<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, 2000

                                       or

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

                        COMMISSION FILE NUMBER 000-24289

                              CLICK2LEARN.COM, 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   X               No
   -------                -----

The number of shares outstanding of the issuer's Common Stock, par value $0.01,
as of June 30, 2000 was 16,861,534 shares.


<PAGE>

                              CLICK2LEARN.COM, INC.

                                   FORM 10 -Q

                       FOR THE QUARTER ENDED JUNE 30, 2000

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                                         PAGE
<S>                                                                                                      <C>
PART I--FINANCIAL INFORMATION

Item 1.  Financial Statements

         Condensed Consolidated Balance Sheets as of June 30, 2000 (unaudited) and December 31, 1999       3

         Condensed Consolidated Statements of Operations for the three months and six months ended
           June 30, 2000 and 1999 (unaudited)                                                              4

         Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2000
           and 1999 (unaudited)                                                                            5

         Notes to Condensed Consolidated Financial Statements                                              6

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations             9

Item 3.  Quantitative and Qualitative Disclosures About Market Risk                                       17

PART II - OTHER INFORMATION

Item 1.  Legal Proceedings                                                                                18

Item 2.  Changes in Securities and Use of Proceeds                                                        18

Item 3.  Defaults upon Senior Securities                                                                  18

Item 4.  Submission of Matters to a Vote of Securities Holders                                            18

Item 5.  Other Information                                                                                19

Item 6.  Exhibits and Reports on Form 8-K                                                                 19

SIGNATURES                                                                                                19

EXHIBIT INDEX                                                                                             20
</TABLE>


                                        2


<PAGE>

                              CLICK2LEARN.COM, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                                           June 30,             December 31,
                                                                                             2000                   1999
                                                                                          (unaudited)
                                                                                         ------------          -------------
<S>                                                                                      <C>                   <C>
                                       ASSETS
Current assets:
    Cash and cash equivalents                                                               $15,149               $19,481
    Accounts receivable, net of allowance for returns and
        doubtful accounts of $1,010 in 2000 and $945 in 1999                                 14,632                13,717
    Inventories                                                                                 202                   203
    Prepaid royalties and licenses                                                              156                    95
    Receivables from related companies                                                           70                     9
    Other current assets                                                                      1,819                 2,272
                                                                                           --------              --------
             Total current assets                                                            32,028                35,777
 Property and equipment, net                                                                  2,597                 2,583
 Goodwill and other intangible assets, net                                                    9,797                10,475
 Other assets                                                                                 1,008                   571
                                                                                           --------              --------
                                                                                            $45,430               $49,406
                                                                                           ========              ========

                        LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Accounts payable                                                                       $ 1,596               $ 2,146
     Accrued liabilities                                                                      3,244                 2,382
     Deferred revenue                                                                         1,423                 1,687
     Customer prepayments                                                                       450                   591
     Other current liabilities                                                                  953                 1,153
                                                                                           --------              --------
             Total current liabilities                                                        7,666                 7,959
 Other noncurrent liabilities                                                                   139                    92
                                                                                           --------              --------
             Total liabilities                                                                7,805                 8,051
                                                                                           --------              --------

Stockholders' equity:
     Preferred stock                                                                              -                     -
     Common stock                                                                               169                   162
     Additional paid-in capital                                                             220,475               217,521
     Accumulated deficit                                                                   (182,114)             (175,527)
     Deferred stock compensation                                                               (446)                 (484)
     Accumulated other comprehensive loss                                                      (458)                 (317)
                                                                                           --------              --------
            Total stockholders' equity                                                       37,625                41,355
                                                                                           --------              --------
            Total liabilities and stockholders' equity                                     $ 45,430              $ 49,406
                                                                                           ========              ========
</TABLE>

      See accompanying notes to Condensed Consolidated Financial Statements


                                        3


<PAGE>

                              CLICK2LEARN.COM, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (IN THOUSANDS)
                                  (unaudited)

<TABLE>
<CAPTION>
                                                                 Three months ended                    Six months ended
                                                                       June 30,                             June 30,
                                                             ---------------------------         --------------------------
                                                               2000               1999               2000            1999
                                                             --------           --------           --------        --------
<S>                                                          <C>                <C>                 <C>            <C>
Revenue:
Product revenue:
  Enterprise products                                        $  2,706           $  3,280           $  6,428        $  6,016
  Other products                                                   27                288                 97             706
                                                             --------           --------           --------        --------
         Total product revenue                                  2,733              3,568              6,525           6,722
Enterprise services                                             5,923              4,983             11,287           9,289
E-learning network                                              1,756                  -              2,484               -
                                                             --------           --------           --------        --------
         Total revenue                                         10,413              8,551             20,296          16,011
                                                             --------           --------           --------        --------
Cost of revenue:
Product revenue:
  Enterprise products                                             205                225                445             403
  Other products                                                    8                122                 36             258
                                                             --------           --------           --------        --------
         Total cost of product revenue                            213                347                481             661
Enterprise services                                             3,676              3,491              7,579           6,767
E-learning network                                              1,278                  -              1,945               -
                                                             --------           --------           --------        --------
         Total cost of revenue                                  5,167              3,838             10,005           7,428
                                                             --------           --------           --------        --------
Gross margin                                                    5,245              4,713             10,291           8,583
                                                             --------           --------           --------        --------
Operating expenses:
  Research and development                                      2,322              1,644              4,774           3,158
  Sales and marketing                                           4,450              3,654              8,987           7,180
  General and administrative                                    1,575              1,400              3,023           2,656
  Amortization of goodwill                                        235                219                470             438
                                                             --------           --------           --------        --------
         Total operating expenses                               8,582              6,917             17,254          13,432
                                                             --------           --------           --------        --------
Loss from operations                                           (3,337)            (2,204)            (6,963)         (4,849)
Other income, net                                                 268                201                545             440
Loss on affliate                                                 (170)                 -               (170)              -
                                                             --------           --------           --------        --------
Net loss                                                      $(3,239)           $(2,003)           $(6,588)        $(4,409)
                                                             ========           ========           ========        ========
Net loss per share, basic and diluted                         $ (0.19)           $ (0.14)           $ (0.40)        $ (0.32)
                                                             ========           ========           ========        ========
Weighted average common shares outstanding, basic and
  diluted                                                      16,754             14,019             16,586          13,993
                                                             ========           ========           ========        ========
</TABLE>


