consisted
   primarily  of leasehold  improvements, computer  equipment and  furniture and
   fixtures. In addition,  we incurred a charge of $6.8 million associated with
   leases related to excess or closed facilities, which represents the excess of
   the remaining lease obligations over estimated market value, net of
   anticipated sublease income.  Amounts accrued (net of anticipated  sublease
   proceeds) related to the consolidation of facilities will be paid over the
   respective lease terms through 2016.

                                      -24-
<PAGE>
At  December  31,  2002,  we  recorded  a  net  adjustment  of  $83,000  to  the
restructuring  accrual based on events  occurring  during the three months ended
December 31, 2002, as a reversal of  previously  expensed  restructuring  costs.
This  reversal was the result of subleasing  one property  earlier than expected
resulting in a reversal of approximately  $450,000,  offset in part by estimates
of sublease income  associated with another property at a lower rental rate than
originally   expected  resulting  in  an  additional  accrual  of  approximately
$367,000.

                        HISTORICAL RESULTS OF OPERATIONS

     The following table sets forth, for the periods indicated, the percentage
of net revenues represented by certain items in our statements of operations.

<TABLE>
<CAPTION>

                                                     Year Ended March 31,
                                              ---------------------------------
                                                 2001         2002        2003
                                              ----------    --------    -------
<S>                                           <C>           <C>         <C>
Revenues:
  Delivered Learning fees (1)............       46.5%         47.1%       53.5%
  Learning Solution services (1).........       53.5          52.9        46.5
                                              -------       -------     -------
  Total revenues.........................      100.0         100.0       100.0
                                              -------       -------     -------
Costs and expenses:
  Cost of Delivered Learning fees........       14.3          15.2        11.5
  Cost of Learning Solution services.....       29.0          27.5        16.4
  Content research and development.......       15.8          16.4        13.6
  Technology research and development....       30.5          26.1        17.0
  Selling and marketing..................       59.8          48.9        31.9
  General and administrative.............       15.6          17.0        16.3
  Depreciation...........................        8.3          12.2        16.3
  Amortization of warrants...............       34.0          25.4          --
  Stock-based compensation ..............       14.1           4.4         0.8
  Amortization of goodwill and other
     intangibles.........................        9.3          16.6         3.2
  Write-off of in-process research and
     development.........................       18.4            --          --
  Impairment of goodwill.................         --          24.1          --
  Acquisition related charges............         --          13.3          --
  Restructuring charge (recovery)........         --          22.6        (0.2)
                                              -------       --------    --------
  Total costs and expenses...............      249.1         269.7       126.8
                                              -------       -------     --------
  Loss from operations...................     (149.1)       (169.7)      (26.8)
  Penalty income recognized (1)..........         --          23.1          --
  Interest and other income..............       13.8           4.4         0.6
                                              -------       -------     --------
  Net loss before cumulative effect of
     accounting change...................     (135.3)       (142.2)      (26.2)
  Cumulative effect of accounting change.         --            --      (119.1)
                                              -------       -------     -------
  Net loss..............................      (135.3)%      (142.2)%    (145.3)%
                                             =========     ========    ========
</TABLE>

(1) Reflects the forgiveness of the penalty associated with the restructuring of
an agreement with EDS resulting in a reduction of revenues of $8.8 million and
$1.2 million for Delivery Learning fees and Learning Solution services,
respectively, and $10 million of penalty income recognized in the fiscal year
ended March 31, 2002.

                                      -25-

<PAGE>
Comparison of Fiscal 2002 to Fiscal 2003

Total Revenues

Total revenues  decreased from $43.4 million in fiscal 2002 to $42.1 million for
fiscal  2003.  For fiscal  2003,  Delivered  Learning  fees  represented  53% of
revenues and Learning  Solution  services  represented 47% of revenues.  This is
compared to fiscal 2002, during which Delivered Learning fees represented 47% of
revenues and  Learning  Solution  services  represented  53% of revenues.  Total
revenues  for fiscal 2002 were reduced by  approximately  $10.0  million,  which
reflects the forgiveness of a penalty  associated with the  restructuring  of an
agreement with EDS (see Note 13 to the Consolidated  Financial  Statements).  We
expect that Delivered Learning fees and Learning Solution services revenues will
continue to account for a similarly significant portion of our total revenues in
the near term. The two components that make up our revenue,  Delivered  Learning
fees and Learning Solution services fluctuated during the year as noted below.

Delivered Learning Fees

Delivered  Learning fees  increased  from $20.4 million for fiscal 2002 to $22.5
million for fiscal 2003.  The fiscal 2002 amount was reduced  by  approximately
$8.8 million,  which reflects the  forgiveness of a penalty  associated with the
restructuring  of an  agreement  with  EDS  (see  Note  13 to  the  Consolidated
Financial Statements).  Before the forgiveness,  revenues for Delivered Learning
fees were $29.2  million for fiscal 2002.  Fiscal 2003 revenues  decreased  from
fiscal 2002 after the $8.8 million adjustment for the EDS forgiveness because of
more  courses  being  delivered to our  customers  that have  contracts  with an
unlimited  delivery provision offset, in part, by fewer enrollments by customers
that pay for delivery as courses are taken. We expect that the number of courses
and  customers  will  continue to increase  as we expand our  customer  base and
course offerings.

Learning Solution Services

Learning Solution services revenues decreased from $23.0 million for fiscal 2002
to $19.6  million  for fiscal  2003.  The fiscal  2002  amount  was  reduced by
approximately  $1.2  million,  which  reflects  the  forgiveness  of  a  penalty
associated with the  restructuring  of an agreement with EDS (see Note 13 to the
Consolidated  Financial Statements).  Before the forgiveness,  Learning Solution
Services  revenues were $24.2 million for fiscal 2002. The $4.6 million decrease
in  revenues is due in large part to the  average  dollar size of our  contracts
decreasing.  We expect Learning  Solutions  services  revenues to increase as we
expand our customer base and course offerings.

To date, our international revenues have been less than 5% of total revenue.

Costs and Expenses

Cost of Delivered Learning Fees

Cost of Delivered Learning fees includes  personnel-related  costs,  maintenance
and facility  costs  required to operate our website and to provide  interactive
tutor support to  participants in our courses.  Cost of Delivered  Learning fees
decreased  from $6.6  million for fiscal 2002 to $4.8  million for fiscal  2003.
This decrease was  attributable to decreased  personnel  costs of  approximately
$700,000,   decreased  contactor  costs  of  approximately  $700,000,  decreased
maintenance  and facility costs of  approximately  $300,000 and decreased  tutor
support costs of  approximately  $170,000.  We have shifted  resources  from our
higher-cost United States locations to our lower-cost India facilities resulting
in an overall  reduction of headcount by 5 employees and the resulting  $700,000
cost savings year over year.  We have also shifted our tutor  resources to India
as  well.  With the  restructuring,  we have  also  eliminated  a number  of our
contractors,  which in turn has reduced our costs in these areas.  We expect the
cost of  Delivered  Learning  fees to  continue  to be  relative  to the revenue
generated from Delivered Learning.

Cost of Learning Solution Services

Cost of Learning Solution services consists primarily of personnel-related costs
and contractor expenses to develop custom courses for specific  customers.  Cost
of Learning  Solution  services  decreased from $11.9 million for fiscal 2002 to
$6.9  million  for fiscal  2003.  This  decrease  was mainly  attributable  to a
decrease in personnel-related costs of $4.9 million related to a lower number of
employees and the shifting of resources  from our  higher-cost  headcount in the
United States to our lower-cost  headcount in India.  Total headcount related to
cost of Learning Solution services  decreased by 11 employees year over year. We
expect the cost of Learning  Solution services to continue to be relative to the
revenue generated from Learning Solutions.

                                      -26-
<PAGE>
Content Research and Development

Content research and development expenses are expensed as incurred in accordance
with SFAS No. 86, and  represent  costs to develop  catalog  courses,  including
personnel-related  costs, content acquisition costs and content editing. Content
research and development expenses decreased from $7.1 million for fiscal 2002 to
$5.7 million for fiscal 2003.  This decrease was  attributable  to a decrease in
personnel-related  costs of $1.6 million related to a lower number of employees,
primarily in the higher-cost  United States.  Total headcount related to content
research and  development  decreased by 34 employees  year over year.  We expect
content research and development costs to remain relatively flat.

Technology Research and Development

Technology   research   and   development    expenses   consist   primarily   of
personnel-related  costs in connection with product  development  efforts of our
underlying  technology.  Technology research and development  expenses decreased
from $11.3  million  for fiscal  2002 to $7.2  million  for  fiscal  2003.  This
decrease was principally  attributable  to a decrease in contractor  spending by
approximately  $1.3  million,  a decrease of $1.2  million in  personnel-related
costs due to the shifting of  resources  from our  higher-cost  headcount in the
United  States  to  our   lower-cost   headcount  in  India,   where  there  are
approximately 24 employees now. Total headcount  related to technology  research
and  development  increased  by nine  employees  year over year with most of the
increase in India. We expect technology research and development costs to remain
relatively flat.

Selling and Marketing

Selling and marketing  expenses consist  primarily of  personnel-related  costs,
commissions,  advertising and other  promotional  expenses and royalties paid to
authors.  Selling and marketing expenses decreased from $21.2 million for fiscal
2002  to  $13.4  million  for  fiscal  2003.  This  decrease  is  due  to  lower
personnel-related  costs  and  commissions  of $4.0  million  as  well as  lower
contractor  costs of  approximately  $800,000.  In addition,  we incurred  fewer
expenses  relating to advertising and tradeshow  activity which reduced spending
in this area by  approximately  $1.3 million from fiscal 2002 to fiscal 2003. We
expect selling and marketing  expenses may increase  slightly in the near future
and commission expense will fluctuate with revenues.

General and Administrative

General and  administrative  expenses  consist  primarily  of  personnel-related
costs, occupancy costs, insurance-related costs, and professional services fees.
General and administrative  expenses decreased from $7.4 million for fiscal 2002
to $6.9 million for fiscal 2003.  This decrease was due to lower occupancy costs
and lower  personnel  costs offset by an increase in insurance and  professional
services fees.  Headcount  decreased by  approximately  five employees year over
year. We expect general and  administrative  expenses to remain  relatively flat
unless there are significant changes in the business.

Amortization of Warrants

Expenses  related  to  warrants  issued to EDS as part of a  strategic  alliance
entered  into in July 2000  totaled  $11.0  million for fiscal 2002 and zero for
fiscal 2003 as a result of the  restructuring of the EDS agreement,  whereby EDS
surrendered its vested and unvested  warrants to purchase shares of DigitalThink
common stock in March 2002. We expensed  approximately $9,000 of warrant expense
for fiscal 2003 related to warrants issued in connection with the  restructuring
of the headquarters facility lease in August 2002.

Stock-Based Compensation

Stock-based  compensation expense decreased from $1.9 million for fiscal 2002 to
approximately $349,000 for fiscal 2003.

Amortization of Goodwill and Other Intangibles

Expenses related to the amortization of goodwill and other intangibles decreased
from $7.2 million for fiscal 2002 to $1.4 million for fiscal 2003 related to the
acquisition of LBI.

Goodwill Impairment

As  part  of our  ongoing  review  of the  Company's  operations  and  financial
performance,  we  performed  an  assessment  of the  carrying  value  of the our
long-lived  assets to be held for use  including  goodwill and other  intangible
assets recorded in connection with our various acquisitions.  The assessment was
performed  pursuant to SFAS 121,  Accounting  for the  Impairment  of Long-Lived
Assets and for  Long-Lived  Assets to Be  Disposed  Of. The  conclusion  of that
assessment was that the value of the technology  purchased  associated  with the
Arista acquisition was no longer being used in the current product offerings and
was not part of the product  roadmap for the  future.  As a result,  we recorded

                                      -27-
<PAGE>
charges  of $10.4  million to write off the  Arista  goodwill  during the fourth
quarter of fiscal 2002, as it no longer had any recoverable value.

Acquisition and other related charges

Expenses  related to the  acquisition of LBI and other related  charges  totaled
$5.8 million for fiscal 2002 and were  comprised of  approximately  $5.3 million
for the write-off of internal use software made obsolete by the acquisition, and
approximately  $500,000  for  severance-related  costs  for  redundancies.   The
write-off of internal use software  related to one significant  project that was
put into service during fiscal 2002 to better enable content  development by the
Company and customers, but was determined to be obsolete given LBI's technology.

Restructuring

In March 2002 we began a strategic  initiative  to  restructure  our business in
response to the current market environment and as part of our continuing program
to create  efficiencies  within our operations.  We recorded total restructuring
charges of $9.8 million as part of our strategic initiative,  which included the
following:

o   Reducing our workforce by approximately 80 employees, mainly within the
    learning services organization, resulting in a severance charge of
    approximately $650,000. Approximately $440,000 was paid in March 2002, and
    approximately $210,000 was paid in the first and second quarters of fiscal
    2003.
o   Consolidating our sales, administrative and content and  technology
    development  facilities  through  building and site closures, from a total
    of approximately 244,000 square feet into approximately 100,000 square feet.
    During the fiscal year ended March 31, 2003, three sites have been vacated:
    Chisholm, Minnesota; Troy, Michigan; and our office in the United  Kingdom.
    Property and  equipment  that was disposed or removed  from  operations
    resulted in a charge of $2.3 million and consisted primarily of leasehold
    improvements, computer equipment and furniture and fixtures. In addition,
    we incurred a charge of $6.8 million  associated with leases related to
    excess or closed  facilities,  which represents the excess of the remaining
    lease obligations over  estimated  market value, net of anticipated sublease
    income.  Amounts accrued (net of anticipated  sublease  proceeds) related to
    the consolidation of facilities will be paid over the respective lease terms
    through 2016.

