<PAGE>
 
                                UNITED  STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                   FORM 10-Q


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

       For the quarterly period ended June 30, 1998
                                      ------------------------------------------
                                        
                                      or

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

       Commission file number 000-24289
                              --------------------------------------------------

 
                       ASYMETRIX LEARNING SYSTEMS, INC.
--------------------------------------------------------------------------------
            (Exact name of registrant as specified in its chapter)


               Delaware                             91-1276003
   -------------------------------     ------------------------------------
   (State or other jurisdiction of     (I.R.S. Employer Identification No.)
    incorporation or organization)

       110-110th Avenue NE,  Bellevue, Washington        98004
--------------------------------------------------------------------------------
        (Address of principal executive offices)      (Zip Code)


                                (425) 462-0501
--------------------------------------------------------------------------------
               (Registrant's telephone number, including area code)

                                        
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 Exchange 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              No [X]
                                ---             ---

The number of shares outstanding of the issuer's Common Stock, par value $0.01,
as of June 30, 1998 was 13,280,453 shares.

                                       1
<PAGE>
 
                               TABLE OF CONTENTS
                                        
PART I -  FINANCIAL INFORMATION                                         PAGE NO.
-----------------------------                                           --------

Item 1.  Financial Statements                                              3

Item 2.  Management's Discussion and Analysis of Financial Condition 
         and Results of Operations                                         8

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.      16 


PART II - OTHER INFORMATION
--------------------------

Item 1.  Legal Proceedings                                                17

Item 2.  Changes in Securities and Use of Proceeds                        17

Item 3.  Defaults upon Senior Securities                                  17

Item 4.  Submission of Matters to a Vote of Securities Holders            17    

Item 5.  Other Information                                                20

Item 6.  Exhibits and Reports on Form 8-K                                 20

SIGNATURES                                                                21

EXHIBIT INDEX                                                             22

EXHIBITS                                                                  23

<PAGE>
 
                         PART I--FINANCIAL INFORMATION
                                        
ITEM 1.  FINANCIAL STATEMENTS

The condensed consolidated financial statements included under this item are as
follows:

                       ASYMETRIX LEARNING SYSTEMS, INC. 
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE> 
<CAPTION> 
                                                                   Three months ended      Six months ended
                                                                        June 30,               June 30,
                                                                   ------------------    ---------------------
                                                                     1998       1997        1998        1997
                                                                   -------    -------      -------     -------
<S>                                                                <C>        <C>        <C>         <C> 
Revenue:                                                                                 
        Product revenue:                                                                 
         Online learning products                                  $ 2,505    $ 1,648      $ 4,574   $   3,051
         Other products                                                730      2,639        2,270       5,450
                                                                   -------    -------      -------     -------
              Total product revenue                                  3,235      4,287        6,844       8,501
        Services revenue                                             4,879      1,105        9,065       1,875
                                                                   -------    -------      -------     -------
               Total revenue                                         8,114      5,392       15,909      10,376
                                                                   -------    -------      -------     -------
Cost of revenue:                                                                         
        Product revenue:                                                                 
         Online learning products                                      230        108          426         168
         Other products                                                288        456          577         937
                                                                   -------    -------      -------     -------
              Total cost of product revenue                            518        564        1,003       1,103
        Services revenue                                             3,031        648        5,777       1,138
                                                                   -------    -------      -------     -------
           Total cost of revenue                                     3,549      1,212        6,780       2,241
                                                                   -------    -------      -------     -------
Gross margin                                                         4,565      4,180        9,129       8,135
                                                                   -------    -------      -------     -------
                                                                                         
Operating expenses:                                                                      
        Research and development                                     1,405      2,159        2,840       4,405
        Sales and marketing                                          3,244      3,241        6,495       6,684
        General and administrative                                   1,283        847        2,695       1,744
        Amortization of goodwill                                       195          -          379           -
                                                                   -------    -------      -------     -------
           Total operating expenses                                  6,127      6,247       12,409      12,833
                                                                   -------    -------      -------     -------
Loss from operations                                                (1,562)    (2,067)      (3,280)     (4,698)
Other income(loss), net                                                 33        (39)       2,206          37
                                                                   -------    -------      -------     -------
Net loss                                                            (1,529)    (2,106)      (1,074)     (4,661)
Accretion of redemption value of redeemable common stock              (604)         -       (1,370)          0
                                                                   -------    -------      -------     -------
Net loss attributable to common stockholders'                      $(2,133)   $(2,106)     $(2,444)    $(4,661)
                                                                   =======    =======      =======     =======
Net loss per share, basic and diluted                              $ (0.27    $ (0.36)     $ (0.33)    $ (0.79)
                                                                   =======    =======      =======     =======
Weighted average common shares outstanding, basic and diluted        8,036      5,932        7,350       5,932
                                                                   =======    =======      =======     =======
</TABLE> 

    See accompanying notes to Condensed Consolidated Financial Statements

                                       3
<PAGE>
 
                        ASYMETRIX LEARNING SYSTEMS, INC.
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                (IN THOUSANDS)
 
<TABLE> 
<CAPTION> 
                                                                         June 30,            December 31,
                                                                           1998                  1997
                                                                       -----------           -----------  
<S>                                                                   <C>                  <C>   
Assets:

Current assets:                               

        Cash and cash equivalents                                     $    28,124           $     2,454
        Accounts receivable, net of allowance for returns and                                           
        doubtful accounts of $1,289 and $1,903                              8,009                 7,105 
        Inventories                                                           346                   480 
        Prepaid royalties and licenses                                        118                    79 
        Receivables from related companies                                    193                   299 
        Other current assets                                                1,040                   343 
                                                                      -----------           ----------- 
             Total current assets                                          37,830                10,760
                                                                      -----------           ----------- 

Property and equipment, net                                                 2,222                 1,834
Goodwill and other intangible assets, net                                  10,138                 8,641
Other assets                                                                  130                   329
                                                                      -----------           -----------  
             Total assets                                             $    50,318           $    21,564
                                                                      ===========           =========== 

Liabilities and Stockholders' Equity:

Current liabilities:

        Notes payable                                                 $       422           $       762  
        Accounts payable                                                    1,770                 1,956
        Accrued liabilities                                                 2,273                 2,164
        Deferred revenue                                                    2,070                 2,981
        Other current liabilities                                           2,527                 2,290
                                                                      -----------           -----------                     
             Total current liabilities                                      9,062                10,153   
Other noncurrent liabilities                                                  161                   181
                                                                      -----------           -----------  
Total liabilities                                                           9,223                10,334
                                                                      -----------           -----------  
Redeemable common stock                                                        --                 1,468

Stockholders' equity:

        Class B stock                                                          --                    43
        Common stock                                                          134                    66
        Additional paid-in capital                                        203,553               169,075         
        Accumulated deficit                                              (161,706)             (159,261)
        Deferred stock compensation                                          (690)                   --
        Accumulated other comprehensive loss                                 (196)                 (161)
                                                                      -----------           -----------  
             Total stockholders' equity                                    41,095                 9,762
                                                                      -----------           -----------  
                     Total liabilities and stockholders' equity       $    50,318           $    21,564
                                                                      ===========           ===========