      See accompanying notes to Condensed Consolidated Financial Statements


                                        4


<PAGE>


                             CLICK2LEARN.COM, INC.
               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                               (IN THOUSANDS)
                                (unaudited)

<TABLE>
<CAPTION>
                                                                                          Six Months Ended
                                                                                                June 30,
                                                                                     ----------------------------
                                                                                       2000                1999
                                                                                     --------            --------
<S>                                                                                  <C>                 <C>
Cash flows from operating activities:
  Net loss                                                                           $ (6,588)           $ (4,409)
  Adjustments to reconcile net loss to net cash used in operating activities:
    Depreciation and amortization                                                       1,229               1,052
    Write-off property and equipment                                                        1                   -
    Stock compensation expense                                                             37                  52
    Loss in Affliate                                                                      170                   -
    Changes in assets and liabilities:
      Accounts receivable                                                               (914)              (1,651)
      Inventories                                                                           1                  68
      Prepaid royalties and licenses                                                      (61)               (182)
      Receivables from related companies                                                  (61)                119
      Other current assets                                                                453                (223)
      Accounts payable                                                                   (551)                608
      Accrued liabilities                                                                 862                 869
      Deferred revenue                                                                   (263)               (311)
      Other current liabilities                                                          (340)               (353)
                                                                                     --------            --------
              Net cash used in operating activities                                    (6,025)             (4,361)
                                                                                     --------            --------
Cash flows from investing activities:
    Purchase of property and equipment                                                   (567)             (1,116)
     Investment in click2learn Japan KK                                                  (740)                  -
    Disposal (purchase) of other assets                                                   133                (103)
                                                                                     --------            --------
               Net cash used in investing activities                                   (1,174)             (1,219)
                                                                                     --------            --------
Cash flows from financing activities:
    Borrowings under (repayment) of notes payable                                          48                 (49)
    Proceeds from exercise of stock options                                             2,960                 276
                                                                                     --------            --------
               Net cash provided by financing activities                                3,308                 227
                                                                                     --------            --------
    Effect of foreign exchange rate changes                                              (141)               (115)
                                                                                     --------            --------
               Net decrease in cash and cash equivalents                               (4,332)             (5,468)
Cash and cash equivalents at beginning of period                                       19,481              21,713
                                                                                     ========            ========
Cash and cash equivalents at end of period                                           $ 15,149            $ 16,245
                                                                                     ========            ========
</TABLE>

     See accompanying notes to Condensed Consolidated Financial Statements


                                       5


<PAGE>

                              CLICK2LEARN.COM, INC.
               NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2000 AND 1999

UNAUDITED INTERIM FINANCIAL INFORMATION

     The accompanying unaudited condensed consolidated financial statements
of click2learn.com, inc. ("click2learn") include the accounts of click2learn
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. These condensed consolidated financial statements and
notes should be read in conjunction with click2learn's audited consolidated
financial statements included in click2learn's Annual Report on Form 10-K for
the fiscal year ended December 31, 1999. 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 three months and six months
ended June 30, 2000 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 RESULTS OF OPERATIONS".

NET LOSS PER SHARE

     Basic earnings per share is computed by dividing the net loss by the
weighted average number of common shares outstanding during the period.
Diluted earnings per share is computed by dividing the net loss by the
weighted average number of common and dilutive common equivalent shares
outstanding during the period. As click2learn had a net loss in each of the
periods presented, basic and diluted net loss per share are the same.

     Excluded from the computation of diluted earnings per share for the
three months and six months ended June 30, 2000 are options to acquire
approximately 4,833,282 shares of common stock with a weighted average share
price of $7.59 and warrants to acquire 1,426,313 shares of common stock with
an weighted average share price of $8.61, and for the three and six months
ended June 30, 1999 are options to acquire approximately 4,247,148 shares of
common stock with a weighted average share price of $4.87 because their
effects would be anti-dilutive.

REVENUE RECOGNITION

     Click2learn recognizes revenue from product sales upon shipment provided
no significant obligations remain outstanding and collection of the resulting
receivable is probable. An allowance for product returns is provided at the
time of the sale. Revenue from technical support agreements is recognized on
a straight-line basis over the life of the contract.

     Click2learn has two types of professional service contracts: fixed price
and time and materials. On a fixed price contract, revenue is recognized using
the percentage of completion method of accounting which is based on the ratio
of costs incurred to the total estimated project cost. On the time and
materials contract, revenue is recognized as the services are performed.
Provisions for any estimated losses on uncompleted contracts are made in the
period in which such losses become evident.

     Revenue from the click2learn.com network includes site fees, royalties,
and content sales. Revenue is established by the specific requirements of the
customer agreements which have a length of one to three years. Revenue for
the site fees and content usage is recognized over the length of the customer
agreements. Royalty revenue is recognized as earned.


                                       6

<PAGE>

COMPREHENSIVE LOSS

     The following table sets forth the components of comprehensive loss (in
thousands) for the periods presented below:

<TABLE>
<CAPTION>
                                                        THREE MONTHS ENDED               SIX MONTHS ENDED
                                                            JUNE 30,                         JUNE 30,
                                                      -----------------------         -----------------------
                                                       2000             1999            2000            1999
                                                      -------         -------         -------         -------
<S>                                                   <C>             <C>             <C>             <C>
Net loss                                              $(3,238)        $(2,003)        $(6,588)        $(4,409)
Foreign currency translation  adjustment                  (74)            (66)           (141)           (113)
                                                      -------         -------         -------         -------
Total comprehensive loss                              $(3,312)        $(2,069)        $(6,729)        $(4,522)
                                                      -------         -------         -------         -------
                                                      -------         -------         -------         -------
</TABLE>

NEW ACCOUNTING PRONOUNCEMENTS

     In June 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
("Statement 133"). Statement 133 provides a comprehensive and consistent
standard for the recognition and measurement of derivatives and hedging
activities. Statement 133 as amended is effective for fiscal years beginning
after June 15, 2000. Click2learn does not expect the adoption of Statement 133
to have a material impact on its consolidated financial statements.

     In December 1999, the United States Securities and Exchange Commission
(SEC) released Staff Accounting Bulletin No. 101, REVENUE RECOGNITION IN
FINANCIAL STATEMENTS ("SAB 101"), which click2learn must adopt by the fourth
quarter of 2000. SAB 101 provides guidance on revenue recognition and the SEC
staff's view on the application of accounting principles to selected revenue
recognition issues.  Click2learn does not anticipate that the adoption of SAB
101 will have a material effect on its consolidated financial statements.

