##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





Form 10-K


FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
SECTIONS 13 OR 15(d)


OF THE SECURITIES EXCHANGE ACT OF 1934


|                         |  |                                                                                             
|------------------------ |  | --------------------------------------------------------------------------------------------
|(Mark One)               |  |                                                                                             
|þ                        |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934    
|                        
|                         |  | For the fiscal year ended January 31, 2005                                                  
|                        
|o                        |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
|                        
|                         |  | For the transition period
    from           to                                             
|                        
|Commission file: 0-25674

SkillSoft Public Limited Company


(Exact name of registrant as specified in its charter)


|                                                                                             |  |                                             
|-------------------------------------------------------------------------------------------- |  | --------------------------------------------
|Republic of Ireland(State or other jurisdiction of
    incorporation or organization)        |  | None(I.R.S. Employer
    Identification No.)
|                                                                                            
|107 Northeastern Boulevard
    Nashua, New Hampshire(Address of principal executive offices) |  | 03062(Zip Code)                             

Registrants telephone number, including area code:


(603) 324-3000


Securities registered pursuant to section 12(b) of the
Act: None


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


(Title of Class)


Ordinary Shares,
0.11


Subscription Rights


þ o


o


þ o






DOCUMENTS INCORPORATED BY REFERENCE












---










SKILLSOFT PUBLIC LIMITED COMPANY


FORM 10-K


TABLE OF CONTENTS


|                                                                         |  |                                                                                                                   |    |      |    | 
|------------------------------------------------------------------------ |  | ----------------------------------------------------------------------------------------------------------------- | -- | ---- | -- | 
|                                                                         |  |                                                                                                                   |    | Page |   
|                                                                         |  |                                                                                                                   |    |      |   
|PART I                                                                  
|Item 1.                                                                  |  | Business                                                                                                          |    |      | 2  | 
|Item 2.                                                                  |  | Properties                                                                                                        |    |      | 19 | 
|Item 3.                                                                  |  | Legal Proceedings                                                                                                 |    |      | 19 | 
|Item 4.                                                                  |  | Submission of Matters to a Vote of Security Holders                                                               |    |      | 20 | 
|                                                                        
|PART II                                                                 
|Item 5.                                                                  |  | Market for Registrants Common, Equity, Related Stockholder
    Matters and Issuer Purchases of Equity Securities |    |      | 22 | 
|Item 6.                                                                  |  | Selected Financial Data                                                                                           |    |      | 23 | 
|Item 7.                                                                  |  | Managements Discussion and Analysis of Financial Condition
    and Results of Operations                         |    |      | 23 | 
|Item 7A.                                                                 |  | Quantitative and Qualitative Disclosures About Market Risk                                                        |    |      | 49 | 
|Item 8.                                                                  |  | Financial Statements and Supplementary Data                                                                       |    |      | 49 | 
|Item 9.                                                                  |  | Changes in and Disagreements with Accountants on Accounting and
    Financial Disclosure                          |    |      | 49 | 
|Item 9A.                                                                 |  | Control and Procedures                                                                                            |    |      | 49 | 
|Item 9B.                                                                 |  | Other Information                                                                                                 |    |      | 51 | 
|                                                                        
|PART III                                                                
|Item 10.                                                                 |  | Directors and Executive Officers of the Registrant                                                                |    |      | 51 | 
|Item 11.                                                                 |  | Executive Compensation                                                                                            |    |      | 54 | 
|Item 12.                                                                 |  | Security Ownership of Certain Beneficial Owners and Management
    and Related Stockholder Matters                |    |      | 58 | 
|Item 13.                                                                 |  | Certain Relationships and Related Transactions                                                                    |    |      | 62 | 
|Item 14.                                                                 |  | Principal Accountant Fees and Services                                                                            |    |      | 62 | 
|                                                                        
|PART IV                                                                 
|Item 15.                                                                 |  | Exhibits and Financial Statement Schedules                                                                        |    |      | 63 | 
|Signatures                                                               |  |                                                                                                                   | 64 |     
|Ex-10.28 Summary of Director Compensation                               
|Ex-10.34 Summary of Fiscal 2006 Executive Incentive Compensation Program
|Ex-21.1 Subsidiaries                                                    
|Ex-23.1 Consent of Ernst & Young LLP                                    
|Ex-31.1 Certification of CEO                                            
|Ex-31.2 Certification of CFO                                            
|Ex-32.1 Certification of CEO pursuant to Section 906                    
|Ex-32.2 Certification of CFO pursuant to Section 906                    



1



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##### Table of Contents






PART I











|        |         
|------- | --------
|Item 1. | Business

General


tm tm tm tm tm tm tm tm tm tm






2



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##### Table of Contents







| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | SkillChoice Multi-Modal Learning Solutions: These
    integrated solutions provide a rich array of resources
    (including courseware, Referenceware, online mentoring, test
    preparation exams, SkillSimulations (SkillSims) and Blended
    Learning Toolkits) to support formal training and informal
    performance support needs. Available as four offerings
    (Complete, IT, Business and Desktop), SkillChoice Solutions
    provide the necessary depth, breadth, quality and currency to
    encompass a wide range of corporate learning objectives.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| | SkillPort: SkillPort, our learning management platform,
    provides a reliable, flexible and cost-effective way for
    organizations to deploy and manage their e-learning programs.
    Using SkillPort, customers can leverage the benefits of the
    multi-modal learning approach and deploy complex solutions
    rapidly, on a global basis. With Search-and-Learn, employees
    view all e-learning assets on the system with a single, unified
    search. SkillPort is available as a hosted solution, supporting
    the growing demand for reliable, scalable and secure e-learning
    with a low-cost, low IT-burden model. Alternatively, customers
    may choose to deploy SkillPort on their own intranet
    infrastructure. Recently introduced add-on modules for our
    Instructor-Led Training (ILT) Management and Credentialing
    extend SkillPorts capability in supporting complex,
    blended learning programs. We have also announced plans for an
    Advanced Reporting Module to support large installations and
    more sophisticated metrics.
|
| | SkillSoft Dialogue: SkillSoft Dialogue is a virtual
    classroom platform that has been designed for the rapid creation
    and delivery of effective live and on-demand learning sessions.
    SkillSoft Dialogue will provide customers access to an online
    repository of hundreds of thousands of pages of SkillSoft
    learning content. This content can be used to enrich the live
    and on-demand learning sessions created in the tool. These
    sessions can also be launched and tracked from SkillPort and
    other standards-based LMS platforms. SkillSoft Dialogue is
    another example of SkillSoft leveraging its strong heritage of
    content development and learning technology to bring a new form
    of value to the market that directly addresses an unmet need of
    todays leading learning organizations.                                                                                                                                                                                                                                     
|
| | Business Skills Collection: This includes more than 2,300
    courseware titles and simulations encompassing professional
    effectiveness, management/leadership, project management, sales
    and customer-facing skills, business strategy/operations,
    finance, human resources, safety/health and financial services.
    Our courses feature strong visual design; a focus on
    instructional objectives at the application and analysis levels;
    learner interactivity; reinforcement through RolePlays,
    SkillSims and case studies; and transfer of learning into
    practice through online Job Aids, Follow-On Activities, Blended
    Learning Toolkits and SkillBriefs.                                                                                                                                                                                                                                                                                                                                                                                       
|
| | IT Skills and Certification Collection: This includes
    more than 2,400 courseware titles encompassing software
    development, operating systems and server technologies, Internet
    and network technologies, enterprise database systems, Web
    design, and desktop computer skills. Our IT skills collection
    also supports more than 100 current industry certification
    exams. The IT courses also feature strong visual design,
    interactivity, and reinforcement of learning transfer via
    frequent practice questions, simulations and mentored and
    self-assessed exercises.                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| | Online Mentoring: This service is offered for over 80
    current certification exams for IT professionals, end user
    technologies and project management skills. Our approximately 50
    on-staff mentors, averaging over 20 current certifications each,
    are available 24 hours a day, 7 days a week. Through
    online chats and e-mail, learners can ask questions, receive
    clarification, and request additional information to help them
    get the answers and understanding they need.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| | Books24x7 Referenceware: This includes more than 7,600
    unabridged IT and business books and reports from more than 100
    publishers that are available to online subscribers through our
    subsidiary, Books24x7. Exclusive assets such as
    Referencepointstm,
    White Papers from SkillSoft Press and Instant Code Books fill
    gaps not covered by traditional book publishers. A unique,
    patent-pending search engine                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | gives subscribers the ability to perform multi-level searches to
    pinpoint information needed for on-the-job performance support
    and problem-solving.                                                                                                                                                                                                                                                                          
|
| | Executive Content: Books24x7 executive level offerings
    give busy executives the information they value in a form that
    fits their busy schedules.
    ExecSummariestm
    offers concise, 8-page summaries of todays best-selling
    business books. Launched in March 2005,
    ExecBlueprintstm
    provides near-term actionable business plans written by leading
    C-level executives from prominent global companies.





Industry Background






| |   |                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the evolution of our economy to a service-based and
    knowledge-based economy, in which the skills of the workforce
    often represent the most important corporate assets;
|
| |  | the increasing recognition by businesses that it is imperative
    to continually improve the skills of their employees in order to
    remain competitive;                   
|
| |  | the rapidly evolving business environment, which necessitates
    continual training and education of the employee base; and                                                  
|
| |  | the increased competition in todays economy for skilled
    employees and the recognition that effective training can be
    used to recruit and retain employees.           





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Content Products








| |                                           
| | ------------------------------------------
| | Business Skills Courseware and Simulations



|                               |  |                               
|------------------------------ |  | ------------------------------
|Professional Effectiveness     |  | Business Strategy & Operations
|Management & Leadership        |  | Safety & Health               
|Project Effectiveness          |  | Workplace Compliance          
|Sales & Customer-Facing Skills |  | Financial Services Industry   
|Finance, HR & Administration   |  |                               





| |                     
| | --------------------
| | IT Skills Courseware



|                                |  |                                        
|------------------------------- |  | ---------------------------------------
|Software Development            |  | Operating Systems & Server Technologies
|Internet & Network Technologies |  | Enterprise Database Systems            
|Web Design                      |  | Desktop Computer Skills                

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|                         |  |                        |  |                              |  |                            
|------------------------ |  | ---------------------- |  | ---------------------------- |  | ---------------------------
|Microsoft                |  | CompTIA                |  | Cisco                        |  | Oracle                     
|MOS                      |  | A+                     |  | CCNA                         |  | OCA 9i                     
|MCP                      |  | Net+                   |  | CCDA                         |  | OCP 9i                     
|MCSA 2000                |  | INet+                  |  | CCNP                         |  | OCA 10g                    
|MCSE 2000                |  | Server+                |  | CCDP                         |  | OCP 10g                    
|MCSD .NET                |  | Linux+                 |  | CCSP                         |  |                            
|MCDBA                    |  |                        |  |                              |  |                            
|MCSA 2003                |  |                        |  |                              |  |                            
|MCSE 2003                |  |                        |  |                              |  |                            
|Macromedia               |  |                        |  | Security                     |  | CIW                        
|Coldfusion MX Developer  |  |                        |  | Sans Geac                    |  | CIW Associate              
|Dreamweaver MX Developer |  |                        |  | CompTIA Security+            |  | Master Enterprise Developer
|Flash MX Developer       |  |                        |  | CISSP
    (ISC2)             |  | CIW Site Designer          
|                         |  |                        |  | SSCP
    (ISC2)              |  |                            
|                         |  |                        |  | ISSEP
    (ISC2)             |  |                            
|                         |  |                        |  | CCSA (CheckPoint)            |  |                            
|ECDL                     |  | Project Mgmt Institute |  | Linux Professional Institute |  |                            
|ECDL V4                  |  | PMP                    |  | LPI: Level 1                 |  |                            
|ICDL V4                  |  |                        |  |                              |  |                            
|ECDL v3                  |  |                        |  |                              |  |                            
|ICDL v4                  |  |                        |  |                              |  |                            





| |          
| | ---------
| | Books24x7





| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ITPRO COLLECTION is geared toward technology professionals
    including developers, network administrators, technology
    executives, information services managers and technical support
    representatives. This collection consists of content from dozens
    of IT publishers including industry leaders such as Apress,
    Microsoft Press, MIT Press, Osborne/ McGraw-Hill, Sybex and John
    Wiley & Sons.                                                                                               
|
| | BUSINESSPRO COLLECTION is geared toward professionals whose role
    requires exercising strong business judgment. This collection
    contains over 30 business skills and professional development
    publishers including industry leaders such as AMACOM, ASTD,
    Berrett-Koehler, Harvard Business School Press, Jossey-Bass,
    Oxford University Press and John Wiley & Sons.                                                                                                                              
|
| | OFFICEESSENTIALS COLLECTION is a specialty collection geared
    toward non-technical users who require occasional real-time
    assistance with common office applications. This collection
    contains award winning content, including the for
    Dummies series, is written in a comfortable,
    easy-to-understand tone and can be deployed to desktops to
    relieve Help Desk congestion, or provided as an end-user
    safety-net during migration to applications such as
    Microsoft Office 2003.

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | FINANCEPRO COLLECTION offers professionals access to relevant
    information on a variety of financial and accounting topics.
    FinancePro delivers fully searchable, online content from
    popular publishers such as AMACOM, John Wiley & Sons,
    McGraw-Hill and Oxford University Press, and is an essential
    tool for anyone needing immediate access to financial reference
    materials including such topics as Generally Accepted Accounting
    Principals (GAAP), International Accounting Standards,
    operations management, planning and taxation.     
|
| | ENGINEERINGPRO COLLECTION is a professional information tool
    containing reference material covering a wide range of
    engineering disciplines, and general reference topics important
    to virtually all engineering professionals. This collection
    features books from publishers such as
    John Wiley & Sons, McGraw-Hill, The Institution of
    Electrical Engineers, EngineeringPress, Industrial Press, Noble
    Publishing, Artech House, Cambridge University Press, The MIT
    Press and others.                                                         
|
| | EXECSUMMARIES COLLECTION provides summaries of leading business
    books from todays foremost business authors. ExecSummaries
    expertly encapsulates the salient points and ideas of
    full-length books into concise, 8-page summaries. Unlike
    excerpts or reviews, designed for ease-of-use with short
    passages, bulleted lists, and other useful elements, these
    thorough, yet high-level overviews provide time-constrained
    executives with the leading ideas that are shaping todays
    business environment.                                       
|
| | EXECBLUEPRINTS COLLECTION provides executives with
    easy-to-absorb, practical information and best practices to help
    provide them with a framework for taking near-term action on
    pressing business issues. Authored by top C-level business
    executives who are regarded as leaders and innovators in their
    fields, these reports are designed to succinctly convey key
    issues, metrics, lessons learned, milestones, timelines and
    action plans required for successful execution.                                                                    
|
| | GOVESSENTIALS COLLECTION is an extensive reference tool targeted
    to meet the information needs of government workers, contractors
    and consultants. By combining the full text of
    government-focused books from major publishers with carefully
    selected public domain content, GovEssentials offers a variety
    of ready-access titles in a broad range of subjects such as
    Foundations of Government, Security & Homeland Defense,
    Acquisition & Contracting, E-Gov & Information
    Technology, and other topics of importance to government workers.



| |               
| | --------------
| | Express Guides





| |                     
| | --------------------
| | Compliance Solutions





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| |                                         
| | ----------------------------------------
| | The SkillSoft Instructional Design Model









| |   |                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | learning outcomes specified by performance goals and objectives;                                                                                           
|
| |  | content and learning activities based on specified objectives;                                                                                             
|
| |  | assessment based on the knowledge and skills specified in the
    objectives;                                                                              
|
| |  | options to take assessments in either pre- or post-test mode;                                                                                              
|
| |  | instructional strategies and multimedia elements tailored to the
    specific course content;                                                              
|
| |  | tools to promote the transfer of learning into the workplace,
    such as online Job Aids and Follow-On Activities;                                        
|
| |  | instructional strategies appropriate for the content and
    learning level, such as examples, behavior modeling, guided
    practice, and simulations; and
|
| |  | levels of learning appropriate for the content and the target
    audience.                                                                                





| |   |                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------
| |  | a friendly, intuitive graphical user interface;                                                                                       
|
| |  | a course structure and navigation that supports self-paced,
    user-controlled instruction;                                          
|
| |  | unlimited access to instruction and assessments;                                                                                      
|
| |  | a standardized templates to create unified and predictable
    functionality;                                                         
|
| |  | a variety of presentation, practice, and assessment templates
    supporting high levels of user interactivity and
    engagement; and
|
| |  | a standardized, yet flexible, flow of instruction.                                                                                    





| |                                    
| | -----------------------------------
| | Learning Design for Business Skills



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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ROLEPLAY EXERCISES  RolePlay exercises present users
    with opportunities for realistic practice of varying aspects of
    course content within everyday workplace scenarios. RolePlay
    exercises have multiple possible outcomes based on users
    responses to the simulations interactions. When integrated
    into course topics, RolePlay exercises allow users to freely
    explore the impact of handling realistic work situations in
    different ways. SkillSofts RolePlay design allows users to
    experience the exercise in score mode or
    explore mode. Using score mode lets learners assess
    their level of skill within the targeted content area. Using
    explore mode allows the learner to dynamically explore
    alternative responses to see the impact of those choices. This
    user-driven exploration is the key to real learning. People
    learn as much, or more, from their mistakes as from the things
    they do correctly. RolePlay brings this principle home to
    e-learning. With over 1,400 RolePlay simulations integrated into
    our courseware library, we are an industry leader in delivering
    simulation-enriched e-learning solutions.
|
| | AUDIO-ENABLED LEARNING  Our business skills
    instruction is audio-enabled. This feature can easily be turned
    on or off based on user preference and greatly enhances
    engagement and retention for many users. Audio can be especially
    key to the instructional effectiveness of behavior modeling,
    RolePlay exercises and SkillSims.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| | SIMULATED DIALOGS  The ability to observe behaviors
    and their outcomes (positive and negative) is a key strategy for
    teaching professional and behavioral skills. The simulated
    dialog strategy gives users an opportunity to observe and listen
    to the conversations of two or more people. The inclusion of
    character audio enhances the emotional and tonal
    qualities of the conversation, while the varying facial
    expressions and body language offer another layer of
    interpretation. These features, combined with the spoken words
    of the characters, provide realistic vignettes or scenarios in
    which varying aspects of a behavioral skill can be presented.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| | CASE STUDIES  A case study strategy describes a
    complex situation, often in the form of a story or scenario, and
    then asks the user to explore its characteristics and possible
    resolutions. Complexity is the primary difference between case
    studies and examples that can be easily presented and practiced
    through other types of strategies, such as multiple choice and
    matching. Case studies are used to achieve learning at the
    application and analysis levels and to present examples of
    content within appropriate business contexts.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| | ANIMATIONS  Animations are an important element of
    our leading visual design. We use animations when movement is an
    important part of the teaching point, when the content requires
    that the users eye be drawn to a specific area of the
    screen or when a key concept can be best presented via animated
    visuals. Examples of content areas where animations can enhance
    learning effectiveness include instruction on process and
    dataflow diagrams, hierarchical and dependency relationships and
    changes in state or perspective.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| | ONLINE JOB AIDS  All of our business skills courses
    include online Job Aids that help support the use of newly
    learned skills and knowledge in the workplace. Job Aids are
    courseware take-aways that can be used as-is, or
    tailored to meet a users needs. Each Job Aid can easily be
    edited to reflect a users organization-specific
    information, and users can add organization-specific Job Aids
    that they have independently developed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| | LEARNING AIDS  Learning aids are tools or documents
    used in support of course content presentation and practice.
    They are designed to support specific course context or content,
    and, therefore, are not available for use outside of the course.
    Learning aids could appear as worksheets (interactive or
    passive), reference documents too large to include in a standard
    template, complex charts or graphs or a variety of other
    formats. Only the content and the chosen instructional
    strategies limit the variations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | SKILLBRIEFS  SkillBriefs are one- to two- page
    text-based HTML documents that summarize the content in each
    topic of a course. SkillBriefs are now available as part of
    course content, as well as through SkillPort. SkillBriefs can be
    used to quickly refresh a learners memory of
    key teaching points, as instant, just-in-time
    non-interactive learning when time doesnt allow for more
    typical instruction and/or as valuable take-aways from a course
    to support transfer of learning into the workplace. There are
    currently SkillBriefs for over 5,500 topics.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| | PRE- AND POST-TESTING ASSESSMENTS  Assessments are
    available for use in both pre-and post-testing modes. When
    Assessments are used in pre-test mode, learners can use the
    results to tailor their initial path of instruction based on
    those results. Post-test Assessments can be used to help
    learners identify areas where review or remediation is necessary.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| | SKILLSIMS BUSINESS SKILLS SIMULATIONS  SkillSims are
    instructional resources that extend the learning advantages of
    RolePlay into larger, more complex e-learning experiences.
    SkillSims are designed to give users an opportunity to practice
    new skills in realistic work situations. Each SkillSims
    simulation, typically 20-to-40 minutes in duration, provides
    users with an opportunity to practice application level skills
    based on content drawn from multiple courses within one of our
    learning paths or series (a collection of related courses).
    Users practice these skills by navigating through different
    scenarios in which they encounter a variety of business
    problems. As in real life, users have the opportunity to select
    different courses of action, and the scenario unfolds according
    to the users choice of actions. Events such as telephone
    calls, meetings and interruptions add to the reality of each
    scenario.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| | SkillSims, with integrated links to their corresponding
    SkillSoft course series, provide a powerful learning experience
    that allows the user to immediately apply newly gained knowledge
    to challenging business situations in risk-free environments.
    This results in engaging learning experiences and real skill
    transfer.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| | BLENDED LEARNING TOOLKITS  Like SkillSims, the
    Blended Learning Toolkits are based on content drawn from
    multiple courses within a single learning path or series.
    However, this product is designed to provide our customers with
    tools for blending and/or transferring e-learning into the
    workplace as well as the classroom. Each Blended Learning
    Toolkit consists of multiple layers of content including a Users
    Guide, approximately 18 to 20 activities or tools, PowerPoint
    presentations that summarize the key teaching points from each
    lesson in all the courses within the learning path and short
    text-based summaries (SkillBriefs) of all the topic content.
    Blended Learning Toolkits are delivered electronically and can
    be used as is or customized to meet individual
    customer requirements. Customers have the freedom to
    blend the tools into traditional classroom settings,
    instructional events delivered via collaborative learning
    platforms, or to hand them over to managers, supervisors,
    facilitators, and anyone else interested in transferring
    learning into the workplace. The Blended Learning Toolkit
    provides multi-layered content with many options for use and
    implementation. It is adaptable and flexible to support a
    variety of audiences, content areas, and implementation
    environments and platforms. The goal of the Blended Learning
    Toolkit is to effectively reinforce the application of knowledge
    and skills from our courses. Most of all, it provides our
    customers with another opportunity to enhance and leverage their
    investment in e-learning.



| |                              
| | -----------------------------
| | Learning Design for IT Skills



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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | TEXT AND GRAPHICS  Our IT skills courses use a
    variety of text and graphic-based strategies to present and
    explain software features and functions. Interactive text and
    graphics are particularly useful to explain buttons, menu items,
    coding or tagging parameters, and syntax. This strategy is also
    an effective method to break down complex concepts into smaller,
    graphically represented parts, or to separate lines of code into
    smaller sections. Clicking or selecting graphically portrayed
    parts produces additional information or explanation
    about that specific part. All these features allow learners to
    review information as often as they want and to ignore something
    if they choose to.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| | DEMONSTRATIONS AND GUIDED PRACTICE  Demos
    in our IT skills courses are demonstrations of software
    procedures and tasks. Most typically, the demonstration will
    divide the procedure or task into specific steps and then
    sequentially show those steps to the user. As the
    demo moves from one step to the next, a simulated representation
    of the software shows what happens next and additional text
    provides commentary. In addition, learners are frequently given
    the option of performing the salient steps of the procedure.
    This feature, called a Try-It, prompts the user to
    perform specific steps, or enter code that achieves a specified
    end result. If learners decide not to perform the step, they can
    click forward, which launches an animated sequence of the
    correct step. A special animation feature, called a Show
    Me, is used to demonstrate a specific sequence step or
    user action. The steps are outlined in advance, and then the
    learner is given the option of reviewing those steps in an
    animated sequence. The automated playback of the demo is
    optional  the learner can opt to view the demo or
    continue to the next section of instruction.
|
| | PROMPTED ANIMATIONS  Animations help the learner
    visualize content  to draw his or her attention to an
    area on an interface or conceptual graphic. Prompted animations
    are initiated by the learner after some other introduction to
    the content in the instruction. When the animation is launched,
    it extends or reinforces the instruction that has already taken
    place. The use of prompted versus autoplay animation
    helps avoid split attention, which can occur when text displays
    simultaneously with animation. Split attention means a learner
    is confused about where to focus or watch, and confounds
    learning.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| | INTERACTIVE EXERCISES  There are many types of
    interactive practice questions and exercises used in our IT
    skills courses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | SkillChecksare a key practice strategy in GUI-based
    content where it is important for the learner to be able to
    use the software application. SkillChecks present
    learners with a task to perform on a simulated interface. If a
    learner performs all the required steps in the task correctly,
    the interface responds as it would in the real application. If
    learners decide not to perform the question, they can click
    forward or click a Show-me button, both of which
    launch an animated sequence of the correct step.
|
| | User-input questionsenable learners to complete a
    statement or segment of code by typing the answer into a blank
    area in the code or statement.                                                                                                                                                                                                                                                                                                                                                                                                         
|
| | Multiple-choice, matching, and ranking questionsare used
    to reinforce newly learned skills and knowledge within an
    instructional topic, and to practice or assess the huge body of
    conceptual information related to a complete understanding and
    implementation of many IT subject areas. Learners are
    debriefed on their performance on these questions
    via detailed feedback for every answer choice, regardless of
    whether they got the question right or wrong.                                                              



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ONLINE MENTORING  Is available for over 80 current
    certification exams for IT professionals, end user technologies
    and project management skills. We have approximately 50 on-staff
    mentors, averaging over 20 certifications apiece, that are
    available 24 hours a day, 7 days a week. Through
    on-line chats and e-mail, learners can ask questions, receive
    clarification, and request additional information to help them
    get the answers and understanding they need.

11



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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | TESTPREP CERTIFICATION PRACTICE EXAMS  Addressing
    over 45 of the most popular current certification exams from
    Microsoft, Cisco, Oracle and CompTIA, TestPrep practice exams
    allow learners to test their knowledge in a simulated
    certification-testing environment. Tests can be taken in two
    modes   study and certification. The un-timed study
    mode is designed to maximize learning by providing feedback and
    mapping back to appropriate SkillSoft courses for further study,
    while the against-the-clock certification mode is designed to
    mimic a certification exam.
|
| | SIMULATIONS AND EXERCISES  Our IT skills courses
    contain standalone topics that give learners the opportunity to
    independently practice or consolidate the most critical
    procedures and learning taught in the preceding instruction.
    There are four types of simulations, each focused on developing
    different skills:                                                                                                                                                                                                                                                                        



| |   |                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Software exercises, which consist of a series of tasks
    that learners perform in a simulated version of the application
    being discussed in the course.
|
| |  | Coding exercises, which give learners the opportunity to
    analyze and write code or commands.                                                             
|
| |  | Hardware exercises, which simulate hardware setup
    problems.                                                                                              
|
| |  | Case-Study exercises, which consist of an interactive
    review of concepts and information, presented in a
    real-world scenario.                      







| |                                                 
| | ------------------------------------------------
| | Web-Based Architecture and Deployment Technology





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Learning Management Platformsare a key enabling
    technology that permit users to access a wide variety of
    e-learning resources over the Web, including courseware,
    simulations, Referenceware, Online Mentoring, SkillBriefs, Job
    Aids and TestPrep Certification Practice Exams. Our SkillPort
    Learning Management System provides a rich feature set to
    support a range of corporate learning needs with a high degree
    of reliability and scalability. Available as a hosted or
    intranet solution, SkillPort offers our customers a low-cost,
    low IT-burden option with fast time-to-learning.
    Over the course of fiscal 2005, we migrated over 95 percent
    of our customers using the MySmartForce platform and other
    SkillSoft platforms. Many of these customers chose SkillPort as
    their LMS, and today there are over 1,200 SkillPort
    installations. In addition to our own platform, we continue to
    strive for convenient, easy integration of our content into
    third-party learning management systems through ongoing support
    of industry standards and initiatives such as our Strategic
    Alliance for Integrated Learning (SAIL). In fiscal 2005, we
    announced our Integration Lab, which tests SkillSoft content for
    interoperability on third party platforms before it is released.
|
| |  | SkillPort Search-and-Learntechnology, a key component of
    SkillPort, allows the users to search and access learning
    resources topically with a single, unified search. For example,
    a learner searching for resources on Cisco networks can discover
    the various SkillSoft courses, books, TestPreps, Express Guides
    and online mentoring services available to the learner with a
    single search query. From the                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

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| |   |                                                                                                                                                                                                                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | identified results, the learner can then choose the resource
    that best meets his or her specific needs, time requirements and
    learning preferences. In fiscal 2005, SkillSoft extended the
    benefits of Search-and-Learn to users of third party platforms
    with the addition of Search-and-Learn Connect, a technology
    integration initiative.
|
| |  | SkillPort Add-On Moduleswere announced in fiscal 2005 to
    expand the scope of blended learning capabilities supported by
    SkillPort and to allow customers to introduce new content types
    as an integrated part of their SkillPort learning programs. The
    four SkillPort add-on modules are:                                                       



| |   |                                   
| | - | ----------------------------------
| |  | Credentialing Module              
|
| |  | Instructor-Led Training Module    
|
| |  | Advanced Report Module            
|
| |  | Customer Content Publishing Module



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | SkillPort Customer Content Supportallows customers to
    track, manage and search custom courses created by
    SkillSofts authoring tools, as well as Microsoft Word,
    PowerPoint and Excel and Adobe PDF documents. This gives
    organizations the ability to incorporate important information
    resources such as white papers, launch plans, budget templates,
    and customized training within a comprehensive learning
    database. SkillPort also supports off-the-shelf and custom
    courseware from third-party providers, as long as the content is
    designed according to open standards and meets SkillSofts
    custom content support guidelines.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  | SkillSoft Dialoguehas been developed in response to our
    customers need to rapidly create and deliver new content
    that ties to the organization and its goals. Many customers have
    added a virtual meeting component to their learning programs to
    deliver company-specific information. They have discovered that
    online meeting tools can be used to quickly create new materials
    and are using these tools to deliver information live, as well
    as recording their presentations for employees to play back
    on-demand. However, they have also encountered some common
    challenges. Most online meeting tools do little to support
    subject matter experts (SMEs) who may not be experienced in how
    to deliver sessions that are rich in interaction, which can
    result in sessions that generate a lower level of engagement and
    knowledge transfer. Additionally, editing these recordings is
    often cumbersome or impossible. SkillSoft Dialogue builds upon
    the foundation of this online meeting technology and adapts it
    to better fit the needs of the learning community. The product
    will aid SMEs in creating more interactive presentations, and
    provide access to SkillSoft content to enrich presentations.
|
| |  | Customization and Authoring Toolsallow customers to
    fine-tune SkillSoft content to be a better fit with their
    business. At the most basic level, we help customers create and
    manage blended learning programs that combine internally created
    documents and our resources on SkillPort or third-party LMS
    platforms. Using SkillSofts Course Customization Toolkit
    (CCT), customers can edit text, graphics and audio of all
    business skills and compliance courses, as well mixing and
    matching topics and lessons, to tailor our courseware to their
    needs. Finally, our Custom Solutions Services Group is available
    to assist customers who wish to develop completely custom
    courses from scratch in an outsourced model.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | Assistive Technology Supportis designed to address the
    requirements of Section 508 of the Rehabilitation Act
    Amendments of 1998, which provides that as of June, 2001
    computer software applications purchased or developed by federal
    agencies must be designed for accessibility by people who are
    blind, deaf or have poor motor skills. We have aggressively
    worked to adapt our online IT and business skills courseware to
    meet the requirements established by Section 508. This
    development work is consistent with our general corporate
    philosophy to help organizations democratize
    training and give all employees access to training and
    development opportunities anywhere, anytime through computers.
    Our North American English IT and business skills courseware now
    provides any user in a government or commercial organization
    with sight, hearing and/or mobility limitations, equal access to
    our courses through the use of assistive technologies such as
    screen readers.                                                                                                                                                                                                                            

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| |                
| | ---------------
| | Product Pricing







Sales and Marketing






| |   |                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------
| |  | a direct field sales force for larger accounts; and                                                  
|
| |  | resellers that address certain opportunities in the United
    States and some international markets.