</TABLE> 

  See the accompanying notes to Condensed Consolidated Financial Statements

                                       4
<PAGE>
 
                       ASYMETRIX LEARNING SYSTEMS, INC.
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (IN THOUSANDS)
 
<TABLE> 
<CAPTION> 
                                                                      Six months ended June 30,
                                                                      ------------------------
                                                                         1998            1997
                                                                      ------------------------
<S>                                                                   <C>          <C> 
Cash flows from operating activities:
        Net loss                                                      $    (1,074) $    (4,661)
        Adjustments to reconcile net loss to net cash used in
          operating activities:
            Depreciation and amortization                                     817          527
            Write-off property and equipment                                    8           --
            Stock compensation expense                                        203           --
            Accrued interest on note receivable from principal
              stockholder                                                      --         (329)
            Accrued interest on Class B stock subscription
              receivable                                                       --          (28)
            Equity in income (losses) from Infomodelers, Inc.              (2,169)         337
        Changes in assets and liabilities:
            Accounts receivable                                              (688)      (1,459)
            Inventories                                                       134          114
            Prepaid royalties and licenses                                    (39)         (40)
            Receivables from related companies                                106            9
            Other current assets                                             (692)        (564)
            Accounts payable                                                 (397)        (371)
            Accrued liabilities                                                61         (435)
            Deferred revenue                                                 (911)         149
            Other current liabilities                                        (139)         407
                                                                      -----------   ----------      
                    Net cash used in operating activities                  (4,780)      (6,344)
                                                                      -----------   ----------

Cash flows from investing activities:

        Purchase of property and equipment                                   (649)         (87)
        Cash received in acquisition                                           45           --
        Disposal of (investment in) Infomodelers, Inc.                      2,373           --
        Disposal of other assets                                               --           10
                                                                      -----------   ----------
               Net cash provided by investing activities                    1,769          (77)
                                                                      -----------   ----------
Cash flows from financing activities:

        Repayments of capital lease obligations                               (18)          --
        Proceeds from (repayment) of notes payable                           (774)          --
        Payments received on notes receivable from principal                             
          stockholder                                                          --        2,900
        Payments received on Class B stock subscription receivable             --          500
        Proceeds from exercise of stock options                               177          100
        Proceeds from initial public offering                              29,331           --
                                                                      -----------   ----------
                Net cash provided by financing activities                  28,716        3,500 
                                                                      -----------   ----------
Effect of foreign exchange rate changes on cash                               (35)          15       
                                                                      -----------   ----------
                Net increase(decrease) in cash and
                  cash equivalents                                         25,670       (2,906)
Cash and cash equivalents at beginning of period                            2,454        3,763
                                                                      -----------   ----------
Cash and cash equivalents at end of period                            $    28,124   $      857
                                                                      ===========   ==========

</TABLE> 

   See the accompanying notes to Condensed Consolidated Financial Statements

                                       5
<PAGE>
 
                        ASYMETRIX LEARNING SYSTEMS, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 1998 AND 1997


UNAUDITED INTERIM FINANCIAL INFORMATION

     The accompanying unaudited condensed consolidated financial statements of
Asymetrix Learning Systems, Inc., and subsidiaries (the "Company") include the
accounts of the Company and its wholly-owned subsidiaries. All significant
intercompany transactions have been eliminated in consolidation. These
statements reflect all normal recurring adjustments which are, in the opinion of
management, necessary for a fair presentation of the financial position and
results of operations for the periods presented. The condensed consolidated
financial statements and notes thereto should be read in conjunction with the
Company's audited consolidated financial statements as of and for the year ended
December 31, 1997 included in the Company's Prospectus, dated June 12, 1998,
filed as part of a Registration Statement on Form S-1 (Registration No. 333-
49037), as amended (the "Registration Statement") in connection with the
Company's initial public offering ("IPO"). Certain information and footnote
disclosures normally included in financial statements prepared in conformity
with generally accepted accounting principles have been condensed or omitted
pursuant to the rules and regulations of the Securities and Exchange Commission.
Interim results of operations for the six months ended June 30, 1998 are not
necessarily indicative of the operating results for the full fiscal year.
Factors that may affect such operating results, include, but are not limited to,
those discussed in "FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS".

INVENTORIES

     Inventories consist of the following (in thousands):

<TABLE> 
<CAPTION> 
                                             June 30,       December 31,
                                               1998            1997
                                             --------       ------------
<S>                                          <C>            <C> 
Raw materials                                  $200            $351
Finished goods                                  218             180
Less obsolescence reserve                       (72)            (51)
                                               ----            ----
                                               $346            $480
                                               ====            ==== 
</TABLE> 

                                       6
<PAGE>
 
STOCKHOLDERS' EQUITY

     On June 12, 1998, the Company completed its IPO and issued 3,000,000 shares
of its Common Stock at an initial public offering price of $11.00 per share. The
net proceeds to the Company from the IPO, after deducting underwriting discounts
and offering expenses incurred by the Company, were approximately $29.3 million.
Concurrent with the IPO, each outstanding share of the Company's Class B Stock
was automatically converted into approximately 0.75 shares of Common Stock.

NET LOSS PER SHARE

     Basic earnings per share is computed by dividing the sum of net loss plus
accretion of redemption value of redeemable common stock by the weighted average
number of common shares outstanding during the period. Diluted earnings per
share is computed by dividing the sum of net loss plus accretion of redemption
value of redeemable common stock by the weighted average number of common and
dilutive common equivalent shares outstanding during the period. As the Company
had a net loss attributable to common stockholders in each of the periods
presented, basic and diluted net loss per share is the same.

     Excluded from the computation of diluted earnings per share for the three
and six months ended June 30, 1998, are options to acquire approximately
3,643,000 and 3,745,000 shares, respectively, of Common Stock because their
effects would be anti-dilutive.

REVENUE RECOGNITION

     Revenue from sales of software products to end-users, resellers, and
distributors is recognized when the products are shipped provided that no
significant obligations of the Company remain and collection of the resulting
receivable is deemed probable. The Company's agreements with certain
distributors and resellers permit them to exchange products under certain
circumstances and permit returns from certain resellers subject to specific
limitations. When appropriate, accruals are established for estimated returns
and exchanges. In the case of nonrefundable minimum royalties from an OEM,
reseller or other distributor, provided that no significant obligations of the
Company remain, the Company recognizes revenue when it delivers its product to
the OEM reseller or other distributor. Additional royalties are paid to the
extent that the advances are exceeded and these additional royalties are
recognized upon delivery of the products by the OEM reseller or other
distributor to its customers. The Company recognizes revenue associated with
technical support agreements over the life of the contract.

     The Company recognizes revenue under custom development contracts as
services are provided for time and materials contracts or by using the
percentage-of-completion method of accounting, based on the ratio of costs
incurred to the total estimated project cost, for individual fixed-price
contracts. Provisions for any estimated losses on uncompleted contracts are made
in the period in which such losses become evident.