     In March 2000, the FASB issued FASB Interpretation No. 44, ACCOUNTING
FOR CERTAIN TRANSACTIONS INVOLVING STOCK COMPENSATION ("FIN No. 44"). FIN No.
44 provides guidance for certain issues arising in the application of
Accounting Principals Board ("APB") Opinion No. 25, ACCOUNTING FOR STOCK
ISSUED TO EMPLOYEES. Among other issues, FIN No. 44 clarifies (a) the
definition of an employee for purposes of applying APB Opinion No. 25, (b)
the criteria for determining whether a plan qualifies as a noncompensatory
plan, (c) the accounting consequence of various modifications to the terms of
a previously fixed stock option or award, and (d) the accounting for an
exchange of stock compensation awards in a business combination. FIN No. 44 is
effective July 1, 2000 but certain conclusions in FIN No. 44 cover specific
events that occur after either December 15, 1998 or January 12, 2000. To the
extent FIN No. 44 covers events occurring during the period after December
15, 1998 or January 12, 2000, but before the effective date of July 1, 2000,
the effects of applying FIN No. 44 are recognized on a prospective basis from
July 1, 2000. Click2learn does not expect that the adoption of FIN No. 44
will have a material effect on its financial statements.

     In March 2000, the Emerging Issues Task Force of the FASB reached a
consensus on Issue No. 00-2, "Accounting for Web Site Development Costs"
which provides guidance on when to capitalize versus expense costs incurred
to develop a web site. The consensus is effective for web site development
cost in quarters beginning after June 30, 2000. Click2learn has not yet
determined the impact, if any, this issue will have on its consolidated
financial statements.

SEGMENT INFORMATION

     Click2learn has two primary segments: enterprise and electronic commerce
(e-commerce). The enterprise segment refers to the single source solution
designed for implementation on a customer's internal information system using
click2learn's products and services. In July 1999, click2learn launched its
e-commerce network. The electronic commerce segment did not exist prior to
1999. The click2learn.com network is an Internet based service for the
delivery and management of e-learning over the Internet including a portal
and e-commerce site. The accounting policies of the operating segments are
the same as those described in the summary of significant accounting
policies. There have been no transactions between segments.

                                       7

<PAGE>

REPORTABLE SEGMENT INFORMATION
(in thousands)

<TABLE>
<CAPTION>
                                                                   FOR THE THREE MONTHS             FOR THE SIX MONTHS
                                                                      ENDED JUNE 30,                  ENDED JUNE 30,
                                                                -----------------------         ------------------------
                                                                  2000           1999            2000             1999
                                                                -------         -------         -------         --------
<S>                                                             <C>             <C>             <C>             <C>
Revenue:

  Enterprise                                                    $ 8,657         $ 8,551         $17,813         $16,011
  Electronic commerce                                             1,756               -           2,483               -
                                                                -------         -------         -------         --------
                                                                $10,413         $ 8,551         $20,296         $16,011
                                                                =======         ========        =======         =======
Operating Loss:

  Enterprise                                                    $  (882)        $ (2,204)       $(1,699)        $(4,849)
  Electronic commerce                                            (2,455)               -         (5,264)               -
                                                                -------         -------         -------         --------
                                                                $ (3,337)       $ (2,204)       $(6,963)        $(4,849)
                                                                =======         ========        =======         =======
</TABLE>

Capital expenditures, depreciation and amortization and total assets were not
significant for the electronic commerce business segment.

GEOGRAPHIC INFORMATION
(in thousands)

Revenues are attributed to geographic areas based on the location of the
customers, and are as follows:

<TABLE>
<CAPTION>
                                                                   FOR THE THREE MONTHS             FOR THE SIX MONTHS
                                                                      ENDED JUNE 30,                  ENDED JUNE 30,
                                                                ------------------------         -----------------------
                                                                 2000             1999            2000            1999
                                                                -------          -------         -------         -------
<S>                                                             <C>              <C>             <C>             <C>
Revenues
  Domestic                                                      $10,053          $ 6,771         $19,008         $12,675
  International - primarily Europe                                  360            1,780           1,288           3,336
                                                                -------          -------         -------         -------
                                                                $10,413          $ 8,551         $20,296         $16,011
                                                                =======          =======         =======         =======
</TABLE>

Long-lived assets represents property, plant and equipment and goodwill, net of
accumulated depreciation and amortization, and are as follows:

<TABLE>
<CAPTION>

                                                                         JUNE 30,
                                                                -----------------------
                                                                  2000            1999
                                                                -------         -------
<S>                                                             <C>             <C>
Long-lived assets:
  Domestic operations                                           $12,083         $12,222
  International operations - primarily Europe                       308              78
                                                                ========        =======
                                                                $12,391         $12,300
                                                                ========        =======
</TABLE>


                                       8

<PAGE>

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

     THE FOLLOWING DISCUSSION OF THE FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF CLICK2LEARN SHOULD BE READ IN CONJUNCTION WITH CLICK2LEARN'S
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES THERETO
INCLUDED ELSEWHERE IN THIS REPORT. THE DISCUSSION IN THIS REPORT CONTAINS
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES.
CLICK2LEARN'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 IN "FACTORS THAT
MAY AFFECT FUTURE RESULTS OF OPERATIONS."

OVERVIEW

     Click2learn provides full service e-learning solutions to a wide variety
of businesses, government agencies and educational institutions.
Click2learn's e-learning solutions include the click2learn.com e-learning
network, a powerful outsourced platform for e-learning delivered by
click2learn as an application service provider (ASP), and a comprehensive
e-learning solution designed for implementation on a customer's internal
information systems.

     The click2learn.com e-learning network includes an e-learning
marketplace that gives organizations access to thousands of leading third
party e-learning courses and allows them to publish and distribute their own
custom e-learning courses or other educational materials through the use of
click2learn's browser-based authoring and publishing tools. In addition to
the click2learn.com e-learning marketplace, the click2learn.com e-learning
network provides customers with secure custom-configured e-learning sites
that are hosted by click2learn as an ASP. These custom-configured web sites
can provide organizations secure delivery and management of training for
employees, suppliers, distributors and customers. In addition, through the
click2learn.com e-learning network's support for e-commerce transactions,
corporate customers and Internet portals can develop an additional revenue
source by selling their proprietary training materials as well as content
from the click2learn.com e-learning marketplace through their configured
sites. The click2learn.com e-learning network was formally launched in the
third quarter of 1999.