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| |   |                                                                                               
| | - | ----------------------------------------------------------------------------------------------
| |  | customer advisory forums and user group events;                                               
|
| |  | product and strategy updates with industry analysts;                                          
|
| |  | public relations activities resulting in articles in trade press
    and speaking engagements;
|
| |  | print advertising in trade publications;                                                      
|
| |  | printed promotional materials;                                                                
|
| |  | promotional materials and events on our Web sites; and                                        
|
| |  | events, seminars and trade shows.                                                             



Customer Service and Support




Installation support


Account consulting


Customer support.


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Competition






| |   |                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The expected growth of this market.                                                                                                                                                 
|
| |  | Our course content providers are often not prohibited from
    developing courses on similar topics for other companies,
    provided that they do not use our toolkit or templates.
|
| |  | The fragmented nature of the competitive landscape, including
    many small competitors in the technology-based segment of the
    market.                                         





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Providers of traditional classroom instruction. Many of the
    companies in this category are attempting to adapt their courses
    to e-learning formats suitable for access via Web browsers and,
    in general, compete for the same training dollars in the
    customers budget.                                                                                                                                                              
|
| |  | Providers of CD-ROM training courses.                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | Suppliers of online corporate education and training courses,
    including Thomson Learning (through subsidiaries such as NETg
    and Course Technologies), ElementK and MindLeaders. Our
    Books24x7 business competes with companies such as Safari, a
    joint venture between Pearson Technology Group and
    OReilly & Associates, which offers aggregated
    content primarily restricted to its own titles on a subscription
    basis.
|
| |  | With our entrance into the virtual classroom market, we will be
    competing with companies such as WebEx, Centra and Interwise.                                                                                                                                                                                                                                                                                                                     





| |   |                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------
| |  | the breadth, depth, currency and instructional design quality of
    the course content;                
|
| |  | informal performance support and other features of the training
    solution;                           
|
| |  | adaptability, flexibility, reliability, scalability and
    performance of technology platforms offered;
|
| |  | standards compliance and ease-of-integration with third party
    systems;                              
|
| |  | the deployment options offered to customers, such as hosted,
    intranet and low bandwidth access;     
|
| |  | customer service and support;                                                                           
|
| |  | price/value relationship;                                                                               
|
| |  | relationships with the customer; and                                                                    
|
| |  | corporate reputation.                                                                                   



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Product Development




















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Proprietary Rights










Employees






18



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|        |           
|------- | ----------
|Item 2. | Properties




















|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings

SEC Investigation




19



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Lawsuits











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



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Executive Officers of SkillSoft




|                    |  |     |    |  |          |                                                                              
|------------------- |  | --- | -- |  | -------- | -----------------------------------------------------------------------------
|Name                |  | Age |    |  | Position
|                    |  |     |    |  |         
|Charles E. Moran    |  |     | 50 |  |          | President and Chief Executive Officer                                        
|Gregory M. Priest   |  |     | 41 |  |          | Chairman and Chief Strategy Officer                                          
|Thomas J. McDonald  |  |     | 55 |  |          | Chief Financial Officer, Executive Vice President and Assistant
    Secretary
|Jerald A. Nine, Jr. |  |     | 47 |  |          | Chief Operating Officer                                                      
|Mark A. Townsend    |  |     | 52 |  |          | Executive Vice President, Technology                                         
|Colm M. Darcy       |  |     | 41 |  |          | Executive Vice President, Content Development                                

Charles E. Moran


Gregory M. Priest


Thomas J. McDonald


Jerald A. Nine, Jr.


Mark A. Townsend


Colm M. Darcy




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PART II







|        |                                                                                                                      
|------- | ---------------------------------------------------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity, Related
    Stockholder Matters and Issuer Purchases of Equity
    Securities.



|                 |  |      |       |  |     |   |      | 
|---------------- |  | ---- | ----- |  | --- | - | ---- | 
|Quarter Ended    |  | High |       |  | Low |  
|                 |  |      |       |  |     |  
|April 30, 2003   |  | $    | 3.85  |  |     | $ | 1.95 | 
|July 31, 2003    |  |      | 6.67  |  |     |   | 3.29 | 
|October 31, 2003 |  |      | 8.92  |  |     |   | 5.80 | 
|January 31, 2004 |  |      | 9.22  |  |     |   | 6.80 | 
|April 30, 2004   |  |      | 13.31 |  |     |   | 8.50 | 
|July 31, 2004    |  |      | 13.59 |  |     |   | 5.98 | 
|October 31, 2004 |  |      | 7.45  |  |     |   | 5.28 | 
|January 31, 2005 |  |      | 7.77  |  |     |   | 4.68 | 









| |                                      
| | -------------------------------------
| | Issuer Purchases of Equity Securities

|                  |  |                   |         |  |                    |                   |      |                 |                      |  |                        |  |  |  |           | 
|----------------- |  | ----------------- | ------- |  | ------------------ | ----------------- | ---- | --------------- | -------------------- |  | ---------------------- |  |  |  | --------- | 
|                  |  | (a)               |         |  | (b)                |                   |      | (c)             |                      |  | (d)                    | 
|                  |  |                   |         |  |                    | Total Number of   |      |                 | Maximum Number (or   | 
|                  |  |                   |         |  |                    | Shares (or Units) |      |                 | Approximate Dollar   | 
|                  |  |                   |         |  |                    | Purchased as Part |      |                 | Value) of Shares (or | 
|                  |  | Total Number of   |         |  | Average Price      |                   |      | of Publicly     |                      |  | Units) that may yet be | 
|                  |  | Shares (or Units) |         |  | Paid per Share (or |                   |      | Announced Plans |                      |  | Purchased Under the    | 
|Period            |  | Purchased(1)      |         |  | Unit)($)           |                   |      | or Programs(2)  |                      |  | Plans or Programs      | 
|                  |  |                   |         |  |                    |                   |      |                 |                      |  |                        | 
|11/01/04-11/30/04 |  |                   |        |  |                    |                   |     |                 |                      |  |                       |  |  |  | 7,000,000 | 
|12/01/04-12/31/04 |  |                   | 443,757 |  |                    |                   | 5.69 |                 |                      |  | 443,757                |  |  |  | 6,556,243 | 
|01/01/05-01/31/05 |  |                   |        |  |                    |                   |     |                 |                      |  |                       |  |  |  | 6,556,243 | 
|Total:            |  |                   | 443,757 |  |                    |                   | 5.69 |                 |                      |  | 443,757                |  |  |  | 6,556,243 | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | We repurchased an aggregate of 443,757 ADSs pursuant to the
    repurchase program that was approved by our shareholders on
    September 24, 2004 (the Program).                                                                                                                                                                                                                                                      
|   
|(2) | Our Board of Directors approved the repurchase by us of up to an
    aggregate of 7,000,000 ADSs at a per share purchase price which
    complies with the requirements of Rule 10b-18 pursuant to
    the Program. Unless terminated earlier by resolution of our
    Board of Directors, the Program will expire on March 24,
    2006 or when we have repurchased all shares authorized for
    repurchase thereunder.

22



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| |                 
| | ----------------
| | Irish Stamp Duty

 













|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data

Appendix A







|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations





Overview






23



---



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24



---



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| |                 
| | ----------------
| | Business Outlook









25



---



##### Table of Contents





Critical Accounting Policies






| |                    
| | -------------------
| | Revenue Recognition













26



---



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| |                                                                 
| | ----------------------------------------------------------------
| | Amortization of Intangible Assets and Impairment of
    Goodwill







| |                         
| | ------------------------
| | Stock Based Compensation





27



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| |                        
| | -----------------------
| | Deferral of Commissions





| |                      
| | ---------------------
| | Restructuring Charges





| |                    
| | -------------------
| | Legal Contingencies



28



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Results of Operations


|                                         |                              |                               |         |         |                     |  |      |                       |    |  |      |    |   |      |     |    |   |  |      |    |  
|---------------------------------------- | ---------------------------- | ----------------------------- | ------- | ------- | ------------------- |  | ---- | --------------------- | -- |  | ---- | -- | - | ---- | --- | -- | - |  | ---- | -- | -
|                                         |                              | Fiscal Year Ended January 31, |        
|                                         |                              |                               |        
|                                         |                              | Dollar                        |         |         | Percent Change      |  |      | Percentage of Revenue |   
|                                         |                              | Increase/(Decrease)           |         |         | Increase/(Decrease) |  |      |                       |   
|                                         |                              | 2004/2005                     |         |         | 2004/2005           |  |      | 2005                  |    |  | 2004 |    |   | 2003 |    
|                                         |                              |                               |         |         |                     |  |      |                       |    |  |      |    |   |      |    
|                                         |                              | (In thousands)                |         |         |                     |  |      |                       |    |  |     
|Revenue                                  |                              | $                             | 18,825  |         |                     |  | 10   | %                     |    |  | 100  | %  |   |      | 100 | %  |   |  | 100  | % 
|Cost of revenue                          |                              |                               | 3,327   |         |                     |  | 18   | %                     |    |  | 10   | %  |   |      | 10  | %  |   |  | 11   | % 
|                                         |                              |                               |         |         |                     |  |      |                       |    |  |      |    |   |      |    
|                                         | Gross profit                 |                               |         | 15,498  |                     |  |      | 9                     | %  |  |      | 90 | % |      |     | 90 | % |  |      | 89 | %
|                                         |                              |                               |         |         |                     |  |      |                       |    |  |      |    |   |      |    
|Research and development                 |                              |                               | (8,052  | )       |                     |  | (15  | )%                    |    |  | 21   | %  |   |      | 28  | %  |   |  | 29   | % 
|Selling and marketing                    |                              |                               | 5,954   |         |                     |  | 7    | %                     |    |  | 44   | %  |   |      | 45  | %  |   |  | 52   | % 
|General and administrative               |                              |                               | (2,721  | )       |                     |  | (10  | )%                    |    |  | 12   | %  |   |      | 14  | %  |   |  | 18   | % 
|Litigation settlement                    |                              |                               | (93,750 | )       |                     |  | (100 | )%                    |    |  |     |    |   |      | 48  | %  |   |  |     |   
|Amortization of stock-based compensation |                              |                               | (795    | )       |                     |  | (40  | )%                    |    |  | 1    | %  |   |      | 1   | %  |   |  | 2    | % 
|Amortization of intangible assets        |                              |                               | (497    | )       |                     |  | (5   | )%                    |    |  | 5    | %  |   |      | 5   | %  |   |  | 5    | % 
|Impairment charge                        |                              |                               | 19,268  |         |                     |  | 100  | %                     |    |  | 9    | %  |   |      |    |    |   |  | 246  | % 
|Restructuring                            |                              |                               | 11,504  |         |                     |  | 619  | %                     |    |  | 6    | %  |   |      | 1   | %  |   |  | 14   | % 
|Restatement:                             |                              |                               |         |         |                     |  |      |                       |    |  |      |    |   |      |     |    |   |  |      |   
|                                         | SEC investigation            |                               |         | 284     |                     |  |      | 15                    | %  |  |      | 1  | % |      |     | 1  | % |  |      |   |  
|                                         | Other professional fees      |                               |         | (14,153 | )                   |  |      | (98                   | )% |  |      |   |   |      |     | 7  | % |  |      | 5  | %
|                                         |                              |                               |         |         |                     |  |      |                       |    |  |      |    |   |      |    
|Total operating expenses                 |                              |                               | (82,958 | )       |                     |  | (28  | )%                    |    |  | 99   | %  |   |      | 151 | %  |   |  | 370  | % 
|                                         |                              |                               |         |         |                     |  |      |                       |    |  |      |    |   |      |    
|Operating loss                           |                              |                               | 98,456  |         |                     |  | 83   | %                     |    |  | (9   | )  |   |      | (61 | )% |   |  | (281 | )%
|                                         |                              |                               |         |         |                     |  |      |                       |    |  |      |    |   |      |    
|                                         | Other (expense)/ income, net |                               |         | (1,478  | )                   |  |      | (188                  | )% |  |      |   |   |      |     |   |   |  |      |   |  
|                                         | Gain on sale of investments  |                               |         | (3,682  | )                   |  |      | (100                  | )% |  |      |   |   |      |     | 2  | % |  |      |   |  
|                                         | Interest income, net         |                               |         | (33     | )                   |  |      | (4                    | )% |  |      |   |   |      |     |   |   |  |      | 2  | %
|                                         |                              |                               |         |         |                     |  |      |                       |    |  |      |    |   |      |    
|Loss before provision for income taxes   |                              |                               | 93,263  |         |                     |  | 83   | %                     |    |  | (9   | )  |   |      | (58 | )% |   |  | (280 | )%
|                                         | Provision for income taxes   |                               |         | 102     |                     |  |      | (19                   | )% |  |      |   |   |      |     |   |   |  |      |   |  
|                                         |                              |                               |         |         |                     |  |      |                       |    |  |      |    |   |      |    
|Net loss                                 |                              | $                             | 93,161  |         |                     |  | 82   | %                     |    |  | (9   | )  |   |      | (59 | )% |   |  | (280 | )%
|                                         |                              |                               |         |         |                     |  |      |                       |    |  |      |    |   |      |    



| |                                                                   
| | ------------------------------------------------------------------
| | Comparison of the Fiscal Years Ended January 31, 2005
    and 2004

Revenue




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|         |               |                               |         |         |      |   |         |         |  |   |        |       | 
|-------- | ------------- | ----------------------------- | ------- | ------- | ---- | - | ------- | ------- |  | - | ------ | ----- | 
|         |               | Fiscal Year Ended January 31, |        
|         |               |                               |        
|         |               | 2005                          |         |         | 2004 |   |         | Change  | 
|         |               |                               |         |         |      |   |         |         | 
|Revenue: |               |                               |         |         |      |   |         |         |  |   |        |      
|         | United States |                               | $       | 165,871 |      |   | $       | 156,121 |  |   | $      | 9,750 | 
|         | International |                               |         | 46,429  |      |   |         | 37,354  |  |   |        | 9,075 | 
|         |               |                               |         |         |      |   |         |         | 
|Total    |               | $                             | 212,300 |         |      | $ | 193,475 |         |  | $ | 18,825 |      
|         |               |                               |         |         |      |   |         |         | 



|         |                      |                               |         |         |      |   |         |         |  |   |        |        | 
|-------- | -------------------- | ----------------------------- | ------- | ------- | ---- | - | ------- | ------- |  | - | ------ | ------ | 
|         |                      | Fiscal Year Ended January 31, |        
|         |                      |                               |        
|         |                      | 2005                          |         |         | 2004 |   |         | Change  | 
|         |                      |                               |         |         |      |   |         |         | 
|Revenue: |                      |                               |         |         |      |   |         |         |  |   |        |       
|         | Multi-Modal Learning |                               | $       | 192,135 |      |   | $       | 180,098 |  |   | $      | 12,037 | 
|         | Retail Certification |                               |         | 20,165  |      |   |         | 13,377  |  |   |        | 6,788  | 
|         |                      |                               |         |         |      |   |         |         | 
|Total    |                      | $                             | 212,300 |         |      | $ | 193,475 |         |  | $ | 18,825 |       
|         |                      |                               |         |         |      |   |         |         | 



Costs and Expenses






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|                           |  |                               
|-------------------------- |  | ------------------------------
|                           |  | Multi-Modal Learning          
|                           |  |                               
|Revenue                    |  | Compound annual growth of 7.0%
|Gross profit               |  | 89.0%                         
|Research and development   |  | 15.0%                         
|Selling and marketing      |  | 36.0%                         
|General and administrative |  | 9.0%                          
|Other income/ (expense)    |  | $2.4 million for all years    
|Working capital            |  | 15.00% of gross revenue       









Interest Income, net




Other (Expense)/ Income, net




Gain on Sale of Investments, net




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Provision for Income Taxes






| |                                                                   
| | ------------------------------------------------------------------
| | Comparison of the Fiscal Years Ended January 31, 2004
    and 2003

|                                         |                              |                               |          |               |                     |  |      |         |    |  |      |    |   |  |      |    |  
|---------------------------------------- | ---------------------------- | ----------------------------- | -------- | ------------- | ------------------- |  | ---- | ------- | -- |  | ---- | -- | - |  | ---- | -- | -
|                                         |                              | Fiscal Year Ended January 31, |          |               |                    
|                                         |                              |                               |          |               |                     | 
|                                         |                              |                               |          | Percentage of |                    
|                                         |                              | Dollar                        |          |               | Percent Change      |  |      | Revenue |   
|                                         |                              | Increase/(Decrease)           |          |               | Increase/(Decrease) |  |      |         |   
|                                         |                              | 2003/2004                     |          |               | 2003/2004           |  |      | 2004    |    |  | 2003 |   
|                                         |                              |                               |          |               |                     |  |      |         |    |  |      |   
|                                         |                              | (In thousands)                |          |               |                     |  |      |         |   
|Revenue                                  |                              | $                             | 92,005   |               |                     |  | 91   | %       |    |  | 100  | %  |   |  | 100  | % 
|Cost of revenue                          |                              |                               | 6,849    |               |                     |  | 59   | %       |    |  | 10   | %  |   |  | 11   | % 
|                                         |                              |                               |          |               |                     |  |      |         |    |  |      |   
|                                         | Gross profit                 |                               |          | 85,156        |                     |  |      | 95      | %  |  |      | 90 | % |  |      | 89 | %
|                                         |                              |                               |          |               |                     |  |      |         |    |  |      |   
|Research and development                 |                              |                               | 24,523   |               |                     |  | 84   | %       |    |  | 28   | %  |   |  | 29   | % 
|Selling and marketing                    |                              |                               | 34,841   |               |                     |  | 66   | %       |    |  | 45   | %  |   |  | 52   | % 
|General and administrative               |                              |                               | 9,969    |               |                     |  | 56   | %       |    |  | 14   | %  |   |  | 18   | % 
|Litigation settlement                    |                              |                               | 93,750   |               |                     |  | 100  | %       |    |  | 48   | %  |   |  |     |   
|Amortization of stock-based compensation |                              |                               | 352      |               |                     |  | 22   | %       |    |  | 1    | %  |   |  | 2    | % 
|Amortization of intangible assets        |                              |                               | 5,389    |               |                     |  | 115  | %       |    |  | 5    | %  |   |  | 5    | % 
|Impairment charge                        |                              |                               | (250,107 | )             |                     |  | (100 | )%      |    |  |     |    |   |  | 246  | % 
|Restructuring                            |                              |                               | (12,322  | )             |                     |  | (87  | )%      |    |  | 1    | %  |   |  | 14   | % 
|Restatement:                             |                              |                               |          |               |                     |  |      |         |    |  |      |    |   |  |      |   
|                                         | SEC investigation            |                               |          | 1,898         |                     |  |      | 100     | %  |  |      | 1  | % |  |      |   |  
|                                         | Other professional fees      |                               |          | 9,366         |                     |  |      | 183     | %  |  |      | 7  | % |  |      | 5  | %
|                                         |                              |                               |          |               |                     |  |      |         |    |  |      |   
|Total operating expenses                 |                              |                               | (82,341  | )             |                     |  | (22  | )%      |    |  | 151  | %  |   |  | 370  | % 
|                                         |                              |                               |          |               |                     |  |      |         |    |  |      |   
|Operating loss                           |                              |                               | 167,497  |               |                     |  | 59   | %       |    |  | (61  | )% |   |  | (281 | )%
|                                         |                              |                               |          |               |                     |  |      |         |    |  |      |   
|                                         | Other (expense)/ income, net |                               |          | 1,068         |                     |  |      | 379     | %  |  |      |   |   |  |      |   |  
|                                         | Gain on sale of investments  |                               |          | 3,682         |                     |  |      | 100     | %  |  |      | 2  | % |  |      |   |  
|                                         | Interest income, net         |                               |          | (1,378        | )                   |  |      | (64     | )% |  |      |   |   |  |      | 2  | %
|                                         |                              |                               |          |               |                     |  |      |         |    |  |      |   
|Loss before provision for income taxes   |                              |                               | 170,869  |               |                     |  | 60   | %       |    |  | (58  | )% |   |  | (280 | )%
|                                         | Provision for income taxes   |                               |          | 146           |                     |  |      | 38      | %  |  |      |   |   |  |      |   |  
|                                         |                              |                               |          |               |                     |  |      |         |    |  |      |   
|Net loss                                 |                              | $                             | 170,723  |               |                     |  | 60   | %       |    |  | (59  | )% |   |  | (280 | )%
|                                         |                              |                               |          |               |                     |  |      |         |    |  |      |   

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Revenue




|         |               |                               |         |         |      |   |         |        |  |   |        |        | 
|-------- | ------------- | ----------------------------- | ------- | ------- | ---- | - | ------- | ------ |  | - | ------ | ------ | 
|         |               | Fiscal Year Ended January 31, |        
|         |               |                               |        
|         |               | 2004                          |         |         | 2003 |   |         | Change | 
|         |               |                               |         |         |      |   |         |        | 
|Revenue: |               |                               |         |         |      |   |         |        |  |   |        |       
|         | United States |                               | $       | 156,121 |      |   | $       | 80,991 |  |   | $      | 75,130 | 
|         | International |                               |         | 37,354  |      |   |         | 20,479 |  |   |        | 16,875 | 
|         |               |                               |         |         |      |   |         |        | 
|Total    |               | $                             | 193,475 |         |      | $ | 101,470 |        |  | $ | 92,005 |       
|         |               |                               |         |         |      |   |         |        | 



|         |                      |                               |         |         |      |   |         |        |  |   |        |        | 
|-------- | -------------------- | ----------------------------- | ------- | ------- | ---- | - | ------- | ------ |  | - | ------ | ------ | 
|         |                      | Fiscal Year Ended January 31, |        
|         |                      |                               |        
|         |                      | 2004                          |         |         | 2003 |   |         | Change | 
|         |                      |                               |         |         |      |   |         |        | 
|Revenue: |                      |                               |         |         |      |   |         |        |  |   |        |       
|         | Multi-Modal Learning |                               | $       | 180,098 |      |   | $       | 94,402 |  |   | $      | 85,696 | 
|         | Retail Certification |                               |         | 13,377  |      |   |         | 7,068  |  |   |        | 6,309  | 
|         |                      |                               |         |         |      |   |         |        | 
|Total    |                      | $                             | 193,475 |         |      | $ | 101,470 |        |  | $ | 92,005 |       
|         |                      |                               |         |         |      |   |         |        | 



Costs and Expenses






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| |                                                                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i) the determination that we would need to restate the
    historical financial statements of SmartForce PLC for the years
    ended December 31, 1999, 2000 and 2001 and the six-months
    ended June 30, 2002,
|
| | (ii) forecasted revenue decreased from the levels utilized
    prior to the Merger, and                                                                                                                           

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (iii) Upon the announcement of the restatement in November
    2002, there was a dramatic decline in our share price in
    relation to the price utilized in the calculation of purchase
    price. The share price at time of the Merger was $4.69 per
    share, the share price on the day prior to the announcement of
    the restatement was $4.63 per share and the share price at
    the close of business on the day of the announcement was
    $3.07 per share, approximately a 34% decline in share price.



|                           |  |                            |  |                           
|-------------------------- |  | -------------------------- |  | --------------------------
|                           |  | Multi-Modal Learning       |  | Retail Certification      
|                           |  |                            |  |                           
|Revenue                    |  | Compound annual            |  | 18% growth through 2008   
|                           |  | growth of 10.6%            |  | 3% growth through 2009    
|                           |  |                            |  | no growth thereafter      
|Gross profit               |  | 88.66%                     |  | 88.85%                    
|Research and development   |  | 18.75%, through 2009       |  | 4.15%                     
|                           |  | 16.00% thereafter          |  |                           
|Selling and marketing      |  | 45.5%, through 2008        |  | 59.00%, through 2005      
|                           |  | 39.00%, thereafter         |  | 58.00%, through 2008      
|                           |  |                            |  | 56.00%, thereafter        
|General and administrative |  | 50.00% of sales growth,    |  | 6.57%, through 2005       
|                           |  | through 2013, 4.90%,       |  | declining to 6.12% in 2009
|                           |  | thereafter                 |  | and thereafter            
|Other income/(expense)     |  | $2.4 million for all years |  | None                      
|Working capital            |  | 15.00% of gross revenue    |  | 15.00% of gross revenue   





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Interest Income/(Expense), net




Other Income/(Expense), net




Gain on Sale of Investments, net




Provision for Income Taxes




Quarterly Operating Results for Fiscal Years Ended
January 31, 2005 and 2004 (unaudited)


The following table sets forth, for the periods indicated,
certain financial data of SkillSoft PLC


|                         |                                          |                                       |        |        |         |   |        |         |     |   |         |        |     |   |        |        |     |  
|------------------------ | ---------------------------------------- | ------------------------------------- | ------ | ------ | ------- | - | ------ | ------- | --- | - | ------- | ------ | --- | - | ------ | ------ | --- | -
|                         |                                          | Q1 2005                               |        |        | Q2 2005 |   |        | Q3 2005 |     |   | Q4 2005 |       
|                         |                                          |                                       |        |        |         |   |        |         |     |   |         |       
|                         |                                          | (In thousands, except per share data) |       
|Revenues                 |                                          | $                                     | 52,817 |        |         | $ | 50,625 |         |     | $ | 52,507  |        |     | $ | 56,351 |       
|Cost of revenues         |                                          |                                       | 5,078  |        |         |   | 5,257  |         |     |   | 5,597   |        |     |   | 5,792  |       
|                         |                                          |                                       |        |        |         |   |        |         |     |   |         |       
|                         | Gross profit                             |                                       |        | 47,739 |         |   |        | 45,368  |     |   |         | 46,910 |     |   |        | 50,559 |    
|Operating expenses:      |                                          |                                       |        |        |         |   |        |         |     |   |         |        |     |   |        |       
|                         | Research and development                 |                                       |        | 9,444  |         |   |        | 12,639  |     |   |         | 10,505 |     |   |        | 12,987 |    
|                         | Selling and marketing                    |                                       |        | 24,362 |         |   |        | 22,664  |     |   |         | 22,441 |     |   |        | 24,019 |    
|                         | General and administrative               |                                       |        | 6,054  |         |   |        | 6,182   |     |   |         | 6,388  |     |   |        | 6,538  |    
|                         | Amortization of stock-based compensation |                                       |        | 348    |         |   |        | 300     |     |   |         | 296    |     |   |        | 247    |    
|                         | Amortization of intangible assets        |                                       |        | 2,422  |         |   |        | 2,390   |     |   |         | 2,390  |     |   |        | 2,373  |    
|                         | Impairment charge                        |                                       |        |       |         |   |        |        |     |   |         |       |     |   |        | 19,268 |    
|                         | Restructuring                            |                                       |        | 147    |         |   |        | 175     |     |   |         | (7     | )   |   |        | 13,046 |    
|                         | Restatement:                             |                                       |        |        |         |   |        |         |     |   |         |        |     |   |        |        |    
|                         |                                          | SEC investigation                     |        |        | 324     |   |        |         | 779 |   |         |        | 716 |   |        |        | 363 |  
|                         |                                          | Other professional fees               |        |        | 114     |   |        |         | 136 |   |         |        | 87  |   |        |        | (17 | )
|                         |                                          |                                       |        |        |         |   |        |         |     |   |         |       
|Total operating expenses |                                          |                                       | 43,215 |        |         |   | 45,265 |         |     |   | 42,816  |        |     |   | 78,824 |       
|                         |                                          |                                       |        |        |         |   |        |         |     |   |         |       

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|                                            |                              |                                       |         |       |         |   |         |         |   |   |         |       |  |   |         |         |  
|------------------------------------------- | ---------------------------- | ------------------------------------- | ------- | ----- | ------- | - | ------- | ------- | - | - | ------- | ----- |  | - | ------- | ------- | -
|                                            |                              | Q1 2005                               |         |       | Q2 2005 |   |         | Q3 2005 |   |   | Q4 2005 |      
|                                            |                              |                                       |         |       |         |   |         |         |   |   |         |      
|                                            |                              | (In thousands, except per share data) |        
|Operating loss                              |                              |                                       | 4,524   |       |         |   | 103     |         |   |   | 4,094   |       |  |   | (28,265 | )      
|                                            | Other (expense)/ income, net |                                       |         | (179  | )       |   |         | (32     | ) |   |         | 75    |  |   |         | (556    | )
|                                            | Interest income, net         |                                       |         | 123   |         |   |         | 241     |   |   |         | 88    |  |   |         | 302     |  
|                                            |                              |                                       |         |       |         |   |         |         |   |   |         |      
|Loss before provision for income taxes      |                              |                                       | 4,468   |       |         |   | 312     |         |   |   | 4,257   |       |  |   | (28,519 | )      
|                                            | Provision for income taxes   |                                       |         | 1,265 |         |   |         | (1,045  | ) |   |         | 142   |  |   |         | 269     |  
|                                            |                              |                                       |         |       |         |   |         |         |   |   |         |      
|                                            | Net income/ (loss)           |                                       | $       | 3,203 |         |   | $       | 1,357   |   |   | $       | 4,115 |  |   | $       | (28,788 | )
|                                            |                              |                                       |         |       |         |   |         |         |   |   |         |      
|Basic and dilutive income/ (loss) per share |                              | $                                     | 0.03    |       |         | $ | 0.01    |         |   | $ | 0.04    |       |  | $ | (0.27   | )      
|                                            |                              |                                       |         |       |         |   |         |         |   |   |         |      
|Basic weighted average shares outstanding   |                              |                                       | 103,163 |       |         |   | 105,422 |         |   |   | 105,936 |       |  |   | 105,973 |        
|                                            |                              |                                       |         |       |         |   |         |         |   |   |         |      
|Diluted weighted average shares outstanding |                              |                                       | 110,393 |       |         |   | 110,555 |         |   |   | 108,941 |       |  |   | 105,973 |        
|                                            |                              |                                       |         |       |         |   |         |         |   |   |         |      

|                                                      |                                          |                                       |         |         |         |   |         |         |       |   |         |         |       |   |         |         |     | 
|----------------------------------------------------- | ---------------------------------------- | ------------------------------------- | ------- | ------- | ------- | - | ------- | ------- | ----- | - | ------- | ------- | ----- | - | ------- | ------- | --- | 
|                                                      |                                          | Q1 2004                               |         |         | Q2 2004 |   |         | Q3 2004 |       |   | Q4 2004 |        
|                                                      |                                          |                                       |         |         |         |   |         |         |       |   |         |        
|                                                      |                                          | (In thousands, except per share data) |        
|Revenues                                              |                                          | $                                     | 43,613  |         |         | $ | 45,109  |         |       | $ | 49,992  |         |       | $ | 54,761  |        
|Cost of revenues                                      |                                          |                                       | 5,497   |         |         |   | 4,180   |         |       |   | 4,557   |         |       |   | 4,163   |        
|                                                      |                                          |                                       |         |         |         |   |         |         |       |   |         |        
|                                                      | Gross profit                             |                                       |         | 38,116  |         |   |         | 40,929  |       |   |         | 45,435  |       |   |         | 50,598  |    
|Operating expenses:                                   |                                          |                                       |         |         |         |   |         |         |       |   |         |         |       |   |         |        
|                                                      | Research and development                 |                                       |         | 12,782  |         |   |         | 12,650  |       |   |         | 15,171  |       |   |         | 13,024  |    
|                                                      | Selling and marketing                    |                                       |         | 23,347  |         |   |         | 23,227  |       |   |         | 20,830  |       |   |         | 20,128  |    
|                                                      | General and administrative               |                                       |         | 6,684   |         |   |         | 6,401   |       |   |         | 6,946   |       |   |         | 7,852   |    
|                                                      | Litigation settlement                    |                                       |         | 2,250   |         |   |         | 44,000  |       |   |         | 16,000  |       |   |         | 31,500  |    
|                                                      | Amortization of stock-based compensation |                                       |         | 490     |         |   |         | 471     |       |   |         | 676     |       |   |         | 349     |    
|                                                      | Amortization of intangible assets        |                                       |         | 2,406   |         |   |         | 2,518   |       |   |         | 2,574   |       |   |         | 2,574   |    
|                                                      | Restructuring                            |                                       |         | 1,193   |         |   |         | 364     |       |   |         | 274     |       |   |         | 26      |    
|                                                      | Restatement:                             |                                       |         |         |         |   |         |         |       |   |         |         |       |   |         |         |    
|                                                      |                                          | SEC investigation                     |         |         | 549     |   |         |         |      |   |         |         | 643   |   |         |         | 706 | 
|                                                      |                                          | Other professional fees               |         |         | 4,810   |   |         |         | 4,622 |   |         |         | 4,370 |   |         |         | 671 | 
|                                                      |                                          |                                       |         |         |         |   |         |         |       |   |         |        
|Total operating expenses                              |                                          |                                       | 54,511  |         |         |   | 94,253  |         |       |   | 67,484  |         |       |   | 76,830  |        
|                                                      |                                          |                                       |         |         |         |   |         |         |       |   |         |        
|Operating loss                                        |                                          |                                       | (16,395 | )       |         |   | (53,324 | )       |       |   | (22,049 | )       |       |   | (26,232 | )      
|                                                      | Other income, net                        |                                       |         | 4       |         |   |         | 17      |       |   |         | 251     |       |   |         | 514     |    
|                                                      | Gain on sale of investments, net         |                                       |         | 3,682   |         |   |         |        |       |   |         |        |       |   |         |        |    
|                                                      | Interest income, net                     |                                       |         | 363     |         |   |         | 231     |       |   |         | 87      |       |   |         | 106     |    
|                                                      |                                          |                                       |         |         |         |   |         |         |       |   |         |        
|Loss before provision for income taxes                |                                          |                                       | (12,346 | )       |         |   | (53,076 | )       |       |   | (21,711 | )       |       |   | (25,612 | )      
|                                                      | Provision for income taxes               |                                       |         | (229    | )       |   |         | (150    | )     |   |         | (150    | )     |   |         |        |    
|                                                      |                                          |                                       |         |         |         |   |         |         |       |   |         |        
|                                                      | Net loss                                 |                                       | $       | (12,575 | )       |   | $       | (53,226 | )     |   | $       | (21,861 | )     |   | $       | (25,612 | )  
|                                                      |                                          |                                       |         |         |         |   |         |         |       |   |         |        
|Basic and dilutive loss per share                     |                                          | $                                     | (0.13   | )       |         | $ | (0.53   | )       |       | $ | (0.22   | )       |       | $ | (0.25   | )      
|                                                      |                                          |                                       |         |         |         |   |         |         |       |   |         |        
|Basic and diluted weighted average shares outstanding |                                          |                                       | 99,599  |         |         |   | 99,615  |         |       |   | 99,994  |         |       |   | 101,231 |        
|                                                      |                                          |                                       |         |         |         |   |         |         |       |   |         |        

