##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
      Form 10-K
 ANNUAL REPORT 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 1934For the fiscal year ended
    January 31, 2007o

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

None(State or other jurisdiction
    of
    incorporation or organization)

(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:
   Title of Each Class

Name of Each Exchange on Which RegisteredOrdinary Shares,
    0.11


NASDAQ Global Market  Securities registered pursuant to Section 12(g) of the
    Act: None
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
  o þ o
  Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K




---



##### 



SKILLSOFT
    PUBLIC LIMITED COMPANY
  FORM 10-K
  TABLE OF CONTENTS
  PagePART IItem 1.

Business


2Item 1A.

Risk
    Factors


21Item 1B.

Unresolved Staff
    Comments


29Item 2.

Properties


29Item 3.

Legal
    Proceedings


29Item 4.

Submission of
    Matters to a Vote of Security Holders


30PART IIItem 5.

Market for
    Registrants Common Equity, Related Stockholder Matters and
    Issuer Purchases of Equity Securities


30Item 6.

Selected Financial
    Data


31Item 7.

Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


31Item 7A.

Quantitative and
    Qualitative Disclosures About Market Risk


47Item 8.

Financial
    Statements and Supplementary Data


48Item 9.

Changes in and
    Disagreements with Accountants on Accounting and Financial
    Disclosure


48Item 9A.

Control and
    Procedures


48Item 9B.

Other
    Information


51PART IIIItem 10.

Directors,
    Executive Officers and Corporate Governance


51Item 11.

Executive
    Compensation


51Item 12.

Security Ownership
    of Certain Beneficial Owners and Management and Related
    Stockholder Matters


51Item 13.

Certain
    Relationships and Related Transactions, and Director
    Independence


51Item 14.

Principal
    Accountant Fees and Services


51PART IVItem 15.

Exhibits and
    Financial Statement Schedules


51Signatures


52EX-10.19 Pledge Agreement dated January 1, 2007EX-21.1 List of Significant SubsidiariesEX-23.1 Consent of Ernst & Young LLPEX-31.1 Section 302 CEO CertificationEX-31.2 Section 302 CFO CertificationEX-32.1 Section 906 CEO CertificationEX-32.2 Section 906 CFO Certification   1




---



##### Table of Contents



PART I  Form 10-K ®
  Form 10-K,
  Item 1.
    Business  General
  e-learning Search-and-Learn,
       2




---



##### Table of Contents



SkillChoice Multi-Modal Learning
    Solutions: ® tm
  SkillPort: e-learning Search-and-Learn tm e-learning e-learning
  SkillSoft Dialogue:
  KnowledgeCenters:
  Business Impact Series:
  Challenge Series:
  Business Skills Courseware Collection:
 3




---



##### Table of Contents



IT Skills and Certification Courseware
    Collection:
  Desktop Skills Courseware
    Collection: day-to-day
  Legal Compliance, Federal Government Compliance, and
    Environmental Safety and Health (ES&H) Courseware
    Collection:
  Online Mentoring: e-mail,
  Books24x7 Referenceware: tm on-the-job
  Executive Content: tm tm
 4




---



##### Table of Contents



(011) 353-1-2181000. (603) 324-3000.
  small-to-medium
  Form 10-K. Form 10-K, Form 10-Q Form 8-K,
  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;
    The increased competition in todays economy for skilled
    employees and the recognition that effective training can be
    used to recruit and retain employees; and
    The retirement of Baby Boom Generation workers during the coming
    15-to-20 years,
    which will result in industries seeking technically skilled and
    educated workers to meet the projected shortage of qualified and
    trained candidates to replace those retiring workers. This
    phenomenon is widely projected to create a major increase in
    demand for training in technical and business skills.  e-learning e-learning e-learning day-to-day
  e-learning
 5




---



##### Table of Contents



E-Learning e-learning e-learning e-learning
  Content
    Products
  e-learning e-learning e-learning on-the-job
    Business
    Skills Courseware and Simulations
  e-learning
  Professional Effectiveness

Business Strategy &
    OperationsManagement & Leadership

Sales & Customer-Facing
    SkillsProject Effectiveness

Finance, HR &
    Administration     IT
    Skills and Certification Courseware
  e-learning
  Software Development

OS & Server TechnologiesInternet & Network
    Technologies

Database SystemsWeb Design  6




---



##### Table of Contents



Microsoft

ISC(2)

CiscoMCP

CISSP (ISC2)

CCNAMCSA 2003

SSCP (ISC2)

CCDAMCSE 2003

CCSA (CheckPoint)

CCNPMCSD .NET



CCDPMCDBA



CCSPMCSA 2000MCSE 2000   Macromedia

CompTIA

SunColdFusion MX Developer

A+ 2006

Sun Certified ProgrammerDreamweaver MX Developer

Net+

for the Java 2 PlatformFlash MX Developer

INet+Server+Linux+Security+   Project Mgmt
    Institute

Linux Professional
    InstitutePMP

LPI: Level 1CAPM

LPI: Level IICIW

Oracle

ITILCIW Associate

10g DBA OCA

FoundationsMaster Enterprise

10g DBA OCPDeveloper



OCA 10gCIW Site Designer



OCP 10g     Desktop
    Skills Courseware Collection
  e-learning day-to-day
  Compliance
    Solutions
  e-learning
     7




---



##### Table of Contents



Leadership
    Development Channel
  one-on-one
  Books24x7
  on-the-job
      easy-to-understand safety-net
     8




---



##### Table of Contents



ease-of-use
  easy-to-absorb,
  E-Gov &
        The
    SkillSoft Instructional Design Model
     9




---



##### Table of Contents




    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, Code Samples and Follow-On Activities;
    instructional strategies appropriate for the content and
    learning level, such as examples, RolePlays, case studies,
    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
      e-learning.
 10




---



##### Table of Contents



just-in-time and/or
    e-learning 20-to-40
 11




---



##### Table of Contents



and/or e-learning e-learning.
  easy-to-follow
  Learning
    Design for IT Skills
  step-by-step
     12




---



##### Table of Contents



SkillChecks
  User-input questions
  Multiple-choice, matching, and ranking questions
  e-mail,
  against-the-clock
 13




---



##### Table of Contents



Software simulations
  Coding exercises and simulations
  Hardware exercises
  Case-Study exercises
      Learning
    Design for Workplace Performance
    Web-Based
    Architecture and Deployment Technology
    Learning Management Platforms. e-learning time-to-learning.
  SkillPort
    Search-and-Learn
    Technology. Search-and-Learn
 14




---



##### Table of Contents



SkillPort Add-On Modules.
  SkillPort Customer Content Support. off-the-shelf
  SkillSoft Dialogue.
  SkillView.
  Assistive Technology Support. Section 508-compliant and/or
  High Performance Web Technology. e-learning
  Flexible Deployment Options.
 15




---



##### Table of Contents



Open Learning Services Architecture. (Search-and-Learn),
  Product
    Pricing
        Sales and
    Marketing
        90-day 120-day
   16




---



##### Table of Contents




    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 and direct mail;
    Online marketing in the form of Web banners, content
    syndication, email sponsorships, newsletters and key-word buying
    on search engines; and
    Events, seminars and trade shows.    Customer
    Service and Support
  e-learning
  Application engineering.
  Account consulting. e-learning e-learning
  Customer support. e-mail
    Competition
    
    The expected growth of this market will attract new entrants.
    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. 17




---



##### Table of Contents




    The tremendously fragmented nature of the competitive landscape,
    including many competitors in the
    e-learning
    segment of the market.    
    Providers of traditional classroom instruction, including
    American Management Association, AchieveGlobal, ESI, DDI, New
    Horizons and GlobalKnowledge. Many of the companies in this
    category are attempting to adapt their courses to
    e-learning
    formats suitable for access via Web browsers or offer
    e-Learning
    courses in conjunction with their instructor-led training and,
    in general, compete for the same training dollars in the
    customers budget.
    Technology companies such as IBM, Cisco, Oracle and Microsoft
    that offer
    e-learning
    courses.
    Suppliers of online corporate education and training courses,
    including Thomson Learning (through subsidiaries such as Thomson
    NETg and Course Technologies), Element K, MindLeaders, Harvard
    Business School Publishing, Ninth House and Corpedia. Our
    Books24x7 business competes with companies such as Safari, a
    joint venture between Pearson Technology Group and
    OReilly & Associates, which offers aggregated IT
    and business content primarily consisting of its own titles on a
    subscription basis. Other companies that compete with one or
    more of Books24x7 collections include Knovel, which offers an
    Engineering collection; and GetAbstract and BusinessBook Review,
    which offer condensed summaries of business books. Element K
    offers a competitive online book collection that consists of a
    combination of their own products, Safari, GetAbstracts and
    books from book publishers that Element K has established
    licenses with.
    With our entrance into the virtual classroom market, we are
    competing with companies such as WebEx, Centra, Interwise and
    Microsoft; and with rapid content development technology
    suppliers such as Macromedia Breeze, Articulate and Microsoft
    PowerPoint.
    With our SkillPort LMS platform technology, we compete with
    other suppliers of LMS products such as SumTotal, Saba, Plateau,
    GeoLearning, Oracle, SAP and IBM.    
    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 and customer learning portals;
    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.    Product
    Development
   18




---



##### Table of Contents



off-the-shelf
    e-learning
      e-learning e-learning
       19




---



##### Table of Contents



Proprietary
    Rights
        Search-and-Learn, and/or
  Employees
         20




---



##### Table of Contents



Item 1A.
    Risk
    Factors    RISKS
    RELATED TO LEGAL PROCEEDINGS
  WE ARE THE
    SUBJECT OF AN ONGOING INVESTIGATION BY THE SEC.
          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.
    e-learning
 21




---



##### Table of Contents



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.
    SOME OF OUR
    INTERNATIONAL SUBSIDIARIES HAVE NOT COMPLIED WITH REGULATORY
    REQUIREMENTS RELATING TO THEIR FINANCIAL STATEMENTS AND TAX
    RETURNS.
    RISKS
    RELATED TO THE OPERATION OF OUR BUSINESS
  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; 22




---



##### Table of Contents




    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.    OUR PROPOSED
    ACQUISTION OF THOMSON NETG MAY FAIL TO CLOSE OR THERE COULD BE
    SUBSTANTIAL DELAYS AND COSTS BEFORE THE ACQUISITION IS COMPLETED.
  Hart-Scott-Rodino
  PAST AND
    FUTURE ACQUISITIONS, INCLUDING THE PROPOSED ACQUISITION OF
    THOMSON NETG, MAY NOT PRODUCE THE BENEFITS WE ANTICIPATE AND
    COULD HARM OUR CURRENT OPERATIONS.
    