     Effective January 1, 1998, the Company adopted Statement of Position 97-2
("SOP 97-2"), Software Revenue Recognition, issued by the American Institute of
Certified Public Accountants. The statement provides specific industry guidance
and stipulates that revenue recognized from software arrangements is to be
allocated to each element of the arrangement based on the relative fair values
of the elements, such as software products, upgrades, enhancements, post
contract customer support, installation, or training. Under SOP 97-2, the
determination of fair value is based on objective evidence which is specific to
the vendor. If such evidence of fair value for each element of the arrangement
does not exist, all revenue from the arrangement is deferred until such time
that evidence of fair value does exist or until all elements of the arrangement
are delivered. The adoption of SOP 97-2 did not have a material effect on
revenue recognition for the three and six months ended June 30, 1998.

                                       7
<PAGE>
 
COMPREHENSIVE LOSS

     In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income
("Statement 130"), which establishes standards for reporting and disclosure of
comprehensive income and its components (revenues, expenses, gains and losses)
in a full set of general-purpose financial statements. Statement 130 is
effective for fiscal years beginning after December 15, 1997 and requires
reclassification of financial statements for earlier periods to be provided for
comparative purposes. The Company has not determined the manner in which it will
present the information required by Statement 130 in its annual financial
statements for the year ending December 31, 1998. The Company's total
comprehensive loss for the three months and six months ended June 30, 1998 was
approximately $1,650,000 and $1,195,000, respectively.
 
NEW ACCOUNTING PRONOUNCEMENTS

     In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, Disclosure About Segments of an
Enterprise and Related Information ("Statement 131"). Statement 131 established
standards for the way that public business enterprises report information about
operating segments. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. Statement 131 is
effective for fiscal years beginning after December 15, 1997. In the initial
year of application, comparative information for earlier years must be restated.
The Company has not determined the manner in which it will present the
information required by Statement 131.

SALE OF INFOMODELERS STOCK

     In February 1998, Infomodelers sold substantially all of its assets to
Visio Corporation, a publicly traded company, in exchange for Visio Corporation
common stock. In connection with this transaction the Company included in equity
in earnings of Infomodelers approximately $2.2 million, which represents its
share of the gain which Infomodelers realized on this transaction. In March
1998, the Company sold to its principal stockholder Infomodelers shares, with an
aggregate book value of $2.4 million, for cash of $2.4 million.

ACQUISITIONS

     In May 1998, the Company acquired Strategic Systems Associates, Inc.
("SSA"), an Illinois-based provider of custom development and consulting
services for the online learning market. The acquisition of SSA was accounted
for using the purchase method of accounting. The Company issued 102,000 shares
of Common Stock valued at approximately $1.1 million in connection with this
acquisition and granted options to purchase 150,000 shares of Common Stock. The
purchase price has been allocated to assets acquired and liabilities assumed
based on their fair value at the date of acquisition as follows (in thousands):

Property and equipment and other assets          $   400,000
Goodwill                                           1,700,000
Net current liabilities                           (1,000,000)
                                                 -----------
                                                 $ 1,100,000

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

     The following discussion should be read in conjunction with the condensed
consolidated financial statements and notes thereto contained herein.

                                       8
<PAGE>
 
     In addition to historical information, this Quarterly Report on Form 10-Q
contains forward-looking statements that involve risks and uncertainties. The
Company's actual results may differ significantly from the results discussed in
the forward-looking statements. Factors that may cause such a difference
include, but are not limited to, those discussed below in the "FACTORS THAT MAY
AFFECT FUTURE RESULTS OF OPERATIONS."

OVERVIEW

     Asymetrix is a leading provider of online enterprise learning solutions
designed to enable organizations to capture, deploy and manage knowledge more
effectively for use as a competitive advantage. The Company's comprehensive
learning solution consists of an open, standards-based, Internet-centric
technology platform as well as professional learning services for the online
learning market. The Company's technology platform includes ToolBook II
Instructor and ToolBook II Assistant, products which enable customers to author
online learning applications, and Librarian, a learning management system
designed to enable customers to deploy and manage such applications. The
Company's professional services include a wide range of consulting and custom
development services focused on the online learning market as well as training
and customer support.

     Asymetrix believes that by providing a single source solution, it is well-
positioned to be the leading provider of online enterprise learning products and
services. Beginning in 1996, the Company redirected its focus to its online
learning products, divested several product lines and discontinued development
efforts not directly related to its online enterprise learning solution. A key
component of the Company's strategy is to provide an online learning solution at
the enterprise level. In February 1998, the Company introduced an enhanced
version of Librarian which the Company believes significantly extends the
existing features and functionality of Librarian by enabling enterprise-wide
deployment of online learning applications.

     The Company has acquired several technologies and services businesses in
pursuing the online enterprise learning market. On September 12, 1997, the
Company acquired Aimtech Corporation ("Aimtech"), a developer of multimedia
authoring products and Internet authoring technologies for an aggregate of
2,183,894 shares of its Series 4 Class B Stock valued at approximately $3.1
million (which have been converted into an aggregate of 1,637,853 shares of
Common Stock). These shares include 2,111,795 shares issued in exchange for all
of Aimtech's outstanding capital stock (which have been converted into an
aggregate of 1,583,780 shares of Common Stock), 44,171 shares issued as a
financial advisory fee (which have been converted into an aggregate of 33,128
shares of Common Stock) and 27,928 shares issued under Aimtech's "Change of
Control" severance policy (which have been converted into an aggregate of 20,945
shares of Common Stock). On September 30, 1997, the Company acquired Oakes
Interactive Incorporated, Acorn Associates Incorporated and TopShelf Multimedia,
Inc. (collectively referred to as the "Oakes Companies"), which provide online
learning consulting, custom development and training services and also
distribute certain technology-based training applications. The Company issued an
aggregate of 1,512,500 shares of its Series 5 Class B Stock valued at
approximately $2.1 million (which have been converted into an aggregate of
1,134,371 shares of Common Stock) in connection with the acquisition of the
Oakes Companies. On December 23, 1997, the Company acquired Communication
Strategies, Inc. ("CSI"), a provider of online learning consulting, custom
development and training services and issued an aggregate of 550,193 shares of
its Common Stock valued at approximately $4.8 million. The Company has also
acquired four other small businesses, Socha Computing, Inc. ("Socha") in July
1997, Graham-Wright Interactive, Inc. in December 1997, Adams Consulting Group,
Inc. in March 1998 and SSA in May 1998. All of these acquisitions were accounted
for using the purchase method of accounting. Accordingly, the Company's
historical consolidated financial statements do not include results of
operations, financial position or cash flows of these entities prior to their
respective dates of acquisition. In addition, as a result of the acquisitions of
Aimtech and Socha, the Company has incurred charges relating to the cost of
acquired in-process research and development of approximately $4.1 million for
1997 and, in connection with all of its acquisitions from July 1, 1997 through
June 30, 1998, has recorded an aggregate of approximately $10.2 million in
goodwill, approximately $1.5 million of which will be amortized on a straight-
line basis over a five year period and the remainder (approximately $8.7
million) of which will be

                                       9
<PAGE>
 
amortized over a 15 year period. If the Company were to incur additional charges
for acquired in-process research and development and amortization of goodwill
with respect to any future acquisitions, the Company's business, operating
results and financial condition could be materially and adversely affected. In
July 1998, the Company acquired Meliora Systems, Inc., an online learning
product and consulting company.