Liquidity and Capital Resources






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|                            |  |                        |        |           |        |   |       |       |  |     |        |  |           |         |       |  |  |   |        | 
|--------------------------- |  | ---------------------- | ------ | --------- | ------ | - | ----- | ----- |  | --- | ------ |  | --------- | ------- | ----- |  |  | - | ------ | 
|                            |  | Payments Due by Period |       
|                            |  |                        |       
|                            |  |                        |        | Less Than |        |   | 1-3   |       |  | 3-5 |        |  | More Than |        
|Contractual Obligations     |  | Total                  |        |           | 1 Year |   |       | Years |  |     | Years  |  |           | 5 Years |      
|                            |  |                        |        |           |        |   |       |       |  |     |        |  |           |         |      
|Operating Lease Obligations |  | $                      | 38,874 |           |        | $ | 6,610 |       |  | $   | 10,499 |  |           | $       | 6,107 |  |  | $ | 15,658 | 
|                            |  |                        |        |           |        |   |       |       |  |     |        |  |           |         |      





Recent Accounting Pronouncements








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| |                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. A modified prospective method in which
    compensation cost is recognized beginning with the effective
    date (a) based on the requirements of Statement 123(R)
    for all share-based payments granted after the effective date
    and (b) based on the requirements of Statement 123 for
    all awards granted to employees prior to the effective date of
    Statement 123(R) that remain unvested on the effective date.
|
| | 2. A modified retrospective method which
    includes the requirements of the modified prospective method
    described above, but also permits entities to restate based on
    the amounts previously recognized under Statement 123 for
    purposes of pro forma disclosures either (a) all prior
    periods presented or (b) prior interim periods of the year
    of adoption.                                                 



Explanation of Use of Non-GAAP Financial Results










FUTURE OPERATING RESULTS




| |                                   
| | ----------------------------------
| | Risks Related to Legal Proceedings

In connection with our restatement of the historical
financial statements of SmartForce, class action lawsuits have
been filed against us and additional lawsuits may be filed, and
we are the subject of a formal order of private investigation
entered by the SEC.






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Claims that we infringe upon the intellectual property rights
of others could result in costly litigation or royalty payments
to third parties, or require us to reengineer or cease sales of
our products or services.






We could incur substantial costs resulting from product
liability claims relating to our customers use of our
products and services.




We could be subjected to legal actions based upon the content
we obtain from third parties over whom we exert limited
control.






| |                                               
| | ----------------------------------------------
| | Risks Related to the Operation of Our Business

Some of our international subsidiaries have not complied with
regulatory requirements relating to their financial statements
and tax returns.




We have experienced net losses in the past, and we may be
unable to achieve or maintain profitability.




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Our quarterly operating results may fluctuate significantly.
This limits your ability to evaluate historical financial
results and increases the likelihood that our results will fall
below market analysts expectations, which could cause the
price of our ADSs to drop rapidly and severely.








| |   |                                                                                                                                                                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the size and timing of new/renewal agreements and upgrades;                                                                                                                                                                                        
|
| |  | royalty rates;                                                                                                                                                                                                                                     
|
| |  | the announcement, introduction and acceptance of new products,
    product enhancements and technologies by us and our competitors;                                                                                                                
|
| |  | the mix of sales between our field sales force, our other direct
    sales channels and our telesales channels;                                                                                                                                    
|
| |  | general conditions in the U.S. or the international economy;                                                                                                                                                                                       
|
| |  | the loss of significant customers;                                                                                                                                                                                                                 
|
| |  | delays in availability of new products;                                                                                                                                                                                                            
|
| |  | product or service quality problems;                                                                                                                                                                                                               
|
| |  | seasonality  due to the budget and purchasing cycles
    of our customers, we expect our revenue and operating results
    will generally be strongest in the second half of our fiscal
    year and weakest in the first half of our fiscal year;
|
| |  | the spending patterns of our customers;                                                                                                                                                                                                            
|
| |  | litigation costs and expenses, including the costs related to
    the restatement of the SmartForce financial statements;                                                                                                                          
|
| |  | non-recurring charges related to acquisitions;                                                                                                                                                                                                     
|
| |  | growing competition that may result in price reductions; and                                                                                                                                                                                       
|
| |  | currency fluctuations.                                                                                                                                                                                                                             



Demand for our products and services may be especially
susceptible to adverse economic conditions.




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Increased competition may result in decreased demand or
prices for our products and services, which may result in
reduced revenues and gross profits and loss of market share.








| |   |                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------
| |  | third-party suppliers of instructor-led information technology,
    business, management and professional skills education and
    training;
|
| |  | suppliers of computer-based training and e-learning solutions;                                                                              
|
| |  | internal education and training departments of potential
    customers; and                                                                 
|
| |  | value-added resellers and network integrators.                                                                                              



We rely on a limited number of third parties to provide us
with educational content for our courses and referenceware, and
our alliances with these third parties may be terminated or fail
to meet our requirements.








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Our success depends on our ability to meet the needs of the
rapidly changing market.




The e-learning market is a developing market, and our
business will suffer if e-learning is not widely accepted.






The success of our e-learning strategy depends on the
reliability and consistent performance of our information
systems and Internet infrastructure.




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Because many users of our e-learning solutions will access
them over the Internet, factors adversely affecting the use of
the Internet or our customers networking infrastructures
could harm our business.








Our restructuring plans may be ineffective or may limit our
ability to compete.




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We depend on a few key personnel to manage and operate the
business and must be able to attract and retain highly qualified
employees.




Changes in accounting standards regarding stock option plans
could limit the desirability of granting stock options, which
could harm our ability to attract and retain employees, and
could also reduce our profitability.




Our business is subject to currency fluctuations that could
adversely affect our operating results.




We may be unable to protect our proprietary rights.
Unauthorized use of our intellectual property may result in
development of products or services that compete with ours.






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Our non-U.S. operations are subject to risks which could
negatively impact our future operating results.






| |   |                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------
| |  | difficulties or delays in developing and supporting non-English
    language versions of our products and services;
|
| |  | political and economic conditions in various jurisdictions;                                                        
|
| |  | difficulties in staffing and managing foreign subsidiary
    operations;                                           
|
| |  | longer sales cycles and account receivable payment cycles;                                                         
|
| |  | multiple, conflicting and changing governmental laws and
    regulations;                                          
|
| |  | foreign currency exchange rate fluctuations;                                                                       
|
| |  | protectionist laws and business practices that may favor local
    competitors;                                    
|
| |  | difficulties in finding and managing local resellers;                                                              
|
| |  | potential adverse tax consequences; and                                                                            
|
| |  | the absence or significant lack of legal protection for
    intellectual property rights.                          



The market price of our ADSs may fluctuate and may not be
sustainable.




Our sales cycle may make it difficult to predict our
operating results.






| |   |                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our need to educate potential customers about the benefits of
    our products;                                                                        
|
| |  | competitive evaluations by customers;                                                                                                                  
|
| |  | the customers internal budgeting and approval processes;                                                                                              
|
| |  | the fact that many customers view training products as
    discretionary spending, rather than purchases essential to their
    business; and          
|
| |  | the fact that we target large companies, which often take longer
    to make purchasing decisions due to the size and complexity of
    the enterprise.

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Our business could be adversely affected if our products
contain errors.









|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures about Market
    Risk



Interest Rate Risk




Foreign Currency Risk









|        |                                            
|------- | -------------------------------------------
|Item 8. | Financial Statements and Supplementary Data

Appendix B







|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure








|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures

Evaluation of Disclosure Controls & Procedures




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Changes in Internal Control




Managements Report on Internal Control over Financial
Reporting






| |   |                                                                                                                                                                                                                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Pertain to the maintenance of records that in reasonable detail
    accurately and fairly reflect the transactions and dispositions
    of the assets of the company;                                                                                                                                                                                          
|
| |  | Provide reasonable assurance that transactions are recorded as
    necessary to permit preparation of financial statements in
    accordance with generally accepted accounting principles, and
    that receipts and expenditures of the company are being made
    only in accordance with authorizations of management and
    directors of the company; and
|
| |  | Provide reasonable assurance regarding prevention or timely
    detection of unauthorized acquisition, use or disposition of the
    companys assets that could have a material effect on the
    financial statements.                                                                                                                                       







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Item 9B. Other
Information







PART III







|         |                                                   
|-------- | --------------------------------------------------
|Item 10. | Directors and Executive Officers of the Registrant

Directors




Gregory M. Priest


Charles E. Moran


P. Howard Edelstein


Stewart K.P. Gross


James S. Krzywicki


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William F. Meagher, Jr


Ferdinand von Prondzynski




Executive Officers




Audit Committee




Director Nomination Process








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Code of Business Conducts and Ethics




Section 16(a) Beneficial Ownership Reporting
Compliance






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|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation

Summary Compensation Table.


Summary Compensation Table


|                            |                             |         |      |                     |        |                 |         |         |        |            |                 |         |           |         |        |         |              |  |  |           |  |   |       |        |     
|--------------------------- | --------------------------- | ------- | ---- | ------------------- | ------ | --------------- | ------- | ------- | ------ | ---------- | --------------- | ------- | --------- | ------- | ------ | ------- | ------------ |  |  | --------- |  | - | ----- | ------ | ----
|                            |                             |         |      |                     |        |                 |         |         |        | Long Term  |                 |         |          
|                            |                             |         |      |                     |        | Compensation(3) |         |         |       
|                            |                             |         |      | Annual Compensation |        |                 | Awards  |         |        |           
|                            |                             |         |      |                     |        |                 |         |         |        |           
|                            |                             |         |      |                     |        | Other           |         |         | Shares |            |                 |        
|                            |                             | Fiscal  |      |                     |        |                 | Annual  |         |        | Underlying |                 |         | All Other |        
|Name and Principal Position |                             | Year(1) |      |                     | Salary |                 |         | Bonus   |        |            | Compensation(2) |         |           | Options |        |         | Compensation | 
|                            |                             |         |      |                     |        |                 |         |         |        |            |                 |         |           |         |        |         |              | 
|Charles E. Moran            |                             |         | 2005 |                     |        | $               | 250,000 |         |        | $          | 42,969          |         |           |         |        |         |              |  |  |           |  | $ | 9,610 | (5)   
|                            | President and Chief         |         |      | 2004                |        |                 |         | 237,500 |        |            |                 | 299,333 |           |         |        |        |              |  |  |          |  |   |       | 9,610  | (5) 
|                            | Executive Officer           |         |      | 2003                |        |                 |         | 93,750  | (4)    |            |                 |        |           |         |        |        |              |  |  |          |  |   |       | 4,327  | (5) 
|Gregory M. Priest           |                             |         | 2005 |                     |        |                 | 250,000 |         |        |            | 66,250          |         |           | $       | 60,000 | (6)     |              |  |  |           |  |   | 8,379 | (7)   
|                            | Chairman of the Board and   |         |      | 2004                |        |                 |         | 250,000 |        |            |                 | 233,217 |           |         |        | 60,000  | (6)          |  |  |          |  |   |       | 8,379  | (7) 
|                            | Chief Strategy Officer      |         |      | 2003                |        |                 |         | 270,833 |        |            |                 | 250,000 | (8)       |         |        | 137,917 | (9)          |  |  | 2,137,500 |  |   |       | 8,379  | (7) 
|Jerald A. Nine Jr.          |                             |         | 2005 |                     |        |                 | 225,000 |         |        |            | 29,883          |         |           |         |        |         |              |  |  |           |  |   | 6,919 | (5)   
|                            | Chief Operating Officer     |         |      | 2004                |        |                 |         | 212,500 |        |            |                 | 213,400 |           |         |        |        |              |  |  |          |  |   |       | 4,973  | (5) 
|                            |                             |         |      | 2003                |        |                 |         | 84,333  | (10)   |            |                 |        |           |         |        |        |              |  |  |          |  |   |       | 3,846  | (5) 
|Colm M. Darcy               |                             |         | 2005 |                     |        |                 | 200,000 |         |        |            | 23,438          |         |           |         |        |         |              |  |  |           |  |   | 6,150 | (5)   
|                            | Executive Vice President    |         |      | 2004                |        |                 |         | 200,000 |        |            |                 | 166,000 |           |         |        |        |              |  |  |          |  |   |       | 5,092  | (5) 
|                            | Content Development         |         |      | 2003                |        |                 |         | 206,667 |        |            |                 | 66,250  |           |         |        |        |              |  |  | 530,000   |  |   |       | 92,230 | (11)
|Mark A. Townsend            |                             |         | 2005 |                     |        |                 | 200,000 |         |        |            | 23,438          |         |           |         |        |         |              |  |  |           |  |   | 7,688 | (5)   
|                            | Executive Vice President    |         |      | 2004                |        |                 |         | 180,000 |        |            |                 | 166,000 |           |         |        |        |              |  |  |          |  |   |       | 7,688  | (5) 
|                            | Technology                  |         |      | 2003                |        |                 |         | 66,667  | (12)   |            |                 |        |           |         |        |        |              |  |  |          |  |   |       | 3,077  | (5) 
|Thomas J. McDonald          |                             |         | 2005 |                     |        |                 | 200,000 |         |        |            | 23,438          |         |           |         |        |         |              |  |  |           |  |   | 7,688 | (5)   
|                            | Executive Vice President    |         |      | 2004                |        |                 |         | 175,000 |        |            |                 | 166,000 |           |         |        |        |              |  |  |          |  |   |       | 7,368  | (5) 
|                            | and Chief Financial Officer |         |      | 2003                |        |                 |         | 62,500  | (13)   |            |                 |        |           |         |        |        |              |  |  |          |  |   |       | 2,884  | (5) 






| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | In connection with the closing of the merger with SkillSoft
    Corporation on September 6, 2002, our fiscal year end
    changed from December 31 to January 31.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| | (2) | Other compensation in the form of perquisites and other personal
    benefits has been omitted, in accordance with the rules of the
    SEC, in those instances in which the aggregate amount of such
    perquisites and other personal benefits constituted less than
    the lesser of $50,000 or 10% of the total annual salary and
    bonus for the executive officer in the fiscal year covered.                                                                                                                                                                                                                                                                                                 
|
| | (3) | We did not grant any stock appreciation rights or make any
    long-term incentive plan payouts during any fiscal year covered.
    This table excludes options granted by SkillSoft Corporation
    prior to the merger on September 6, 2002 to each of
    Messrs. Moran, Nine, Townsend and McDonald, which options
    were assumed by us in connection with the merger and, based on
    the merger exchange ratio of 1 share of SkillSoft
    Corporation common stock for 2.3674 of our ordinary shares of
    the Company, are exercisable to purchase an aggregate of
    1,657,179, 1,065,329, 946,959 and 946,959 ordinary shares,
    respectively, at an exercise price of $4.06 per share.
|
| | (4) | Mr. Moran has served as our Chief Executive Officer since
    the closing of our merger with SkillSoft Corporation on
    September 6, 2002, and, therefore, the salary reported on
    this table for 2002 reflects salary paid to Mr. Moran from
    such date through January 31, 2003.                                                                                                                                                                                                                                                                                                                                                                                                              
|
| | (5) | Consists of amounts paid as accrued vacation time.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| | (6) | Consists of amounts paid as an accommodation allowance (see
    Employment Agreements  Gregory M. Priests
    Employment Agreement).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

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| |     |                                                                                                                                                                                                                                                                                                                             
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (7) | Consists of amounts paid as car allowances.                                                                                                                                                                                                                                                                                 
|
| | (8) | Consists of amounts paid as a bonus earned and approved prior to
    the merger with SkillSoft Corporation on September 6, 2002.                                                                                                                                                                                            
|
| | (9) | Consists of $60,000 paid to Mr. Priest as an accommodation
    allowance (see Employment Agreements  Gregory
    M. Priests Employment Agreement) and a total of
    $77,917 paid to Mr. Priest as a non-recoverable advance
    against bonuses on a monthly basis from January 1, 2002
    through September 30, 2002.



|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Mr. Nine served as the Companys Executive Vice
    President, Global Sales and Marketing and General Manager,
    Content Solutions Division, from the closing of our merger with
    SkillSoft Corporation on September 6, 2002 until being
    appointed Chief Operating Officer in February 2004, and,
    therefore, the salary reported on this table for 2002 reflects
    salary paid to Mr. Nine from such date through
    January 31, 2003.
|    
|(11) | Consists of $69,153 paid to Mr. Darcy in connection with
    his relocation to Nashua, New Hampshire and $23,077 paid to
    Mr. Darcy as accrued vacation time.                                                                                                                                                                                                                                                                                      
|    
|(12) | Mr. Townsend has served as our Executive Vice President,
    Technology, since the closing of our merger with SkillSoft
    Corporation on September 6, 2002, and, therefore, the
    salary reported on this table reflects salary paid to
    Mr. Townsend from such date through January 31, 2003.                                                                                                                                                 
|    
|(13) | Mr. McDonald has served as our Executive Vice President and
    Chief Financial Officer since the closing of our merger with
    SkillSoft Corporation on September 6, 2002, and, therefore,
    the salary reported on this table reflects salary paid to
    Mr. McDonald from such date through January 31, 2003.                                                                                                                                  

Share Option Grants Table.


Fiscal Year-End Option Value Table.


|                   |  |             |         |  |             |                           |                             |             |                      |                         |               |  |  |             |         |  |               |   |         |  |  |   |           | 
|------------------ |  | ----------- | ------- |  | ----------- | ------------------------- | --------------------------- | ----------- | -------------------- | ----------------------- | ------------- |  |  | ----------- | ------- |  | ------------- | - | ------- |  |  | - | --------- | 
|                   |  |             |         |  |             | Number of Ordinary Shares |                             |             | Value of Unexercised |                        
|                   |  | Number of   |         |  |             |                           | Underlying Unexercised      |             |                      | In-the-Money Options at |              
|                   |  | Shares      |         |  |             |                           | Options at January 31, 2005 |             |                      | January 31, 2005(2)     |              
|                   |  | Acquired on |         |  | Value       |                           |                             |             |                      |                         |               | 
|Name               |  | Exercise    |         |  | Realized(1) |                           |                             | Exercisable |                      |                         | Unexercisable |  |  | Exercisable |         |  | Unexercisable |  
|                   |  |             |         |  |             |                           |                             |             |                      |                         |               |  |  |             |         |  |               |  
|Charles E. Moran   |  |             | 649,017 |  |             | $                         | 4,488,388                   |             |                      |                         | 930,319       |  |  |             | 774,338 |  |               | $ | 324,932 |  |  | $ | 629,728   | 
|Gregory M. Priest  |  |             | 250,000 |  |             |                           | 2,419,070                   |             |                      |                         | 2,055,721     |  |  |             | 610,938 |  |               |   | 740,135 |  |  |   | 1,050,813 | 
|Colm M. Darcy      |  |             | 131,979 |  |             |                           | 743,808                     |             |                      |                         | 179,658       |  |  |             | 181,876 |  |               |   | 101,790 |  |  |   | 241,792   | 
|Jerald A. Nine Jr. |  |             | 328,476 |  |             |                           | 1,999,244                   |             |                      |                         | 535,045       |  |  |             | 480,877 |  |               |   | 346,916 |  |  |   | 404,824   | 
|Mark A. Townsend   |  |             | 212,808 |  |             |                           | 1,065,594                   |             |                      |                         | 556,596       |  |  |             | 414,294 |  |               |   | 496,453 |  |  |   | 359,844   | 
|Thomas J. McDonald |  |             | 0       |  |             |                           | 0                           |             |                      |                         | 769,404       |  |  |             | 414,294 |  |               |   | 549,236 |  |  |   | 359,844   | 






|    |                                                                                                                                                                                                                                                                                                                                                                                         
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The value realized upon exercise is the excess of the fair
    market value (determined on the basis of the closing price per
    share of our ADSs on the NASDAQ National Market) of the
    underlying ordinary shares on the date of exercise over the
    exercise price of the option multiplied by the number of
    ordinary shares acquired upon exercise.                      
|   
|(2) | The value of the in-the-money options is the excess of the fair
    market value (determined on the basis of the closing price per
    share of our ADSs on the NASDAQ National Market) of the
    underlying ordinary shares on January 31, 2005
    ($5.02 per share) over the exercise price of the option
    multiplied by the number of ordinary shares underlying the
    option.

Employment Agreements


Charles E. Morans Employment Agreement.


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Thomas J. McDonalds Employment Agreement.


Gregory M. Priests Employment Agreement.


Colm M. Darcys Employment Agreement.


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Jerald A. Nines Employment Agreement.


Mark A. Townsends Employment Agreement.


Compensation Committee Interlocks and Insider
Participation




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Directors Compensation













|         |                                                                                                   
|-------- | --------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial Owners and
    Management and Related Stockholder Matters





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|                                                                         |  |      |            |                      |                  |  |      |   
|------------------------------------------------------------------------ |  | ---- | ---------- | -------------------- | ---------------- |  | ---- | --
|                                                                         |  |      |            | Amount and Nature of |                 
|                                                                         |  |      |            | Beneficial Ownership |                 
|                                                                         |  |      |            |                      |                 
|Name and Address Owner of Beneficial                                     |  | ADSs |            |                      | Percentage Owned | 
|                                                                         |  |      |            |                      |                  | 
|5% Shareholders                                                          |  |      |            |                      |                  |  |      |   
|Columbia Wanger Asset Management, L.P.(1)                                |  |      | 21,799,500 |                      |                  |  | 20.5 | % 
|Warburg, Pincus Ventures, L.P.(2)                                        |  |      | 13,279,987 |                      |                  |  | 12.5 | % 
|Transamerica Investment Management, LLC(3)                               |  |      | 10,481,969 |                      |                  |  | 9.9  | %%
|WestField Capital Management(4)                                          |  |      | 8,698,902  |                      |                  |  | 8.2  | % 
|Cramer Rosenthal McGlynn, LLC(5)                                         |  |      | 5,230,550  |                      |                  |  | 4.9  | % 
|Directors                                                                |  |      |            |                      |                  |  |      |   
|Charles E. Moran(6)                                                      |  |      | 2,417,265  |                      |                  |  | 2.3  | % 
|Gregory M. Priest(7)                                                     |  |      | 2,210,630  |                      |                  |  | 2.0  | % 
|James S. Krzywicki(8)                                                    |  |      | 143,000    |                      |                  |  | *    |   
|Ferdinand von Prondzynski(9)                                             |  |      | 26,260     |                      |                  |  | *    |   
|P. Howard Edelstein(10)                                                  |  |      | 15,000     |                      |                  |  | *    |   
|Stewart K.P. Gross(11)                                                   |  |      | 15,000     |                      |                  |  | *    |   
|William F. Meagher, Jr(12)                                               |  |      | 7,250      |                      |                  |  | *    |   
|Named Executive Officers                                                 |  |      |            |                      |                  |  |      |   
|Mark A. Townsend(13)                                                     |  |      | 1,163,187  |                      |                  |  | 1.1  | % 
|Jerald A. Nine(14)                                                       |  |      | 1,035,979  |                      |                  |  | 1.0  | % 
|Thomas J. McDonald(15)                                                   |  |      | 939,317    |                      |                  |  | *    |   
|Colm M. Darcy(16)                                                        |  |      | 221,116    |                      |                  |  | *    |   
|All current directors and executive officers As a group
    (11 persons) |  |      | 8,194,000  |                      |                  |  | 7.3  | % 






| |   |             
| | - | ------------
| | * | Less than 1%



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | On February 7, 2005, Columbia Wanger Asset Management, L.P.
    (WAM), WAM Acquisition GP, Inc. (WAM GP)
    and Columbia Acorn Trust (Acorn) filed Amendment
    No. 4 to Schedule 13G with the SEC reporting
    beneficial ownership and shared voting and dispositive power
    with respect to 21,799,500 ADSs for WAM and WAM GP and
    18,125,900 ADSs for Acorn, consisting of shares beneficially
    owned by WAM, WAM GP and Acorn; the following information is
    reported in reliance on such filing. WAM is an Investment
    Adviser registered under section 203 of the Investment
    Advisors Act of 1940 and reports ADSs acquired on behalf of
    discretionary clients. Acorn is a discretionary client of WAM.
    WAM GP is the general partner of WAM. WAM, WAM GP and Acorn file
    jointly pursuant to a Joint Filing Agreement dated
    February 7, 2005 among WAM, WAM GP and Acorn. The address
    of WAM, WAM GP and Acorn is 227 West Monroe Street,
    Suite 3000, Chicago, Illinois 60606.
|
| | (2) | On September 16, 2002, Warburg Pincus Ventures, L.P.
    (WPV), Warburg Pincus & Co.
    (WP) and Warburg Pincus LLC (WP LLC)
    filed a Schedule 13D with the SEC reporting beneficial
    ownership and shared voting and dispositive power with respect
    to 13,279,987 ADSs, consisting of shares beneficially owned by
    WPV, WP and WP LLC; the following information is reported in
    reliance on such filing. WP is the sole general partner of WPV.
    WPV is managed by WP LLC. The address for WPV is 466 Lexington
    Avenue, 10th Floor, New York, New York 10017.                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| | (3) | On July 8, 1004, Transamerica Investment Management, LLC
    (TIM) filed Amendment No. 3 to
    Schedule 13G with the SEC reporting beneficial ownership
    and shared voting and dispositive power with respect to
    10,481,969 ADSs; the following information is reported in
    reliance on such filing. The                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

59



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| |  |                                                                                                                                                                                                                                                                                                                                                                                                
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Amendment No. 2 to Schedule 13G filed with the SEC was
    filed erroneously with respect to SkillSoft Corporation rather
    than SkillSoft PLC. TIM is deemed to be the beneficial owner
    pursuant to separate arrangements whereby TIM acts as investment
    adviser to certain individuals and entities. The address of TIM
    is 1150 S. Olive Street, Los Angeles, California 90015.