    Difficulties in integrating the technologies, operations,
    financial controls and personnel of the acquired company;
    Difficulties in retaining or transitioning customers of the
    acquired company;
    Diversion of management time and focus;
    The incurrence of unanticipated expenses associated with the
    acquisition or the assumption of unknown liabilities or
    unanticipated financial, accounting or other problems of the
    acquired company; and 23




---



##### Table of Contents




    Accounting charges related to the acquisition, including
    restructuring charges, write-offs of in-process research and
    development costs, and subsequent impairment charges relating to
    goodwill or other intangible assets acquired in the transaction.  WE HAVE
    EXPERIENCED NET LOSSES IN THE PAST, AND WE MAY BE UNABLE TO
    MAINTAIN PROFITABILITY.
    DEMAND FOR
    OUR PRODUCTS AND SERVICES MAY BE ESPECIALLY SUSCEPTIBLE TO
    ADVERSE ECONOMIC CONDITIONS.
    INCREASED
    COMPETITION MAY RESULT IN DECREASED DEMAND FOR OUR PRODUCTS AND
    SERVICES, WHICH MAY RESULT IN REDUCED REVENUE AND GROSS PROFITS
    AND LOSS OF MARKET SHARE.
      
    third-party suppliers of instructor-led information technology,
    business, management and professional skills education and
    training;
    technology companies that offer learning courses covering their
    own technology products;
    suppliers of computer-based training and
    e-learning
    solutions;
    internal education, training departments and HR outsourcers of
    potential customers; and
    value-added resellers and network integrators.  e-learning e-learning
  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.
   24




---



##### Table of Contents



e-learning
    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.
  e-learning
 25




---



##### Table of Contents



e-learning
  NEW PRODUCTS
    INTRODUCED BY US MAY NOT BE SUCCESSFUL.
    THE SUCCESS
    OF OUR
    E-LEARNING
    STRATEGY DEPENDS ON THE RELIABILITY AND CONSISTENT PERFORMANCE
    OF OUR INFORMATION SYSTEMS AND INTERNET INFRASTRUCTURE.
  e-learning e-learning
  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.
  e-learning e-learning
    e-learning
 26




---



##### Table of Contents



WE DEPEND ON
    A FEW KEY PERSONNEL TO MANAGE AND OPERATE THE BUSINESS AND MUST
    BE ABLE TO ATTRACT AND RETAIN HIGHLY QUALIFIED EMPLOYEES.
    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.
     27




---



##### Table of Contents



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.    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.    OUR BUSINESS
    COULD BE ADVERSELY AFFECTED IF OUR PRODUCTS CONTAIN ERRORS.
    RISKS
    RELATED TO OUR ADSs
  THE MARKET
    PRICE OF OUR ADSs MAY FLUCTUATE AND MAY NOT BE SUSTAINABLE.
   28




---



##### Table of Contents



SALES OF
    LARGE BLOCKS OF OUR ADSs COULD CAUSE THE MARKET PRICE OF OUR
    ADSs TO DROP SIGNIFICANTLY, EVEN IF OUR BUSINESS IS DOING WELL.
    Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties              Item 3.
    Legal
    Proceedings  SEC
    Investigations
   29




---



##### Table of Contents



Item 4.
    Submission
    of Matters to a Vote of Security Holders   PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities.    Quarter Ended

High


LowApril 30, 2005

$
5.33


$
2.95July 31, 2005


4.10



3.30October 31, 2005


4.93



3.77January 31, 2006


5.97



3.87April 30, 2006


5.95



4.60July 31, 2006


6.53



5.19October 31, 2006


6.86



5.35January 31, 2007


6.98



5.41        30




---



##### Table of Contents



Irish
    Stamp Duty
          Item 6.
    Selected
    Financial Data  Appendix A
  Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Form 10-K.
  Overview
  e-learning e-learning
   31




---



##### Table of Contents



Business
    Outlook
    e-learning
 32




---



##### Table of Contents



direct-to-consumer
  small-to-medium
  Critical
    Accounting Policies
    Revenue
    Recognition
    97-2, SOP 98-4 SOP 98-9,
 33




---



##### Table of Contents



®
  and/or pay-for-use pay-for-use
            out-of-pocket No. 01-14, Income Statement Characterization of Reimbursements
    Received for
    Out-of-Pocket
    Expenses Incurred 01-14).
   34




---



##### Table of Contents



Amortization
    of Intangible Assets and Impairment of Goodwill
      Share
    Based Compensation
  Share-Based Payment Accounting for
    Stock-Based Compensation. Accounting for
    Stock Issued to Employees Statement of Cash
    Flows. Accounting for Stock-based
    Compensation  Transition and Disclosure
    in-the-money
   35




---



##### Table of Contents



Deferral
    of Commissions
  Bulletin 90-1 Accounting for Separately Priced Extended Warranty and
    Product Maintenance Contracts Revenue Recognition
  Restructuring
    Charges
  Business Combinations, EITF 95-3 Accounting
    for Costs Associated with Exit or Disposal Activities.
 36




---



##### Table of Contents



sub-lease sub-lease
    Legal
    Contingencies
  Accounting for
    Contingencies,
  Income
    Taxes
   37




---



##### Table of Contents



Results
    of Operations
  Fiscal Year Ended January 31,Dollar


Percent ChangeIncrease/(Decrease)


Increase/(Decrease)


Percentage of Revenue2006/2007


2006/2007


2005


2006


2007(In thousands)Revenue

$
9,605



4
%


100
%


100
%


100
%Cost of revenue


1,294



5
%


10
%


12
%


12
%Cost of revenue 
    amortization of intangible assets


(2,517
)


(36
)%


3
%


3
%


2
%Gross profit


10,828



6
%


87
%


85
%


86
%Research and development


1,604



4
%


22
%


18
%


18
%Selling and marketing


2,456



3
%


44
%


41
%


40
%General and administrative


1,959



8
%


12
%


12
%


12
%Legal settlements / (insurance
    recoveries)


17,710



*







(8
)%


Amortization of intangible assets


(522
)


(24
)%


1
%


1
%


1
%Impairment charge






*



9
%






Restructuring


(615
)


(96
)%


6
%






Restatement:SEC investigation


(1,090
)


(55
)%


1
%


1
%


Other professional fees






*



1
%






Total operating expenses


21,502



15
%


96
%


65
%


72
%Operating income


(10,674
)


(25
)%


(9
)%


20
%


14
%Other income/(expense), net


(837
)


*











Gain/(loss) on sale assets, net


586



*











Interest income


2,531



142
%






1
%


2
%Interest expense


153



(35
)%










Income before provision for income
    taxes


(8,241
)


(19
)%


(9
)%


21
%


16
%Provision for income taxes


2,821



31
%






4
%


5
%Net income/(loss)

$
(11,062
)


(31
)%


(9
)%


16
%


11
%     *
    
    Not meaningful
    
    Does not add due to rounding.  Comparison
    of the Fiscal Years Ended January 31, 2007 and
    2006
  Revenue
  Fiscal Year Ended January 31,2006


2007


Change(In thousands)Revenue:Multi-Modal Learning (MML)

$
201,236


$
220,150


$
18,914Retail Certification


14,331



5,022



(9,309
)Total

$
215,567


$
225,172


$
9,605  38




---



##### Table of Contents



Fiscal Year Ended January 31,2006


2007


Change(In thousands)Revenue:United States

$
168,525


$
175,483


$
6,958International


47,042



49,689



2,647Total

$
215,567


$
225,172


$
9,605       Operating
    Expenses
         39




---



##### Table of Contents



Other
    (Expense)/Income, net
    Gain/(Loss)
    on Sale of Assets, net
    Interest
    Income
   40




---



##### Table of Contents



Provision
    for Income Taxes
    Comparison
    of the Fiscal Years Ended January 31, 2006 and
    2005
  Fiscal Year Ended January 31,Dollar


Percent ChangeIncrease/(Decrease)


Increase/(Decrease)