     As part of its strategy to focus on the online enterprise learning market,
the Company divested product lines and technologies which were unrelated to this
market. In October 1996, the Company completed the spin-off of its Database
Tools Division to Infomodelers, Inc. ("Infomodelers") and distributed a
controlling interest in Infomodelers to its stockholders. In March 1998, the
Company sold substantially all of its remaining interest in Infomodelers to
Vulcan Ventures, Inc. for an aggregate purchase price of approximately $2.4
million in cash, which price included approximately $2.0 million for shares of
Infomodelers Series A Preferred Stock and approximately $390,000 for shares of
Infomodelers Common Stock. In July 1997, the Company established SuperCede, Inc.
("SuperCede"), which is now a 50%-owned subsidiary, and transferred the assets
of its Internet Development Tools Division and SuperCede products to SuperCede.
The Company's historical financial statements do not consolidate the results of
operations, financial position or cash flows of Infomodelers subsequent to
October 1996 or of SuperCede subsequent to September 1997. The Company accounts
for its Infomodelers and SuperCede investments using the equity method of
accounting.

     The Company incurred net losses of $23.6 million and $13.1 million in 1996
and 1997, respectively, and an operating loss of $1.7 million in the three
months ended March 31, 1998, and has yet to achieve operating income under its
new business model. The Company's limited operating history under its new
business model, and the emerging nature of the market for online enterprise
learning among other factors, make prediction of the Company's future operating
results difficult. Although the Company has experienced revenue growth in
certain recent periods and although the financial statements herein also reflect
revenue growth in certain periods there can be no assurance that such growth
rates are sustainable or indicative of actual growth rates that the Company may
experience and, therefore, they should not be considered indicative of future
operating results. In addition, the Company intends to continue to invest in
acquisitions, its professional services business, and research and development,
among other things. As a result, the Company expects to continue to incur
operating losses at least through 1998. There can be no assurance that the
Company will achieve profitability or, if profitability is achieved, that it
will be sustained.

RESULTS OF OPERATIONS

     The following table presents the Company's results of operations as a
percentage of total revenue for the periods indicated.

<TABLE>
<CAPTION>
                                                         Three Months        Six Months
                                                        Ended June 30,     Ended June 30,
                                                        --------------     --------------
                                                        1998      1997     1998     1997
                                                        ----      ----     ----     ----
                                                          Unaudited          Unaudited
<S>                                                     <C>       <C>      <C>      <C>
Revenue:                                                                   
      Product revenue:                                                     
           Online learning products                       31%       31%      29%      29%
           Other products                                  9        49       14       53
                                                        ----      ----     ----     ----
           Total product revenue                          40        80       43       82
      Services revenue                                    60        20       57       18
                                                        ----      ----     ----     ----
           Total revenue                                 100       100      100      100
Cost of Revenue:                                                                    
      Product revenue:                                                              
           Online learning products                        3         2        3        2
           Other products                                  4         8        4        9
                                                        ----      ----     ----     ----
           Total cost of product revenue                   6        10        6       11

</TABLE> 

                                       10
<PAGE>
 
<TABLE> 
<S>                                                     <C>       <C>      <C>      <C>
      Services revenue                                    37        12       36       11
                                                        ----      ----     ----     ----
           Total cost of revenue                          44        22       43       22
                                                        ----      ----     ----     ----
Gross Margin                                              56        78       57       78
Operating Expenses:                                                                 
      Research and development                            17        40       18       42
      Sales and marketing                                 40        60       41       64
      General and administrative                          16        16       17       17
      Amortization of goodwill                             2         0        2        0
                                                        ----      ----     ----     ----
           Total operating expenses                       76       116       78      124
                                                        ----      ----     ----     ----
Loss from operations                                     -19       -38      -21      -45
                                                        ----      ----     ----     ----
Other income (expense), net                                0        -1       14        0
Net income (loss)                                        -19%      -39%      -7%     -45%
                                                        ----      ----     ----     ----
</TABLE>
                                        
THREE AND SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE AND SIX MONTHS ENDED
JUNE 30, 1997

     Revenue.   Total revenue increased 50% from $5.4 million in the three
months ended June 30, 1997 to $8.1 million in the three months ended June 30,
1998. Total revenue increased 53% from $10.4 million in the six months ended
June 30, 1997 to $15.9 million in the six months ended June 30, 1998.

     Online learning product revenue increased 52% from $1.6 million in the
three months ended June 30, 1997 to $2.5 million in the three months ended June
30, 1998. Online learning product revenue increased 50% from $3.0 million in the
six months ended June 30, 1997 to $4.6 million in the six months ended June 30,
1998. The increase in online learning product revenue for both periods was due
primarily to increased demand for the Company's online learning products as a
result of the Company's focus on the online learning market. Other product
revenue decreased 72% from $2.6 million in the three months ended June 30, 1997
to $730,000 in the three months ended June 30, 1998. Other product revenue
decreased 58% from $5.5 million in the six months ended June 30, 1997 to $2.3
million for the six months ended June 30, 1998. Other product revenue consists
of revenue from the Company's products which are not targeted at the online
learning market, and also includes revenue from SuperCede products prior to its
spin-off by the Company. Included in other product revenue in the three months
and six months ended June 30, 1997 was approximately $851,000 and $1,541,000,
respectively, from sales of SuperCede products. Total product revenue decreased
25% from $4.3 million in the three months ended June 30, 1997 to $3.2 million in
the three months ended June 30, 1998. Total product revenue decreased 19% from
$8.5 million in the six months ended June 30, 1997 to $6.8 million in the six
months ended June 30, 1998. The Company anticipates that future growth in
product sales, if any, will be attributable to its online learning products and
that its other product revenue will continue to decrease.

     Services revenue increased 342% from $1.1 million in the three months ended
June 30, 1997 to $4.9 million in the three months ended June 30, 1998. Services
revenue increased 383% from $1.9 million for the six months ended June 30, 1997
to $9.1 million for the six months ended June 30, 1998. The increases in
services revenue for each of these periods were due primarily to the expansion
of the Company's professional services business.

     Cost of Revenue.  Cost of product revenue includes costs of media, manuals
and distribution costs. Gross margin from the Company's online learning products
is generally higher than that of its other products because these products are
typically sold by the Company's direct sales force, as compared with other
products sold through indirect channels, such as OEMs and resellers. Cost of
services revenue consists primarily of personnel-related costs in providing
consulting, maintenance and training to customers. Gross margin on product
revenue is higher than gross margin on services revenue, reflecting the lower
materials, packaging and other costs of software compared with the relatively
high personnel costs associated with providing professional services.