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (4) | On February 11, 2005, Westfield Capital Management, Co.,
    LLC (Westfield) filed Amendment No. 1 to
    Schedule 13G with the SEC reporting beneficial ownership
    with respect to 8,698,902 ADSs, consisting of 7,652,502 ADSs for
    which Westfield has sole voting power and 8,698,902 ADSs for
    which Cramer has sole dispositive power. The Amendment
    No. 1 to Schedule 13G filing with the SEC was filed
    erroneously with respect to SkillSoft Corporation rather than
    SkillSoft PLC. Westfield is an Investment Adviser registered in
    accordance with (S)240.13d-1(b) (1) (ii) (E). The address
    of Westfield is One Financial Center, Boston, Massachusetts
    02111.                                                                                                                                                                                    
|
| | (5) | On February 11, 2005, Cramer Rosenthal McGlynn, LLC
    (Cramer) filed Amendment No. 2 to
    Schedule 13G with the SEC reporting beneficial ownership
    with respect to 5,230,550 ADSs, consisting of 2,326,050 ADSs for
    which Cramer has sole voting power, 2,506,350 ADSs for which
    Cramer has sole dispositive power, 2,654,500 ADSs for which
    Cramer has shared voting power and 2,724,200 ADSs for which
    Cramer has shared dispositive power; the following information
    is reported in reliance on such filing. The Amendment No. 1
    to Schedule 13G filing with the SEC was filed erroneously
    with respect to SkillSoft Corporation rather than SkillSoft PLC.
    Cramer is an Investment Adviser registered under
    section 203 of the Investment Advisors Act of 1940. The
    address of Cramer is 520 Madison Avenue, New York, New York
    10022.
|
| | (6) | Consists of 1,127,602 ADSs issuable upon exercise of share
    options held by Mr. Moran, 11 ADSs held by
    Mr. Morans wife, 2,367 ADSs held in a family trust of
    which Mr. Moran is a trustee, and 1,287,285 ADSs
    beneficially owned by Mr. Morans wife, as trustee of
    various trusts for the benefit of Mr. Morans
    children. Mr. Moran disclaims beneficial ownership of the
    shares held in trust.                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| | (7) | Includes 2,199,471 ADSs issuable upon exercise of share options
    held by Mr. Priest.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| | (8) | Includes 140,000 ADSs issuable upon exercise of share options
    held by Mr. Krzywicki.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| | (9) | Includes 26,250 ADSs issuable upon exercise of share options
    held by Dr. von Prondzynski.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   



|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Represents 15,000 ADSs issuable upon exercise of share options
    held by Mr. Edelstein.                                                                                                                                                                                                                                                                                                                                                                                              
|    
|(11) | Consists of 15,000 ADSs issuable upon exercise of share options
    held by Mr. Gross. Mr. Gross, a director, is the
    former managing director and member of WP LLC and a former
    general partner of WP. Mr. Gross has a pecuniary interest
    in certain shares held by WP, and disclaims beneficial ownership
    of the WP shares. See Note 2 of this table.
    Mr. Grosss address is c/o Lightyear Capital LLC,
    375 Park Avenue, 11th Floor, New York, New York 10152.
|    
|(12) | Includes 6,250 ADSs issuable upon exercise of share options held
    by Mr. Meagher.                                                                                                                                                                                                                                                                                                                                                                                                   
|    
|(13) | Includes 655,236 ADSs issuable upon exercise of share options
    held by Mr. Townsend and 59,185 ADSs beneficially owned by
    Mr. Townsends wife as trustee of the MCM Trust.
    Mr. Townsend disclaims beneficial ownership of the shares
    held in trust                                                                                                                                                                                                                      
|    
|(14) | Includes 653,414 ADSs issuable upon exercise of share options
    held by Mr. Nine and 332,244 ADSs held by
    Mr. Nines wife as trustee of the Kimberly M. Nine
    Revocable Trust. Mr. Nine disclaims beneficial ownership of
    the shares held in trust.                                                                                                                                                                                                                       
|    
|(15) | Includes 868,044 ADSs issuable upon exercise of share options
    held by Mr. McDonald, 1,953 ADSs beneficially owned by
    Mr. McDonalds wife, as trustee for the benefit of
    Mr. McDonalds family and 3,906 owned by
    Mr. McDonalds daughters. Mr. McDonald disclaims
    beneficial ownership of the shares held in trust and by his
    daughters.                                                                                                                       
|    
|(16) | Represents 221,116 ADSs issuable upon exercise of share options
    held by Mr. Darcy.                                                                                                                                                                                                                                                                                                                                                                                                 

60



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##### Table of Contents



Equity Compensation Plan Information




|                                                           |  |                         |            |     |                               |                            |                       |                         |  |  |           |    
|---------------------------------------------------------- |  | ----------------------- | ---------- | --- | ----------------------------- | -------------------------- | --------------------- | ----------------------- |  |  | --------- | ---
|                                                           |  | (a)                     |            |     | (b)                           |                            |                       | (c)                     | 
|                                                           |  |                         |            |     |                               | Number of Shares Remaining |                      
|                                                           |  |                         |            |     |                               | Available for Future       |                      
|                                                           |  | Number of Shares to be  |            |     |                               |                            | Issuance Under Equity |                        
|                                                           |  | Issued Upon Exercise of |            |     | Weighted-Average Exercise     |                            |                       | Compensation Plans      | 
|                                                           |  | Outstanding Options,    |            |     | Price of Outstanding Options, |                            |                       | (Excluding Securities   | 
|Plan Category(1)                                           |  | Warrants and Rights     |            |     | Warrants and Rights           |                            |                       | Reflected in Column(a)) | 
|                                                           |  |                         |            |     |                               |                            |                       |                         | 
|Equity compensation plans Approved by security holders     |  |                         | 5,807,310  | (2) |                               | $                          | 8.61                  | (2)                     |  |  | 98,750    |    
|Equity compensation plans Not approved by security holders |  |                         | 4,786,918  | (3) |                               | $                          | 12.54                 |                         |  |  | 6,442,034 | (4)
|Total                                                      |  |                         | 10,594,228 |     |                               | $                          | 10.39                 |                         |  |  | 6,540,784 |    






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | This table excludes an aggregate of 8,382,274 ordinary shares
    issuable upon exercise of options that we assumed in connection
    with its merger with SkillSoft Corporation. The weighted average
    exercise price of the excluded options is $12.63 per share.
    We assumed the SkillSoft Corporation 1998 Stock Incentive Plan,
    1999 Non-Employee Director Stock Option Plan, 2001 Stock
    Incentive Plan and Books24x7.com, Inc. 1994 Stock Option Plan
    only insofar as they related to options outstanding under the
    plans at the time of the merger, and we may not grant any future
    options under any of the plans.                                                                                                                                                                                                                                                      
|   
|(2) | Excludes ordinary shares issuable under our 1995 Employee Stock
    Purchase Plan in connection with the current offering period;
    such ordinary shares are included in column (c).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   
|(3) | Consists of 4,781,869 ordinary shares subject to outstanding
    options under our 1996 Supplemental Stock Plan (the 1996
    Plan), 4,961 ordinary shares subject to outstanding
    options under the ForeFront Group, Inc. Amended and Restated
    1996 Stock Option Plan (the ForeFront 1996 Plan), 88
    ordinary shares subject to outstanding options under the
    Knowledge Well Group Limited 1998 Share Option Plan (the
    Knowledge Well Group 1998 Plan) and 0 ordinary
    shares subject to outstanding options under the Knowledge Well
    Limited 1998 Share Option Plan (the Knowledge Well
    1998 Plan).                                                                                                                                                                                                                                                                
|   
|(4) | Consists of 5,245,437 ordinary shares available for issuance
    under the 1996 Plan, 2 ordinary shares available for issuance
    under the ForeFront Group, Inc. 1996 Non-employee
    Directors Stock Option Plan (the ForeFront
    1996 Director Plan), 337,862 ordinary shares
    available for issuance under the ForeFront 1996 Plan, 624,464
    ordinary shares available for issuance under the Knowledge Well
    Group 1998 Plan and 234,269 ordinary shares available for
    issuance under the Knowledge Well 1998 Plan. A description of
    the material terms of the 1996 Plan, the ForeFront
    1996 Director Plan, the ForeFront 1996 Plan, the Knowledge
    Well 1998 Plan and the Knowledge Well Group 1998 Plan is
    included in Note 9 to the consolidated financial statements
    included in this Annual Report on Form 10-K and
    incorporated herein by reference.

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##### Table of Contents








|         |                                               
|-------- | ----------------------------------------------
|Item 13. | Certain Relationships and Related Transactions








|         |                                       
|-------- | --------------------------------------
|Item 14. | Principal Accountant Fees and Services

Auditors Fees




|                      |  |                   |           |  |                   |   |           | 
|--------------------- |  | ----------------- | --------- |  | ----------------- | - | --------- | 
|                      |  | Fiscal Year Ended |           |  | Fiscal Year Ended |  
|                      |  | January 31,       |           |  | January 31,       |  
|Fee Category          |  | 2005              |           |  | 2004              |  
|                      |  |                   |           |  |                   |  
|Audit Fees(1)         |  | $                 | 1,775,600 |  |                   | $ | 5,458,600 | 
|Audit-Related Fees(2) |  |                   | 27,000    |  |                   |   | 44,000    | 
|Tax Fees(3)           |  |                   | 782,500   |  |                   |   | 1,161,500 | 
|All Other Fees(4)     |  |                   | 0         |  |                   |   | 3,500     | 
|                      |  |                   |           |  |                   |  
|Total Fees            |  | $                 | 2,585,100 |  |                   | $ | 6,667,600 | 
|                      |  |                   |           |  |                   |  






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Audit fees consist of fees for the audit of our financial
    statements, the audit of our internal control over financial
    reporting as set forth in Section 404 of the Sarbanes-Oxley
    Act, the review of the interim financial statements in our
    quarterly reports on Form 10-Q, the audit of the
    restatement of the historical SmartForce financial statements
    and other professional services provided or accrued for in
    connection with statutory and regulatory filings or engagements
    for the fiscal years ended January 31, 2005 and
    January 31, 2004.                                                                                                             
|   
|(2) | Audit-related fees consist of fees for assurance and related
    services that are reasonably related to the performance of the
    audit and the review of our financial statements and which are
    not reported under Audit Fees. These services relate
    to accounting consultations and employee benefit plan audits.                                                                                                                                                                                                                                                                                                                                                                           
|   
|(3) | Tax fees consist of fees for tax compliance, tax advice and tax
    planning services. Tax compliance services, which relate to
    preparation of original and amended tax returns and claims for
    refunds, accounted for $292,500 of the total tax fees billed in
    the fiscal year ended January 31, 2005 and $578,000 of the
    total tax fees billed in the fiscal year ended January 31,
    2004. Tax advice and tax planning services relate to a transfer
    pricing analysis, tax advice, assistance with tax audits and
    appeals, tax advice related to mergers and acquisitions,
    employee benefit plans and requests for rulings or technical
    advice for taxing authorities.
|   
|(4) | All other fees for the fiscal year ended January 31, 2004
    consist of corporate secretarial services.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

Pre-approval Policies and Procedures








62



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##### Table of Contents






PART IV







|         |                                           
|-------- | ------------------------------------------
|Item 15. | Exhibits and Financial Statement Schedules





| |    |                                                                                                                                                 
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. | Financial Statements. The following documents are filed
    as Appendix B hereto and are included as part of
    this Annual Report on Form 10K:



















| |    |                                                                                                                                                                                                            
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2. | Financial Statement Schedules. All Financial Statement
    Schedules have been omitted since they are either not required,
    not applicable, or the information is otherwise included in this
    report.
|
| | 3. | Exhibits. The Exhibits listed in the Exhibit Index
    immediately preceding such Exhibits are filed as part of and
    incorporated by reference in this Form 10-K.                                       

63



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##### Table of Contents






SIGNATURES






| |                                     
| | ------------------------------------
| | SkillSoft Public Limited
    Company
| | (Registrant)                        



| |     |                     
| | --- | --------------------
| | By: | /s/ Charles E. Moran

| |                                      
| | -------------------------------------
| |                                      
| | Charles E. Moran                     
| | President and Chief Executive Officer





|                                                               |  |                                                                                      |  |                |  | 
|-------------------------------------------------------------- |  | ------------------------------------------------------------------------------------ |  | -------------- |  | 
|Signature                                                      |  | Title                                                                                |  | Date          
|                                                               |  |                                                                                      |  |               
|                                                              
|/s/ Charles E. MoranCharles
    E. Moran                       |  | President and Chief Executive Officer and Director
    (Principal Executive Officer) |  | April 15, 2005
|                                                              
|/s/ Thomas J. McDonaldThomas
    J. McDonald                   |  | Chief Financial Officer
    (Principal Financial and
    Accounting Officer)         |  | April 15, 2005
|                                                              
|/s/ Gregory M. PriestGregory
    M. Priest                     |  | Director                                                                             |  | April 15, 2005
|                                                              
|/s/ P. Howard EdelsteinP.
    Howard Edelstein                 |  | Director                                                                             |  | April 15, 2005
|                                                              
|/s/ Stewart K. P. GrossStewart
    K. P. Gross                 |  | Director                                                                             |  | April 15, 2005
|                                                              
|/s/ James S. KrzywickiJames
    S. Krzywicki                   |  | Director                                                                             |  | April 15, 2005
|                                                              
|/s/ Ferdinand von
    ProndzynskiFerdinand
    von Prondzynski |  | Director                                                                             |  | April 15, 2005
|                                                              
|/s/ William F. Meagher,
    Jr.William
    F. Meagher, Jr.     |  | Director                                                                             |  | April 15, 2005

64



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##### Table of Contents



APPENDIX A


SELECTED FINANCIAL DATA




|                                             |                                          |                                       |         |         |             |   |         |             |        |   |             |          |        |             |          |          |         |   |         |         |         | 
|-------------------------------------------- | ---------------------------------------- | ------------------------------------- | ------- | ------- | ----------- | - | ------- | ----------- | ------ | - | ----------- | -------- | ------ | ----------- | -------- | -------- | ------- | - | ------- | ------- | ------- | 
|                                             |                                          | Year Ended                            |         |         | Year Ended  |   |         | Year Ended  |        |   | Year Ended  |          |        | Year Ended  |         
|                                             |                                          | January 31,                           |         |         | January 31, |   |         | January 31, |        |   | January 31, |          |        | January 31, |         
|                                             |                                          | 2001                                  |         |         | 2002        |   |         | 2003(1)     |        |   | 2004        |          |        | 2005        |         
|                                             |                                          |                                       |         |         |             |   |         |             |        |   |             |          |        |             |         
|                                             |                                          | (In thousands, except per share data) |        
|Statement of Operations Data:                |                                          |                                       |         |         |             |   |         |             |        |   |             |          |        |             |          |          |         |   |         |        
|Revenue                                      |                                          | $                                     | 19,297  |         |             | $ | 44,271  |             |        | $ | 101,470     |          |        | $           | 193,475  |          |         | $ | 212,300 |        
|Cost of revenue                              |                                          |                                       | 1,506   |         |             |   | 2,552   |             |        |   | 11,548      |          |        |             | 18,397   |          |         |   | 21,724  |        
|                                             |                                          |                                       |         |         |             |   |         |             |        |   |             |          |        |             |         
|                                             |                                          | Gross profit                          |         |         | 17,791      |   |         |             | 41,719 |   |             |          | 89,922 |             |          |          | 175,078 |   |         |         | 190,576 | 
|Operating expenses:                          |                                          |                                       |         |         |             |   |         |             |        |   |             |          |        |             |          |          |         |   |         |        
|                                             | Research and development                 |                                       |         | 14,047  |             |   |         | 17,698      |        |   |             | 29,104   |        |             |          | 53,627   |         |   |         | 45,575  |        
|                                             | Selling and marketing                    |                                       |         | 20,946  |             |   |         | 27,602      |        |   |             | 52,691   |        |             |          | 87,532   |         |   |         | 93,486  |        
|                                             | General and administrative               |                                       |         | 5,776   |             |   |         | 7,199       |        |   |             | 17,914   |        |             |          | 27,883   |         |   |         | 25,162  |        
|                                             | Litigation settlement                    |                                       |         |        |             |   |         |            |        |   |             |         |        |             |          | 93,750   |         |   |         |        |        
|                                             | Amortization of stock-based compensation |                                       |         | 814     |             |   |         | 793         |        |   |             | 1,634    |        |             |          | 1,986    |         |   |         | 1,191   |        
|                                             | Amortization of intangible assets        |                                       |         |        |             |   |         | 27          |        |   |             | 4,683    |        |             |          | 10,072   |         |   |         | 9,575   |        
|                                             | Impairment charge                        |                                       |         |        |             |   |         |            |        |   |             | 250,107  |        |             |          |         |         |   |         | 19,268  |        
|                                             | Restructuring                            |                                       |         |        |             |   |         |            |        |   |             | 14,179   |        |             |          | 1,857    |         |   |         | 13,361  |        
|                                             | Restatement:                             |                                       |         |         |             |   |         |             |        |   |             |          |        |             |          |          |         |   |         |         |        
|                                             |                                          | SEC Investigation                     |         |         |            |   |         |             |       |   |             |          |       |             |          |          | 1,898   |   |         |         | 2,182   | 
|                                             |                                          | Other professional fees               |         |         |            |   |         |             |       |   |             |          | 5,107  |             |          |          | 14,473  |   |         |         | 320     | 
|                                             |                                          |                                       |         |         |             |   |         |             |        |   |             |          |        |             |         
|Total operating expenses                     |                                          |                                       | 41,583  |         |             |   | 53,319  |             |        |   | 375,419     |          |        |             | 293,078  |          |         |   | 210,120 |        
|                                             |                                          |                                       |         |         |             |   |         |             |        |   |             |          |        |             |         
|Operating loss                               |                                          |                                       | (23,792 | )       |             |   | (11,600 | )           |        |   | (285,497    | )        |        |             | (118,000 | )        |         |   | (19,544 | )      
|                                             | Other income (expense), net              |                                       |         | 6       |             |   |         | 150         |        |   |             | (282     | )      |             |          | 786      |         |   |         | (692    | )      
|                                             | Gain on sale of investments, net         |                                       |         |        |             |   |         |            |        |   |             |         |        |             |          | 3,682    |         |   |         |        |        
|                                             | Interest income, net                     |                                       |         | 1,826   |             |   |         | 1,810       |        |   |             | 2,165    |        |             |          | 787      |         |   |         | 754     |        
|                                             |                                          |                                       |         |         |             |   |         |             |        |   |             |          |        |             |         
|Loss before provision for income taxes       |                                          |                                       | (21,960 | )       |             |   | (9,640  | )           |        |   | (283,614    | )        |        |             | (112,745 | )        |         |   | (19,482 | )      
|                                             | Provision for income taxes               |                                       |         |        |             |   |         |            |        |   |             | (383     | )      |             |          | (529     | )       |   |         | 631     |        
|                                             |                                          |                                       |         |         |             |   |         |             |        |   |             |          |        |             |         
|                                             | Net loss                                 |                                       |         | (21,960 | )           |   |         | (9,640      | )      |   |             | (283,997 | )      |             |          | (113,274 | )       |   |         | (20,113 | )      
|Preferred stock dividend                     |                                          |                                       |        |         |             |   |        |             |        |   |            |          |        |             |         |          |         |   |        |        
|                                             |                                          |                                       |         |         |             |   |         |             |        |   |             |          |        |             |         
|Net loss attributable to common shareholders |                                          | $                                     | (21,960 | )       |             | $ | (9,640  | )           |        | $ | (283,997    | )        |        | $           | (113,274 | )        |         | $ | (20,113 | )      
|                                             |                                          |                                       |         |         |             |   |         |             |        |   |             |          |        |             |         

A-1



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##### Table of Contents



|                       |                                                       |                                       |   |        |             |  |   |             |   |  |             |        |   |             |   |         |   |  |   |         |  
|---------------------- | ----------------------------------------------------- | ------------------------------------- | - | ------ | ----------- |  | - | ----------- | - |  | ----------- | ------ | - | ----------- | - | ------- | - |  | - | ------- | -
|                       |                                                       | Year Ended                            |   |        | Year Ended  |  |   | Year Ended  |   |  | Year Ended  |        |   | Year Ended  |  
|                       |                                                       | January 31,                           |   |        | January 31, |  |   | January 31, |   |  | January 31, |        |   | January 31, |  
|                       |                                                       | 2001                                  |   |        | 2002        |  |   | 2003(1)     |   |  | 2004        |        |   | 2005        |  
|                       |                                                       |                                       |   |        |             |  |   |             |   |  |             |        |   |             |  
|                       |                                                       | (In thousands, except per share data) |  
|Net loss per share(2): |                                                       |                                       |   |        |             |  |   |             |   |  |             |        |   |             |   |         |   |  |   |        
|                       | Basic and diluted loss per share                      |                                       | $ | (0.73  | )           |  | $ | (0.27       | ) |  | $           | (4.40  | ) |             | $ | (1.13   | ) |  | $ | (0.19   | )
|                       |                                                       |                                       |   |        |             |  |   |             |   |  |             |        |   |             |  
|                       | Basic and diluted weighted average shares outstanding |                                       |   | 29,990 |             |  |   | 35,324      |   |  |             | 64,472 |   |             |   | 100,115 |   |  |   | 105,134 |  
|                       |                                                       |                                       |   |        |             |  |   |             |   |  |             |        |   |             |  

|                                                  |  |                |        |  |             |   |         |             |  |   |             |  |  |             |         |   |  |   |         |  
|------------------------------------------------- |  | -------------- | ------ |  | ----------- | - | ------- | ----------- |  | - | ----------- |  |  | ----------- | ------- | - |  | - | ------- | -
|                                                  |  | As of          |        |  | As of       |   |         | As of       |  |   | As of       |  |  | As of       |        
|                                                  |  | January 31,    |        |  | January 31, |   |         | January 31, |  |   | January 31, |  |  | January 31, |        
|                                                  |  | 2001           |        |  | 2002        |   |         | 2003        |  |   | 2004        |  |  | 2005        |        
|                                                  |  |                |        |  |             |   |         |             |  |   |             |  |  |             |        
|                                                  |  | (In thousands) |       
|Balance Sheet Data:                               |  |                |        |  |             |   |         |             |  |   |             |  |  |             |         |   |  |   |         |  
|Cash, cash equivalents and short-term investments |  | $              | 23,907 |  |             | $ | 68,946  |             |  | $ | 125,031     |  |  | $           | 61,340  |   |  | $ | 54,927  |  
|Working capital (deficit)                         |  |                | 18,130 |  |             |   | 48,650  |             |  |   | 31,822      |  |  |             | (49,115 | ) |  |   | (46,754 | )
|Long-term investments & other assets              |  |                | 28     |  |             |   | 13,814  |             |  |   | 1,132       |  |  |             | 390     |   |  |   | 9,003   |  
|Total assets                                      |  |                | 38,624 |  |             |   | 153,458 |             |  |   | 378,137     |  |  |             | 342,378 |   |  |   | 303,497 |  
|Stockholders equity (deficit)                    |  |                | 19,668 |  |             |   | 113,750 |             |  |   | 191,087     |  |  |             | 85,758  |   |  |   | 84,919  |  






|    |                                                                                                                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The statement of operations data for the year ended
    January 31, 2003 includes the operating results of
    SkillSoft PLC for the post-September 6, 2002 period and a
    full year of operating results for Books24x7.com, Inc.
|   
|(2) | See Note 2(e) of the Notes to the Consolidated Financial
    Statements for the determination of shares used in computing
    basic and diluted net loss per common share.                                                         

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##### Table of Contents



APPENDIX B


FINANCIAL STATEMENTS


INDEX


|                                                                                                                                   |  |      |      | 
|---------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ---- | 
|                                                                                                                                   |  | Page |     
|                                                                                                                                   |  |      |     
|Reports of Independent Registered Public
    Accounting Firm                                                                       |  |      | B-2  | 
|Consolidated Balance Sheets as of
    January 31, 2004 and 2005                                                                    |  |      | B-4  | 
|Consolidated Statements of Operations for
    the Years Ended January 31, 2003, 2004 and 2005                                      |  |      | B-5  | 
|Consolidated Statements of
    Stockholders Equity and Comprehensive Loss for the Years
    Ended January 31, 2003, 2004 and 2005 |  |      | B-6  | 
|Consolidated Statements of Cash Flows for
    the Years Ended January 31, 2003, 2004 and 2005                                      |  |      | B-9  | 
|Notes to the Consolidated Financial
    Statements                                                                                 |  |      | B-10 | 

B-1



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##### Table of Contents






REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM















| |                       
| | ----------------------
| | /s/ Ernst & Young, LLP





B-2



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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




| |                                                                  
| | -----------------------------------------------------------------
| | To the Board of Directors and 
     Shareholders of SkillSoft PLC



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We have audited managements assessment, included in the
    accompanying Managements Report on Internal Control Over
    Financial Reporting, that SkillSoft PLC maintained effective
    internal control over financial reporting as of January 31,
    2005 based on criteria established in Internal
    Control  Integrated Framework issued by the Committee
    of Sponsoring Organizations of the Treadway Commission (the COSO
    criteria). SkillSoft PLCs management is responsible for
    maintaining effective internal control over financial reporting
    and for its assessment of the effectiveness of internal control
    over financial reporting. Our responsibility is to express an
    opinion on managements assessment and an opinion on the
    effectiveness of the companys internal control over
    financial reporting based on our audit.













| |                          
| | -------------------------
| | /s/ Ernst & Young
    LLP





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##### Table of Contents



SKILLSOFT PUBLIC LIMITED COMPANY AND SUBSIDIARIES





CONSOLIDATED BALANCE SHEETS


|                                           |                                                                                                                         |                                                                                                                                                                                                |         |          |         |   |         |          |         | 
|------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------- | -------- | ------- | - | ------- | -------- | ------- | 
|                                           |                                                                                                                         | January 31,                                                                                                                                                                                    |        
|                                           |                                                                                                                         |                                                                                                                                                                                                |        
|                                           |                                                                                                                         | 2004                                                                                                                                                                                           |         |          | 2005    |  
|                                           |                                                                                                                         |                                                                                                                                                                                                |         |          |         |  
|                                           |                                                                                                                         | (In thousands                                                                                                                                                                                  |        
|                                           |                                                                                                                         | except share data                                                                                                                                                                              |        
|                                           |                                                                                                                         | and per share data)                                                                                                                                                                            |        
|ASSETS                                     |                                                                                                                         |                                                                                                                                                                                                |         |          |         |   |         |         
|Current assets:                            |                                                                                                                         |                                                                                                                                                                                                |         |          |         |   |         |         
|                                           | Cash and cash equivalents                                                                                               |                                                                                                                                                                                                | $       | 41,929   |         |   | $       | 34,906   |        
|                                           | Short-term investments                                                                                                  |                                                                                                                                                                                                |         | 18,474   |         |   |         | 20,021   |        
|                                           | Accounts receivable, less reserves of approximately $1,071 and
    $1,383 as of January 31, 2004 and 2005, respectively |                                                                                                                                                                                                |         | 72,775   |         |   |         | 87,030   |        
|                                           | Prepaid expenses and other current assets                                                                               |                                                                                                                                                                                                |         | 24,759   |         |   |         | 22,659   |        
|                                           | Restricted cash                                                                                                         |                                                                                                                                                                                                |         | 25,981   |         |   |         | 994      |        
|                                           |                                                                                                                         |                                                                                                                                                                                                |         |          |         |  
|                                           |                                                                                                                         | Total current assets                                                                                                                                                                           |         |          | 183,918 |   |         |          | 165,610 | 
|Property and equipment, at cost:           |                                                                                                                         |                                                                                                                                                                                                |         |          |         |   |         |         
|                                           | Computer equipment                                                                                                      |                                                                                                                                                                                                |         | 17,913   |         |   |         | 23,900   |        
|                                           | Furniture and fixtures                                                                                                  |                                                                                                                                                                                                |         | 2,541    |         |   |         | 2,142    |        
|                                           | Leasehold improvements                                                                                                  |                                                                                                                                                                                                |         | 891      |         |   |         | 1,559    |        
|                                           |                                                                                                                         |                                                                                                                                                                                                |         |          |         |  
|                                           |                                                                                                                         |                                                                                                                                                                                                | 21,345  |          |         |   | 27,601  |         
|                                           | Less  accumulated depreciation and amortization                                                                        |                                                                                                                                                                                                |         | 14,898   |         |   |         | 18,464   |        
|                                           |                                                                                                                         |                                                                                                                                                                                                |         |          |         |  
|                                           |                                                                                                                         |                                                                                                                                                                                                | 6,447   |          |         |   | 9,137   |         
|Intangible assets:                         |                                                                                                                         |                                                                                                                                                                                                |         |          |         |   |         |         
|                                           | Acquired intangible assets, net                                                                                         |                                                                                                                                                                                                |         | 25,745   |         |   |         | 16,171   |        
|                                           | Goodwill                                                                                                                |                                                                                                                                                                                                |         | 125,878  |         |   |         | 103,576  |        
|                                           |                                                                                                                         |                                                                                                                                                                                                |         |          |         |  
|                                           |                                                                                                                         |                                                                                                                                                                                                | 151,623 |          |         |   | 119,747 |         
|Long-term investments                      |                                                                                                                         |                                                                                                                                                                                                | 266     |          |         |   | 8,943   |         
|Other assets                               |                                                                                                                         |                                                                                                                                                                                                | 124     |          |         |   | 60      |         
|                                           |                                                                                                                         |                                                                                                                                                                                                |         |          |         |  
|Total assets                               |                                                                                                                         | $                                                                                                                                                                                              | 342,378 |          |         | $ | 303,497 |         
|                                           |                                                                                                                         |                                                                                                                                                                                                |         |          |         |  
|                                          
|LIABILITIES AND STOCKHOLDERS EQUITY      
|Current liabilities:                       |                                                                                                                         |                                                                                                                                                                                                |         |          |         |   |         |         
|                                           | Accounts payable                                                                                                        |                                                                                                                                                                                                | $       | 6,588    |         |   | $       | 5,361    |        
|                                           | Accrued expenses                                                                                                        |                                                                                                                                                                                                |         | 92,117   |         |   |         | 66,995   |        
|                                           | Deferred revenue                                                                                                        |                                                                                                                                                                                                |         | 134,328  |         |   |         | 140,008  |        
|                                           |                                                                                                                         |                                                                                                                                                                                                |         |          |         |  
|                                           |                                                                                                                         | Total current liabilities                                                                                                                                                                      |         |          | 233,033 |   |         |          | 212,364 | 
|Long term liabilities                      |                                                                                                                         |                                                                                                                                                                                                | 23,587  |          |         |   | 6,214   |         
|Stockholders equity:                      |                                                                                                                         |                                                                                                                                                                                                |         |          |         |   |         |         
|                                           | Ordinary Shares,
    0.11 par
    value                                                                               |                                                                                                                                                                                                |         |          |         |   |         |          |        
|                                           |                                                                                                                         | Authorized  250,000,000 shares authorized at
    January 31, 2004 and 2005; 101,857,714 and 106,207,818
    issued and outstanding at January 31, 2004 and
    January 31, 2005, respectively |         |          | 11,031  |   |         |          | 11,617  | 
|                                           | Additional paid-in capital                                                                                              |                                                                                                                                                                                                |         | 538,493  |         |   |         | 559,052  |        
|                                           | Treasury stock, at cost, 443,757 ordinary shares at
    January 31, 2005                                                |                                                                                                                                                                                                |         |         |         |   |         | (2,523   | )      
|                                           | Accumulated deficit                                                                                                     |                                                                                                                                                                                                |         | (460,916 | )       |   |         | (481,029 | )      
|                                           | Deferred compensation                                                                                                   |                                                                                                                                                                                                |         | (2,404   | )       |   |         | (1,358   | )      
|                                           | Accumulated other comprehensive income (loss)                                                                           |                                                                                                                                                                                                |         | (446     | )       |   |         | (840     | )      
|                                           |                                                                                                                         |                                                                                                                                                                                                |         |          |         |  
|                                           |                                                                                                                         | Total stockholders equity                                                                                                                                                                     |         |          | 85,758  |   |         |          | 84,919  | 
|                                           |                                                                                                                         |                                                                                                                                                                                                |         |          |         |  
|Total liabilities and stockholders equity |                                                                                                                         | $                                                                                                                                                                                              | 342,378 |          |         | $ | 303,497 |         
|                                           |                                                                                                                         |                                                                                                                                                                                                |         |          |         |  



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##### Table of Contents



SKILLSOFT PUBLIC LIMITED COMPANY AND SUBSIDIARIES





CONSOLIDATED STATEMENTS OF OPERATIONS


|                                            |                                                              |                                       |          |          |       |   |          |          |        |   |         |         |       | 
|------------------------------------------- | ------------------------------------------------------------ | ------------------------------------- | -------- | -------- | ----- | - | -------- | -------- | ------ | - | ------- | ------- | ----- | 
|                                            |                                                              | Years Ended January 31,               |         
|                                            |                                                              |                                       |         
|                                            |                                                              | 2003                                  |          |          | 2004  |   |          | 2005     |       
|                                            |                                                              |                                       |          |          |       |   |          |          |       
|                                            |                                                              | (In thousands, except per share data) |         
|Revenue                                     |                                                              | $                                     | 101,470  |          |       | $ | 193,475  |          |        | $ | 212,300 |        
|Cost of revenue(1)                          |                                                              |                                       | 11,548   |          |       |   | 18,397   |          |        |   | 21,724  |        
|                                            |                                                              |                                       |          |          |       |   |          |          |       
|                                            | Gross profit                                                 |                                       |          | 89,922   |       |   |          | 175,078  |        |   |         | 190,576 |      
|Operating expenses:                         |                                                              |                                       |          |          |       |   |          |          |        |   |         |        
|Research and development(1)                 |                                                              |                                       | 29,104   |          |       |   | 53,627   |          |        |   | 45,575  |        
|Selling and marketing(1)                    |                                                              |                                       | 52,691   |          |       |   | 87,532   |          |        |   | 93,486  |        
|General and administrative(1)               |                                                              |                                       | 17,914   |          |       |   | 27,883   |          |        |   | 25,162  |        
|Litigation settlement                       |                                                              |                                       |         |          |       |   | 93,750   |          |        |   |        |        
|Amortization of stock-based compensation(1) |                                                              |                                       | 1,634    |          |       |   | 1,986    |          |        |   | 1,191   |        
|Amortization of intangible assets           |                                                              |                                       | 4,683    |          |       |   | 10,072   |          |        |   | 9,575   |        
|Impairment charge                           |                                                              |                                       | 250,107  |          |       |   |         |          |        |   | 19,268  |        
|Restructuring                               |                                                              |                                       | 14,179   |          |       |   | 1,857    |          |        |   | 13,361  |        
|Restatement:                                |                                                              |                                       |          |          |       |   |          |          |        |   |         |        
|                                            |                                                              | SEC investigation                     |          |          |      |   |          |          | 1,898  |   |         |         | 2,182 | 
|                                            |                                                              | Other professional fees               |          |          | 5,107 |   |          |          | 14,473 |   |         |         | 320   | 
|                                            |                                                              |                                       |          |          |       |   |          |          |       
|Total operating expenses                    |                                                              |                                       | 375,419  |          |       |   | 293,078  |          |        |   | 210,120 |        
|                                            |                                                              |                                       |          |          |       |   |          |          |       
|Operating loss                              |                                                              |                                       | (285,497 | )        |       |   | (118,000 | )        |        |   | (19,544 | )      
|                                            | Other (expense)/ income, net                                 |                                       |          | (282     | )     |   |          | 786      |        |   |         | (692    | )    
|                                            | Gain on sale of investments, net                             |                                       |          |         |       |   |          | 3,682    |        |   |         |        |      
|                                            | Interest income, net                                         |                                       |          | 2,165    |       |   |          | 787      |        |   |         | 754     |      
|                                            |                                                              |                                       |          |          |       |   |          |          |       
|Loss before provision for income taxes      |                                                              |                                       | (283,614 | )        |       |   | (112,745 | )        |        |   | (19,482 | )      
|                                            | Provision for income taxes                                   |                                       |          | 383      |       |   |          | 529      |        |   |         | 631     |      
|                                            |                                                              |                                       |          |          |       |   |          |          |       
|                                            | Net loss                                                     |                                       | $        | (283,997 | )     |   | $        | (113,274 | )      |   | $       | (20,113 | )    
|                                            |                                                              |                                       |          |          |       |   |          |          |       
|Net loss per share:                         |                                                              |                                       |          |          |       |   |          |          |        |   |         |        
|                                            | Basic and diluted loss per share                             |                                       | $        | (4.40    | )     |   | $        | (1.13    | )      |   | $       | (0.19   | )    
|                                            |                                                              |                                       |          |          |       |   |          |          |       
|                                            | Basic and diluted weighted average common shares outstanding |                                       |          | 64,472   |       |   |          | 100,115  |        |   |         | 105,134 |      
|                                            |                                                              |                                       |          |          |       |   |          |          |       






|    |                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------
|(1) | The following summarizes the departmental allocation of the
    amortization of stock-based compensation (in thousands):

|                           |  |      |       |  |      |   |       |      |  |   |       | 
|-------------------------- |  | ---- | ----- |  | ---- | - | ----- | ---- |  | - | ----- | 
|                           |  | 2003 |       |  | 2004 |   |       | 2005 | 
|                           |  |      |       |  |      |   |       |      | 
|Cost of revenue            |  | $    | 4     |  |      | $ | 4     |      |  | $ |      | 
|Research and development   |  |      | 704   |  |      |   | 772   |      |  |   | 266   | 
|Selling and marketing      |  |      | 416   |  |      |   | 446   |      |  |   | 879   | 
|General and administrative |  |      | 510   |  |      |   | 764   |      |  |   | 46    | 
|                           |  |      |       |  |      |   |       |      | 
|                           |  | $    | 1,634 |  |      | $ | 1,986 |      |  | $ | 1,191 | 
|                           |  |      |       |  |      |   |       |      | 