Percentage of Revenue2005/2006


2005/2006


2004


2005


2006(In thousands)Revenue

$
3,267



2
%


100
%


100
%


100
%Cost of revenue


3,583



16
%


10
%


10
%


12
%Cost of revenue 
    amortization of intangible assets


75



1
%


4
%


3
%


3
%Gross profit


(391
)






87
%


87
%


85
%Research and development


(6,669
)


(15
)%


28
%


22
%


18
%Selling and marketing


(5,927
)


(6
)%


45
%


44
%


41
%General and administrative


568



2
%


15
%


12
%


12
%Legal settlements/(insurance
    recoveries)


(17,710
)


*



48
%






(8
)%Amortization of intangible assets


(537
)


(20
)%


2
%


1
%


1
%Impairment charge


(19,268
)


*







9
%


Restructuring


(12,720
)


(95
)%


1
%


6
%


Restatement:SEC investigation


(194
)


(9
)%


1
%


1
%


1
%Other professional fees


(320
)


*



7
%






Total operating expenses


(62,777
)


(31
)%


148
%


96
%


65
%Operating income/(loss)


62,386



*



(61
)%


(9
)%


20
%Other income/(expense), net


1,433



*











(Loss)/gain on sale assets, net


(586
)


*



2
%






Interest income


688



63
%










1
%Interest expense


(94
)


28
%










Income/(loss) before provision for
    income taxes


63,827



*



(58
)%


(9
)%


21
%Provision for income taxes


8,499



1,347
%










4
%Net income/(loss)

$
55,328



*



(59
)%


(9
)%


16
%     *
    
    Not meaningful
    
    Does not add due to rounding. 41




---



##### Table of Contents



Revenue
    Fiscal Year Ended January 31,2005


2006


ChangeRevenue:United States

$
165,871


$
168,525


$
2,654International


46,429



47,042



613Total

$
212,300


$
215,567


$
3,267     Fiscal Year Ended January 31,2005


2006


ChangeRevenue:Multi-Modal Learning

$
192,135


$
201,236


$
9,101Retail Certification


20,165



14,331



(5,834
)Total

$
212,300


$
215,567


$
3,267       Operating
    Expenses
     42




---



##### Table of Contents



in-the-money
       43




---



##### Table of Contents



Other
    (Expense)/Income, net
    Gain/(Loss)
    on Sale of Assets, net
    Interest
    Income
    Provision
    for Income Taxes
    Liquidity
    and Capital Resources
         44




---



##### Table of Contents



Payments Due by PeriodLess Than








More ThanContractual Obligations

Total


1 Year


1-3 Years


3-5 Years


5 YearsOperating Lease Obligations

$
19,733


$
5,181


$
6,126


$
2,157


$
6,269        45




---



##### Table of Contents



Recent
    Accounting Pronouncements
  Accounting for Uncertainty in Income
    Taxes Accounting for Income
    Taxes. Accounting for
    Contingencies.
    The Fair Value
    Option for Financial Assets and Financial
    Liabilities  Including an Amendment of FASB Statement
    No. 115.
 46




---



##### Table of Contents



Explanation
    of Use of Non-GAAP Financial Results
          Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk    Interest
    Rate Risk
    Foreign
    Currency Risk
   47




---



##### Table of Contents



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
  Rules 13a-15(e) 15d-15(e)
  Changes
    in Internal Control
    Managements
    Report on Internal Control over Financial
    Reporting
  Rule 13a-15(f) 15d-15(f)
  
    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 48




---



##### Table of Contents




    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.        Form 10-K.
 49




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
                 
    50




---



##### Table of Contents



Item 9B.
    Other
    Information   PART III  Item 10.
    Directors,
    and Executive Officers and Corporate Governance  Form 10-K,
  Item 11.
    Executive
    Compensation  Form 10-K,
  Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters  Form 10-K,
  Item 13.
    Certain
    Relationships and Related Transactions and Director
    Independence  Form 10-K,
  Item 14.
    Principal
    Accountant Fees and Services  Form 10-K,
 PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules    Financial Statements. Appendix B Form 10-K:
                Financial Statement Schedules.
  Exhibits. Form 10-K.
 51




---



##### Table of Contents



SIGNATURES       By:
    /s/  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 13, 2007/s/  THOMAS
    J. MCDONALDThomas
    J. McDonald

Chief Financial Officer 
    (Principal Financial Officer)

April 13, 2007/s/  ANTHONY
    P. AMATOAnthony
    P. Amato

Vice President, Finance and Chief
    Accounting Officer 
    (Principal Accounting Officer)

April 13, 2007/s/  P.
    HOWARD EDELSTEINP.
    Howard Edelstein

Director

April 13, 2007/s/  STEWART
    K. P. GROSSStewart
    K. P. Gross

Director

April 13, 2007/s/  JAMES
    S. KRZYWICKIJames
    S. Krzywicki

Director

April 13, 2007/s/  FERDINAND
    VON PRONDZYNSKIFerdinand
    von Prondzynski

Director

April 13, 2007/s/  WILLIAM
    F.
    MEAGHER, JR.William
    F. Meagher, Jr.

Director

April 13, 2007  52




---



##### Table of Contents



APPENDIX A
  SELECTED
    FINANCIAL DATA
  Form 10-K.
  Year Ended


Year Ended


Year Ended


Year Ended


Year EndedJanuary 31,


January 31,


January 31,


January 31,


January 31,2003(1)


2004


2005


2006


2007(In thousands, except per share data)Statement of Operations
    Data:Revenue

$
101,470


$
193,475


$
212,300


$
215,567


$
225,172Cost of revenues


11,552



18,401



21,724



25,307



26,601Cost of revenues 
    amortization of intangible assets(3)


2,804



6,791



6,864



6,939



4,422Gross profit


87,114



168,283



183,712



183,321



194,149Operating expenses:Research and development(3)


29,808



54,399



45,841



39,172



40,776Selling and marketing


53,107



87,978



94,365



88,438



90,894General and administrative


18,424



28,647



25,208



25,776



27,735Legal settlements/(insurance
    recoveries)






93,750







(17,710
)


Amortization of intangible
    assets(3)


1,879



3,281



2,711



2,174



1,652Impairment charge


250,107







19,268







Restructuring


14,179



1,857



13,361



641



26Restatement:SEC Investigation






1,898



2,182



1,988



898Other professional fees


5,107



14,473



320







Total operating expenses


372,611



286,283



203,256



140,479



161,981Operating (loss)/income


(285,497
)


(118,000
)


(19,544
)


42,842



32,168Other income/(expense), net


(282
)


786



(692
)


741



(96
)Gain/(loss) on sale of
    investments, net






3,682







(586
)


Interest income


2,288



954



1,091



1,779



4,310Interest expense


(123
)


(167
)


(337
)


(431
)


(278
)(Loss)/income before provision for
    income taxes


(283,614
)


(112,745
)


(19,482
)


44,345



36,104Provision for income taxes


383



529



631



9,130



11,951Net (loss)/income

$
(283,997
)

$
(113,274
)

$
(20,113
)

$
35,215


$
24,153Net income/(loss) per share(2):Basic (loss)/income per share

$
(4.40
)

$
(1.13
)

$
(0.19
)

$
0.34


$
0.24Dilutive (loss)/income per share

$
(4.40
)

$
(1.13
)

$
(0.19
)

$
0.34


$
0.23Basic weighted average shares
    outstanding


64,472



100,115



105,134



102,473



101,698Diluted weighted average shares
    outstanding


64,472



100,115



105,134



103,352



104,240   A-1




---



##### Table of Contents



As of


As of


As of


As of


As ofJanuary 31,


January 31,


January 31,


January 31,


January 31,2003


2004


2005


2006


2007(In thousands)Balance Sheet Data:Cash, cash equivalents and
    short-term investments

$
125,144


$
61,606


$
55,158


$
73,569


$
104,117Working capital (deficit)


31,935



(48,849
)


(46,523
)


(8,018
)


38,134Long-term investments, deferred
    tax assets, net & other assets


1,019



124



8,772



736



6,719Total assets


378,137



342,378



303,497



299,902



342,970Stockholders equity


191,087



85,758



84,919



102,272



137,929     (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.(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.(3)
    
    Certain reclassifications have been made to prior year amounts
    to conform to the fiscal 2007 presentation. A-2




---



##### Table of Contents



APPENDIX B
  FINANCIAL
    STATEMENTS
  INDEX
  PageReport of
    Independent Registered Public Accounting Firm


B-2Consolidated
    Balance Sheets as of January 31, 2006 and 2007


B-3Consolidated
    Statements of Operations for the Years Ended January 31,
    2005, 2006 and 2007


B-4Consolidated
    Statements of Stockholders Equity and Comprehensive
    Income/(Loss) for the Years Ended January 31, 2005, 2006
    and 2007


B-5Consolidated
    Statements of Cash Flows for the Years Ended January 31,
    2005, 2006 and 2007


B-8Notes to the
    Consolidated Financial Statements


B-9  B-1




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM           Share-Based Payment.
    