At December 31, 2002,  the Company  recorded a net  adjustment of $83,000 to the
restructuring  accrual based on events  occurring  during the three months ended
December 31, 2002, as a reversal of  previously  expensed  restructuring  costs.
This reversal was the result of the Company subleasing one property earlier than
expected  resulting in a reversal of approximately  $450,000,  offset in part by
estimates of sublease income  associated with another property at a lower rental
rate  than   originally   expected   resulting  in  an  additional   accrual  of
approximately $367,000.

Penalty Recognized

On March 27, 2002, we restructured the agreement  entered into with EDS, whereby
EDS  surrendered  its  vested  and  unvested  warrants  to  purchase  shares  of
DigitalThink common stock and we forgave the $10.0 million total non-performance
penalty  associated with this agreement.  We recorded a charge of  approximately
$10.0   million  as  a  reduction  of  revenue  and  we  recorded  a  credit  of
approximately $10.0 million as other income.

Net Loss Before Cumulative Effect of Accounting Change

The net loss before the cumulative  effect of accounting  change  decreased from
$61.6 million for fiscal 2002 to $11.1 million for fiscal 2003.

Cumulative Effect of Accounting Change

Effective April 1, 2002, the Company  adopted SFAS No. 142,  "Goodwill and Other
Intangible   Assets."   SFAS  No.  142  requires,   among  other   things,   the
discontinuance  of  amortization   related  to  goodwill  and  indefinite  lived
intangible  assets.  These assets will then be subject to an impairment  test at
least annually. In addition, the statement includes provisions upon adoption for
the reclassification of certain existing recognized intangibles to goodwill, the
identification of reporting units for the purpose of assessing  potential future
impairments  of  goodwill,  the  reassessment  of the useful  lives of  existing
recognized  intangibles and the  reclassification  of certain intangibles out of
previously  reported  goodwill.  Upon the  adoption of SFAS No. 142, the Company
recognized  a  goodwill  impairment  loss of $50.2  million as of April 1, 2002,
which was  recorded  as the  cumulative  effect of an  accounting  change in the
Company's  consolidated  statements of operations  for fiscal 2003.  The Company
performed its annual goodwill  impairment  analysis on October 31, 2002, using a
valuation model based on market  capitalization  adjusted for outstanding  debt,

                                      -28-
<PAGE>
consistent with the model used as of April 1, 2002. This analysis indicated that
no additional  adjustments were required to the remaining goodwill balance.  Any
further  impairment  losses recorded in the future could have a material adverse
impact on our financial conditions and results of operations.

Quarterly Results of Operations

The following table sets forth  unaudited  quarterly  consolidated  statement of
operations data for each of the eight most recent quarters. In our opinion, this
information  has been  prepared  on the  same  basis  as the  audited  financial
statements  contained in this report and includes  all  adjustments  we consider
necessary for fair presentation in accordance with generally accepted accounting
principles.  This  information  should be read in  conjunction  with our  annual
consolidated  financial  statements and the related notes appearing elsewhere in
this  report.   Our  operating  results  for  any  three-month  period  are  not
necessarily indicative of results for any future period.

<TABLE>
<CAPTION>


                               June 30,  September 30,  December 31,  March 31,
                                2001         2001          2001         2002
                              --------   ------------  -----------   ---------
<S>                           <C>        <C>           <C>           <C>
Revenues:
Delivered Learning fees (1)   $ 7,778       $8,239      $ 7,397      $ (3,013)
Learning  Solution services (1) 7,232        7,045        6,410         2,268
                              -------      ---------     ---------    --------
  Total revenues.............  15,010       15,284       13,807          (745)
Costs and expenses:
Cost of Delivered Learning
  fees.......................   1,795        1,775        1,567         1,482
Cost of Learning Solution
  services...................   3,363        3,375        3,023         2,173
Content research and
  development................   1,382        1,919        1,862         1,931
Technology research and
  development................   3,246        3,153        2,603         2,316
Selling and marketing........   7,210        5,390        4,676         3,932
General and administrative      1,758        1,790        1,604         2,203
Depreciation.................   1,067        1,443        1,308         1,456
Amortization of warrants.....   2,751        2,751        2,751         2,750
Stock-based compensation.....     628          541          469           250
Amortization   of  goodwill
and other intangibles........   1,201        1,794        2,114         2,099
Impairment of goodwill.......      --           --           --        10,437
Acquisition and other
related charges..............      --        5,792           --            --
Restructuring charge (recovery)    --           --           --         9,778
                              -------      -------     --------      --------
Total costs and expenses.....  24,401       29,723       21,977        40,807
                              -------      -------     --------      --------
Interest and other income....     829          578          324           180
Penalty income recognized(1).      --          --            --        10,000
                              -------      -------     --------      --------
Net  loss  before  cumulative
effect of accounting change..  (8,562)    (13,861)      (7,846)       (31,372)
Cumulative effect of
accounting change (2)........      --          --           --             --
                              -------      -------      -------      --------
Net loss..................... $(8,562)   $(13,861)     $(7,846)      $(31,372)
                              =======    =========     ========      =========

<CAPTION>
                              June 30,  September 30,  December 31,  March 31,
                                2002         2002          2002         2003
                              --------   ------------  -----------   ---------
<S>                           <C>        <C>           <C>           <C>
Revenues:
Delivered Learning fees (1)   $ 4,994       $5,867      $ 5,554      $  6,103
Learning  Solution services (1) 4,611        4,156        5,481         5,361
                              -------      ---------     ---------    --------
  Total revenues.............   9,605       10,023       11,035        11,464
Costs and expenses:
Cost of Delivered Learning
  fees.......................   1,395        1,220        1,042         1,177
Cost of Learning Solution
  services...................   1,695        1,381        1,852         1,983
Content research and
  development................   1,486        1,382        1,346         1,533
Technology research and
  development................   1,953        1,647        1,667         1,899
Selling and marketing........   3,450        3,463        3,355         3,150
General and administrative      2,167        1,680        1,510         1,496
Depreciation.................   1,695        1,829        1,729         1,617
Amortization of warrants.....      --            1            4             4
Stock-based compensation.....     140          123          105           (19)
Amortization   of  goodwill
and other intangibles........     359          359          341           305
Impairment of goodwill.......      --           --           --            --
Acquisition and other
related charges..............      --           --           --            --
Restructuring charge (recovery)    --           --          (83)           --
                              -------      -------     --------      --------
Total costs and expenses.....  14,340       13,085       12,868        13,145
                              -------      -------     --------      --------
Interest and other income....      95           69           60            31
Penalty income recognized(1).      --          --            --            --
                              -------      -------     --------      --------
Net  loss  before  cumulative
effect of accounting change..  (4,640)     (2,993)      (1,773)        (1,650)
Cumulative effect of
accounting change (2)........ (50,189)         --           --             --
                              -------      -------      -------      --------
Net loss.................... $(54,829)   $ (2,993)     $(1,773)      $ (1,650)
                              =======    =========     ========      =========
</TABLE>

(1) Reflects the forgiveness of the penalty associated with the restructuring of
an agreement  with EDS  resulting in a reduction of revenues of $8.8 million and
$1.2  million  for  Delivery  Learning  fees  and  Learning  Solution  services,
respectively,  and $10 million of penalty  income  recognized in the fiscal year
ended March 31, 2002.
(2) Reflects the cumulative effect of accounting change of $50.2 million related
to the adoption of SFAS142 by the company in fiscal 2003.

Critical Accounting Policies

     Management has evaluated the accounting policies used in the preparation of
the consolidated financial statements and related notes contained in this report
and believes those policies to be reasonable and appropriate. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities. We believe that the following accounting policies are both
important to the portrayal of the company's financial condition and results and
requires management's most difficult, subjective or complex judgments. For a
more detailed discussion of these policies and significant estimates inherent in
the preparation of our consolidated financial statements, see Note 1 to the
Consolidated Financial Statements.

     Revenue Recognition. We have two types of revenues: Delivered Learning fees
and Learning Solution services. Delivered Learning fees allow access to training
systems, courses hosted by the Company, tutor support, and other learning
materials for a fixed period, typically six months. Delivered Learning fees are
recognized ratably over this access period. Learning Solution services revenues
consist of revenues from fixed-price contracts, which require the accurate
estimation of the value, scope and duration of each course hour. Revenues for
these projects are recognized on percentage of completion, in accordance with
AICPA SOP 81-1, Accounting for Performance of Construction/Production-Type
Contracts, as development progresses based on the percentage of completion
method. The percentage of completion is based on the ratio of actual custom
development or service costs incurred to date, to total estimated costs to
complete the custom course or service. Provisions for estimated losses on
incomplete contracts are made on a contract-by-contract basis and recognized in
the period in which such losses become probable and can be reasonably estimated.
If we do not accurately estimate the resources required or the scope of work to
be performed, or do not manage its projects properly within the planned periods
of time or satisfy our obligations under the contracts, then future learning
services margins may be significantly and negatively affected or losses on
existing contracts may need to be recognized. Any such resulting reductions in
margins or contract losses could be material to our results of operations. To
date, there have been no material losses.

                                      -29-
<PAGE>
     Allowance for Doubtful Accounts. We maintain an allowance for doubtful
accounts for estimated losses resulting from the inability of our customers to
make required payments. We review, with assistance from our sales team, the
ability of our customers to make any obligatory payments. We provide an
allowance for doubtful accounts for all specific receivables that we judge to be
unlikely of collection. In addition, we record an estimated reserve based on the
size and age of all receivable balances against which we have not established
specific reserves. These estimated allowances are periodically reviewed,
analyzing the customer's payment history and information regarding customer's
credit worthiness known to us. If the financial condition of our customers were
to deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required. For fiscal 2002 and fiscal 2003, the
Allowance for Doubtful Accounts was approximately $484,000 and approximately
$296,000, respectively. While losses depend to a large degree on future economic
conditions, we do not anticipate significant adverse credit development in
fiscal 2004.

     Goodwill and Other Acquired Intangibles. Our business acquisitions
typically result in goodwill and other intangible assets, which affect the
amount of future period amortization expense and possible impairment expense
that we will incur. The determination of the value of such intangible assets
requires management to make estimates and assumptions that affect our
consolidated financial statements. In assessing the recoverability of our
goodwill and other intangibles, we must make assumptions regarding estimated
future cash flows and other factors to determine the fair value of the
respective assets. If these estimates or their related assumptions change in the
future, we may be required to record impairment charges for these assets not
previously recorded.

     As noted above, on April 1, 2002, we adopted SFAS No. 142, Goodwill and
Other Intangible Assets. SFAS No. 142 addresses the initial recognition and
measurement of intangible assets acquired outside of a business combination and
the accounting for goodwill and other intangible assets subsequent to their
acquisition. As a result of the adoption of SFAS No. 142 during the quarter
ending September 30, 2002, we incurred a reduction in goodwill of $50.2 million
that resulted in a charge to our results of operations from the cumulative
effect of the adoption of a new accounting principle during the fiscal year
ended March 31, 2003. The impaired goodwill was not deductible for taxes, and as
a result, no tax benefit was recorded in relation to the charge. In addition, we
performed our annual goodwill impairment analysis on October 31, 2002, using a
valuation model based on market capitalization adjusted for outstanding debt,
consistent with the model used as of April 1, 2002. This analysis indicated that
no additional adjustments were required to the remaining goodwill balance.

      Operating Leases. We have many operating lease agreements related to our
office buildings throughout the United States, the United Kingdom and India. The
agreements qualify for operating lease accounting treatment under SFAS No. 13,
Accounting for Leases, and, as such, the assets are not included on our balance
sheet. We believe we will be able to meet our obligations under the agreements,
but if we default on our commitments and are unable to remedy the default
quickly enough, the lessors may terminate all remaining commitments and demand
payment equal to the lessor's net present value of all future lease payments. If
we default on the leases and are required to make payment, this will decrease
our cash available for working capital and could require us to find alternate
facilities on terms that may not be as favorable as the current arrangement. As
of March 31, 2003, we were in compliance with all covenants. For further
information on these leases, please refer to the section below entitled
"Liquidity and Capital Resources" and Note 12 of Notes to Consolidated Financial
Statements.

     Accounting for Employee Stock Options. At March 31, 2003, the Company has
two stock-based employee compensation plans, which are described more fully in
Note 8. We account for stock-based awards to employees using the intrinsic value
method in accordance with Accounting Principles Board (APB) No. 25, Accounting
for Stock Issued to Employees (APB 25). We account for stock based awards to
non-employees in accordance with SFAS No. 123, Accounting for Stock-Based
Compensation. Approximately $349,000 of stock-based compensation was reflected
in the net loss for fiscal 2003 as options granted prior to our initial public
offering had an exercise price below the fair market value of the underlying
common stock on the date of grant. These options have been accounted for as
deferred stock compensation and the related expense has been recognized in
fiscal 2000 to fiscal 2003. Information about the impact on our operating
results of using APB Opinion No. 25 is included in Note 1 of our Notes to
Consolidated Financial Statements.

                                      -30-

<PAGE>
Liquidity and Capital Resources

    Since inception, we have satisfied our cash requirements primarily through
sales of equity securities and to a lesser extent, revenues. As of March 31,
2003, our principal sources of liquidity included cash and cash equivalents
aggregating $22.7 million, and funds from operations. This compares to cash and
cash equivalents of $29.5 million on March 31, 2002 and investments in
marketable securities of $1.6 million at March 31, 2002.