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##### Table of Contents



SKILLSOFT PUBLIC LIMITED COMPANY AND SUBSIDIARIES





CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY AND
COMPREHENSIVE LOSS


(In thousands except share and per share data)


|                                                                                                          |  |                 |   |              |          |              |           |  |  |       |   |           |            |   |       |       |  |         |             |  |          |            |       |             |       |   |              |       |  |              |       |  |               |   |          |               |  |   |               |   |  |   |      |   |  |   |       |   |  |   |          |   |  |   |          |  
|--------------------------------------------------------------------------------------------------------- |  | --------------- | - | ------------ | -------- | ------------ | --------- |  |  | ----- | - | --------- | ---------- | - | ----- | ----- |  | ------- | ----------- |  | -------- | ---------- | ----- | ----------- | ----- | - | ------------ | ----- |  | ------------ | ----- |  | ------------- | - | -------- | ------------- |  | - | ------------- | - |  | - | ---- | - |  | - | ----- | - |  | - | -------- | - |  | - | -------- | -
|                                                                                                          |  |                 |   |              |          | Class A      |           |  |  |       |   |           |            |   |       |       |  |         |             |  |          |            |       |            
|                                                                                                          |  |                 |   | Common Stock |          | Common Stock |           |  |  |       |   |           |            |   |       |       |  |         |             |  |          |            |      
|                                                                                                          |  | Convertible     |   |              |          |              |           |  |  |       |   |           |            |   |       |       |  |         |             |  |          |            |      
|                                                                                                          |  | Preferred Stock |   |              |          |              |           |  |  |       |   |           |            |   |       | Notes |  |         | Accumulated |  |          |            |       |            
|                                                                                                          |  |                 |   |              |          | $.001        |           |  |  | 0.11 |   |           | Additional |   |       |       |  |         |             |  |          | Receivable |       |             | Other |   |              | Total |  |              | Total | 
|                                                                                                          |  | Number of       |   |              | Carrying |              | Number of |  |  | Par   |   | Number of |            |   | Par   |       |  | Paid-In |             |  | Treasury |            |       | Accumulated |       |   | Deferred     |       |  | from         |       |  | Comprehensive |   |          | Stockholders |  |   | Comprehensive |  
|                                                                                                          |  | Shares          |   |              | Value    |              | Shares    |  |  | Value |   | Shares    |            |   | Value |       |  | Capital |             |  | Stock    |            |       | Deficit     |       |   | Compensation |       |  | Stockholders |       |  | Income        |   |          | Equity        |  |   | Loss          |  
|                                                                                                          |  |                 |   |              |          |              |           |  |  |       |   |           |            |   |       |       |  |         |             |  |          |            |       |             |       |   |              |       |  |              |       |  |               |   |          |               |  |   |               |  
|BALANCE, JANUARY 31, 2002                                                                                 |  |                 |  |              |          | $            |          |  |  |       |  |           |            | $ |      |       |  |         | 40,988,314  |  |          | $          | 4,348 |             |       | $ | 175,902      |       |  |              |      |  |               | $ | (63,645  | )             |  | $ | (2,563        | ) |  | $ | (338 | ) |  | $ | 46    |   |  | $ | 113,750  |   |  |   |          |  
|Exercise of stock options                                                                                 |  |                 |  |              |          |              |          |  |  |       |  |           |            |   |      |       |  |         | 826,316     |  |          |            | 86    |             |       |   | 333          |       |  |              |      |  |               |   |         |               |  |   |              |   |  |   |     |   |  |   |      |   |  |   | 419      |   |  |   |         |  
|Issuance of common stock and assumption of common stock options
    in the purchase of a business         |  |                 |  |              |          |              |          |  |  |       |  |           |            |   |      |       |  |         | 57,392,542  |  |          |            | 6,261 |             |       |   | 350,079      |       |  |              |      |  |               |   |         |               |  |   |              |   |  |   |     |   |  |   |      |   |  |   | 356,340  |   |  |   |         |  
|Issuance common stock under employee stock purchase plan                                                  |  |                 |  |              |          |              |          |  |  |       |  |           |            |   |      |       |  |         | 390,974     |  |          |            | 42    |             |       |   | 1,199        |       |  |              |      |  |               |   |         |               |  |   |              |   |  |   |     |   |  |   |      |   |  |   | 1,241    |   |  |   |         |  
|Deferred compensation associated with assumed stock options in
    the purchase of a business             |  |                 |  |              |          |              |          |  |  |       |  |           |            |   |      |       |  |         |            |  |          |            |      |             |       |   | 3,416        |       |  |              |      |  |               |   |         |               |  |   | (3,416        | ) |  |   |     |   |  |   |      |   |  |   |         |   |  |   |         |  
|Amortization of deferred compensation                                                                     |  |                 |  |              |          |              |          |  |  |       |  |           |            |   |      |       |  |         |            |  |          |            |      |             |       |   |             |       |  |              |      |  |               |   |         |               |  |   | 1,634         |   |  |   |     |   |  |   |      |   |  |   | 1,634    |   |  |   |         |  
|Net unrealized loss on marketable securities reclassified from
    held-to-maturity to available-for-sale |  |                 |  |              |          |              |          |  |  |       |  |           |            |   |      |       |  |         |            |  |          |            |      |             |       |   |             |       |  |              |      |  |               |   |         |               |  |   |              |   |  |   |     |   |  |   | (548  | ) |  |   | (548     | ) |  | $ | (548     | )
|Repayment of note receivable                                                                              |  |                 |  |              |          |              |          |  |  |       |  |           |            |   |      |       |  |         |            |  |          |            |      |             |       |   |             |       |  |              |      |  |               |   |         |               |  |   |              |   |  |   | 280  |   |  |   |      |   |  |   | 280      |   |  |   |         |  
|Unrealized gains/(losses) on marketable securities                                                        |  |                 |  |              |          |              |          |  |  |       |  |           |            |   |      |       |  |         |            |  |          |            |      |             |       |   |             |       |  |              |      |  |               |   |         |               |  |   |              |   |  |   |      |   |  |   | 2,335 |   |  |   | 2,335    |   |  |   | 2,335    |  
|Translation adjustment                                                                                    |  |                 |   |              |          |              |          |  |  |       |  |           |            |   |      |       |  |         |            |  |          |            |      |             |       |   |             |       |  |              |      |  |               |   |         |               |  |   |              |   |  |   |     |   |  |   | (367  | ) |  |   | (367     | ) |  |   | (367     | )
|Net loss                                                                                                  |  |                 |  |              |          |              |          |  |  |       |  |           |            |   |      |       |  |         |            |  |          |            |      |             |       |   |             |       |  |              |      |  |               |   | (283,997 | )             |  |   |              |   |  |   |     |   |  |   |      |   |  |   | (283,997 | ) |  |   | (283,997 | )
|                                                                                                          |  |                 |   |              |          |              |           |  |  |       |   |           |            |   |       |       |  |         |             |  |          |            |       |             |       |   |              |       |  |              |       |  |               |   |          |               |  |   |               |   |  |  
|Comprehensive net loss for the year ended January 31, 2003                                                |  |                 |   |              |          |              |           |  |  |       |   |           |            |   |       |       |  |         |             |  |          |            |       |             |       |   |              |       |  |              |       |  |               |   |          |               |  |   |               |   |  |   |      |   |  |   |       |   |  |   |          |   |  | $ | (282,577 | )



B-6



---



##### Table of Contents



SKILLSOFT PUBLIC LIMITED COMPANY AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY AND
COMPREHENSIVE LOSS


(In thousands except share and per share data)


|                                                                                               |  |                 |   |              |          |         |              |           |  |  |       |       |  |           |            |  |       |  |            |             |  |  |          |            |  |             |         |   |              |       |   |              |       |  |               |   |  |               |        |   |               |  |     |   |  |  |        |   |  |  |          |   |  |   |          |  
|---------------------------------------------------------------------------------------------- |  | --------------- | - | ------------ | -------- | ------- | ------------ | --------- |  |  | ----- | ----- |  | --------- | ---------- |  | ----- |  | ---------- | ----------- |  |  | -------- | ---------- |  | ----------- | ------- | - | ------------ | ----- | - | ------------ | ----- |  | ------------- | - |  | ------------- | ------ | - | ------------- |  | --- | - |  |  | ------ | - |  |  | -------- | - |  | - | -------- | -
|                                                                                               |  |                 |   |              |          | Class A |              |           |  |  |       |       |  |           |            |  |       |  |            |             |  |  |          |            | 
|                                                                                               |  |                 |   | Common Stock |          |         | Common Stock |           |  |  |       |       |  |           |            |  |       |  |            |             |  |  |          |           
|                                                                                               |  | Convertible     |   |              |          |         |              |           |  |  |       |       |  |           |            |  |       |  |            |             |  |  |          |            | 
|                                                                                               |  | Preferred Stock |   |              |          |         |              |           |  |  |       |       |  |           |            |  | Notes |  |            | Accumulated |  |  |          |            | 
|                                                                                               |  |                 |   |              |          |         | $.001        |           |  |  |       | 0.11 |  |           | Additional |  |       |  |            |             |  |  |          | Receivable |  |             | Other   |   |              | Total |   |              | Total | 
|                                                                                               |  | Number of       |   |              | Carrying |         |              | Number of |  |  | Par   |       |  | Number of |            |  | Par   |  |            | Paid-In     |  |  | Treasury |            |  | Accumulated |         |   | Deferred     |       |   | from         |       |  | Comprehensive |   |  | Stockholders |        |   | Comprehensive | 
|                                                                                               |  | Shares          |   |              | Value    |         |              | Shares    |  |  | Value |       |  | Shares    |            |  | Value |  |            | Capital     |  |  | Stock    |            |  | Deficit     |         |   | Compensation |       |   | Stockholders |       |  | Income        |   |  | Equity        |        |   | Loss          | 
|                                                                                               |  |                 |   |              |          |         |              |           |  |  |       |       |  |           |            |  |       |  |            |             |  |  |          |            |  |             |         |   |              |       |   |              |       |  |               |   |  |               |        |   |               | 
|BALANCE, JANUARY 31, 2003                                                                      |  |                 |  |              |          |         |             |           |  |  |      |       |  |           |           |  |       |  | 99,598,146 |             |  |  | 10,737   |            |  |             | 530,929 |   |              |       |  |              |       |  | (347,642      | ) |  |               | (4,345 | ) |               |  | (58 | ) |  |  | 1,466  |   |  |  | 191,087  |   |  |   |          |  
|Exercise of stock options                                                                      |  |                 |  |              |          |         |             |           |  |  |      |       |  |           |           |  |       |  | 1,530,657  |             |  |  | 201      |            |  |             | 4,936   |   |              |       |  |              |       |  |              |   |  |               |       |   |               |  |    |   |  |  |       |   |  |  | 5,137    |   |  |   |         |  
|Issuance of common stock  settlement of IP Learn
    litigation                               |  |                 |  |              |          |         |             |           |  |  |      |       |  |           |           |  |       |  | 100,000    |             |  |  | 13       |            |  |             | 487     |   |              |       |  |              |       |  |              |   |  |               |       |   |               |  |    |   |  |  |       |   |  |  | 500      |   |  |   |         |  
|Issuance of common stock under employee stock purchase plan                                    |  |                 |  |              |          |         |             |           |  |  |      |       |  |           |           |  |       |  | 628,911    |             |  |  | 80       |            |  |             | 2,096   |   |              |       |  |              |       |  |              |   |  |               |       |   |               |  |    |   |  |  |       |   |  |  | 2,176    |   |  |   |         |  
|Deferred compensation  reversal of unearned
    compensation related to employee terminations |  |                 |  |              |          |         |             |           |  |  |      |       |  |           |           |  |       |  |           |             |  |  |         |            |  |             | (229    | ) |              |       |  |              |       |  |              |   |  |               | 229    |   |               |  |    |   |  |  |       |   |  |  |         |   |  |   |         |  
|Amortization of deferred compensation                                                          |  |                 |  |              |          |         |             |           |  |  |      |       |  |           |           |  |       |  |           |             |  |  |         |            |  |             |        |   |              |       |  |              |       |  |              |   |  |               | 1,986  |   |               |  |    |   |  |  |       |   |  |  | 1,986    |   |  |   |         |  
|Deferred compensation  amended stock option grants                                            |  |                 |  |              |          |         |             |           |  |  |      |       |  |           |           |  |       |  |           |             |  |  |         |            |  |             | 274     |   |              |       |  |              |       |  |              |   |  |               | (274   | ) |               |  |    |   |  |  |       |   |  |  |         |   |  |   |         |  
|Repayment of note receivable                                                                   |  |                 |  |              |          |         |             |           |  |  |      |       |  |           |           |  |       |  |           |             |  |  |         |            |  |             |        |   |              |       |  |              |       |  |              |   |  |               |       |   |               |  | 58  |   |  |  |       |   |  |  | 58       |   |  |   |         |  
|Unrealized gains/(losses) on marketable securities                                             |  |                 |   |              |          |         |             |           |  |  |      |       |  |           |           |  |       |  |           |             |  |  |         |            |  |             |        |   |              |       |  |              |       |  |              |   |  |               |       |   |               |  |    |   |  |  | (1,713 | ) |  |  | (1,713   | ) |  | $ | (1,713   | )
|Translation adjustment                                                                         |  |                 |   |              |          |         |             |           |  |  |      |       |  |           |           |  |       |  |           |             |  |  |         |            |  |             |        |   |              |       |  |              |       |  |              |   |  |               |       |   |               |  |    |   |  |  | (199   | ) |  |  | (199     | ) |  |   | (199     | )
|Net loss                                                                                       |  |                 |  |              |          |         |             |           |  |  |      |       |  |           |           |  |       |  |           |             |  |  |         |            |  |             |        |   |              |       |  |              |       |  | (113,274      | ) |  |               |       |   |               |  |    |   |  |  |       |   |  |  | (113,274 | ) |  |   | (113,274 | )
|                                                                                               |  |                 |   |              |          |         |              |           |  |  |       |       |  |           |            |  |       |  |            |             |  |  |          |            |  |             |         |   |              |       |   |              |       |  |               |   |  |               |        |   |               | 
|Comprehensive net loss for the year ended January 31, 2004                                     |  |                 |   |              |          |         |              |           |  |  |       |       |  |           |            |  |       |  |            |             |  |  |          |            |  |             |         |   |              |       |   |              |       |  |               |   |  |               |        |   |               |  |     |   |  |  |        |   |  |  |          |   |  | $ | (115,186 | )



B-7



---



##### Table of Contents



SKILLSOFT PUBLIC LIMITED COMPANY AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY AND
COMPREHENSIVE LOSS  (Continued)


(In thousands except share and per share data)


|                                                            |  |                 |   |              |          |              |           |  |  |       |   |           |            |   |       |       |  |         |             |  |          |            |        |               |  |   |              |  |  |              |        |        |  |   |               |   |  |               |        |   |  |   |   |  |  |   |      |   |  |   |         |   |  |   |         |  
|----------------------------------------------------------- |  | --------------- | - | ------------ | -------- | ------------ | --------- |  |  | ----- | - | --------- | ---------- | - | ----- | ----- |  | ------- | ----------- |  | -------- | ---------- | ------ | ------------- |  | - | ------------ |  |  | ------------ | ------ | ------ |  | - | ------------- | - |  | ------------- | ------ | - |  | - | - |  |  | - | ---- | - |  | - | ------- | - |  | - | ------- | -
|                                                            |  |                 |   |              |          | Class A      |           |  |  |       |   |           |            |   |       |       |  |         |             |  |          |            |        |              
|                                                            |  |                 |   | Common Stock |          | Common Stock |           |  |  |       |   |           |            |   |       |       |  |         |             |  |          |            |       
|                                                            |  | Convertible     |   |              |          |              |           |  |  |       |   |           |            |   |       |       |  |         | Accumulated |  |          |            |        |              
|                                                            |  | Preferred Stock |   |              |          |              |           |  |  |       |   |           |            |   |       | Notes |  | Other   |             |  |          |            |       
|                                                            |  |                 |   |              |          | $.001        |           |  |  | 0.11 |   |           | Additional |   |       |       |  |         |             |  |          | Receivable |        | Comprehensive |  |   | Total        |  |  | Total        |       
|                                                            |  | Number of       |   |              | Carrying |              | Number of |  |  | Par   |   | Number of |            |   | Par   |       |  | Paid-In |             |  | Treasury |            |        | Accumulated   |  |   | Deferred     |  |  | from         |        | Income |  |   | Stockholders |   |  | Comprehensive |       
|                                                            |  | Shares          |   |              | Value    |              | Shares    |  |  | Value |   | Shares    |            |   | Value |       |  | Capital |             |  | Stock    |            |        | Deficit       |  |   | Compensation |  |  | Stockholders |        | (Loss) |  |   | Equity        |   |  | Loss          |       
|                                                            |  |                 |   |              |          |              |           |  |  |       |   |           |            |   |       |       |  |         |             |  |          |            |        |               |  |   |              |  |  |              |        |        |  |   |               |   |  |               |       
|BALANCE, JANUARY 31, 2004                                   |  |                 |  |              |          |              |          |  |  |       |  |           |            |   |      |       |  |         | 101,857,714 |  |          |            | 11,031 |               |  |   | 538,493      |  |  |              |       |        |  |   | (460,916      | ) |  |               | (2,404 | ) |  |   |  |  |  |   | (446 | ) |  |   | 85,758  |   |  |   |         |  
|Exercise of stock options                                   |  |                 |  |              |          |              |          |  |  |       |  |           |            |   |      |       |  |         | 3,816,626   |  |          |            | 514    |               |  |   | 17,436       |  |  |              |       |        |  |   |              |   |  |               |       |   |  |   |  |  |  |   |     |   |  |   | 17,950  |   |  |   |        |  
|Issuance of common stock under employee stock purchase plan |  |                 |  |              |          |              |          |  |  |       |  |           |            |   |      |       |  |         | 533,478     |  |          |            | 72     |               |  |   | 2,978        |  |  |              |       |        |  |   |              |   |  |               |       |   |  |   |  |  |  |   |     |   |  |   | 3,050   |   |  |   |        |  
|Purchase of treasury stock (443,757 shares)                 |  |                 |  |              |          |              |          |  |  |       |  |           |            |   |      |       |  |         |            |  |          |            |       |               |  |   |             |  |  |              | (2,523 | )      |  |   |              |   |  |               |       |   |  |   |  |  |  |   |     |   |  |   | (2,523  | ) |  |   |        |  
|Amortization of deferred compensation                       |  |                 |  |              |          |              |          |  |  |       |  |           |            |   |      |       |  |         |            |  |          |            |       |               |  |   | 145          |  |  |              |       |        |  |   |              |   |  |               | 1,046  |   |  |   |  |  |  |   |     |   |  |   | 1,191   |   |  |   |        |  
|Unrealized gains/(losses) on marketable securities          |  |                 |   |              |          |              |          |  |  |       |  |           |            |   |      |       |  |         |            |  |          |            |       |               |  |   |             |  |  |              |       |        |  |   |              |   |  |               |       |   |  |   |  |  |  |   | (133 | ) |  |   | (133    | ) |  | $ | (133    | )
|Translation adjustment                                      |  |                 |   |              |          |              |          |  |  |       |  |           |            |   |      |       |  |         |            |  |          |            |       |               |  |   |             |  |  |              |       |        |  |   |              |   |  |               |       |   |  |   |  |  |  |   | (261 | ) |  |   | (261    | ) |  |   | (261    | )
|Net loss                                                    |  |                 |  |              |          |              |          |  |  |       |  |           |            |   |      |       |  |         |            |  |          |            |       |               |  |   |             |  |  |              |       |        |  |   | (20,113       | ) |  |               |       |   |  |   |  |  |  |   |     |   |  |   | (20,113 | ) |  |   | (20,113 | )
|                                                            |  |                 |   |              |          |              |           |  |  |       |   |           |            |   |       |       |  |         |             |  |          |            |        |               |  |   |              |  |  |              |        |        |  |   |               |   |  |               |        |   |  |  
|Comprehensive net loss for the year ended January 31, 2005  |  |                 |   |              |          |              |           |  |  |       |   |           |            |   |       |       |  |         |             |  |          |            |        |               |  |   |              |  |  |              |        |        |  |   |               |   |  |               |        |   |  |   |   |  |  |   |      |   |  |   |         |   |  | $ | (20,507 | )
|BALANCE, JANUARY 31, 2005                                   |  |                 |  |              |          | $            |          |  |  |       |  |           |            | $ |      |       |  |         | 106,207,818 |  |          | $          | 11,617 |               |  | $ | 559,052      |  |  |              | (2,523 | )      |  | $ | (481,029      | ) |  | $             | (1,358 | ) |  | $ |  |  |  | $ | (840 | ) |  | $ | 84,919  |   |  |   |         |  
|                                                            |  |                 |   |              |          |              |           |  |  |       |   |           |            |   |       |       |  |         |             |  |          |            |        |               |  |   |              |  |  |              |        |        |  |   |               |   |  |               |        |   |  |  



B-8



---



##### Table of Contents



SKILLSOFT PUBLIC LIMITED COMPANY AND SUBSIDIARIES





CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                                                                |                                                                                  |                                           |        |          |         |   |         |          |         |   |        |         |         |  
|------------------------------------------------------------------------------- | -------------------------------------------------------------------------------- | ----------------------------------------- | ------ | -------- | ------- | - | ------- | -------- | ------- | - | ------ | ------- | ------- | -
|                                                                                |                                                                                  | Years Ended January 31,                   |       
|                                                                                |                                                                                  |                                           |       
|                                                                                |                                                                                  | 2003                                      |        |          | 2004    |   |         | 2005     |        
|                                                                                |                                                                                  |                                           |        |          |         |   |         |          |        
|                                                                                |                                                                                  | (In thousands)                            |       
|Cash flows from operating activities:                                           |                                                                                  |                                           |        |          |         |   |         |          |         |   |        |        
|                                                                                | Net loss                                                                         |                                           | $      | (283,997 | )       |   | $       | (113,274 | )       |   | $      | (20,113 | )      
|                                                                                | Adjustments to reconcile net loss to net cash used in operating
    activities  |                                           |        |          |         |   |         |          |         |   |        |         |        
|                                                                                | Stock-based compensation                                                         |                                           |        | 1,634    |         |   |         | 2,486    |         |   |        | 1,191   |        
|                                                                                | Depreciation and amortization                                                    |                                           |        | 8,712    |         |   |         | 9,329    |         |   |        | 4,779   |        
|                                                                                | Impairment charge                                                                |                                           |        | 250,107  |         |   |         |         |         |   |        | 19,268  |        
|                                                                                | Amortization of acquired intangible assets                                       |                                           |        | 4,683    |         |   |         | 10,072   |         |   |        | 9,575   |        
|                                                                                | Provision for bad debts                                                          |                                           |        | 399      |         |   |         | 459      |         |   |        | 335     |        
|                                                                                | Provision for income tax  non-cash                                              |                                           |        |         |         |   |         |         |         |   |        | 326     |        
|                                                                                | Realized gain on sale of investments                                             |                                           |        |         |         |   |         | (3,682   | )       |   |        |        |        
|                                                                                | Changes in current assets and liabilities, net of acquisitions                   |                                           |        |          |         |   |         |          |         |   |        |         |        
|                                                                                |                                                                                  | Accounts receivable                       |        |          | (21,064 | ) |         |          | (5,149  | ) |        |         | (14,062 | )
|                                                                                |                                                                                  | Prepaid expenses and other current assets |        |          | (8,506  | ) |         |          | (6,632  | ) |        |         | 2,406   |  
|                                                                                |                                                                                  | Accounts payable                          |        |          | 2,647   |   |         |          | (4,181  | ) |        |         | (1,220  | )
|                                                                                |                                                                                  | Accrued expenses (includes long term)     |        |          | (28,396 | ) |         |          | 45,887  |   |        |         | (40,858 | )
|                                                                                |                                                                                  | Deferred revenue                          |        |          | 35,028  |   |         |          | 23,522  |   |        |         | 4,743   |  
|                                                                                |                                                                                  |                                           |        |          |         |   |         |          |        
|                                                                                |                                                                                  | Net cash used in operating activities     |        |          | (38,753 | ) |         |          | (41,163 | ) |        |         | (33,630 | )
|Cash flows from investing activities:                                           |                                                                                  |                                           |        |          |         |   |         |          |         |   |        |        
|                                                                                | Purchases of property and equipment                                              |                                           |        | (8,886   | )       |   |         | (3,643   | )       |   |        | (7,594  | )      
|                                                                                | Purchase of short-term investments                                               |                                           |        | (88,882  | )       |   |         | (92,614  | )       |   |        | (43,567 | )      
|                                                                                | Maturity of short-term investments                                               |                                           |        | 40,604   |         |   |         | 137,786  |         |   |        | 42,063  |        
|                                                                                | Sales of short-term investments                                                  |                                           |        | 73,776   |         |   |         | 6,119    |         |   |        |        |        
|                                                                                | Disposition of net assets                                                        |                                           |        | (1,087   | )       |   |         |         |         |   |        |        |        
|                                                                                | Purchase of long-term investments                                                |                                           |        | (669     | )       |   |         |         |         |   |        | (8,889  | )      
|                                                                                | Designation of restricted cash                                                   |                                           |        |         |         |   |         | (25,981  | )       |   |        | 24,943  |        
|                                                                                | Net cash (used for)/ received in a business combination                          |                                           |        | 49,333   |         |   |         | (5,187   | )       |   |        |        |        
|                                                                                | (Increase)/decrease in other assets                                              |                                           |        | (2,244   | )       |   |         | 409      |         |   |        |        |        
|                                                                                |                                                                                  |                                           |        |          |         |   |         |          |        
|                                                                                |                                                                                  | Net cash provided by investing activities |        |          | 61,945  |   |         |          | 16,889  |   |        |         | 6,956   |  
|Cash flows from financing activities:                                           |                                                                                  |                                           |        |          |         |   |         |          |         |   |        |        
|                                                                                | Exercise of stock options                                                        |                                           |        | 419      |         |   |         | 5,138    |         |   |        | 17,950  |        
|                                                                                | Proceeds from employee stock purchase plan                                       |                                           |        | 1,241    |         |   |         | 2,175    |         |   |        | 3,050   |        
|                                                                                | Repayment of note receivable                                                     |                                           |        | 280      |         |   |         | 58       |         |   |        |        |        
|                                                                                | Payments to acquire treasury stock                                               |                                           |        |         |         |   |         |         |         |   |        | (2,523  | )      
|                                                                                |                                                                                  |                                           |        |          |         |   |         |          |        
|                                                                                |                                                                                  | Net cash provided by financing activities |        |          | 1,940   |   |         |          | 7,371   |   |        |         | 18,477  |  
|Effect of exchange rate changes on cash and cash equivalents                    |                                                                                  |                                           | 2,964  |          |         |   | 5,551   |          |         |   | 1,174  |        
|                                                                                |                                                                                  |                                           |        |          |         |   |         |          |        
|Net increase (decrease) in cash and cash equivalents                            |                                                                                  |                                           | 28,096 |          |         |   | (11,352 | )        |         |   | (7,023 | )      
|Cash and cash equivalents, beginning of year                                    |                                                                                  |                                           | 25,185 |          |         |   | 53,281  |          |         |   | 41,929 |        
|                                                                                |                                                                                  |                                           |        |          |         |   |         |          |        
|Cash and cash equivalents, end of year                                          |                                                                                  | $                                         | 53,281 |          |         | $ | 41,929  |          |         | $ | 34,906 |        
|                                                                                |                                                                                  |                                           |        |          |         |   |         |          |        
|Supplemental disclosure of cash flow information:                               |                                                                                  |                                           |        |          |         |   |         |          |         |   |        |        
|                                                                                | Cash paid for income taxes                                                       |                                           | $      | 7        |         |   | $       | 781      |         |   | $      | 200     |        
|Supplemental disclosure of cash flows related to acquisitions
    (see Note 3): |                                                                                  |                                           |        |          |         |   |         |          |         |   |        |        
|                                                                                | Fair value of assets acquired, excluding cash                                    |                                           | $      | 439,946  |         |   | $       | 5,438    |         |   | $      |        |        
|                                                                                | Payments in connection with the acquisition, net of cash acquired                |                                           |        | 49,333   |         |   |         | (5,187   | )       |   |        |        |        
|                                                                                | Issuance of common stock and assumption of common stock options                  |                                           |        | (356,339 | )       |   |         |         |         |   |        |        |        
|                                                                                |                                                                                  |                                           |        |          |         |   |         |          |        
|                                                                                |                                                                                  | Liabilities assumed                       |        | $        | 132,940 |   |         | $        | 251     |   |        | $       |        |  
|                                                                                |                                                                                  |                                           |        |          |         |   |         |          |        



B-9



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##### Table of Contents



SKILLSOFT PUBLIC LIMITED COMPANY AND SUBSIDIARIES





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




|    |                      
|--- | ---------------------
|(1) | Basis of Presentation





|    |                                           
|--- | ------------------------------------------
|(2) | Summary of Significant Accounting Policies





| |                                
| | -------------------------------
| | (a) Principles of Consolidation





| |                     
| | --------------------
| | (b) Use of Estimates





| |                        
| | -----------------------
| | (c) Revenue Recognition





B-10



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##### Table of Contents



SKILLSOFT PUBLIC LIMITED COMPANY AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


