    B-2




---



##### Table of Contents



SKILLSOFT
    PUBLIC LIMITED COMPANY AND SUBSIDIARIES
  CONSOLIDATED
    BALANCE SHEETS
  January 31,2006


2007(In thousandsexcept share data)ASSETSCurrent assets:Cash and cash equivalents

$
51,937


$
48,612Short-term investments


21,632



55,505Accounts receivable, less reserves
    of approximately $787 and $206 as of January 31, 2006 and
    2007, respectively


85,681



94,343Prepaid expenses and other current
    assets


22,006



22,215Restricted cash


5,039



20,095Total current assets


186,295



240,770Property and equipment, at cost:Computer equipment


29,341



34,610Furniture and fixtures


2,128



2,370Leasehold improvements


1,615



1,65933,084



38,639Less  accumulated
    depreciation and amortization


22,853



28,96710,231



9,672Intangible assets:Acquired intangible assets, net


8,711



2,638Goodwill


93,929



83,171102,640



85,809Long-term investments






3,598Deferred tax assets, net


694



159Other assets


42



2,962Total assets

$
299,902


$
342,970LIABILITIES AND
    STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
3,819


$
3,327Accrued compensation


15,984



17,870Accrued expenses


37,811



35,427Deferred revenue


136,699



146,012Total current liabilities


194,313



202,636Long term liabilities


3,317



2,405Commitments and Contingencies
    (Note 8) Stockholders equity:Ordinary Shares,
    0.11 par value: 250,000,000 shares authorized;
    107,344,243 and 109,255,366 issued at January 31, 2006 and
    January 31, 2007, respectively


11,773



12,039Additional paid-in capital


562,052



573,394Treasury stock, at cost, 6,533,884
    ordinary shares


(24,524
)


(24,524
)Accumulated deficit


(445,814
)


(421,661
)Deferred compensation


(465
)


Accumulated other comprehensive
    loss


(750
)


(1,319
)Total stockholders equity


102,272



137,929Total liabilities and
    stockholders equity

$
299,902


$
342,970  B-3




---



##### Table of Contents



SKILLSOFT
    PUBLIC LIMITED COMPANY AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF OPERATIONS
  Years Ended January 31,2005


2006


2007(In thousands, except per share data)Revenue

$
212,300


$
215,567


$
225,172Cost of revenues(1)


21,724



25,307



26,601Cost of revenues 
    amortization of intangible assets


6,864



6,939



4,422Gross profit


183,712



183,321



194,149Operating expenses:Research and development(1)


45,841



39,172



40,776Selling and marketing(1)


94,365



88,438



90,894General and administrative(1)


25,208



25,776



27,735Legal settlements (insurance
    recoveries)






(17,710
)


Amortization of intangible assets


2,711



2,174



1,652Impairment charge


19,268







Restructuring


13,361



641



26Restatement:SEC investigation


2,182



1,988



898Other professional fees


320







Total operating expenses


203,256



140,479



161,981Operating (loss) income


(19,544
)


42,842



32,168Other income (expense), net


(692
)


741



(96
)Loss on sale of assets, net






(586
)


Interest income


1,091



1,779



4,310Interest expense


(337
)


(431
)


(278
)(Loss) income before provision for
    income taxes


(19,482
)


44,345



36,104Provision for income taxes


631



9,130



11,951Net (loss) income

$
(20,113
)

$
35,215


$
24,153Net (loss) income per share:Basic (loss) income per share

$
(0.19
)

$
0.34


$
0.24Diluted (loss) income per share

$
(0.19
)

$
0.34


$
0.23Basic weighted average shares
    outstanding


105,134



102,473



101,698Diluted weighted average shares
    outstanding


105,134



103,352



104,240     (1)
    
    The following summarizes the allocation of stock-based
    compensation (in thousands):  2005


2006


2007Cost of revenue

$



$



$
90Research and development


266



187



952Selling and marketing


879



674



1,883General and administrative


46



120



2,134    B-4




---



##### Table of Contents



SKILLSOFT
    PUBLIC LIMITED COMPANY AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME
    (LOSS)
 (In thousands except number of shares)
  AccumulatedNotes


OtherOrdinary Shares


Additional


Treasury Stock








Receivable


Comprehensive


Total


TotalNumber of


0.11 Par


Paid-In


Number of





Accumulated


Deferred


from


Income


Stockholders


ComprehensiveShares


Value


Capital


Shares


Cost


Deficit


Compensation


Stockholders


(Loss)


Equity


LossBALANCE, 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



(2,523
)


















(2,523
)


Amortization of deferred
    compensation










145















1,046











1,191



Unrealized (losses) gains 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



443,757


$
(2,523
)

$
(481,029
)

$
(1,358
)

$



$
(840
)

$
84,919    B-5




---



##### Table of Contents



SKILLSOFT
    PUBLIC LIMITED COMPANY AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS EQUITY AND COMPREHENSIVE
    INCOME/(LOSS)
 (In thousands except number of shares)
  AccumulatedNotes


OtherOrdinary Shares





Additional


Treasury Stock








Receivable


Comprehensive


Total


TotalNumber of


0.11 Par


Paid-In


Number of





Accumulated


Deferred


from


Income


Stockholders


ComprehensiveShares


Value


Capital


Shares


Cost


Deficit


Compensation


Stockholders


(Loss)


Equity


LossBALANCE, JANUARY 31,
    2005


106,207,818


$
11,617


$
559,052



443,757


$
(2,523
)

$
(481,029
)

$
(1,358
)

$



$
(840
)

$
84,919


$Exercise of stock options


370,930



51



797



























848



Issuance of common stock under
    employee stock purchase plan


765,495



105



2,105



























2,210



Stock option modification










89



























89



Tax Benefit 
    Non-qualified stock options










9



























9



Purchase of treasury stock














6,090,127



(22,001
)


















(22,001
)


Amortization of deferred
    compensation


























893











893



Unrealized gains on marketable
    securities


































44



44



44Translation adjustment


































46



46



46Net income






















35,215















35,215



35,215Comprehensive net income for the
    year ended January 31, 2006









































$
35,305BALANCE, JANUARY 31,
    2006


107,344,243


$
11,773


$
562,052



6,533,884


$
(24,524
)

$
(445,814
)

$
(465
)

$



$
(750
)

$
102,272    B-6




---



##### Table of Contents



SKILLSOFT
    PUBLIC LIMITED COMPANY AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS EQUITY AND COMPREHENSIVE
    INCOME/(LOSS)  (Continued)
 (In thousands except number of shares)
  AccumulatedNotes


OtherOrdinary Shares





Additional


Treasury Stock








Receivable


Comprehensive


Total


TotalNumber of


0.11 Par


Paid-In


Number of





Accumulated


Deferred


from


Income


Stockholders


ComprehensiveShares


Value


Capital


Shares


Cost


Deficit


Compensation


Stockholders


(Loss)


Equity


LossBALANCE, JANUARY 31,
    2006


107,344,243


$
11,773


$
562,052



6,533,884


$
(24,524
)

$
(445,814
)

$
(465
)

$



$
(750
)

$
102,272


$Exercise of stock options


1,288,128



182



5,178



























5,360



Issuance of common stock under
    employee stock purchase plan


622,995



84



1,570



























1,654



Stock-based compensation










5,059



























5,059



Reclassification of deferred
    compensation










(465
)














465















Unrealized gains on marketable
    securities


































82



82



82Translation adjustment


































(651
)


(651
)


(651
)Net income






















24,153















24,153



24,153Comprehensive net income for the
    year ended January 31, 2007









































$
23,584BALANCE, JANUARY 31,
    2007


109,255,366


$
12,039


$
573,394



6,533,884


$
(24,524
)

$
(421,661
)

$



$



$
(1,319
)

$
137,929    B-7




---



##### Table of Contents



SKILLSOFT
    PUBLIC LIMITED COMPANY AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  Years Ended January 31,2005


2006


2007(In thousands)Cash flows from operating
    activities:Net (loss) income

$
(20,113
)

$
35,215


$
24,153Adjustments to reconcile net
    (loss) income to net cash (used in)/ provided by operating
    activities Stock-based compensation


1,191



981



5,059Depreciation and amortization


4,779



5,224



6,100Impairment charge


19,268







Amortization of intangible assets


9,575



9,113



6,074Provision (recovery) for bad debts


335



(593
)


(589
)Provision for income
    tax  non-cash


326



7,922



10,073Realized gain on sale of assets,
    net






586



Changes in current assets and
    liabilities, net of acquisitionsAccounts receivable


(14,062
)


784



(7,033
)Prepaid expenses and other current
    assets


2,406



407



878Accounts payable


(1,220
)


(1,935
)


(532
)Accrued expenses, including
    long-term liabilities


(40,858
)


(12,859
)


(1,839
)Deferred revenue


4,743



(2,693
)


7,581Net cash (used in) provided by
    operating activities


(33,630
)


42,152



49,925Cash flows from investing
    activities:Purchases of property and equipment


(7,594
)


(6,423
)


(5,519
)Capitalized software development
    costs






(1,652
)


Cash paid for acquisition costs










(2,881
)Purchase of investments


(52,456
)


(20,048
)


(91,168
)Maturity of investments


42,063



27,219



53,585Release (designation) of
    restricted cash, net


24,943



(4,045
)


(15,056
)Net cash provided by (used in)
    investing activities


6,956



(4,949
)


(61,039
)Cash flows from financing
    activities:Exercise of stock options


17,950



848



5,360Proceeds from employee stock
    purchase plan


3,050



2,210



1,654Payments to acquire treasury shares


(2,523
)


(22,001
)


Net cash provided by (used in)
    financing activities


18,477



(18,943
)