    In December 2001, we entered into a $5.0 million line of credit agreement
and had available $2.8 million from this line of credit as of March 31, 2002.
Borrowings under the line of credit bear interest at prime plus 1/2%. Subsequent
to March 31, 2002, the balance of $2.2 million on the line of credit was repaid.
In June 2002, we amended the line of credit agreement to increase the line to
$8.0 million and renewed the line of credit in December 2002 to expire in
December 2003. We had available $2.9 million from this line of credit as of
March 31, 2003. Subsequent to March 31, 2003, the balance of $5.1 million on the
line of credit was repaid.

     Our operating activities used cash of $9.1 million in fiscal 2003, $19.0
million in fiscal 2002 and $18.2 million in fiscal 2001. The improvement in cash
generation from operations was primarily driven by an improvement in operating
losses offset by a usage of cash in operating assets and liabilities. We had a
use of cash from accounts receivable and deferred revenue in fiscal 2002 of $2.2
million and a use of cash of approximately $1.3 million in fiscal 2003. We were
able to collect our receivables quicker in fiscal 2003 as compared to fiscal
2002 on lower revenues. We had a use of cash of $1.0 million from current
liabilities (which includes accounts payable and accrued liabilities) in fiscal
2002 compared to a use of cash of $4.8 million in fiscal 2003 resulting from a
reduction of expenses and the payment of invoices over fiscal 2003. To date, we
have met our operating expense requirements primarily from the proceeds of our
equity offerings. Beginning in the second half of fiscal 2004, we plan to meet
our operating expense requirements from cash flow from operating activities.

     Our investing activities used $1.4 million in fiscal 2003 and $7.9 million
in fiscal 2001 and provided cash of $17.1 million in fiscal 2002. The source of
cash in fiscal 2002 resulted from the sales of marketable securities offset by
the acquisition of capital assets, including hardware for our web-site, computer
and office equipment, and platform development costs, and purchases of
marketable securities. The use of cash in fiscal 2003 of approximately $3.2
million resulted from the acquisition of capital assets, including leasehold
improvements, hardware for our web-site, and computer and office related
equipment, offset in part by maturity of marketable securities of $1.6 million.
We plan to continue to invest in capital assets as our business grows.

     Our financing activities sourced cash of $3.8 million in fiscal 2003, $1.2
million in fiscal 2002 and $1.7 million in fiscal 2001. The source in fiscal
2001 were the proceeds received from issuance of common stock through the
exercise of options and the employee stock purchase plan. The source in fiscal
2002 were the proceeds received from issuance of common stock through the
exercise of options and the employee stock purchase plan of $2.6 million offset
by $1.4 million of payments on notes payable. The sources in fiscal 2003 reflect
the exercise of stock options and stock purchases in the employee stock purchase
plan program of approximately $951,000 and net borrowings on the company's line
of credit of approximately $2.9 million.

     We lease our facilities and certain equipment and furniture under operating
lease agreements that expire at various dates through fiscal 2008 and
thereafter. Future lease payments under the operating lease agreements are
approximately as follows:

<TABLE>
<CAPTION>

   <S>                                            <C>
   Fiscal Year Ending March 31,                   (in thousands)
     2004.....................................        $4,870
     2005......................................        5,037
     2006......................................        5,492
     2007......................................        5,793
     2008......................................        6,448
     Thereafter...............................        31,220
                                                      ------
        Total.................................       $58,860
                                                     =======
</TABLE>

     We believe that our principal sources of liquidity, which include cash and
cash equivalents of $22.7 million at March 31, 2003 and funds expected from
operations will satisfy our currently anticipated working capital and capital
expenditure requirements for at least the next twelve months. Our future
liquidity and capital requirements will depend on numerous factors. The rate of
expansion of our operations in response to potential growth opportunities and
competitive pressures, as well as the macroeconomic environment, will affect our
capital requirements as will funding of net losses and possible negative cash
flows. Additionally, we may need additional capital to fund acquisitions of
complementary businesses, products, and technologies. Our forecast of the period
of time through which our financial resources will be adequate to support
operations is a forward-looking statement that involves risks and uncertainties.
Actual financial resources to support ongoing operations may differ materially
from estimates. We may seek to sell additional equity or debt securities or
secure a larger bank line of credit. The sale of additional equity or debt
securities could result in additional dilution to our stockholders. Currently,

                                      -31-
<PAGE>
we have no other immediately available sources of liquidity. Additional
financing may not be available in amounts or on terms acceptable to us, if at
all.

Recent Accounting Pronouncements

     In October 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets which supersedes SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of and APB No. 30, Reporting the Results of Operations--Reporting
the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual
and Infrequently Occurring Events and Transactions. SFAS No. 144 also amends
Accounting Research Bulletin No. 51, Consolidated Financial Statements. SFAS No.
144 requires that long-lived assets that are to be disposed of by sale be
measured at the lower of book value or fair value less cost to sell. The
statement also significantly changes the criteria required to classify an asset
as held-for-sale. Additionally, SFAS No. 144 expands the scope of discontinued
operations to include all components of an entity with operations that (1) can
be distinguished from the rest of the entity and (2) will be eliminated from the
ongoing operations of the entity in a disposal transaction. We adopted SFAS No.
144 in our quarter ended June 30, 2002. Such adoption has had no impact on the
financial statements through March 31, 2003.

     In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities, which addresses accounting for restructuring
and similar costs. SFAS No. 146 supersedes previous accounting guidance,
principally Emerging Issues Task Force Issue No. 94-3. We will adopt the
provisions of SFAS 146 for restructuring activities initiated after December 31,
2002. SFAS No. 146 requires that the liability for costs associated with an exit
or disposal activity be recognized when the liability is incurred. Under Issue
94-3, a liability for an exit cost was recognized at the date of our commitment
to an exit plan. SFAS No. 146 also establishes that the liability should
initially be measured and recorded at fair value. Accordingly, SFAS No. 146 may
affect the timing of recognizing future restructuring costs as well as the
amounts recognized.

     In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure". SFAS No. 148 amends SFAS No. 123,
"Accounting for Stock-Based Compensation" to provide alternative methods of
transition for an entity that voluntarily changes to the fair value based method
of accounting for stock-based employee compensation. SFAS No. 148 also amends
the disclosure requirements of SFAS No. 123, "Accounting for Sock-Based
Compensation" to require more prominent disclosures about the method of
accounting for stock-based employee compensation and the effect of the method
used on reported results in both annual and interim financial statements. We
adopted the disclosure provisions of SFAS No. 148 for our annual period ended
March 31, 2003.

                                      -32-
<PAGE>
Item 7A. Quantitative and Qualitative Disclosures about Market Risk

    The following discusses our exposure to market risk related to changes in
interest rates and foreign currency exchange rates. This discussion contains
forward-looking statements that are subject to risks and uncertainties. Actual
results could vary materially as a result of a number of factors.

Interest Rate Risk

     As of March 31, 2003, we had cash and cash equivalents of $22.7 million,
consisting of cash and highly liquid short-term investments with original
maturities of three months or less at the date of purchase. Additionally the
Company had no marketable securities, classified as available for sale, with
maturities greater than three months. These investments may be subject to
interest rate risk and will decrease in value if market rates increase. A
hypothetical increase or decrease in market interest rates of 10% from the
market rates in effect at March 31, 2003 would cause the fair value of these
investments to change by an immaterial amount. Declines in interest rates over
time would result in lower interest income.

Foreign Currency and Exchange Rate Risk

     Almost all of our revenues recognized to date have been denominated in U.S.
dollars and are primarily from the United States. However, a portion of our
future revenue may be derived from international customers. Revenues from these
customers may be denominated in the local currency of the applicable countries.
As a result, our operating results could become subject to significant foreign
currency fluctuations based upon changes in exchange rates in relation to the
U.S. dollar.

     Furthermore, as we engage in business outside the United States, changes in
exchange rates relative to the U.S. dollar could make us less competitive in
international markets. Although we will continue to monitor our foreign currency
exposure, and may use financial instruments to limit this exposure, there can be
no assurance that exchange rate fluctuations will not have a materially negative
impact on our business.

                                      -33-
<PAGE>
Item 8. Consolidated Financial Statements and Supplementary Data

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>

                                                                        Page
                                                                     ----------
<S>                                                                     <C>
Independent Auditors' Report.........................................    35
Consolidated Balance Sheets as of March 31, 2002 and 2003............    36
Consolidated Statements of Operations for the years ended
   March 31, 2001, 2002 and 2003.....................................    37
Consolidated Statement of Stockholders' Equity (Deficit)
   for the years ended March 31, 2001, 2002 and 2003.................    38
Consolidated Statements of Cash Flows for the years ended
    March 31, 2001, 2002 and 2003....................................    39
Notes to Consolidated Financial Statements...........................    40
</TABLE>

                                      -34-
<PAGE>
                          INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
DigitalThink, Inc.

    We have audited the accompanying consolidated balance sheets of
DigitalThink, Inc. and subsidiaries as of March 31, 2002 and 2003, and the
related consolidated statements of operations, stockholders' equity (deficit),
and cash flows for each of the three years in the period ended March 31, 2003.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

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

    In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of DigitalThink, Inc. and
subsidiaries at March 31, 2002 and 2003, and the results of their operations and
their cash flows for each of the three years in the period ended March 31, 2003
in conformity with accounting principles generally accepted in the United States
of America.

    As discussed in Note 4 to the accompanying consolidated financial
statements, effective April 1, 2002, the Company changed its method of
accounting for goodwill in accordance with Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets."

                                                        DELOITTE & TOUCHE LLP

San Francisco, California
April 18, 2003

                                      -35-
<PAGE>

<TABLE>
<CAPTION>

                       DIGITALTHINK, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                      (in thousands, except per share data)

                                     ASSETS

                                                            As of March 31,
                                                       ------------------------
                                                          2002          2003
                                                       ------------  ----------
<S>                                                    <C>           <C>
Current assets:
   Cash and cash equivalents......................     $  29,470    $   22,668
   Marketable securities..........................         1,640            --
   Accounts receivable, net of allowance for doubtful
      accounts of $484 and $296, respectively.....         5,779         6,344
   Prepaid expenses and other current assets......         1,675         2,302
                                                       ----------    ----------
       Total current assets.......................        38,564        31,314
   Restricted cash and deposits...................         4,083         4,041
   Property and equipment, net....................        18,325        14,510
   Goodwill and other intangible assets...........        75,300        23,747
                                                       ----------    ----------
       Total assets...............................     $ 136,272    $   73,612
                                                       ==========   ===========

                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable...............................     $   3,569    $    2,213
   Accrued liabilities............................         7,938         5,316
   Borrowings under line of credit and notes payable       2,577         5,266
   Deferred revenues...............................        7,043         6,343
                                                      -----------   ------------
       Total current liabilities...................       21,127        19,138
   Long-term restructuring charge and capital lease
     obligations...................................        5,419         4,716
   Commitments and contingencies (Note 12)
Stockholders' equity:
   Common stock -- $0.001 per share value;
      250,000 shares authorized;
      issued and outstanding 40,452 in 2002
      and 41,619 in 2003...........................      267,814       268,718
   Deferred stock compensation.....................         (631)         (224)
   Accumulated other comprehensive loss............         (264)         (298)
   Accumulated deficit.............................     (157,193)     (218,438)
                                                       ----------     ---------
       Total stockholders' equity..................      109,726        49,758
                                                       ----------    ----------
       Total liabilities and stockholders' equity...   $ 136,272     $  73,612
                                                       ==========    ==========

</TABLE>

See accompanying notes to consolidated financial statements.

                                      -36-
<PAGE>
                       DIGITALTHINK, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (in thousands, except per share data)
<TABLE>
<CAPTION>
                                                    Year Ended March 31,
                                           ------------------------------------
                                             2001          2002           2003
                                           ----------   -----------    --------
<S>                                        <C>          <C>            <C>
Revenues:
  Delivered Learning fees.............    $  17,978    $   20,401     $  22,518
  Learning Solution services..........       20,680        22,955        19,609
                                           ----------   -----------   ----------
    Total revenues....................       38,658        43,356        42,127
                                           ----------   -----------   ----------
Costs and expenses:
  Cost of Delivered Learning fees.....        5,509         6,619         4,834
  Cost of Learning Solution services..       11,211        11,934         6,911
  Content research and development....        6,092         7,094         5,747
  Technology research and development.       11,791        11,318         7,166
  Selling and marketing...............       23,105        21,208        13,418
  General and administrative..........        6,046         7,355         6,853
  Depreciation........................        3,190         5,274         6,870
  Amortization of warrants............       13,131        11,003             9
  Stock-based compensation*...........        5,432         1,888           349
  Amortization of goodwill and other
     intangibles......................        3,602         7,208         1,364
  Write-off of in-process research and
     development......................        7,118            --            --
  Impairment of goodwill..............           --        10,437            --
  Acquisition related charges.........           --         5,792            --
  Restructuring charge (recovery).....           --         9,778           (83)
                                           ----------   -----------   ----------
     Total costs and expenses.........       96,227       116,908        53,438
                                           ----------   -----------   ----------
     Loss from operations.............      (57,569)      (73,552)      (11,311)
     Penalty income recognized (Note 13)         --        10,000           --
     Interest and other income........        5,344         1,911           255
                                           ----------   -----------   ----------
     Net loss before cumulative effect of
        accounting principle..........      (52,225)      (61,641)      (11,056)
     Cumulative effect of accounting change      --            --       (50,189)
                                           ----------   -----------   ----------
     Net loss.........................    $ (52,225)  $   (61,641)    $ (61,245)
                                           ==========   ===========   ==========

    Net loss per share--basic and diluted:
    Before cumulative effect of accounting
       change.........................    $   (1.51)  $     (1.61)    $   (0.27)
    Cumulative effect of accounting change       --            --         (1.22)
                                           ----------   -----------   ----------
    Net loss per share--basic and diluted $   (1.51)  $     (1.61)    $   (1.49)
                                           ==========   ===========   ==========

    Shares used in computing basic and
      diluted  loss per share........        34,524        38,176        41,203
                                           ==========   ===========   ==========

(*) Stock-based compensation:
    Cost of Delivered Learning fees.....  $     121   $        28     $       3
    Cost of Learning Solution services..        500           165            35
    Content research and development....         76            34             3
    Technology research and development.      1,329           555            87
    Selling and marketing...............      1,391           451           111
    General and administrative..........      2,015           655           110
                                           ----------   -----------   ----------
    Total...............................  $   5,432    $    1,888     $     349
                                           ==========   ===========   ==========
</TABLE>
See accompanying notes to consolidated financial statements.