                                       11
<PAGE>
 
     Total cost of revenue increased 193% from $1.2 million in the three months
ended June 30, 1997 to $3.5 million in the three months ended June 30, 1998.
Total cost of revenue increased 203% from $2.2 million in the six months ended
June 30, 1997 to $6.8 million in the six months ended June 30, 1998.

     Cost of online learning products revenue increased 113% from $108,000 in
the three months ended June 30, 1997 to $230,000 in the three months ended June
30, 1998. Cost of online learning products revenue increased 157% from $166,000
for the six months ended June 30, 1997 to $426,000 for the six months ended June
30, 1998. The increase for both periods was due primarily to increased sales of
the Company's online learning products. Cost of other products revenue decreased
37% from $456,000 in the three months ended June 30, 1997 to $288,000 in the
three months ended June 30, 1998. For the six months ended June 30, 1998 cost of
other product revenue declined 38% from $937,000 for the six months ended June
30, 1997 to $577,000 for the six months ended June 30, 1998. The respective
declines were due primarily to decreased sales of the Company's other products.
Cost of other products revenue attributable to sales of SuperCede products were
$71,000 and $203,000 in the three and six months ended June 30, 1997. Total cost
of product revenue decreased 8% from $564,000 in the three months ended June 30,
1997 to $518,000 in the three months ended June 30, 1998. Total cost of product
revenue decreased 9% from $1.1 million for the six months ended June 30, 1997 to
$1.0 million for the six months ended June 30, 1998.

     Online learning products gross margin was 93% and 91% in the three months
ended June 30, 1997 and 1998, respectively. Online learning products gross
margin was 95% and 91% in the six months ended June 30, 1997 and 1998,
respectively. Other products gross margin decreased from 83% in the three months
ended June 30, 1997 to 61% in the three months ended June 30, 1998. This
decrease was primarily due to a decrease in revenue from OEM arrangements, which
typically yield higher gross margins. Other products gross margin for the six
months ended June 30, 1998 was 75% compared to 83% in the prior year period.
Total product gross margin fell from 87% in both the three and six months ended
June 30, 1997 to 84% and 85%, respectively, in the three and six months ended
June 30, 1998.

     Cost of services revenue increased 368% from $648,000 in the three months
ended June 30, 1997 to $3.0 million in the three months ended June 30, 1998.
Cost of services revenue increased 408% from $1.1 million for the six months
ended June 30, 1997 to $5.8 million for the six months ended June 30, 1998. The
increase for each of these periods was due primarily to increased professional
service projects in 1998.

     Services gross margin decreased from 41% in the three months ended June 30,
1997 to 38% in the three months ended June 30, 1998. For the six months ended
June 30, 1998 services gross margin decreased to 36% from 39% in the prior year
period. The Company anticipates that cost of services revenue will increase in
absolute dollars as it adds additional professional services personnel. To the
extent services revenue increases relative to product sales revenue as a
percentage of total revenue, overall gross margins would decline.

OPERATING EXPENSES

     Research and Development.  Research and development expenses include
expenses associated with the development of new products and new product
versions and consist primarily of salaries, depreciation of development
equipment, supplies and overhead allocations. Research and development expenses
decreased 35% from $2.2 million in the three months ended June 30, 1997 to $1.4
million in the three months ended June 30, 1998. Research and development
expenses decreased 36% from $4.4 million to $2.8 million for the six months
ended June 30, 1997 and 1998. Research and development expenses as a percentage
of total revenue decreased from 40% in the three months ended June 30, 1997 to
17% in the three months ended June 30, 1998. Research and development expenses
as a percent of total revenue were 42% and 18% in the six months ended June 30,
1997 and 1998. The decrease in each of these periods was due to the spin-off of
SuperCede. Research and development expenses related to SuperCede were $905,000
and $1.7 million in the three and six months ended June 30, 1997. The Company
expects research and development expenses to increase in absolute dollars in the
future.

                                       12
<PAGE>
 
     Sales and Marketing.  Sales and marketing expenses consist primarily of
sales and marketing personnel costs, including sales commissions, travel,
advertising, public relations, seminars, trade shows and other marketing
literature and overhead allocations. Sales and marketing expenses were unchanged
from $3.2 million in the three months ended June 30, 1997 and 1998. Sales and
marketing expenses decreased 3% from $6.7 million to $6.5 million in the six
months ended June 30, 1997 and 1998. Sales and marketing expenses as a
percentage of total revenue decreased from 60% and 64% in the three and six
months ended June 30, 1997, respectively, to 40% and 41% in the three and six
months ended June 30, 1998 respectively. Selling expense increased in absolute
dollars, due to the adoption of a direct sales model and marketing expense
declined because of the spin off of Supercede in September 1997. Sales and
marketing expenses related to SuperCede were $697,000 and $1.6 million in the
three and six months ended June 30, 1997, respectively. The Company expects that
sales and marketing expenses will increase in absolute dollars in the future as
the Company continues to increase its sales and marketing efforts in the online
learning market.

     General and Administrative.  General and administrative expenses consist
primarily of salaries and other personnel-related expenses for the Company's
administrative, executive and finance personnel as well as outside legal and
audit costs. General and administrative expenses increased 52% from $847,000 for
the three months ended June 30, 1997 to $1.3 million in the three months ended
June 30, 1998. General and administrative expenses increased 55% from $1.7
million to $2.7 million in the six months ended June 30, 1997 and 1998. Both the
three and six month increase was due primarily to increased overhead due to the
Company's increased size. General and administrative expenses as a percentage of
total revenue were consistent at 16% and 17% in the three and six months ended
June 30, 1997 and 1998, respectively. General and administrative expenses
related to SuperCede were $337,000 and $653,000 in the three and six months
ended June 30, 1997. The Company expects that general and administrative
expenses will increase in absolute dollars in the future as the Company incurs
additional costs (including directors' and officers' liability insurance,
investor relations programs and increased professional fees) related to being a
public company.

AMORTIZATION OF GOODWILL

     Amortization of goodwill expenses relates to the amortization of excess
purchase price over net assets, from acquired companies booked under the
purchase method of accounting. For the three and six months ended June 30, 1997
the Company did not have amortization of goodwill expenses. For the three and
six months ended June 30, 1998, $195,000 and $379,000 of expense was recorded.
These amounts reflect the amortization of goodwill acquired in connection with
the acquisitions of Aimtech, the Oakes Companies, CSI, Graham-Wright
Interactive, Inc., Adams Consulting Group, Inc. and SSA.