7,014Effect of exchange rate changes on
    cash and cash equivalents


1,174



(1,229
)


775Net (decrease) increase in cash
    and cash equivalents


(7,023
)


17,031



(3,325
)Cash and cash equivalents,
    beginning of year


41,929



34,906



51,937Cash and cash equivalents, end of
    year

$
34,906


$
51,937


$
48,612Supplemental disclosure of cash
    flow information:Cash paid for interest

$
337


$
431


$
279Cash paid for income taxes

$
200


$
1,375


$
2,280    B-8




---



##### Table of Contents



SKILLSOFT
    PUBLIC LIMITED COMPANY AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
  (1)  Basis
    of Presentation
  e-learning
  (2)  Summary
    of Significant Accounting Policies
    (a)  Principles
    of Consolidation
    (b)  Use
    of Estimates
    (c)  Revenue
    Recognition
    97-2, Software Revenue Recognition, SOP 98-4 SOP 98-9
  ®
  and/or
 B-9




---



##### Table of Contents



SKILLSOFT
    PUBLIC LIMITED COMPANY AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  pay-for-use pay-for-use
            out-of-pocket No. 01-14, Income Statement Characterization of Reimbursements
    Received for
    Out-of-Pocket
    Expenses Incurred 01-14.)
     B-10




---



##### Table of Contents



SKILLSOFT
    PUBLIC LIMITED COMPANY AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (d)  Deferred
    Commissions
  Bulletin 90-1, Accounting for Separately Priced Extended Warranty and
    Product Maintenance Contracts Revenue Recognition,
  (e)  Net
    Income/(Loss) Per Share
      Year Ended January 31,2005


2006


2007Basic weighted average shares
    outstanding


105,134



102,473



101,698Effect of diluted shares
    outstanding






879



2,542Diluted weighted average common
    shares outstanding


105,134



103,352



104,240     Year Ended January 31,2005


2006


2007Options outstanding


18,977



9,858



8,520   (f)  Foreign
    Currency Translation
  Foreign Currency
    Translation.
 B-11




---



##### Table of Contents



SKILLSOFT
    PUBLIC LIMITED COMPANY AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (g)  Cash,
    Cash Equivalents, Restricted Cash, Short-term Investments, and
    Long-term Investments
    Accounting for Certain
    Investments in Debt and Equity Securities available- for-sale.
    2006
  Gross


GrossContracted





Unrealized


UnrealizedDescription

Maturity


Cost


Gains


Losses


Fair ValueCash and cash equivalents:Cash


N/A


$
25,692


$



$



$
25,692Commercial paper


0-3 months



18,090







(3
)


18,087Money market funds


0-3 months



8,158











8,158$
51,940







(3
)

$
51,937Short-term investments:Publicly-traded equity securities


N/A



181



49







230Commercial paper


4-12 months



2,371







(1
)


2,370Federal agency notes


4-12 months



10,879







(29
)


10,850Corporate debt securities


4-12 months



8,201







(19
)


8,182$
21,632



49



(49
)


21,632  B-12




---



##### Table of Contents



SKILLSOFT
    PUBLIC LIMITED COMPANY AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  2007
  Gross


GrossContracted





Unrealized


UnrealizedDescription

Maturity


Cost


Gains


Losses


Fair ValueCash and cash equivalents:Cash


N/A


$
32,776


$



$



$
32,776Commercial paper


0-3 months



15,838







(2
)


15,836$
48,614







(2
)

$
48,612Short-term investments:Publicly-traded equity securities


N/A



138



94







232Commercial paper


4-12 months



11,829







(1
)


11,828Federal agency notes


4-12 months



3,495







(2
)


3,493Corporate debt securities


4-12 months



37,964







(12
)


37,952Certificates of deposit


4-12 months



2,000











2,000$
55,426



94



(15
)

$
55,505Long-term investments:Corporate debt securities


13-24 months


$
3,607







(9
)

$
3,598   (h)  Depreciation
    and Amortization
    Estimated Useful LivesComputer equipment

2-3 yearsFurniture and fixtures

5 yearsLeasehold improvements

Lesser of:7 years or life of lease     (i)  Research
    and Development Expenses
  Accounting for the Costs of
    Computer Software to Be Sold, Leased or Otherwise Marketed
 B-13




---



##### Table of Contents



SKILLSOFT
    PUBLIC LIMITED COMPANY AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
       (j)  Other
    Comprehensive Income
    Year EndedJanuary 31,2006


2007Unrealized holding gains/(losses)

$
(15
)

$
67Foreign currency adjustment


(735
)


(1,386
)Total accumulated other
    comprehensive income (loss)

$
(750
)

$
(1,319
)   (k)  Fair
    Value of Financial Instruments
    (l)  Concentrations
    of Credit Risk and Off-Balance-Sheet Risk
          (m)  Disclosures
    about Segments of an Enterprise
   B-14




---



##### Table of Contents



SKILLSOFT
    PUBLIC LIMITED COMPANY AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (n)  Amortization
    and Impairment of Goodwill and Intangible Assets
    Goodwill and Other Intangible
    Assets.
  (o)  Restructuring
    Charges
  Accounting for Costs Associated
    with Exit or Disposal Activities
  (p)  Advertising
    Costs
    (q)  Accounting
    for Stock-Based Compensation
   B-15




---



##### Table of Contents



SKILLSOFT
    PUBLIC LIMITED COMPANY AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
            B-16




---



##### Table of Contents



SKILLSOFT
    PUBLIC LIMITED COMPANY AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Year Ended January 31,2005


2006Net (loss)/income As reported

$
(20,113
)

$
35,215Add: Share-based employee
    compensation expense recognized under APB No. 25


1,191



893Less: Total share-based employee
    compensation expense determined under fair value based method
    for all awards under the employee share option plan


(24,474
)


(24,551
)Less: Total share-based employee
    compensation expense determined under fair value based method
    for all awards under the ESPP


(1,019
)


(753
)Pro forma net income/(loss)

$
(44,415
)

$
10,804Basic and diluted net loss per
    share As reported

$
(0.19
)

$
0.34Pro forma

$
(0.42
)

$
0.11     Form 10-K
    Year Ended January 31,2005


2006


2007Risk-free interest rates


3.31-4.35
%


3.86-4.48
%


4.41-5.03
%Expected dividend yield










Volatility factor


86
%


67
%


60
%Expected lives


7 years



7 years



4 yearsWeighted average fair value of
    options granted

$
8.78


$
2.78


$
3.16Weighted average remaining
    contractual life of options outstanding


6.79 years



5.99 years



5.47 years  B-17




---



##### Table of Contents



SKILLSOFT
    PUBLIC LIMITED COMPANY AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      (r)  Recent
    Accounting Pronouncements
  Accounting for Uncertainty in Income
    Taxes, , Accounting for Income
    Taxes. Accounting for
    Contingencies.
  Fair Value Measurements
  The Fair Value
    Option for Financial Assets and Financial
    Liabilities  Including an Amendment of FASB Statement
    No. 115.
 B-18




---



##### Table of Contents



SKILLSOFT
    PUBLIC LIMITED COMPANY AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   (s)  Prior
    Year Financial Statement Reclassifications
            (3)  Pending
    Acquisition
    Hart-Scott-Rodino
  (4)  Special
    Charges
  (a)  Merger
    and Exit Costs
  EITF 95-3,
 B-19




---



##### Table of Contents



SKILLSOFT
    PUBLIC LIMITED COMPANY AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          EmployeeSeverance and


ClosedownRelated Costs


of Facilities


Other


TotalMerger and exit accrual,
    January 31, 2005

$
1,955


$
6,552


$
334


$
8,841Payments made during the year
    ended January 31, 2006


(316
)


(3,275
)


(110
)


(3,701
)Reversal without utilization to
    accrual during the year ended January 31, 2006


(453
)






(55
)


(508
)Adjustments to accrual during the
    year ended January 31, 2006






180







180Merger and exit accrual,
    January 31, 2006

$
1,186


$
3,457


$
169


$
4,812Payments made during the year
    ended January 31, 2007


(308
)


(1,288
)


(48
)


(1,644
)Reversal without utilization to
    accrual during the year ended January 31, 2007






(68
)






(68
)Adjustments to accrual during the
    year ended January 31, 2007






177







177Merger and exit accrual,
    January 31, 2007

$
878


$
2,278


$
121


$
3,277Long-term obligation

$



$
1,476


$



$
1,476Current obligation

$
878


$
802


$
121


$
1,801    B-20




---



##### Table of Contents



SKILLSOFT
    PUBLIC LIMITED COMPANY AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Year Ended January 31, 2008

$
1,801Year Ended January 31, 2009


493Year Ended January 31, 2010


332Year Ended January 31, 2011


651Total

$
3,277   (b)
    Restructuring        EmployeeSeverance and


ContractualRelated Costs


Obligations


TotalTotal restructuring accrual as of
    January 31, 2005

$
624


$
8,744


$
9,368Payments and write downs made
    during the year ended January 31, 2006


(968
)


(6,874
)


(7,842
)Restructuring charge for year
    ended January 31, 2006


344



117



461Total restructuring accrual as of
    January 31, 2006






1,987



1,987Payments and write downs made
    during the year ended January 31, 2007






(415
)


(415
)Restructuring charge for year
    ended January 31, 2007


88



(239
)