                                      -37-
<PAGE>

                       DIGITALTHINK, INC. AND SUBSIDIARIES

            CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                    Years ended March 31, 2001, 2002 and 2003
                                 (in thousands)
<TABLE>
<CAPTION>


                                  Common stock                     Stockholders'
                                ----------------    Deferred Stock     Notes
                                Shares    Amount     Compensation   Receivable
                               -------- ---------  --------------- -------------
<S>                            <C>      <C>        <C>             <C>
Balances, March 31, 2000......  33,788  $ 149,160  $    (7,953)     $      --
Components of comprehensive
  income:
 Net loss.....................      --         --           --             --
 Change in unrealized gain on
   available-for-sale
   investments................      --         --           --             --
 Translation adjustment.......      --         --           --             --

    Total comprehensive income

 Exercise of stock options.....    525        480           --             --
 Employee stock purchase plan..    100      1,187           --             --
 Stockholders' notes receivable     --         --           --             (9)
 Forfeited and unvested options     --       (974)         974             --
 Amortization of deferred stock
   compensation................     --         --        5,432             --
 Amortization of warrants......     --     13,131           --             --
 Issuance of common stock and
   assumption of stock options
   in connection with
   acquisition.................    586     24,599       (1,552)            --
                               --------  --------     ---------      ---------
Balances, March 31, 2001....... 34,999    187,583       (3,099)            (9)
Components of comprehensive
   income:
  Net loss.....................     --         --           --             --
  Change in unrealized gain on
   available-for-sale
   investments.................     --         --           --             --
  Translation adjustment.......     --         --           --             --

     Total comprehensive income

  Exercise of stock options
    and warrants...............    516        993           --             --
  Employee stock purchase plan.    228      1,629           --             --
  Repayment of stockholders'
   notes receivable............    --         --           --              9
  Forfeited and unvested options    --       (580)         580             --
  Amortization of deferred  stock
   compensation................     --         --        1,888             --
  Amortization of warrants.....     --     11,003           --             --
  Issuance of common stock and
    assumption of warrants in
    connection with acquisition  4,709     67,186           --             --
                               --------  --------    ---------      ---------
Balances, March 31, 2002......  40,452    267,814         (631)            --
Components of comprehensive
    income:
   Net loss....................     --         --           --             --
   Change in unrealized gain on
    available-for-sale
    investments................     --         --           --             --
   Translation adjustment......     --         --           --             --

     Total comprehensive income

  Exercise of stock options and
    warrants...................    477        309           --             --
  Employee stock purchase plan.    582        505           --             --
  Forfeited and unvested options    --        (67)          67             --
  Amortization of deferred stock
   compensation................     --         --          349             --
  Amortization of warrants.....     --          9           (9)            --
  Issuance of common stock for
   services rendered...........      8          9           --             --
  Issuance of common stock.....    100        111           --             --
  Issuance of stock options for
   services....................     --          9           --             --
  Issuance of stock options for
    cash.......................     --         19           --             --
                                --------  --------  ----------      ---------
Balances, March 31, 2003........ 41,619  $268,718     $   (224)     $      --
                                ======== ========   ==========      =========

<CAPTION>

                                  Accumulated
                                     Other
                                 Comprehensive       Accumulated
                                     Loss              Deficit        Total
                               -----------------    -------------  ------------
<S>                            <C>                  <C>            <C>
Balances, March 31, 2000......    $    --            $ (43,327)    $  97,880
Components of comprehensive
  income:
 Net loss.....................         --              (52,225)      (52,225)
 Change in unrealized gain on
   available-for-sale
   investments................        177                   --           177
 Translation adjustment.......         27                   --            27
                                                                     --------
    Total comprehensive income                                       (52,021)
                                                                     --------
 Exercise of stock options.....        --                   --           480
 Employee stock purchase plan..        --                   --         1,187
 Stockholders' notes receivable        --                   --            (9)
 Forfeited and unvested options        --                   --            --
 Amortization of deferred stock
   compensation................        --                   --         5,432
 Amortization of warrants......        --                   --        13,131
 Issuance of common stock and
   assumption of stock options
   in connection with
   acquisition.................        --                   --        23,047
                                ----------            ---------    ---------
Balances, March 31, 2001.......       204              (95,552)       89,127
Components of comprehensive
   income:
  Net loss.....................        --              (61,641)      (61,641)
  Change in unrealized gain on
   available-for-sale
   investments.................     (165)                   --          (165)
  Translation adjustment.......     (303)                   --          (303)
                                                                     --------
     Total comprehensive income       --                    --       (62,109)
                                                                     --------
  Exercise of stock options
    and warrants...............       --                    --           993
  Employee stock purchase plan.       --                    --         1,629
  Repayment of stockholders'
   notes receivable............       --                    --             9
  Forfeited and unvested options      --                    --            --
  Amortization of deferred  stock
   compensation................       --                    --         1,888
  Amortization of warrants.....       --                    --        11,003
  Issuance of common stock and
    assumption of warrants in
    connection with acquisition       --                    --        67,186
                                 ----------            ---------    ---------
Balances, March 31, 2002......      (264)              (157,193)     109,726
Components of comprehensive
    income:
   Net loss....................       --                (61,245)     (61,245)
   Change in unrealized gain on
    available-for-sale
    investments................      (12)                    --          (12)
   Translation adjustment......      (22)                    --          (22)
                                                                    ---------
     Total comprehensive income                                      (61,279)
                                                                    ---------
  Exercise of stock options and
    warrants...................        --                    --          309
  Employee stock purchase plan.        --                    --          505
  Forfeited and unvested options       --                    --           --
  Amortization of deferred stock
   compensation................        --                    --          349
  Amortization of warrants.....        --                    --           --
  Issuance of common stock for
   services rendered...........        --                    --            9
  Issuance of common stock.....        --                    --          111
  Issuance of stock options for
   services....................        --                    --            9
  Issuance of stock options for
    cash.......................        --                    --           19
                                ----------            ---------    ---------
Balances, March 31, 2003........ $  (298)             $(218,438)    $ 49,758
                                ==========           ===========   =========
</TABLE>

See accompanying notes to consolidated financial statements.

                                      -38-
<PAGE>
                       DIGITALTHINK, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)


<TABLE>
<CAPTION>
                                                      Year Ended March 31,
                                           -------------------------------------
                                              2001           2002          2003
                                           ----------    ------------  ---------
<S>                                        <C>           <C>           <C>
Cash flows from operating activities:
  Net loss...............................$  (52,225)   $   (61,641)  $  (61,245)
  Adjustments to reconcile net loss to
    net cash used in
    operating activities:
    Depreciation.........................     3,190          5,274        6,870
    Cumulative effect of accounting change       --            --        50,189
    Amortization of deferred stock
      compensation.......................     5,432          1,888          349
    Amortization of stock options issued
      for services.......................        --             --            9
    Amortization of warrants.............    13,131         11,003            9
    Amortization of goodwill and other
      intangibles........................     3,602          7,208        1,364
    Impairment of goodwill...............        --         10,437           --
    Restructuring charges (recovery).....        --          2,333          (83)
    Acquisition related charges..........        --          5,328           --
    Loss on disposal of property and equipment   --             --           69
    Write-off of in-process research and
      development........................     7,118             --           --
    Changes in assets and liabilities:
      Accounts receivable................    (3,705)         4,078         (565)
      Prepaid expenses and other current
        assets...........................    (1,705)         2,427         (627)
      Accounts payable...................     1,868         (2,433)      (1,356)
      Accrued liabilities................       652          1,397       (3,419)
      Deferred revenues..................     4,456         (6,294)        (700)
                                            --------     ----------  -----------
      Net cash used in operating activities (18,186)       (18,995)      (9,136)
                                            --------     ----------  -----------
Cash flows from investing activities:
     Restricted cash (increase)/decrease..   (2,033)          (250)          42
     Purchases of property and equipment..  (12,404)       (14,402)      (3,246)
     Sales of property and equipment             --             --          123
     Net cash paid in acquisition.........   (1,732)          (169)          --
     Purchases of marketable securities...  (52,799)       (17,300)          --
     Proceeds from maturities of marketable
       securities.........................   61,117         49,186        1,640
     Other assets.........................       --              9           --
                                           --------      ----------   ----------
      Net cash (used in) provided by
       investing activities...............   (7,851)        17,074       (1,441)
                                           --------      ----------   ----------
Cash flows from financing activities:
     Payments and proceeds from notes
        payable..........................        --         (1,440)       2,855
     Proceeds from sale of common stock..     1,668          2,622          942
                                           --------      ----------   ----------
      Net cash provided by financing
         activities......................     1,668          1,182        3,797
                                           --------      ----------   ----------
Effect of exchange rate changes on cash
  and cash equivalents..................         27           (303)         (22)
Net decrease in cash and cash equivalents   (24,342)        (1,042)      (6,802)
Cash and cash equivalents, beginning
   of year..............................     54,854         30,512       29,470
                                           --------      ----------   ----------
Cash and cash equivalents, end of year.. $   30,512    $    29,470   $   22,668
                                          ==========    ===========   ==========

Supplemental disclosure of cash flow information:
   Cash paid for interest............... $       --    $        41   $       63
Supplemental disclosure of noncash
   investing and financing activities:
   Unrealized gain/(loss) on marketable
     securities......................... $      177    $      (165)  $       --
   Issuance of common stock for
     acquisitions....................... $   24,599    $    67,186   $       --

</TABLE>

See accompanying notes to consolidated financial statements.

                                      -39-
<PAGE>
                       DIGITALTHINK, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

   Organization

     DigitalThink, Inc. (the "Company") provides custom e-learning solutions
designed to address the strategic business objectives of our customers through
training courseware and the delivery of that courseware on a robust technology
platform. The Company completed the initial development of its delivery
technology and initial content, and began significant sales and marketing
efforts in fiscal year 1998. In November 1999, the Company reincorporated in
Delaware from California.

   Principles of Consolidation

     The consolidated financial statements include the accounts of DigitalThink
Inc., and its wholly-owned subsidiaries. All significant intercompany balances
and transactions have been eliminated in consolidation.

   Estimates

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

     Significant estimates used in the preparation of consolidated financial
statements include:

     Accruals associated with restructuring. In March 2002 we initiated a
strategic initiative, under which we restructured our business in response to
the current market environment and as part of our continuing program to create
efficiencies within our operations. This resulted in the Company recording total
restructuring charges of $9.8 million as part of our strategic initiative. All
of these actions required estimates, which are periodically reviewed and
adjusted, if appropriate, based on current circumstances.

     Revenue Recognition and Percentage of Completion. Revenues for Learning
Solution services, including custom course development or consulting services,
are recognized as earned in accordance with SOP 81-1, Accounting for Performance
of Construction/Production-Type Contracts, as development progresses based on
the percentage of completion method. The percentage of completion is based on
the ratio of actual custom development or service costs incurred to date, to
total estimated costs to complete the custom course or service. Provisions for
estimated losses on incomplete contracts will be made on a contract-by-contract
basis and recognized in the period in which such losses become probable and can
be reasonably estimated. To date, there have been no material losses.

   Cash and Cash Equivalents

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

   Marketable Securities

     At March 31, 2003, the Company did not have any short-term marketable
securities.

     At March 31, 2002 all short-term marketable securities were due in one year
or less and consisted of the following (in thousands):

<TABLE>
<CAPTION>
                                      Gross              Gross        Estimated
                           Cost    Unrealized Gains Unrealized Losses Fair Value
                         --------- ---------------- ----------------- ----------
<S>                      <C>       <C>               <C>              <C>
 Short-Term Investments
    Government agencies   $  1,652    $  --     $        (12)      $     1,640
</TABLE>

     The Company classifies these investments as available for sale. Unrealized
gains or losses are included in a separate component of stockholders' equity.
Realized gains and losses are computed based on the specific determination
method and were not material during any of the periods presented.

                                      -40-
<PAGE>
                       DIGITALTHINK, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

1. Summary of Significant Accounting Policies - (Continued)

   Restricted Cash and Deposits

     Restricted cash and deposits represent deposits held as collateral relating
to operating leases and letters of credit.

   Concentration of Credit Risk

     Financial instruments potentially subjecting the Company to concentrations
of credit risk consist primarily of cash, cash equivalents, short term
investments and accounts receivable. The Company invests its excess cash in
deposits with major banks, in U.S. Treasury and U.S. agency obligations and in
debt securities of corporations with strong credit ratings. No losses have been
experienced on such investments.