OTHER INCOME (EXPENSE)

     The Company recorded no other expense in the three or six months ended June
30, 1997 and 1998. Interest income from principal stockholder was $147,000 and
$329,000 in the three and six months ended June 30, 1997, respectively, and was
related to interest payments to the Company on a note receivable from the
Company's principal stockholder. This note receivable was repaid in full in
October 1997. Other interest income, net was $2,000 and $33,000 in the three
months ended June 30, 1997 and 1998, respectively. For the six months ended June
30, 1997 and 1998, other interest income, net was $46,000 and $55,000
respectively. Equity in income (losses) from Infomodelers was $(188,000) and
$(338,000) in the three and six months ended June 30, 1997, respectively, and $0
and $2.2 million, respectively, in the three and six months ended June 30, 1998,
representing the Company's equity in the net income (losses) from Infomodelers
in such periods. Equity in income (losses) from Infomodelers in 1998 resulted
from the sale by Infomodelers of substantially all of its assets to Visio
Corporation. Because the Company sold substantially all of its interest in
Infomodelers in March 1998, the Company does not anticipate that it will record
equity in income (losses) from Infomodelers in future periods.

                                       13
<PAGE>
 
YEAR 2000 COMPLIANCE

     Many currently installed computer systems and software products are coded
to accept only two digit entries in the date code field and cannot distinguish
21st century dates from 20th century dates. These date code fields will need to
distinguish 21st century dates from 20th century dates and, as a result, many
companies' software and computer systems may need to be upgraded or replaced in
order to comply with such "Year 2000" requirements. Although the Company
believes that its products and internal systems are Year 2000 compliant, the
Company utilizes third-party equipment and software that may not be Year 2000
compliant. Failure of such third-party equipment or software to operate properly
with regard to the Year 2000 and thereafter could require the Company to incur
unanticipated expenses to remedy any problems, which could have a material
adverse effect on the Company's business, operating results and financial
condition. Furthermore, the purchasing patterns of customers or potential
customers may be affected by Year 2000 issues as companies expend significant
resources to correct their current systems for Year 2000 compliance. These
expenditures may result in reduced funds available to purchase products and
services such as those offered by the Company, which could have a material
adverse effect on the Company's business, operating results and financial
condition.

LIQUIDITY AND CAPITAL RESOURCES

     At June 30, 1998, the Company had cash and cash equivalents totaling $28.1
million, an increase of $25.7 million from December 31, 1997. The increase in
cash and cash equivalents was due primarily to net proceeds of $29.3 million
generated from the Company's IPO, $177,000 from the exercise of employee
options, and $2.4 million from the sale of Infomodelers shares, offset by $4.8 
million used in operating activities, $649,000 used in investing activities and
$792,000 net, used to repay notes payable and capital lease obligations. At June
30, 1998, the principal sources of liquidity for the Company were $28.8 million
in working capital and a $5.0 million bank line of credit. Borrowings under the
Company's line of credit will bear interest at the bank's reference rate or
LIBOR plus 1.0% per annum, and this line of credit expires on December 31, 1998.
The Company's obligations under this line of credit are secured by the Company's
accounts receivable. As of June 30, 1998, the Company had no outstanding
borrowings under this line of credit.

     The Company anticipates that the net proceeds received from its IPO,
together with cash and cash equivalents will be sufficient to meet its working
capital needs and capital expenditures for at least the next 12 months. The
Company's long-term liquidity will be affected by numerous factors, including
acquisitions of businesses or technologies, demand for the Company's online
learning products and services, the extent to which such online learning
products and services achieve market acceptance, the timing of and extent to
which the Company invests in new technology, the expenses of sales and marketing
and new product development, the extent to which competitors are successful in
developing their own products and services and increasing their own market
share, the level and timing of revenues, and other factors. In addition, the
Company from time to time evaluates potential acquisitions of businesses,
products or technologies that compliment the Company's business. To the extent
that resources are insufficient to fund the Company's activities, the Company
may need to raise additional funds. There can be no assurance that such
additional funding, if needed, will be available on terms attractive to the
Company, or at all. If adequate funds are not available on acceptable terms, the
Company may be unable to expand its business, develop or enhance its products
and services, take advantage of future opportunities or respond to competitive
pressures, any of which could have a material adverse effect on the Company's
business, operating results and financial condition.

FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS

     Limited Operating History In Online Learning Market. The Company was
incorporated in December 1984. Until early 1995, the Company was engaged in
various technology and development activities and in the development and
marketing of multimedia authoring products, database and Internet tools, World
Wide Web publishing products and other ancillary products, most of which are not
included as part of the Company's online enterprise learning solution. Starting
in 1995, the Company recapitalized and

                                       14
<PAGE>
 
redirected its focus to the development and marketing of authoring products and
a learning management system designed to capitalize on the advantages of the
Internet as a means of delivering technology-based training applications. Since
1995 the Company has also introduced a variety of professional services.
Accordingly, the Company has only a limited operating history upon which to base
an evaluation of its current business and prospects. The Company's prospects
must be considered in light of the risks and uncertainties encountered by
companies in the early stage of development, particularly companies in new and
rapidly evolving markets such as online enterprise learning and by companies
engaged in a business transition from developing and marketing software products
to offering an integrated product and services solution. Such risks include, but
are not limited to the demand for technology-based training and online
enterprise learning applications; the management of both internal and
acquisition-based growth; demand for the Company's products and services; the
ability of the Company to meet the needs of sophisticated corporate customers;
and competition. To address these risks, the Company must, among other things
successfully introduce new products and services; achieve commercial acceptance
of its new products and services; continue to expand its professional services
business; successfully identify, acquire and integrate acquired businesses;
respond to competitive developments; attract, integrate, retain and motivate
qualified personnel; and address new or evolving technologies and standards.
There can be no assurance that the Company will be successful in addressing such
risks and the failure to do so could have a material adverse effect on the
Company's business, operating results and financial condition.

     Fluctuations in Quarterly Operating Results.  The Company's quarterly
operating results have varied significantly in the past and are expected to
fluctuate significantly in the future as a result of a variety of factors, many
of which are outside the Company's control. Factors that may adversely affect
the Company's quarterly operating results include the demand for technology-
based training in general and demand for online enterprise learning solutions in
particular; the size and timing of product orders and the timing and execution
of professional services engagements; the mix of revenue from products and
services; the mix of products sold; the inability of the Company to meet its own
or client project milestones or to meet client expectations; market acceptance
of the Company's or competitors' products and services; the ability of the
Company to develop and market new or enhanced products and services in a timely
manner and market acceptance of such products, including the latest release of
Librarian, and services; the Company's ability to integrate acquisitions
successfully and to identify, acquire and integrate suitable acquisition
candidates; the timing of revenue recognition; charges related to acquisitions;
competitive conditions; technological changes; personnel changes; general
economic conditions; and economic conditions specific to the technology-based
training and online learning markets. With its emphasis on providing an online
enterprise learning solution, the Company is targeting its selling and marketing
efforts towards customers with the potential need for enterprise-wide solutions.
Because the Company believes that the implementation of its solutions may
require an enterprise-wide decision by prospective customers, the Company may be
required to provide a significant level of education to prospective customers
regarding the Company's solutions. Therefore, the Company believes that the
period between initial contact and the sale of the Company's solutions could be
lengthy, and the implementation cycle could lengthen because of increases in the
size and complexity of customer implementations. Uncertainty of timing with
respect to sales or implementations could have a material adverse effect on the
Company's business and operations and cause the Company's operating results to
vary significantly from quarter to quarter. Therefore, the Company's operating
results for any particular quarterly period may not be indicative of future
operating results.