(151
)Total restructuring accrual as of
    January 31, 2007

$
88


$
1,333


$
1,421Long-term obligation

$



$
762


$
762Current obligation

$
88


$
571


$
659  B-21




---



##### Table of Contents



SKILLSOFT
    PUBLIC LIMITED COMPANY AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year


Year


YearEnded


Ended


EndedJanuary 31,


January 31,


January 31,2005


2006


2007Research and development

$
11,510


$
5


$
(226
)Selling and marketing


846



394



53General and administrative


477



62



22Total

$
12,833


$
461


$
(151
)     Year Ended January 31, 2008

$
659Year Ended January 31, 2009


394Year Ended January 31, 2010


368Total

$
1,421   (c)
    SEC
    investigation and Other Professional Fees    (5)  Goodwill
    and Intangible Assets
    January 31, 2006


January 31, 2007Gross





Net


Gross





NetCarrying


Accumulated


Carrying


Carrying


Accumulated


CarryingAmount


Amortization


Amount


Amount


Amortization


AmountInternally developedsoftware/courseware

$
28,257


$
23,414


$
4,843


$
28,257


$
27,836


$
421Customer contracts


13,018



10,055



2,963



13,018



11,701



1,317Books trademark


905







905



905



5



90042,180



33,469



8,711



42,180



39,542



2,638Goodwill


93,929







93,929



83,171







83,171Total

$
136,109


$
33,469


$
102,640


$
125,351


$
39,542


$
85,809    B-22




---



##### Table of Contents



SKILLSOFT
    PUBLIC LIMITED COMPANY AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      TotalGross carrying amount of goodwill,
    January 31, 2005

$
103,576Utilization of tax benefit


(7,922
)Reserve adjustment


(1,725
)Gross carrying amount of goodwill,
    January 31, 2006


93,929Utilization of tax benefit


(10,073
)Tax refund received in excess of
    purchase price allocation


(390
)Reserve adjustment


(295
)Gross carrying amount of goodwill,
    January 31, 2007

$
83,171     AmortizationFiscal Year

Expense2008

$
1,6262009


112Total

$
1,738   Goodwill
    Impairment
      (6)  Related
    Party Transactions
  CBT
    Technology
   B-23




---



##### Table of Contents



SKILLSOFT
    PUBLIC LIMITED COMPANY AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      (7)  Income
    Taxes
    January 31,2005


2006


2007Ireland

$
(20,066
)

$
13,178


$
1,526United States


(5,994
)


28,365



29,296Rest of World


6,578



2,802



5,282$
(19,482
)

$
44,345


$
36,104     January 312005


2006


2007Current:Ireland

$



$



$
United States


56



2,382



3,158Rest of World


482



968



832$
538


$
3,350


$
3,990Deferred:Ireland

$



$



$
183United States


156



99



7,778Rest of World


(63
)


71



$
93


$
170


$
7,961Tax provision

$
631


$
9,130


$
11,951  B-24




---



##### Table of Contents



SKILLSOFT
    PUBLIC LIMITED COMPANY AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    January 31,2006


2007CurrentNet operating loss carryforwards

$
10,822


$
18,037Nondeductible expenses and reserves


4,770



3,38715,592



21,424Non-currentNet operating loss carryforwards

$
128,284


$
95,957Tax credits


5,612



6,823Nondeductible non-goodwill
    intangibles


(2,008
)


(1,018
)FAS 123(R) compensation






1,762131,888



103,524Total current and non-current


147,480



125,948Less  valuation
    allowance


(146,786
)


(124,789
)$
694


$
159         January 31,2005


2006


2007Income tax provision at statutory
    rate


12.5
%


12.5
%


12.5
%Increase (decrease) in tax
    resulting from:State tax provision, net of
    federal benefit


(6.8
)


4.5



6.5Tax exempt legal
    settlements/(insurance proceeds)


0.0



(4.9
)


0.0Foreign differential


(21.4
)


15.7



17.2Nondeductible items, primarily
    goodwill impairment charge in 2005


(11.8
)


2.0



2.9Change in valuation allowance


24.3



(9.2
)


(6.0
)Effective tax rate


(3.2
)%


20.6
%


33.1
%  B-25




---



##### Table of Contents



SKILLSOFT
    PUBLIC LIMITED COMPANY AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
                    (8)  Commitments
    and Contingencies
  (a)
    Leases   B-26




---



##### Table of Contents



SKILLSOFT
    PUBLIC LIMITED COMPANY AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Facilities


Other


TotalFiscal year ended January 31:2008

$
4,614


$
567


$
5,1812009


4,145



85



4,2302010


1,896







1,8962011


1,397







1,3972012


760







760Thereafter


6,269







6,269$
19,081


$
652


$
19,733   (b)
    Minimum
    Commitments  and/or
  (c)
    Litigation  SEC
    Investigations
       B-27




---



##### Table of Contents



SKILLSOFT
    PUBLIC LIMITED COMPANY AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Lawsuits
          (d)
    Credit
    Facility   B-28




---



##### Table of Contents



SKILLSOFT
    PUBLIC LIMITED COMPANY AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   (e)
    Delinquent
    Foreign Filings    (9)  Stockholders
    Equity
  (a)
    Stock
    Option Plans          
    Under the 1990 Share Option Scheme (the 1990 Plan), options
    to acquire ordinary shares in the Company could have been
    granted to any director or employee of the Company. The 1990
    Plan has expired by its terms.
    Under the 1994 Share Option Plan (the 1994 Plan), all
    employees and directors of the Company and any independent
    contractor who performed services for the Company were eligible
    to receive grants of non-statutory options (NSOs). Employees
    were also eligible to receive grants of incentive share options
    intended to qualify under Section 422 of the Internal
    Revenue Code. The 1994 Plan has expired by terms.
    Under the 2001 Outside Director Plan (the Outside Director
    Plan), all outside directors of the Company are eligible to
    receive option grants upon appointment to the Board of Directors
    and each subsequent year thereafter.
    Under the 1996 Supplemental Stock Plan (the 1996 Plan), all
    employees, with the exception of directors and executive
    officers, were eligible to receive grants of NSOs. The 1996
    Supplemental Stock Plan has expired by terms on October 15,
    2006. B-29




---



##### Table of Contents



SKILLSOFT
    PUBLIC LIMITED COMPANY AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   
    Under the ForeFront92 Plan, (the FF92 Plan) NSOs and ISOs
    were granted to any employee or director of ForeFront. The FF92
    Plan has expired by terms.
    Under the 1996 ForeFront Group Inc. Non-Qualified Stock Option
    Plan, (the FF96 Plan) NSOs were granted to employees and
    directors of ForeFront. The FF96 Plan has expired by terms.
    Under the Forefront Directors 1996 Plan, (the
    FF96 Directors Plan) non-employee directors were
    eligible to receive grants of options to acquire common stock
    upon election to the Board of Directors and each subsequent year
    thereafter. The FF96 Directors Plan has expired by
    terms.
    Under the Knowledge Well Limited 1998 Share Option Plan,
    (the KWL Plan) and the Knowledge Well Group Limited
    1998 Share Option Plan, (the KWGL Plan), employees and
    directors and any independent contractor who performs services
    for Knowledge Well Limited (KWL) and Knowledge Well Group
    Limited (KWGL) were eligible to receive grants of NSOs.
    Employees of KWL and KWGL were also eligible to receive grants
    of ISOs which were intended to qualify under Section 422 of
    the Internal Revenue Code.
    Under the 2002 Stock Incentive Plan, (the 2002 Plan) all
    employees, inside directors and consultants are eligible to
    receive incentive share options or non-statutory share options.
    Share purchase rights may also be granted under the plan.   B-30




---



##### Table of Contents



SKILLSOFT
    PUBLIC LIMITED COMPANY AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Plan Name

Authorized


Outstanding


Available for Grant1990 Share Option Scheme (the
    1990 Plan)


4,700,000



144,798



1994 Share Option Plan (the
    1994 Plan)


11,747,036



2,884,943



1996 Supplemental Stock Plan (the
    1996 Plan)(1) (2)


8,701,554



4,202,314



2001 Outside Director Option Plan
    (the Outside Director Plan)


750,000



345,000



398,7501996 ForeFront Group Inc.
    Non-Qualified Stock Option Plan (the FF96 Plan) (1)


456,101







Knowledge Well Limited
    1998 Share Option Plan (the KWL Plan) (1)


420,531







Knowledge Well Group Limited
    1998 Share Option Plan (the KWGL Plan) (1)


30,338



88



Books24x7.com, Inc. 1994 Stock
    Option Plan (the Books Plan)


867,436



43,425



1998 Stock Incentive Plan (the
    1998 Plan)


7,402,071



907,318



2001 Stock Incentive Plan (the
    2001 Plan)


11,354,512



6,555,433



2002 Stock Incentive Plan (the
    2002 Plan)(1)


8,850,000



5,104,948



2,264,51355,279,579



20,188,267



2,663,263     (1)
    
    On March 23, 2006, the Companys shareholders approved
    a resolution to transfer an aggregate of 5,100,000 shares
    from certain non-shareholder approved plans to the 2002 Plan.
    This includes 342,823 shares from the FF96 Plan,
    624,462 shares from the KWGL Plan, 234,269 shares from
    the KWL Plan and 3,898,446 shares from the 1996 Plan.(2)
    
    On September 28, 2006, the Companys shareholders
    approved a resolution to transfer 1,400,000 shares from the
    1996 Plan to the 2002 Plan. B-31