     Accounts receivable are unsecured, and the Company is at risk to the extent
that such amounts become uncollectible. The Company closely monitors its
outstanding receivable balances on an on-going basis. At March 31, 2002, one
account represented 23% of gross accounts receivable, although less than 30 days
outstanding. At March 31, 2003, one account represented 15% of gross accounts
receivable, although less than 30 days outstanding.

     In fiscal 2001, one customer accounted for 10% of total revenues. In fiscal
2002, our largest customer, EDS, accounted for 8.8% and another customer
accounted for 15.5% of our total revenues of $43.4 million, or 25.9% and 12.6%,
respectively, when excluding the forgiveness of a $10.0 million penalty
associated with the restructuring of an agreement with EDS. In fiscal 2003, our
largest customer, EDS, accounted for 37.1% of total revenues and two other
customers accounted for 14.4% and 10.8% of total revenues, respectively.

   Property and Equipment

     Property and equipment is stated at cost. Depreciation is computed using
the straight-line method over estimated useful lives of three to four years.
Leasehold improvements are amortized using the straight-line method over the
shorter of the estimated useful lives or the remaining lease terms.

   Long-Lived Assets

     The Company reviews long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of that asset may not
be recoverable. An impairment loss would be recognized when the sum of the
undiscounted future net cash flows expected to result from the use of the asset
and its eventual disposition is less than its carrying amount.

    Goodwill

     Goodwill is recorded when the consideration paid for acquisitions exceeds
the estimated fair value of identifiable net tangible and intangible assets
acquired. Goodwill related to acquisitions occurring prior to July 1, 2001 and
other acquisition-related intangibles are amortized on a straight-line basis up
to four years. Goodwill and other acquisition-related intangibles are reviewed
for recoverability periodically or whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable.

     As part of our ongoing review of the Company's operations and financial
performance, we performed an assessment of the carrying value of the our
long-lived assets to be held for use including goodwill and other intangible
assets recorded in connection with our various acquisitions. The assessment was
performed pursuant to SFAS 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of. The conclusion of that
assessment was that the value of the technology purchased associated with the
Arista acquisition was no longer being used in the current product offerings and
was not part of the product roadmap for the future. As a result, we recorded
charges of $10.4 million to write off the Arista goodwill during the fourth
quarter of fiscal 2002 as it no longer had any recoverable value.

     See Note 4 to the Consolidated Financial Statements.


                                      -41-
<PAGE>
                       DIGITALTHINK, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

1. Summary of Significant Accounting Policies - (Continued)

   Revenue Recognition

     Delivered Learning fees allow access to training systems, courses hosted by
the Company, tutor support, and other learning materials for a fixed period,
typically six to twelve months. Delivered Learning fees are recognized ratably
over this access period. Revenues for Learning Solution services, including
custom course development or consulting services, are recognized as earned in
accordance with SOP 81-1, Accounting for Performance of
Construction/Production-Type Contracts, as development progresses based on the
percentage of completion method. The percentage of completion is based on the
ratio of actual custom development or service costs incurred to date, to total
estimated costs to complete the custom course or service. Provisions for
estimated losses on incomplete contracts will be made on a contract-by-contract
basis and recognized in the period in which such losses become probable and can
be reasonably estimated. To date, there have been no material losses. Custom
contracts typically call for non-refundable payments due upon achievement of
certain milestones in production of the courses or in consulting services.
Deferred revenues represent customer prepayments for both Delivered Learning
fees and Learning Solution services.

   Content research and development

     Expenses charged to operations as incurred include course development
personnel related costs. Course development expenses and subject matter expert
payments to course authors are expensed as incurred, in accordance with SFAS No.
86, as the recoverability of such costs against future revenues is uncertain.

   Technology research and development

     Expenses are charged to operations as incurred. Such expenses include
web-site development costs. Web-site development costs which meet the
capitalization criteria of SOP 98-1, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use are capitalized and amortized
over the useful economic life.

   Income Taxes

     The Company accounts for income taxes using an asset and liability
approach. Deferred tax liabilities are recognized for future taxable amounts and
deferred tax assets are recognized for future deductions and operating loss
carryforwards, net of a valuation allowance to reduce net deferred tax assets to
amounts that are more likely than not to be realized.

   Translation of Foreign Currency

     The Company's foreign operations are measured using local currencies as the
functional currency. Assets and liabilities are translated into U.S. dollars at
year-end rates of exchange, and results of operations are translated at average
rates for the year.

   Loss per Common Share

     Basic loss per common share excludes dilution and is computed by dividing
net loss by the weighted average number of common shares outstanding during the
period. Diluted loss per common share reflects the potential dilution that could
occur if securities or other contracts to issue common stock were exercised or
converted into common stock. Common share equivalents are excluded from the
computation in loss periods as their effect would be anti-dilutive.

                                      -42-
<PAGE>
                       DIGITALTHINK, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

1. Summary of Significant Accounting Policies - (Continued)

   Recently Issued Accounting Standards

     In October 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets which supersedes SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of and APB No. 30, Reporting the Results of Operations--Reporting
the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual
and Infrequently Occurring Events and Transactions. SFAS No. 144 also amends
Accounting Research Bulletin No. 51, Consolidated Financial Statements. SFAS No.
144 requires that long-lived assets that are to be disposed of by sale be
measured at the lower of book value or fair value less cost to sell. The
statement also significantly changes the criteria required to classify an asset
as held-for-sale. Additionally, SFAS No. 144 expands the scope of discontinued
operations to include all components of an entity with operations that (1) can
be distinguished from the rest of the entity and (2) will be eliminated from the
ongoing operations of the entity in a disposal transaction. The Company adopted
SFAS No. 144 in its quarter ended June 30, 2002 and there was no impact to the
financial statements upon adoption.

     In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities, which addresses accounting for restructuring
and similar costs. SFAS No. 146 supersedes previous accounting guidance,
principally Emerging Issues Task Force Issue No. 94-3. The Company will adopt
the provisions of SFAS 146 for restructuring activities initiated after December
31, 2002. SFAS No. 146 requires that the liability for costs associated with an
exit or disposal activity be recognized when the liability is incurred. Under
Issue 94-3, a liability for an exit cost was recognized at the date of the
Company's commitment to an exit plan. SFAS No. 146 also establishes that the
liability should initially be measured and recorded at fair value. Accordingly,
SFAS No. 146 may affect the timing of recognizing future restructuring costs as
well as the amounts recognized.

     In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure". SFAS No. 148 amends SFAS No. 123,
"Accounting for Stock-Based Compensation" to provide alternative methods of
transition for an entity that voluntarily changes to the fair value based method
of accounting for stock-based employee compensation. SFAS No. 148 also amends
the disclosure requirements of SFAS No. 123, "Accounting for Sock-Based
Compensation" to require more prominent disclosures about the method of
accounting for stock-based employee compensation and the effect of the method
used on reported results in both annual and interim financial statements. We
adopted the disclosure provisions of SFAS No. 148 for our annual period ended
March 31, 2003.

   Stock-Based Compensation

     At March 31, 2003, the Company has two stock-based employee compensation
plans, which are described more fully in Note 8. The Company accounts for
stock-based awards to employees using the intrinsic value method in accordance
with Accounting Principles Board (APB) No. 25, Accounting for Stock Issued to
Employees (APB 25). The Company accounts for stock based awards to non-employees
in accordance with SFAS No. 123, Accounting for Stock-Based Compensation.
Approximately $349,000 of stock-based compensation was reflected in the net loss
for fiscal 2003 as options granted prior to the Company's initial public
offering had an exercise price below the fair market value of the underlying
common stock on the date of grant. These options have been accounted for as
deferred stock compensation and the related expense has been recognized in
fiscal 2000 to fiscal 2003. The following table illustrates the effect on net
loss and earnings per share if the Company had applied the fair value
recognition provisions of FASB Statement No. 123, "Accounting for Stock-Based
Compensation", to stock-based employee compensation. Refer to Note 8 for the
assumptions used in calculating the estimated fair value of the stock options.
<TABLE>
<CAPTION>
                                                  Years Ended March 31,
                                        ----------------------------------------
                                           2001           2002            2003
                                        ----------    -----------     ----------
<S>                                     <C>           <C>             <C>
Net loss (in thousands):
  As reported.......................   $ (52,225)    $   (61,641)    $  (61,245)
  Add:  Stock-based  employee
    compensation  included  in
    reported net loss...............       5,432           1,888            349
  Deduct:  Total-stock based employee
    compensation expense determined
    under fair value based method for
    all awards                           (21,348)        (17,182)        (5,403)
                                         --------   -------------     ----------
  Pro forma.........................   $ (68,141)    $   (76,935)    $  (66,299)
                                       ==========    ===========     ===========
  Basic and diluted net loss per share:
    As reported.....................   $   (1.51)    $     (1.61)    $    (1.49)
    Pro forma.......................   $   (1.97)    $     (2.02)    $    (1.61)

</TABLE>
                                      -43-
<PAGE>
                       DIGITALTHINK, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

1. Summary of Significant Accounting Policies - (Continued)

   Comprehensive Income

     The Company is required to report comprehensive income in the financial
statements, in addition to net income. The primary differences between net
income and comprehensive income are foreign currency translation adjustments and
net unrealized gains or losses on securities available for sale.

   Reclassification

     Certain prior year amounts in the consolidated financial statements and
notes thereto have been reclassified to conform to the current year
presentation.

2. Business Combinations

     On July 6, 2000 DigitalThink, Inc. acquired Arista Knowledge Systems, Inc.
("Arista"), a company providing Internet-based learning management systems.
DigitalThink issued approximately 746,000 shares of DigitalThink common stock in
exchange for outstanding stock, options and warrants of Arista. The total cost
of the acquisition, including transaction costs, was approximately $26.3
million. The acquisition was accounted for as a purchase business combination;
accordingly the results of operations of Arista have been included with the
Company's results of operations since July 6, 2000. The purchase price paid for
the Arista acquisition was allocated based on the estimated fair values of the
net assets acquired as follows (in thousands):

<TABLE>
    <S>                                                          <C>
    In-process research and development                          $  7,118
    Acquired technology, workforce intangible and goodwill         19,212
    Intrinsic value of unvested Arista options assumed              1,552
    Tangible assets acquired                                        1,718
    Liabilities assumed                                            (3,269)
                                                                 ---------
      Net assets acquired                                        $ 26,331
                                                                 =========
</TABLE>

     The consideration given in the acquisition of Arista was as follows:

<TABLE>
    <S>                                                          <C>
    DigitalThink common stock                                    $ 20,523
    Stock options assumed                                           3,976
    Net cash paid                                                   1,732
    Transaction costs                                                 100
                                                                  -------
      Total purchase price                                       $ 26,331
                                                                 ========
</TABLE>

     Of the purchase price, $7.1 million represents purchased in-process
technology that had not yet reached technological feasibility and had no
alternative future use. Accordingly, this amount was immediately expensed in the
consolidated statement of operations upon consummation of the acquisition. The
value assigned to purchased in-process technology was based on a valuation
prepared by an independent third-party appraiser. Intangible assets acquired
will be amortized on a straight-line basis over a period of four years.

     The following unaudited pro forma results of operations for the year ended
March 31, 2001 give effect to the acquisition as if it had occurred at the
beginning of fiscal 2001. The pro forma results of operations exclude the $7.1
million of nonrecurring charges that were recorded in conjunction with the
acquisition (in thousands, except per share amounts):

<TABLE>
<CAPTION>

                                                   Year Ended March 31, 2001
                                                   -------------------------
   <S>                                                    <C>
   Net revenues                                            $ 38,658
   Loss from operations                                    $ 62,061
   Net loss                                                $(58,353)
   Basic and diluted loss per share attributable
     to common shareholders                                $  (1.69)
</TABLE>

                                      -42-
<PAGE>
                       DIGITALTHINK, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

2. Business Combinations - (Continued)

     Effective August 28, 2001, the Company acquired LearningByte International,
Inc. ("LBI"), a provider of custom e-learning courseware, in exchange for
approximately 4.7 million shares of DigitalThink common stock and assume
approximately 500,000 warrants outstanding, for a total purchase price of
approximately $68.0 million, including transaction costs, as follow (in
thousands):

<TABLE>
   <S>                                                 <C>
   DigitalThink common stock                          $  63,656
   Warrants assumed at fair value                         3,530
   Transaction costs                                        800
                                                      ---------
    Total purchase price                              $  67,986
                                                      =========
</TABLE>

     The acquisition of LBI was accounted for by the purchase method. LBI's
results of operations have been included in the Company's results of operations
since the effective date of the acquisition. The assets acquired and liabilities
assumed were recorded at estimated fair values as determined by the Company's
management. The Company obtained an independent appraisal of the fair value of
the acquired tangible and identified intangible assets, and their remaining
useful lives. Intangible assets acquired will be amortized on a straight-line
basis over a weighted average period of 4.6 years. Goodwill will not be
amortized in accordance with SFAS 141. A summary of the assets acquired and
liabilities assumed in the acquisition follows (in thousands):

<TABLE>
   <S>                                                  <C>
   Acquired technology and customer list               $  6,800
   Goodwill                                              70,040
   Net fair value of tangible assets
      acquired and liabilities assumed                   (8,854)
                                                       --------
                  Net assets acquired                  $ 67,986
                                                       =========
</TABLE>

     The following table reflects the results of operations on a pro forma basis
as if the acquisition had been completed on April 1, 2000 and 2001, and does not
consider the effects of synergies and cost reduction initiatives directly
related to all acquisitions. Therefore, the pro forma financial information is
as follows (in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                  Years Ended March 31,
                                          ------------------------------------
                                              2001                     2002
                                          ------------             -----------
<S>                                       <C>                     <C>
  Net revenues                            $    32,216             $    46,387
  Loss from operations                    $   (58,781)            $   (70,513)
  Net loss                                $   (54,476)            $   (70,162)
  Basic and diluted loss per share        $     (1.39)            $     (1.75)
</TABLE>

    In connection with the LBI acquisition, the Company recorded a charge of
$5.8 million comprised of approximately $5.3 million for the write-off of
internal use software made obsolete by the acquisition of LBI and $0.5 million
for severance-related costs.