     In addition to its ASP solution, click2learn provides
internally-implemented enterprise e-learning solutions based on Ingenium, a
learning management and skills assessment system that enables customers to
deploy and manage all aspects of their learning activities and to assess the
skills and learning needs of their employees. The Ingenium system supports
the management and delivery of multiple types of learning activities within
an organization including instructor-led training, training delivered on
CD-ROM or e-learning courses delivered over an organization's intranet. The
Ingenium system also allows an organization to closely match and track all
employees' readiness to perform their job functions based on the analysis of
the skills required to accomplish any tasks.

     Click2learn's e-learning solutions are supported by one of the
industry's largest professional services groups, including custom content
development, strategic consulting and integration services, and by its
e-learning authoring products, featuring ToolBook II Instructor (for
professional developers) and ToolBook II Assistant (for subject matter
experts).

     Revenues are derived from four categories: click2learn.com e-learning
network site fees and royalties, content sales, software licenses and
professional services. Click2learn.com e-learning network site fees or
royalties are determined by contracts with lengths of 1 to 3 years and vary
depending on the functionality provided or the commerce conducted through the
site. Revenues from functionality fees are generally recognized evenly over
the life of the contract, and revenues from royalties are recognized as
earned. Revenues from content sales are either spread evenly over the life of
the contract for course usage with respect to e-learning courses or are
recognized when shipped for hard goods and when delivered for instructor-led
courses. Revenues from software licenses generally are recognized upon
shipment of products from click2learn's warehouse. The enterprise e-learning
products that fall under this category are the Ingenium learning management
system and the ToolBook II line of authoring products. Professional service
revenues are generally associated with fixed price contracts or time and
material contracts. Revenues from fixed price contracts are recognized based
on the percentage-of-completion method. Revenues from time and material
contracts are earned as the work is performed based on the agreed upon rates.

                                       9
<PAGE>

     Click2learn incurred net losses of $5.2 million in 1998, $10.0 million in
1999 and $6.6 million in the six months ended June 30, 2000 and has yet to
achieve operating income or net income under its new business model.
Click2learn's limited operating history under its current business model and
the emerging nature of the market for e-learning, among other factors, make
prediction of click2learn's future operating results difficult. Despite the
establishment of the click2learn.com e-learning network, which is based on an
unproven business model, click2learn expects to continue to derive the
majority of its revenues from its enterprise products and services segment for
at least the next 12 months.

     Although click2learn has experienced revenue growth in certain recent
periods and 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 click2learn may
experience and, therefore, they should not be considered indicative of future
operating results. In addition, click2learn intends to continue to invest in
the click2learn.com e-learning network, its professional services business,
and research and development, among other things. As a result, click2learn
expects to continue to incur annual operating losses at least through 2000.
There can be no assurance that click2learn will achieve profitability or, if
profitability is achieved, that it will be sustained.

RESULTS OF OPERATIONS

THREE AND SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO THREE AND SIX MONTHS
ENDED JUNE 30, 1999

     REVENUE. Total revenue increased 22% from $8.6 million in the three
months ended June 30, 1999 to $10.4 million in the three months ended June
30, 2000. Total revenue increased 27% from $16.0 million in the six months
ended June 30, 1999 to $20.3 million in the six months ended June 30, 2000.

     Online learning product revenue decreased 18% from $3.3 million in the
three months ended June 30, 1999 to $2.7 million in the three months ended
June 30, 2000. Online learning product revenue increased 7% from $6.0 million
in the six months ended June 30, 1999 to $6.4 million in the six months ended
June 30, 2000. The increase in online learning product revenue for the six
month period was due primarily to increased demand for click2learn's online
learning products. The June 30, 2000 quarter decline was attributed to
staffing changes in the direct sales team responsible for Toolbook sales.
Other product revenue decreased 91% from $288,000 in the three months ended
June 30, 1999 to $27,000 in the three months ended June 30, 2000. Other
product revenue decreased 86% from $706,000 in the six months ended June 30,
1999 to $97,000 in the six months ended June 30, 2000. Other product revenue
consists of revenue from products which are not targeted at the online
learning market, many of which have been discontinued or divested over the
past years. Total product revenue decreased 23% from $3.6 million in the
three months ended June 30, 1999 to $2.7 million in the three months ended
June 30, 2000, reflecting the above mentioned decreases. Total product
revenue decreased 3% from $6.7 million in the six months ended June 30, 1999
to $6.5 million in the six months ended June 30, 2000, reflecting the
decrease in other product revenue. As a result of click2learn's strategy to
focus on the online learning market, click2learn anticipates that growth in
product sales, if any, will be attributable to its online learning products
and that its other product revenue will not be material in the future.

     Services revenue increased 19% from $5.0 million in the three months
ended June 30, 1999 to $5.9 million in the three months ended June 30, 2000.
Services revenue increased 22% from $9.3 million in the six months ended June
30, 1999 to $11.3 million in the six months ended June 30, 2000.

     Revenues from the click2learn.com e-learning network were $1.8 million
in the three months ended June 30, 2000 and $2.4 million in the six months
ended June 30, 2000. There were no e-learning revenues in the three and six
months ended June 30, 1999 because the click2learn.com e-learning network was
not launched until the third quarter of 1999. E-learning network revenue
consists of revenues from site fees and royalties received from click2learn,
sales of content through the click2learn.com e-learning network, and
professional services related to the click2learn.com e-learning network.

      COST OF REVENUE. Cost of product revenue includes costs of media,
manuals and distribution costs. Gross margin from click2learn's online
learning products is generally higher than that of its other products because
these products are typically sold by click2learn'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

                                      10
<PAGE>

costs in providing consulting, custom development, support 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.

     Total cost of revenue increased 35% from $3.8 million in the three
months ended June 30, 1999 to $5.2 million in the three months ended June 30,
2000. Total cost of revenue increased 35% from $7.5 million in the six months
ended June 30, 1999 to $10.0 million in the six months ended June 30, 2000.