B-11



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##### Table of Contents



SKILLSOFT PUBLIC LIMITED COMPANY AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










| |                         
| | ------------------------
| | (d) Deferred Commissions





| |                       
| | ----------------------
| | (e) Net Loss Per Share







|                                                                        |  |                        |          |   |      |   |          |      |  |   |         |  
|----------------------------------------------------------------------- |  | ---------------------- | -------- | - | ---- | - | -------- | ---- |  | - | ------- | -
|                                                                        |  | Year Ended January 31, |         
|                                                                        |  |                        |         
|                                                                        |  | 2003                   |          |   | 2004 |   |          | 2005 | 
|                                                                        |  |                        |          |   |      |   |          |      | 
|Net loss applicable to ordinary shares                                  |  | $                      | (283,997 | ) |      | $ | (113,274 | )    |  | $ | (20,113 | )
|                                                                        |  |                        |          |   |      |   |          |      | 
|Computation of basic and diluted net loss per share:                    |  |                        |          |   |      |   |          |      |  |   |         |  
|Weighted average shares outstanding                                     |  |                        | 64,500   |   |      |   | 100,120  |      |  |   | 105,134 |  
|Less weighted average unvested restricted common shares
    outstanding |  |                        | (28      | ) |      |   | (5       | )    |  |   |        |  
|                                                                        |  |                        |          |   |      |   |          |      | 
|Shares used in computing net loss per share                             |  |                        | 64,472   |   |      |   | 100,115  |      |  |   | 105,134 |  
|                                                                        |  |                        |          |   |      |   |          |      | 
|Basic and diluted net loss per share                                    |  | $                      | (4.40    | ) |      | $ | (1.13    | )    |  | $ | (0.19   | )
|                                                                        |  |                        |          |   |      |   |          |      | 

B-12



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##### Table of Contents



SKILLSOFT PUBLIC LIMITED COMPANY AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                           |  |                        |            |  |      |  |            |      |  |  |            | 
|-------------------------- |  | ---------------------- | ---------- |  | ---- |  | ---------- | ---- |  |  | ---------- | 
|                           |  | Year Ended January 31, |           
|                           |  |                        |           
|                           |  | 2003                   |            |  | 2004 |  |            | 2005 | 
|                           |  |                        |            |  |      |  |            |      | 
|Options outstanding        |  |                        | 25,604,086 |  |      |  | 23,036,822 |      |  |  | 18,976,502 | 
|Unvested restricted shares |  |                        | 20,291     |  |      |  |           |      |  |  |           | 



| |                                 
| | --------------------------------
| | (f) Foreign Currency Translation





| |                                                                                 
| | --------------------------------------------------------------------------------
| | (g) Cash, Cash Equivalents, Short-term Investments
    and Long-term Investments



B-13



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##### Table of Contents



SKILLSOFT PUBLIC LIMITED COMPANY AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




2004


|                           |                          |            |  |              |      |       |            |        |       |            |        |    |  |            |     |     |   |   |        |        | 
|-------------------------- | ------------------------ | ---------- |  | ------------ | ---- | ----- | ---------- | ------ | ----- | ---------- | ------ | -- |  | ---------- | --- | --- | - | - | ------ | ------ | 
|                           |                          |            |  |              |      | Gross |            |        | Gross |            |        |   
|                           |                          | Contracted |  |              |      |       | Unrealized |        |       | Unrealized |        |    | 
|Description                |                          | Maturity   |  |              | Cost |       |            | Gains  |       |            | Losses |    |  | Fair Value |    
|                           |                          |            |  |              |      |       |            |        |       |            |        |    |  |            |    
|Cash and cash equivalents: |                          |            |  |              |      |       |            |        |       |            |        |    |  |            |     |     |   |   |        |       
|                           | Cash                     |            |  | N/A          |      |       | $          | 36,271 |       |            | $      |   |  |            | $   |    |   |   | $      | 36,271 | 
|                           | Federal agency notes     |            |  | 0-3 months   |      |       |            | 2,598  |       |            |        |   |  |            |     |    |   |   |        | 2,598  | 
|                           | Money market funds       |            |  | 0-3 months   |      |       |            | 3,997  |       |            |        |   |  |            |     |    |   |   |        | 3,997  | 
|                           |                          |            |  |              |      |       |            |        |       |            |        |    |  |            |    
|                           |                          |            |  |              |      |       | 42,866     |        |       |            |        |    |  |            |     |     |   |   | 42,866 |       
|Short-term investments:    |                          |            |  |              |      |       |            |        |       |            |        |    |  |            |     |     |   |   |        |       
|                           | Commercial paper         |            |  | 4-12 months  |      |       |            | 3,802  |       |            |        |   |  |            |     | (13 | ) |   |        | 3,789  | 
|                           | Federal agency notes     |            |  | 4-12 months  |      |       |            | 14,683 |       |            |        | 2  |  |            |     |     |   |   |        | 14,685 | 
|                           | Public equity securities |            |  | N/A          |      |       |            |       |       |            |        |   |  |            |     |    |   |   |        |        | 
|                           |                          |            |  |              |      |       |            |        |       |            |        |    |  |            |    
|                           |                          |            |  |              |      |       | 18,485     |        |       |            | 2      |    |  |            | (13 | )   |   |   | 18,474 |       
|Long-term investments:     |                          |            |  |              |      |       |            |        |       |            |        |    |  |            |     |     |   |   |        |       
|                           | Federal agency notes     |            |  | 13-24 months |      |       |            |       |       |            |        |   |  |            |     |    |   |   |        |       | 
|                           | Public equity securities |            |  | N/A          |      |       |            | 181    |       |            |        | 85 |  |            |     |    |   |   |        | 266    | 
|                           |                          |            |  |              |      |       |            |        |       |            |        |    |  |            |    
|                           |                          |            |  |              |      |       | 181        |        |       |            | 85     |    |  |            |     |     |   |   | 266    |       
|                           |                          |            |  |              |      |       |            |        |       |            |        |    |  |            |    
|                           |                          |            |  |              |      | $     | 61,532     |        |       | $          | 87     |    |  | $          | (13 | )   |   | $ | 61,606 |       
|                           |                          |            |  |              |      |       |            |        |       |            |        |    |  |            |    

2005


|                           |                          |            |  |               |      |       |            |        |       |            |        |    |  |            |     |     |   |   |        |        | 
|-------------------------- | ------------------------ | ---------- |  | ------------- | ---- | ----- | ---------- | ------ | ----- | ---------- | ------ | -- |  | ---------- | --- | --- | - | - | ------ | ------ | 
|                           |                          |            |  |               |      | Gross |            |        | Gross |            |        |   
|                           |                          | Contracted |  |               |      |       | Unrealized |        |       | Unrealized |        |    | 
|Description                |                          | Maturity   |  |               | Cost |       |            | Gains  |       |            | Losses |    |  | Fair Value |    
|                           |                          |            |  |               |      |       |            |        |       |            |        |    |  |            |    
|Cash and cash equivalents: |                          |            |  |               |      |       |            |        |       |            |        |    |  |            |     |     |   |   |        |       
|                           | Cash                     |            |  | N/A           |      |       | $          | 28,238 |       |            | $      |   |  |            | $   |    |   |   | $      | 28,238 | 
|                           | Commercial paper         |            |  | 0-3 months    |      |       |            | 3,592  |       |            |        |   |  |            |     |    |   |   |        | 3,592  | 
|                           | Federal agency notes     |            |  | 0-3 months    |      |       |            | 1,999  |       |            |        |   |  |            |     |    |   |   |        | 1,999  | 
|                           | Money market funds       |            |  | 0-3 months    |      |       |            | 1,077  |       |            |        |   |  |            |     |    |   |   |        | 1,077  | 
|                           |                          |            |  |               |      |       |            |        |       |            |        |    |  |            |    
|                           |                          |            |  |               |      |       | 34,906     |        |       |            |        |    |  |            |     |     |   |   | 34,906 |       
|Short-term investments:    |                          |            |  |               |      |       |            |        |       |            |        |    |  |            |     |     |   |   |        |       
|                           | Commercial paper         |            |  | 4-12 months   |      |       |            | 8,897  |       |            |        |   |  |            |     | (4  | ) |   |        | 8,893  | 
|                           | Federal agency notes     |            |  | 4-12 months   |      |       |            | 6,986  |       |            |        |   |  |            |     | (14 | ) |   |        | 6,972  | 
|                           | Public equity securities |            |  | N/A           |      |       |            | 4,178  |       |            |        |   |  |            |     | (22 | ) |   |        | 4,156  | 
|                           |                          |            |  |               |      |       |            |        |       |            |        |    |  |            |    
|                           |                          |            |  |               |      |       | 20,061     |        |       |            |       |    |  |            | (40 | )   |   |   | 20,021 |       
|Long-term investments:     |                          |            |  |               |      |       |            |        |       |            |        |    |  |            |     |     |   |   |        |       
|                           | Federal agency notes     |            |  | 13-24  months |      |       |            | 5,428  |       |            |        |   |  |            |     | (36 | ) |   |        | 5,392  | 
|                           | Public equity securities |            |  | N/A           |      |       |            | 3,522  |       |            |        | 29 |  |            |     |    |   |   |        | 3,551  | 
|                           |                          |            |  |               |      |       |            |        |       |            |        |    |  |            |    
|                           |                          |            |  |               |      |       | 8,950      |        |       |            | 29     |    |  |            | (36 | )   |   |   | 8,943  |       
|                           |                          |            |  |               |      |       |            |        |       |            |        |    |  |            |    
|                           |                          |            |  |               |      | $     | 63,917     |        |       | $          | 29     |    |  | $          | (76 | )   |   | $ | 63,870 |       
|                           |                          |            |  |               |      |       |            |        |       |            |        |    |  |            |    

B-14



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##### Table of Contents



SKILLSOFT PUBLIC LIMITED COMPANY AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                                  
| | ---------------------------------
| | (h) Depreciation and Amortization



|                       |  |                         |            | 
|---------------------- |  | ----------------------- | ---------- | 
|                       |  | Estimated               |           
|                       |  | Useful Lives            |           
|                       |  |                         |           
|Computer equipment     |  |                         | 2-3 years  | 
|Furniture and fixtures |  |                         | 5 years    | 
|Leasehold improvements |  |                         | Lesser of: | 
|                       |  | 7 years or lifeof lease





| |                                                                         
| | ------------------------------------------------------------------------
| | (i) Software Development Costs and Research and
    Development Expenses







| |                               
| | ------------------------------
| | (j) Other Comprehensive Income



|                            |                                                     |                        |       |       |      |   |      |      |   |   |      |      |  
|--------------------------- | --------------------------------------------------- | ---------------------- | ----- | ----- | ---- | - | ---- | ---- | - | - | ---- | ---- | -
|                            |                                                     | Year Ended January 31, |      
|                            |                                                     |                        |      
|                            |                                                     | 2003                   |       |       | 2004 |   |      | 2005 |  
|                            |                                                     |                        |       |       |      |   |      |      |  
|Unrealized holding gains    |                                                     | $                      | 1,787 |       |      | $ | 74   |      |   | $ | (59  | )   
|Foreign currency adjustment |                                                     |                        | (321  | )     |      |   | (520 | )    |   |   | (781 | )   
|                            |                                                     |                        |       |       |      |   |      |      |  
|                            | Total accumulated other comprehensive income (loss) |                        | $     | 1,466 |      |   | $    | (446 | ) |   | $    | (840 | )
|                            |                                                     |                        |       |       |      |   |      |      |  



| |                                        
| | ---------------------------------------
| | (k) Fair Value of Financial Instruments



B-15



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##### Table of Contents



SKILLSOFT PUBLIC LIMITED COMPANY AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                                                                 
| | ----------------------------------------------------------------
| | (l) Concentrations of Credit Risk and
    Off-Balance-Sheet Risk











| |                                                    
| | ---------------------------------------------------
| | (m) Disclosures About Segments of an
    Enterprise





| |                                                                      
| | ---------------------------------------------------------------------
| | (n) Amortization and Impairment of Goodwill and
    Intangible Assets





B-16



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##### Table of Contents



SKILLSOFT PUBLIC LIMITED COMPANY AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                          
| | -------------------------
| | (o) Restructuring Charges





| |                      
| | ---------------------
| | (p) Advertising Costs





| |                      
| | ---------------------
| | (q) Government Grants





| |                                            
| | -------------------------------------------
| | (r) Accounting for Stock-Based Compensation



B-17



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##### Table of Contents



SKILLSOFT PUBLIC LIMITED COMPANY AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                                                                       |  |                        |            |  |      |  |            |      |  |  |            | 
|---------------------------------------------------------------------- |  | ---------------------- | ---------- |  | ---- |  | ---------- | ---- |  |  | ---------- | 
|                                                                       |  | Year Ended January 31, |           
|                                                                       |  |                        |           
|                                                                       |  | 2003                   |            |  | 2004 |  |            | 2005 | 
|                                                                       |  |                        |            |  |      |  |            |      | 
|Risk-free interest rates                                               |  |                        | 3.50-5.14% |  |      |  | 2.84-3.96% |      |  |  | 3.31-4.35% | 
|Expected dividend yield                                                |  |                        |           |  |      |  |           |      |  |  |           | 
|Volatility factor                                                      |  |                        | 104%       |  |      |  | 96%        |      |  |  | 86%        | 
|Expected lives                                                         |  |                        | 7 years    |  |      |  | 7 years    |      |  |  | 7 years    | 
|Weighted average fair value of options granted                         |  |                        | $3.82      |  |      |  | $3.50      |      |  |  | $8.78      | 
|Weighted average remaining contractual life of options
    outstanding |  |                        | 8.3 years  |  |      |  | 7.6 years  |      |  |  | 6.79 years | 



|                                       |                                                                                                          |                        |   |          |      |  |   |          |   |  |   |         |  
|-------------------------------------- | -------------------------------------------------------------------------------------------------------- | ---------------------- | - | -------- | ---- |  | - | -------- | - |  | - | ------- | -
|                                       |                                                                                                          | Year Ended January 31, |  
|                                       |                                                                                                          |                        |  
|                                       |                                                                                                          | 2003                   |   |          | 2004 |  |   | 2005     |  
|                                       |                                                                                                          |                        |   |          |      |  |   |          |  
|Net loss                              |                                                                                                          |                        |   |          |      |  |   |          |   |  |   |        
|                                       | As reported                                                                                              |                        | $ | (283,997 | )    |  | $ | (113,274 | ) |  | $ | (20,113 | )
|                                       | Add: Stock-based compensation expense recognized under APB
    No. 25                                    |                        |   | 1,634    |      |  |   | 1,986    |   |  |   | 1,191   |  
|                                       | Less: Total stock-based compensation expense determined under
    fair value based method for all awards |                        |   | (19,348  | )    |  |   | (22,181  | ) |  |   | (25,493 | )
|                                       |                                                                                                          |                        |   |          |      |  |   |          |  
|                                       | Pro forma net loss                                                                                       |                        | $ | (301,711 | )    |  | $ | (133,469 | ) |  | $ | (44,415 | )
|                                       |                                                                                                          |                        |   |          |      |  |   |          |  
|Basic and diluted net loss per share  |                                                                                                          |                        |   |          |      |  |   |          |   |  |   |        
|                                       | As reported                                                                                              |                        | $ | (4.40    | )    |  | $ | (1.13    | ) |  | $ | (0.19   | )
|                                       |                                                                                                          |                        |   |          |      |  |   |          |  
|                                       | Pro forma                                                                                                |                        | $ | (4.68    | )    |  | $ | (1.33    | ) |  | $ | (0.42   | )
|                                       |                                                                                                          |                        |   |          |      |  |   |          |  





| |                                     
| | ------------------------------------
| | (s) Recent Accounting Pronouncements



B-18



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##### Table of Contents



SKILLSOFT PUBLIC LIMITED COMPANY AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. A modified prospective method in which
    compensation cost is recognized beginning with the effective
    date (a) based on the requirements of Statement 123(R)
    for all share-based payments granted after the effective date
    and (b) based on the requirements of Statement 123 for
    all awards granted to employees prior to the effective date of
    Statement 123(R) that remain unvested on the effective date.
|
| | 2. A modified retrospective method which
    includes the requirements of the modified prospective method
    described above, but also permits entities to restate based on
    the amounts previously recognized under Statement 123 for
    purposes of pro forma disclosures either (a) all prior
    periods presented or (b) prior interim periods of the year
    of adoption.                                                 







| |                                                         
| | --------------------------------------------------------
| | (t) Prior Year Financial Statement
    Reclassifications





|    |                              
|--- | -----------------------------
|(3) | Acquisitions and Dispositions



| |                          
| | -------------------------
| | (a) SkillSoft Corporation




B-19



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##### Table of Contents



SKILLSOFT PUBLIC LIMITED COMPANY AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|                                          |  |        |         |  
|----------------------------------------- |  | ------ | ------- | -
|Description                               |  | Amount |        
|                                          |  |        |        
|Cash and cash equivalents                 |  | $      | 50,231  |  
|Short-term investments                    |  |        | 34,830  |  
|Accounts receivable, net                  |  |        | 23,351  |  
|Prepaid expenses and other current assets |  |        | 8,753   |  
|Property and equipment                    |  |        | 9,131   |  
|Goodwill                                  |  |        | 323,681 |  
|Amortizable intangible assets             |  |        | 37,000  |  
|Other assets                              |  |        | 3,199   |  
|Accounts payable                          |  |        | (2,326  | )
|Accrued expenses*                         |  |        | (69,519 | )
|Deferred revenue                          |  |        | (46,619 | )
|                                          |  |        |        
|Total                                     |  | $      | 371,712 |  
|                                          |  |        |        






|  |                                      
|- | -------------------------------------
|* | Includes exit costs of $30.3 million.



|                                                               |                                                           |        |         |         | 
|-------------------------------------------------------------- | --------------------------------------------------------- | ------ | ------- | ------- | 
|Description                                                    |                                                           | Amount |        
|                                                               |                                                           |        |        
|Issuance of ordinary shares                                    |                                                           | $      | 317,440 |        
|Valuation of ordinary share options assumed                    |                                                           |        | 38,899  |        
|Cash paid, including acquisition costs                         |                                                           |        | 15,373  |        
|                                                               |                                                           |        |        
|Total purchase price                                           |                                                           |        | 371,712 |        
|Liabilities incurred (exit costs)                              |                                                           |        | 30,261  |        
|Tangible assets acquired in excess of liabilities assumed, net |                                                           |        | (41,292 | )      
|                                                               |                                                           |        |        
|                                                               | Total purchase price to be allocated to intangible assets |        | $       | 360,681 | 
|                                                               |                                                           |        |        



|                                                          |  |        |         |  |      |  |         | 
|--------------------------------------------------------- |  | ------ | ------- |  | ---- |  | ------- | 
|Description                                               |  | Amount |         |  | Life | 
|                                                          |  |        |         |  |      | 
|Total purchase price to be allocated to intangible assets |  | $      | 360,681 |  |      |  |        | 
|Less  Value assigned to content                          |  |        | 25,000  |  |      |  | 4 years | 
|Less  Value assigned to customer contracts               |  |        | 12,000  |  |      |  | 5 years | 
|                                                          |  |        |         |  |      | 
|Goodwill                                                  |  | $      | 323,681 |  |      |  |        | 
|                                                          |  |        |         |  |      | 

B-20



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##### Table of Contents



SKILLSOFT PUBLIC LIMITED COMPANY AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)












| |                              
| | -----------------------------
| | Amortizable Intangible Assets





| |                 
| | ----------------
| | Deferred Revenue





| |                      
| | ---------------------
| | Deferred Compensation



B-21



---



##### Table of Contents



SKILLSOFT PUBLIC LIMITED COMPANY AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |               
| | --------------
| | Deferred Taxes





| |                       
| | ----------------------
| | (b) Telcom Disposition





|                         |                            |              |       |     | 
|------------------------ | -------------------------- | ------------ | ----- | --- | 
|                         |                            | For the      |      
|                         |                            | Period Ended |      
|                         |                            | January 31,  |      
|                         |                            | 2003         |      
|                         |                            |              |      
|Revenue                  |                            | $            | 2,400 |    
|Cost of revenue          |                            |              | 1,664 |    
|                         |                            |              |      
|Gross profit             |                            |              | 736   |    
|Operating expenses:      |                            |              |       |    
|                         | Selling and marketing      |              |       | 291 | 
|                         | General and administrative |              |       | 548 | 
|                         |                            |              |      
|Total operating expenses |                            |              | 839   |    
|                         |                            |              |      
|Net loss                 |                            | $            | (103  | )  
|                         |                            |              |      



| |                  
| | -----------------
| | (c) GoTrain Corp.



B-22



---



##### Table of Contents



SKILLSOFT PUBLIC LIMITED COMPANY AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                          
| | -------------------------
| | (d) Merger and Exit Costs



| |           
| | ----------
| | SmartForce







B-23



---



##### Table of Contents



SKILLSOFT PUBLIC LIMITED COMPANY AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                                  |                      |               |        |       |               |   |        |       |  |   |        |       |  |   |         |        | 
|----------------------------------------------------------------- | -------------------- | ------------- | ------ | ----- | ------------- | - | ------ | ----- |  | - | ------ | ----- |  | - | ------- | ------ | 
|                                                                  |                      | Employee      |        |       |               |   |        |       | 
|                                                                  |                      | Severance and |        |       | Closedown     |   |        |       |  |  
|                                                                  |                      | Related Costs |        |       | of Facilities |   |        | Other |  |   | Total  |      
|                                                                  |                      |               |        |       |               |   |        |       |  |   |        |      
|Merger and exit costs incurred in acquisition                     |                      | $             | 14,495 |       |               | $ | 12,725 |       |  | $ | 3,041  |       |  | $ | 30,261  |       
|Payments made during the year ended January 31, 2003              |                      |               | (8,528 | )     |               |   | (1,342 | )     |  |   | (1,832 | )     |  |   | (11,702 | )     
|                                                                  |                      |               |        |       |               |   |        |       |  |   |        |      
|Merger and exit accrual, January 31, 2003                         |                      | $             | 5,967  |       |               | $ | 11,383 |       |  | $ | 1,209  |       |  | $ | 18,559  |       
|                                                                  |                      |               |        |       |               |   |        |       |  |   |        |      
|                                                                  | Long term obligation |               | $      |      |               |   | $      | 6,255 |  |   | $      |      |  |   | $       | 6,255  | 
|                                                                  | Current obligation   |               | $      | 5,967 |               |   | $      | 5,128 |  |   | $      | 1,209 |  |   | $       | 12,304 | 
|Payments made during the year ended January 31, 2004              |                      |               | (3,039 | )     |               |   | (4,044 | )     |  |   | (242   | )     |  |   | (7,325  | )     
|Adjustments to accrual during the year ended January 31,
    2004 |                      |               | (97    | )     |               |   | 1,734  |       |  |   | (483   | )     |  |   | 1,154   |       
|                                                                  |                      |               |        |       |               |   |        |       |  |   |        |      
|Merger and exit accrual, January 31, 2004                         |                      | $             | 2,831  |       |               | $ | 9,073  |       |  | $ | 484    |       |  | $ | 12,388  |       
|                                                                  |                      |               |        |       |               |   |        |       |  |   |        |      
|                                                                  | Long term obligation |               | $      |      |               |   | $      | 5,469 |  |   | $      |      |  |   | $       | 5,469  | 
|                                                                  | Current obligation   |               | $      | 2,831 |               |   | $      | 3,604 |  |   | $      | 484   |  |   | $       | 6,919  | 
|Payments made during the year ended January 31, 2005              |                      |               | (925   | )     |               |   | (3,228 | )     |  |   | (210   | )     |  |   | (4,363  | )     
|Adjustments to accrual during the year ended January 31,
    2005 |                      |               | 49     |       |               |   | 707    |       |  |   | 60     |       |  |   | 816     |       
|                                                                  |                      |               |        |       |               |   |        |       |  |   |        |      
|Merger and exit accrual, January 31, 2005                         |                      | $             | 1,955  |       |               | $ | 6,552  |       |  | $ | 334    |       |  | $ | 8,841   |       
|                                                                  |                      |               |        |       |               |   |        |       |  |   |        |      
|                                                                  | Long term obligation |               | $      |      |               |   | $      | 4,022 |  |   | $      |      |  |   | $       | 4,022  | 
|                                                                  | Current obligation   |               | $      | 1,955 |               |   | $      | 2,530 |  |   | $      | 334   |  |   | $       | 4,819  | 





|                            |  |   |       | 
|--------------------------- |  | - | ----- | 
|Year Ended January 31, 2006 |  | $ | 4,819 | 
|Year Ended January 31, 2007 |  |   | 1,374 | 
|Year Ended January 31, 2008 |  |   | 1,093 | 
|Year Ended January 31, 2009 |  |   | 816   | 
|Thereafter                  |  |   | 739   | 
|                            |  |   |      
|Total                       |  | $ | 8,841 | 
|                            |  |   |      



| |      
| | -----
| | Books



B-24



---



##### Table of Contents



SKILLSOFT PUBLIC LIMITED COMPANY AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                     |  |               |        |   |               |   |      |       |  |   |        |  
|---------------------------------------------------- |  | ------------- | ------ | - | ------------- | - | ---- | ----- |  | - | ------ | -
|                                                     |  | Employee      |        |   |               |   |     
|                                                     |  | Severance and |        |   | Closedown     |   |      |      
|                                                     |  | Related Costs |        |   | of Facilities |   |      | Total | 
|                                                     |  |               |        |   |               |   |      |       | 
|Exit costs incurred in acquisition                   |  | $             | 1,561  |   |               | $ | 282  |       |  | $ | 1,843  |  
|Payments made during the year ended January 31, 2002 |  |               | (14    | ) |               |   | (6   | )     |  |   | (20    | )
|                                                     |  |               |        |   |               |   |      |       | 
|Acquisition cost accrual, January 31, 2002           |  |               | 1,547  |   |               |   | 276  |       |  |   | 1,823  |  
|Payments made during the year ended January 31, 2003 |  |               | (1,456 | ) |               |   | (276 | )     |  |   | (1,732 | )
|                                                     |  |               |        |   |               |   |      |       | 
|Acquisition cost accrual, January 31, 2003           |  |               | 91     |   |               |   |     |       |  |   | 91     |  
|                                                     |  |               |        |   |               |   |      |       | 
|Payments made during the year ended January 31, 2004 |  |               | (91    | ) |               |   |     |       |  |   | (91    | )
|                                                     |  |               |        |   |               |   |      |       | 
|Acquisition cost accrual, January 31, 2004           |  | $             |       |   |               | $ |     |       |  | $ |       |  
|                                                     |  |               |        |   |               |   |      |       | 



|    |                                                                 
|--- | ----------------------------------------------------------------
|(4) | Restructuring, SEC investigation and Other professional
    fees



| |                  
| | -----------------
| | (a) Restructuring







B-25



---



##### Table of Contents



SKILLSOFT PUBLIC LIMITED COMPANY AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                                         |  |               |        |   |             |   |        |       |  |   |         |  
|------------------------------------------------------------------------ |  | ------------- | ------ | - | ----------- | - | ------ | ----- |  | - | ------- | -
|                                                                         |  | Employee      |        |   |             |   |       
|                                                                         |  | Severance and |        |   | Contractual |   |        |      
|                                                                         |  | Related Costs |        |   | Obligations |   |        | Total | 
|                                                                         |  |               |        |   |             |   |        |       | 
|Total restructuring accrual                                              |  | $             | 10,192 |   |             | $ | 3,987  |       |  | $ | 14,179  |  
|Payments made during the year ended January 31, 2003                     |  |               | (9,063 | ) |             |   | (2,431 | )     |  |   | (11,494 | )
|                                                                         |  |               |        |   |             |   |        |       | 
|Total restructuring accrual as of January 31, 2003                       |  |               | 1,129  |   |             |   | 1,556  |       |  |   | 2,685   |  
|Payments made during the year ended January 31, 2004                     |  |               | (2,356 | ) |             |   | (2,102 | )     |  |   | (4,458  | )
|Restructuring charge for year ended January 31, 2004                     |  |               | 1,227  |   |             |   | 630    |       |  |   | 1,857   |  
|                                                                         |  |               |        |   |             |   |        |       | 
|Total restructuring accrual as of January 31, 2004                       |  |               |       |   |             |   | 84     |       |  |   | 84      |  
|Payments and write downs made during the year ended
    January 31, 2005 |  |               | (2,932 | ) |             |   | (617   | )     |  |   | (3,549  | )
|Restructuring charge for year ended January 31, 2005                     |  |               | 3,556  |   |             |   | 9,277  |       |  |   | 12,833  |  
|                                                                         |  |               |        |   |             |   |        |       | 
|Total restructuring accrual as of January 31, 2005                       |  | $             | 624    |   |             | $ | 8,744  |       |  | $ | 9,368   |  
|                                                                         |  |               |        |   |             |   |        |       | 



|                           |       |             |       |        |             |   |       |             |  |   |        |        | 
|-------------------------- | ----- | ----------- | ----- | ------ | ----------- | - | ----- | ----------- |  | - | ------ | ------ | 
|                           |       | Year Ended  |       |        | Year Ended  |   |       | Year Ended  | 
|                           |       | January 31, |       |        | January 31, |   |       | January 31, | 
|                           |       | 2003        |       |        | 2004        |   |       | 2005        | 
|                           |       |             |       |        |             |   |       |             | 
|Cost of revenue            |       | $           | 990   |        |             | $ |      |             |  | $ |       |       
|Research and development   |       |             | 1,761 |        |             |   | 126   |             |  |   | 11,510 |       
|Selling and marketing      |       |             | 7,922 |        |             |   | 643   |             |  |   | 846    |       
|General and administrative |       |             | 3,506 |        |             |   | 1,088 |             |  |   | 477    |       
|                           |       |             |       |        |             |   |       |             | 
|                           | Total |             | $     | 14,179 |             |   | $     | 1,857       |  |   | $      | 12,833 | 
|                           |       |             |       |        |             |   |       |             | 



| |                                                      
| | -----------------------------------------------------
| | (b) SEC investigation and Other professional
    fees





|    |                               
|--- | ------------------------------
|(5) | Goodwill and Intangible Assets



B-26



---



##### Table of Contents



SKILLSOFT PUBLIC LIMITED COMPANY AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                                         |  |                  |         |  |                  |   |        |          |  |       |          |  |  |              |         |  |          |   |        |  |  |   |         | 
|---------------------------------------- |  | ---------------- | ------- |  | ---------------- | - | ------ | -------- |  | ----- | -------- |  |  | ------------ | ------- |  | -------- | - | ------ |  |  | - | ------- | 
|                                         |  | January 31, 2004 |         |  | January 31, 2005 |  
|                                         |  |                  |         |  |                  |  
|                                         |  | Gross            |         |  |                  |   | Net    |          |  | Gross |          |  |  |              | Net     | 
|                                         |  | Carrying         |         |  | Accumulated      |   |        | Carrying |  |       | Carrying |  |  | Accumulated  |         |  | Carrying |  
|                                         |  | Amount           |         |  | Amortization     |   |        | Amount   |  |       | Amount   |  |  | Amortization |         |  | Amount   |  
|                                         |  |                  |         |  |                  |   |        |          |  |       |          |  |  |              |         |  |          |  
|Internally developed software/courseware |  | $                | 26,610  |  |                  | $ | 9,615  |          |  | $     | 16,995   |  |  | $            | 26,610  |  |          | $ | 16,476 |  |  | $ | 10,134  | 
|Customer contracts                       |  |                  | 13,018  |  |                  |   | 5,168  |          |  |       | 7,850    |  |  |              | 13,018  |  |          |   | 7,881  |  |  |   | 5,137   | 
|Books trademark                          |  |                  | 900     |  |                  |   |       |          |  |       | 900      |  |  |              | 900     |  |          |   |       |  |  |   | 900     | 
|                                         |  |                  |         |  |                  |   |        |          |  |       |          |  |  |              |         |  |          |  
|                                         |  |                  | 40,528  |  |                  |   | 14,783 |          |  |       | 25,745   |  |  |              | 40,528  |  |          |   | 24,357 |  |  |   | 16,171  | 
|Goodwill                                 |  |                  | 125,878 |  |                  |   |       |          |  |       | 125,878  |  |  |              | 103,576 |  |          |   |       |  |  |   | 103,576 | 
|                                         |  |                  |         |  |                  |   |        |          |  |       |          |  |  |              |         |  |          |  
|Total                                    |  | $                | 166,406 |  |                  | $ | 14,783 |          |  | $     | 151,623  |  |  | $            | 144,104 |  |          | $ | 24,357 |  |  | $ | 119,747 | 
|                                         |  |                  |         |  |                  |   |        |          |  |       |          |  |  |              |         |  |          |  







|                                       |  |                   |        |  |             |   |       | 
|-------------------------------------- |  | ----------------- | ------ |  | ----------- | - | ----- | 
|                                       |  | Fiscal Year Ended |       
|                                       |  |                   |       
|                                       |  | January 31,       |        |  | January 31, |  
|                                       |  | 2004              |        |  | 2005        |  
|                                       |  |                   |        |  |             |  
|Internal developed software/courseware |  | $                 | 6,792  |  |             | $ | 6,865 | 
|Customer contracts                     |  |                   | 3,280  |  |             |   | 2,710 | 
|                                       |  |                   |        |  |             |  
|                                       |  | $                 | 10,072 |  |             | $ | 9,575 | 
|                                       |  |                   |        |  |             |  



|            |       |              |       |        | 
|----------- | ----- | ------------ | ----- | ------ | 
|            |       | Amortization |      
|Fiscal Year |       | Expense      |      
|            |       |              |      
|2006        |       | $            | 8,592 |       
|2007        |       |              | 5,345 |       
|2008        |       |              | 1,321 |       
|2009        |       |              | 13    |       
|            |       |              |      
|            | Total |              | $     | 15,271 | 
|            |       |              |      