     Effective November 16, 2001, the Company acquired TCT Technical Training
Pvt. Ltd. ("TCT"), of Kolkata, India, a content developer of custom courseware.
DigitalThink acquired all the outstanding shares of TCT for $500,000 after we
received governmental approval in November 2001. TCT has been acting exclusively
as a contractor to the Company since April 2001, when the transaction was first
announced. Upon acquisition, $215,000 was recorded as an intangible to be
amortized over one year and $285,000 was the net fair value of tangible assets
acquired and liabilities assumed. The acquisition of TCT was accounted for by
the purchase method. TCT's results of operations have been included in the
Company's results of operations since the effective date of the acquisition. Pro
forma financial information in connection with the TCT acquisition has not been
provided, as results would not have differed materially from actual reported
results.

                                      -45-
<PAGE>
                       DIGITALTHINK, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

3. Restructuring Charge

<TABLE>
<CAPTION>

                 Remaining               Amounts
                 Liability               Recorded            Remaining Liability
                Balances as of   Cash    in Other     Net      Balances as of
                March 31, 2002 Payments  Accounts Adjustments   March 31, 2003
                -------------- --------  -------- ----------- -----------------
<S>             <C>            <C>       <C>      <C>         <C>
(in thousands)
Severance         $    210     $  (210)    $   --   $   --        $      --
Facilities and
 equipment              32         (32)        --       --               --
Lease commitments    7,627      (1,867)       (67)     (83)           5,610
                  ---------    --------   --------  -------       ----------
   Total           $ 7,869     $(2,109)     $ (67)   $ (83)       $   5,610
                  =========    ========   ========  =======       ==========
</TABLE>


     In March 2002 we initiated a strategic initiative, under which we
restructured our business in response to the current market environment and as
part of our continuing program to create efficiencies within our operations. We
recorded total restructuring charges of $9.8 million as part of our strategic
initiative, which included the following:

o     Reducing our workforce by approximately 80 employees, mainly within
      the learning services organization, resulting in a severance charge
      of approximately $650 thousand severance charge. Approximately $440
      thousand was paid in March 2002, and approximately $210 thousand
      was paid in the first and second quarters of fiscal 2003.
o     Consolidating  our sales,  administrative  and content and  technology
      development  facilities  through  building and site closures, from a total
      of approximately  244,000 square feet into approximately 100,000 square
      feet. During the fiscal year ended March 31, 2002, four sites have been
      vacated: Chisholm, Minnesota;  Minneapolis,  Minnesota; Troy, Michigan;
      and our office in the United Kingdom.  Property and equipment that was
      disposed or removed from operations resulted in a charge of $2.3 million
      and  consisted  primarily of leasehold  improvements,  computer  equipment
      and furniture and fixtures.  In  addition,  we  incurred a charge of $6.8
      million  associated  with  leases  related to excess or closed facilities,
      which  represents  the excess of the remaining  lease  obligations  over
      estimated  market value,  net of anticipated  sublease income.  Amounts
      accrued (net of anticipated  sublease  proceeds) related to the
      consolidation of facilities will be paid over the respective lease terms
      through 2016.

     The Company has been recording deferred rent for those leased facilities
that met the criteria in accordance with SFAS No. 13, Accounting for Leases.
Nine leased facilities were included in the restructuring costs and for two of
those facilities; the Company had recorded deferred rent of approximately
$864,000. This amount of deferred rent was a liability as of March 2002 and
noted as part of the restructuring liability.

     At March 31, 2003, restructuring charge obligations were recorded as $1.0
million in accrued liabilities and $4.6 million in long-term liabilities. The
"Amounts Recorded in Other Accounts" are balances that have been reclassified to
accounts payable from accrued liabilities as the amounts have been invoiced and
become due.

     The net adjustments of $83,000 were made to the restructuring accrual based
on events occurring during the three months ended December 31, 2002, as a
reversal of previously expensed restructuring costs. This reversal was the
result of the Company subleasing one property earlier than expected resulting in
a reversal of approximately $450,000, offset by estimates of sublease income
associated with another property at a lower rental rate than originally expected
resulting in an additional accrual of approximately $367,000.

                                      -46-
<PAGE>
                       DIGITALTHINK, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

4.  Change in Accounting for Goodwill and Certain Intangibles

     Effective  April 1, 2002,  the Company  adopted SFAS No. 141,  Business
Combinations.  SFAS No. 141 requires that the purchase method of  accounting  be
used for all  combinations  initiated  after June 30,  2001.  The adoption of
SFAS No. 141 did not have an impact on the results of operations, financial
position or liquidity of the Company.

     Effective April 1, 2002, the Company adopted SFAS No. 142, Goodwill and
Other Intangible Assets. SFAS No. 142 addresses the initial recognition and
measurement of intangible assets acquired outside of a business combination and
the accounting for goodwill and other intangible assets subsequent to their
acquisition. SFAS No. 142 provides that intangible assets with finite useful
lives be amortized and that goodwill and intangible assets with indefinite lives
will not be amortized, but will rather be tested at least annually for
impairment. Intangible assets, including goodwill, that are not subject to
amortization will be tested for impairment annually, or more frequently if
events or changes in circumstances indicate that the asset might be impaired,
using a two step impairment assessment. The first step of the impairment test
identifies potential impairment and compares the fair value of the reporting
unit (the Company in this case) with its carrying amount, including goodwill. If
the fair value of the reporting unit exceeds its carrying amount, goodwill of
the reporting unit is not considered impaired, and the second step of the
impairment test is not necessary. If the carrying amount of the reporting unit
exceeds its fair value, the second step of the impairment test shall be
performed to measure the amount of the impairment loss, if any. During the
second quarter ending September 30, 2002, we performed the required impairment
tests of goodwill and indefinite-lived intangible assets as of April 1, 2002. We
incurred a reduction in goodwill of $50.2 million upon the completion of our
analysis, which resulted in a charge to the results of operations from the
cumulative effect of the adoption of a new accounting principle during the year
ended March 31, 2003. The impaired goodwill was not deductible for taxes, and as
a result, no tax benefit was recorded in relation to the charge. The Company
performed its annual goodwill impairment analysis on October 31, 2002, using a
valuation model based on market capitalization adjusted for outstanding debt,
consistent with the model used as of April 1, 2002. This analysis indicated that
no additional adjustments were required to the remaining goodwill balance.

     The following sets forth a summary of net loss and net loss per share
information for the years ended December 31, 2002 and 2001 adjusted for the
non-amortization provisions of SFAS No. 142 (in thousands, except per share
amounts):

<TABLE>
<CAPTION>
                                                   Years Ended March 31,
                                            -----------------------------------
                                              2001         2002           2003
                                            --------    ----------   -----------
<S>                                         <C>          <C>           <C>
Reported net loss before cumulative effect
  of accounting change                      $(52,225)   $(61,641)     $ (11,056)

Reported net loss                           $(52,225)   $(61,641)     $ (61,245)

Goodwill amortization                       $   3,602   $  5,674      $      --

Adjusted net loss before cumulative
  effect of accounting change               $(48,623)   $(55,967)     $ (11,056)

Adjusted net loss                           $(48,623)   $(55,967)     $ (61,245)

Weighted average common shares outstanding
  used in computing basic and diluted loss
  per share                                   34,524      38,176         41,203
Basic and diluted net loss per share:
Reported net loss per share before
  cumulative effect of accounting change    $  (1.51)   $  (1.61)     $   (0.27)

Reported net loss per share                 $  (1.51)   $  (1.61)     $   (1.49)

Goodwill amortization                       $   0.10    $   0.15      $      --

Adjusted net loss per share--basic and
  diluted before cumulative effect of
  accounting change                         $  (1.41)   $  (1.46)     $   (0.27)

Adjusted net loss per share--basic and
   diluted                                  $  (1.41)   $  (1.46)     $   (1.49)
</TABLE>
                                      -47-
<PAGE>
                       DIGITALTHINK, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

4.  Change in Accounting for Goodwill and Certain Intangibles - (Continued)

    Changes in the carrying amount of goodwill for the fiscal year ended March
31, 2003 were as follows (in thousands):

<TABLE>
    <S>                                                  <C>
    Balance at March 31, 2002                            $         69,818
    Cumulative effect of change in accounting principle           (50,189)
                                                         -----------------
    Balance at March 31, 2003                            $         19,629
                                                         =================
</TABLE>

     The gross carrying amount and accumulated amortization of the Company's
intangible assets other than goodwill as of March 31, 2003 and March 31, 2002
were as follows (in thousands):

<TABLE>
<CAPTION>
                               March 31, 2002             March 31, 2003
                        --------------------------    --------------------------
                          Gross                Net    Gross                Net
                        Carrying Accumulated  Book   Carrying Accumulated  Book
                         Amount  Amortization Value   Amount  Amortization Value
                        -------- ------------ ------ -------- ------------ -----
<S>                     <C>      <C>          <C>    <C>      <C>          <C>
Amortized Intangible Assets:
LearningByte acquired
   technology            $6,100  $   (762)   $5,338   $6,100  $ (1,982)  $4,118
TCT acquired
   technology               215       (71)      144      215      (215)      --
                         ------  ---------   ------   ------  ---------  -------
Total                    $6,315  $   (833)   $5,482   $6,315  $ (2,197)  $4,118
                         ======  =========   ======   ======  =========  =======
</TABLE>

     Amortization expense recorded on the intangible assets for the fiscal years
ended March 31, 2002 and 2003 was $1.5 million and $1.4 million, respectively.
The estimated future amortization expense by fiscal year is as follows: 2004 is
$1.2 million; 2005 is $1.2 million; 2006 is $1.2 million and 2007 is
approximately $500,000.

5. Property and Equipment

    Property and equipment consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                           March 31,
                                                  ------------------------
                                                      2002          2003
                                                  ----------     ---------
<S>                                               <C>            <C>
Furniture and fixtures..........................   $   737       $    942
Computer hardware and software..................    18,812         20,259
Leasehold improvements..........................     8,337          9,117
Accumulated depreciation........................    (9,561)       (15,808)
                                                  ---------      ---------
    Property and equipment, net.................   $18,325       $ 14,510
                                                  =========      ========
</TABLE>

6. Accrued Liabilities (in thousands):

<TABLE>
<CAPTION>
                                                           March 31,
                                                    ----------------------
                                                      2002          2003
                                                    --------      --------
<S>                                                 <C>           <C>
Payroll and related expenses........................$ 1,464       $ 1,396
Deferred rent.......................................    103         1,176
Restructuring charge................................  2,569         1,038
Other...............................................  3,802         1,706
                                                     -------      --------
     Total accrued liabilities..................... $ 7,938       $ 5,316
                                                    =======       ========
</TABLE>

                                      -48-
<PAGE>
                       DIGITALTHINK, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

7. Income Taxes:

     No income taxes were provided for any of the periods presented due to the
Company's net losses. Deferred tax assets are comprised of the following (in
thousands):

<TABLE>
<CAPTION>
                                                                March 31,
                                                         ----------------------
                                                           2002         2003
                                                         --------    ----------
<S>                                                      <C>         <C>
Deferred tax assets:
  Accruals and reserves................................. $   539     $    892
  Net operating losses and tax credits carried forward..  31,755       49,838
  Basis difference in fixed assets......................     392        1,428
                                                         -------     --------
      Total gross deferred tax asset before valuation
         allowance......................................  32,686       52,128
  Valuation allowance................................... (32,686)     (52,158)
                                                         --------    --------
  Net deferred tax asset................................ $    --     $     --
                                                         ========    ========
</TABLE>

     At March 31, 2003, the Company had available federal and California state
net operating loss carryforwards of approximately $126 million and $86 million,
respectively, to offset future taxable income. These net operating loss
carryforwards begin to expire in 2008 and 2005 for federal and state purposes,
respectively. The Company has federal and California state research and
development credit carryforwards of $878,000 and $441,000 respectively. The
Company also has California state enterprise zone credit carryforwards of
$613,000. At March 31, 2003, the Company's wholly owned foreign subsidiaries in
the United Kingdom and India had foreign net operation loss carryforwards of
approximately $3 million to offset future foreign taxable income. At March 31,
2002 and 2003, the net deferred tax assets have been fully reserved due to the
uncertainty surrounding the realization of such benefits. The difference between
book accumulated deficit and cumulative tax net operating losses at March 31,
2003 is due primarily to permanent goodwill related to DigitalThink stock
acquisitions and warrant expense that are not deductible for tax purposes.

     Internal Revenue Code Section 382 places a limitation (the "Section 382
Limitation") on the amount of taxable income which can be offset by net
operating loss ("NOL") carryforwards after a change in control (generally
greater than 50% change in ownership) of a loss corporation. California has
similar rules. Generally, after a control change, a loss corporation cannot
deduct NOL carryforwards in excess of the Section 382 Limitation. Due to these
"change in ownership" provisions, utilization of the NOL carryforwards may be
subject to an annual limitation regarding their utilization against taxable
income in future periods.