     Cost of online learning products revenue decreased 9% from $225,000 in
the three months ended June 30, 1999 to $205,000 in the three months ended
June 30, 2000. Cost of online learning products revenue increased 10% from
$403,000 in the six months ended June 30, 1999 to $445,000 in the six months
ended June 30, 2000. The changes were due to the increase or decrease in
associated revenue in the 2000 periods. Cost of other products revenue
decreased 93% from $122,000 in the three months ended June 30, 1999 to $8,000
in the three months ended June 30, 2000. Cost of other products revenue
decreased 86% from $258,000 in the six months ended June 30, 1999 to $36,000
in the six months ended June 30, 2000. The decline was due to decreased sales
of click2learn's other products. Total cost of product revenue decreased 39%
from $347,000 in the three months ended June 30, 1999 to $213,000 in the
three months ended June 30, 2000. Total cost of product revenue decreased 27%
from $661,000 in the six months ended June 30, 1999 to $481,000 in the six
months ended June 30, 2000.

     Cost of e-learning network revenue was $1.3 million for the three months
ended June 30, 2000 and $1.9 million for the six months ended June 30, 2000.
Cost of e-learning network revenues consists of royalties payable to content
publishers or developers for content sold through the click2learn.com
e-learning network, royalties payable to corporate customers or Internet
portals with respect to content sold through their e-learning sites, and
personnel costs for professional services related to the click2learn.com
e-learning network.

     Total products gross margin increased from 90% in the three months ended
June 30, 1999 to 92% in the three months ended June 30, 2000. Total products
gross margin increased from 90% in the six months ended June 30, 1999 to 93%
in the six months ended June 30, 2000.

     Cost of services revenue increased 5% from $3.5 million in the three
months ended June 30, 1999 to $3.7 million in the three months ended June 30,
2000. Cost of services revenue increased 12% from $6.8 million in the six
months ended June 30, 1999 to $7.6 million in the six months ended June 30,
2000. The increase was due primarily to increased revenue and related costs.

     Services gross margin increased from 30% in the three months ended June
30, 1999 to 38% in the three months ended June 30, 2000. Services gross
margin increased from 27% in the six months ended June 30, 1999 to 33% in the
six months ended June 30, 2000. Click2learn 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.

     E-learning network gross margin was 27% for the three months ended
June 30, 2000 and 22% for the six months ended June 30, 2000.

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. Research and development expenses were $1.6
million in the three months ended June 30, 1999 and $2.3 million in the three
months ended June 30, 2000. Research and development expenses as a percentage
of total revenue increased from 19% in the three months ended June 30, 1999
to 22% in the three months ended June 30, 2000. Research and development
expenses as a percentage of total revenue increased from 20% in the six
months ended June 30, 1999 to 24% in the six months ended June 30, 2000. The
increases resulted from click2learn's investment in developing the
click2learn.com e-learning network. Click2learn expects research and
development expenses to increase in absolute dollars in the future.

     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

                                      11
<PAGE>

literature and overhead. Sales and marketing expenses were $3.7 million in
the three months ended June 30, 1999 and $4.5 million in the three months
ended June 30,1999. Sales and marketing expenses as a percentage of total
revenue were unchanged at 43% in the three months ended June 30, 1999 and
2000, respectively. Sales and marketing expenses as a percentage of total
revenue decreased from 45% in the six months ended June 30, 1999 to 44% in
the six months ended June 30, 2000. Click2learn expects that sales and
marketing expenses will continue to increase in absolute dollars in the
future as click2learn 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 click2learn's
administrative, executive and finance personnel as well as outside advisors.
General and administrative expenses increased from $1.4 million for the three
months ended June 30, 1999 to $1.6 million in the three months ended June 30,
2000. General and administrative expenses increased from $2.7 million for the
six months ended June 30, 1999 to $3.0 million for the six months ended
June 30, 2000. General and administrative expenses as a percentage of total
revenue decreased from 16% to 15% in the three months ended June 30, 1999
compared to the three months ended June 30, 2000. General and administrative
expenses as a percentage of total revenue decreased from 17% to 15% in the six
months ended June 30, 1999 compared to the six months ended June 30, 2000.
Click2learn expects that general and administrative expenses will increase in
absolute dollars in the future.

AMORTIZATION OF GOODWILL

     Amortization of goodwill relates to the amortization of the excess of
the purchase price over the net assets of companies acquired under the
purchase method of accounting. For the three months ended June 30, 1999 and
2000, click2learn recognized $219,000 and $235,000, respectively, of
amortization expense. For the six months ended June 30, 1999 and 2000,
click2learn recognized $438,000 and $470,000, respectively, of expense for
amortization of goodwill.

OTHER INCOME, NET

     Click2learn recorded no other expense in the three months ended June 30,
1999 and in the three months ended June 30, 2000. Click2learn recorded no
other expense in the six months ended June 30, 1999 and in the six months
ended June 30, 2000. Other interest income, net was $201,000 in the three
months ended June 30, 1999 and $268,000 in the three months ended June 30,
2000. Other interest income, net was $440,000 in the six months ended June
30, 1999 and $545,000 in the six months ended June 30, 2000.

LOSS ON AFFLIATE

     During the three month period ended June 30, 2000, click2learn
established a joint venture with SOFTBANK Media & Marketing Corp. and
SOFTBANK Forums Japan, Inc. creating Click2Learn Japan K.K. Click2learn's
initial contribution to the joint venture's capitalization was approximately
$800,000. Accounting for click2learn's portion of the joint venture's
operating results is under the equity method. For the three months ended
June 30, 2000, losses of $170,000 were recorded as related to our share of
the joint venture's results for the period.

LIQUIDITY AND CAPITAL RESOURCES

     At June 30, 2000, click2learn had cash and cash equivalents totaling
$15.1 million, a decrease of $4.3 million from December 31, 1999. The
decrease in cash and cash equivalents was due primarily to $3.6 million used
in operating activities and $1.1 million used in investing activities. At
June 30, 2000, the principal source of liquidity for click2learn was $24.3
million of working capital.

     Click2learn anticipates that its cash and cash equivalents will be
sufficient to meet its working capital needs and capital expenditures for at
least the next 12 months. Click2learn's long-term liquidity will be affected
by numerous factors, including acquisitions of businesses or technologies,
demand for click2learn'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 click2learn 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

                                     12
<PAGE>

services and increasing their own market share, the level and timing of
revenues, and other factors. In addition, click2learn from time to time
evaluates potential acquisitions of businesses, products or technologies that
complement click2learn's business. To the extent that resources are
insufficient to fund click2learn's activities, click2learn may need to raise
additional funds. There can be no assurance that such additional funding, if
needed, will be available on terms attractive to click2learn, or at all. If
adequate funds are not available on acceptable terms, click2learn 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 click2learn's business,
operating results and financial condition.