---



##### Table of Contents



SKILLSOFT
    PUBLIC LIMITED COMPANY AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     WeightedAverageWeighted


Remaining


AggregateAverage


Contractual


IntrinsicShares


Exercise Price


Exercise Price


Term (Years)


Value(In thousands)Outstanding, January 31, 2004


23,036,822


$
0.11 -  44.25


$
7.88Granted


1,713,800



2.82 -  12.99



10.78Exercised


(3,816,626
)


0.11 - 11.60



4.70Canceled


(1,957,494
)


0.25 -  43.12



12.86Outstanding, January 31, 2005


18,976,502


$
0.11 - 44.25


$
8.27Granted


271,550



3.04 -   5.65



4.06Exercised


(370,925
)


0.11 -  4.12



2.29Canceled


(2,639,037
)


0.25 -  42.38



12.02Outstanding, January 31, 2006


16,238,090


$
0.11 -  44.25


$
7.73



5.99Granted


5,880,000



5.00 -   6.41



6.33Exercised


(1,288,128
)


0.11 -   6.18



3.46Canceled


(641,785
)


2.82 -  44.25



11.48Outstanding, January 31, 2007


20,188,177


$
0.11 -  42.88


$
7.48



5.47


$
26,669Exercisable, January 31, 2007


14,315,877


$
0.11 - $42.88


$
7.94



4.92


$
23,056Vested and Expected to Vest,
    January 31, 2007(1)


18,995,664






$
7.55



5.39


$
25,952Exercisable, January 31, 2006


15,189,336


$
0.11 - $44.25


$
7.97Exercisable, January 31, 2005


12,083,373


$
0.11 - $44.25


$
9.61     (1)
    
    This represents the number of vested options as of
    January 31, 2007 plus the number of unvested options as of
    January 31, 2007 that are expected to vest as adjusted to
    reflect an estimated forfeiture rate of 11.6%. The Company
    recognizes expense incurred under SFAS 123(R) on a straight
    line basis. Due to the Companys vesting schedule, expense
    is incurred on options that have not yet vested but which are
    expected to vest in a future period. The options for which
    expense has been incurred but have not yet vested are included
    above as options expected to vest.  in-the-money
   B-32




---



##### Table of Contents



SKILLSOFT
    PUBLIC LIMITED COMPANY AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Outstanding


ExercisableWeightedAverage


Weighted





WeightedRemaining


Average





AverageNumber of


Contractual


Exercise


Number of


ExerciseRange of Exercise Prices

Shares


Life (Years)


Price


Shares


Price$ 0.11 - $ 3.30


986,491



5.19


$
2.69



986,491


$
2.69$ 3.34 - $ 3.66


940,137



5.87



3.64



940,137



3.64$ 3.72 - $ 4.06


4,232,113



5.60



4.05



4,232,113



4.05$ 4.07 - $ 6.12


2,700,489



5.52



5.65



1,720,489



5.47$ 6.18 - $ 6.84


6,492,094



6.32



6.40



1,622,094



6.36$ 6.91 - $11.01


1,396,963



4.00



9.39



1,374,463



9.39$11.14 - $16.44


2,201,454



4.63



13.73



2,201,454



13.73$17.00 - $44.25


1,238,436



3.54



22.23



1,238,436



22.23$ 0.11 - $44.25


20,188,177



5.47


$
7.48



14,315,677


$
7.94           (b)
    Employee
    Share Purchase Plan   B-33




---



##### 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-34




---



##### Table of Contents



SKILLSOFT
    PUBLIC LIMITED COMPANY AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Year Ended January 31, 2005Multi-Modal


Retail Certification


Combined(In thousands)Revenue

$
192,135


$
20,165


$
212,300Cost of revenues


21,269



455



21,724Cost of revenues 
    amortization of intangible assets


6,864







6,864Gross profit


164,002



19,710



183,712Operating expenses:Research and development


45,572



269



45,841Selling and marketing


81,026



13,339



94,365General and administrative


23,332



1,876



25,208Amortization of intangible assets


2,711







2,711Impairment charge






19,268



19,268Restructuring


13,361







13,361Restatement:SEC investigation


2,182







2,182Other professional fees


320







320Total operating expenses


168,504



34,752



203,256Loss from operations

$
(4,502
)

$
(15,042
)

$
(19,544
)Supplemental segment disclosuresProvision for income taxes


626



5



631Depreciation, amortization and
    stock based compensation expense

$
15,447


$
98


$
15,545  B-35




---



##### Table of Contents



SKILLSOFT
    PUBLIC LIMITED COMPANY AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    As of January 31, 2005Multi-Modal


Retail Certification


CombinedCurrent assets, net

$
154,241


$
11,600


$
165,841Property and equipment, net


9,011



126



9,137Goodwill


103,576







103,576Other assets


24,943







24,943Total consolidated assets

$
291,771


$
11,726


$
303,497Current liabilities

$
195,582


$
16,782


$
212,364Long-term liabilities


6,174



40



6,214Total liabilities


201,756



16,822



218,578Stockholders equity


90,015



(5,096
)


84,919Total consolidated liabilities and
    stockholders equity

$
291,771


$
11,726


$
303,497Supplemental segment disclosuresCapital Expenditures

$
7,476


$
118


$
7,594   Year Ended January 31, 2006Multi-Modal


Retail Certification


Combined(In thousands)Revenue

$
201,236


$
14,331


$
215,567Cost of revenues


25,103



204



25,307Cost of revenues


6,939







6,939Gross profit


169,194



14,127



183,321Operating expenses:Research and development


39,172







39,172Selling and marketing


85,662



2,776



88,438General and administrative


25,377



399



25,776Legal settlements/(insurance
    recoveries)


(17,710
)






(17,710
)Amortization of intangible assets


2,174







2,174Restructuring


123



518



641Restatement:SEC investigation


1,988







1,988Other professional fees










Total operating expenses


136,786



3,693



140,479Operating income

$
32,408


$
10,434


$
42,842Supplemental segment disclosuresProvision for income taxes


9,130







9,130Depreciation, amortization and
    stock based compensation expense

$
15,212


$
17


$
15,229  B-36




---



##### Table of Contents



SKILLSOFT
    PUBLIC LIMITED COMPANY AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    As of January 31, 2006Multi-Modal


Retail Certification


CombinedCurrent assets, net

$
186,295


$



$
186,295Property and equipment, net


10,231







10,231Goodwill


93,929







93,929Other assets


9,447







9,477Total consolidated assets

$
299,902


$



$
299,902Current liabilities

$
189,091


$
5,222


$
194,313Long-term liabilities


3,317







3,317Total liabilities


192,408



5,222



197,630Stockholders equity


107,494



(5,222
)


102,272Total consolidated liabilities and
    stockholders equity

$
299,902


$



$
299,902Supplemental segment disclosuresCapital expenditures

$
6,423


$



$
6,423   Year Ended January 31, 2007Multi-Modal


Retail Certification


Combined(In thousands)Revenue

$
220,150


$
5,022


$
225,172Cost of revenues


26,601







26,601Cost of revenues


4,422







4,422Gross profit


189,127



5,022



194,149Operating expenses:Research and development


40,776







40,776Selling and marketing


90,875



19



90,894General and administrative


27,743



(8
)


27,735Amortization of intangible assets


1,652







1,652Restructuring


74



(48
)


26Restatement:SEC investigation


898







898Other professional fees










Total operating expenses


162,018



(37
)


161,981Operating income

$
27,109


$
5,059


$
32,168Supplemental segment disclosuresProvision for income taxes


11,951







11,951Depreciation, amortization and
    share-based compensation expense

$
17,233


$



$
17,233  B-37




---



##### Table of Contents



SKILLSOFT
    PUBLIC LIMITED COMPANY AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    As of January 31, 2007Multi-Modal


Retail Certification


CombinedCurrent assets, net

$
240,226


$
544


$
240,770Property and equipment, net


9,672







9,672Goodwill


83,171







83,171Other assets


9,357







9,357Total consolidated assets

$
342,426


$
544


$
342,970Current liabilities

$
202,151


$
485


$
202,636Long-term liabilities


2,405







2,405Total liabilities


204,556



485



205,041Stockholders equity


137,870



59



137,929Total consolidated liabilities and
    stockholders equity

$
342,426


$
544


$
342,970Supplemental segment disclosuresCapital expenditures

$
5,519


$



$
5,519   Geographical
    Reporting
    Year Ended January 31,2005


2006


2007Revenue:United States

$
165,871


$
168,525


$
175,483United Kingdom


20,219



22,838



26,030Canada


8,274



9,147



9,595Europe, excluding UK


7,244



4,793



2,001Australia/New Zealand


6,885



7,691



8,963Other (Countries less than 5%
    individually, by region)


3,807



2,573



3,100All Foreign Locations


46,429



47,042



49,689Total revenue

$
212,300


$
215,567


$
225,172    B-38




---



##### Table of Contents



SKILLSOFT
    PUBLIC LIMITED COMPANY AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   (12)  Prepaid
    Expenses and Other Current Assets
    Year EndedJanuary 31,2006