     Acquisitions.  The Company has acquired ten companies since July 1997 and
is continuing to pursue a strategy of growth through acquisition. The successful
implementation of this strategy depends on the Company's ability to identify
suitable acquisition candidates, acquire such companies on acceptable terms,
integrate their operations and technology successfully with those of the
Company, retain existing customers and maintain the goodwill of the acquired
businesses. Acquisitions involve a number of risks, including the integration of
acquired products and technologies in a timely manner; the integration of
businesses and employees with the Company's business; the management of
geographically-dispersed operations; adverse effects on the Company's reported
operating results from acquisition-related charges and amortization of goodwill;
potential increases in stock compensation expense and increased compensation
expense resulting from newly-hired employees; the diversion of management
attention; the assumption of unknown liabilities; potential disputes with the
sellers of one or more acquired entities; the

                                       15
<PAGE>
 
inability of the Company to maintain customers or goodwill of an acquired
business; the need to divest unwanted assets or products; and the possible
failure to retain key acquired personnel. Client satisfaction or performance
problems with an acquired firm could also have a material adverse effect on the
reputation of the Company as a whole, and any acquired business could
significantly underperform relative to the Company's expectations. Moreover, in
pursuing acquisition opportunities, the Company may compete for acquisition
targets with other companies with similar growth strategies that may have
greater resources than the Company, which could result in increased prices of
acquisition targets and a diminished pool of companies available for
acquisition. If the Company is unable to manage internal or acquisition-based
growth effectively, the Company's business, operating results and financial
condition would be materially and adversely affected

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

     Not applicable.

                                       16
<PAGE>
 
                           PART II--OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

     From time to time, the Company is involved in legal proceedings and
litigation arising in the ordinary course of business. Except as described
below, the Company is not a party to any material litigation or legal
proceedings.

     Richard B. Grant v. Asymetrix Corporation, No. CV-96-3635 HLH, Central
District of California. On May 21, 1996, Richard B. Grant filed a complaint
alleging that the Company's ToolBook and Multimedia ToolBook products infringe a
patent owned by him and seeking unspecified damages. The Company has received an
opinion that the products do not infringe this patent and that the patent is
invalid. This action is still in the discovery stage, and it is not yet possible
to assess the likelihood of its outcome. Although the Company believes that it
does not infringe this patent and that the patent is invalid, and although the
Company intends to vigorously defend this action, the results of litigation can
never be predicted with certainty, and the costs of defense, regardless of
outcome, could have a material adverse effect on the business, operating results
and financial condition of the Company.

ITEM 2.   CHANGES IN SECURITIES AND USE OF PROCEEDS

     In connection with the Company's IPO, the Company registered 3,000,000
shares of its Common Stock, all of which were sold by the Company. The
Registration Statement was declared effective by the Securities and Exchange
Commission on June 11, 1998. NationsBanc Montgomery Securities LLC was the
managing underwriter of the IPO. The IPO commenced on June 12, 1998, and
terminated following the sale of all of the securities registered under the
Registration Statement, plus an additional 25,000 shares pursuant to the
exercise of the underwriters' over-allotment option. The Common Stock was
offered and sold to the public at $11.00 per share, for aggregate consideration
of $33,275,000, of which the Company received net proceeds of $30,945,750, and
the remaining $2,329,250 was the underwriting discount.

     As a result of the IPO and a 3-for-4 reverse split effected immediately
prior to the IPO, all shares of each Series of the Company's Class B Stock were
converted into Common Stock. The conversion into Common Stock was as follows:
37,500 shares of the Company's Series 1 Class B Stock were converted into 28,125
shares of Common Stock; 388,395 shares of the Company's Series A Preferred Stock
were converted into 291,296 shares of Common Stock; 2,382,994 shares of the
Company's Series 4 Class B Stock were converted into 1,785,099 shares of Common
Stock; an option to purchase 19,431 shares of the Company's Series 4 Class B
Stock was converted into an option to purchase 14,573 shares of Common Stock;
and 1,512,500 shares of the Company's Series 5 Class B Stock were converted into
1,134,371 shares of Common Stock.

     On May 22, 1998 the Company issued 102,000 shares of Common Stock in
exchange for all of the issued and outstanding capital stock of SSA. The shares
were issued to three individual shareholders of SSA in exchange for all of such
shareholders' capital stock of SSA. The proceeds were used to acquire all of the
capital stock of SSA. The issuance of such securities was exempt pursuant to
Section 4(2) of the Securities Act of 1933 under Rule 506 of Regulation D in
that there were three individuals who received securities in the transaction,
each of whom was capable of evaluating the merits and risks of the transaction.

     During the three months ended June 30, 1998, the Company issued 51,378
shares of Common Stock (as adjusted to reflect the 3-for-4 reverse stock split)
pursuant to the exercise of employee stock options. The issuance of such
securities was exempt pursuant to Section 4(2) of the Securities Act of 1933
and/or under Rule 701.

     From the effective date of the Registration Statement through June 30,
1998, the Company has incurred an estimated $3,758,000 in expenses for the
Company's account in connection with the issuance and distribution of the Common
Stock, including underwriting discounts and commissions of $2,329,250 

                                       17
<PAGE>
 
and other expenses of $1,428,750. No finders' fees or expenses were paid to or
for the underwriters. None of these payments were made, directly or indirectly,
to: (i) directors or officers of the Company, or their associates; (ii) persons
owning ten percent or more of any class of equity securities of the Company; or
(iii) affiliates of the Company.

     From the effective date of the Registration Statement through June 30,
1998, the Company has applied approximately $2.6 million of the Offering
proceeds to working capital requirements. None of these payments were made,
directly or indirectly, to: (i) directors or officers of the Company, or their
associates; (ii) persons owning ten percent or more of any class of equity
securities of the Company; or (iii) affiliates of the Company. To date, the
Company believes that it has used the Offering proceeds in a manner consistent
with the use of proceeds described in the Registration Statement. The remaining
$28.1 million of the Offering proceeds is invested in short-term marketable debt
securities, money market funds and other cash equivalents.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

     Not applicable.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS.

     A special meeting of the shareholders of Asymetrix Learning Systems, Inc.,
a Washington corporation and predecessor to the Company ("Asymetrix
Washington"), was held on May 7, 1998 at the Company's office in Bellevue,
Washington. The meeting was held pursuant to a Notice of Special Meeting of
Shareholders mailed to the shareholders on April 10, 1998.