                                      -49-
<PAGE>
                       DIGITALTHINK, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

8. Stockholders' Equity (Deficit)

   Stock Option Plan

     The Company's stock option plans provide for grants of incentive or
nonstatutory stock options to officers, employees, directors and consultants.
Options vest over four years and expire over terms up to ten years. One of the
Company's stock option plans provides for annual increases in the number of
shares available for issuance equal to the lesser of 2 million shares, 5% of the
outstanding shares on the date of the annual increase, or a lesser amount as may
be determined by the board of directors.

     The Company had 1,941,409 shares available for future grant at March 31,
2003.

     A summary of the activity under the Company's stock option plans is as
follows:

<TABLE>
<CAPTION>
                                                                       Weighted
                                                                        Average
                                                          Number       Exercise
                                                        of Shares        Price
                                                       -----------    ----------
<S>                                                    <C>            <C>
Balances,  March 31, 2000 (487,576  exercisable
  at a weighted  average exercise price of
  $4.18 per share)....................................   4,879,264     $  3.13
Granted (weighted average fair value of
  $14.47)............................................    4,627,554       17.12
Options assumed in acquisition........................     159,704       17.44
Canceled..............................................  (1,012,929)      15.77
Exercised.............................................    (524,698)       0.90
                                                       ------------    -------
Balances,  March 31, 2001 (1,407,436  exercisable
  at a weighted average exercise price of
  $3.14 per share) ...................................   8,128,895        9.89
Granted (weighted average fair value of $7.99)........   1,629,519        9.63
Canceled..............................................  (2,277,736)      14.44
Exercised.............................................    (505,066)       1.96
                                                       ------------    -------
Balances,  March 31, 2002 (2,849,597  exercisable
   at a weighted average exercise price of
   $7.53 per share)...................................   6,975,612        8.89
Granted (weighted average fair value of $0.79)........   5,747,351        1.19
Canceled..............................................  (3,215,774)       8.21
Exercised.............................................    (476,870)       0.65
                                                      -------------    --------
Balances, March 31, 2003.............................    9,030,319    $   4.19
                                                      =============    ========

</TABLE>
     The following table summarizes information as of March 31, 2003 concerning
options outstanding:

<TABLE>
<CAPTION>

                            Options Outstanding                 Vested Options
                 ----------------------------------------    ------------------
                             Weighted Average    Weighted              Weighted
 Range of                        Remaining        Average               Average
 Exercise          Number     Contractual Life   Exercise     Number   Exercise
 Prices         Outstanding       (Years)          Price      Vested     Price
 ---------      ------------  ----------------  ----------   --------  ---------
<S>             <C>           <C>               <C>          <C>       <C>

 $0.05 - $1.00     587,045          5.17         $ 0.23       535,247   $ 0.16
  1.02 -  1.14   4,105,142          8.84           1.14     1,872,917     1.13
  1.17 -  1.83   1,479,690          7.89           1.51       816,517     1.50
  2.04 -  8.00   1,121,992          8.17           7.36       514,226     7.76
  8.06 - 11.00   1,119,041          7.65           9.36       665,870     9.37
 11.19 - 34.25     401,050          7.73          17.83       228,814    18.76
 34.63 - 56.00     216,359          3.98          22.52       141,385    41.78
                ----------          ----         -------    ---------   --------
      Total      9,030,319          8.05         $ 4.19     4,774,976   $ 5.00
                ==========          ====         =======    =========   ========

</TABLE>
   Additional Stock Plan Information

     As discussed in Note 1, the Company accounts for its stock-based awards
using the intrinsic value method in accordance with Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees, and its related
interpretations.

                                      -50-
<PAGE>
                       DIGITALTHINK, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

8. Stockholders' Equity (Deficit) - (Continued)

     Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation (SFAS 123), requires the disclosure of pro forma net
income (loss) had the Company adopted the fair value method (see Note 1). Under
SFAS 123, the fair value of stock-based awards to employees is calculated
through the use of option pricing models, even though such models were developed
to estimate the fair value of freely tradable, fully transferable options
without vesting restrictions, which significantly differ from the Company's
stock option awards. These models also require subjective assumptions, including
expected time to exercise, which greatly affect the calculated values. The
following weighted average assumptions were used: expected life after vesting,
0.5 years in fiscal 2000, 3 years in fiscal 2001, 2.5 years in fiscal 2002 and
1.5 years in fiscal 2003; average risk-free interest rate, 6.0% in fiscal 2000,
5.3% in fiscal 2001, 4.5% in fiscal 2002 and 2.15% in fiscal 2003. The Company's
calculations include volatility of 100% in the period following the public
offering through March 31, 2000, 115% in fiscal 2001, 120% in fiscal 2002 and
110% in fiscal 2003 and no dividends during the expected term. The Company's
calculations are based on a multiple option valuation approach, and forfeitures
are recognized as they occur.

   Stock-Based Compensation

     During fiscal 2001, the Company assumed 159,704 unvested common stock
options at a weighted average price of $17.44 per share, which was less than the
fair value of $35 per share, related to the Arista acquisition. Accordingly, the
Company recorded $1.6 million as the value of such options. Stock-based
compensation of $5.4 million was amortized to expense in the year ended March
31, 2001. In addition, the Company recorded a $974,000 decrease in deferred
stock compensation in fiscal 2001 due to unvested options of terminated
employees.

     At March 31, 2002, the Company had $631,000 in deferred stock compensation
related to options, which will be amortized to expense through fiscal 2004.

     At March 31, 2003, the Company had $224,000 in deferred stock compensation
related to options, which will be amortized to expense through fiscal 2004.

9. Net Loss Per Share

     For fiscal 2001, 2002 and 2003, the Company had stock options outstanding
of 8,128,895, 6,975,612, and 9,030,319 respectively, which could potentially
dilute basic earnings per share in the future, but were excluded in the
computation of diluted net loss per share in the periods presented, as their
effect would have been antidilutive.

10. Related Party Transactions

     During fiscal 2001, the Company generated revenues of approximately $4.0
million, $3.0 million, $831,000, $827,000, and $199,000 from 5 customers who are
investors in the Company. Additionally, the Company generated revenues of $2.5
million from one customer of which one of the Company's directors is a director.
Receivables at fiscal year-end relating to these six customers totaled $752,000.

     During fiscal 2002, the Company generated revenues of approximately $4.0
million, $1.5 million, $335,000, and $10,000 from 4 customers who are investors
in the Company. Additionally, the Company generated revenues of $3.9 million
from one customer of which one of the Company's directors is an executive
officer. Receivables at fiscal year-end relating to these six customers totaled
$486,000.

     During fiscal 2003, the Company generated revenues of approximately $40,000
and $33,000 from two customers who are investors in the Company. Additionally,
the Company generated revenues of $4.5 million from one customer of which one of
the Company's directors serves as a board member. Receivables at fiscal year-end
relating to these three customers totaled approximately $922,000.

                                      -51-
<PAGE>
                       DIGITALTHINK, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

11. Employee Benefit Plans

   401(k) Plan

     The Company has a 401(k) retirement plan (the Plan) that covers
substantially all employees of the Company. The Plan provides for voluntary
salary reduction contributions of up to 20% of eligible participants' annual
compensation. The Company has not provided matching contributions for any of the
periods presented.

   Employee Stock Purchase Plan

     The Company has a Qualified Employee Stock Purchase Plan (ESPP) under which
200,000 shares of common stock were originally reserved for issuance. The ESPP
allows for annual increases equal to the lesser of 1% of the outstanding shares
of common stock on the first day of the fiscal year, 400,000 shares, or such
lesser amount as may be determined by the board. Under the ESPP, eligible
employees may purchase shares of the Company's common stock through payroll
deductions of up to 10% of the participant's compensation.

     Under this plan, eligible employees may purchase shares of the Company's
common stock at 85% of fair market value at specific, predetermined dates. In
fiscal 2001, approximately 100,000 shares were purchased at an average price of
$11.87. In fiscal 2002, approximately 228,000 shares were purchased at an
average price of $7.18. In fiscal 2003, approximately 582,000 shares were
purchased at an average price of $0.87. At March 31, 2003, approximately 42,000
shares were available for purchase under the ESPP.

12. Lease Commitments

     The Company leases its principal office facilities under operating leases.
As of March 31, 2003, future minimum payments under facilities operating leases
are as follows (in thousands):

<TABLE>
<CAPTION>

     Fiscal Year Ending
          March 31,
     -------------------
     <S>                                         <C>
            2004.............................    $   4,870
            2005.............................        5,037
            2006.............................        5,492
            2007.............................        5,793
            2008.............................        6,448
            Thereafter.......................       31,220
                                                 ---------
              Total...........................    $ 58,860
                                                 =========
</TABLE>

     Rent expense under operating leases was $2.7 million, $4.4 million, and
$3.8 million for the years ended March 31, 2001, 2002 and 2003, respectively.

                                      -52-
<PAGE>
                       DIGITALTHINK, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

13. Strategic Alliance with Electronic Data Systems Corporation

     On July 11, 2000 the Company entered into an agreement with EDS pursuant to
which EDS was issued two separate performance warrants to purchase shares of
DigitalThink common stock. Under the terms of the first warrant, EDS could earn
warrants to purchase up to 862,955 shares of DigitalThink common stock
exercisable at $29 per share. The warrant could have been earned when EDS
delivered third-party customers from the United States prior to July 31, 2003,
which generated a total of $50 million of contractually committed revenue to
DigitalThink recognizable by July 31, 2005. The warrants expired October 31,
2003. This warrant contained a significant disincentive for non-performance. If
EDS failed to deliver the full $50 million of contracted, United States revenue
by July 31, 2003, EDS agreed to pay DigitalThink $5 million.

     Under the terms of the second warrant, EDS could earn warrants for up to
690,364 shares of DigitalThink common stock exercisable at $29 per share. The
warrant could have been earned when EDS delivered third-party customers from
outside the United States prior to July 31, 2003, which generated a total of $50
million of contractually committed revenue to DigitalThink recognizable by July
31, 2005. The warrants expired October 31, 2003. This warrant contained a
significant disincentive for non-performance. If EDS failed to deliver the full
$50 million of contracted, non-United States revenue by July 31, 2003, EDS
agreed to pay DigitalThink $5 million.

     The Company calculated a fixed non-cash charge of $38 million related to
this transaction, based on the fair value of the warrants issued. A portion of
the warrant vested at the date of the transaction resulting in an immediate
charge of $4.9 million. Amortization of the remaining warrant expense would
occur over three years from July 2000 through July 2003, in proportion to the
amount of revenue generated under the agreement, or on a straight-line basis,
whichever is faster. Through March 31, 2002, amortization was recorded on a
straight-line basis totaling $24.1 million.

     On March 27, 2002, DigitalThink restructured the agreement entered into
with EDS, whereby EDS has surrendered its vested and unvested warrants to
purchase shares of DigitalThink common stock and DigitalThink has forgiven the
$10.0 million total non-performance penalty associated with these warrants.
Therefore, during the fiscal year ended 2002 a charge of approximately $10.0
million was recorded as a reduction of revenue and a credit of approximately
$10.0 million was recorded as other income.

14. Subsequent Event

     On April 16, 2003, the Company acquired privately held Horn Interactive,
Inc., ("Horn") a provider of simulation-based custom e-learning. The Company
issued approximately 2 million shares of DigitalThink common stock in exchange
for all the outstanding shares of Horn and Horn has become a wholly-owned
subsidiary of the Company. The total cost of the acquisition, including
transaction costs, was approximately $5.0 million. The acquisition was accounted
for as a purchase business combination; accordingly the results of operations of
Horn will be included in the Company's results of operations from April 17, 2003
forward.


                                    * * * * *

                                      -53-
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

    Not applicable

                                    PART III

Item 10. Directors and Executive Officers of the Registrant

     The information required by this item with respect to executive officers is
contained in Part I of this report. The information required by this item with
respect to directors is hereby incorporated by reference from the information
under the caption "Election of Directors" to be contained in DigitalThink's
proxy statement, to be filed with the Securities and Exchange Commission no
later than 120 days from the end of our last fiscal year in connection with the
solicitation of proxies for our 2003 Annual Meeting of Stockholders (the "Proxy
Statement"). The information required by this item with respect to compliance
within Section 16(a) of the Securities Exchange Act is incorporated by reference
to the information under the caption "Compliance with Section 16(a) of the
Securities Exchange Act of 1934" in the Proxy Statement.

Item 11. Executive Compensation

     The information required by this item is incorporated by reference to the
information under the caption "Executive Officer Compensation" in the Proxy
Statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management

     The information required by this item is incorporated by reference from the
information under the caption "Security Ownership of Certain Beneficial Owners
and Management" and "Equity Compensation Plan Information" in the Proxy
Statement.

Item 13. Certain Relationships and Related Transactions

     The information required by this item is incorporated by reference from the
information under the caption "Certain Relationships and Related Transactions"
in the Proxy Statement.


Item 14:  Controls and Procedures

Evaluation of disclosure controls and procedures

     DigitalThink's management, under the supervision and with the participation
of the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"),
performed an evaluation of the effectiveness of the design and operation of our
"disclosure controls and procedures" (as defined in Securities Exchange Act of
1934 (the "Exchange Act") Rules 13a-14(c) and 15-d-14(c)) as of a date (the
"Evaluation Date") within 90 days before the filing date of this annual report
on Form 10-K. Based on that evaluation, the CEO and CFO, concluded that, as of
the Evaluation Date, DigitalThink's disclosure controls and procedures were
effective to ensure that information DigitalThink is required to disclose in
filings or submissions under the Exchange Act is recorded, processed, summarized
and reported accurately and timely within the time periods specified by the
Securities and Exchange Commission.