2007Other receivables

$
485


$
415Prepaid commissions and
    recoverable sales draw


15,427



14,011Prepaid insurances


1,559



1,822Prepaid facilities


408



458Reclaimable taxes


1,395



430Prepaid royalties


157



1,199Other


2,575



3,880Total prepaid expenses and other
    current assets

$
22,006


$
22,215   (13)  Accrued
    Expenses  Current
    Year EndedJanuary 31,2006


2007Course development fees

$
1,170


$
1,860Professional fees


2,989



2,639Accrued payables


1,254



415Accrued miscellaneous taxes


395



385Accrued merger related costs*


2,977



1,892Sales tax payable/VAT payable


4,193



4,405Accrued royalties


3,129



3,693Accrued litigation settlements


17,040



15,250Accrued restructuring


810



659Other accrued liabilities


3,854



4,229Total accrued expenses

$
37,811


$
35,427     *
    
    Includes $1,584 and $1,381 of accrued income taxes in
    January 31, 2006 and 2007, respectively.  (14)  Valuation &
    Qualifying Accounts
  Allowance
    for Doubtful Accounts (amounts in thousands)
  Balance at


Net provision





BalanceBeginning


added/(credited





at Endof Period


without utiliazation)


Write-offs


of PeriodYear ended January 31, 2005

$
1,071


$
335


$
(23
)

$
1,383Year ended January 31, 2006

$
1,383


$
254


$
(850
)

$
787Year ended January 31, 2007

$
787


$
(452
)

$
(129
)

$
206  B-39




---



##### Table of Contents



SKILLSOFT
    PUBLIC LIMITED COMPANY AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  (15)  Share
    Repurchase Program
    (16)  Concentration
    of Suppliers
   B-40




---



##### Table of Contents



SKILLSOFT
    PUBLIC LIMITED COMPANY AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   (17)  Quarterly
    Statement of Operation Information
  Quarterly
    Operating Results for Fiscal Years Ended January 31, 2007
    and 2006 (unaudited)
  The
    following table sets forth, for the periods indicated, certain
    financial data of SkillSoft PLC
  Q1 2007


Q2 2007


Q3 2007


Q4 2007(In thousands, except per share data)Revenue

$
54,653


$
55,734


$
57,135


$
57,650Cost of revenues


6,451



6,665



6,846



6,639Cost of revenues 
    amortization of intangible assets


1,732



1,731



740



219Gross profit


46,470



47,338



49,549



50,792Operating expenses:Research and development


9,965



9,901



10,047



10,863Selling and marketing


23,257



23,136



21,983



22,518General and administrative


7,280



6,824



6,844



6,787Amortization of intangible assets


416



412



412



412Restructuring






22



25



(21
)Restatement  SEC
    investigation


252



69



114



463Total operating expenses


41,170



40,364



39,425



41,022Operating income


5,300



6,974



10,124



9,770Other income/(expense), net


10



(41
)


(35
)


(30
)Interest income


805



1,069



1,137



1,299Interest expense


(66
)


(70
)


(69
)


(73
)Income before provision for income
    taxes


6,049



7,932



11,157



10,966Provision for income taxes


1,996



3,107



4,073



2,775Net income

$
4,053


$
4,825


$
7,084


$
8,191Basic and dilutive income per share

$
0.04


$
0.05


$
0.07


$
0.08Basic weighted average shares
    outstanding


101,037



101,525



101,764



102,444Diluted weighted average shares
    outstanding


102,889



104,050



104,725



105,272   B-41




---



##### Table of Contents



SKILLSOFT
    PUBLIC LIMITED COMPANY AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Q1 2006


Q2 2006


Q3 2006


Q4 2006(In thousands, except per share data)Revenue

$
53,327


$
53,604


$
53,901


$
54,735Cost of revenues


5,834



6,318



6,509



6,646Cost of revenues 
    amortization of intangible assets


1,700



1,761



1,739



1,739Gross profit


45,793



45,525



45,653



46,350Operating expenses:Research and development


9,917



10,237



9,169



9,849Selling and marketing


24,211



20,883



20,546



22,798General and administrative


6,284



6,743



5,504



7,245Legal settlements/(Insurance
    recoveries)






(19,500
)






1,790Amortization of intangible assets


546



546



546



536Restructuring


703



(116
)


226



(172
)Restatement:SEC investigation


250



834



507



397Other professional fees














Total operating expenses


41,911



19,627



36,498



42,443Operating income


3,882



25,898



9,155



3,907Other (expense)/income, net


(110
)


495



341



15(Loss)/gain on sale of assets, net


(681
)






73



22Interest income


356



348



511



564Interest expense


(61
)


(38
)


(243
)


(89
)Income before provision for income
    taxes


3,386



26,703



9,837



4,419Provision for income taxes


919



3,759



4,154



298Net income

$
2,467


$
22,944


$
5,683


$
4,121Basic and dilutive income per share

$
0.02


$
0.22


$
0.06


$
0.04Basic weighted average shares
    outstanding


105,662



103,796



100,664



100,707Diluted weighted average shares
    outstanding


105,877



104,223



101,541



102,439   (18)  Subsequent
    events
   B-42




---



##### Table of Contents



EXHIBIT INDEX
  ExhibitNo.

Title2
.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)).2
.2

Stock and Asset Purchase Agreement
    among T.N.H. France SARL, T.N.H. Holdings GmbH, The Thomson
    Corporation (Australia) Pty Ltd, Thomson Information and
    Solutions Limited, Thomson Global Resources, Thomson Learning
    Inc., Thomson Learning Inc., SkillSoft PLC and SkillSoft
    Corporation, dated October 25, 2006 (Incorporated by
    reference to Exhibit 2.1 to SkillSoft PLCs Current
    Report on
    Form 8-K
    as filed with the Securities and Exchange Commission on
    October 26, 2006 (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)).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)).10
.3**

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
.4**

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
.5**

1996 Supplemental Stock Plan
    (Incorporated by reference to exhibit 10.3 to SkillSoft
    PLCs Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended October 31, 2006 as filed with
    the Securities and Exchange Commission on December 8, 2006
    (File
    No. 000-25674)).




---



##### Table of Contents



ExhibitNo.

Title10
.6**

2002 Share Option Plan, as
    amended (Incorporated by reference to exhibit 10.2 to
    SkillSoft PLCs Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended October 31, 2006 as filed with
    the Securities and Exchange Commission on December 8, 2006
    (File
    No. 000-25674)).10
.7**

2001 Outside Director Option Plan,
    as amended (Incorporated by reference to exhibit 10.4 to
    SkillSoft PLCs Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended October 31, 2006 as filed with
    the Securities and Exchange Commission on December 8, 2006
    (File
    No. 000-25674)).10
.8 **

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
.9**

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
.10

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
.11**

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
.12**

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)).10
.13**

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
.14

Lease dated May 25, 2001, as
    amended between 1987 Tamposi Limited Partnership and SkillSoft
    Corporation (Incorporated by reference to exhibit 10.15 to
    SkillSoft PLCs Annual Report on
    Form 10-K
    for the fiscal year ended January 31, 2006 as filed with
    the Securities and Exchange Commission on April 13, 2006
    (File
    No. 000-25674)).10
.15**

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
.16**

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
.17**

Amended and Restated Summary of
    Director Compensation (Incorporated by reference from
    exhibit 99.1 to SkillSoft PLCs Current Report on
    Form 8-K
    as filed with the Securities and Exchange Commission on
    March 28, 2006 (File
    No. 000-25674)).10
.18

Lease agreement, dated
    June 9, 2004, as amended, by and between Hewlett-Packard
    Company and SkillSoft Corporation (Incorporated by reference to
    exhibit 10.19 to SkillSoft PLCs Annual Report on
    Form 10-K
    for the fiscal year ended January 31, 2006 as filed with
    the Securities and Exchange Commission on April 13, 2006
    (File
    No. 000-25674)).10
.19

Pledge Agreement, dated
    January 31, 2007, between Silicon Valley Bank and SkillSoft
    Corporation.10
.20**

Form of Director Option Agreement
    for initial grants under the 2001 Director Option Plan
    (Incorporated by reference to exhibit 99.2 to SkillSoft
    PLCs Current Report on
    Form 8-K
    as filed with the Securities and Exchange Commission on
    January 4, 2006 (File
    No. 000-25674)).




---



##### Table of Contents



ExhibitNo.

Title10
.21**

Form of Director Option Agreement
    for subsequent grants under the 2001 Director Option Plan
    (Incorporated by reference to exhibit 99.3 to SkillSoft
    PLCs Current Report on
    Form 8-K
    as filed with the Securities and Exchange Commission on
    January 4, 2006 (File
    No. 000-25674)).10
.22**

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
.23**

Summary of Fiscal 2007 Executive
    Incentive Compensation Program. (Incorporated by reference to
    exhibit 99.1 to SkillSoft PLCs Current Report on
    Form 8-K
    as filed with the Securities and Exchange Commission on
    April 28, 2006 (File
    No. 000-25674)).10
.24

Release and Settlement Agreement
    (Incorporated by reference to exhibit 10.1 to SkillSoft
    PLCs Quarterly Report on
    Form 10-Q
    for the quarter ended July 31, 2005 as filed with the
    Securities and Exchange Commission on September 9, 2005
    (File
    No. 000-25674)).21
.1

List of Significant Subsidiaries.23
.1

Consent of Ernst & Young
    LLP31
.1

Certification of SkillSoft
    PLCs Chief Executive Officer pursuant to
    Rule 13a-14(a)/Rule 15d-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 15d-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.