B-27



---



##### Table of Contents



SKILLSOFT PUBLIC LIMITED COMPANY AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                             
| | ----------------------------
| | Goodwill Impairment Analysis











|    |                           
|--- | --------------------------
|(6) | Related Party Transactions



| |                                       
| | --------------------------------------
| | (a) Notes Receivable from Stockholders





B-28



---



##### Table of Contents



SKILLSOFT PUBLIC LIMITED COMPANY AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                                
| | -------------------------------
| | (b) Ownership of CBT Technology







| |                         
| | ------------------------
| | (c) Spherion Corporation





| |                                           
| | ------------------------------------------
| | (d) Business Performance Technologies, LLP





B-29



---



##### Table of Contents



SKILLSOFT PUBLIC LIMITED COMPANY AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |             
|--- | ------------
|(7) | Income Taxes



|              |  |             |          |   |      |   |          |      |  |   |         |  
|------------- |  | ----------- | -------- | - | ---- | - | -------- | ---- |  | - | ------- | -
|              |  | January 31, |         
|              |  |             |         
|              |  | 2003        |          |   | 2004 |   |          | 2005 | 
|              |  |             |          |   |      |   |          |      | 
|Ireland       |  | $           | (49,241  | ) |      | $ | (55,076  | )    |  | $ | (20,066 | )
|United States |  |             | (209,884 | ) |      |   | (61,995  | )    |  |   | (5,994  | )
|Rest of World |  |             | (24,489  | ) |      |   | 4,325    |      |  |   | 6,578   |  
|              |  |             |          |   |      |   |          |      | 
|              |  | $           | (283,614 | ) |      | $ | (112,746 | )    |  | $ | (19,482 | )
|              |  |             |          |   |      |   |          |      | 



|              |  |            |     |  |      |   |     |      |  |   |     |  
|------------- |  | ---------- | --- |  | ---- | - | --- | ---- |  | - | --- | -
|              |  | January 31 |    
|              |  |            |    
|              |  | 2003       |     |  | 2004 |   |     | 2005 | 
|              |  |            |     |  |      |   |     |      | 
|Current:      |  |            |     |  |      |   |     |      |  |   |     |  
|Ireland       |  | $          |    |  |      | $ |    |      |  | $ |    |  
|United States |  |            |     |  |      |   | 50  |      |  |   | 56  |  
|Rest of World |  |            | 383 |  |      |   | 479 |      |  |   | 482 |  
|              |  |            |     |  |      |   |     |      | 
|              |  | $          | 383 |  |      | $ | 529 |      |  | $ | 538 |  
|              |  |            |     |  |      |   |     |      | 
|Deferred:     |  |            |     |  |      |   |     |      |  |   |     |  
|Ireland       |  | $          |    |  |      | $ |    |      |  | $ |    |  
|United States |  |            |    |  |      |   |    |      |  |   | 156 |  
|Rest of World |  |            |    |  |      |   |    |      |  |   | (63 | )
|              |  |            |     |  |      |   |     |      | 
|              |  | $          |    |  |      | $ |    |      |  | $ | 93  |  
|              |  |            |     |  |      |   |     |      | 
|Tax provision |  | $          | 383 |  |      | $ | 529 |      |  | $ | 631 |  
|              |  |            |     |  |      |   |     |      | 



|                                       |  |             |          |   |      |   |          |      |  |   |          |  
|-------------------------------------- |  | ----------- | -------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                                       |  | January 31, |         
|                                       |  |             |         
|                                       |  | 2003        |          |   | 2004 |   |          | 2005 | 
|                                       |  |             |          |   |      |   |          |      | 
|Net operating loss carryforwards       |  | $           | 129,857  |   |      | $ | 151,644  |      |  | $ | 150,464  |  
|Nondeductible expenses and reserves    |  |             | 3,366    |   |      |   | 15,200   |      |  |   | 6,627    |  
|Tax credits                            |  |             | 1,530    |   |      |   | 3,030    |      |  |   | 3,326    |  
|Nondeductible non-goodwill intangibles |  |             | (7,445   | ) |      |   | (6,360   | )    |  |   | (3,497   | )
|Integration costs                      |  |             | (1,513   | ) |      |   | (2,310   | )    |  |   |         |  
|                                       |  |             |          |   |      |   |          |      | 
|                                       |  |             | 125,795  |   |      |   | 161,204  |      |  |   | 156,920  |  
|Less  valuation allowance             |  |             | (125,795 | ) |      |   | (161,204 | )    |  |   | (157,004 | )
|                                       |  |             |          |   |      |   |          |      | 
|                                       |  | $           |         |   |      | $ |         |      |  | $ | (84      | )
|                                       |  |             |          |   |      |   |          |      | 

B-30



---



##### Table of Contents



SKILLSOFT PUBLIC LIMITED COMPANY AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                          |  |             |       |    |      |  |        |      |  |  |       |   
|--------------------------------------------------------- |  | ----------- | ----- | -- | ---- |  | ------ | ---- |  |  | ----- | --
|                                                          |  | January 31, |      
|                                                          |  |             |      
|                                                          |  | 2003        |       |    | 2004 |  |        | 2005 | 
|                                                          |  |             |       |    |      |  |        |      | 
|Income tax provision at statutory rate                    |  |             | 15.7  | %  |      |  | 12.0   | %    |  |  | 12.0  | % 
|Increase (decrease) in tax resulting from:                |  |             |       |    |      |  |        |      |  |  |       |   
|State tax provision, net of federal benefit               |  |             | 0.0   |    |      |  | (0.04  | )    |  |  | (6.8  | ) 
|Foreign differential                                      |  |             | (0.1  | )  |      |  | 15.44  |      |  |  | (21.4 | ) 
|Nondeductible items, primarily goodwill impairment charge |  |             | (13.9 | )  |      |  | 0.0    |      |  |  | (11.3 | ) 
|Unbenefitted current activity                             |  |             | (1.8  | )  |      |  | (27.87 | )    |  |  | 24.3  |   
|                                                          |  |             |       |    |      |  |        |      | 
|Effective tax rate                                        |  |             | (0.1  | )% |      |  | (0.47  | )%   |  |  | (3.2  | )%
|                                                          |  |             |       |    |      |  |        |      | 















B-31



---



##### Table of Contents



SKILLSOFT PUBLIC LIMITED COMPANY AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|    |                              
|--- | -----------------------------
|(8) | Commitments and Contingencies



| |           
| | ----------
| | (a) Leases





|                              |  |            |        |  |       |   |     |       |  |   |        | 
|----------------------------- |  | ---------- | ------ |  | ----- | - | --- | ----- |  | - | ------ | 
|                              |  | Facilities |        |  | Other |   |     | Total | 
|                              |  |            |        |  |       |   |     |       | 
|Fiscal year ended January 31: |  |            |        |  |       |   |     |       |  |   |        | 
|2006                          |  | $          | 6,119  |  |       | $ | 491 |       |  | $ | 6,610  | 
|2007                          |  |            | 5,367  |  |       |   | 241 |       |  |   | 5,608  | 
|2008                          |  |            | 4,847  |  |       |   | 44  |       |  |   | 4,891  | 
|2009                          |  |            | 4,100  |  |       |   | 19  |       |  |   | 4,119  | 
|2010                          |  |            | 1,981  |  |       |   | 7   |       |  |   | 1,988  | 
|Thereafter                    |  |            | 15,658 |  |       |   |    |       |  |   | 15,658 | 
|                              |  |            |        |  |       |   |     |       | 
|                              |  | $          | 38,072 |  |       | $ | 802 |       |  | $ | 38,874 | 
|                              |  |            |        |  |       |   |     |       | 



| |                        
| | -----------------------
| | (b) Minimum Commitments





| |               
| | --------------
| | (c) Litigation



| |                  
| | -----------------
| | SEC Investigation



B-32



---



##### Table of Contents



SKILLSOFT PUBLIC LIMITED COMPANY AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |         
| | --------
| | Lawsuits









B-33



---



##### Table of Contents



SKILLSOFT PUBLIC LIMITED COMPANY AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)












| |                    
| | -------------------
| | (d) Credit Facility



B-34



---



##### Table of Contents



SKILLSOFT PUBLIC LIMITED COMPANY AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                               
| | ------------------------------
| | (e) Delinquent Foreign Filings





|    |                     
|--- | --------------------
|(9) | Stockholders Equity



| |                                   
| | ----------------------------------
| | (a) Reverse Acquisition Accounting






|                                           |  |             |            | 
|------------------------------------------ |  | ----------- | ---------- | 
|                                           |  | As of       |           
|                                           |  | January 31, |           
|                                           |  | 2002        |           
|                                           |  |             |           
|Outstanding shares, as previously reported |  |             | 17,313,641 | 
|Multiplied times exchange ratio            |  |             | 2.3674     | 
|                                           |  |             |           
|Shares, as restated                        |  |             | 40,988,314 | 
|                                           |  |             |           

|                                                                              |  |             |        | 
|----------------------------------------------------------------------------- |  | ----------- | ------ | 
|                                                                              |  | For the     |       
|                                                                              |  | Year        |       
|                                                                              |  | Ended       |       
|                                                                              |  | January 31, |       
|                                                                              |  | 2002        |       
|                                                                              |  |             |       
|Weighted average shares outstanding (in thousands) as previously
    reported |  |             | 14,921 | 
|Multiplied times exchange ratio                                               |  |             | 2.3674 | 
|                                                                              |  |             |       
|Weighted average shares outstanding (in thousands) as restated                |  |             | 35,324 | 
|                                                                              |  |             |       



| |                       
| | ----------------------
| | (b) Stock Option Plans



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##### Table of Contents



SKILLSOFT PUBLIC LIMITED COMPANY AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










B-36



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##### Table of Contents



SKILLSOFT PUBLIC LIMITED COMPANY AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                                                    |  |            |            |  |             |  |            |                     |  |  |           | 
|----------------------------------------------------------------------------------- |  | ---------- | ---------- |  | ----------- |  | ---------- | ------------------- |  |  | --------- | 
|Plan Name                                                                           |  | Authorized |            |  | Outstanding |  |            | Available for Grant | 
|                                                                                    |  |            |            |  |             |  |            |                     | 
|1990 Share Option Scheme (the 1990 Plan)                                            |  |            | 4,700,000  |  |             |  | 168,148    |                     |  |  |          | 
|1994 Share Option Plan (the 1994 Plan)                                              |  |            | 11,747,036 |  |             |  | 4,408,901  |                     |  |  |          | 
|1996 Supplemental Stock Plan (the 1996 Plan)                                        |  |            | 14,000,000 |  |             |  | 4,781,869  |                     |  |  | 5,245,437 | 
|2001 Outside Director Option Plan (the Outside Director Plan)                       |  |            | 350,000    |  |             |  | 245,000    |                     |  |  | 98,750    | 
|1996 ForeFront Group Inc. Non-Qualified Stock Option Plan (the
    FF96 Plan)       |  |            | 798,924    |  |             |  | 4,961      |                     |  |  | 337,862   | 
|ForeFront 1996 Non-Employee Directors Stock Plan (the FF
    Directors 1996 Plan) |  |            | 18,822     |  |             |  |           |                     |  |  | 2         | 
|Knowledge Well Limited 1998 Share Option Plan (the KWL Plan)                        |  |            | 654,800    |  |             |  |           |                     |  |  | 234,269   | 
|Knowledge Well Group Limited 1998 Share Option Plan (the
    KWGL Plan)             |  |            | 654,800    |  |             |  | 88         |                     |  |  | 624,462   | 
|Books24x7.com, Inc. 1994 Stock Option Plan                                          |  |            | 867,436    |  |             |  | 125,359    |                     |  |  |          | 
|1998 Stock Incentive Plan (the 1998 Plan)                                           |  |            | 7,402,071  |  |             |  | 1,229,791  |                     |  |  |          | 
|1999 Stock Incentive Plan (the 1999 Plan)                                           |  |            | 568,176    |  |             |  | 94,696     |                     |  |  |          | 
|2001 Stock Incentive Plan (the 2001 Plan)                                           |  |            | 11,354,512 |  |             |  | 6,932,428  |                     |  |  |          | 
|2002 Stock Incentive Plan (the 2002 Plan)                                           |  |            | 2,350,000  |  |             |  | 985,261    |                     |  |  |          | 
|                                                                                    |  |            |            |  |             |  |            |                     | 
|                                                                                    |  |            | 55,466,577 |  |             |  | 18,976,502 |                     |  |  | 6,540,782 | 
|                                                                                    |  |            |            |  |             |  |            |                     | 



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SKILLSOFT PUBLIC LIMITED COMPANY AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                              |                      |        |            |            |                |          |             |                |  |   |       |       | 
|----------------------------- | -------------------- | ------ | ---------- | ---------- | -------------- | -------- | ----------- | -------------- |  | - | ----- | ----- | 
|                              |                      |        |            |            |                | Weighted |            
|                              |                      |        |            |            |                | Average  |            
|                              |                      | Shares |            |            | Exercise Price |          |             | Exercise Price | 
|                              |                      |        |            |            |                |          |             |                | 
|Outstanding, January 31, 2002 |                      |        | 7,080,141  |            |                | $        | 0.11- 15.26 |                |  | $ | 6.18  |      
|                              | Granted              |        |            | 6,509,496  |                |          |             | 2.75- 10.67    |  |   |       | 4.47  | 
|                              | Acquired from merger |        |            | 15,941,705 |                |          |             | 3.05- 44.25    |  |   |       | 11.99 | 
|                              | Exercised            |        |            | (826,316   | )              |          |             | 0.11 -  9.03   |  |   |       | 0.50  | 
|                              | Canceled             |        |            | (3,100,840 | )              |          |             | 0.11- 44.25    |  |   |       | 13.32 | 
|                              |                      |        |            |            |                |          |             |                | 
|Outstanding, January 31, 2003 |                      |        | 25,604,186 |            |                |          | 0.11- 44.25 |                |  |   | 8.69  |      
|                              |                      |        |            |            |                |          |             |                | 
|                              | Granted              |        |            | 2,320,550  |                |          |             | 2.61-  8.65    |  |   |       | 4.41  | 
|*Beginning Balance Adjustment |                      |        | (177,951   | )          |                |          | 0.11- 42.88 |                |  |   | 13.57 |      
|                              | Exercised            |        |            | (1,530,657 | )              |          |             | 0.11-  8.19    |  |   |       | 3.40  | 
|                              | Canceled             |        |            | (3,179,306 | )              |          |             | 0.11- 41.13    |  |   |       | 13.57 | 
|                              |                      |        |            |            |                |          |             |                | 
|Outstanding, January 31, 2004 |                      |        | 23,036,822 |            |                |          | 0.11- 44.25 |                |  |   | 7.88  |      
|                              |                      |        |            |            |                |          |             |                | 
|                              | Granted              |        |            | 1,713,800  |                |          | 2.82-$      | 12.99          |  |   |       | 10.78 | 
|                              | Exercised            |        |            | (3,816,626 | )              |          | .11-$       | 11.60          |  |   |       | 4.70  | 
|                              | Canceled             |        |            | (1,957,494 | )              |          | .25-$       | 43.12          |  |   |       | 12.86 | 
|                              |                      |        |            |            |                |          |             |                | 
|Outstanding, January 31, 2005 |                      |        | 18,976,502 |            |                | $        | 0.11-$44.25 |                |  | $ | 8.27  |      
|                              |                      |        |            |            |                |          |             |                | 
|Exercisable, January 31, 2005 |                      |        | 12,083,373 |            |                | $        | 0.11-$44.25 |                |  | $ | 9.61  |      
|                              |                      |        |            |            |                |          |             |                | 
|Exercisable, January 31, 2004 |                      |        | 12,117,780 |            |                | $        | 0.11-$44.25 |                |  | $ | 10.28 |      
|                              |                      |        |            |            |                |          |             |                | 
|Exercisable, January 31, 2003 |                      |        | 9,883,805  |            |                | $        | 0.11-$44.25 |                |  | $ | 12.71 |      
|                              |                      |        |            |            |                |          |             |                | 






|  |                                                                                                                                                                                                                                                                                                                                                       
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Beginning balance adjustment is comprised of: certain extensions
    of post-termination exercise periods as a result of the
    Companys failure to file Form 8-K as a result of the
    restatement of SmartForces historical financial statements
    offset by retroactive terminations of options shown as
    outstanding at January 31, 2003.



|                         |  |             |            |           |              |  |          |          |  |   |           |          |  |          |            |  |  |   |       | 
|------------------------ |  | ----------- | ---------- | --------- | ------------ |  | -------- | -------- |  | - | --------- | -------- |  | -------- | ---------- |  |  | - | ----- | 
|                         |  | Outstanding |            |           | Exercisable  | 
|                         |  |             |            |           |              | 
|                         |  |             |            | Weighted  |              |  |          |          | 
|                         |  |             |            | Average   |              |  | Weighted |          |  |   |           | Weighted | 
|                         |  |             |            | Remaining |              |  | Average  |          |  |   |           | Average  | 
|                         |  | Number of   |            |           | Contractual  |  |          | Exercise |  |   | Number of |          |  | Exercise |           
|Range of Exercise Prices |  | Shares      |            |           | Life (Years) |  |          | Price    |  |   | Shares    |          |  | Price    |           
|                         |  |             |            |           |              |  |          |          |  |   |           |          |  |          |           
|$  0.11-$  3.30          |  |             | 2,320,339  |           |              |  | 7.15     |          |  | $ | 2.78      |          |  |          | 1,017,634  |  |  | $ | 2.23  | 
|$  3.34-$  3.66          |  |             | 1,298,464  |           |              |  | 7.84     |          |  |   | 3.65      |          |  |          | 535,693    |  |  |   | 3.64  | 
|$  3.72-$  4.06          |  |             | 4,361,766  |           |              |  | 7.54     |          |  |   | 4.06      |          |  |          | 2,196,793  |  |  |   | 4.06  | 
|$  4.07-$  6.12          |  |             | 2,133,715  |           |              |  | 6.95     |          |  |   | 5.45      |          |  |          | 1,595,318  |  |  |   | 5.45  | 
|$  6.18-$   7.5          |  |             | 2,011,348  |           |              |  | 6.74     |          |  |   | 6.50      |          |  |          | 1,476,628  |  |  |   | 6.45  | 
|$  7.55-$ 11.60          |  |             | 2,421,296  |           |              |  | 5.69     |          |  |   | 10.23     |          |  |          | 1,961,396  |  |  |   | 10.42 | 
|$ 11.66-$ 16.44          |  |             | 2,514,372  |           |              |  | 6.56     |          |  |   | 14.42     |          |  |          | 1,400,563  |  |  |   | 15.93 | 
|$ 17.00-$ 44.25          |  |             | 1,915,202  |           |              |  | 5.53     |          |  |   | 22.11     |          |  |          | 1,899,348  |  |  |   | 22.10 | 
|                         |  |             |            |           |              |  |          |          |  |   |           |          |  |          |           
|$  0.11-$ 44.25          |  |             | 18,976,502 |           |              |  | 6.79     |          |  | $ | 8.27      |          |  |          | 12,083,373 |  |  | $ | 9.61  | 
|                         |  |             |            |           |              |  |          |          |  |   |           |          |  |          |           

B-38



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##### Table of Contents



SKILLSOFT PUBLIC LIMITED COMPANY AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)














| |                                  
| | ---------------------------------
| | (e) Employee Stock Purchase Plans





B-39



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##### Table of Contents



SKILLSOFT PUBLIC LIMITED COMPANY AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










|     |                      
|---- | ---------------------
|(10) | Employee Benefit Plan





|     |                                            
|---- | -------------------------------------------
|(11) | Disclosures About Segments of an Enterprise



B-40



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##### Table of Contents



SKILLSOFT PUBLIC LIMITED COMPANY AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                  |                                          |                             |         |                |                      |   |       |          |   |   |         |          |       | 
|--------------------------------- | ---------------------------------------- | --------------------------- | ------- | -------------- | -------------------- | - | ----- | -------- | - | - | ------- | -------- | ----- | 
|                                  |                                          | Year Ended January 31, 2003 |        
|                                  |                                          |                             |        
|                                  |                                          | Multi-Modal                 |         |                | Retail Certification |   |       | Combined |  
|                                  |                                          |                             |         |                |                      |   |       |          |  
|                                  |                                          |                             |         | (In thousands) |                      |   |      
|Revenue                           |                                          | $                           | 94,402  |                |                      | $ | 7,068 |          |   | $ | 101,470 |         
|Cost of revenues                  |                                          |                             | 10,825  |                |                      |   | 723   |          |   |   | 11,548  |         
|                                  |                                          |                             |         |                |                      |   |       |          |  
|                                  | Gross profit                             |                             |         | 83,577         |                      |   |       | 6,345    |   |   |         | 89,922   |      
|                                  |                                          |                             |         |                |                      |   |       |          |  
|Operating expenses:               |                                          |                             |         |                |                      |   |       |          |   |   |         |         
|                                  | Research and development                 |                             |         | 28,687         |                      |   |       | 417      |   |   |         | 29,104   |      
|                                  | Selling and marketing                    |                             |         | 47,032         |                      |   |       | 5,659    |   |   |         | 52,691   |      
|                                  | General and administrative               |                             |         | 17,326         |                      |   |       | 588      |   |   |         | 17,914   |      
|                                  | Amortization of stock based compensation |                             |         | 1,634          |                      |   |       |         |   |   |         | 1,634    |      
|                                  | Amortization of intangible assets        |                             |         | 4,683          |                      |   |       |         |   |   |         | 4,683    |      
|                                  | Impairment charge                        |                             |         | 250,107        |                      |   |       |         |   |   |         | 250,107  |      
|                                  | Restructuring                            |                             |         | 14,179         |                      |   |       |         |   |   |         | 14,179   |      
|                                  | Restatement:                             |                             |         |                |                      |   |       |          |   |   |         |          |      
|                                  |                                          | SEC Investigation           |         |                |                     |   |       |          |  |   |         |          |      | 
|                                  |                                          | Other professional fees     |         |                | 5,107                |   |       |          |  |   |         |          | 5,107 | 
|                                  |                                          |                             |         |                |                      |   |       |          |  
|Total operating expenses          |                                          |                             | 368,755 |                |                      |   | 6,664 |          |   |   | 375,419 |         
|                                  |                                          |                             |         |                |                      |   |       |          |  
|                                  | Loss from operations                     |                             | $       | (285,178       | )                    |   | $     | (319     | ) |   | $       | (285,497 | )    
|                                  |                                          |                             |         |                |                      |   |       |          |  
|Supplemental segment disclosures: |                                          |                             |         |                |                      |   |       |          |   |   |         |         
|                                  | Provision for income taxes               |                             | $       | 383            |                      |   | $     |         |   |   | $       | 383      |      
|                                  |                                          |                             |         |                |                      |   |       |          |  
|                                  | Depreciation and amortization expense    |                             | $       | 13,302         |                      |   | $     | 93       |   |   | $       | 13,395   |      
|                                  |                                          |                             |         |                |                      |   |       |          |  



|                                                        |                      |                        |         |       |                      |   |         |          |  |   |         |       | 
|------------------------------------------------------- | -------------------- | ---------------------- | ------- | ----- | -------------------- | - | ------- | -------- |  | - | ------- | ----- | 
|                                                        |                      | As of January 31, 2003 |        
|                                                        |                      |                        |        
|                                                        |                      | Multi-Modal            |         |       | Retail Certification |   |         | Combined | 
|                                                        |                      |                        |         |       |                      |   |         |          | 
|Current assets, net                                     |                      | $                      | 195,107 |       |                      | $ | 16,217  |          |  | $ | 211,324 |      
|Property and equipment, net                             |                      |                        | 11,463  |       |                      |   | 501     |          |  |   | 11,964  |      
|Receivable from subsidiaries                            |                      |                        | 17,602  |       |                      |   | (17,602 | )        |  |   |        |      
|Goodwill                                                |                      |                        | 101,126 |       |                      |   | 18,301  |          |  |   | 119,427 |      
|Other assets                                            |                      |                        | 33,038  |       |                      |   | 2,384   |          |  |   | 35,422  |      
|                                                        |                      |                        |         |       |                      |   |         |          | 
|Total consolidated assets                               |                      | $                      | 358,336 |       |                      | $ | 19,801  |          |  | $ | 378,137 |      
|                                                        |                      |                        |         |       |                      |   |         |          | 
|Current liabilities                                     |                      | $                      | 167,439 |       |                      | $ | 12,063  |          |  | $ | 179,502 |      
|Long-term liabilities                                   |                      |                        | 7,423   |       |                      |   | 125     |          |  |   | 7,548   |      
|                                                        |                      |                        |         |       |                      |   |         |          | 
|Total liabilities                                       |                      |                        | 174,862 |       |                      |   | 12,188  |          |  |   | 187,050 |      
|Stockholders equity                                    |                      |                        | 183,474 |       |                      |   | 7,613   |          |  |   | 191,087 |      
|                                                        |                      |                        |         |       |                      |   |         |          | 
|Total consolidated liabilities and stockholders equity |                      | $                      | 358,336 |       |                      | $ | 19,801  |          |  | $ | 378,137 |      
|                                                        |                      |                        |         |       |                      |   |         |          | 
|Supplemental segment disclosures                        |                      |                        |         |       |                      |   |         |          |  |   |         |      
|                                                        | Capital Expenditures |                        | $       | 8,588 |                      |   | $       | 298      |  |   | $       | 8,886 | 
|                                                        |                      |                        |         |       |                      |   |         |          | 

B-41



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##### Table of Contents



SKILLSOFT PUBLIC LIMITED COMPANY AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|                                  |                                                                 |                             |         |          |                      |   |        |          |        |   |         |          |         | 
|--------------------------------- | --------------------------------------------------------------- | --------------------------- | ------- | -------- | -------------------- | - | ------ | -------- | ------ | - | ------- | -------- | ------- | 
|                                  |                                                                 | Year Ended January 31, 2004 |        
|                                  |                                                                 |                             |        
|                                  |                                                                 | Multi-Modal                 |         |          | Retail Certification |   |        | Combined |       
|                                  |                                                                 |                             |         |          |                      |   |        |          |       
|                                  |                                                                 | (In thousands)              |        
|Revenue                           |                                                                 | $                           | 180,098 |          |                      | $ | 13,377 |          |        | $ | 193,475 |         
|Cost of revenues                  |                                                                 |                             | 17,825  |          |                      |   | 572    |          |        |   | 18,397  |         
|                                  |                                                                 |                             |         |          |                      |   |        |          |       
|                                  | Gross profit                                                    |                             |         | 162,273  |                      |   |        | 12,805   |        |   |         | 175,078  |        
|                                  |                                                                 |                             |         |          |                      |   |        |          |       
|Operating expenses:               |                                                                 |                             |         |          |                      |   |        |          |        |   |         |         
|                                  | Research and development                                        |                             |         | 53,627   |                      |   |        |         |        |   |         | 53,627   |        
|                                  | Selling and marketing                                           |                             |         | 74,556   |                      |   |        | 12,976   |        |   |         | 87,532   |        
|                                  | General and administrative                                      |                             |         | 25,660   |                      |   |        | 2,223    |        |   |         | 27,883   |        
|                                  | Legal settlements                                               |                             |         | 93,750   |                      |   |        |         |        |   |         | 93,750   |        
|                                  | Amortization of stock based compensation                        |                             |         | 1,986    |                      |   |        |         |        |   |         | 1,986    |        
|                                  | Amortization of intangible assets                               |                             |         | 10,072   |                      |   |        |         |        |   |         | 10,072   |        
|                                  | Impairment charge                                               |                             |         |         |                      |   |        |         |        |   |         |         |        
|                                  | Restructuring and other non-recurring items                     |                             |         | 1,857    |                      |   |        |         |        |   |         | 1,857    |        
|                                  | Restatement:                                                    |                             |         |          |                      |   |        |          |        |   |         |          |        
|                                  |                                                                 | SEC investigation           |         |          | 1,898                |   |        |          |       |   |         |          | 1,898   | 
|                                  |                                                                 | Other professional fees     |         |          | 14,473               |   |        |          |       |   |         |          | 14,473  | 
|                                  |                                                                 |                             |         |          |                      |   |        |          |       
|                                  |                                                                 | Total operating expenses    |         |          | 277,879              |   |        |          | 15,199 |   |         |          | 293,078 | 
|                                  |                                                                 |                             |         |          |                      |   |        |          |       
|                                  | Loss from operations                                            |                             | $       | (115,606 | )                    |   | $      | (2,394   | )      |   | $       | (118,000 | )      
|                                  |                                                                 |                             |         |          |                      |   |        |          |       
|Supplemental segment disclosures: |                                                                 |                             |         |          |                      |   |        |          |        |   |         |         
|                                  | Provision for income taxes                                      |                             |         | 529      |                      |   |        |         |        |   |         | 529      |        
|                                  |                                                                 |                             |         |          |                      |   |        |          |       
|                                  | Depreciation, amortization and stock based compensation expense |                             | $       | 20,908   |                      |   | $      | 479      |        |   | $       | 21,387   |        
|                                  |                                                                 |                             |         |          |                      |   |        |          |       



|                                                        |  |                        |         |  |                      |   |        |          |  |   |         | 
|------------------------------------------------------- |  | ---------------------- | ------- |  | -------------------- | - | ------ | -------- |  | - | ------- | 
|                                                        |  | As of January 31, 2004 |        
|                                                        |  |                        |        
|                                                        |  | Multi-Modal            |         |  | Retail Certification |   |        | Combined | 
|                                                        |  |                        |         |  |                      |   |        |          | 
|Current assets, net                                     |  | $                      | 171,620 |  |                      | $ | 12,298 |          |  | $ | 183,918 | 
|Property and equipment, net                             |  |                        | 6,272   |  |                      |   | 175    |          |  |   | 6,447   | 
|Goodwill                                                |  |                        | 106,602 |  |                      |   | 19,276 |          |  |   | 125,878 | 
|Other assets                                            |  |                        | 26,135  |  |                      |   |       |          |  |   | 26,135  | 
|                                                        |  |                        |         |  |                      |   |        |          | 
|Total consolidated assets                               |  | $                      | 310,629 |  |                      | $ | 31,749 |          |  | $ | 342,378 | 
|                                                        |  |                        |         |  |                      |   |        |          | 
|Current liabilities                                     |  | $                      | 215,111 |  |                      | $ | 17,922 |          |  | $ | 233,033 | 
|Long-term liabilities                                   |  |                        | 23,510  |  |                      |   | 77     |          |  |   | 23,587  | 
|                                                        |  |                        |         |  |                      |   |        |          | 
|Total liabilities                                       |  |                        | 238,621 |  |                      |   | 17,999 |          |  |   | 256,620 | 
|Stockholders equity                                    |  |                        | 72,008  |  |                      |   | 13,750 |          |  |   | 85,758  | 
|                                                        |  |                        |         |  |                      |   |        |          | 
|Total consolidated liabilities and stockholders equity |  | $                      | 310,629 |  |                      | $ | 31,749 |          |  | $ | 342,378 | 
|                                                        |  |                        |         |  |                      |   |        |          | 
|Supplemental segment disclosures                        |  |                        |         |  |                      |   |        |          |  |   |         | 
|Capital expenditures                                    |  | $                      | 3,490   |  |                      | $ | 153    |          |  | $ | 3,643   | 
|                                                        |  |                        |         |  |                      |   |        |          | 