YEAR 2000 COMPLIANCE

     To date, click2learn has not experienced any material year 2000 related
problems with its software or third-party software or computer systems.

FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS

     CLICK2LEARN HAS A LIMITED OPERATING HISTORY IN ITS CURRENT MARKETS.
Until early 1995, click2learn was engaged in various research and development
activities and in developing and marketing multimedia authoring products,
database and Internet tools, web publishing products and other ancillary
products, most of which click2learn does not currently sell. Starting in
1995, click2learn began to focus its development and marketing efforts on
products and services for the enterprise learning market. Click2learn
announced the click2learn.com e-learning network in July 1999, and has not
previously hosted, operated and managed e-commerce web sites. Accordingly,
click2learn has a limited operating history on which to evaluate its current
business and prospects.

     Risks click2learn faces under its new business model include, but are
not limited to, the demand for technology-based training and e-learning
applications, demand for e-learning products and services, broad and timely
acceptance of the click2learn.com e-learning network, competition and those
other risks described in this section. To address these risks, click2learn
must, among other things:

     -  successfully introduce and build the click2learn.com e-learning network
        and attract user traffic to the e-learning network;

     -  establish corporate e-learning sites for its customers and generate
        revenues from such customers;

     -  continue to establish relationships with leading providers of learning
        content to sell that content through the click2learn.com e-learning
        network;

     -  continue to establish co-branded e-learning sites for Internet portals
        and corporate customers for the use of click2learn.com as the
        "learning channel" for their web sites;

     -  respond to competitive developments;

     -  attract, integrate, retain and motivate qualified personnel;

     -  successfully introduce new products and services; and

     -  address and establish new technologies and technology standards.

     The pricing, expense and revenue model for the click2learn.com
e-learning network has not been broadly tested in the marketplace. If the
pricing, expense and revenue model is not acceptable to users, customers,
content providers or advertisers, the click2learn.com e-learning network may
not be commercially successful. This would seriously harm click2learn's
business, particularly if it experiences a decline in the growth of revenues
from its enterprise e-learning products and services. Click2learn expects to
continue to derive the majority of its revenues over at least the next 12
months from its enterprise e-learning products and services, rather than the
click2learn.com e-learning network.

     CLICK2LEARN'S OPERATING RESULTS COULD VARY SIGNIFICANTLY FROM QUARTER TO
QUARTER. Click2learn'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 click2learn's
control. Factors that may adversely affect click2learn's quarterly operating
results include:

     -  the demand for technology-based training and e-learning solutions;

                                      13
<PAGE>

     -  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 ability to meet client project milestones;

     -  market acceptance of click2learn's or its competitors' products
        and services;

     -  click2learn's ability to develop and market new or enhanced
        products and services in a timely manner and the market acceptance
        of these products and services;

     -  timing of revenues and expenses relating to the click2learn.com
        e-learning network; and

     -  the timing of revenue recognition.

     Click2learn's future revenues are difficult to predict and click2learn
may not be able to adjust spending in response to revenue shortfalls.
Click2learn's limited operating history under its current business model,
including the click2learn.com e-learning network, possible acquisitions and
the emerging nature of the market make prediction of future revenue and
expenses difficult. Expense levels are based, in part, on expectations as to
future revenue and to a large extent are fixed in the short term. If
click2learn is not able to predict future revenue accurately, it may be
unable to adjust spending in a timely manner to compensate for any unexpected
revenue shortfall.

     CLICK2LEARN IS IN A DEVELOPING MARKET. The e-learning market is in the
early stages of development. Corporate training and education have
historically been conducted primarily through classroom instruction and have
traditionally been performed by a company's internal personnel. Many
companies have invested heavily in their current training solutions. Although
technology-based training applications have been available for several years,
they currently account for only a small portion of the overall training
market. Accordingly, the future success of click2learn will depend upon,
among other factors, the extent to which companies adopt technology-based
solutions and use the Internet in connection with their training activities
and the extent to which companies utilize the services or purchase products
of third-party providers, and more particularly whether companies adopt
solutions delivered over the Internet on an application service provider
basis, including private e-learning sites hosted by third parties such as
those on the click2learn.com e-learning network. Many companies that have
already invested substantial resources in traditional methods of corporate
training may be reluctant to adopt a new strategy that may limit or compete
with their existing investments. Even if companies implement technology-based
training or e-learning solutions, they may still choose to design, develop,
deliver or manage all or a part of their education and training internally.
If technology-based learning and the use of the Internet for learning do not
become widespread, or if companies do not use the products and services of
third parties to develop, deliver or manage their training needs, then
click2learn's products and services, including the click2learn.com e-learning
network, may not achieve commercial success.

     CLICK2LEARN DEPENDS ON INCREASING USE OF THE INTERNET. The
click2learn.com e-learning network depends on the increased acceptance and
use of the Internet, both generally and as a means for the purchase and
delivery of learning content. Rapid growth in the use of the Internet is a
recent phenomenon. As a result, acceptance and use may not continue to
develop at historical rates and a sufficiently broad base of business
customers or consumers may not adopt or continue to use the Internet,
particularly for training and education. Demand and market acceptance for
recently introduced services and products over the Internet are subject to a
high level of uncertainty, and there exist few proven services and products.

     Click2learn's business would be seriously harmed if:

     -  use of the Internet does not continue to increase or increases
        more slowly than expected;

     -  the technology underlying the Internet does not effectively
        support any expansion that may occur;

     -  the necessary communication and computer network technology for the
        Internet does not continue to develop; or

     -  governmental regulation of the Internet increases.

     INTERNET SECURITY RISKS. A significant barrier to the widespread use of
the Internet for applications such as training and education is the secure
transmission of confidential information over public networks. Advances in
computer capabilities, new discoveries in the field of cryptography or other
events or developments could result in compromises or breaches of
click2learn's security systems or those of other web sites. If any
well-publicized


                                      14

<PAGE>

security breach were to occur, the Internet may not become widely accepted
for commerce and communications. Anyone who circumvents click2learn's
security measures could misappropriate proprietary information or cause
interruptions in our services or operations.