     Six proposal were submitted to the shareholders and approved at the special
meeting, as follows (all share and vote numbers are prior to the Company's 
3-for-4 reverse split as described in Proposal 5):

     Proposal 1: Approval of the reincorporation of Asymetrix Washington
corporation under the laws Delaware by means of a merger of the Asymetrix
Washington into the Company, which was at that time a wholly-owned subsidiary of
Asymetrix Washington organized under the laws of Delaware. The number of votes
cast for, cast against or abstaining from Proposal 1, both in person and by
proxy was as follows:

<TABLE>
<CAPTION>
                                                          CLASS B STOCK
                                COMMON      ------------------------------------------------------
                                 STOCK         SERIES 1      SERIES A       SERIES 4       SERIES 5
                              ---------        --------      --------      ---------      ---------
<S>                           <C>              <C>           <C>           <C>            <C>
VOTES FOR                     8,615,038         37,500        388,395      2,120,915      1,512,500
VOTES AGAINST                    16,326              0              0         16,093              0
ABSTAIN                           7,595              0              0            200              0
</TABLE>

  Proposal 2: Approval of adoption of a form of Indemnity Agreement to be
entered into by the Company with its officers and directors.  Votes cast by
officers, directors and their affiliates were not counted in determining the
outcome on Proposal 2. The number of votes counted, cast for, cast against or
abstaining from Proposal 2, both in person and by proxy was as follows:

<TABLE>
<CAPTION>
                                                                CLASS B STOCK
                               COMMON      -------------------------------------------------------
                                STOCK          SERIES 1      SERIES A       SERIES 4       SERIES 5
                              ---------        --------      --------      ---------      ---------
<S>                           <C>              <C>           <C>           <C>            <C>
VOTES COUNTED                   839,621        37,500          388,395      1,727,816        151,250
VOTES FOR                       820,426        37,500          388,395      1,725,681        151,250
VOTES AGAINST                    14,333             0                0          1,421              0
ABSTAIN                           1,100             0                0            674              0
</TABLE>
                                                                                

                                       18
<PAGE>
 
     Proposal 3: Approval of adoption by the Company of a 1998 Equity Incentive
Plan and the reservation for issuance thereunder of: (a) 1,500,000 shares of
Common Stock (following the 3-for-4 reverse split described in Proposal 5) plus
(b) any authorized shares not issued or subject to outstanding grants under the
Company's 1995 Combined Incentive and Nonqualified Stock Option Plan ("the 1995
Plan"); plus (c) any shares issuable upon exercise of options granted pursuant
to the 1995 Plan that expire or are cancelled for any reason without having been
exercised in full. The number of votes cast for, cast against or abstaining from
Proposal 3, both in person and by proxy was as follows:

<TABLE>
<CAPTION>
                                                                 CLASS B STOCK                            
                               COMMON          ---------------------------------------------------- 
                                STOCK          SERIES 1      SERIES A       SERIES 4       SERIES 5
                              ---------        --------      --------      ---------      ---------
<S>                           <C>             <C>            <C>           <C>            <C>
VOTES FOR                     8,617,876        37,500          388,395      2,129,907      1,512,500
VOTES AGAINST                    10,916             0                0          2,368              0
ABSTAIN                          10,167             0                0          4,933              0
</TABLE>

     Proposal 4: Approval of adoption by the Company a 1998 Directors Stock
Option Plan and the reservation of 187,500 shares of Common Stock (following the
3-for-4 reverse split described in Proposal 5) for issuance thereunder. The
number of votes cast for, cast against or abstaining from Proposal 4, both in
person and by proxy was as follows:

<TABLE>
<CAPTION>
                                                                 CLASS B STOCK                             
                                COMMON         ---------------------------------------------------- 
                                STOCK          SERIES 1      SERIES A       SERIES 4       SERIES 5
                              ---------        --------      --------      ---------      ---------
<S>                           <C>              <C>           <C>           <C>            <C>
VOTES FOR                     8,605,265        37,500          388,395      2,129,433      1,512,500
VOTES AGAINST                    16,920             0                0          2,842              0
ABSTAIN                          16,774             0                0          4,933              0
</TABLE>

     Proposal 5: Approval of an amendment of the Company's Certificate of
Incorporation to be filed upon the effectiveness of the Registration Statement
relating to the IPO to authorize a three-for-four reverse stock split of the
Company's Common Stock. The number of votes cast for, cast against or abstaining
from Proposal 5, both in person and by proxy was as follows:

<TABLE>
<CAPTION>
                                                                 CLASS B STOCK                             
                               COMMON          ---------------------------------------------------- 
                                STOCK          SERIES 1      SERIES A       SERIES 4       SERIES 5
                              ---------        --------      --------      ---------      ---------
<S>                           <C>              <C>           <C>           <C>            <C>
VOTES FOR                     8,606,643        37,500          388,395      2,108,290      1,512,500
VOTES AGAINST                    22,149             0                0         28,718              0
ABSTAIN                          10,167             0                0            200              0
</TABLE>

     Proposal 6: Approval of the amendment and the restatement of the Company's
Certificate of Incorporation after the conversion of the outstanding Class B
Stock of Asymetrix into Common Stock upon the closing of the IPO to eliminate
all shares of Preferred Stock and to authorize the Company's Board of Directors
to issue "blank check" preferred stock. The number of votes cast for, cast
against or abstaining from Proposal 6, both in person and by proxy was as
follows:

<TABLE>
<CAPTION>
                                                                CLASS B STOCK                       
                               COMMON          ---------------------------------------------------- 
                                STOCK          SERIES 1      SERIES A       SERIES 4       SERIES 5
                              ---------        --------      --------      ---------      ---------
<S>                           <C>              <C>           <C>           <C>            <C>
VOTES FOR                     8,620,493        37,500          388,395      2,120,915      1,512,500
VOTES AGAINST                     7,199             0                0         16,093              0
ABSTAIN                          11,267             0                0            200              0
</TABLE>

                                       19
<PAGE>
 
ITEM 5.  OTHER INFORMATION.

     In July 1998, the Company acquired Meliora Systems, Inc. ("Meliora"), an
online learning software developer and provider of consulting services based in
Rochester, New York.  The acquisition of Meliora was accounted for using the
pooling of interests method of accounting. The Company issued 268,000 shares of
Common Stock in connection with this acquisition and granted options to purchase
270,000 shares of Common Stock.

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K.


     (a)  Exhibits.

           2.1   Agreement and Plan of Reorganization dated May 22, 1998 by and
                 between the Company and Strategic Systems Associates, Inc.

           2.2   Agreement and Plan of Reorganization dated June 22, 1998 by and
                 between the Company and Meliora Systems, Inc.

           27    Financial Data Schedule

     (b)  Reports on Form 8-K.

          No reports on Form 8-K were filed during the three months ended June
          30, 1998.

                                       20
<PAGE>
 
                                   SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                      ASYMETRIX LEARNING SYSTEMS, INC.

    August 13, 1998                          /s/ John D. Atherly
---------------------------      ---------------------------------------------
         Date                                    John D. Atherly
                                   Vice President, Finance and Administration
                                           and Chief Financial Officer
                                 (Duly Authorized Officer and Chief Accounting
                                                   Officer)

                                       21
<PAGE>
 
                                 EXHIBIT INDEX

           2.1   Agreement and Plan of Reorganization dated May 22, 1998 by and
                 between the Company and Strategic Systems Associates, Inc.

           2.2   Agreement and Plan of Reorganization dated June 22, 1998 by and
                 between the Company and Meliora Systems, Inc.

           27    Financial Data Schedule

                                      22