B-42



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##### Table of Contents



SKILLSOFT PUBLIC LIMITED COMPANY AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|                                  |                                                                 |                             |         |         |                      |   |         |          |        |   |         |         |         | 
|--------------------------------- | --------------------------------------------------------------- | --------------------------- | ------- | ------- | -------------------- | - | ------- | -------- | ------ | - | ------- | ------- | ------- | 
|                                  |                                                                 | Year Ended January 31, 2005 |        
|                                  |                                                                 |                             |        
|                                  |                                                                 | Multi-Modal                 |         |         | Retail Certification |   |         | Combined |       
|                                  |                                                                 |                             |         |         |                      |   |         |          |       
|                                  |                                                                 | (In thousands)              |        
|Revenue                           |                                                                 | $                           | 192,135 |         |                      | $ | 20,165  |          |        | $ | 212,300 |        
|Cost of revenues                  |                                                                 |                             | 21,269  |         |                      |   | 455     |          |        |   | 21,724  |        
|                                  |                                                                 |                             |         |         |                      |   |         |          |       
|                                  | Gross profit                                                    |                             |         | 170,866 |                      |   |         | 19,710   |        |   |         | 190,576 |        
|                                  |                                                                 |                             |         |         |                      |   |         |          |       
|Operating expenses:               |                                                                 |                             |         |         |                      |   |         |          |        |   |         |        
|                                  | Research and development                                        |                             |         | 45,306  |                      |   |         | 269      |        |   |         | 45,575  |        
|                                  | Selling and marketing                                           |                             |         | 80,147  |                      |   |         | 13,339   |        |   |         | 93,486  |        
|                                  | General and administrative                                      |                             |         | 23,286  |                      |   |         | 1,876    |        |   |         | 25,162  |        
|                                  | Amortization of stock based compensation                        |                             |         | 1,191   |                      |   |         |         |        |   |         | 1,191   |        
|                                  | Amortization of intangible assets                               |                             |         | 9,575   |                      |   |         |         |        |   |         | 9,575   |        
|                                  | Impairment charge                                               |                             |         |        |                      |   |         | 19,268   |        |   |         | 19,268  |        
|                                  | Restructuring                                                   |                             |         | 13,361  |                      |   |         |         |        |   |         | 13,361  |        
|                                  | Restatement:                                                    |                             |         |         |                      |   |         |          |        |   |         |         |        
|                                  |                                                                 | SEC investigation           |         |         | 2,182                |   |         |          |       |   |         |         | 2,182   | 
|                                  |                                                                 | Other professional fees     |         |         | 320                  |   |         |          |       |   |         |         | 320     | 
|                                  |                                                                 |                             |         |         |                      |   |         |          |       
|                                  |                                                                 | Total operating expenses    |         |         | 175,368              |   |         |          | 34,752 |   |         |         | 210,120 | 
|                                  |                                                                 |                             |         |         |                      |   |         |          |       
|Operating loss                    |                                                                 | $                           | (4,502  | )       |                      | $ | (15,042 | )        |        | $ | (19,544 | )      
|                                  |                                                                 |                             |         |         |                      |   |         |          |       
|Supplemental segment disclosures: |                                                                 |                             |         |         |                      |   |         |          |        |   |         |        
|                                  | Provision for income taxes                                      |                             |         | 626     |                      |   |         | 5        |        |   |         | 631     |        
|                                  |                                                                 |                             |         |         |                      |   |         |          |       
|                                  | Depreciation, amortization and stock based compensation expense |                             | $       | 15,447  |                      |   | $       | 98       |        |   | $       | 15,545  |        
|                                  |                                                                 |                             |         |         |                      |   |         |          |       



|                                                        |  |                        |         |  |                      |   |        |          |  |   |         | 
|------------------------------------------------------- |  | ---------------------- | ------- |  | -------------------- | - | ------ | -------- |  | - | ------- | 
|                                                        |  | As of January 31, 2005 |        
|                                                        |  |                        |        
|                                                        |  | Multi-Modal            |         |  | Retail Certification |   |        | Combined | 
|                                                        |  |                        |         |  |                      |   |        |          | 
|Current assets, net                                     |  | $                      | 154,010 |  |                      | $ | 11,600 |          |  | $ | 165,610 | 
|Property and equipment, net                             |  |                        | 9,011   |  |                      |   | 126    |          |  |   | 9,137   | 
|Goodwill                                                |  |                        | 103,576 |  |                      |   |       |          |  |   | 103,576 | 
|Other assets                                            |  |                        | 25,174  |  |                      |   |       |          |  |   | 25,174  | 
|                                                        |  |                        |         |  |                      |   |        |          | 
|Total consolidated assets                               |  | $                      | 291,771 |  |                      | $ | 11,726 |          |  | $ | 303,497 | 
|                                                        |  |                        |         |  |                      |   |        |          | 
|Current liabilities                                     |  | $                      | 195,582 |  |                      | $ | 16,782 |          |  | $ | 212,364 | 
|Long-term liabilities                                   |  |                        | 6,174   |  |                      |   | 40     |          |  |   | 6,214   | 
|                                                        |  |                        |         |  |                      |   |        |          | 
|Total liabilities                                       |  |                        | 201,756 |  |                      |   | 16,822 |          |  |   | 218,578 | 
|Stockholders equity                                    |  |                        | 90,015  |  |                      |   | (5,096 | )        |  |   | 84,919  | 
|                                                        |  |                        |         |  |                      |   |        |          | 
|Total consolidated liabilities and stockholders equity |  | $                      | 291,771 |  |                      | $ | 11,726 |          |  | $ | 303,497 | 
|                                                        |  |                        |         |  |                      |   |        |          | 
|Supplemental segment disclosures                        |  |                        |         |  |                      |   |        |          |  |   |         | 
|Capital expenditures                                    |  | $                      | 7,476   |  |                      | $ | 118    |          |  | $ | 7,594   | 
|                                                        |  |                        |         |  |                      |   |        |          | 

B-43



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##### Table of Contents



SKILLSOFT PUBLIC LIMITED COMPANY AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                       
| | ----------------------
| | Geographical Reporting



|                                                       |               |                        |        |         |      |   |         |         |  |   |         |         | 
|------------------------------------------------------ | ------------- | ---------------------- | ------ | ------- | ---- | - | ------- | ------- |  | - | ------- | ------- | 
|                                                       |               | Year Ended January 31, |       
|                                                       |               |                        |       
|                                                       |               | 2003                   |        |         | 2004 |   |         | 2005    | 
|                                                       |               |                        |        |         |      |   |         |         | 
|Revenue:                                               |               |                        |        |         |      |   |         |         |  |   |         |        
|United States                                          |               | $                      | 80,991 |         |      | $ | 156,121 |         |  | $ | 165,871 |        
|United Kingdom                                         |               |                        | 9,075  |         |      |   | 9,785   |         |  |   | 20,219  |        
|Canada                                                 |               |                        | 2,345  |         |      |   | 6,801   |         |  |   | 8,274   |        
|Europe, excluding UK                                   |               |                        | 5,465  |         |      |   | 14,231  |         |  |   | 7,244   |        
|Australia/ New Zealand                                 |               |                        | 3,260  |         |      |   | 5,086   |         |  |   | 6,885   |        
|Other (Countries less than 5% individually, by region) |               |                        | 334    |         |      |   | 1,451   |         |  |   | 3,807   |        
|                                                       |               |                        |        |         |      |   |         |         | 
|All Foreign Locations                                  |               |                        | 20,479 |         |      |   | 37,354  |         |  |   | 46,429  |        
|                                                       |               |                        |        |         |      |   |         |         | 
|                                                       | Total revenue |                        | $      | 101,470 |      |   | $       | 193,475 |  |   | $       | 212,300 | 
|                                                       |               |                        |        |         |      |   |         |         | 





|     |                                          
|---- | -----------------------------------------
|(12) | Prepaid Expenses and Other Current Assets



|                                               |                                                 |             |        |        |      |   |        |        | 
|---------------------------------------------- | ----------------------------------------------- | ----------- | ------ | ------ | ---- | - | ------ | ------ | 
|                                               |                                                 | Year Ended  |       
|                                               |                                                 | January 31, |       
|                                               |                                                 |             |       
|                                               |                                                 | 2004        |        |        | 2005 |  
|                                               |                                                 |             |        |        |      |  
|Accounts receivable other                      |                                                 | $           | 2,107  |        |      | $ | 1,225  |       
|Prepaid commissions and recoverable sales draw |                                                 |             | 12,978 |        |      |   | 13,613 |       
|Prepaid insurances                             |                                                 |             | 1,441  |        |      |   | 1,964  |       
|Prepaid facilities                             |                                                 |             | 601    |        |      |   | 617    |       
|Reclaimable taxes                              |                                                 |             | 2,737  |        |      |   | 1,731  |       
|Prepaid royalties                              |                                                 |             | 253    |        |      |   | 252    |       
|Other                                          |                                                 |             | 4,642  |        |      |   | 3,257  |       
|                                               |                                                 |             |        |        |      |  
|                                               | Total prepaid expenses and other current assets |             | $      | 24,759 |      |   | $      | 22,659 | 
|                                               |                                                 |             |        |        |      |  

B-44



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##### Table of Contents



SKILLSOFT PUBLIC LIMITED COMPANY AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|     |                           
|---- | --------------------------
|(13) | Accrued Expenses  Current



|                                  |                        |             |        |        |      |   |        |        | 
|--------------------------------- | ---------------------- | ----------- | ------ | ------ | ---- | - | ------ | ------ | 
|                                  |                        | Year Ended  |       
|                                  |                        | January 31, |       
|                                  |                        |             |       
|                                  |                        | 2004        |        |        | 2005 |  
|                                  |                        |             |        |        |      |  
|Accrued compensation and benefits |                        | $           | 19,787 |        |      | $ | 20,415 |       
|Course development fees           |                        |             | 1,518  |        |      |   | 2,205  |       
|Professional fees                 |                        |             | 3,410  |        |      |   | 2,788  |       
|Accrued payables                  |                        |             | 2,703  |        |      |   | 1,798  |       
|Accrued misc. taxes               |                        |             | 2,357  |        |      |   | 238    |       
|Accrued merger related costs*     |                        |             | 6,919  |        |      |   | 5,271  |       
|Sales tax payable/ VAT payable    |                        |             | 2,513  |        |      |   | 3,864  |       
|Accrued royalties                 |                        |             | 1,351  |        |      |   | 2,422  |       
|Accrued litigation settlements    |                        |             | 44,250 |        |      |   | 15,250 |       
|Accrued restructuring             |                        |             | 84     |        |      |   | 8,005  |       
|Other accrued liabilities         |                        |             | 7,225  |        |      |   | 4,739  |       
|                                  |                        |             |        |        |      |  
|                                  | Total accrued expenses |             | $      | 92,117 |      |   | $      | 66,995 | 
|                                  |                        |             |        |        |      |  






|  |                                                                                                   
|- | --------------------------------------------------------------------------------------------------
|* | Includes $2,210 and $1,684 of accrued income taxes in
    January 31, 2004 and 2005, respectively.



|     |                                
|---- | -------------------------------
|(14) | Valuation & Qualifying Accounts



| |                                                           
| | ----------------------------------------------------------
| | Allowance for Doubtful Accounts (amounts in
    thousands)

|                            |  |            |       |  |            |   |     |            |  |   |       |         |  |           |      |   |  |   |       | 
|--------------------------- |  | ---------- | ----- |  | ---------- | - | --- | ---------- |  | - | ----- | ------- |  | --------- | ---- | - |  | - | ----- | 
|                            |  | Balance at |       |  | Addition   |   |     |            |  |   |       | Balance | 
|                            |  | Beginning  |       |  | Charged    |   |     |            |  |   |       | at End  | 
|                            |  | of Period  |       |  | to Expense |   |     | Adjustment |  |   | Other |         |  | of Period |     
|                            |  |            |       |  |            |   |     |            |  |   |       |         |  |           |     
|Year ended January 31, 2003 |  | $          | 269   |  |            | $ | 621 |            |  | $ | (42   | )       |  | $         |     |   |  | $ | 848   | 
|Year ended January 31, 2004 |  | $          | 848   |  |            | $ | 459 |            |  | $ | (70   | )       |  | $         | (166 | ) |  | $ | 1,071 | 
|Year ended January 31, 2005 |  | $          | 1,071 |  |            | $ | 335 |            |  | $ | (23   | )       |  | $         |     |   |  | $ | 1,383 | 



|     |                  
|---- | -----------------
|(15) | Subsequent Events



B-45



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##### Table of Contents






EXHIBIT INDEX


|        |    |      |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------- | -- | ---- | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |      |      
|No.     |    |      | Title
|        |    |      |      
|        | 2  | .1   |       | Agreement and Plan of Merger, dated as of June 10, 2002, by
    and among SmartForce Public Limited Company, SkillSoft
    Corporation and Slate Acquisition Corp. (Incorporated by
    reference to exhibit 2.1 to SkillSoft PLCs Current
    Report on Form 8-K dated June 14, 2002 (File No.
    000-25674)).                                                                                                                                                                                                              
|        | 3  | .1   |       | Memorandum of Association of SkillSoft PLC as amended on
    March 24, 1992, March 31, 1995, April 28, 1998,
    January 26, 2000, July 10, 2001, September 6,
    2002 and November 19, 2002 (Incorporated by reference to
    exhibit 3.1 to SkillSoft PLCs Quarterly Report on
    Form 10-Q for the fiscal quarter ended October 31, 2002 as
    filed with the Securities and Exchange Commission on
    January 21, 2003 (File No. 000-25674)).                                                                         
|       
|        | 3  | .2   |       | Articles of Association of SkillSoft PLC as amended on
    July 6, 1995, and April 28, 1998, January 26,
    2000, July 10, 2001, September 6, 2002 and
    November 19, 2002 (Incorporated by reference to
    exhibit 3.2 to SkillSoft PLCs Quarterly Report on
    Form 10-Q for the fiscal quarter ended October 31, 2002 as
    filed with the Securities and Exchange Commission on
    January 21, 2003 (File No. 000- 25674)).                                                                                        
|       
|        | 4  | .1   |       | Specimen certificate representing the ordinary shares of
    SkillSoft PLC (Incorporated by reference to exhibit 4.1 to
    SkillSoft PLCs Annual Report on Form 10-K for the fiscal
    year ended January 31, 2003 as filed with the Securities
    and Exchange Commission on April 29, 2003 (File No.
    000-25674)).                                                                                                                                                                                                    
|       
|        | 4  | .2   |       | Amended and Restated Deposit Agreement (including the form of
    American Depositary Receipt), dated as of April 13, 1995 as
    amended and restated as of September 4, 2002, among
    SkillSoft PLC, The Bank of New York, as Depositary, and each
    Owner and Beneficial Owner from time to time of American
    Depositary Receipts issued thereunder (Incorporated by reference
    to Exhibit 4.1 to SkillSoft PLCs Current Report on
    Form 8-K dated September 4, 2002 (File No. 000-256740)).                  
|       
|        | 4  | .3   |       | Amended and Restated Restricted Deposit Agreement (including the
    form of American Depositary Receipt), dated as of
    November 30, 1995 and amended and restated as of
    September 4, 2002, among SkillSoft PLC, The Bank of New
    York, as Depositary, and each Owner and Beneficial Owner from
    time to time of American Depositary Receipts issued thereunder
    (Incorporated by reference to exhibit 4.2 to SkillSoft
    PLCs Current Report on Form 8-K dated September 4,
    2002 (File No. 000-25674)).
|       
|        | 4  | .4   |       | Restricted Deposit Agreement (B) dated as of June 8, 1998
    and amended and restated as of September 4, 2002 among
    SkillSoft PLC, The Bank of New York, and the owners and
    beneficial owners of Restricted American Depositary Receipts
    (Incorporated by reference to Exhibit 4.3 to SkillSoft
    PLCs Current Report on Form 8-K dated September 4,
    2002 (File No. 000-25674)).                                                                                                                           
|       
|        | 4  | .5   |       | Declaration of Subscription Rights dated as of October 4,
    1998 (Incorporated by reference to exhibit 4.1 to SkillSoft
    PLCs Report on Form 8-A filed with the Securities and
    Exchange Commission on October 5, 1998).                                                                                                                                                                                                                                                                                              
|       
|        | 4  | .6   |       | Amendment to Declaration of Subscription Rights, dated as of
    June 10, 2002, of SkillSoft PLC (Incorporated by reference
    to exhibit 4.1 to SkillSoft PLCs Current Report on
    Form 8-K dated June 10, 2002 (File No. 000-25674)).                                                                                                                                                                                                                                                                                    
|       
|        | 4  | .7   |       | Second Amendment to Declaration of Subscription Rights, dated as
    of October 9, 2002, of SkillSoft PLC (Incorporated by
    reference to exhibit 4.2 to SkillSoft PLCs Current
    Report on Form 8-K dated June 10, 2002 (File No.
    000-25674)).                                                                                                                                                                                                                                                                       
|       
|        | 10 | .1** |       | 1990 Share Option Scheme (Incorporated by reference to
    exhibit 10.1 to SkillSoft PLCs Registration Statement
    on Form F-1 declared effective with the Securities and
    Exchange Commission on April 13, 1995 (File
    No. 333-89904)).                                                                                                                                                                                                                                                                              
|       
|        | 10 | .2** |       | 1994 Share Option Plan (Incorporated be reference to
    exhibit 10.2 to SkillSoft PLCs Registration Statement
    on Form F-1 declared effective with the Securities and
    Exchange Commission on April 13, 1995 (File
    No. 333-89904)).                                                                                                                                                                                                                                                                                



---



##### Table of Contents



|        |    |       |       |                                                                                                                                                                                                                                                                                                                                                                                           
|------- | -- | ----- | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |       |      
|No.     |    |       | Title
|        |    |       |      
|       
|        | 10 | .3**  |       | 1995 Employee Share Purchase Plan (Incorporated by reference to
    exhibit 10.3 to SkillSoft PLCs Quarterly Report on
    Form 10-Q for the fiscal quarter ended June 30, 2002 as
    filed with the Securities and Exchange Commission on
    August 14, 2002 (File No. 000-25674)).                                                                                                   
|       
|        | 10 | .4**  |       | Form of Indemnification Agreement between CBT Systems USA, Ltd.
    (formerly, Thornton Holdings, Ltd.) and its directors and
    officers dated as of April 1995 (Incorporated by reference to
    exhibit 10.5 to SkillSoft PLCs Registration Statement
    on Form F-1 declared effective with the Securities and
    Exchange Commission on April 13, 1995 (File
    No. 333-89904)).
|       
|        | 10 | .5**  |       | Form of Indemnification Agreement between SmartForce (USA) and
    its directors and officers dated as of September 6, 2002
    (Incorporated by reference to exhibit 10.5 to SkillSoft
    PLCs Annual Report on Form 10-K for the fiscal year ended
    January 31, 2003 as filed with the Securities and Exchange
    Commission on April 29, 2003 (File No. 000-25674)).             
|       
|        | 10 | .6**  |       | 1996 Supplemental Stock Plan (Incorporated by reference to
    exhibit 10.16 to SkillSoft PLCs Annual Report on Form
    10-K for the fiscal year ended December 31, 1996 as filed
    with the Securities and Exchange Commission on March 30,
    1997 (File No. 0-25674)).                                                                                                            
|       
|        | 10 | .7**  |       | 2002 Share Option Plan (Incorporated by reference to
    exhibit 10.34 to SkillSoft PLCs Quarterly Report on
    Form 10-Q for the fiscal quarter ended June 30, 2002 as
    filed with the Securities and Exchange Commission on
    August 14, 2002 (File No. 000-256740)).                                                                                                            
|       
|        | 10 | .8**  |       | 2001 Outside Director Option Plan (Incorporated by reference to
    exhibit 10.1 to SkillSoft PLCs Quarterly Report on
    Form 10-Q for the quarter ended September 30, 2001 as filed
    with the Securities and Exchange Commission on November 14,
    2001 (File No. 000-25674)).                                                                                                   
|       
|        | 10 | .9    |       | Agreement and Release, effective as of September 13, 2002,
    between SmartForce PLC and Jeff Newton (Incorporated by
    reference to exhibit 10.5 to SkillSoft PLCs Quarterly
    Report on Form 10-Q for the quarter ended October 31, 2002
    as filed with the Securities and Exchange Commission on
    January 21, 2003 (File No. 000-25674)).                                  
|       
|        | 10 | .10   |       | Separation Agreement and Release, effective as of May 8,
    2002, between SmartForce PLC and Thomas Francis McKeagney
    (Incorporated by reference to exhibit 10.6 to SkillSoft
    PLCs Quarterly Report on Form 10-Q for the quarter ended
    October 31, 2002 as filed with the Securities and Exchange
    Commission on January 21, 2003 (File No. 000-25674)).                 
|       
|        | 10 | .11** |       | Amended and Restated Employment Agreement dated June 10,
    2002 between SkillSoft PLC and Gregory M. Priest (Incorporated
    by reference to exhibit 10.30 to SkillSoft PLCs
    Amendment No. 1 to Registration Statement on Form S-4
    as filed with the Securities and Exchange Commission on
    July 30, 2002 (File No. 333-90872)).                                           
|       
|        | 10 | .12** |       | Employment Agreement dated June 10, 2002 between SkillSoft
    PLC and Charles E. Moran (Incorporated by reference to
    exhibit 10.31 to SkillSoft PLCs Amendment No. 1
    to Registration Statement on Form S-4 as filed with the
    Securities and Exchange Commission on July 30, 2002 (File
    No. 333-90872)).                                                                 
|       
|        | 10 | .13** |       | Employment Agreement dated as of June 10, 2002 between
    SkillSoft PLC and Jerald A. Nine, Jr. (Incorporated by
    reference to exhibit 10.33 to SkillSoft PLCs
    Amendment No. 1 to Registration Statement on Form S-4
    as filed with the Securities and Exchange Commission on
    July 30, 2002 (File No. 333-90872)).                                                        
|       
|        | 10 | .14   |       | Registration Rights Agreement dated as of June 10, 2002
    between SkillSoft PLC and Warburg Pincus Ventures, L.P.
    (Incorporated by reference to exhibit 10.27 to SkillSoft
    PLCs Amendment No. 1 to Registration Statement on
    Form S-4 as filed with the Securities and Exchange
    Commission on July 30, 2002 (File No. 333-90872)).                                     
|       
|        | 10 | .15** |       | Employment Agreement dated January 12, 1998 between
    SkillSoft Corporation and Mark A. Townsend (Incorporated by
    reference to exhibit 10.15 to SkillSoft PLCs Annual
    Report on Form 10-K for the fiscal year ended January 31,
    2003 as filed with the Securities and Exchange Commission on
    April 29, 2003 (File No. 000-25674)).                                     
|       
|        | 10 | .16** |       | Employment Agreement dated January 12, 1998 between
    SkillSoft Corporation and Thomas J. McDonald (Incorporated by
    reference to exhibit 10.16 to SkillSoft PLCs Annual
    Report on Form 10-K for the fiscal year ended January 31,
    2003 as filed with the Securities and Exchange Commission on
    April 29, 2003 (File No. 000-25674)).                                   



---



##### Table of Contents



|        |    |        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                      
|------- | -- | ------ | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |        |      
|No.     |    |        | Title
|        |    |        |      
|       
|        | 10 | .17**  |       | Employment Agreement dated effective September 6, 2002
    between SkillSoft PLC and Colm Darcy (Incorporated by reference
    to exhibit 10.17 to SkillSoft PLCs Annual Report on
    Form 10-K for the fiscal year ended January 31, 2003 as
    filed with the Securities and Exchange Commission on
    April 29, 2003 (File No. 000-25674)).                                                                                   
|       
|        | 10 | .18    |       | Lease dated February 18, 1998, as amended, between
    SkillSoft Corporation and Five N Associates (Incorporated by
    reference to exhibit 10.18 to SkillSoft PLCs Annual
    Report on Form 10-K for the fiscal year ended January 31,
    2003 as filed with the Securities and Exchange Commission on
    April 29, 2003 (File No. 000-25674)).                                                                                
|       
|        | 10 | .19    |       | Fifth Supplemental Agreement dated November 26, 2001 to the
    Lease between SkillSoft Corporation and Five N Associates
    (Incorporated by reference to exhibit 10.19 to SkillSoft
    PLCs Annual Report on Form 10-K for the fiscal year ended
    January 31, 2003 as filed with the Securities and Exchange
    Commission on April 29, 2003 (File No. 000-25674)).                                                         
|       
|        | 10 | .20    |       | Lease dated May 25, 2001 between 1987 Tamposi Limited
    Partnership and SkillSoft Corporation (Incorporated by reference
    to exhibit 10.20 to SkillSoft PLCs Annual Report on
    Form 10-K for the fiscal year ended January 31, 2003 as
    filed with the Securities and Exchange Commission on
    April 29, 2003 (File No. 000-25674)).                                                                                   
|       
|        | 10 | .21*** |       | Fleet National Bank Commercial Loan Agreement, dated as of
    June 24, 2003, by and among SkillSoft Corporation,
    SkillSoft PLC and Fleet National Bank (Incorporated by reference
    to exhibit 10.1 to SkillSoft PLCs Quarterly Report on
    Form 10-Q for the quarter ended July 31, 2003 as filed with
    the Securities and Exchange Commission on September 15,
    2003 (File No. 000-25674)).                        
|       
|        | 10 | .22    |       | Revolving Line of Credit Promissory Note payable to Fleet
    National Bank, dated June 24, 2003, executed by SkillSoft
    Corporation and SkillSoft PLC (Incorporated by reference to
    exhibit 10.2 to SkillSoft PLCs Quarterly Report on
    Form 10-Q for the quarter ended July 31, 2003 as filed with
    the Securities and Exchange Commission on September 15,
    2003 (File No. 000-25674)).                          
|       
|        | 10 | .23    |       | Security Agreement, dated as of June 24, 2003, by and
    between SkillSoft Corporation and Fleet National Bank
    (Incorporated by reference to exhibit 10.3 to SkillSoft
    PLCs Quarterly Report on Form 10-Q for the quarter ended
    July 31, 2003 as filed with the Securities and Exchange
    Commission on September 15, 2003 (File No. 000-25674)).                                                                    
|       
|        | 10 | .24    |       | Settlement Agreement and General Release, dated as of
    July 21, 2003, by and between The Thompson Corporation,
    National Educational Training Group and SkillSoft Corporation
    (Incorporated by reference to exhibit 10.4 to SkillSoft
    PLCs Quarterly Report on Form 10-Q for the quarter ended
    July 31, 2003 as filed with the Securities and Exchange
    Commission on September 15, 2003 (File No. 000-25674)).
|       
|        | 10 | .25    |       | Stipulation of Settlement, dated November 26, 2003
    (Incorporated by reference to exhibit 10.1 to SkillSoft
    PLCs Quarterly Report on Form 10-Q for the quarter ended
    October 31, 2003 as filed with the Securities and Exchange
    Commission on December 15, 2003 (File No. 000-25674)).                                                                                                                               
|       
|        | 10 | .26**  |       | Indemnification Agreement, dated November 13, 2003, by and
    between SkillSoft Corporation and P. Howard Edelstein
    (Incorporated by reference from exhibit 10.2 to SkillSoft
    PLCs Quarterly Report on Form 10-Q for the quarter ended
    October 31, 2003 as filed with the Securities and Exchange
    Commission on December 15, 2003 (File No. 000-25674)).                                                           
|       
|        | 10 | .27**  |       | Indemnification Agreement, dated March 4, 2004, by and
    between SkillSoft Corporation and William Meagher. (Incorporated
    by reference from exhibit 10.27 to SkillSoft PLCs
    Annual Report on Form 10-K for the fiscal year ended
    January 31, 2004 as filed with the Securities and Exchange
    Commission on April 15, 2004 (File No. 000-25674)).                                                                   
|       
|        | 10 | .28** |       | Summary of Director Compensation                                                                                                                                                                                                                                                                                                                                                                                                     
|       
|        | 10 | .29    |       | Lease agreement, dated June 9, 2004, by and between
    Hewlett-Packard Company and SkillSoft Corporation (Incorporated
    by reference to exhibit 10.1 to SkillSoft PLCs
    Quarterly Report on Form 10-Q for the quarter ended
    July 31, 2004 as filed with the Securities and Exchange
    Commission on September 9, 2004 (File No. 000-25674)).                                                                           



---



##### Table of Contents



|        |    |        |       |                                                                                                                                                                                                                                                                                                                                                                                                                      
|------- | -- | ------ | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |        |      
|No.     |    |        | Title
|        |    |        |      
|       
|        | 10 | .30    |       | Loan and Security Agreement, dated July 23, 2004, by and
    between Silicon Valley Bank, SkillSoft Corporation, SmartCertify
    Direct Inc. and Books247.com, Inc. (Incorporated by reference to
    exhibit 10.2 to SkillSoft PLCs Quarterly Report on
    Form 10-Q for the quarter ended July 31, 2004 as filed with
    the Securities and Exchange Commission on September 9, 2004
    (File No. 000-25674)).
|       
|        | 10 | .31**  |       | Form of Director Option Agreement for initial grants under the
    2001 Director Option Plan (Incorporated by reference to
    exhibit 10.3 to SkillSoft PLCs Quarterly Report on
    Form 10-Q for the quarter ended July 31, 2004 as filed with
    the Securities and Exchange Commission on September 9, 2004
    (File No. 000-25674)).                                                                        
|       
|        | 10 | .32**  |       | Form of Director Option Agreement for subsequent grants under
    the 2001 Director Option Plan (Incorporated by reference to
    exhibit 10.4 to SkillSoft PLCs Quarterly Report on
    Form 10-Q for the quarter ended July 31, 2004 as filed with
    the Securities and Exchange Commission on September 9, 2004
    (File No. 000-25674)).                                                                     
|       
|        | 10 | .33**  |       | Form of Option Agreement under 2002 Share Option Plan
    (Incorporated by reference to exhibit 10.5 to SkillSoft
    PLCs Quarterly Report on Form 10-Q for the quarter ended
    July 31, 2004 as filed with the Securities and Exchange
    Commission on September 9, 2004 (File No. 000-25674)).                                                                                                               
|       
|        | 10 | .34** |       | Summary of Fiscal 2006 Executive Incentive Compensation Program.                                                                                                                                                                                                                                                                                                                                                     
|       
|        | 21 | .1    |       | List of Significant Subsidiaries.                                                                                                                                                                                                                                                                                                                                                                                    
|       
|        | 23 | .1    |       | Consent of Ernst & Young LLP                                                                                                                                                                                                                                                                                                                                                                                         
|       
|        | 31 | .1    |       | Certification of SkillSoft PLCs Chief Executive Officer
    pursuant to Rule 13a-14(a)/Rule 15(d)-14(a) under the
    Securities Exchange Act of 1934.                                                                                                                                                                                                                                                              
|       
|        | 31 | .2    |       | Certification of SkillSoft PLCs Chief Financial Officer
    pursuant to Rule 13a-14(a)/Rule 15(d)-14(a) under the
    Securities Exchange Act of 1934.                                                                                                                                                                                                                                                              
|       
|        | 32 | .1    |       | Certification of SkillSoft PLCs Chief Executive Officer
    pursuant to Rule 13a-14(b)/Rule 15d-14(b) under the
    Securities Exchange Act of 1934, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                      
|        | 32 | .2    |       | Certification of SkillSoft PLCs Chief Financial Officer
    pursuant to Rule 13a-14(b)/Rule 15d-14(b) under the
    Securities Exchange Act of 1934, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                      






| |   |                
| | - | ---------------
| |  | Filed herewith.



|   |                                                                                                                                                      
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------
|** | Denotes management or compensatory plan or arrangement required
    to be filed by registrant pursuant to Item 15(c) of this
    report on Form 10-K.



|    |                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------
|*** | Confidential treatment requested for certain portions, which
    portions have been separately filed with the Securities and
    Exchange Commission.