     The Internet is a public network, and data is sent over this network
from many sources. In the past, computer viruses, software programs that
disable or impair computers, have been distributed and have rapidly spread
over the Internet. Computer viruses could be introduced into our systems or
those of our customers or content providers, which could disrupt the
click2learn.com e-learning network or make it inaccessible to users. We may
be required to expend significant capital and other resources to protect
against the threat of security breaches or to alleviate problems caused by
breaches. To the extent that our activities may involve the storage and
transmission of proprietary information, such as personal information or
credit card numbers, security breaches could expose us to a risk of loss or
litigation and possible liability.

     POSSIBILITY OF PERFORMANCE PROBLEMS. The click2learn.com e-learning
network has only been recently introduced. If the volume of traffic or
content on the click2learn.com e-learning network increases, the network may
experience slower response times or other problems. In addition, both
click2learn and users depend on Internet service providers,
telecommunications companies and the efficient operation of their computer
networks and other computer equipment for the operation of and access to the
click2learn.com e-learning network. Each of these has experienced significant
outages in the past and could experience outages, delays and other
difficulties due to system failures unrelated to click2learn's systems. Any
delays in response time or performance problems resulting from these
unrelated systems could cause users to believe the click2learn.com e-learning
network is not functioning properly and therefore not use the click2learn.com
e-learning network for their training needs.

     COMPETITION. The e-learning market is highly fragmented and competitive,
rapidly evolving and subject to rapid technological change, with no single
competitor accounting for a dominant market share. Because of the lack of
significant barriers to entry in its market, click2learn expects that new
competitors will enter this market in the future. Click2learn's competitors
vary in size and scope and the breadth of products and services offered.
Click2learn faces competition from:

     -  other companies focused on delivering learning content over the
        Internet, such as SmartForce, DigitalThink and TrainingNet, with
        respect to the click2learn.com e-learning network, as well
        developers or resellers of training content who make their content
        vailable over the Internet;

     -  other developers of enterprise learning management systems, such
        as Saba and Docent, as well as publishers of e-learning courses
        that sell management systems with their titles with respect to
        click2learn's Ingenium learning management system;

     -  developers of multimedia and web authoring tools with respect to its
        ToolBook II authoring products;

     -  many small, regional e-learning and technology-based training
        services businesses; and

     -  large professional consulting firms and in-house training departments,
        with respect to all aspects of its enterprise learning solutions.

     Several of click2learn's current and potential competitors have longer
operating histories and significantly greater financial, technical, marketing
and other resources and therefore may be able to respond more quickly to new
or changing opportunities, technologies, standards and customer requirements.
Many of these competitors also have broader and more established distribution
channels that may be used to establish strategic alliances or deliver
competing products or services directly to customers. If these competitors
were to bundle competing products or services with the products and services
of their strategic partners, the demand for click2learn's products and
services might be substantially reduced and click2learn's ability to market and
sell products and services successfully may be substantially diminished. In
addition, the existence or announcement of strategic relationships involving
click2learn's competitors could adversely affect its ability to attract and
retain customers.

     DEPENDENCE ON THIRD PARTY TECHNOLOGY AND CONTENT. Click2learn uses
licensed third party technology in its products and in the click2learn.com
e-learning network and it licenses content from third parties for the
click2learn.com e-learning network. Click2learn may not be able to continue
to license technology or content from third parties. Future licenses to this
technology and content may not be available to click2learn on commercially
reasonable terms or at all. The loss of or inability to obtain or maintain
any of these technology or content licenses could result in delays in the
introduction of new products or could force click2learn to discontinue
permitting access to portions of the click2learn.com e-learning network until
equivalent technology or content, if available, is

                                      15

<PAGE>

identified, licensed and integrated. Furthermore, although it has taken steps
to protect itself in the relevant license agreements, click2learn may be
subjected to legal claims related to licensed technology or content based on
defamation, negligence, product liability, infringement of intellectual
property or other legal theories.

     CUSTOMER REQUIREMENTS AND FIXED PRICE ENGAGEMENTS. Click2learn could
face liability from customers if it does not meet their expectations. Many of
click2learn's professional services engagements require it to develop
e-learning applications to suit unique customer requirements. The failure or
inability to meet a customer's expectations or requirements in the
performance of services could injure click2learn's business reputation or
result in a claim for damages, regardless of click2learn's responsibility for
the failure. Click2learn attempts to limit contractually its liability for
damages arising from product defects, negligent acts, errors, mistakes or
omissions in rendering professional services. However, these contractual
protections are not always obtained and may not be enforced or otherwise
protect click2learn from liability for damages. Click2learn's insurance may
not be sufficient to cover one or more claims.

     Many professional services projects are performed on a fixed-price basis
rather than on a time and materials basis. If click2learn does not accurately
predict the costs of these projects, it could incur unexpected costs. If
click2learn does not complete fixed-price engagements within budget, on time
and to clients' satisfaction, click2learn would bear the risk of cost
overruns.

     SOFTWARE DEFECTS. Software products frequently contain errors or
failures, especially when first introduced or when new versions are released.
Click2learn has in the past discovered errors in its products and those of
third parties after their initial release. Because click2learn's enterprise
e-learning products are complex products targeted for enterprise customers in
an emerging market, customers and potential customers may have a greater
sensitivity to product defects than the market for software products
generally. Product defects could result in loss of revenue or delay in market
acceptance, diversion of development resources, damage to our reputation, or
increased service and warranty costs.

     KEY PERSONNEL. Click2learn's future success depends on the performance
of the senior management team and other key employees, and on its ability to
attract, integrate, motivate and retain additional highly skilled technical,
sales and marketing, and professional services personnel. There is intense
competition for these personnel. Click2learn does not have employment
agreements with most of its executives or other key employees. In addition,
click2learn does not maintain key person life insurance for any officers or
key employees.

     INTELLECTUAL PROPERTY. Despite click2learn's precautions, it may be
possible for a third party to copy or otherwise obtain and use its
intellectual property or trade secrets without authorization. In addition,
others could independently develop substantially equivalent intellectual
property. Litigation may be necessary in the future to enforce click2learn's
intellectual property rights, to protect trade secrets or to determine the
validity and scope of the proprietary rights of others. This litigation could
result in substantial costs and diversion of management and technical
resources.