Changes in internal controls

     Subsequent to the Evaluation Date, there were no significant changes in
DigitalThink's internal controls or in other factors that could significantly
affect DigitalThink's disclosure controls and procedures, nor were there any
significant deficiencies or material weaknesses in DigitalThink's internal
controls. As a result, no corrective actions were required or undertaken.

                                      -54-
<PAGE>
                                     PART IV

Item 15. Exhibits, Financial Statement Schedule, and Reports on Form 8-K

(a)1. Consolidated Financial Statements

     The  following  Consolidated  Financial  Statements of  DigitalThink,  Inc.
and Report of Deloitte & Touche LLP have been filed under Item 8 of this Form
10-K.

                   Index to Consolidated Financial Statements

     Independent Auditors' Report
     Consolidated Balance Sheets as of March 31, 2002 and 2003
     Consolidated Statements of Operations for the years ended March 31, 2001,
       2002 and 2003
     Consolidated Statement of Stockholders' Equity (Deficit) for the years
       ended March 31, 2001, 2002 and 2003
     Consolidated Statements of Cash Flows for the years ended March 31, 2001,
       2002 and 2003
     Notes to Consolidated Financial Statements

(a)2. Financial Statement Schedule

     The following financial statement schedule of DigitalThink, Inc. for the
fiscal years ended March 31, 2001, 2002, and 2003 is filed with this Report and
should be read in conjunction with the Consolidated Financial Statements of
DigitalThink included under Item 8.

     Schedule II - Valuation and Qualifying Accounts

     Schedules not listed above have been omitted because they are not
applicable or are not required or the information required to be set forth
therein is included in the Consolidated Financial Statements or Note thereto.

(a)3. Exhibits

     Refer to (C) below.

(b) Reports on Form 8-K

     On January 28, 2003, we filed a current report on Form 8-K announcing the
addition of J. Jay Tyler as our Executive Vice President of Sales and Marketing.

                                      -55-
<PAGE>
(c) Exhibits

<TABLE>
<CAPTION>

 Exhibit
 Number     Description of Document
--------    -------------------------------------
<S>         <C>
  2.1       Agreement and Plan of Reorganization among and between DigitalThink,
            LearningByte International and Merger Sub, dated August 14, 2001 (1)
  2.2       Agreement and Plan of Merger and Reorganization dated April 16,
            2003, by and among DigitalThink, Inc., Buffalo Bill Acquisition
            Corp., Horn Interactive, Inc. and the shareholders of Horn
            Interactive, Inc. (2)
  3.1       Bylaws of DigitalThink, Inc. (3)
  3.2       Bylaws of DigitalThink, Inc. (4)
  3.3       Bylaws of DigitalThink, Inc.
  4.2       Preferred Stock Rights Agreement, dated as of March 31, 2003 between
            DigitalThink, Inc. and Mellon Investor Services, LLC,  including the
            Certificate of Designation,  the form of Rights  Certificate and the
            Summary of Rights attached thereto as Exhibits A, B and C,
            respectively. (9)
 10.1       Restated Investors Rights Agreement dated November 10, 1999 (5)
 10.2       1996 Stock Plan and forms of agreements thereunder (5)
 10.3       1999 Employee Stock Purchase Plan (5)
 10.4       Form of Director and Executive Officer Indemnification Agreement (5)
 10.16      Change of Control Severance Agreement between DigitalThink and Jon
            C. Madonna dated September 14, 2001 (3)
 10.17      Change of Control Severance Agreement between DigitalThink and
            Michael W. Pope dated September 14, 2001 (3)
 10.19      Restated 1996 ISO Stock Plan (6)
 10.20      Standard  Industrial/Commercial  Single Tenant Lease  Amendment
            dated September 4, 2002 between Thomas A. Price and Gwendolyn L.
            Price,  as trustees of the Price Trust UTD October 5, 1984 and
            DigitalThink, for office space located at 601 Brannan Street, San
            Francisco, California (6)
 10.21      Warrant Agreement dated August 21, 2002 between Thomas A. Price and
            Gwendolyn L. Price, as trustees of the Price Trust UTD October 5,
            1984 and DigitalThink (6)
 10.22      Agreement of Sublease dated November 5, 2002 between San Francisco
            Unified School District and DigitalThink, for office space located
            at 1064 and 1098 Harrison Street, San Francisco, California (7)
 10.23      Stock and Option Purchase Agreement between DigitalThink and Roger
            Goddu, dated September 20, 2002. (8)
 10.24      Employment Agreement between DigitalThink and J. Jay Tyler dated
            January 27, 2003
 21.1       DigitalThink subsidiaries
 23.1       Independent Auditors' Consent
 24.1       Power of Attorney (see signature page)
 99.1       Certification of Chief Executive Officer pursuant to Section 906 of
            the Sarbanes-Oxley Act of 2002
 99.2       Certification of Chief Financial Officer pursuant to Section 906 of
            the Sarbanes-Oxley Act of 2002
----------
</TABLE>

(1) Incorporated by reference to exhibit 99.1 filed with our Current Report on
Form 8-K dated August 22, 2001.
(2) Incorporated by reference to our Current
Report on Form 8-K dated April 16, 2003.
(3) Incorporated by reference to our Annual Report on Form 10-K for the fiscal
year ended March 31, 2002.
(4) Incorporated by reference to exhibit 4.2(b) filed with our Registration
Statement on From S-1 (File No. 333-92429), as amended.
(5) Incorporated by reference to our Registration Statement on From S-1 (File
No. 333-92429), as amended.
(6) Incorporated by reference to our Quarterly Report on Form 10-Q for the
quarter ended September 30, 2002.
(7) Incorporated by reference to our Quarterly Report on Form 10-Q for the
quarter ended December 31, 2002.
(8) Incorporated by reference to exhibit 99.1 filed with our Current Report on
Form 8-K dated October 7, 2002.
(9) Incorporated by reference to our Form 8-A/A dated March 31, 2003.

                                      -56-
<PAGE>

                                   SIGNATURES

    Pursuant to the requirements of the Securities Act, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                           DIGITALTHINK, INC.
                           (Registrant)
June 10, 2003
                           By:   /s/ MICHAEL W. POPE
                                 -------------------------------------
                                 Michael W. Pope
                                 President and Chief Executive Officer

June 10, 2003
                           By:   /s/ ROBERT J. KROLIK
                                --------------------------------------
                                 Robert J. Krolik
                                 Chief Financial Officer

                                POWER OF ATTORNEY

    KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Michael W. Pope and Robert J. Krolik, and each of
them, each with the power of substitution, his attorney-in-fact, to sign any
amendments to this Annual Report on Form 10-K (including post-effective
amendments), and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.

    Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

     Signature                  Title                                 Date

BY:  /s/ JON C. MADONNA         Chairman of the Board             June 10, 2003
   --------------------------
     Jon C. Madonna

By:  /s/ MICHAEL W. POPE        Chief Executive Officer,
   --------------------------   President and Director            June 10, 2003
       Michael W. Pope         (Principal Executive Officer)

By:  /s/ ROBERT J. KROLIK       Chief Financial Officer           June 10, 2003
   --------------------------
     Robert J. Krolik          (Principal Financial and Accounting Officer)

By:  /s/ STEVE L. ESKENAZI      Director                          June 10, 2003
   --------------------------
     Steve L. Eskenazi

By:  /s/ PETER J. GOETTNER      Director                          June 10, 2003
   --------------------------
     Peter J. Goettner

By:  /s/ SAMUEL D. KINGSLAND    Director                          June 10, 2003
   --------------------------
     Samuel D. Kingsland

By:  /s/ WILLIAM H. LANE, III   Director                          June 10, 2003
   --------------------------
     William H. Lane, III

By:  /s/ ROGER V. GODDU         Director                          June 10, 2003
   --------------------------
     Roger V. Goddu

By:  /s/ RODERICK C. MCGEARY    Director                          June 10, 2003
   --------------------------
     Roderick C. McGeary

                                      -57-
<PAGE>
CERTIFICATIONS


I, Michael W. Pope, certify that:


1. I have reviewed this annual report on Form 10-K of DigitalThink, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;


4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.


Date: June 10, 2003

/s/ MICHAEL W. POPE
----------------------------------------------------------
Michael W. Pope
Chief Executive Officer, President and Director

                                      -58-
<PAGE>
I, Robert J. Krolik, certify that:


1. I have reviewed this annual report on Form 10-K of DigitalThink, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.


Date: June 10, 2003

/s/ ROBERT J. KROLIK
----------------------------------------------------------
Robert J. Krolik
Chief Financial Officer

                                      -59-
<PAGE>

                                                                    Schedule II


                       DigitalThink, Inc. and Subsidiaries
                        Valuation and Qualifying Accounts
                 For the Years Ended March 31, 2001, 2002, 2003


<TABLE>
<CAPTION>
                           Balance at Charges to           Charged    Balance at
                           Beginning  Costs and            To Other     End of
                           of Period   Expenses Deductions Accounts(1)  Period
                          ---------- ---------- ---------- ---------- ---------
<S>                       <C>        <C>        <C>        <C>        <C>
Year ended March 31, 2001:
Allowance for doubtful
   accounts............... $205,000    $170,000  $(128,000) $   -      $247,000
Year ended March 31, 2002:
Allowance for doubtful
   accounts............... $247,000    $ 96,000  $(342,000) $483,000   $484,000
Year ended March 31, 2003:
Allowance for doubtful
   accounts............... $484,000    $150,000  $(338,000) $   -      $296,000

</TABLE>

---------------------------------------------------------
(1) Recorded on the books of acquired company

                                      -60-
<PAGE>


                                  EXHIBIT LIST


<TABLE>
<CAPTION>

 Exhibit
 Number       Description of Document
---------     --------------------------------------------------------------
<S>           <C>
  2.1         Agreement and Plan of Reorganization among and between
              DigitalThink, LearningByte International and Merger Sub, dated
              August 14, 2001 (1)
  2.2         Agreement and Plan of Merger and Reorganization dated April 16,
              2003, by and among DigitalThink, Inc., Buffalo Bill Acquisition
              Corp., Horn Interactive, Inc. and the shareholders of Horn
              Interactive, Inc. (2)
  3.1         Bylaws of DigitalThink, Inc. (3)
  3.2         Bylaws of DigitalThink, Inc. (4)
  3.3         Bylaws of DigitalThink, Inc.
  4.2         Preferred  Stock Rights  Agreement,  dated as of March 31, 2003
              between  DigitalThink, Inc. and Mellon Investor Services, LLC,
              including the  Certificate of  Designation,  the form of Rights
              Certificate and the Summary of Rights attached thereto as Exhibits
              A, B and C, respectively. (9)
 10.1         Restated Investors Rights Agreement dated November 10, 1999 (5)
 10.2         1996 Stock Plan and forms of agreements thereunder (5)
 10.3         1999 Employee Stock Purchase Plan (5)
 10.4         Form of Director and Executive Officer Indemnification Agreement
              (5)
 10.16        Change of Control Severance Agreement between DigitalThink and
              Jon C. Madonna dated September 14, 2001 (3)
 10.17        Change of Control Severance Agreement between DigitalThink and
              Michael W. Pope dated September 14, 2001 (3)
 10.19        Restated 1996 ISO Stock Plan (6)
 10.20        Standard  Industrial/Commercial  Single Tenant Lease  Amendment
              dated September 4, 2002 between Thomas A. Price and Gwendolyn L.
              Price, as trustees of the Price Trust UTD October 5, 1984 and
              DigitalThink,  for office space located at 601 Brannan Street, San
              Francisco, California (6)
 10.21        Warrant  Agreement  dated  August 21,  2002  between  Thomas A.
              Price and  Gwendolyn  L.  Price,  as trustees of the Price Trust
              UTD October 5, 1984 and DigitalThink (6)
 10.22        Agreement   of   Sublease   dated   November  5,  2002   between
              San   Francisco   Unified   School   District and DigitalThink,
              for  office   space   located  at  1064  and  1098   Harrison
              Street,   San   Francisco, California (7)
 10.23        Stock and Option Purchase Agreement between DigitalThink and Roger
              Goddu, dated September 20, 2002. (8)
 10.24        Employment Agreement between DigitalThink and J. Jay Tyler dated
              January 27, 2003
 21.1         DigitalThink subsidiaries
 23.1         Independent Auditors' Consent
 24.1         Power of Attorney (see signature page)
 99.1         Certification of Chief Executive Officer pursuant to Section 906
              of the Sarbanes-Oxley Act of 2002
 99.2         Certification of Chief Financial Officer pursuant to Section 906
              of the Sarbanes-Oxley Act of 2002
----------
</TABLE>

(1) Incorporated by reference to exhibit 99.1 filed with our Current Report on
    Form 8-K dated August 22, 2001.
(2) Incorporated by reference to our Current Report on Form 8-K dated April 16,
    2003.
(3) Incorporated by reference to our Annual Report on Form 10-K for the fiscal
    year ended March 31, 2002.
(4) Incorporated by reference to exhibit 4.2(b) filed with our Registration
    Statement on From S-1 (File No. 333-92429), as amended.
(5) Incorporated by reference to our Registration Statement on From S-1 (File
    No. 333-92429), as amended.
(6) Incorporated by reference to our Quarterly Report on Form 10-Q for the
    quarter ended September 30, 2002.
(7) Incorporated by reference to our Quarterly Report on Form 10-Q for the
    quarter ended December 31, 2002.
(8) Incorporated by reference to exhibit 99.1 filed with our Current Report on
    Form 8-K dated October 7, 2002.
(9) Incorporated by reference to our Form 8-A/A dated March 31, 2003.