     From time to time click2learn has received, and may in the future
receive, notice of claims of infringement of other parties' proprietary
rights. Infringement or other claims could be asserted or prosecuted against
click2learn in the future. Any such claims, with or without merit, could be
time-consuming, and result in costly litigation and diversion of technical
and management personnel. They could also cause product shipment delays or
require click2learn to develop non-infringing technology or enter into
royalty or licensing agreements. These royalty or licensing agreements, if
required, may not be available on reasonable terms, or at all.

     GENERAL ECONOMIC CONDITIONS. Click2learn's revenues are subject to
fluctuation as a result of general economic conditions. A significant portion
of click2learn's revenues are derived from the sale of products and services
to Fortune 1000 companies or government agencies, which historically have
adjusted their expenditures for education and training during economic
downturns. Should the economy weaken in any future period, these
organizations may not increase or may reduce their expenditures on education
and training, which could have an adverse effect on click2learn's business.

                                      16
<PAGE>

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Click2learn holds its assets primarily in cash and cash equivalents,
such as short-term marketable debt securities, money market funds and other
cash equivalents. Click2learn minimizes its risk by investing in financial
instruments with a maturity of three months or less. Click2learn does not use
derivative financial instruments.

     Click2learn has foreign currency risk as a result of its foreign
subsidiary activities. For the three and six months ended June 20, 2000,
international revenues from click2learn's foreign subsidiaries accounted for
approximately 4% and 6%, respectively, of total revenues. International sales
are made mostly from the click2learn's foreign subsidiaries and are typically
denominated in the local currency of each country. All foreign subsidiaries
use the local currency as their functional currency.

     Click2learn's international business is subject to risks typical of an
international business, including, but not limited to differing economic
conditions, changes in political climate, differing tax structures, other
regulations and restrictions, and foreign exchange rate volatility.
Accordingly, click2learn's future results could be adversely impacted by
changes in these or other factors.

     Click2learn's exposure to foreign exchange rate fluctuations arises in
part from intercompany accounts in which costs incurred in the United States
are charged to the click2learn's foreign subsidiaries. These intercompany
accounts are typically denominated in the functional currency of the foreign
subsidiary in order to centralize foreign exchange risk with the parent
company in the United States. Click2learn is also exposed to foreign exchange
rate fluctuations as the financial results of foreign subsidiaries are
translated in U.S. dollars in consolidation. As exchanges rates vary, these
results, when translated, may vary from expectations and adversely impact
overall expected profitability. The effect of foreign exchange rate
fluctuations on click2learn for the three and six months ended June 30, 2000
was not material.

                                      17


<PAGE>

PART II--OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         Not applicable.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

         Not applicable.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         Not applicable.

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

         The 2000 Annual Meeting of the Stockholders of click2learn was held on
May 25, 2000 at 110 - 110th Avenue NE, Bellevue, Washington. The meeting was
held pursuant to a Notice of Annual Meeting of Stockholders mailed to the
stockholders on May 3, 2000. Three proposals were submitted to the stockholders
and approved at the annual meeting, as follows:

         PROPOSAL 1: Election of Kevin Oakes, Ronald S. Posner and Shelley
Harrison as Class II directors to serve until the annual meeting of the
stockholders to be held in 2003, and the election of Jonathan Klein as a Class I
director to serve until the annual meeting of the stockholders to be held in
2002. The number of votes cast for or withheld from each nominee, both in person
and by proxy, was as follows:

<TABLE>
<CAPTION>
                           KEVIN OAKES     RONALD S. POSNER     SHELLEY HARRISON     JONATHAN D. KLEIN
                           -----------     ----------------     ----------------     -----------------
<S>                        <C>             <C>                  <C>                  <C>
Votes For                   14,655,536         14,648,418          14,647,219            14,655,100
Votes Withheld                 312,699            319,817             321,016               313,135
</TABLE>

     The following table sets forth the name of each director elected at the
meeting, and the name of each other director whose term of office as a
director continued after the meeting

<TABLE>
<CAPTION>
                                                                   TERM
                             DIRECTOR NAME                        EXPIRES
                             -------------                        -------
                             <S>                                  <C>
                             DIRECTORS ELECTED:
                             Kevin Oakes                           2003
                             Shelley Harrison, Ph.D.               2003
                             Ronald S. Posner                      2003
                             Jonathan D. Klein                     2002

                             CONTINUING DIRECTORS:
                             Bert Kolde                            2001
                             James A. Billmaier                    2001
                             Sally Narodick                        2002
                             Joseph DiNucci                        2002
</TABLE>

     PROPOSAL 2: An amendment of click2learn's 1998 Equity Incentive Plan to
increase the number of shares of common stock reserved for issuance thereunder
from 2,500,000 shares to 4,000,000 shares. The number of votes cast for, cast
against or abstaining from Proposal 2, both in person and by proxy, and broker
non-votes was as follows:

<TABLE>
                             <S>                                 <C>
                             Votes For                           8,700,086
                             Votes Against                       2,193,159
                             Abstaining                             22,076
                             Broker Non-votes                    4,052,914
</TABLE>

                                       18
<PAGE>

     PROPOSAL 3: Ratification of the appointment of KPMG LLP as click2learn's
independent accountants to perform the audit of Click2learn's financial
statements for 2000. The number of votes cast for, cast against or abstaining
from Proposal 3, both in person and by proxy, was as follows:

<TABLE>
                             <S>                                <C>
                             Votes For                          14,951,368
                             Votes Against                           7,294
                             Abstaining                              9,573
</TABLE>

ITEM 5.  OTHER INFORMATION.

         Not applicable.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)  Exhibits.

              27  Financial Data Schedule

         (b)  Reports on Form 8-K.

     A report on Form 8-K was filed on June 22, 2000 reporting that click2learn
had changed its name from Asymetrix Learning Systems, Inc. to click2learn.com,
inc. and had changed its ticker symbol from ASYM to CLKS. No financial
statements were filed with the Form 8-K.


                                  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.


                                  CLICK2LEARN.COM, INC.


  August 14, 2000                            /s/ John D. Atherly
--------------------              ---------------------------------------------
       Date                                    John D. Atherly
                                  Vice President, Finance and Administration
                                            and Chief Financial Officer
                                  (Duly Authorized Officer and Chief Accounting
                                                   Officer)


                                     19


<PAGE>

                                EXHIBIT INDEX

         27       Financial Data Schedule


                                      20